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Duke Realty Reports Second Quarter 2017 Results

$2.45 Billion of Previously Announced $2.95 Billion Medical Office Sales Completed at 4.6 Percent In-Place Cap Rate

18.7 Percent Rent Growth on Leases

2017 Guidance Updated

INDIANAPOLIS, July 26, 2017 (GLOBE NEWSWIRE) -- Duke Realty Corporation (NYSE:DRE), a leading industrial property REIT, today reported results for the second quarter of 2017.

/EIN News/ -- Quarterly Highlights

•Net income per diluted share was $3.38 for the quarter.  Funds from Operations (“FFO”) per diluted share, as defined by the National Association of Real Estate Investment Trusts (“NAREIT”), was $0.36 for the quarter while Core Funds from Operations (“Core FFO”) per diluted share was $0.32 for the quarter. 

•Portfolio operating performance within the company's industrial portfolio:

  • Total stabilized occupancy at June 30, 2017 of 97.7 percent compared to 98.7 percent at March 31, 2017 and 98.1 percent at June 30, 2016

  • Total in-service occupancy at June 30, 2017 of 96.0 percent compared to 97.9 percent at March 31, 2017 and 96.7 percent at June 30, 2016

  • Total occupancy, including properties under development, of 93.5 percent at June 30, 2017 compared to 95.9 percent at March 31, 2017 and 95.6 percent at June 30, 2016

  • Tenant retention of 71.5 percent for the quarter

  • Same-property net operating income growth of 3.6 percent and 4.6 percent for the three and six months ended June 30, 2017 compared to the same periods in 2016

  • Total leasing activity of 4.6 million square feet for the quarter

  • Overall rent growth on new and renewal leases of 18.7 percent for the quarter

•Successful execution of capital transactions:

  • Completed the sale of 77 medical office properties, ownership interests in two unconsolidated medical office joint ventures, one parcel of undeveloped medical office land and one non-strategic industrial building for a combined sales price of $2.46 billion, with an additional $20 million promote payment related to the sale of one of the unconsolidated joint ventures

  • Redeemed $286 million of 6.5 percent unsecured notes with a scheduled maturity of January 2018

  • Repaid $250 million variable-rate term loan with a scheduled maturity in January 2019

  • Repaid the $237 million of borrowings on the company's unsecured line of credit that was outstanding on March 31, 2017

  • Completed $124 million of acquisitions of five bulk industrial buildings in Tier 1 markets during the quarter

  • Started new industrial development projects with expected costs of $154 million

Jim Connor, Chairman and CEO said, "I am happy to announce that we have substantially completed the previously announced sale of our medical office business, generating $2.45 billion in proceeds to date, with the remaining properties expected to close during the third quarter. This transaction generated significant stakeholder value and positions us for substantial future growth as the leading pure play domestic industrial REIT.

We continued to maintain high levels of occupancy, completing the second quarter with stabilized occupancy in our industrial portfolio at 97.7 percent, which reflects an expected slight decrease from the peak occupancy that we reached at March 31, 2017.  Rental rate growth on new and renewal leases continues to be very strong, with growth for leases executed during the quarter totaling nearly 19 percent."

Mark Denien, Executive Vice President and Chief Financial Officer, stated, "We were able to utilize immediately a portion of the proceeds from our medical office sales to reduce indebtedness, paying off over $930 million of debt since March 31, 2017, including $129 million of 6.75 percent unsecured notes that were repaid earlier this month and that were scheduled to mature in March 2020.

Of the total sales price from the medical office dispositions, $400 million was structured as seller financing, which bears interest at 4 percent and matures over the next three years, while another $796 million was placed in escrow accounts to finance future acquisitions and development.  These actions will enable us to prudently re-deploy proceeds over time as opportunistic investment opportunities arise.

After using the remaining proceeds to finance development and acquisition activities, we finished the quarter with $76 million of available cash."

Financial Performance

•A complete reconciliation, in dollars and per share amounts, of net income to FFO, as defined by NAREIT, as well as to Core FFO, is included in the financial tables included in this release.

•Net income was $3.38 per diluted share, or $1.22 billion, for the second quarter of 2017 compared to $0.31 per diluted share for the second quarter of 2016.  The significant increase in net income per diluted share from the second quarter of 2016 was driven by the gains recognized on the medical office sales.

•FFO, as defined by NAREIT, was $0.36 per diluted share for the second quarter of 2017, or $131 million, compared to $0.35 per diluted share for the second quarter of 2016. FFO, as defined by NAREIT, increased from the second quarter of 2016 as the result of $20 million of promote income, which was partially offset by a $7 million increase in debt extinguishment costs.

•Core FFO was $0.32 per diluted share, or $117 million, for the second quarter of 2017 compared to $0.30 per diluted share for the second quarter of 2016.  The increase to Core FFO was the result of improved operational performance from increased occupancy and rental rate growth.  The impact of the company's medical office sales was not fully reflected in Core FFO during the second quarter of 2017 due to the majority of such sales being completed in June.

Real Estate Investment Activity

Mr. Connor further stated, “We started $154 million of developments, which were 35 percent pre-leased in total.  After considering the speculative developments we have recently started, we finished the quarter with a 10.9 million square foot development pipeline, with total expected project costs of $774 million, and a strong pre-leasing level of 65 percent.  As reflected in our updated 2017 guidance, we expect to continue to re-deploy the proceeds of our medical office sales to fund a robust development pipeline. 

The medical office sale proceeds will also be used to fund our pipeline of acquisitions, as reflected in our updated guidance, which are in high-barrier markets and are generally newly constructed properties.  Earlier this month we closed on three acquisitions; two in Southern California and one in Northern New Jersey for a total of $150 million.  We have approximately $500 million of acquisitions in Southern California, New Jersey and South Florida under contract and subject to customary closing conditions that we expect to close by year end. Many of the pending acquisitions are recently completed speculative development projects, allowing for future value creation as we execute leases in these high-growth markets.  These acquisitions will be immediately accretive to FFO and AFFO upon stabilization as the stabilized returns will be in excess of the cap rate achieved on the medical office disposition.   Also, given the high-barrier markets where these acquisitions are located, they will provide better prospects for future rent growth than our medical office properties provided."

Development

The second quarter included the following development activity:

 Wholly Owned Properties

•During the quarter, the company started $121 million of wholly owned bulk industrial development projects totaling 1.8 million square feet, which were 20 percent pre-leased in total.  These wholly owned development starts were comprised of four industrial developments, which included a speculative development project in the Lehigh Valley of Pennsylvania totaling one million square feet, a 46 percent pre-leased project in Minneapolis totaling 375,000 square feet and two projects in other markets totaling 360,000 square feet and 47 percent pre-leased. 

•Four industrial projects totaling 1.9 million square feet, which were 65 percent leased, were placed in service during the quarter.

Joint Venture Properties

•During the quarter, a 50 percent-owned joint venture started a 400,000 square foot bulk industrial product in Indianapolis, which was 100 percent pre-leased, while another 50 percent-owned joint venture started a 232,000 square foot bulk industrial project in Columbus, which was 44 percent pre-leased.

•A 284,000 square foot industrial project in Indianapolis, which was 100 percent pre-leased, was placed in service during the quarter by a 50 percent-owned joint venture. 

Acquisitions

The company acquired two recently completed bulk industrial properties in Chicago totaling 502,000 square feet, which were 100 percent leased, and three vacant bulk industrial projects in South Florida totaling 677,000 square feet, which were recently completed on a speculative basis.

Building Dispositions

Building dispositions totaled $2.46 billion in the second quarter and included the following:

Wholly Owned Properties

•A 10 building portfolio of 100 percent-leased medical office buildings, sold to a hospital system, totaling 381,000 square feet

•65 medical office buildings totaling 4.6 million square feet, of which four buildings were under construction and one building was undergoing expansion, sold to a subsidiary of Healthcare Trust of America, Inc. ("HTA")

•Two medical office buildings, sold to another investor resulting from the exercise of a right of first refusal by a hospital system, totaling 206,000 square feet

•One non-strategic industrial building, totaling 68,000 square feet

Joint Venture Properties

•The company's ownership interest in one unconsolidated medical office joint venture sold to HTA

•The company's ownership interest in one unconsolidated medical office joint venture, sold to our partner pursuant to a buy/sell provision

•The company's ownership interest in a joint venture that owned one suburban office property was acquired by its partner

Distributions Declared

The company's board of directors declared a quarterly cash distribution on its common stock of $0.19 per share, or $0.76 per share on an annualized basis. The second quarter dividend will be payable on August 31, 2017 to shareholders of record on August 16, 2017.

2017 Earnings Guidance

A reconciliation of the company's per share guidance for diluted net income per common share to FFO, as defined by NAREIT and to Core FFO is included in the financial tables to this release.  The company revised its guidance for net income to $4.40 to $4.66 per diluted share from its previous guidance of $4.19 to $4.70 per diluted share.  The company revised its guidance for FFO, as defined by NAREIT, to $1.20 to $1.33 per diluted share from its previous guidance of $1.07 to $1.21 and also revised its guidance for Core FFO to $1.20 to $1.26 per diluted share from its previous range of $1.16 to $1.24 per diluted share.  The company revised its guidance for the range of growth in adjusted funds from operations ("AFFO"), on a share adjusted basis, to a range of 0.9 percent to 4.7 percent from the previous range of 0.0 percent to 5.7 percent.

Key changes to the assumptions underlying this updated guidance are as follows:

•The estimate for acquisitions was increased to a range of $700 million to $1.1 billion from the previous range of $150 million to $900 million;

•The estimate for development starts was increased to a range of $700 million to $900 million from the previous range of $500 million to $700 million;

•The pessimistic end of the estimate for average percentage leased was increased to 96.4 percent from the previous estimate of 96.0 percent;

•The estimate for growth in same property net operating income was narrowed to a range of 3.0 percent to 3.8 percent from the previous range of 2.5 percent to 4.3 percent;

•The estimate for special dividends per share was narrowed to a range of $0.70 to $1.15 from the previous range of $0.70 to $2.00.

More specific assumptions and components of the 2017 guidance will be available by 6:00 p.m. Eastern Time today in the company’s supplemental information packet and in the Range of Estimates page in the Investor Relations section of the company's website.
      
FFO and AFFO Reporting Definitions

FFO: FFO is computed in accordance with standards established by NAREIT.  NAREIT defines FFO as net income (loss) excluding gains (losses) on sales of depreciable property, impairment charges related to depreciable real estate assets; plus real estate related depreciation and amortization, and after similar adjustments for unconsolidated joint ventures. The company believes FFO to be most directly comparable to net income as defined by generally accepted accounting principles ("GAAP"). The company believes that FFO should be examined in conjunction with net income (as defined by GAAP) as presented in the financial statements accompanying this release. FFO does not represent a measure of liquidity, nor is it indicative of funds available for the company’s cash needs, including the company’s ability to make cash distributions to shareholders.

Core FFO: Core FFO is computed as FFO adjusted for certain items that are generally non-cash in nature and that materially distort the comparative measurement of company performance over time. The adjustments include gains on sale of undeveloped land, impairment charges not related to depreciable real estate assets, tax expenses or benefits related to (i) changes in deferred tax asset valuation allowances, (ii) changes in tax exposure accruals that were established as the result of the adoption of new accounting principles, or (iii) taxable income (loss) related to other items excluded from FFO or Core FFO (collectively referred to as “other income tax items”), gains (losses) on debt transactions, gains (losses) on and related costs of acquisitions, gains on sale of merchant buildings, promote income and severance charges related to major overhead restructuring activities. Although the company’s calculation of Core FFO differs from NAREIT’s definition of FFO and may not be comparable to that of other REITs and real estate companies, the company believes it provides a meaningful supplemental measure of its operating performance.

AFFO: AFFO is a supplemental performance measure defined by the company as Core FFO (as defined above), less recurring building improvements and total second generation capital expenditures (the leasing of vacant space that had previously been under lease by the company is referred to as second generation lease activity) related to leases commencing during the reporting period and adjusted for certain non-cash items including straight line rental income and expense, non-cash components of interest expense and stock compensation expense, and after similar adjustments for unconsolidated partnerships and joint ventures.

Same-Property Performance

The company includes same-property net operating income growth as a property-level supplemental measure of performance.  The company utilizes same-property net operating income growth as a supplemental measure to evaluate property-level performance, and jointly-controlled properties are included at the company's ownership percentage.

A reconciliation of net income from continuing operations to same property net operating income is included in the financial tables to this release.  A description of the properties that are excluded from the company’s same-property net operating income measure is included on page 17 of its June 30, 2017 supplemental information.

About Duke Realty Corporation

Duke Realty Corporation owns and operates approximately 138 million rentable square feet of industrial assets in 21 major U.S. metropolitan areas. Duke Realty Corporation is publicly traded on the NYSE under the symbol DRE and is listed on the S&P 500 Index. More information about Duke Realty Corporation is available at www.dukerealty.com.

Second Quarter Earnings Call and Supplemental Information

Duke Realty Corporation is hosting a conference call tomorrow, July 27, 2017, at 3:00 p.m. ET to discuss its second quarter operating results. All investors and other interested parties are invited to listen to the call. Access is available through the Investor Relations section of the company's website.

A copy of the company's supplemental information will be available by 6:00 p.m. ET today through the Investor Relations section of the company's website.

Cautionary Notice Regarding Forward-Looking Statements

This news release may contain forward-looking statements within the meaning of the federal securities laws.  All statements, other than statements of historical facts, including, among others, statements regarding the company’s future financial position or results, future dividends, and future performance, are forward-looking statements. Those statements include statements regarding the intent, belief or current expectations of the company, members of its management team, as well as the assumptions on which such statements are based, and generally are identified by the use of words such as "may," "will," "seeks," "anticipates," "believes," "estimates," "expects," "plans," "intends," "should," or similar expressions. Forward-looking statements are not guarantees of future performance and involve risks and uncertainties that actual results may differ materially from those contemplated by such forward-looking statements. Many of these factors are beyond the company’s abilities to control or predict. Such factors include, but are not limited to, (i) general adverse economic and local real estate conditions; (ii) the inability of major tenants to continue paying their rent obligations due to bankruptcy, insolvency or a general downturn in their business; (iii) financing risks, such as the inability to obtain equity, debt or other sources of financing or refinancing on favorable terms, if at all; (iv) the company’s ability to raise capital by selling its assets; (v) changes in governmental laws and regulations; (vi) the level and volatility of interest rates and foreign currency exchange rates; (vii) valuation of joint venture investments, (viii) valuation of marketable securities and other investments; (ix) valuation of real estate; (x) increases in operating costs; (xi) changes in the dividend policy for the company’s common stock; (xii) the reduction in the company’s income in the event of multiple lease terminations by tenants; (xiii) impairment charges, (xiv) the effects of geopolitical instability and risks such as terrorist attacks; (xv) the effects of weather and natural disasters such as floods, droughts, wind, tornadoes and hurricanes; and (xvi) the effect of any damage to our reputation resulting from developments relating to any of items (i) – (xv). Additional information concerning factors that could cause actual results to differ materially from those forward-looking statements is contained from time to time in the company's filings with the Securities and Exchange Commission.  The company refers you to the section entitled “Risk Factors” contained in the company's Annual Report on Form 10-K for the year ended December 31, 2016. Copies of each filing may be obtained from the company or the Securities and Exchange Commission.
The risks included here are not exhaustive and undue reliance should not be placed on any forward-looking statements, which are based on current expectations. All written and oral forward-looking statements attributable to the company, its management, or persons acting on their behalf are qualified in their entirety by these cautionary statements. Further, forward-looking statements speak only as of the date they are made, and the company undertakes no obligation to update or revise forward-looking statements to reflect changed assumptions, the occurrence of unanticipated events or changes to future operating results over time unless otherwise required by law. 

Duke Realty Corporation and Subsidiaries
Consolidated Statement of Operations
(Unaudited and in thousands, except per share amounts)
               
  Three Months Ended   Six Months Ended
  June 30,   June 30,
    2017       2016       2017       2016  
Revenues:              
Rental and related revenue $ 165,836     $ 157,910     $ 337,512     $ 318,497  
General contractor and service fee revenue   23,576       26,044       32,975       49,195  
    189,412       183,954       370,487       367,692  
Expenses:              
Rental expenses   14,506       17,017       30,743       37,752  
Real estate taxes   26,902       24,899       53,412       49,685  
General contractor and other services expenses   22,374       22,228       29,998       43,148  
Depreciation and amortization   67,013       61,136       129,036       120,669  
    130,795       125,280       243,189       251,254  
Other operating activities:              
Equity in earnings of unconsolidated companies   51,933       3,534       56,682       25,394  
Gain on dissolution of unconsolidated company   -       30,697       -       30,697  
Promote income   20,007       24,087       20,007       24,087  
Gain on sale of properties   34,341       39,314       71,387       54,891  
Gain on land sales   1,279       707       2,784       837  
Other operating expenses   (718 )     (836 )     (1,457 )     (2,072 )
Impairment charges   -       (5,651 )     (859 )     (12,056 )
General and administrative expenses   (11,858 )     (11,584 )     (31,090 )     (29,682 )
    94,984       80,268       117,454       92,096  
               
Operating income   153,601       138,942       244,752       208,534  
               
Other income (expenses):              
Interest and other income, net   2,260       567       2,792       3,090  
Interest expense   (21,680 )     (29,511 )     (44,566 )     (59,644 )
Loss on debt extinguishment   (9,561 )     (2,430 )     (9,536 )     (2,430 )
Acquisition-related activity   -       (72 )     -       (75 )
Income from continuing operations, before income taxes   124,620       107,496       193,442       149,475  
Income tax benefit (expense)   (5,426 )     157       (7,557 )     (186 )
Income from continuing operations   119,194       107,653       185,885       149,289  
               
Discontinued operations:              
Income before gain on sales   11,095       2,278       15,185       4,484  
Gain on sale of depreciable properties, net of tax   1,109,091       252       1,109,091       166  
Income tax expense   (11,613 )     -       (11,613 )     -  
Income from discontinued operations   1,108,573       2,530       1,112,663       4,650  
               
Net income   1,227,767       110,183       1,298,548       153,939  
Net income attributable to noncontrolling interests   (17,224 )     (1,116 )     (17,805 )     (1,565 )
Net income attributable to common shareholders $ 1,210,543     $ 109,067     $ 1,280,743     $ 152,374  
               
Basic net income per common share:              
Continuing operations attributable to common shareholders $ 0.33     $ 0.30     $ 0.52     $ 0.43  
Discontinued operations attributable to common shareholders   3.07       0.01       3.08       0.01  
Total $ 3.40     $ 0.31     $ 3.60     $ 0.44  
               
Diluted net income per common share:              
Continuing operations attributable to common shareholders $ 0.33     $ 0.30     $ 0.51     $ 0.43  
Discontinued operations attributable to common shareholders   3.05       0.01       3.06       0.01  
Total $ 3.38     $ 0.31     $ 3.57     $ 0.44  
               

 

Duke Realty Corporation and Subsidiaries  
Consolidated Balance Sheets  
(Unaudited and in thousands)  
           
           
    June 30,   December 31,  
      2017       2016    
Assets          
Real estate investments:          
Real estate assets   $ 5,500,036     $ 5,144,805    
Construction in progress     469,734       303,644    
Investments in and advances to unconsolidated companies     132,817       197,807    
Undeveloped land     189,469       237,436    
      6,292,056       5,883,692    
Accumulated depreciation     (1,122,527 )     (1,042,944 )  
           
Net real estate investments     5,169,529       4,840,748    
           
Real estate investments and other assets held-for-sale     213,654       1,324,258    
           
Cash and cash equivalents     76,326       12,639    
Accounts receivable, net     23,580       15,838    
Straight-line rents receivable, net     86,824       82,554    
Receivables on construction contracts, including retentions     9,274       6,159    
Deferred leasing and other costs, net     263,358       258,741    
Restricted cash held in escrow for like-kind exchange     839,128       40,102    
Notes receivable from property sales     423,946       25,460    
Other escrow deposits and other assets     211,950       165,503    
           
    $ 7,317,569     $ 6,772,002    
           
Liabilities and Equity          
Indebtedness:          
Secured debt, net of deferred financing costs   $ 337,729     $ 383,725    
Unsecured debt, net of deferred financing costs     1,942,399       2,476,752    
Unsecured line of credit     -       48,000    
      2,280,128       2,908,477    
           
Liabilities related to real estate investments held-for-sale     9,089       56,291    
           
Construction payables and amounts due subcontractors, including retentions     73,749       44,250    
Accrued real estate taxes     65,551       59,112    
Accrued interest     13,944       23,633    
Other liabilities     173,457       153,846    
Tenant security deposits and prepaid rents     38,195       33,100    
Total liabilities     2,654,113       3,278,709    
           
Shareholders' equity:          
           
Common shares     3,557       3,548    
Additional paid-in-capital     5,196,184       5,192,011    
Accumulated other comprehensive income     -       682    
Distributions in excess of net income     (585,592 )     (1,730,423 )  
Total shareholders' equity     4,614,149       3,465,818    
           
Noncontrolling interests     49,307       27,475    
Total equity     4,663,456       3,493,293    
           
    $ 7,317,569     $ 6,772,002    
           

 

Duke Realty Corporation and Subsidiaries  
Summary of EPS, FFO and AFFO  
Three Months Ended June 30  
(Unaudited and in thousands, except per share amounts)  
       
     2017       2016     
     Wtd.         Wtd.       
     Avg.   Per       Avg.   Per     
   Amount   Shares   Share     Amount   Shares   Share     
Net income attributable to common shareholders  $1,210,543         $109,067          
Less: dividends on participating securities   (540 )         (582 )        
 Net income per common share- basic    1,210,003   355,647 $3.40     108,485   347,464 $0.31    
Add back:                  
Noncontrolling interest in earnings of unitholders   11,240   3,305       1,101   3,504      
Other potentially dilutive securities   540   3,029       582   3,465      
 Net income attributable to common shareholders- diluted  $1,221,783   361,981 $3.38   $110,168   354,433 $0.31    
                   
 Reconciliation to funds from operations ("FFO")                   
 Net income attributable to common shareholders  $1,210,543   355,647     $109,067   347,464      
Adjustments:                  
Depreciation and amortization   73,328           80,161          
Company share of joint venture depreciation, amortization and other   2,602           4,253          
Gains on depreciable property sales - wholly owned, discontinued operations   (1,103,077 )         (252 )        
Gains on depreciable property sales - wholly owned, continuing operations   (34,341 )         (39,314 )        
Income tax expense (benefit) triggered by depreciable property sales   19,658           (157 )        
Gains on depreciable property sales - joint ventures   (48,933 )         (91 )        
Gain on dissolution of unconsolidated company   -           (30,697 )        
Noncontrolling interest share of adjustments   10,046           (139 )        
NAREIT FFO attributable to common shareholders - basic    129,826   355,647 $0.37     122,831   347,464 $0.35    
Noncontrolling interest in income of unitholders   11,240   3,305       1,101   3,504      
Noncontrolling interest share of adjustments   (10,046 )         139          
Other potentially dilutive securities   3,029       3,465      
NAREIT FFO attributable to common shareholders - diluted  $131,020     361,981 $0.36   $124,071     354,433 $0.35    
Gain on land sales   (1,279 )         (707 )        
Loss on debt extinguishment   9,561           2,430          
Land impairment charges   -           5,651          
Gain on non-depreciable property sale - joint venture   (119 )         -          
Promote income   (20,007 )         (24,087 )        
Income tax benefit from valuation allowance adjustment   (2,619 )         -          
Acquisition-related activity   -           72          
Core FFO attributable to common shareholders - diluted  $116,557     361,981 $0.32   $107,430     354,433 $0.30    
                   
Adjusted FFO                   
Core FFO - diluted
$116,557   361,981 $0.32   $107,430   354,433 $0.30    
Adjustments:                  
Straight-line rental income and expense   (4,725 )         (3,794 )        
Amortization of above/below market rents and concessions   121           424          
Stock based compensation expense   3,600           3,108          
Noncash interest expense   1,649           1,527          
Second generation concessions   (75 )         (71 )        
Second generation tenant improvements   (4,685 )         (6,585 )        
Second generation leasing commissions   (7,868 )         (6,071 )        
Building improvements   (1,687 )         (741 )        
Adjusted FFO - diluted  $102,887     361,981     $95,227     354,433      
                   
(1) Excludes noncontrolling interest share of gains of $6,014 on depreciable property sales - wholly owned, discontinued operations during the three months ended June 30, 2017.  

 

Duke Realty Corporation and Subsidiaries  
Summary of EPS, FFO and AFFO  
Six Months Ended June 30  
(Unaudited and in thousands, except per share amounts)  
       
     2017       2016     
     Wtd.         Wtd.       
     Avg.   Per       Avg.   Per     
   Amount   Shares   Share     Amount   Shares   Share     
Net income attributable to common shareholders  $1,280,743         $152,374          
Less: dividends on participating securities   (1,083 )         (1,171 )        
Net income per common share- basic    1,279,660   355,466 $3.60     151,203   346,564 $0.44    
Add back:                  
Noncontrolling interest in earnings of unitholders   11,892   3,310       1,539   3,501      
Other potentially dilutive securities   1,083   3,013       569   2,162      
Net income attributable to common shareholders- diluted  $1,292,635   361,789 $3.57   $153,311   352,227 $0.44    
                   
Reconciliation to funds from operations ("FFO")                   
Net income attributable to common shareholders  $1,280,743   355,466     $152,374   346,564      
Adjustments:                  
Depreciation and amortization   154,885           157,959          
Company share of joint venture depreciation, amortization and other   5,096           7,892          
Impairment charges - depreciable property   859           -          
Gains on depreciable property sales - wholly owned, discontinued operations   (1,103,077 )         (166 )        
Gains on depreciable property sales - wholly owned, continuing operations   (71,387 )         (54,891 )        
Income tax benefit triggered by depreciable property sales   19,658           186          
Gains on depreciable property sales - joint ventures   (50,731 )         (18,033 )        
Gain on dissolution of unconsolidated company   -           (30,697 )        
Noncontrolling interest share of adjustments   9,640           (623 )        
NAREIT FFO attributable to common shareholders - basic    245,686   355,466 $0.69     214,001   346,564 $0.62    
Noncontrolling interest in income of unitholders   11,892   3,310       1,539   3,501      
Noncontrolling interest share of adjustments   (9,640 )         623          
Other potentially dilutive securities   3,013       3,434      
NAREIT FFO attributable to common shareholders - diluted  $247,938    361,789 $0.69   $216,163    353,499 $0.61    
Gain on land sales   (2,784 )         (837 )        
Loss on debt extinguishment, including joint venture share   9,536           4,022          
Gain on non-depreciable property sale - joint venture   (119 )         -          
Land impairment charges   -           12,056          
Promote income   (20,007 )         (24,087 )        
Income tax benefit from valuation allowance adjustment   (2,619 )         -          
Acquisition-related activity   -           75          
Core FFO attributable to common shareholders - diluted  $231,945    361,789 $0.64   $207,392    353,499 $0.59    
                   
Adjusted FFO                   
Core FFO - diluted
$231,945   361,789 $0.64   $207,392   353,499 $0.59    
Adjustments:                  
Straight-line rental income and expense   (8,044 )         (7,505 )        
Amortization of above/below market rents and concessions   663           1,058          
Stock based compensation expense   14,080           13,486          
Noncash interest expense   3,204           2,985          
Second generation concessions   (75 )         (71 )        
Second generation tenant improvements   (7,497 )         (14,602 )        
Second generation leasing commissions   (10,277 )         (15,869 )        
Building improvements   (2,931 )         (1,262 )        
Adjusted FFO - diluted  $221,068    361,789     $185,612    353,499      
                   
(1) Excludes noncontrolling interest share of gains of $6,014 on depreciable property sales - wholly owned, discontinued operations during the six months ended June 30, 2017.    

 

Duke Realty Corporation and Subsidiaries
Reconciliation of Same Property Net Operating Income Growth
(Unaudited and in thousands)
         
  Three Months Ended  
  June 30, 2017   June 30, 2016  
         
Income from continuing operations before income taxes $124,620     $107,496    
Share of same property NOI from unconsolidated joint ventures   3,749       4,265    
Income and expense items not allocated to segments   1,996       12,234    
Earnings from service operations   (1,202 )     (3,816 )  
Properties not included and other adjustments   (20,962 )     (15,705 )  
Same property NOI $108,201     $104,474    
         
Percent Change   3.6 %      
         
  Six Months Ended  
  June 30, 2017   June 30, 2016  
         
Income from continuing operations before income taxes $193,442     $149,475    
Share of same property NOI from unconsolidated joint ventures   7,473       8,360    
Income and expense items not allocated to segments   64,461       87,955    
Earnings from service operations   (2,977 )     (6,047 )  
Properties not included and other adjustments   (46,321 )     (33,180 )  
Same property NOI $216,078     $206,563    
         
Percent Change   4.6 %      
         
         
Duke Realty Corporation and Subsidiaries
Reconciliation of 2017 FFO Guidance
(Unaudited )
         
  Pessimistic   Optimistic  
Net income per common share, diluted $4.40     $4.66    
Depreciation and gains on sales of depreciated property (including share of joint venture)   (3.20 )     (3.33 )  
FFO per share - diluted, as defined by NAREIT $1.20     $1.33    
Gains on land sales   0.00       (0.05 )  
Other reconciling items   0.00       (0.02 )  
Core FFO per share - diluted $1.20     $1.26    

 

 

Contact Information:

Investors:
Ron Hubbard
317.808.6060

Media:
Helen McCarthy
317.708.8010

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