-- Funds from operations per diluted share ("FFO") was $0.29 for the
quarter, which includes the effects of $18.7 million of impairment and
other non-cash charges and $1.5 million of gains on repurchases of
unsecured bonds. Without the effects of these non-cash items, FFO for
the quarter was $0.37, in line with expectations.
-- Liquidity position further enhanced during the quarter:
-- $575.0 million raised in sale of 75.2 million shares of common
stock in follow-on public offering closed April 21, 2009;
-- $114.0 million in secured financing closed on July 16, 2009;
-- $73.3 million in cash generated from property and land sales;
-- $21.5 million par value of unsecured debt obligations repurchased
at a discount.
-- Capital raised through July 2009 exceeded $970.0 million; anticipate
capital raised in 2009 in excess of $1.2 billion upon closing of $280.0
million of secured debt financing in third quarter.
-- 2009 FFO guidance reaffirmed: $1.42 - $1.64 per share as adjusted for
the additional shares issued in the April 2009 common stock offering
($1.85 - $2.15 per share pre-offering).
"We are pleased that we have been able to raise nearly $1 billion of
capital to date in 2009," said Dennis D. Oklak, chairman and chief
executive officer. "We are focused on using funds to reduce leverage. We
are on track with our capital plan and, as of mid-July, have a zero balance
outstanding on our credit facility."
Financial Performance
-- FFO for the second quarter of 2009 was $0.29 (including $0.13 per
share dilution resulting from the company's common offering in April),
compared to $0.59 for the second quarter of 2008. Second quarter 2009 FFO
includes impairments and other non-cash charges of $18.7 million ($0.09 per
share), partially offset by $1.5 million ($0.01per share) of gains on the
repurchase of unsecured debt obligations. Excluding the impact of these
non-cash items, FFO would have been $0.37 for the second quarter of 2009.
-- Net income per diluted share (EPS) for the second quarter 2009 was a
loss of $0.16, as compared to earnings of $0.11 for the same quarter in
2008. The loss was primarily attributable to impairment charges incurred
and higher depreciation expense recognized in the second quarter of 2009.
Financing Update
The company announced the following transactions which, in the aggregate,
have or will add additional liquidity and strengthen the company's balance
sheet:
-- Completion on April 21, 2009, of an underwritten public offering of
75,210,000 shares of the company's common stock at a price per share of
$7.65. The offering raised $575.0 million ($551.9 million of net
proceeds), which the company used to repay outstanding borrowings under its
unsecured line of credit and for general corporate purposes.
-- Completion of a $114.0 million, 10-year secured debt financing on July
16, 2009. The loan is secured by a portfolio of suburban office and
industrial assets.
-- Execution of a commitment letter in July for a $280.0 million 7-year
secured loan. The loan, subject to closing, will be secured by suburban
office and industrial assets. The company anticipates the closing of this
loan in the third quarter of 2009. The company is also actively discussing
additional secured debt financing, which the company believes may generate
proceeds in the range of $75 million to $100 million in 2009. To the
extent that such financing is finalized, it also would be secured by a
geographically diverse portfolio of suburban office and industrial assets.
As of June 30, 2009, the company had $5.9 billion of in-service,
unencumbered assets in its portfolio.
-- Repurchase of $21.5 million in outstanding unsecured debt that was
scheduled to mature in 2010 and 2011. Year to date, the company has
repurchased $191.0 million par value of unsecured debt maturing at various
dates from 2009 through 2011 for $150.0 million at an average discount of
21.5 percent.
Portfolio Performance
-- Overall portfolio occupancy, including projects under development, was
87.4 percent as of June 30, 2009, compared to 87.3 percent at March 31,
2009.
-- Stabilized, in-service properties (128 million square feet) were 88.5
percent leased at June 30, 2009, compared with 89.7 percent at March 31,
2009. This decrease is attributable to the addition of 11 recently
developed properties aggregating 3.3 million square feet which were 42
percent leased at June 30, 2009. The company classifies a property as
stabilized upon the earlier of its reaching 90% occupancy or one year after
its in-service date. The decrease in stabilized occupancy as a result of
these newly developed assets was anticipated by the company.
-- Tenant retention for the second quarter of 2009 was 81.9 percent, with
growth in net effective rents on renewals of 3.1 percent.
-- Same store net operating income decreased by 1.6 percent for the
second quarter of 2009, compared with the three-month period ended June 30,
2008. Same store net operating income increased by approximately 1.6
percent for the 12-month period ended June 30, 2009, compared with the 12-
month period ended June 30, 2008.
Real Estate Investment Activity
Development
Wholly Owned Properties
-- The company's wholly owned development pipeline at June 30, 2009,
consists mostly of projects that are in the final stages of completion. The
total estimated costs of these projects upon stabilization are $297.1
million, with $130.0 million in remaining costs to be funded. The pipeline
is comprised of 13 properties (1.7 million square feet), which are 89
percent pre-leased.
-- The company began only one project during the quarter: an expansion of
a bulk distribution facility in Phoenix which is 100% leased and scheduled
for contribution to a joint venture upon completion in the second half of
2009.
-- The company placed into service three healthcare properties (242,000
square feet), of which two were 100% leased and one was 10% leased upon
completion.
Joint Venture Properties
-- The company's joint venture development pipeline at June 30, 2009,
consists mostly of projects that are in the final stages of completion. The
total estimated costs of these projects upon stabilization are $339.5
million, with $118.0 million in remaining costs to be funded. The pipeline
is comprised of 3 properties (1.1 million square feet), which are 26
percent pre-leased. Each joint venture has obtained third-party debt to
finance construction of these properties. (All joint venture costs and
square footage are reported at 100 percent ownership.)
-- Two speculative industrial assets were placed in service during the
quarter: a 503,000 square foot bulk industrial property in the Dugan
Realty joint venture and a 533,000 square foot bulk industrial building in
the AllPoints Midwest joint venture. Neither property is leased.
Acquisitions
The company acquired two industrial properties aggregating 450,000 square
feet near the Port of Savannah, Georgia. These properties are 100% leased.
Dispositions
-- During the quarter, the company completed the disposition of five
assets, including three properties contributed to the company's joint
venture with CB Richard Ellis Realty Trust. The company realized gross
proceeds of $65.8 million at an aggregate capitalization rate of 9.0%.
-- The company sold approximately 30 acres of undeveloped land that no
longer met its growth objectives. These sales generated gross proceeds of
$7.5 million.
Real Estate Valuation - Impairment and Other Charges
During the second quarter of 2009, the company recorded impairment and
other charges for the quarter of $18.7 million, pertaining to certain land
parcels sold or held for sale ($4.6 million), properties sold or held for
sale ($7.4 million), and investments in joint ventures ($6.7 million).
These charges were the result of increases in estimated capitalization
rates and changes in market conditions that negatively affected values.
These non-cash charges have no effect on liquidity, and have no impact on
compliance with the company's credit facility or unsecured bond covenants.
General and Administrative Expenses
General and administrative expenses for the second quarter aggregated $13.6
million, compared with $6.9 million for the same period in 2008. The second
quarter 2009 expenses include approximately $3.5 million of severance
payments resulting from a reduction in workforce during the quarter. Year
to date non-recurring severance costs included in general and
administrative expenses totaled $6.1 million.
As a result of current economic conditions, the company's workforce has
been reduced approximately 26 percent since the beginning of 2008 and most
development activities have been curtailed.
Dividends Declared
The company's board of directors has declared a quarterly cash dividend on
the company's common stock of $0.17 per share, or $0.68 per share on an
annualized basis. The second quarter dividend will be payable August 31,
2009, to shareholders of record as of August 14, 2009. The company's policy
is to pay aggregate annual dividends in 2009 in an amount generally equal
to and not to exceed its annual taxable income.
The board also declared the following dividends on the company's
outstanding preferred stock:
NYSE Quarterly
Class Symbol Amount/Share Record Date Payment Date
------ ------------ ------------------ ------------------
Series J DREPRJ $ 0.414063 August 17, 2009 August 31, 2009
Series K DREPRK $ 0.406250 August 17, 2009 August 31, 2009
Series L DREPRL $ 0.412500 August 17, 2009 August 31, 2009
Series M DREPRM $ 0.434375 September 16, 2009 September 30, 2009
Series N DREPRN $ 0.453125 September 16, 2009 September 30, 2009
Series O DREPRO $ 0.523438 September 16, 2009 September 30, 2009
Earnings Guidance Reaffirmed
The company reaffirmed FFO guidance for 2009 of $1.42 - $1.64 per share, as
adjusted for the additional shares issued in the April 2009 common stock
offering ($1.85 - $2.15 per share pre-offering). Based upon current
expectations of leasing volumes, tenant delinquencies and other economic
conditions for the rest of 2009, it is anticipated that FFO per share will
be at the lower end of guidance. Guidance excludes the effects of
impairment and other non-cash charges and gains on the repurchase of the
company's securities.
About Duke Realty Corporation
Duke Realty Corporation owns and operates approximately 136 million
rentable square feet of industrial and office space in 20 U.S. cities. Duke
Realty Corporation is publicly traded on the NYSE under the symbol DRE and
is listed on the S&P MidCap 400 Index. More information about Duke is
available at www.dukerealty.com.
Second Quarter Earnings Call and Supplemental Information
Duke is hosting a conference call tomorrow, July 30, 2009, at 3:00 p.m. EDT
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 Web site.
A copy of the company's supplemental information fact book will be
available after 6:00 p.m. EDT today through the Investor Relations section
of the company's Web site.
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, projected financing sources, future
transactions with joint venture partners, 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, including the
current economic recession; (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) increases in operating
costs; (x) changes in the dividend policy for the company's common stock;
(xi) the reduction in the company's income in the event of multiple lease
terminations by tenants; and (xii) impairment charges. 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,
2008. 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
Statement of Operations
June 30, 2009
(In thousands, except per share amounts)
Quarter Ended Six Months Ended
-------------------- --------------------
June 30, June 30,
-------------------- --------------------
2009 2008 2009 2008
--------- --------- --------- ---------
Revenues:
Rental and related revenue $ 224,987 $ 211,613 $ 445,700 $ 423,248
General contractor revenue 119,705 85,635 218,062 162,394
Service fee revenue 7,537 8,613 14,274 16,137
--------- --------- --------- ---------
352,229 305,861 678,036 601,779
--------- --------- --------- ---------
Expenses:
Rental expenses 49,016 44,917 103,160 95,153
Real estate taxes 29,946 25,806 59,085 51,262
General contractor costs 111,212 81,248 202,615 154,421
Service Operations expenses 7,063 7,368 12,406 14,437
Depreciation and amortization 86,745 75,525 166,678 151,129
--------- --------- --------- ---------
283,982 234,864 543,944 466,402
--------- --------- --------- ---------
Other Operating Activities
Equity in earnings of
unconsolidated companies 2,462 6,881 4,989 16,980
Gain on sale of
Build-for-Sale properties,
net of tax 0 4,758 0 5,130
Earnings from sales of land,
net 0 3,393 0 4,022
Undeveloped land carrying
costs (2,680) (1,911) (5,045) (4,060)
Impairment charges (16,949) 0 (16,592) 0
Other operating expenses (182) (1,991) (520) (2,799)
General and administrative
expense (13,600) (6,889) (23,480) (19,052)
--------- --------- --------- ---------
(30,949) 4,241 (40,648) 221
--------- --------- --------- ---------
Operating income 37,298 75,238 93,444 135,598
Other Income (Expense)
Interest and other income
(expense), net 5 (541) 128 1,018
Interest expense (52,025) (47,841) (104,073) (95,944)
Gain on extinguishment of
debt 1,449 0 34,511 0
Net loss on business
combinations (999) 0 (999) 0
--------- --------- --------- ---------
Income (loss) from
continuing operations (14,272) 26,856 23,011 40,672
Discontinued Operations:
Income from discontinued
operations before impairment
and gain on sales (103) (159) 82 2,640
Impairment charges (772) 0 (772) 0
Gain on sale of depreciable
properties 49 9,531 5,168 10,641
--------- --------- --------- ---------
Income (loss) from
discontinued operations (826) 9,372 4,478 13,281
Net income (loss) (15,098) 36,228 27,489 53,953
Dividends on preferred shares (18,363) (18,866) (36,726) (34,172)
Net (income) loss attributable
to noncontrolling interests 1,055 (1,105) 421 (991)
--------- --------- --------- ---------
Net income (loss)
attributable to common
shareholders ($ 32,406) $ 16,257 ($ 8,816) $ 18,790
========= ========= ========= =========
Basic net income (loss) per
Common Share:
Continuing operations
attributable to common
shareholders ($ 0.15) $ 0.05 ($ 0.08) $ 0.03
Discontinued operations
attributable to common
shareholders ($ 0.01) $ 0.06 $ 0.02 $ 0.09
--------- --------- --------- ---------
Total ($ 0.16) $ 0.11 ($ 0.06) $ 0.12
========= ========= ========= =========
Diluted net income (loss) per
Common Share:
Continuing operations
attributable to common
shareholders ($ 0.15) $ 0.05 ($ 0.08) $ 0.03
Discontinued operations
attributable to common
shareholders ($ 0.01) $ 0.06 $ 0.02 $ 0.09
--------- --------- --------- ---------
Total ($ 0.16) $ 0.11 ($ 0.06) $ 0.12
========= ========= ========= =========
Duke Realty Corporation
Statement of Funds From Operations
June 30, 2009
(In thousands, except per share amounts)
Three Months Ended
June 30,
(Unaudited)
---------------------------------------------------
2009 2008
-------------------------- -----------------------
Wtd. Wtd.
Avg. Per Avg. Per
Amount Shares Share Amount Shares Share
--------- ------- ------- -------- ------- ------
Net Income (Loss)
Attributable to
Common Shares ($ 32,406) $ 16,257
Less income allocated
to participating
securities (403) (402)
--------- --------
Net Income (Loss) Per
Common Share- Basic (32,809) 207,290 ($ 0.16) 15,855 146,741 $ 0.11
Add back:
Noncontrolling
interest in
earnings of
unitholders - - 872 7,684
Other common
stock
equivalents - 199
--------- ------- -------- -------
Net Income (Loss) Per
Common Share-
Diluted ($ 32,809) 207,290 ($ 0.16) $ 16,727 154,624 $ 0.11
========= ======= ======== =======
Reconciliation to
Funds From
Operations ("FFO")
Net Income (Loss)
Attributable to
Common Shares ($ 32,406) 207,290 $ 16,257 146,741
Adjustments:
Depreciation and
Amortization 86,818 76,575
Company Share of
Joint Venture
Depreciation
and amortization 8,251 7,391
Earnings from
depreciable
property
sales-wholly
owned (49) (9,531)
Earnings from
depreciable
property
sales-JV - (476)
Noncontrolling
interest share
of adjustments (2,985) (3,662)
--------- ------- -------- -------
Funds From
Operations- Basic 59,629 207,290 $ 0.29 86,554 146,741 $ 0.59
Noncontrolling
interest in
earnings of
unitholders (1,051) 6,725 872 7,684
Noncontrolling
interest share
of adjustments 2,985 3,662
Other common
stock
equivalents 764 639
--------- ------- -------- -------
Funds From
Operations- Diluted 61,563 214,779 $ 0.29 91,088 155,064 $ 0.59
Less gains on
extinguishment
of debt (1,449) -
Add back
impairment and
other
non-recurring
charges 18,720 -
--------- ------- -------- -------
Adjusted Funds From
Operations- Diluted $ 78,834 214,779 $ 0.37 91,088 155,064 $ 0.59
========= ======= ======== =======
Six Months Ended
June 30,
(Unaudited)
----------------------------------------------------
2009 2008
-------------------------- ------------------------
Wtd. Wtd.
Avg. Per Avg. Per
Amount Shares Share Amount Shares Share
--------- ------- ------- -------- ------- ------
Net Income (Loss)
Attributable to
Common Shares ($ 8,816) $ 18,790
Less income allocated
to participating
securities (976) (809)
--------- --------
Net Income (Loss) Per
Common Share- Basic (9,792) 178,052 ($ 0.06) 17,981 146,536 $ 0.12
Add back:
Noncontrolling
interest in
earnings of
unitholders - - 1,010 7,771
Other common
stock
equivalents - 170
--------- ------- -------- -------
Net Income (Loss) Per
Common Share-
Diluted ($ 9,792) 178,052 ($ 0.06) $ 18,991 154,477 $ 0.12
========= ======= ======== =======
Reconciliation to
Funds From
Operations ("FFO")
Net Income (Loss)
Attributable to
Common Shares ($ 8,816) 178,052 $ 18,790 146,536
Adjustments:
Depreciation and
Amortization 167,026 155,696
Company Share of
Joint Venture
Depreciation
and amortization 19,469 14,319
Earnings from
depreciable
property
sales-wholly
owned (5,168) (10,641)
Earnings from
depreciable
property
sales-JV - (495)
Noncontrolling
interest share
of adjustments (6,618) (7,988)
--------- ------- -------- -------
Funds From
Operations- Basic 165,893 178,052 $ 0.93 169,681 146,536 $ 1.16
Noncontrolling
interest in
earnings of
unitholders (334) 6,745 1,010 7,771
Noncontrolling
interest share
of adjustments 6,618 7,988
Other common
stock
equivalents 638 587
--------- ------- -------- -------
Funds From
Operations- Diluted 172,177 185,435 $ 0.93 178,679 154,894 $ 1.15
Less gains on
extinguishment
of debt (34,511) -
Add back
impairment and
other
non-recurring
charges 18,363 -
--------- ------- -------- -------
Adjusted Funds From
Operations- Diluted $ 156,029 185,435 $ 0.84 178,679 154,894 $ 1.15
========= ======= ======== =======
Duke Realty Corporation
Balance Sheet
June 30, 2009
(In thousands, except per share amounts)
June 30, December 31,
2009 2008
=========== =============
ASSETS:
Rental Property $ 6,466,795 $ 6,297,923
Less: Accumulated Depreciation (1,252,221) (1,167,113)
Construction in Progress 168,103 159,330
Land Held for Development 812,003 806,379
----------- -------------
Net Real Estate Investments 6,194,680 6,096,519
----------- -------------
Cash 26,699 22,532
Accounts Receivable 22,157 28,026
Straight-line Rents Receivable 128,172 123,863
Receivables on Construction Contracts 68,124 75,100
Investments in and Advances to Unconsolidated
Companies 486,937 693,503
Deferred Financing Costs, Net 44,484 47,907
Deferred Leasing and Other Costs, Net 387,915 369,224
Escrow Deposits and Other Assets 236,228 234,209
----------- -------------
Total Assets $ 7,595,396 $ 7,690,883
=========== =============
LIABILITIES AND SHAREHOLDERS' EQUITY:
Secured Debt $ 666,405 $ 507,351
Unsecured Notes 2,978,568 3,285,980
Unsecured Line of Credit 92,923 483,659
Construction Payables and Amounts due
Subcontractors 96,632 105,227
Accrued Real Estate Taxes 91,577 78,483
Accrued Interest 51,981 56,376
Accrued Expenses 27,265 45,059
Other Liabilities 180,805 187,425
Tenant Security Deposits and Prepaid Rents 32,285 41,348
----------- -------------
Total Liabilities 4,218,441 4,790,908
----------- -------------
Preferred Stock 1,016,625 1,016,625
Common Stock and Additional Paid-in Capital 3,264,884 2,703,997
Accumulated Other Comprehensive Income (7,149) (8,652)
Distributions in Excess of Net Income (953,216) (867,951)
----------- -------------
Total Shareholders' Equity 3,321,144 2,844,019
----------- -------------
Non-controlling Interest 55,811 55,956
----------- -------------
Total Liabilities and Equity $ 7,595,396 $ 7,690,883
=========== =============
Contact Information: Contact Information: Media: Jim Bremner 317.808.6920 jim.bremner@dukerealty.com Investors: Randy Henry 317.808.6060 randy.henry@dukerealty.com