-- Recurring funds from operations per diluted share ("Recurring FFO") was
$0.28 for the quarter. There were no material non-recurring
adjustments to FFO recognized in the quarter.
-- Positive momentum in operating performance:
-- Overall portfolio occupancy at 87.5 percent, up from 87.2 percent
at year end 2009;
-- Tenant retention rate over 82 percent;
-- Over 5.5 million square feet of leases completed during the
quarter.
-- Executing capital strategy; balance sheet strengthened:
-- $100.0 million of unsecured bonds retired in January with available
cash;
-- $122.6 million in proceeds generated from first quarter asset
dispositions;
-- $250.0 million offering of 6.75% unsecured bonds;
-- $212.2 million par value unsecured bonds with 2011 and 2013
maturity dates repurchased in April 2010.
"We are beginning to see signs that the economy is improving," said Dennis
D. Oklak, chairman and chief executive officer. "For the quarter, we were
able to maintain occupancy levels from year end 2009 on our overall
portfolio, execute the highest first quarter leasing activity in five
years, and successfully dispose of non-strategic assets in alignment with
our operating strategy. Additionally, I am very pleased with how we are
executing on our capital strategy."
Financial Performance
-- Recurring FFO for the first quarter was $0.28 compared with $0.50 for
the first quarter of 2009. The variance is primarily attributable to
an increase in our weighted average share count due to the common
equity offering in April 2009.
-- Net income per diluted share (EPS) for first quarter 2010 was a loss of
$0.07, as compared to earnings of $0.15 for the same quarter in 2009.
The variance is primarily attributable to $33.1 million of gains
realized from the repurchase of the company's unsecured bonds during
the first quarter of 2009.
Capital Markets
The company has continued to address near-term debt obligations and execute
on deleveraging actions, including:
-- Retired $100 million of 6.25% unsecured bonds with available cash.
-- Repurchased in the open market $15 million principal amount of its 2011
exchangeable notes.
-- On April 1, 2010, executed a $250 million offering of 6.75% senior
unsecured notes due March 15, 2020.
-- Also in April, repurchased $212.2 million principal amount of unsecured
bonds through a tender offer comprised of the following:
-- $66.4 million of its 6.95% March 2011 senior notes, repurchased on
April 1, 2010;
-- $95.8 million of its 5.625% August 2011 senior notes repurchased on
April 20, 2010; and
-- $50.0 million of its 6.25% May 2013 senior notes repurchased on
April 20, 2010.
As a result of these and previously announced capital transactions, the
company has $880 million of available liquidity to repay 2011 maturities
and pursue strategic opportunities. This liquidity consists of $850 million
available on the company's unsecured line of credit and $30 million of cash
on hand as of March 31, 2010.
Portfolio Performance
Specific operational highlights include:
-- Overall portfolio occupancy, including projects under development, of
87.5 percent as of March 31, 2010, compared to 87.2 percent at
December 31, 2009.
-- Tenant retention for the quarter of 82.7 percent.
-- Same property net operating income decreased by 2.5 percent for the
first quarter of 2010, compared with the three-month period ended
March 31, 2009; in-line with expectations.
"Although the environment remains challenging, we are pleased to report
that the second half of the first quarter showed a significant improvement
in our operations. The primary driver was leasing activity in our bulk
warehouse portfolio," stated Mr. Oklak.
Real Estate Investment Activity
Development
Wholly Owned Properties
-- The company's wholly owned development pipeline at March 31, 2010
consists of three significantly pre-leased projects. The total
estimated costs of these projects upon stabilization are $95.5 million,
with $17.1 million in costs remaining to be funded. The pipeline is
463,000 square feet and 99.0 percent pre-leased in the aggregate.
-- During the first quarter 2010, the company placed into service a
202,000 square foot office building that was 100.0% pre-leased.
Joint Venture Properties
-- The company's joint venture development pipeline at March 31, 2010,
consists of three projects which total 956,000 square feet and are 52
percent pre-leased. The total estimated costs of these projects upon
stabilization are $326.6 million, with $185.3 million in remaining
costs to be funded. (All joint venture costs and square footage are
reported for 100 percent ownership.)
Dispositions
Proceeds from first quarter non-strategic building dispositions were $122.6
million at a stabilized capitalization rate of 9.5 percent and were
primarily comprised of Midwest office and non-strategic properties.
Significant dispositions included:
-- Four office buildings located in Columbus, Ohio totaling over 322,000
square feet;
-- Three office buildings located in Raleigh, North Carolina totaling over
265,000 square feet that were sold to our CBRE Realty Trust joint
venture;
-- A retail center located in Cincinnati, Ohio totaling 360,000 square
feet; and
-- A 247,500 square feet industrial building sold to a user from a joint
venture in which the company has a 50% ownership interest.
Acquisitions
Within our joint venture with CBRE Realty Trust, we acquired two office
buildings located in the South Florida area totaling over 222,000 square
feet that are 100% leased. The company's 20% share of the acquisition price
was approximately $8.7 million with a projected stabilized return of 9.5%.
Dividends Declared
The company's board of directors 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 first quarter dividend will be payable May 31, 2010,
to shareholders of record as of May 17, 2010.
The board also declared the following dividends on the company's
outstanding preferred stock:
Quarterly
NYSE Amount/ Record Payment
Class Symbol Share Date Date
-------- ------ --------- ------------- -------------
Series J DREPRJ $0.414063 May 17, 2010 May 31, 2010
Series K DREPRK $0.406250 May 17, 2010 May 31, 2010
Series L DREPRL $0.412500 May 17, 2010 May 31, 2010
Series M DREPRM $0.434375 June 16, 2010 June 30, 2010
Series N DREPRN $0.453125 June 16, 2010 June 30, 2010
Series O DREPRO $0.523438 June 16, 2010 June 30, 2010
2010 Earnings Guidance
The company reaffirmed Recurring FFO guidance for 2010 of $0.95 to $1.15
per share.
Information Regarding FFO
We compute FFO in accordance with standards established by the National
Association of Real Estate Investment Trusts ("NAREIT"). NAREIT defines
FFO as net income (loss) before non-controlling interest and excluding
gains (losses) on sales of depreciable property and extraordinary items
(computed in accordance with generally accepted accounting principles
("GAAP")); plus real estate related depreciation and amortization, and
after similar adjustments for unconsolidated joint ventures. We believe
FFO to be most directly comparable to net income as defined by GAAP. We
believe 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 our cash needs, including our ability to
make cash distributions to shareholders. A reconciliation of net income
per share, as defined by GAAP, to FFO per share, as defined by NAREIT, is
included in the financial information accompanying this release.
For information purposes, we also provide FFO adjusted for certain
non-recurring items such as impairment charges, gains (losses) on debt
transactions and gains (losses) on the repurchases of preferred stock to
reflect what management defines as Recurring FFO. Although our calculation
of Recurring FFO differs from NAREIT's definition of FFO and may not be
comparable to that of other REITs and real estate companies, we believe it
provides a meaningful supplemental measure of our operating performance. A
reconciliation of FFO as defined by NAREIT to Recurring FFO is included in
the Financial Performance section of this release.
About Duke Realty Corporation
Duke Realty Corporation owns and operates more than 134 million rentable
square feet of industrial and office, including medical office, space in 18
major 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.
First Quarter Earnings Call and Supplemental Information
Duke is hosting a conference call tomorrow, April 29, 2010, at 3:00 p.m.
EDT to discuss its first 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 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,
2009. 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
March 31, 2010
(In thousands, except per share amounts)
Three Months Ended
--------------------
March 31,
--------------------
2010 2009
--------- ---------
Revenues:
Rental and related revenue $ 222,020 $ 217,285
General contractor and service fee revenue 113,641 105,088
--------- ---------
335,661 322,373
--------- ---------
Expenses:
Rental expenses 53,792 53,416
Real estate taxes 30,190 28,591
General contractor and service operations expenses 107,162 99,447
Depreciation and amortization 83,461 78,986
--------- ---------
274,605 260,440
--------- ---------
Other Operating Activities
Equity in earnings of unconsolidated companies 4,929 2,527
Gain on sale of properties 2,069 -
Earnings from sales of land - 357
Undeveloped land carrying costs (2,251) (2,365)
Other operating expenses (277) (338)
General and administrative expense (13,544) (9,880)
--------- ---------
(9,074) (9,699)
--------- ---------
Operating income 51,982 52,234
Other Income (Expense)
Interest and other income (expense), net 151 123
Interest expense (59,021) (51,011)
Gain (loss) on debt transactions (354) 33,062
--------- ---------
Income (loss) from continuing operations before
income taxes (7,242) 34,408
Income tax benefit - 2,707
--------- ---------
Income (loss) from continuing operations (7,242) 37,115
Discontinued Operations:
Income before impairment and gain on sales 112 353
Gain on sale of depreciable properties 9,778 5,119
--------- ---------
Income from discontinued operations 9,890 5,472
Net income 2,648 42,587
Dividends on preferred shares (18,363) (18,363)
Net (income) loss attributable to noncontrolling
interests 451 (977)
--------- ---------
Net income (loss) attributable to common
shareholders ($ 15,264) $ 23,247
========= =========
Basic net income (loss) per Common Share:
Continuing operations attributable to common
shareholders ($ 0.11) $ 0.12
Discontinued operations attributable to common
shareholders $ 0.04 $ 0.03
--------- ---------
Total ($ 0.07) $ 0.15
========= =========
Diluted net income (loss) per Common Share:
Continuing operations attributable to common
shareholders ($ 0.11) $ 0.12
Discontinued operations attributable to common
shareholders $ 0.04 $ 0.03
--------- ---------
Total ($ 0.07) $ 0.15
========= =========
Duke Realty Corporation
Statement of Funds From Operations
March 31, 2010
(In thousands, except per share amounts)
Three Months Ended
March 31,
(Unaudited)
----------------------------------------------------
2010 2009
-------------------------- ------------------------
Wtd. Wtd.
Avg. Per Avg. Per
Amount Shares Share Amount Shares Share
--------- ------- ------- -------- ------- -------
Net Income (Loss)
Attributable to
Common Shares ($ 15,264) $ 23,247
Less: Dividends on
share based awards
expected to vest (502) (515)
--------- --------
Net Income (Loss)
Per Common Share-
Basic (15,766) 224,153 ($ 0.07) 22,732 148,488 $ 0.15
Add back:
Noncontrolling
interest in
earnings of
unitholders - 1,060 6,766
Other
potentially
dilutive
securities 493
--------- ------- -------- -------
Net Income (Loss)
Per Common Share-
Diluted ($ 15,766) 224,153 ($ 0.07) $ 23,792 155,747 $ 0.15
========= ======= ======== =======
Reconciliation to
Funds From
Operations ("FFO")
Net Income (Loss)
Attributable to
Common Shares ($ 15,264) 224,153 $ 23,247 148,488
Adjustments:
Depreciation and
amortization 84,168 80,208
Company share of
joint venture
depreciation
and
amortization 9,563 11,218
Earnings from
depreciable
property
sales-wholly
owned,
continuing
operations (9,778) (5,119)
Earnings from
depreciable
property
sales-wholly
owned,
discontinued
operations (2,069) -
Earnings from
depreciable
property
sales-JV (2,304) -
Noncontrolling
interest share
of adjustments (2,278) (3,761)
--------- ------- -------- -------
Funds From
Operations- Basic 62,038 224,153 $ 0.28 105,793 148,488 $ 0.71
Noncontrolling
interest in
earnings (loss)
of unitholders (449) 6,607 1,060 6,766
Noncontrolling
interest share
of adjustments 2,278 3,761
Other
potentially
dilutive
securities 1,435 493
--------- ------- -------- -------
Funds From
Operations- Diluted 63,867 232,195 $ 0.28 110,614 155,747 $ 0.71
(Gains) losses
on debt
transactions 354 (33,062)
(Gains) losses
on land sales - (357)
--------- ------- -------- -------
Recurring Funds From
Operations- Diluted $ 64,221 232,195 $ 0.28 77,195 155,747 $ 0.50
========= ======= ======== =======
Duke Realty Corporation
Balance Sheet
March 31, 2010
(In thousands, except per share amounts)
March 31, December 31,
2010 2009
----------- -----------
ASSETS:
Rental Property $ 6,298,396 $ 6,390,119
Less: Accumulated Depreciation (1,313,671) (1,311,733)
Construction in Progress 88,485 103,298
Land Held for Development 655,947 660,723
----------- -----------
Net Real Estate Investments 5,729,157 5,842,407
----------- -----------
Cash 30,999 147,322
Accounts Receivable 20,798 20,604
Straight-line Rents Receivable 133,138 131,934
Receivables on Construction Contracts 40,982 18,755
Investments in and Advances to Unconsolidated
Companies 516,356 501,121
Deferred Financing Costs, Net 51,302 54,489
Deferred Leasing and Other Costs, Net 360,702 371,286
Escrow Deposits and Other Assets 208,834 216,361
----------- -----------
Total Assets $ 7,092,268 $ 7,304,279
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY:
Secured Debt $ 785,769 $ 785,797
Unsecured Notes 2,938,688 3,052,465
Unsecured Line of Credit 15,876 15,770
Construction Payables and Amounts due
Subcontractors 58,568 43,147
Accrued Real Estate Taxes 80,986 84,347
Accrued Interest 36,612 62,971
Accrued Expenses 27,733 48,758
Other Liabilities 194,901 198,906
Tenant Security Deposits and Prepaid Rents 35,947 44,258
----------- -----------
Total Liabilities 4,175,080 4,336,419
----------- -----------
Preferred Stock 1,016,625 1,016,625
Common Stock and Additional Paid-in Capital 3,273,760 3,269,436
Accumulated Other Comprehensive Income (4,906) (5,630)
Distributions in Excess of Net Income (1,409,048) (1,355,086)
----------- -----------
Total Shareholders' Equity 2,876,431 2,925,345
----------- -----------
Non-controlling Interest 40,757 42,515
----------- -----------
Total Liabilities and Equity $ 7,092,268 $ 7,304,279
=========== ===========
Contact Information: Contact Information: Media: Jim Bremner 317.808.6920 jim.bremner@dukerealty.com Investors: Randy Henry 317.808.6060 randy.henry@dukerealty.com