-- Core funds from operations per diluted share ("Core FFO") was $0.29 for
the quarter. Funds from Operations per diluted share ("FFO") as defined
by the National Association of Real Estate Investment Trusts ("NAREIT")
was $0.17 for the quarter and included $20.3 million ($0.09 per share)
of losses on debt and preferred stock transactions, and $8.0 million
($0.03 per share) representing a non-cash impairment charge on an
asset sale.
-- Strategic acquisition of industrial portfolio announced:
-- In June, the company announced the acquisition of its joint venture
partner's 50 percent interest in Dugan Realty, L.L.C. ("Dugan") for
$298.2 million, including the assumption of our partner's share of
the venture's debt of $141.5 million. The transaction closed on
July 1, 2010.
-- Overall portfolio occupancy increased:
-- Overall portfolio occupancy at June 30, 2010 was 87.9 percent, up
from 87.2 percent at year-end 2009 and 87.5 percent at March 31,
2010;
-- Tenant retention rate was over 76 percent; and
-- Approximately 6 million square feet of leases were completed during
the quarter.
-- Significant capital market transactions:
-- $310.8 million raised in sale of 26.45 million shares of common
equity executed in conjunction with the acquisition of joint
venture partner's interest in Dugan;
-- $260.7 million par value unsecured bonds with 2011 and 2013
maturity dates repurchased in quarter through tender offer and open
market purchases;
-- $250.0 million offering of ten-year, 6.75% unsecured bonds executed
in April;
-- $55.7 million face amount of 8.375% Series O preferred stock
repurchased in open market; and
-- $40.7 million in proceeds generated from second quarter asset
dispositions.
-- 2010 Core FFO guidance reaffirmed at $0.95 - $1.15 per share range,
including the effect of the additional shares issued in the June 2010
common equity offering.
Financial Performance
-- Core FFO for the second quarter was $0.29 compared with $0.37 for the
second quarter of 2009. The year over year change is primarily
attributable to an increase in debt costs in 2010 and an increase in
the company's weighted average share count due to common equity
offerings in April 2009 and June 2010. FFO as defined by NAREIT was
$0.17 and $0.29 for the second quarter 2010 and 2009, respectively.
Included in the $0.17 per share for 2010 are $20.3 million ($0.09 per
share) of losses on debt and preferred stock transactions, and an $8.0
million ($0.03 per share) non-cash impairment charge on an asset sale.
Included in the 2009 second quarter FFO of $0.29 were $18.7 million
($0.09 per share) of non-cash impairment charges and a $1.5 million
($0.01 per share) gain on debt transactions. A reconciliation of FFO as
defined by NAREIT to Core FFO is included in the Financial Performance
section of this release.
-- Net income per diluted share (EPS) for second quarter 2010 was a loss
of $0.19, as compared to a loss of $0.16 for the same quarter in 2009.
The losses in both periods were primarily the result of non-cash
impairment charges of $8.0 million and $18.7 million recognized in the
second quarter of 2010 and 2009, respectively, and $20.3 million of
losses on debt and preferred stock repurchases during the second
quarter of 2010.
Capital Markets Transactions
The company has significantly improved its liquidity position while
executing on deleveraging actions, including:
-- Completed the issuance and sale of 26.45 million shares of common stock
in a public offering at a price of $11.75 per share, generating gross
proceeds of $310.8 million ($298.1 million in net proceeds). The
company used the proceeds to fund the acquisition of its joint venture
partner's interest in Dugan, repay debt, repurchase preferred stock and
for general corporate purposes.
-- Repurchased in the open market and through a tender offer $260.7
million principal amount of its 2011 and 2013 unsecured bonds. A loss
of approximately $15.8 million for the quarter was recognized in
conjunction with these repurchases. Year to date the company has
repurchased $275.7 million of unsecured bonds.
-- Executed a $250 million offering of 6.75% senior unsecured notes due
March 15, 2020.
-- Repurchased $55.7 million face amount of 8.375% Series O preferred
stock in the open market. In conjunction with these repurchases, a
loss of approximately $4.5 million was recognized.
As a result of these and previously announced capital transactions, the
company has no outstanding borrowings on its $850 million unsecured line of
credit and $256.3 million of cash on hand as of June 30, 2010, to fund the
closing of the Dugan acquisition and for repayment of debt assumed in the
transaction.
Portfolio Performance
Operational highlights include:
-- Overall portfolio occupancy, including projects under development was
87.9 percent as of June 30, 2010, compared to 87.5 percent at
March 31, 2010.
-- Tenant retention for the quarter was 76.3 percent.
-- Same-property net operating income for the three and twelve months
ended June 30th decreased 1.6 percent and 3.0 percent, respectively and
in line with our expectations.
Real Estate Investment Activity
Acquisitions
In June, the company announced the acquisition of its joint venture
partner's 50 percent interest in Dugan. The purchase price was $298.2
million, including the assumption of our partner's share of the venture's
debt of $141.5 million. Dugan has a $195.4 million secured loan due in
October 2010 and an $87.6 million secured loan due in October 2012. Dugan
owns 106 industrial buildings totaling 20.8 million square feet and 62.6
net acres of undeveloped land located in Midwest and Southeast markets.
The portfolio was 86.6 percent leased as of June 30, 2010. The
transaction closed on July 1, 2010.
Also during the second quarter, the company acquired a 250,000 square foot
industrial building in Phoenix, AZ that is 100 percent leased with a
stabilized return of 8.8 percent. The company assumed $4.5 million of
secured debt as part of this transaction. The company also acquired two
newly developed industrial properties and land in South Florida. These
assets total approximately 225,000 square feet and the land can support two
additional buildings totaling 180,000 square feet. The buildings are not
currently leased.
Development
Wholly Owned Properties
-- The company's wholly owned development pipeline at June 30, 2010
consists of three pre-leased medical office projects. The total
estimated costs of these projects upon stabilization are $76.9 million,
with $12.3 million in costs remaining to be funded. The pipeline is
301,000 square feet and 92.0 percent pre-leased in the aggregate.
-- During the second quarter 2010, the company placed into service a
202,000 square foot office building that was 100 percent pre-leased.
-- A single, 40,000 square foot medical office asset was the only
development start during the quarter. The asset is 51.0 percent
pre-leased and located in Atlanta, GA.
Joint Venture Properties
-- The company's joint venture development pipeline at June 30, 2010,
consists of two projects which total 522,000 square feet and are 94
percent pre-leased. The total estimated costs of these projects upon
stabilization are $187.2 million, with $113.5 million in remaining
costs to be funded. (All joint venture costs and square footage are
reported for 100 percent ownership.)
-- During the second quarter, a single, 436,000 square foot office project
in Atlanta, GA was placed into service and was 2 percent pre-leased.
Dispositions
Proceeds from second quarter non-strategic building dispositions were $31.0
million at a stabilized capitalization rate of 8.2 percent. Significant
dispositions included:
-- An 18 year old, 400,000 square foot industrial building in
Cincinnati, OH that is 100 percent leased to a single tenant;
-- Three industrial and office assets totaling 139,000 square feet located
in Minneapolis, MN which were sold to the city for redevelopment; and
-- A 91,000 square foot office building located in Indianapolis, IN sold
to a user.
The company also received proceeds of $9.7 million on the disposition of
land parcels during the second quarter. The primary disposition was
approximately 50 acres of industrial land in Chicago, IL sold to an
existing customer to develop their own facility. The company recognized a
non-cash impairment charge of nearly $8 million on this sale.
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 second quarter dividend will be payable August 31,
2010, to shareholders of record as of August 17, 2010.
The board also declared the following dividends on the company's
outstanding preferred stock:
Quarterly
NYSE Amount/
Class Symbol Share Record Date Payment Date
-------- ---------- ---------- -------------------- --------------------
Series J DREPRJ $ 0.414063 August 17, 2010 August 31, 2010
Series K DREPRK $ 0.406250 August 17, 2010 August 31, 2010
Series L DREPRL $ 0.412500 August 17, 2010 August 31, 2010
Series M DREPRM $ 0.434375 September 16, 2010 September 30, 2010
Series N DREPRN $ 0.453125 September 16, 2010 September 30, 2010
Series O DREPRO $ 0.523438 September 16, 2010 September 30, 2010
2010 Earnings Guidance
The company reaffirmed Core FFO guidance for 2010 of $0.95 to $1.15 per
share, including for the effects of the June 2010 common equity offering.
Information Regarding FFO
The company computes 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. The company
believes FFO to be most directly comparable to net income as defined by
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 its ability to make cash distributions to shareholders. A
reconciliation of net income and net income per share, as defined by GAAP,
to FFO and FFO per share, as defined by NAREIT, is included in the
financial information accompanying this release.
For information purposes, the company also provides FFO adjusted for
certain non-cash 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 Core FFO. Although the 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. A
reconciliation of FFO as defined by NAREIT to Core 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.
Second Quarter Earnings Call and Supplemental Information
Duke is hosting a conference call tomorrow, July 29, 2010, 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 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
June 30, 2010
(In thousands, except per share amounts)
Three Months Ended Six Months Ended
-------------------- --------------------
June 30, June 30,
-------------------- --------------------
2010 2009 2010 2009
--------- --------- --------- ---------
Revenues:
Rental and related revenue $ 215,536 $ 218,828 $ 436,625 $ 435,110
General contractor and
service fee revenue 168,398 129,444 282,039 234,532
--------- --------- --------- ---------
383,934 348,272 718,664 669,642
--------- --------- --------- ---------
Expenses:
Rental expenses 47,745 48,240 101,395 101,478
Real estate taxes 29,140 29,311 59,246 57,824
General contractor and
service other services
expenses 160,617 123,664 267,779 223,111
Depreciation and amortization 81,681 84,859 164,833 163,555
--------- --------- --------- ---------
319,183 286,074 593,253 545,968
--------- --------- --------- ---------
Other operating activities
Equity in earnings of
unconsolidated companies 2,016 2,462 6,945 4,989
Gain on sale of properties 4,973 - 7,042 -
Earnings from sales of land - - - 357
Undeveloped land carrying
costs (2,542) (2,680) (4,793) (5,045)
Impairment charges (7,974) (16,949) (7,974) (16,949)
Other operating expenses (145) (182) (422) (520)
General and administrative
expense (9,151) (13,600) (22,695) (23,480)
--------- --------- --------- ---------
(12,823) (30,949) (21,897) (40,648)
--------- --------- --------- ---------
Operating income 51,928 31,249 103,514 83,026
Other income (expense)
Interest and other income,
net 204 5 355 128
Interest expense (60,637) (50,917) (119,447) (101,777)
Gain (loss) on debt
transactions (15,773) 1,449 (16,127) 34,511
Loss on business combinations - (999) - (999)
--------- --------- --------- ---------
Income (loss) from
continuing operations
before income taxes (24,278) (19,213) (31,705) 14,889
Income tax benefit - 3,187 - 5,894
--------- --------- --------- ---------
Income (loss) from
continuing operations (24,278) (16,026) (31,705) 20,783
Discontinued operations:
Income before gain on sales 560 1,651 857 2,310
Impairment charges - (772) - (772)
Gain on sale of depreciable
properties 3,078 49 12,856 5,168
--------- --------- --------- ---------
Income from discontinued
operations 3,638 928 13,713 6,706
Net income (loss) (20,640) (15,098) (17,992) 27,489
Dividends on preferred shares (18,363) (18,363) (36,726) (36,726)
Loss on repurchase of preferred
shares (4,492) - (4,492) -
Net loss attributable to
noncontrolling interests 1,104 1,055 1,555 421
--------- --------- --------- ---------
Net income (loss)
attributable to common
shareholders ($ 42,391) ($ 32,406) ($ 57,655) ($ 8,816)
========= ========= ========= =========
Basic net income (loss) per
common share:
Continuing operations
attributable to common
shareholders ($ 0.21) ($ 0.16) ($ 0.32) ($ 0.09)
Discontinued operations
attributable to common
shareholders $ 0.02 $ 0.00 $ 0.06 $ 0.03
--------- --------- --------- ---------
Total ($ 0.19) ($ 0.16) ($ 0.26) ($ 0.06)
========= ========= ========= =========
Diluted net income (loss) per
common share:
Continuing operations
attributable to common
shareholders ($ 0.21) ($ 0.16) ($ 0.32) ($ 0.09)
Discontinued operations
attributable to common
shareholders $ 0.02 $ 0.00 $ 0.06 $ 0.03
--------- --------- --------- ---------
Total ($ 0.19) ($ 0.16) ($ 0.26) ($ 0.06)
========= ========= ========= =========
Duke Realty Corporation
Statement of Funds From Operations
June 30, 2010
(In thousands, except per share amounts)
Three Months Ended
June 30
(Unaudited)
--------------------------------------------------
2010 2009
------------------------ ------------------------
Wtd. Wtd.
Avg. Per Avg. Per
Amount Shares Share Amount Shares Share
-------- ------- ------ -------- ------- ------
Net Loss Attributable
to Common Shares ($42,391) ($32,406)
Less: Dividends on
share based awards
expected to vest (505) (403)
-------- --------
Net Loss Per Common
Share- Basic (42,896) 227,082 ($0.19) (32,809) 207,290 ($0.16)
Add back:
Noncontrolling
interest in
earnings of
unitholders - -
Other potentially
dilutive
securities
-------- ------- -------- -------
Net Loss Per Common
Share- Diluted ($42,896) 227,082 ($0.19) ($32,809) 207,290 ($0.16)
======== ======= ======== =======
Reconciliation to
Funds From Operations
("FFO")
Net Loss Attributable
to Common Shares ($42,391) 227,082 ($32,406) 207,290
Adjustments:
Depreciation and
amortization 82,005 86,818
Company share of
joint venture
depreciation and
amortization 10,372 8,251
Earnings from
depreciable
property
sales-wholly
owned,
discontinued
operations (3,078) (49)
Earnings from
depreciable
property
sales-wholly
owned, continuing
operations (4,973) -
Earnings from
depreciable
property sales-JV (4) -
Noncontrolling
interest share of
adjustments (2,315) (2,985)
-------- ------- -------- -------
Funds From Operations-
Basic 39,616 227,082 $ 0.17 59,629 207,290 $ 0.29
Noncontrolling
interest in loss
of unitholders (1,212) 6,404 (1,051) 6,725
Noncontrolling
interest share of
adjustments 2,315 2,985
Other potentially
dilutive
securities 2,615 764
-------- ------- -------- -------
Funds From Operations-
Diluted $ 40,719 236,101 $ 0.17 $ 61,563 214,779 $ 0.29
(Gains) losses on
debt transactions 15,773 (1,449)
Losses on
repurchases of
preferred shares,
net 4,492 -
Impairment charges
and loss on
business
combination 7,974 18,720
-------- ------- -------- -------
Core Funds From
Operations- Diluted $ 68,958 236,101 $ 0.29 $ 78,834 214,779 $ 0.37
======== ======= ======== =======
Six Months Ended
June 30
(Unaudited)
--------------------------------------------------
2010 2009
------------------------ ------------------------
Wtd. Wtd.
Avg. Per Avg. Per
Amount Shares Share Amount Shares Share
-------- ------- ------ -------- ------- ------
Net Loss Attributable
to Common Shares ($57,655) ($ 8,816)
Less: Dividends on
share based awards
expected to vest (1,005) (976)
-------- --------
Net Loss Per Common
Share- Basic (58,660) 225,625 ($0.26) (9,792) 178,052 ($0.06)
Add back:
Noncontrolling
interest in
earnings of
unitholders - -
Other potentially
dilutive
securities
-------- ------- -------- -------
Net Loss Per Common
Share- Diluted ($58,660) 225,625 ($0.26) ($ 9,792) 178,052 ($0.06)
======== ======= ======== =======
Reconciliation to
Funds From Operations
("FFO")
Net Loss Attributable
to Common Shares ($57,655) 225,625 ($ 8,816) 178,052
Adjustments:
Depreciation and
amortization 166,173 167,026
Company share of
joint venture
depreciation and
amortization 19,935 19,469
Earnings from
depreciable
property
sales-wholly owned,
discontinued
operations (12,856) (5,168)
Earnings from
depreciable
property
sales-wholly
owned, continuing
operations (7,042) -
Earnings from
depreciable
property sales-JV (2,308) -
Noncontrolling
interest share of
adjustments (4,593) (6,618)
-------- ------- -------- -------
Funds From Operations-
Basic 101,654 225,625 $ 0.45 165,893 178,052 $ 0.93
Noncontrolling
interest in loss
of unitholders (1,661) 6,505 (334) 6,745
Noncontrolling
interest share of
adjustments 4,593 6,618
Other potentially
dilutive
securities 2,552 638
-------- ------- -------- -------
Funds From Operations-
Diluted $104,586 234,682 $ 0.45 $172,177 185,435 $ 0.93
(Gains) losses on
debt transactions 16,127 (34,511)
Losses on
repurchases of
preferred shares,
net 4,492 -
Impairment charges
and loss on
business
combination 7,974 18,363
-------- ------- -------- -------
Core Funds From
Operations- Diluted $133,179 234,682 $ 0.57 $156,029 185,435 $ 0.84
======== ======= ======== =======
Duke Realty Corporation
Balance Sheet
June 30, 2010
(In thousands, except per share amounts)
June 30, December 31,
2010 2009
----------- -----------
ASSETS:
Rental Property $ 6,318,248 $ 6,390,119
Less: Accumulated Depreciation (1,357,939) (1,311,733)
Construction in Progress 79,971 103,298
Land Held for Development 643,832 660,723
----------- -----------
Net Real Estate Investments 5,684,112 5,842,407
----------- -----------
Cash 256,265 147,322
Accounts Receivable 19,382 20,604
Straight-line Rents Receivable 136,944 131,934
Receivables on Construction Contracts 55,532 18,755
Investments in and Advances to Unconsolidated
Companies 518,157 501,121
Deferred Financing Costs, Net 49,195 54,489
Deferred Leasing and Other Costs, Net 355,248 371,286
Escrow Deposits and Other Assets 226,852 216,361
----------- -----------
Total Assets $ 7,301,687 $ 7,304,279
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY:
Secured Debt $ 788,850 $ 785,797
Unsecured Notes 2,929,603 3,052,465
Unsecured Line of Credit 16,083 15,770
Construction Payables and Amounts due
Subcontractors 73,165 43,147
Accrued Real Estate Taxes 90,049 84,347
Accrued Interest 60,351 62,971
Accrued Expenses 35,058 48,758
Other Liabilities 188,239 198,906
Tenant Security Deposits and Prepaid Rents 38,989 44,258
----------- -----------
Total Liabilities 4,220,387 4,336,419
----------- -----------
Preferred Stock 960,957 1,016,625
Common Stock and Additional Paid-in Capital 3,571,901 3,269,436
Accumulated Other Comprehensive Loss (2,888) (5,630)
Distributions in Excess of Net Income (1,490,099) (1,355,086)
----------- -----------
Total Shareholders' Equity 3,039,871 2,925,345
----------- -----------
Non-controlling Interest 41,429 42,515
----------- -----------
Total Liabilities and Equity $ 7,301,687 $ 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