-- Funds from operations per diluted share ("FFO") for the quarter was
income of $0.32, excluding the effects of impairment and related
charges as well as losses on debt transactions. With the effects of
these items, FFO for the quarter was a loss of $1.02, which includes
the effects of $297.1 million of non-cash impairment and related
charges and $13.6 million of losses on debt transactions.
-- Impairment charges primarily recognized as a result of further
refinements in strategy including planned reductions in undeveloped
land inventory in light of lower anticipated development volume and
the targeting of non-strategic property dispositions to further
align focus on high growth markets with an emphasis on industrial
and medical properties.
-- Liquidity position was further enhanced during the quarter to
$1.5 billion (based upon available line of credit balance and cash
on hand):
-- $500.0 million unsecured bonds issued in August;
-- $351.9 million par value of unsecured debt obligations
repurchased; and
-- $114.0 million secured financing closed in July.
-- Capital raised year to date through September 2009 of nearly $1.5
billion; all remaining 2009 and 2010 unsecured debt maturities
addressed with available cash.
-- 2009 FFO guidance reaffirmed at the lower end of the $1.42 - $1.64 per
share range as adjusted for the additional shares issued in the April
2009 common stock offering.
"We have continued to access the capital markets, have now addressed all of
our near-term obligations and remain focused on deleveraging our balance
sheet," said Dennis D. Oklak, chairman and chief executive officer. "Our
core operating portfolio has held up reasonably well during the last twelve
months. We are focused on leasing our recently placed in-service
development projects and strategically reducing our undeveloped land
inventory in light of lower anticipated development volume for the
foreseeable future."
Financial Performance
-- FFO for the third quarter of 2009 was a loss of $1.02 compared to
income of $0.65 for the third quarter of 2008. Third quarter 2009 FFO
included non-cash impairment and related charges of $297.1 million ($1.28
per share), and $13.6 million ($0.06 per share) of losses on debt
transactions. Excluding the impact of these items, FFO was $0.32 for the
third quarter of 2009.
-- Net income per diluted share (EPS) for third quarter 2009 was a loss
of $1.44, as compared to earnings of $0.08 for the same quarter in 2008.
The loss was primarily attributable to the impairment and other non-cash
charges and losses on debt transactions recognized in the third quarter of
2009.
Capital Markets
During the third quarter 2009, the company successfully refinanced,
extended and obtained new financings, including:
-- Completed a $500 million unsecured debt offering consisting of $250 million of 7.375% (7.50% effective interest rate) notes due 2015 and $250 million of 8.25% (8.375% effective interest rate) notes due 2019. -- Repurchased $206.8 million face value of its December 2011 exchangeable notes. -- Repurchased $145.1 million of unsecured bonds through a tender offer comprised of the following: -- $39.3 million of its 7.75% November 2009 senior notes; -- $57.9 million of its 5.25% January 2010 senior notes; and -- $47.9 million of its 6.95% March 2011 senior notes -- Closed on a $114 million, 10-year, interest only secured loan bearing interest at 7.75%. The loan is secured by a portfolio of suburban office and industrial assets. -- Recognized $13.6 million of losses on debt transactions, comprised of a $6.5 million commitment fee paid to terminate a previously announced $280 million secured debt transaction, and approximately $7.1 million in book losses on unsecured notes repurchased either through a cash tender offer transaction or open market purchases during the quarter.As a result of these and previously announced capital transactions, the company has nearly $1.5 billion of available liquidity as of September 30, 2009, including $1.3 billion of availability on its credit facility and $155 million of cash. All remaining 2009 and 2010 unsecured debt maturities will be repaid with available cash. Portfolio Performance
-- Overall portfolio occupancy, including projects under development, was
87.0 percent as of September 30, 2009, compared to 87.4 percent at June 30,
2009.
-- Stabilized, in-service properties (130 million square feet) were 87.7
percent leased at September 30, 2009, compared with 88.5 percent at June
30, 2009. This decrease is primarily attributable to the addition of 6
recently developed properties aggregating nearly 1.5 million square feet
which were 55.6 percent leased at September 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 third quarter of 2009 was 85.0 percent with a
slight decrease in net effective rents on renewals of 0.8 percent.
-- Same property net operating income decreased by 5.6 percent for the
third quarter of 2009, compared with the three-month period ended September
30, 2008. Same property net operating income decreased by approximately 0.5
percent for the 12-month period ended September 30, 2009, compared with the
12-month period ended September 30, 2008. Core operations results were
consistent with forecasts and in line with expectations.
Real Estate Investment Activity
Development
Wholly Owned Properties
-- The company's wholly owned development pipeline at September 30, 2009,
consisted mostly of projects that are in the final stages of completion.
The total estimated costs of these projects upon stabilization are $223.6
million, with $71.1 million in costs remaining to be funded. The pipeline
is 1.4 million square feet comprised of 9 properties and one building
expansion, which are 92 percent pre-leased in the aggregate.
-- The company placed into service two healthcare properties totaling
250,000 square feet, which were 82% pre-leased in the aggregate, and a
146,000 square foot, 100% pre-leased suburban office building.
-- The company began construction of one medical office property (45,000
square feet) that is 62% pre-leased.
Joint Venture Properties
-- The company's joint venture development pipeline at September 30,
2009, consists of three projects which total 1.1 million square feet and
are 28 percent pre-leased. The total estimated costs of these projects upon
stabilization are $337.9 million, with $95.4 million in remaining costs to
be funded. 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.)
Real Estate Valuation - Impairment and Other Charges
During the third quarter of 2009, the company recorded non-cash impairment
and related charges of $297.1 million.
Components of these charges were as follows:
-- Impairment of land holdings targeted for disposition of $132.0
million;
-- Impairment of operating and under development properties of $70.7
million;
-- Impairment of investment in 3630 Peachtree joint venture in Atlanta,
Georgia of $50.7 million;
-- Impairment of other real estate assets of $31.4 million; and
-- Reserves of deferred tax assets of $12.3 million.
These charges were primarily triggered as a result of further refinements
in strategy including planned reductions in undeveloped land inventory in
light of lower anticipated development volume and the targeting of
non-strategic property dispositions. These impairment charges rely upon
many subjective assumptions, such as intended holding periods, future
capitalization rates and rental rates, used in applying relevant accounting
rules. These non-cash charges have no effect on liquidity, and have no
significant impact on compliance with the company's credit facility or
unsecured bond covenants.
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 third quarter dividend will be payable November 30,
2009, to shareholders of record as of November 13, 2009. The company's
policy is to pay aggregate annual dividends in 2009 in an amount generally
equal to and not to exceed its estimated 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 November 16, 2009 November 30, 2009
Series K DREPRK $0.406250 November 16, 2009 November 30, 2009
Series L DREPRL $0.412500 November 16, 2009 November 30, 2009
Series M DREPRM $0.434375 December 17, 2009 December 31, 2009
Series N DREPRN $0.453125 December 17, 2009 December 31, 2009
Series O DREPRO $0.523438 December 17, 2009 December 31, 2009
Earnings Guidance
The company reaffirmed FFO guidance for 2009 in the range of $1.42 - $1.64,
as adjusted for the additional shares issued in the April 2009 common stock
offering. As previously discussed in the second quarter of 2009, it is
anticipated that the FFO per share will be at the lower end of guidance
based upon current expectations of leasing volumes and the timing of
potential transactions expected to occur in the fourth quarter of 2009.
Guidance reflects $6.7 million ($0.035 per share) of severance costs
incurred through September 30, 2009, and excludes the effects of impairment
and other non-cash charges as well as gains or losses on debt transactions.
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.
Third Quarter Earnings Call and Supplemental Information
Duke is hosting a conference call tomorrow, October 29, 2009, at 3:00 p.m.
EDT to discuss its third 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
September 30, 2009
(In thousands, except per share amounts)
Quarter Ended Nine Months Ended
---------------------- ----------------------
September 30, September 30,
---------------------- ----------------------
2009 2008 2009 2008
---------- ---------- ---------- ----------
Revenues:
Rental and related
revenue $ 224,013 $ 215,264 $ 669,713 $ 638,512
General contractor and
service fee revenue 100,880 93,316 335,412 271,847
---------- ---------- ---------- ----------
324,893 308,580 1,005,125 910,359
---------- ---------- ---------- ----------
Expenses:
Rental expenses 49,921 48,045 153,081 143,198
Real estate taxes 30,096 25,750 89,181 77,012
General contractor and
service operations
expenses 96,241 96,155 319,352 266,878
Depreciation and
amortization 87,647 74,229 254,325 225,358
---------- ---------- ---------- ----------
263,905 244,179 815,939 712,446
---------- ---------- ---------- ----------
Other Operating Activities
Equity in earnings of
unconsolidated companies 2,364 204 7,353 17,184
Gain on sale of
Build-for-Sale
properties - 20,338 - 26,657
Earnings from sales of
land - 4,469 357 8,491
Undeveloped land carrying
costs (2,601) (1,686) (7,646) (5,746)
Impairment charges (284,845) 0 (301,794) 0
Other operating expenses (323) (2,474) (843) (5,273)
General and
administrative expense (11,233) (10,448) (34,713) (29,500)
---------- ---------- ---------- ----------
(296,638) 10,403 (337,286) 11,813
---------- ---------- ---------- ----------
Operating income (235,650) 74,804 (148,100) 209,726
Other Income (Expense)
Interest and other income
(expense), net 796 205 924 1,223
Interest expense (57,719) (50,071) (161,746) (146,001)
Gain (loss) on debt
transactions (13,631) - 20,880 -
Loss on business
combinations - - (999) -
---------- ---------- ---------- ----------
Income (loss) from
continuing
operations before
income taxes (306,204) 24,938 (289,041) 64,948
Income tax benefit
(expense) 4,326 4,239 10,220 4,915
Valuation allowance on
deferred tax asset (12,273) - (12,273) -
---------- ---------- ---------- ----------
Income (loss) from
continuing
operations (314,151) 29,177 (291,094) 69,863
Discontinued Operations:
Income before impairment
and gain on sales - 466 36 3,092
Impairment charges - - (772) -
Gain on sale of
depreciable properties 0 1,299 5,168 11,940
---------- ---------- ---------- ----------
Income (loss) from
discontinued
operations - 1,765 4,432 15,032
Net income (loss) (314,151) 30,942 (286,662) 84,895
Dividends on preferred
shares (18,363) (18,866) (55,089) (53,038)
Net (income) loss
attributable to
noncontrolling interests 9,632 (586) 11,583 (1,577)
---------- ---------- ---------- ----------
Net income (loss)
attributable to
common shareholders $ (322,882) $ 11,490 $ (330,168) $ 30,280
========== ========== ========== ==========
Basic net income (loss) per
Common Share:
Continuing operations
attributable to common
shareholders $ (1.44) $ 0.07 $ (1.73) $ 0.10
Discontinued operations
attributable to common
shareholders $ 0.00 $ 0.01 $ 0.02 $ 0.10
---------- ---------- ---------- ----------
Total $ (1.44) $ 0.08 $ (1.71) $ 0.20
========== ========== ========== ==========
Diluted net income (loss)
per Common Share:
Continuing operations
attributable to common
shareholders $ (1.44) $ 0.07 $ (1.73) $ 0.10
Discontinued operations
attributable to common
shareholders $ 0.00 $ 0.01 $ 0.02 $ 0.10
---------- ---------- ---------- ----------
Total $ (1.44) $ 0.08 $ (1.71) $ 0.20
========== ========== ========== ==========
Duke Realty Corporation
Statement of Funds From Operations
September 30, 2009
(In thousands, except per share amounts)
Three Months Ended
September 30,
(Unaudited)
------------------------------------------------------
2009 2008
-------------------------- --------------------------
Wtd. Wtd.
Avg. Per Avg. Per
Amount Shares Share Amount Shares Share
--------- ------- ------- --------- ------- --------
Net Income (Loss)
Attributable to
Common Shares $(322,882) $ 11,490
Less: Dividends on
share based awards
expected to vest (391) (409)
--------- ---------
Net Income (Loss)
Per Common Share-
Basic (323,273) 223,952 $ (1.44) 11,081 146,966 $ 0.08
Add back:
Noncontrolling
interest in
earnings of
unitholders - 605 7,638
Other common
stock
equivalents 232
--------- ------- --------- -------
Net Income (Loss)
Per Common Share-
Diluted $(323,273) 223,952 $ (1.44) $ 11,686 154,836 $ 0.08
========= ======= ========= =======
Reconciliation to
Funds From
Operations ("FFO")
Net Income (Loss)
Attributable to
Common Shares $(322,882) 223,952 $ 11,490 146,966
Adjustments:
Depreciation and
Amortization 87,647 75,260
Company Share
of Joint
Venture
Depreciation
and
amortization 8,543 14,450
Earnings from
depreciable
property
sales-wholly
owned - (1,299)
Earnings from
depreciable
property
sales-JV - -
Noncontrolling
interest share
of adjustments (2,771) (4,363)
--------- ------- --------- -------
Funds From
Operations-Basic (229,463) 223,952 $ (1.02) 95,538 146,966 $ 0.65
Noncontrolling
interest in
earnings of
unitholders (9,545) 6,646 605 7,638
Noncontrolling
interest
share of
adjustments 2,771 4,363
Other common
stock
equivalents 740
--------- ------- --------- -------
Funds From
Operations-
Diluted (236,237) 230,598 $ (1.02) 100,506 155,344 $ 0.65
Add loss on debt
transactions 13,631 -
Add impairment
charges 284,845 -
Add valuation
allowance on
deferred tax
asset 12,273 -
Other common
stock
equivalents 1,073
--------- ------- --------- -------
Adjusted Funds
From Operations-
Diluted $ 74,512 231,671 $ 0.32 100,506 155,344 $ 0.65
========= ======= ========= =======
Nine Months Ended
September 30,
(Unaudited)
------------------------------------------------------
2009 2008
-------------------------- --------------------------
Wtd. Wtd.
Avg. Per Avg. Per
Amount Shares Share Amount Shares Share
--------- ------- ------- --------- ------- --------
Net Income (Loss)
Attributable to
Common Shares $(330,168) $ 30,280
Less income
allocated to
participating
securities (1,366) (1,218)
--------- ---------
Net Income (Loss)
Per Common Share-
Basic (331,534) 193,520 $ (1.71) 29,062 146,680 $ 0.20
Add back:
Noncontrolling
interest in
earnings of
unitholders - 1,615 7,727
Other common
stock
equivalents 216
--------- ------- --------- -------
Net Income (Loss)
Per Common Share-
Diluted $(331,534) 193,520 $ (1.71) $ 30,677 154,623 $ 0.20
========= ======= ========= =======
Reconciliation to
Funds From
Operations ("FFO")
Net Income (Loss)
Attributable to
Common Shares $(330,168) 193,520 $ 30,280 146,680
Adjustments:
Depreciation and
Amortization 254,673 230,956
Company Share
of Joint
Venture
Depreciation
and
amortization 28,013 28,769
Earnings
(loss) from
depreciable
property
sales-wholly
owned (5,168) (11,940)
Earnings
(loss) from
depreciable
property
sales-JV - (495)
Noncontrolling
interest share
of adjustments (9,302) (12,351)
--------- ------- --------- -------
Funds From
Operations-Basic (61,952) 193,520 $ (0.32) 265,219 146,680 $ 1.81
Noncontrolling
interest in
earnings of
unitholders (11,410) 6,711 1,615 7,727
Noncontrolling
interest share
of adjustments 9,302 12,351
Other common
stock
equivalents 698
--------- ------- --------- -------
Funds From
Operations-
Diluted (64,060) 200,231 $ (0.32) 279,185 155,105 $ 1.80
Less gain on
debt
transactions (20,880) -
Add impairment
charges and net
loss on
business
combination 303,208 -
Add valuation
allowance on
deferred tax
asset 12,273 -
Other common
stock
equivalents 883
--------- ------- --------- -------
Adjusted Funds
From Operations-
Diluted $ 230,541 201,114 $ 1.15 279,185 155,105 $ 1.80
========= ======= ========= =======
Duke Realty Corporation
Balance Sheet
September 30, 2009
(In thousands, except per share amounts)
September 30, December 31,
2009 2008
-------------- --------------
ASSETS:
Rental Property $ 6,432,630 $ 6,297,923
Less: Accumulated Depreciation (1,274,728) (1,167,113)
Construction in Progress 144,748 159,330
Land Held for Development 666,175 806,379
-------------- --------------
Net Real Estate Investments 5,968,825 6,096,519
-------------- --------------
Cash 155,914 22,532
Accounts Receivable 23,880 28,026
Straight-line Rents Receivable 132,763 123,863
Receivables on Construction Contracts 32,446 75,100
Investments in and Advances to
Unconsolidated Companies 483,882 693,503
Deferred Financing Costs, Net 45,997 47,907
Deferred Leasing and Other Costs, Net 382,784 369,224
Escrow Deposits and Other Assets 212,455 234,209
-------------- --------------
Total Assets $ 7,438,946 $ 7,690,883
============== ==============
LIABILITIES AND SHAREHOLDERS' EQUITY:
Secured Debt $ 783,425 $ 507,351
Unsecured Notes 3,133,879 3,285,980
Unsecured Line of Credit 15,299 483,659
Construction Payables and Amounts due
Subcontractors 66,790 105,227
Accrued Real Estate Taxes 114,529 78,483
Accrued Interest 40,701 56,376
Accrued Expenses 35,815 45,059
Other Liabilities 203,426 187,425
Tenant Security Deposits and Prepaid
Rents 37,142 41,348
-------------- --------------
Total Liabilities 4,431,006 4,790,908
-------------- --------------
Preferred Stock 1,016,625 1,016,625
Common Stock and Additional Paid-in
Capital 3,267,510 2,703,997
Accumulated Other Comprehensive Income (6,440) (8,652)
Distributions in Excess of Net Income (1,313,103) (867,951)
-------------- --------------
Total Shareholders' Equity 2,964,592 2,844,019
-------------- --------------
Non-controlling Interest 43,348 55,956
-------------- --------------
Total Liabilities and Equity $ 7,438,946 $ 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