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Duke Realty Reports Third Quarter 2016 Results
In-Service Occupancy Increased to Record Level of 97.3 Percent
Significant Progress on Remaining Suburban Office Dispositions
Quarterly Dividend per Share Increased $0.01 per share, or 5.6 percent
Improved Financial and Operating Guidance Announced

INDIANAPOLIS, IN -- (Marketwired) -- 10/26/16 -- Duke Realty Corporation(NYSE: DRE), a leading industrial and medical office property REIT, today reported results for the third quarter of 2016.

Quarterly Highlights

  • Diluted earnings per share was $0.32 for the quarter. Funds from Operations ("FFO") per diluted share, as defined by the National Association of Real Estate Investment Trusts ("NAREIT"), was $0.31 for the quarter. Core Funds from Operations ("Core FFO") per diluted share was also $0.31 for the quarter.
  • Portfolio operating performance:
    • Total in-service occupancy at September 30, 2016 of 97.3 percent compared to 96.7 percent at June 30, 2016
    • In-service occupancy in the bulk distribution portfolio at September 30, 2016 of 97.4 percent compared to 96.7 percent at June 30, 2016
    • In-service occupancy in the medical office portfolio of 95.2 percent at September 30, 2016 compared to 95.8 percent at June 30, 2016
    • Total occupancy, including properties under development, of 95.2 percent at September 30, 2016 compared to 95.6 percent at June 30, 2016
    • Tenant retention of 68.4 percent for the quarter
    • Same-property net operating income growth of 5.7 percent for the quarter ended September 30, 2016 as compared to the quarter ended September 30, 2015 and 5.1 percent for the twelve months ended September 30, 2016 as compared to the twelve months ended September 30, 2015
    • Total leasing activity of 4.4 million square feet
    • Overall rent growth on new and renewal leases of 19.3 percent
  • Successful execution of capital transactions:
    • Redeemed $203 million of 5.95 percent unsecured notes originally due February 2017
    • Issued 3.7 million common shares subsequent to the company's second quarter earnings release at an average price of $28.07 per share for net proceeds of $103 million
    • Completed $239 million of non-strategic building and land dispositions

Jim Connor, President and CEO, said, "I'm happy to report another record-high level of in-service occupancy as of September 30, 2016, with in-service occupancy exceeding 97 percent for the first time in company history. Same-property net operating income growth also continued at a strong pace, increasing 5.7 percent for the three months ended September 30, 2016 compared to the same period in 2015, as the result of both increased occupancy and strong rental rate growth.

We also completed significant office property dispositions during the quarter, selling eleven suburban office properties in Indianapolis. We are on track to execute additional suburban office sales during the fourth quarter and early next year that will essentially complete our exit from that product type.

I am also very pleased to announce that, given the strength of our balance sheet and our optimistic outlook in the ability to continue to grow adjusted funds from operations, our board of directors today authorized a 5.6 percent increase, or $0.01 per share, in the regular quarterly dividend."

Mark Denien, Executive Vice President and Chief Financial Officer, stated, "We used proceeds from the office dispositions executed during the quarter to retire outstanding debt, thereby further improving our balance sheet and leverage metrics. We also opportunistically utilized our ATM program during the third quarter, taking advantage of our strong share price, to pre-fund our increasing development pipeline.

On October 20th, we also redeemed our remaining $130 million of 8.25 percent unsecured notes, that had a scheduled maturity date in August 2019. This transaction further improves our leverage metrics, improving our prospects for a ratings upgrade, and will result in a significant ongoing reduction to interest expense."

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. The following table reconciles diluted income per common share to diluted FFO per share, as defined by NAREIT, and to diluted Core FFO per share as measured by the company for the three months ended September 30, 2016 and 2015:
       
    Three Months Ended September 30  
    2016     2015  
Net income per common share, diluted   $ 0.32     $ 0.22  
  Adjustments:                
  Depreciation and amortization     0.22       0.23  
  Gains on depreciable property sales     (0.22 )     (0.21 )
  Company share of reconciling items from joint ventures.     (0.01 )     0.03  
FFO per share - diluted, as defined by NAREIT   $ 0.31     $ 0.27  
Adjustments:                
  Gain on land sales     (0.01 )      
  Loss on debt extinguishment     0.02        
  Land impairment charges           0.01  
  Promote income     (0.01 )      
  Acquisition-related activity           0.01  
Core FFO per share - diluted   $ 0.31     $ 0.29  
                 
  • Net income was $0.32 per diluted share for the three months ended September 30, 2016, compared to $0.22 per diluted share for the same period in 2015. Increased equity in earnings of unconsolidated joint ventures, partly due to higher gains on the sale of joint venture properties, the impact of development properties being placed in service, improved operational performance and lower interest expense were the main factors driving the increase to net income per diluted share.
  • FFO, as defined by NAREIT, was $112 million, an increase of $17 million, or $0.04 per share, from the three months ended September 30, 2015.
  • Core FFO was $111 million for the third quarter of 2016, an increase of $10 million, or $0.02 per share, from the third quarter of 2015.

Real Estate Investment Activity

Development

Mr. Connor further stated, "We increased the pace of our development activity, starting $183 million of developments, which were 50 percent pre-leased in total, during the quarter. We finished the quarter with a robust development pipeline totaling 7.2 million square feet with total expected project costs of $574.9 million, which were 58 percent pre-leased in total.

We also have a strong list of build to suit prospects that we expect to sign in the fourth quarter."

The third quarter included the following development activity:

Wholly Owned Properties

  • During the quarter, the company started $127 million of wholly owned bulk industrial development projects totaling 2.2 million square feet, which were 64 percent leased in total. These wholly owned development starts were comprised of five new industrial developments, which included a 100 percent leased, 1.4 million square foot project in Savannah, Georgia as well as four speculative projects, totaling 808,000 square feet, in Chicago, Tampa, Baltimore and Raleigh.
  • The company also started $28 million of wholly owned medical office projects during the quarter, comprised of two 100 percent leased projects totaling 72,000 square feet.

Joint Venture Properties

  • During the quarter, a 50 percent-owned joint venture started a $28 million, 708,000 square foot, speculative bulk industrial product in Indianapolis. This is the only joint venture-owned project that was under construction at September 30, 2016.
  • Two bulk industrial projects, which were 90 percent leased and 1.3 million square feet in total, were placed in service during the quarter by two 50 percent-owned joint ventures. One of these projects was sold, pursuant to a pre-existing agreement, in early October.

Building Dispositions

Building dispositions totaled $227 million in the third quarter and included the following:

Wholly Owned Properties

  • Eleven suburban office properties in Indianapolis, Indiana, totaling 1.4 million square feet, which were 85 percent leased
  • Two non-strategic light industrial properties totaling 157,000 square feet

Joint Venture Properties

  • A bulk industrial project in Phoenix, Arizona, totaling one million square feet, which was 100 percent leased
  • A bulk industrial project in Indianapolis, Indiana, totaling 937,000 square feet, which was vacant, to a user who will occupy the building

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 third quarter dividend will be payable November 30, 2016 to shareholders of record on November 16, 2016.

2016 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 guidance for diluted net income per common share for 2016 to a range of $0.87 to $1.07 per share, compared to its previous guidance of $0.98 to $1.18 per share. The company revised its guidance for FFO, as defined by NAREIT, for 2016 to a range of $1.16 to $1.26 per share, compared to its previous guidance of $1.13 to $1.30 per share. The company revised its Core FFO guidance for 2016 to a range of $1.18 to $1.20 per share, increasing the lower range of previous guidance from $1.16 per share. Key changes to the assumptions underlying this updated guidance are as follows:

  • The estimate for average in-service occupancy was revised upward to a range of 96.4 percent to 96.6 percent from the previous range of 96.0 percent to 96.5 percent.
  • The estimate for same-property net operating income growth was increased to a range of 5.2 percent to 6.0 percent from the previous range of 4.25 percent to 5.5 percent.
  • The estimate for development starts was increased to a range of $650 million to $750 million from the previous range of $500 million to $650 million.
  • Guidance for effective leverage was revised to a range of 38 percent to 35 percent from the previous range of 39 percent to 36 percent.
  • Guidance for fixed-charge coverage was increased to a range of 3.7 times to 3.9 times from the previous range of 3.6 times to 3.8 times.
  • Guidance for net debt to EBITDA was changed to a range of 5.5 times to 5.1 times from the previous range of 5.7 times to 5.4 times.

The company's full 2016 range of estimates is presented on page 32 of its September 30, 2016 supplemental information.

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, 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 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 20 of its September 30, 2016 supplemental information.

About Duke Realty Corporation

Duke Realty Corporation owns and operates approximately 138 million rentable square feet of industrial, medical office and other non core 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 MidCap 400 Index. More information about Duke Realty Corporation is available at www.dukerealty.com.

Third Quarter Earnings Call and Supplemental Information

Duke Realty Corporation is hosting a conference call tomorrow, October 27, 2016, at 3:00 p.m. ET 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 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, 2015. 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     Nine Months Ended  
    September 30,     September 30,  
    2016     2015     2016     2015  
Revenues:                                
  Rental and related revenue   $ 206,848     $ 200,938     $ 609,171     $ 617,549  
  General contractor and service fee revenue     19,351       33,599       68,546       110,320  
      226,199       234,537       677,717       727,869  
Expenses:                                
  Rental expenses     26,084       30,137       81,092       96,355  
  Real estate taxes     31,313       27,702       90,888       86,228  
  General contractor and other services expenses     17,182       29,694       60,330       98,455  
  Depreciation and amortization     80,688       79,898       238,647       240,135  
      155,267       167,431       470,957       521,173  
Other operating activities:                                
  Equity in earnings (loss) of unconsolidated companies     12,010       (5,088 )     37,404       16,281  
  Gain on dissolution of unconsolidated company     -       -       30,697       -  
  Promote income     2,212       -       26,299       -  
  Gain on sale of properties     82,698       71,259       137,589       202,153  
  Gain on land sales     1,601       1,659       2,438       24,096  
  Other operating expenses     (1,424 )     (1,467 )     (3,496 )     (4,579 )
  Impairment charges     (3,042 )     (2,426 )     (15,098 )     (7,896 )
  General and administrative expenses     (12,534 )     (11,340 )     (42,216 )     (47,582 )
        81,521       52,597       173,617       182,473  
                                   
    Operating income     152,453       119,703       380,377       389,169  
                                 
Other income (expenses):                                
  Interest and other income, net     507       1,343       3,597       3,056  
  Interest expense     (34,606 )     (41,615 )     (109,520 )     (134,576 )
  Loss on debt extinguishment     (6,243 )     64       (8,673 )     (82,589 )
  Acquisition-related activity     (7 )     (5,660 )     (82 )     (6,993 )
Income from continuing operations, before income taxes     112,104       73,835       265,699       168,067  
  Income tax benefit     359       3,305       173       4,109  
    Income from continuing operations     112,463       77,140       265,872       172,176  
                                 
Discontinued operations:                                
  Income (loss) before gain on sales     377       (43 )     741       10,546  
  Gain on sale of depreciable properties, net of tax     319       111       485       414,620  
    Income from discontinued operations     696       68       1,226       425,166  
                                 
Net income     113,159       77,208       267,098       597,342  
Net income attributable to noncontrolling interests     (1,145 )     (774 )     (2,710 )     (6,284 )
    Net income attributable to common shareholders   $ 112,014     $ 76,434     $ 264,388     $ 591,058  
                                 
Basic net income per common share:                                
  Continuing operations attributable to common shareholders   $ 0.32     $ 0.22     $ 0.75     $ 0.49  
  Discontinued operations attributable to common shareholders     0.00       0.00       0.00       1.22  
Total   $ 0.32     $ 0.22     $ 0.75     $ 1.71  
                                 
Diluted net income per common share:                                
  Continuing operations attributable to common shareholders   $ 0.32     $ 0.22     $ 0.75     $ 0.49  
  Discontinued operations attributable to common shareholders     0.00       0.00       0.00       1.21  
Total   $ 0.32     $ 0.22     $ 0.75     $ 1.70  
   
   
   
Duke Realty Corporation and Subsidiaries  
Consolidated Balance Sheets  
(Unaudited and in thousands)  
   
   
    September 30,     December 31,  
    2016     2015  
    Assets                
Real estate investments:                
  Land and improvements   $ 1,494,196     $ 1,391,763  
  Buildings and tenant improvements     4,919,897       4,740,837  
  Construction in progress     290,647       321,062  
  Investments in and advances to unconsolidated companies     261,447       268,390  
  Undeveloped land     316,369       383,045  
      7,282,556       7,105,097  
  Accumulated depreciation     (1,282,033 )     (1,192,425 )
                 
    Net real estate investments     6,000,523       5,912,672  
                 
Real estate investments and other assets held-for-sale     18,184       45,801  
                 
Cash and cash equivalents     110,211       22,533  
Accounts receivable, net     26,180       18,846  
Straight-line rents receivable, net     118,594       116,781  
Receivables on construction contracts, including retentions     8,528       16,459  
Deferred leasing and other costs, net     335,109       346,374  
Escrow deposits and other assets     244,752       416,049  
                 
    $ 6,862,081     $ 6,895,515  
                 
    Liabilities and Equity                
Indebtedness:                
  Secured debt, net of deferred financing costs   $ 385,763     $ 738,444  
  Unsecured debt, net of deferred financing costs     2,605,288       2,510,697  
  Unsecured line of credit     -       71,000  
      2,991,051       3,320,141  
                 
Liabilities related to real estate investments held-for-sale     238       972  
                 
Construction payables and amounts due subcontractors, including retentions     51,339       54,921  
Accrued real estate taxes     93,722       71,617  
Accrued interest     30,601       34,447  
Other accrued expenses     41,314       61,827  
Other liabilities     103,602       106,283  
Tenant security deposits and prepaid rents     41,292       40,506  
    Total liabilities     3,353,159       3,690,714  
                 
Shareholders' equity:                
                 
  Common shares     3,546       3,453  
  Additional paid-in-capital     5,187,374       4,961,923  
  Accumulated other comprehensive income     938       1,806  
  Distributions in excess of net income     (1,710,215 )     (1,785,250 )
    Total shareholders' equity     3,481,643       3,181,932  
                 
Noncontrolling interests     27,279       22,869  
  Total equity     3,508,922       3,204,801  
                 
    $ 6,862,081     $ 6,895,515  
 
 
 
Duke Realty Corporation and Subsidiaries
Summary of EPS, FFO and AFFO
Three Months Ended September 30
(Unaudited and in thousands, except per share amounts)
 
       
  2016   2015
        Wtd.             Wtd.    
        Avg.   Per         Avg.   Per
  Amount     Shares   Share   Amount     Shares   Share
Net income attributable to common shareholders $ 112,014               $ 76,434            
Less: dividends on participating securities   (580 )               (593 )          
Net income per common share- basic   111,434     351,856   $ 0.32     75,841     345,256   $ 0.22
Add back:                                  
  Noncontrolling interest in earnings of unitholders   1,131     3,495           751     3,504      
  Other potentially dilutive securities   580     3,630           593     3,390      
Net income attributable to common shareholders- diluted $ 113,145     358,981   $ 0.32   $ 77,185     352,150   $ 0.22
                                   
Reconciliation to funds from operations ("FFO")                                  
Net income attributable to common shareholders $ 112,014     351,856         $ 76,434     345,256      
Adjustments:                                  
Depreciation and amortization   80,688                 79,898            
  Company share of joint venture depreciation, amortization and other   3,772                 12,501            
  Impairment charges - depreciable property   3,042                 -            
  Gains on depreciable property sales - wholly owned, discontinued operations   (319 )               (66 )          
  Gains on depreciable property sales - wholly owned, continuing operations   (82,698 )               (71,259 )          
  Income tax benefit triggered by depreciable property sales   (359 )               (3,350 )          
  Gains on depreciable property sales - joint ventures   (5,668 )               (189 )          
  Noncontrolling interest share of adjustments   15                 (176 )          
NAREIT FFO attributable to common shareholders - basic   110,487     351,856   $ 0.31     93,793     345,256   $ 0.27
  Noncontrolling interest in income of unitholders   1,131     3,495           751     3,504      
  Noncontrolling interest share of adjustments   (15 )               176            
  Other potentially dilutive securities         3,630                 3,390      
NAREIT FFO attributable to common shareholders - diluted $ 111,603     358,981   $ 0.31   $ 94,720     352,150   $ 0.27
  Gain on land sales, including share of joint ventures   (4,673 )               (1,659 )          
  Loss on debt extinguishment   6,243                 (64 )          
  Land impairment charges   -                 2,426            
  Overhead restructuring charges   -                 215            
  Promote income   (2,212 )               -            
  Acquisition-related activity   7                 5,660            
Core FFO attributable to common shareholders - diluted $ 110,968     358,981   $ 0.31   $ 101,298     352,150   $ 0.29
                                   
Adjusted FFO                                  
Core FFO - diluted $ 110,968     358,981   $ 0.31   $ 101,298     352,150   $ 0.29
Adjustments:                                  
  Straight-line rental income and expense   (5,742 )               (5,820 )          
  Amortization of above/below market rents and concessions   303                 280            
  Stock based compensation expense   3,262                 1,730            
  Noncash interest expense   1,609                 1,831            
  Second generation concessions   (240 )               (8 )          
  Second generation tenant improvements   (3,352 )               (9,791 )          
  Second generation leasing commissions   (3,628 )               (5,962 )          
  Building improvements   (677 )               (2,152 )          
Adjusted FFO - diluted $ 102,503     358,981         $ 81,406     352,150      
 
 
 
Duke Realty Corporation and Subsidiaries
Summary of EPS, FFO and AFFO
Nine Months Ended September 30
(Unaudited and in thousands, except per share amounts)
 
       
  2016   2015
        Wtd.             Wtd.    
        Avg.   Per         Avg.   Per
  Amount     Shares   Share   Amount     Shares   Share
Net income attributable to common shareholders $ 264,388               $ 591,058            
Less: dividends on participating securities   (1,751 )               (1,803 )          
Net income per common share- basic   262,637     348,341   $ 0.75     589,255     344,986   $ 1.71
Add back:                                  
  Noncontrolling interest in earnings of unitholders   2,670     3,499           6,212     3,609      
  Other potentially dilutive securities   1,751     3,565           1,803     3,418      
Net income attributable to common shareholders- diluted $ 267,058     355,405   $ 0.75   $ 597,270     352,013   $ 1.70
                                   
Reconciliation to funds from operations ("FFO")                                  
Net income attributable to common shareholders $ 264,388     348,341         $ 591,058     344,986      
Adjustments:                                  
  Depreciation and amortization   238,647                 243,652            
  Company share of joint venture depreciation, amortization and other   11,664                 22,247            
  Impairment charges - depreciable property   3,042                 864            
  Gains on depreciable property sales - wholly owned, discontinued operations   (485 )               (417,795 )          
  Gains on depreciable property sales - wholly owned, continuing operations   (137,589 )               (202,153 )          
  Income tax benefit triggered by depreciable property sales   (173 )               (934 )          
  Gains on depreciable property sales - joint ventures   (23,700 )               (13,722 )          
  Gain on dissolution of unconsolidated company   (30,697 )               -            
  Noncontrolling interest share of adjustments   (604 )               3,808            
NAREIT FFO attributable to common shareholders - basic   324,493     348,341   $ 0.93     227,025     344,986   $ 0.66
  Noncontrolling interest in income of unitholders   2,670     3,499           6,212     3,609      
  Noncontrolling interest share of adjustments   604                 (3,808 )          
  Other potentially dilutive securities         3,565                 3,418      
NAREIT FFO attributable to common shareholders - diluted $ 327,767     355,405   $ 0.92   $ 229,429     352,013   $ 0.65
  Gain on land sales, including share of joint ventures   (5,510 )               (24,096 )          
  Loss on debt extinguishment, including share of joint ventures   10,265                 82,589            
  Land impairment charges   12,056                 7,032            
  Overhead restructuring Charges   -                 7,422            
  Promote income   (26,299 )               -            
  Acquisition-related activity   82                 6,993            
Core FFO attributable to common shareholders - diluted $ 318,361     355,405   $ 0.90   $ 309,369     352,013   $ 0.88
                                   
Adjusted FFO                                  
Core FFO - diluted $ 318,361     355,405   $ 0.90   $ 309,369     352,013   $ 0.88
Adjustments:                                  
  Straight-line rental income and expense   (13,247 )               (19,085 )          
  Amortization of above/below market rents and concessions   1,361                 2,961            
  Stock based compensation expense   16,748                 15,334            
  Noncash interest expense   4,594                 5,353            
  Second generation concessions   (311 )               (56 )          
  Second generation tenant improvements   (17,954 )               (21,682 )          
  Second generation leasing commissions   (19,497 )               (16,988 )          
  Building improvements   (1,939 )               (4,539 )          
Adjusted FFO - diluted $ 288,116     355,405         $ 270,667     352,013      
   
   
   
Duke Realty Corporation and Subsidiaries  
Reconciliation of Same Property Net Operating Income Growth  
(Unaudited and in thousands)  
           
  Three Months Ended  
  September 30, 2016     September 30, 2015  
               
Income from continuing operations before income taxes $ 112,104     $ 73,835  
Share of same property NOI from unconsolidated joint ventures   5,205       5,120  
Income and expense items not allocated to segments   40,908       74,975  
Earnings from service operations   (2,169 )     (3,905 )
Properties not included and other adjustments   (33,568 )     (34,112 )
Same property NOI $ 122,480     $ 115,913  
               
Percent Change   5.7 %        
               
  Twelve Months Ended  
  September 30, 2016     September 30, 2015  
               
Income from continuing operations before income taxes $ 282,909     $ 173,027  
Share of same property NOI from unconsolidated joint ventures   21,076       19,931  
Income and expense items not allocated to segments   310,099       425,315  
Earnings from service operations   (10,548 )     (14,919 )
Properties not included and other adjustments   (124,055 )     (147,214 )
Same property NOI $ 479,481     $ 456,140  
               
Percent Change   5.1 %        
               
               
Duke Realty Corporation and Subsidiaries  
Reconciliation of 2016 FFO Guidance  
(Unaudited)  
           
  Pessimistic     Optimistic  
           
Net income per common share, diluted $ 0.87     $ 1.07  
Gain on dissolution of unconsolidated company   (0.07 )     (0.07 )
Depreciation and gains on sales of depreciated property (including share of joint venture)   0.36       0.26  
FFO per share - diluted, as defined by NAREIT $ 1.16     $ 1.26  
Gains on land sales, net of impairments   0.01       (0.01 )
Promote income   (0.07 )     (0.07 )
Loss on debt extinguishment   0.09       0.09  
Other reconciling items   (0.01 )     (0.07 )
Core FFO per share - diluted $ 1.18     $ 1.20  
               
               

Contact Information:

Investors:
Ron Hubbard
317.808.6060

Media:
Helen McCarthy
317.708.8010

Source: Duke Realty Corporation