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Duke Realty Reports Third Quarter 2019 Results

9.3 Percent Increase to Quarterly Dividend

26.8 Percent Growth in Rents on Leasing Activity

Quarterly Leasing Volume of 7.0 Million Square Feet

2019 Earnings and Development Guidance Updated

INDIANAPOLIS, Oct. 30, 2019 (GLOBE NEWSWIRE) -- Duke Realty Corporation (NYSE: DRE), the largest domestic-only, logistics REIT, today reported results for the third quarter 2019.

Jim Connor, Chairman and Chief Executive Officer, said, "I'm happy to announce our third quarter operating results, which were highlighted by 7.0 million square feet of leasing activity and continued strong rent growth on second generation leases.  Through the lease-up of recently completed speculative developments and renewing or backfilling 83 percent of our expirations, we increased our in-service occupancy from 95.4 percent to 96.2 percent during the third quarter, which will continue to drive growth in total portfolio net operating income.

Same-property net operating income growth was 2.8 percent and 4.9 percent for the three and nine months ended September 30, 2019 compared to the same periods in 2018.  Same-property net operating income for the third quarter of 2019 was negatively impacted by a previously announced tenant bankruptcy, which was immediately backfilled; the relocation of a tenant from two of our existing properties to one of our newly completed build-to-suit developments; and an exceptionally high, 98.8 percent, average commencement occupancy level in the third quarter of 2018.

We continue to see strong demand and excellent rent growth across our markets on second generation leases executed during the quarter.  Our results are testimony to the location and quality of our properties, given that only five percent of our second generation leasing volume was completed in Tier 1 coastal markets.  We believe that meaningful differences in supply, demand and pricing power exist among the individual sub-markets within the major metropolitan areas in which we operate.  Our recent record at driving rental growth across these markets is an indicator that we have concentrated our assets within the most desirable of these sub-markets.

Our continued success in driving strong rental rate growth and in the lease-up of our speculative developments at better rental rates, and ahead of our original underwriting timing, led us to increase our guidance for Core FFO.

Finally, we are pleased to be able to increase our quarterly dividend from $0.215 per share to $0.235 per share.  This 9.3 percent increase to our quarterly dividend is based on our expectation of continued cash flow growth allowing us to maintain more-than-adequate coverage of our ongoing dividends."

Mark Denien, Executive Vice President and Chief Financial Officer, stated, "We generated significant capital from multiple sources during the third quarter of 2019 to fund our current and future development opportunities.  We took advantage of the favorable interest rate environment to issue $175 million of unsecured notes at an effective rate of 2.8 percent, which will mature in December 2027.  We issued $202 million of equity under our ATM program between early August and early October at an average price of $33.56 per share.  We also completed $280 million of property sales in primarily Midwest markets. As the result of these transactions, we finished the third quarter with $121 million of cash on hand, in addition to $119 million of cash held in escrow for near-term tax deferred exchange transactions and no outstanding borrowings on our unsecured line of credit.  These capital sources will be used to fund our significant development pipeline and prospects for future projects while continuing to target a debt-to-EBITDA ratio in the low five times.

Last week, we redeemed $250 million of our unsecured notes, which were set to mature in February 2021, leaving us with no significant debt maturities until June 2022.  We will likely issue a new series of unsecured bonds in the near future to replace these notes and fund future development needs."

Quarterly Highlights

  • A complete reconciliation, in dollars and per share amounts, of net income to funds from operations ("FFO"), as defined by NAREIT, as well as to Core FFO, is included in the financial tables included in this release.
     
  • Net income was $0.62 per diluted share for the third quarter of 2019, compared to $0.15 per diluted share for the third quarter of 2018.  Net income per diluted share increased as the result of significant gains on property sales recognized during the quarter.
     
  • FFO, as defined by NAREIT, was $0.37 per diluted share for the third quarter of 2019, compared to $0.35 per diluted share for the third quarter of 2018.  FFO per diluted share, as defined by NAREIT, increased due to continued growth in our asset base as well as strong operational performance.
     
  • Core FFO was $0.37 per diluted share for the third quarter of 2019, compared to $0.35 per diluted share for the third quarter of 2018.
     
  • Key indicators of the company's operating performance were as follows:
    • The company's stabilized portfolio was 97.9 percent leased at September 30, 2019, compared to 98.2 percent leased at June 30, 2019 and 97.9 percent leased at September 30, 2018.
    • The company's in-service portfolio was 96.2 percent leased at September 30, 2019 compared to 95.4 percent leased at June 30, 2019 and 96.8 percent leased at September 30, 2018.
    • The company's total portfolio, including properties under development, was 93.9 percent leased at September 30, 2019 compared to 93.4 percent leased at June 30, 2019 and 93.7 percent leased at September 30, 2018.
    • Tenant retention was 80.4 percent and 81.3 percent, respectively, for the three and nine months ended September 30, 2019.
    • Same-property net operating income growth was 2.8 percent and 4.9 percent for the three and nine month periods ended September 30, 2019 compared to the same periods in 2018.
    • Total leasing activity was 7.0 million square feet for the quarter.
    • Overall cash and annualized net effective rent growth on new and renewal leases was 13.7 percent and 26.8 percent, respectively, for the quarter.
  • Capital transactions in the third quarter included:
    • Starting six new development projects with expected costs of $211 million that were 49 percent pre-leased;
    • Completing the $39 million acquisition of one property in South Florida; and
    • Property dispositions totaling $280 million.

Real Estate Investment Activity

Mr. Connor further stated, "During the third quarter we sold a portfolio of 18 buildings in Indianapolis, Cincinnati and Columbus for $218 million.  The buildings in this 100 percent leased portfolio had an average age of 25 years with 48 percent of its square footage expiring within three years. The disposition of this portfolio is in line with our long-term strategy to refine our geographic presence into more Tier 1 markets.  We believe that this sale maximized our return on these properties when considering the capital expenditures that will be required to backfill this portfolio's upcoming lease expirations.  We reinvested a small portion of the proceeds into a newly developed property in South Florida, which we believe will have better long-term growth potential, and we expect to use the remaining proceeds to fund development.

Development starts during the quarter were 49 percent leased, while our 7.2 million square foot development pipeline was 46 percent leased.  We've consistently demonstrated our ability to lease up our speculative space, including executing 1.8 million square feet of leasing this quarter to stabilize seven speculative properties.  Considering the prospective leases currently under negotiation, I expect that we will continue to make significant progress in the lease up of our speculative properties through the rest of the year.

Based on our expectations for the remainder of the year, with a strong backlog of build-to-suit development prospects, we have increased our annual guidance for development starts to a range of $1.0 billion to $1.15 billion."

Development

The third quarter included the following development activity:

Consolidated Properties

  • The company started five development projects, with expected costs of $203 million, totaling 1.9 million square feet.  These development starts included a 100 percent leased, 616,000 square foot project in Eastern Pennsylvania; a 100 percent leased, 210,000 square foot project in Atlanta; a 50 percent leased, 107,000 square foot project in Central Florida; an 800,000 square foot speculative project in Southern California; and a 209,000 square foot speculative project in Northern California.
  • Six projects totaling 1.3 million square feet, which were 92 percent leased in total, were placed in service. 

Unconsolidated Joint Venture Properties

  • A fully leased, 133,000 square foot, building expansion in Indianapolis was started by a 50 percent-owned joint venture.

Acquisitions

The company acquired a 252,000 square foot project in South Florida, which was 100 percent leased.

Building Dispositions
   
Building dispositions totaled $280 million in the third quarter and included the following:
Consolidated Properties

  • A 100 percent leased, 18 building portfolio of properties in Indianapolis, Cincinnati and Columbus totaling 4.1 million square feet;
  • A 74 percent leased, six building portfolio of high office build-out properties in Atlanta totaling 298,000 square feet;
  • A recently vacated property in Indianapolis totaling 425,000 square feet; and
  • A 56 percent leased property in Minneapolis totaling 154,000 square feet.

Unconsolidated Joint Venture Properties

Two office properties, totaling 211,000 square feet and 55 percent leased, in Washington DC were sold by a 30 percent owned joint venture.

Distributions Declared

The company's board of directors declared a quarterly cash distribution on its common stock of $0.235 per share, or $0.94 per share on an annualized basis. The third quarter dividend will be payable on November 29, 2019 to shareholders of record on November 14, 2019.

2019 Earnings Guidance

A reconciliation of the company's 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 its guidance for FFO, as defined by NAREIT, to $1.37 to $1.45 per diluted share from its previous guidance of $1.38 to $1.46 per diluted share.

Commenting on the company's 2019 guidance, Mr. Connor stated, "Due to our continued successes that I've elaborated on earlier in this release, we are increasing our guidance for Core FFO to a range of $1.42 to $1.46 per diluted share, from the previous range of $1.41 to $1.45 per diluted share."

Other guidance changes are as follows:

  • The guidance for growth in same-property net operating income was revised to a range of 4.4 percent to 4.8 percent from the previous range of 4.0 percent to 5.0 percent;
  • The estimate for development starts was increased to a range of $1.0 billion to $1.15 billion from the previous range of $900 million to $1.1 billion;
  • The estimate for average percent leased within the company's in-service portfolio was revised to a range of 95.6 percent to 96.2 percent from the previous range of 94.9 percent to 96.5 percent;
  • The estimate for building dispositions was revised to a range of $450 million to $500 million from the previous range of $350 million to $550 million; and
  • The estimate for building acquisitions was increased to a range of $175 million to $225 million from the previous range of $100 million to $200 million.

More specific assumptions and components of the company's 2019 guidance will be available by 6:00 p.m. Eastern Time today through the Investor Relations section of the company's website.  A number of factors could limit our ability to deliver results in line with our assumptions, such as interest rates, the economy, the supply and demand of industrial real estate, the availability and terms of financing to the company or potential buyers of real estate, and the timing and yield for dispositions and acquisitions.  There can be no assurance that the company can achieve such results.  Except as required, the company undertakes no duty to update forward looking statements.

FFO and AFFO Reporting Definitions

FFO: FFO is a non-GAAP performance measure computed in accordance with standards established by the National Association of Real Estate Investment Trusts (“NAREIT”) Funds from Operations White Paper - 2018 Restatement. It is calculated as  net income  attributable to common shareholders computed in accordance with generally accepted accounting principles (“GAAP") , excluding depreciation and amortization related to real estate, gains and losses on sales of real estate assets (including real estate assets incidental to our business) and related taxes, gains and losses from change in control, impairment charges related to real estate assets (including real estate assets incidental to our business) and similar adjustments for unconsolidated joint ventures and partially owned consolidated entities.  We believe FFO to be most directly comparable to net income attributable to common shareholders as defined by GAAP.  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.

Core FFO: Core FFO is computed as FFO adjusted for certain items that are generally non-cash in nature and that can create significant earnings volatility and do not directly relate to our core business operations.  The adjustments include 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 previous 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 or losses on debt transactions, gains or losses from involuntary conversion from weather events or natural disasters, promote income, severance and other charges related to major overhead restructuring activities and the expense impact of costs attributable to successful leasing activities.  Although our 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, we believe it provides a meaningful supplemental measure of our operating performance.

AFFO: AFFO is defined by the company as the 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 including interest rate hedge amortization, 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 income from continuing operations before income taxes 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 16 of its September 30, 2019 supplemental information.

About Duke Realty Corporation

Duke Realty Corporation owns and operates approximately 155 million rentable square feet of industrial assets in 20 major logistics markets. Duke Realty Corporation is publicly traded on the NYSE under the symbol DRE and is listed on the S&P 500 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 31, 2019, 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, 2018. 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.

Contact Information:

Investors:
Ron Hubbard
317.808.6060

Media:
Helen McCarthy
317.708.8010


 

 
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,
    2019       2018       2019       2018  
Revenues:              
Rental and related revenue $ 215,374     $ 196,912     $ 638,446     $ 582,461  
General contractor and service fee revenue   25,955       34,986       104,838       94,552  
    241,329       231,898       743,284       677,013  
Expenses:              
Rental expenses   19,158       17,268       57,423       53,558  
Real estate taxes   31,739       31,515       96,556       93,857  
General contractor and other services expenses   23,640       33,730       99,415       89,392  
Depreciation and amortization   83,924       78,855       242,920       232,216  
    158,461       161,368       496,314       469,023  
Other operating activities:              
Equity in earnings of unconsolidated joint ventures   3,736       5,552       12,594       15,521  
Gain on sale of properties   173,646       (107 )     204,075       194,741  
Gain on land sales   3,869       3,915       6,569       7,221  
Other operating expenses   (874 )     (1,104 )     (4,515 )     (3,902 )
Non-incremental costs related to successful leases   (1,123 )           (6,726 )      
General and administrative expenses   (13,720 )     (8,959 )     (49,123 )     (43,441 )
    165,534       (703 )     162,874       170,140  
               
Operating income   248,402       69,827       409,844       378,130  
               
Other income (expenses):              
Interest and other income, net   2,085       4,129       7,377       13,319  
Interest expense   (22,604 )     (21,462 )     (68,246 )     (62,137 )
Loss on debt extinguishment         (89 )     (13 )     (240 )
Gain on involuntary conversion               2,259        
Income from continuing operations, before income taxes   227,883       52,405       351,221       329,072  
Income tax benefit (expense)   536       897       (6,465 )     (9,495 )
Income from continuing operations   228,419       53,302       344,756       319,577  
               
Discontinued operations:              
Income before gain on sales         85             108  
Gain on sale of properties   112       136       366       3,157  
Income from discontinued operations   112       221       366       3,265  
               
Net income   228,531       53,523       345,122       322,842  
Net income attributable to noncontrolling interests   (1,965 )     (498 )     (2,952 )     (3,009 )
Net income attributable to common shareholders $ 226,566     $ 53,025     $ 342,170     $ 319,833  
               
Basic net income per common share:              
Continuing operations attributable to common shareholders $ 0.62     $ 0.15     $ 0.95     $ 0.88  
Discontinued operations attributable to common shareholders $     $     $     $ 0.01  
Total $ 0.62     $ 0.15     $ 0.95     $ 0.89  
               
Diluted net income per common share:              
Continuing operations attributable to common shareholders $ 0.62     $ 0.15     $ 0.94     $ 0.88  
Discontinued operations attributable to common shareholders $     $     $     $ 0.01  
Total $ 0.62     $ 0.15     $ 0.94     $ 0.89  
               



Duke Realty Corporation and Subsidiaries
Consolidated Balance Sheets
(Unaudited and in thousands)
       
       
  September 30,   December 31,
  2019   2018
Assets      
Real estate investments:      
Real estate assets $ 7,691,643     $ 7,248,346  
Construction in progress   469,218       477,162  
Investments in and advances to unconsolidated joint ventures   110,815       110,795  
Undeveloped land   307,973       360,816  
    8,579,649       8,197,119  
Accumulated depreciation   (1,427,180 )     (1,344,176 )
Net real estate investments   7,152,469       6,852,943  
Real estate investments and other assets held-for-sale   23,739       1,082  
Cash and cash equivalents   121,233       17,901  
Accounts receivable   20,449       14,254  
Straight-line rents receivable   123,689       109,334  
Receivables on construction contracts, including retentions   24,186       41,215  
Deferred leasing and other costs, net   315,579       313,799  
Restricted cash held in escrow for like-kind exchange   119,240        
Notes receivable from property sales   127,550       272,550  
Other escrow deposits and other assets   234,820       180,946  
       
  $ 8,262,954     $ 7,804,024  
       
Liabilities and Equity      
Indebtedness:      
Secured debt, net of deferred financing costs $ 34,896     $ 79,563  
Unsecured debt, net of deferred financing costs   2,732,686       2,548,938  
Unsecured line of credit         30,000  
    2,767,582       2,658,501  
Liabilities related to real estate investments held-for-sale   2,515        
Construction payables and amounts due subcontractors, including retentions   70,310       92,288  
Accrued real estate taxes   85,684       73,358  
Accrued interest   28,680       16,153  
Other liabilities   242,744       205,433  
Tenant security deposits and prepaid rents   44,167       45,048  
Total liabilities   3,241,682       3,090,781  
Shareholders' equity:      
Common shares   3,663       3,589  
Additional paid-in-capital   5,472,510       5,244,375  
Accumulated other comprehensive loss   (42,104 )     (4,676 )
Distributions in excess of net income   (476,136 )     (585,087 )
Total shareholders' equity   4,957,933       4,658,201  
Noncontrolling interests   63,339       55,042  
Total equity   5,021,272       4,713,243  
  $ 8,262,954     $ 7,804,024  
       



Duke Realty Corporation and Subsidiaries
Summary of EPS, FFO and AFFO
Three Months Ended September 30,
(Unaudited and in thousands, except per share amounts)
               
               
               
  2019   2018
    Wtd.       Wtd.  
    Avg. Per     Avg. Per
  Amount Shares Share   Amount Shares Share
Net income attributable to common shareholders $ 226,566         $ 53,025      
Less dividends on participating securities   (350 )         (394 )    
Net income per common share-basic   226,216   362,416 $ 0.62     52,631   357,898 $ 0.15
Add back:              
Noncontrolling interest in earnings of unitholders   1,968   3,142       495   3,302  
Other potentially dilutive securities   350   1,713         210  
Net income attributable to common shareholders-diluted $ 228,534   367,271 $ 0.62     53,126   361,410 $ 0.15
Reconciliation to FFO              
Net income attributable to common shareholders $ 226,566   362,416     $ 53,025   357,898  
Adjustments:              
Depreciation and amortization   83,924           78,855      
Depreciation, amortization and other - unconsolidated joint ventures   2,858           2,367      
Gains on sales of properties   (173,758 )         (29 )    
Gains on land sales   (3,869 )         (3,915 )    
Income tax benefit triggered by sales of real estate assets   (536 )         (897 )    
Gains on sales of real estate assets - unconsolidated joint ventures   (332 )         (2,008 )    
Noncontrolling interest share of adjustments   788           (680 )    
NAREIT FFO attributable to common shareholders - basic   135,641   362,416 $ 0.37     126,718   357,898 $ 0.35
Noncontrolling interest in income of unitholders   1,968   3,142       495   3,302  
Noncontrolling interest share of adjustments   (788 )         680      
Other potentially dilutive securities   1,713       2,117  
NAREIT FFO attributable to common shareholders - diluted $ 136,821   367,271 $ 0.37   $ 127,893   363,317 $ 0.35
Gain on involuntary conversion - including share of unconsolidated joint venture   (1,300 )         (1,397 )    
Loss on debt extinguishment             89      
Non-incremental costs related to successful leases   1,123                
Core FFO attributable to common shareholders - diluted $ 136,644   367,271 $ 0.37   $ 126,585   363,317 $ 0.35
AFFO              
Core FFO - diluted $ 136,644   367,271 $ 0.37   $ 126,585   363,317 $ 0.35
Adjustments:              
Straight-line rental income and expense   (5,282 )         (6,445 )    
Amortization of above/below market rents and concessions   (1,742 )         (593 )    
Stock based compensation expense   2,045           2,208      
Noncash interest expense   1,513           1,443      
Second generation concessions   (300 )              
Second generation tenant improvements   (3,227 )         (4,043 )    
Second generation leasing costs   (5,253 )         (4,440 )    
Building improvements   (4,203 )         (1,417 )    
AFFO - diluted $ 120,195   367,271     $ 113,298   363,317  
 



Duke Realty Corporation and Subsidiaries
Summary of EPS, FFO and AFFO
Nine Months Ended September 30,
(Unaudited and in thousands, except per share amounts)
               
               
               
  2019   2018
    Wtd.       Wtd.  
    Avg. Per     Avg. Per
  Amount Shares Share   Amount Shares Share
Net income attributable to common shareholders $ 342,170         $ 319,833      
Less dividends on participating securities   (1,125 )         (1,249 )    
Net income per common share-basic   341,045   360,424 $ 0.95     318,584   357,235 $ 0.89
Add back:              
Noncontrolling interest in earnings of unitholders   2,971   3,118       3,002   3,350  
Other potentially dilutive securities   1,125   1,801       1,249   2,160  
Net income attributable to common shareholders-diluted $ 345,141   365,343 $ 0.94   $ 322,835   362,745 $ 0.89
Reconciliation to FFO              
Net income attributable to common shareholders $ 342,170   360,424     $ 319,833   357,235  
Adjustments:              
Depreciation and amortization   242,920           232,216      
Depreciation, amortization and other - unconsolidated joint ventures   7,628           6,647      
Gains on sales of properties   (204,441 )         (197,898 )    
Gains on land sales   (6,569 )         (7,221 )    
Income tax expense triggered by sales of real estate assets   6,465           9,495      
Gains on sales of real estate assets - unconsolidated joint ventures   (4,859 )         (8,186 )    
Noncontrolling interest share of adjustments   (353 )         (326 )    
NAREIT FFO attributable to common shareholders - basic   382,961   360,424 $ 1.06     354,560   357,235 $ 0.99
Noncontrolling interest in income of unitholders   2,971   3,118       3,002   3,350  
Noncontrolling interest share of adjustments   353           326      
Other potentially dilutive securities   1,801       2,160  
NAREIT FFO attributable to common shareholders - diluted $ 386,285   365,343 $ 1.06   $ 357,888   362,745 $ 0.99
Gains on involuntary conversion - including share of unconsolidated joint venture   (3,559 )         (1,397 )    
Loss on debt extinguishment   13           240      
Non-incremental costs related to successful leases   6,726                
Core FFO attributable to common shareholders - diluted $ 389,465   365,343 $ 1.07   $ 356,731   362,745 $ 0.98
AFFO              
Core FFO - diluted $ 389,465   365,343 $ 1.07   $ 356,731   362,745 $ 0.98
Adjustments:              
Straight-line rental income and expense   (16,066 )         (17,759 )    
Amortization of above/below market rents and concessions   (4,546 )         (1,598 )    
Stock based compensation expense   17,258           18,238      
Noncash interest expense   4,577           4,244      
Second generation concessions   (334 )         (135 )    
Second generation tenant improvements   (8,306 )         (12,194 )    
Second generation leasing commissions   (14,198 )         (16,232 )    
Building improvements   (6,747 )         (3,165 )    
AFFO - diluted $ 361,103   365,343     $ 328,130   362,745  
 



Duke Realty Corporation and Subsidiaries
Reconciliation of Same Property Net Operating Income Growth
(Unaudited and in thousands)
       
  Three Months Ended
  September 30, 2019   September 30, 2018
       
Income from continuing operations before income taxes $ 227,883     $ 52,405  
Share of same property NOI from unconsolidated joint ventures   4,277       4,063  
Income and expense items not allocated to segments   (61,216 )     98,638  
Earnings from service operations   (2,315 )     (1,256 )
Properties not included and other adjustments   (37,280 )     (26,093 )
Same property NOI - Cash Basis $ 131,349     $ 127,757  
       
Percent Change   2.8 %    
       
  Nine Months Ended
  September 30, 2019   September 30, 2018
       
Income from continuing operations before income taxes $ 351,221     $ 329,072  
Share of same property NOI from unconsolidated joint ventures   12,696       12,014  
Income and expense items not allocated to segments   137,881       115,021  
Earnings from service operations   (5,423 )     (5,160 )
Properties not included and other adjustments   (103,996 )     (77,021 )
Same property NOI - Cash Basis $ 392,379     $ 373,926  
       
Percent Change   4.9 %    
       
       
Duke Realty Corporation and Subsidiaries
Reconciliation of 2019 FFO Guidance
(Unaudited)
       
  Pessimistic   Optimistic
Net income attributable to common shareholders - diluted $ 1.11     $ 1.27  
Depreciation and gains on sales of real estate assets (including share of unconsolidated joint ventures)   0.26       0.18  
NAREIT FFO attributable to common shareholders - diluted $ 1.37     $ 1.45  
Non-incremental costs related to successful leases   0.04       0.02  
Loss on debt extinguishment   0.02       0.02  
Other reconciling items   (0.01 )     (0.03 )
Core FFO attributable to common shareholders - diluted $ 1.42     $ 1.46  

 

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Source: Duke Realty Corporation