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Duke Realty Reports Third Quarter 2020 Results

8.5 Percent Increase to Quarterly Dividend

32.1 Percent Growth in Net Effective Rents on Quarterly Leasing Activity

Strong Rent Collections and Increased Occupancy

2020 Guidance Updated with Improved Earnings and Development Metrics  

INDIANAPOLIS, Oct. 28, 2020 (GLOBE NEWSWIRE) -- Duke Realty Corporation (NYSE: DRE), the largest domestic-only logistics REIT, today reported results for the third quarter of 2020.
     
Jim Connor, Chairman and Chief Executive Officer, said, “We delivered excellent operating results for the third quarter of 2020, putting ourselves on pace to finish the year at levels exceeding our initial, pre-pandemic, 2020 financial performance expectations. Leases executed during the quarter totaled 7.3 million square feet and drove the highest total and in-service portfolio occupancy levels since early 2017. Second generation leases executed during the quarter resulted in rental rate growth of 32.1 percent on a net effective basis and 17.2 percent on a cash basis. Growth in same property net operating income was very strong at 5.0 percent and 5.5 percent for the three and nine months ended September 30, 2020, respectively, compared to the corresponding periods in 2019.

“Monthly rent collections are strong and the pace of such collections has improved each month from the start of the pandemic. Thus far, we’ve collected more than 99 percent of deferred rents that have come due under revised billing terms, with some tenants even repaying their deferrals in advance to avoid interest charges. Cash bad debt expense for the quarter was essentially zero.
   
“As a result of our strong operating performance, we are pleased to increase our quarterly dividend from $0.235 per share to $0.255 per share. This 8.5 percent increase to our quarterly dividend is based on our expectation of continued cash flow growth allowing us to maintain more-than-adequate cash flow coverage to continue to grow our business.”

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 $0.19 per diluted share for the third quarter of 2020, compared to $0.62 per diluted share for the third quarter of 2019. Net income per diluted share for the third quarter of 2020 was lower than the third quarter of 2019 due to significant gains on building sales recognized in the third quarter of 2019.

  • FFO, as defined by NAREIT, was $0.39 per diluted share for the third quarter of 2020, compared to $0.37 per diluted share for the third quarter of 2019. FFO per diluted share, as defined by NAREIT, increased from the third quarter of 2019 due to rent growth on new and renewal leases, higher in-service occupancy and leasing of new developments.

  • Core FFO was $0.40 per diluted share for the third quarter of 2020, compared to $0.37 per diluted share for the third quarter of 2019. Core FFO per diluted share for the third quarter of 2020 increased for the same reasons as the increase to FFO per diluted share, as defined by NAREIT.

  • Key indicators of the company’s operating performance were as follows:

    – The company’s stabilized in-service portfolio was 97.5 percent leased at September 30, 2020, compared to 97.3 percent leased at June 30, 2020 and 97.9 percent leased at September 30, 2019.

    – The company’s total in-service portfolio was 97.1 percent leased at September 30, 2020 compared to 96.7 percent leased at June 30, 2020 and 96.2 percent leased at September 30, 2019.

    – The company’s total portfolio, including properties under development, was 95.6 percent leased at September 30, 2020 compared to 95.3 percent leased at June 30, 2020 and 93.9 percent leased at September 30, 2019.

    – Tenant retention was 45.7 percent for the three months ended September 30, 2020 and 67.2 percent after considering immediate backfills.

    – Same-property net operating income growth was 5.0 percent and 5.5 percent, respectively, for the three and nine month periods ended September 30, 2020 compared to the same periods in 2019. Same-property net operating growth was positively impacted by increased occupancy and rental rate growth as well as the expiration of free rent periods.

    – Total leasing activity was 7.3 million square feet for the quarter.

    – Overall cash and annualized net effective rent growth on new and renewal leases was 17.2 percent and 32.1 percent, respectively, for the quarter.

    – The company collected or has executed deferral agreements for 99.9 percent of third quarter rents and 99.8 percent of October rents. Further detail on collections and deferral agreements appears on pages 16 and 17 of the company’s supplemental information located in the Investor Relations section of the company’s website.
  • Capital transactions included:

    – Issued 995,000 common shares, generating $39 million of net proceeds, under the company’s ATM program at an average price of $39.14 per share.

    – Completed one property disposition totaling $18 million.

    – Completed the acquisition of five properties totaling $112 million.

    – Started four new development projects with expected costs of $261 million that were 28 percent pre-leased.

Real Estate Investment Activity

Mr. Connor further stated, “We finished the quarter with a 7.0 million square foot development pipeline totaling $897 million in expected costs. During the third quarter we fully leased a 1.1 million square foot property in Southern California that was started on a speculative basis in the fourth quarter of 2019 and is not scheduled to be delivered until the second quarter of 2021. Due to our ability to consistently lease up our speculative space we began two new speculative development projects during the quarter, one in Southern California and one in Seattle, totaling 1.4 million square feet. Even with this level of speculative project starts, we still finished the quarter with our development pipeline being 63 percent pre-leased overall. Our non-coastal development pipeline is 100 percent leased with expected costs totaling $173 million and our development pipeline in high barrier coastal markets is 46 percent leased with expected costs totaling $724 million. As rental rates continue to rise in the coastal markets we have targeted for growth, we believe there is potential to achieve yields higher than our initial underwriting for the speculative portion of our development pipeline.

“The development projects slated for delivery over the next six months have expected costs of $344 million and are 93 percent pre-leased. Once delivered, these projects will be immediately accretive at their current occupancy level.”

Development  

The third quarter included the following development activity:

  • The company started four wholly owned development projects with expected costs of $261 million, totaling 2.0 million square feet, which were 28 percent leased in total. These projects included a 1.2 million square foot speculative project in Southern California, a 415,000 square foot build-to-suit project in Eastern Pennsylvania, a 72 percent leased, 222,000 square foot project in South Florida and a 190,000 square foot speculative project in Seattle.
  • Four wholly owned projects totaling 1.5 million square feet were placed in service during the quarter. These projects were 89 percent leased in total and included a 100 percent leased, 800,000 square foot, project in Southern California and two 100 percent leased projects in Northern New Jersey, totaling 518,000 square feet.

Building Acquisitions

Building acquisitions totaled $112 million in the third quarter and included the following:

  • Three 100 percent leased buildings in the East Bay submarket of Northern California, totaling 428,000 square feet. One of these buildings, totaling 141,000 square feet, is expected to be redeveloped soon after its existing one-year lease expires.
  • A 100 percent leased, 188,000 square foot, building in Northern New Jersey.
  • A 100 percent leased, 64,000 square foot, building in Seattle.

Building Dispositions

The company disposed of a 100 percent leased wholly-owned project in Indianapolis, totaling 280,000 square feet, for $18 million.
   
Distributions Declared

The company’s board of directors declared a quarterly cash distribution on its common stock of $0.255 per share, or $1.02 per share on an annualized basis. The third quarter dividend will be payable on November 30, 2020 to shareholders of record on November 16, 2020.

2020 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 issued revised guidance for net income of $0.66 to $0.88 per diluted share, compared to the previous range of $0.63 to $0.87 per diluted share. The company issued revised guidance for FFO, as defined by NAREIT, of $1.38 to $1.44 per diluted share, compared to the previous range of $1.35 to $1.43 per diluted share. The Company also issued revised guidance for Core FFO of $1.50 to $1.54 per diluted share, compared to the previous range of $1.48 to $1.54 per diluted share.

Commenting on the company’s revised 2020 guidance, Mr. Connor stated, “We continued to post strong operating results and execute on our leasing and rent collection objectives at a level above our expectations, as our company and sector continues to outperform the general economy through this protracted pandemic.

“This mid-point of the revised guidance for Core FFO includes an estimate of nearly $6 million in combined cash and straight line bad debt charges or lost rent from tenant defaults, which includes actual year-to-date bad debt expense of $5.5 million. This represents a decrease of approximately $3 million from the $9 million of bad debt expense we estimated when we updated our guidance in July. The mid-point of our revised guidance was also positively impacted by improved leasing assumptions compared to our July guidance.

“Driven largely by the same factors as Core FFO, the guidance for the growth in adjusted funds from operations (‘AFFO’), on a share-adjusted basis, has been revised to between 4.6 percent and 7.7 percent, compared to the previous range of 3.1 percent to 7.7 percent.

“Our range of guidance for the average percentage leased of our stabilized in-service portfolio has been revised to between 97.3 percent and 97.7 percent, compared to the previous range of 96.5 percent to 97.9 percent. Our range of guidance for the average percentage leased of our total in-service portfolio has been revised to between 96.7 percent and 97.1 percent, compared to the previous range of 96.0 percent to 97.4 percent. The increased guidance is the result of better tenant demand and the expectation of fewer tenant defaults compared to our previous guidance.

“These factors, along with strong rental rate growth on recently executed leases, resulted in revised guidance for growth in same-property net operating income to between 4.7 percent and 5.1 percent, compared to the previous range of 3.5 percent to 4.5 percent.

“Our revised guidance for 2020 development starts is between $650 million and $800 million, compared to the previous range of between $350 million and $550 million. We have a strong prospect list of build-to-suit projects, in excess of pre-COVID levels, and anticipate an increased level of development starts in the fourth quarter and early 2021, which drove the revision to our guidance for development starts.”

Other guidance changes are as follows:

  • Dispositions of properties in a range of $250 million to $350 million, compared to the previous range of between $200 million and $400 million.
  • Acquisitions of properties ranging between $225 million and $325 million, compared to the previous range of between $50 million and $250 million.

More specific assumptions and components of the company’s 2020 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 the impact of COVID-19 on the economy, the supply and demand of industrial real estate, the ability of our tenants to continue paying rent, our ability to continue our development activity, the availability and terms of financing to us or potential buyers of our 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”). 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 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 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 18 of its September 30, 2020 supplemental information.
           
About Duke Realty Corporation

Duke Realty Corporation owns and operates approximately 159 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 a member of 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 29, 2020, 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 although not all forward looking statements may contain such words. 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 and trade wars; (xv) the effects of natural disasters, including the current pandemic caused by the COVID-19 outbreak, as well 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). 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, 2019. 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. 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:
Gene Miller
317.808.6195



 
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,
        2020     2019       2020     2019  
Revenues:            
  Rental and related revenue   $ 235,391   $ 215,374     $ 680,520   $ 638,446  
  General contractor and service fee revenue     26,637     25,955       46,388     104,838  
        262,028     241,329       726,908     743,284  
Expenses:            
  Rental expenses     20,231     19,158       56,631     57,423  
  Real estate taxes     37,027     31,739       110,517     96,556  
  General contractor and other services expenses     24,604     23,640       41,578     99,415  
  Depreciation and amortization     88,596     83,924       260,659     242,920  
        170,458     158,461       469,385     496,314  
Other operating activities:            
  Equity in earnings of unconsolidated joint ventures     4,023     3,736       8,958     12,594  
  Gain on sale of properties     10,968     173,646       19,905     204,075  
  Gain on land sales     2,346     3,869       8,551     6,569  
  Other operating expenses     (1,772 )   (874 )     (4,430 )   (4,515 )
  Impairment charges     -     -       (5,626 )   -  
  Non-incremental costs related to successful leases     (4,058 )   (1,123 )     (10,617 )   (6,726 )
  General and administrative expenses     (11,439 )   (13,720 )     (46,808 )   (49,123 )
        68     165,534       (30,067 )   162,874  
               
  Operating income   91,638     248,402       227,456     409,844  
               
Other income (expenses):            
  Interest and other income, net     32     2,085       1,643     7,377  
  Interest expense     (23,059 )   (22,604 )     (69,394 )   (68,246 )
  Loss on debt extinguishment     (120 )   -       (32,898 )   (13 )
  Gain on involuntary conversion     3,029     -       4,312     2,259  
Income from continuing operations, before income taxes     71,520     227,883       131,119     351,221  
  Income tax benefit (expense)     956     536       1,166     (6,465 )
  Income from continuing operations   72,476     228,419       132,285     344,756  
               
Discontinued operations:            
  Gain on sale of properties     40     112       111     366  
  Income from discontinued operations   40     112       111     366  
               
Net income     72,516     228,531       132,396     345,122  
Net income attributable to noncontrolling interests     (693 )   (1,965 )     (1,297 )   (2,952 )
  Net income attributable to common shareholders $ 71,823   $ 226,566     $ 131,099   $ 342,170  
               
Basic net income per common share:            
  Continuing operations attributable to common shareholders   $ 0.19   $ 0.62     $ 0.35   $ 0.95  
Diluted net income per common share:            
  Continuing operations attributable to common shareholders   $ 0.19   $ 0.62     $ 0.35   $ 0.94  
               
               



  Duke Realty Corporation and Subsidiaries
  Consolidated Balance Sheets
  (Unaudited and in thousands)
           
      September 30,   December 31,
        2020       2019  
  Assets        
Real estate investments:        
  Real estate assets   $ 8,569,340     $ 7,993,377  
  Construction in progress     604,819       550,926  
  Investments in and advances to unconsolidated joint ventures     132,127       133,074  
  Undeveloped land     267,254       254,537  
        9,573,540       8,931,914  
  Accumulated depreciation     (1,637,190 )     (1,480,461 )
           
  Net real estate investments   7,936,350       7,451,453  
           
Real estate investments and other assets held-for-sale     -       18,463  
           
Cash and cash equivalents     6,748       110,891  
Accounts receivable     15,072       20,349  
Straight-line rent receivable     145,130       129,344  
Receivables on construction contracts, including retentions     44,824       25,607  
Deferred leasing and other costs, net     325,846       320,444  
Restricted cash held in escrow for like-kind exchange     -       1,673  
Notes receivable from property sales     -       110,000  
Other escrow deposits and other assets     269,055       232,338  
           
      $ 8,743,025     $ 8,420,562  
           
  Liabilities and Equity        
Indebtedness:        
  Secured debt, net of deferred financing costs   $ 74,339     $ 34,023  
  Unsecured debt, net of deferred financing costs     3,025,089       2,880,742  
  Unsecured line of credit     47,000       -  
        3,146,428       2,914,765  
Liabilities related to real estate investments held-for-sale        
    -       887  
           
Construction payables and amounts due subcontractors, including retentions     83,047       68,840  
Accrued real estate taxes     101,846       69,042  
Accrued interest     26,499       14,181  
Other liabilities     249,266       223,680  
Tenant security deposits and prepaid rents     47,292       48,907  
  Total liabilities   3,654,378       3,340,302  
           
Shareholders’ equity:        
           
  Common shares     3,715       3,680  
  Additional paid-in capital     5,653,143       5,525,463  
  Accumulated other comprehensive loss     (32,457 )     (35,036 )
  Distributions in excess of net income     (606,182 )     (475,992 )
  Total shareholders’ equity   5,018,219       5,018,115  
           
Noncontrolling interests     70,428       62,145  
  Total equity     5,088,647       5,080,260  
           
      $ 8,743,025     $ 8,420,562  
           
           



Duke Realty Corporation and Subsidiaries
Summary of EPS, FFO and AFFO
Three Months Ended September 30,
(Unaudited and in thousands, except per share amounts)
                 
  2020 2019
    Wtd.
    Wtd.
 
    Avg.
Per   Avg.
Per
  Amount Shares
Share Amount Shares
Share
Net income attributable to common shareholders $ 71,823         $ 226,566        
Less dividends on participating securities   (352 )         (350 )      
Net income per common share-basic   71,471   371,082   $ 0.19     226,216   362,416   $ 0.62  
Add back:                
Noncontrolling interest in earnings of unitholders   638   3,330       1,968   3,142    
Other potentially dilutive securities   -   422       350   1,713    
Net income attributable to common shareholders-diluted $ 72,109   374,834   $ 0.19     228,534   367,271   $ 0.62  
Reconciliation to FFO                
Net income attributable to common shareholders $ 71,823   371,082     $ 226,566   362,416    
Adjustments:                
Depreciation and amortization   88,596           83,924        
Depreciation, amortization and other - unconsolidated joint ventures   2,259           2,858        
Gains on sales of properties   (11,008 )         (173,758 )      
Gains on land sales   (2,346 )         (3,869 )      
Income tax benefit triggered by sales of real estate assets   (956 )         (536 )      
Gains on sales of real estate assets - unconsolidated joint ventures   (1,095 )         (332 )      
Noncontrolling interest share of adjustments   (671 )         788        
NAREIT FFO attributable to common shareholders - basic   146,602   371,082   $ 0.40     135,641   362,416   $ 0.37  
Noncontrolling interest in income of unitholders   638   3,330       1,968   3,142    
Noncontrolling interest share of adjustments   671           (788 )      
Other potentially dilutive securities   1,833       1,713    
NAREIT FFO attributable to common shareholders - diluted $ 147,911   376,245   $ 0.39   $ 136,821   367,271   $ 0.37  
Gain on involuntary conversion - including share of unconsolidated joint venture   (3,029 )         (1,300 )      
Loss on debt extinguishment   120           -        
Non-incremental costs related to successful leases   4,058           1,123        
Core FFO attributable to common shareholders - diluted $ 149,060   376,245   $ 0.40   $ 136,644   367,271   $ 0.37  
AFFO                
Core FFO - diluted $ 149,060   376,245   $ 0.40   $ 136,644   367,271   $ 0.37  
Adjustments:                
Straight-line rental income and expense   (7,796 )         (5,282 )      
Amortization of above/below market rents and concessions   (1,836 )         (1,742 )      
Stock based compensation expense   2,736           2,045        
Noncash interest expense   2,463           1,513        
Second generation concessions   (58 )         (300 )      
Second generation tenant improvements   (3,685 )         (3,227 )      
Second generation leasing costs   (5,623 )         (5,253 )      
Building improvements   (413 )         (4,203 )      
AFFO - diluted $ 134,848   376,245     $ 120,195   367,271    
 
                 



Duke Realty Corporation and Subsidiaries
Summary of EPS, FFO and AFFO
Nine Months Ended September 30,
(Unaudited and in thousands, except per share amounts)
                 
  2020
2019
     Wtd.
     Wtd.
 
     Avg.
Per    Avg.
Per
  Amount  Shares
Share Amount  Shares
Share
Net income attributable to common shareholders $ 131,099         $ 342,170        
Less dividends on participating securities   (1,064 )         (1,125 )      
Net income per common share-basic   130,035   369,375   $ 0.35     341,045   360,424   $ 0.95  
Add back:                
Noncontrolling interest in earnings of unitholders   1,164   3,296       2,971   3,118    
Other potentially dilutive securities   -   420       1,125   1,801    
Net income attributable to common shareholders-diluted $ 131,199   373,091   $ 0.35   $ 345,141   365,343   $ 0.94  
Reconciliation to FFO                
Net income attributable to common shareholders $ 131,099   369,375     $ 342,170   360,424    
Adjustments:                
Depreciation and amortization   260,659           242,920        
Depreciation, amortization and other - unconsolidated joint ventures   6,759           7,628        
Gains on sales of properties   (20,016 )         (204,441 )      
Gains on land sales   (8,551 )         (6,569 )      
Income tax (benefit) expense triggered by depreciable property sales   (1,166 )         6,465        
Impairment charges   5,626           -        
Gains on sales of real estate assets - unconsolidated joint ventures   (787 )         (4,859 )      
Noncontrolling interest share of adjustments   (2,144 )         (353 )      
NAREIT FFO attributable to common shareholders - basic   371,479   369,375   $ 1.01     382,961   360,424   $ 1.06  
Noncontrolling interest in income of unitholders   1,164   3,296       2,971   3,118    
Noncontrolling interest share of adjustments   2,144           353        
Other potentially dilutive securities   1,821       1,801    
NAREIT FFO attributable to common shareholders - diluted $ 374,787   374,492   $ 1.00   $ 386,285   365,343   $ 1.06  
Gain on involuntary conversion - including share of unconsolidated joint venture   (4,312 )         (3,559 )      
Loss on debt extinguishment   32,898           13        
Non-incremental costs related to successful leases   10,617           6,726        
Overhead restructuring charges   2,063           -        
Core FFO attributable to common shareholders - diluted $ 416,053   374,492   $ 1.11   $ 389,465   365,343   $ 1.07  
AFFO                
Core FFO - diluted $ 416,053   374,492   $ 1.11   $ 389,465   365,343   $ 1.07  
Adjustments:                
Straight-line rental income and expense   (15,934 )         (16,066 )      
Amortization of above/below market rents and concessions   (5,934 )         (4,546 )      
Stock based compensation expense   20,335           17,258        
Noncash interest expense   6,896           4,577        
Second generation concessions   (394 )         (334 )      
Second generation tenant improvements   (10,073 )         (8,306 )      
Second generation leasing costs   (14,126 )         (14,198 )      
Building improvements   (1,306 )         (6,747 )      
AFFO - diluted $ 395,517   374,492     $ 361,103   365,343    
 
                 



Duke Realty Corporation and Subsidiaries
Reconciliation of Same Property Net Operating Income Growth
(Unaudited and in thousands)
     
  Three Months Ended
  September 30, 2020 September 30, 2019
     
Income from continuing operations before income taxes $ 71,520   $ 227,883  
Share of same property NOI from unconsolidated joint ventures   4,917     4,564  
Income and expense items not allocated to segments   108,318     (61,216 )
Earnings from service operations   (2,033 )   (2,315 )
Properties not included and other adjustments   (28,034 )   (21,564 )
Same property NOI - Cash Basis $ 154,688   $ 147,352  
     
Percent Change   5.0 %  
     
  Nine Months Ended
  September 30, 2020 September 30, 2019
     
Income from continuing operations before income taxes $ 131,119   $ 351,221  
Share of same property NOI from unconsolidated joint ventures   14,236     13,550  
Income and expense items not allocated to segments   386,408     137,881  
Earnings from service operations   (4,810 )   (5,423 )
Properties not included and other adjustments   (66,912 )   (61,284 )
Same property NOI - Cash Basis $ 460,041   $ 435,945  
     
Percent Change   5.5 %  
     
     
Duke Realty Corporation and Subsidiaries
Reconciliation of 2020 FFO Per Diluted Share Guidance
(Unaudited )
     
  Pessimistic Optimistic
Net income attributable to common shareholders - diluted $ 0.66   $ 0.88  
Depreciation   0.94     0.92  
Gains on land and property sales, net of impairment charges   (0.24 )   (0.38 )
Share of joint venture adjustments   0.02     0.02  
NAREIT FFO attributable to common shareholders - diluted $ 1.38   $ 1.44  
Loss on debt extinguishment   0.09     0.09  
Non-incremental costs related to successful leases   0.04     0.03  
Other reconciling items   (0.01 )   (0.02 )
Core FFO attributable to common shareholders - diluted $ 1.50   $ 1.54  
     

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Source: Duke Realty Corporation