In-Service Occupancy Increased to 97.4 percent
$393 Million of Development Starts
22.1 percent Growth in Rents on Leasing Activity
Earnings Guidance Increased
INDIANAPOLIS, July 25, 2018 (GLOBE NEWSWIRE) -- Duke Realty Corporation (NYSE:DRE), the largest domestic only, industrial REIT today reported results for the second quarter 2018.
Jim Connor, Chairman and Chief Executive Officer said, "Our leasing activity has continued at a very strong pace, well ahead of a year ago, which is impressive given our already high occupancy levels. In particular, we have continued to lease up our speculative developments much faster than originally anticipated. During the quarter, we executed 7.8 million square feet of total leases, which included a 20-year lease of a 1.0 million square foot speculative property in Pennsylvania to a major logistics company just before it was placed in service. New and renewal leases executed during the quarter resulted in rent growth of 9.2 percent on a cash basis and 22.1 percent growth in annualized net effective rents.
Growth in same-property net operating income was 3.9 percent for the quarter, an improvement from the 3.4 percent growth during the first quarter, and was the result of continued rental rate growth."
Mark Denien, Executive Vice President and Chief Financial Officer, stated, "While maintaining a measured and prudent re-investment strategy, our deployment of the proceeds from the 2017 sale of our medical office properties has moved quicker than anticipated. Additionally, we continue to maintain significant capacity for additional investment with $146 million of cash held in escrow to be applied toward future investments, $86 million in cash, $277 million in interest-bearing notes receivable that will mature at various points through January 2020, and no outstanding borrowings on our line of credit."
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 $0.54 per diluted share, or $196 million, for the second quarter of 2018, compared to $3.38 per diluted share for the second quarter of 2017. The decrease to net income per diluted share was due to the significant gains recognized from the sale of the majority of the company's medical office properties during the second quarter of 2017.
- FFO, as defined by NAREIT, was $0.33 per diluted share, or $121 million, for the second quarter of 2018, compared to $0.36 per diluted share for the second quarter of 2017. FFO per diluted share, as defined by NAREIT, decreased due to the fact that the second quarter of 2017 included $20 million of promote income, which was partially offset by $10 million in debt extinguishment costs.
- Core FFO was $0.33 per diluted share, or $121 million, for the second quarter of 2018, compared to $0.32 per diluted share for the second quarter of 2017. The increase in Core FFO per diluted share from the second quarter of 2017 was mainly the result of lower interest expense, due to using a portion of the proceeds from the medical office sales to reduce leverage, as well as from re-investing a portion of such proceeds into new industrial properties and overall improved operations. This increase to Core FFO was partially offset by the fact that the second quarter of 2017 included a significant amount of pre-sale operations from the company's medical office properties.
- Operating performance within the company's industrial portfolio:
- Total stabilized occupancy at June 30, 2018 of 98.2 percent compared to 98.5 percent at March 31, 2018 and 97.7 percent at June 30, 2017
- Total in-service occupancy at June 30, 2018 of 97.4 percent compared to 97.0 percent at March 31, 2018 and 96.0 percent at June 30, 2017
- Total occupancy, including properties under development, of 94.0 percent at June 30, 2018 compared to 94.4 percent at March 31, 2018 and 93.5 percent at June 30, 2017
- Tenant retention of 74.7 percent
- Same-property net operating income growth of 3.9 percent and 3.7 percent for the three and six-month periods ended June 30, 2018 compared to the same periods in 2017
- Total leasing activity of 7.8 million square feet for the quarter
- Overall cash and annualized net effective rent growth on new and renewal leases of 9.2 percent and 22.1 percent, respectively, for the quarter - Successful execution of capital transactions in the second quarter:
- Completed $301 million of building dispositions
- Completed $187 million of building acquisitions
- Started 13 new industrial development projects with expected costs of $393 million
Real Estate Investment Activity
Mr. Connor further stated, "We started $393 million of developments during the quarter, totaling 5.7 million square feet, which were 53 percent pre-leased. With $616 million of development starts to date and strong prospects for the remainder of the year, we have increased our 2018 guidance for development starts.
We have also continued to be opportunistic in strategic capital recycling. During the quarter we closed on the sale of a 3.8 million square foot portfolio in Columbus, of which 20 percent of the net operating income was generated from a facility leased by the Bon-Ton Stores, which is in the process of liquidating. We recycled a significant amount of these proceeds into a new, 1.1 million square foot, three-building portfolio in Miami, Florida. Given the impending large vacancy in the Columbus portfolio and the superior rent growth prospects in Miami, we are confident that the long term returns of this Miami portfolio will be greater than the Columbus portfolio we sold. These Miami properties are within two miles of some of our existing properties, which should facilitate operational and leasing synergies."
Development
The second quarter included the following development activity:
Wholly Owned Properties
- During the quarter, the company started $370 million of wholly owned development projects totaling 5.4 million square feet, which were 51 percent pre-leased in total. These wholly owned development starts were comprised of two build-to-suit developments in Columbus totaling 2.1 million square feet; a 657,000 square foot speculative development in Southern California; a 244,000 square foot development in Southern California that was fully pre-leased shortly after development commenced; a 71 percent pre-leased, 635,000 square foot development in Dallas; two speculative developments in Atlanta totaling 692,000 square feet; a 183,000 square foot speculative development in Chicago; and three speculative developments in other markets totaling 923,000 square feet.
- Four projects totaling 2.2 million square feet, which were 100 percent leased, were placed in service during the quarter.
Joint Venture Properties
- During the quarter, a 50 percent-owned joint venture started two developments in Indianapolis, totaling 284,000 square feet, which were 81 percent pre-leased.
- A 708,000 square foot industrial project in Indianapolis, which was 100 percent leased, was placed in service during the quarter by a 50 percent-owned joint venture.
Acquisitions
The company acquired three industrial properties in Miami, Florida, totaling 1.1 million square feet, which were 100 percent leased. The properties are located in the northwest corridor of Miami-Dade with immediate access to major transportation arteries.
The company also purchased a 56,000 square foot industrial building in an infill location in Orange County, CA.
Building Dispositions
Building dispositions totaled $301 million in the second quarter and included the following:
Wholly Owned Properties
- Four industrial properties in Columbus, OH totaling 3.8 million square feet
- Two industrial properties in Chicago, IL totaling 375,000 square feet
- One industrial property in Savannah, GA totaling 800,000 square feet
Distributions Declared
The company's board of directors declared a quarterly cash distribution on its common stock of $0.20 per share, or $0.80 per share on an annualized basis. The second quarter dividend will be payable on August 31, 2018 to shareholders of record on August 16, 2018.
Revisions to 2018 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 net income to a range of $0.97 to $1.12 per diluted share from its previous guidance of $0.71 to $1.09 per diluted share. The company revised its guidance for FFO, as defined by NAREIT, to a range of $1.29 to $1.37 per diluted share from its previous guidance of $1.26 to $1.34.
Commenting on the revision to the company's 2018 guidance, Mr. Connor stated, "We are increasing our guidance for Core FFO to a range of $1.29 to $1.35 per diluted share, from the previous range of $1.26 to $1.32 per diluted share. This increase to guidance is due to overall strong operating results including better than expected progress on the redeployment of proceeds from selling our medical office business into new developments as well as the accelerated pace of leasing of our speculative pipeline."
A summary of all guidance changes are as follows:
- The guidance for Core FFO was increased to a range of $1.29 to $1.35 per diluted share from the previous range of $1.26 to $1.32 per diluted share.
- The guidance for growth in same-property net operating income was narrowed to a range of 3.50 percent to 4.50 percent from the previous range of 3.25 percent to 4.75 percent.
- The estimate for average percent leased within the company's stabilized portfolio was increased to a range of 97.9 percent to 98.7 percent from the previous range of 97.5 percent to 98.5 percent.
- The estimate for average percent leased, for all of the company's in-service properties, was increased to a range of 96.5 percent to 97.3 percent from the previous range of 96.0 percent to 97.0 percent.
- The estimate for building acquisitions was decreased to a range of $100 million to $400 million from the previous range of $100 million to $500 million.
- The estimate for building dispositions was increased to a range of $470 million to $600 million from the previous range of $350 million to $550 million.
- The estimate for development starts was increased to a range of $750 million to $950 million from the previous range of $650 million to $850 million.
- The estimate for earnings from service operations was increased to a range of $2 million to $5 million from the previous range of $1 million to $4 million.
An updated version of the company's 2018 guidance will be available by 6:00 p.m. Eastern Time today through the Investor Relations section of the company's website.
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; 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 generally accepted accounting principles ("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 17 of its June 30, 2018 supplemental information.
About Duke Realty Corporation
Duke Realty Corporation owns and operates approximately 150 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.
Second Quarter Earnings Call and Supplemental Information
Duke Realty Corporation is hosting a conference call tomorrow, July 26, 2018, at 3:00 p.m. ET to discuss its second quarter operating results. All investors and other interested parties are invited to listen to the call. Access is available through the Investor Relations section of the company's 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, 2017. 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 | Six Months Ended | ||||||||||||||||
| June 30, | June 30, | ||||||||||||||||
| 2018 | 2017 | 2018 | 2017 | ||||||||||||||
| Revenues: | |||||||||||||||||
| Rental and related revenue | $ | 192,093 | $ | 165,836 | $ | 385,549 | $ | 337,512 | |||||||||
| General contractor and service fee revenue | 18,465 | 23,576 | 59,566 | 32,975 | |||||||||||||
| 210,558 | 189,412 | 445,115 | 370,487 | ||||||||||||||
| Expenses: | |||||||||||||||||
| Rental expenses | 16,769 | 14,506 | 37,165 | 30,743 | |||||||||||||
| Real estate taxes | 31,196 | 26,902 | 62,342 | 53,412 | |||||||||||||
| General contractor and other services expenses | 15,253 | 22,374 | 55,662 | 29,998 | |||||||||||||
| Depreciation and amortization | 75,832 | 67,013 | 153,361 | 129,036 | |||||||||||||
| 139,050 | 130,795 | 308,530 | 243,189 | ||||||||||||||
| Other operating activities: | |||||||||||||||||
| Equity in earnings of unconsolidated joint ventures | 1,682 | 51,933 | 9,969 | 56,682 | |||||||||||||
| Promote income | — | 20,007 | — | 20,007 | |||||||||||||
| Gain on sale of properties | 149,962 | 34,341 | 194,848 | 71,387 | |||||||||||||
| Gain on land sales | 357 | 1,279 | 3,306 | 2,784 | |||||||||||||
| Other operating expenses | (1,137 | ) | (718 | ) | (1,923 | ) | (1,457 | ) | |||||||||
| Impairment charges | — | — | — | (859 | ) | ||||||||||||
| General and administrative expenses | (13,459 | ) | (11,858 | ) | (34,482 | ) | (31,090 | ) | |||||||||
| 137,405 | 94,984 | 171,718 | 117,454 | ||||||||||||||
| Operating income | 208,913 | 153,601 | 308,303 | 244,752 | |||||||||||||
| Other income (expenses): | |||||||||||||||||
| Interest and other income, net | 4,727 | 2,260 | 9,190 | 2,792 | |||||||||||||
| Interest expense | (20,675 | ) | (21,680 | ) | (40,675 | ) | (44,566 | ) | |||||||||
| Loss on debt extinguishment | (151 | ) | (9,561 | ) | (151 | ) | (9,536 | ) | |||||||||
| Income from continuing operations, before income taxes | 192,814 | 124,620 | 276,667 | 193,442 | |||||||||||||
| Income tax expense | (63 | ) | (5,426 | ) | (10,392 | ) | (7,557 | ) | |||||||||
| Income from continuing operations | 192,751 | 119,194 | 266,275 | 185,885 | |||||||||||||
| Discontinued operations: | |||||||||||||||||
| Income before gain on sales and income taxes | 31 | 11,095 | 23 | 15,185 | |||||||||||||
| Gain on sale of depreciable properties | 2,889 | 1,109,091 | 3,021 | 1,109,091 | |||||||||||||
| Income tax expense | — | (11,613 | ) | — | (11,613 | ) | |||||||||||
| Income from discontinued operations | 2,920 | 1,108,573 | 3,044 | 1,112,663 | |||||||||||||
| Net income | 195,671 | 1,227,767 | 269,319 | 1,298,548 | |||||||||||||
| Net income attributable to noncontrolling interests | (1,826 | ) | (17,224 | ) | (2,511 | ) | (17,805 | ) | |||||||||
| Net income attributable to common shareholders | $ | 193,845 | $ | 1,210,543 | $ | 266,808 | $ | 1,280,743 | |||||||||
| Basic net income per common share: | |||||||||||||||||
| Continuing operations attributable to common shareholders | $ | 0.53 | $ | 0.33 | $ | 0.74 | $ | 0.52 | |||||||||
| Discontinued operations attributable to common shareholders | 0.01 | 3.07 | 0.01 | 3.08 | |||||||||||||
| Total | $ | 0.54 | $ | 3.40 | $ | 0.75 | $ | 3.60 | |||||||||
| Diluted net income per common share: | |||||||||||||||||
| Continuing operations attributable to common shareholders | $ | 0.53 | $ | 0.33 | $ | 0.73 | $ | 0.51 | |||||||||
| Discontinued operations attributable to common shareholders | 0.01 | 3.05 | 0.01 | 3.06 | |||||||||||||
| Total | $ | 0.54 | $ | 3.38 | $ | 0.74 | $ | 3.57 | |||||||||
| Duke Realty Corporation and Subsidiaries | ||||||||||
| Consolidated Balance Sheets | ||||||||||
| (Unaudited and in thousands) | ||||||||||
| June 30, | December 31, | |||||||||
| 2018 | 2017 | |||||||||
| Assets | ||||||||||
| Real estate investments: | ||||||||||
| Real estate assets | $ | 6,785,491 | $ | 6,593,567 | ||||||
| Construction in progress | 496,496 | 401,407 | ||||||||
| Investments in and advances to unconsolidated joint ventures | 108,768 | 126,487 | ||||||||
| Undeveloped land | 226,931 | 226,987 | ||||||||
| 7,617,686 | 7,348,448 | |||||||||
| Accumulated depreciation | (1,251,610 | ) | (1,193,905 | ) | ||||||
| Net real estate investments | 6,366,076 | 6,154,543 | ||||||||
| Real estate investments and other assets held-for-sale | — | 17,550 | ||||||||
| Cash and cash equivalents | 86,339 | 67,562 | ||||||||
| Accounts receivable, net | 19,728 | 19,427 | ||||||||
| Straight-line rents receivable, net | 96,749 | 93,005 | ||||||||
| Receivables on construction contracts, including retentions | 13,442 | 13,480 | ||||||||
| Deferred leasing and other costs, net | 313,061 | 292,682 | ||||||||
| Restricted cash held in escrow for like-kind exchange | 146,110 | 116,405 | ||||||||
| Notes receivable from property sales | 276,766 | 426,657 | ||||||||
| Other escrow deposits and other assets | 184,547 | 186,885 | ||||||||
| $ | 7,502,818 | $ | 7,388,196 | |||||||
| Liabilities and Equity | ||||||||||
| Indebtedness: | ||||||||||
| Secured debt, net of deferred financing costs | $ | 305,923 | $ | 311,349 | ||||||
| Unsecured debt, net of deferred financing costs | 2,111,506 | 2,111,542 | ||||||||
| 2,417,429 | 2,422,891 | |||||||||
| Liabilities related to real estate investments held-for-sale | ||||||||||
| — | 1,163 | |||||||||
| Construction payables and amounts due subcontractors, including retentions | 93,515 | 54,545 | ||||||||
| Accrued real estate taxes | 75,768 | 67,374 | ||||||||
| Accrued interest | 17,774 | 17,911 | ||||||||
| Other liabilities | 147,800 | 210,825 | ||||||||
| Tenant security deposits and prepaid rents | 41,562 | 39,109 | ||||||||
| Total liabilities | 2,793,848 | 2,813,818 | ||||||||
| Shareholders' equity: | ||||||||||
| Common shares | 3,572 | 3,564 | ||||||||
| Additional paid-in-capital | 5,209,605 | 5,205,316 | ||||||||
| Distributions in excess of net income | (552,685 | ) | (676,036 | ) | ||||||
| Total shareholders' equity | 4,660,492 | 4,532,844 | ||||||||
| Noncontrolling interests | 48,478 | 41,534 | ||||||||
| Total equity | 4,708,970 | 4,574,378 | ||||||||
| $ | 7,502,818 | $ | 7,388,196 | |||||||
| Duke Realty Corporation and Subsidiaries | |||||||||||||||
| Summary of EPS, FFO and AFFO | |||||||||||||||
| Three Months Ended June 30, | |||||||||||||||
| (Unaudited and in thousands, except per share amounts) | |||||||||||||||
| 2018 | 2017 | ||||||||||||||
| Wtd. | Wtd. | ||||||||||||||
| Avg. | Per | Avg. | Per | ||||||||||||
| Amount | Shares | Share | Amount | Shares | Share | ||||||||||
| Net income attributable to common shareholders | $ | 193,845 | $ | 1,210,543 | |||||||||||
| Less dividends on participating securities | (418 | ) | (540 | ) | |||||||||||
| Net income per common share-basic | 193,427 | 357,054 | $ | 0.54 | 1,210,003 | 355,647 | $ | 3.40 | |||||||
| Add back: | |||||||||||||||
| Noncontrolling interest in earnings of unitholders | 1,824 | 3,393 | 11,240 | 3,305 | |||||||||||
| Other potentially dilutive securities | 418 | 2,294 | 540 | 3,029 | |||||||||||
| Net income attributable to common shareholders-diluted | $ | 195,669 | 362,741 | $ | 0.54 | 1,221,783 | 361,981 | $ | 3.38 | ||||||
| Reconciliation to FFO | |||||||||||||||
| Net income attributable to common shareholders | $ | 193,845 | 357,054 | $ | 1,210,543 | 355,647 | |||||||||
| Adjustments: | |||||||||||||||
| Depreciation and amortization | 75,832 | 73,328 | |||||||||||||
| Company share of joint venture depreciation, amortization and other | 2,119 | 2,602 | |||||||||||||
| Gains on depreciable property sales - discontinued operations | (2,889 | ) | (1,103,077 | ) | |||||||||||
| Gains on depreciable property sales - continuing operations | (149,962 | ) | (34,341 | ) | |||||||||||
| Income tax expense triggered by depreciable property sales | 63 | 19,658 | |||||||||||||
| Gains on depreciable property sales - unconsolidated joint ventures | 38 | (48,933 | ) | ||||||||||||
| Noncontrolling interest share of adjustments | (704 | ) | 10,046 | ||||||||||||
| NAREIT FFO attributable to common shareholders - basic | 118,342 | 357,054 | $ | 0.33 | 129,826 | 355,647 | $ | 0.37 | |||||||
| Noncontrolling interest in income of unitholders | 1,824 | 3,393 | 11,240 | 3,305 | |||||||||||
| Noncontrolling interest share of adjustments | 704 | (10,046 | ) | ||||||||||||
| Other potentially dilutive securities | 2,294 | 3,029 | |||||||||||||
| NAREIT FFO attributable to common shareholders - diluted | $ | 120,870 | 362,741 | $ | 0.33 | $ | 131,020 | 361,981 | $ | 0.36 | |||||
| Gains on land sales | (357 | ) | (1,279 | ) | |||||||||||
| Loss on debt extinguishment | 151 | 9,561 | |||||||||||||
| Gain on non-depreciable property sale - unconsolidated joint ventures | — | (119 | ) | ||||||||||||
| Promote income | — | (20,007 | ) | ||||||||||||
| Other income tax items | — | (2,619 | ) | ||||||||||||
| Core FFO attributable to common shareholders - diluted | $ | 120,664 | 362,741 | $ | 0.33 | $ | 116,557 | 361,981 | $ | 0.32 | |||||
| AFFO | |||||||||||||||
| Core FFO - diluted | $ | 120,664 | 362,741 | $ | 0.33 | $ | 116,557 | 361,981 | $ | 0.32 | |||||
| Adjustments: | |||||||||||||||
| Straight-line rental income and expense | (4,780 | ) | (4,725 | ) | |||||||||||
| Amortization of above/below market rents and concessions | (460 | ) | 121 | ||||||||||||
| Stock based compensation expense | 3,568 | 3,600 | |||||||||||||
| Noncash interest expense | 1,402 | 1,649 | |||||||||||||
| Second generation concessions | (135 | ) | (75 | ) | |||||||||||
| Second generation tenant improvements | (5,692 | ) | (4,685 | ) | |||||||||||
| Second generation leasing costs | (6,376 | ) | (7,868 | ) | |||||||||||
| Building improvements | (1,165 | ) | (1,687 | ) | |||||||||||
| AFFO - diluted | $ | 107,026 | 362,741 | $ | 102,887 | 361,981 | |||||||||
| Duke Realty Corporation and Subsidiaries | |||||||||||||||
| Summary of EPS, FFO and AFFO | |||||||||||||||
| Six Months Ended June 30, | |||||||||||||||
| (Unaudited and in thousands, except per share amounts) | |||||||||||||||
| 2018 | 2017 | ||||||||||||||
| Wtd. | Wtd. | ||||||||||||||
| Avg. | Per | Avg. | Per | ||||||||||||
| Amount | Shares | Share | Amount | Shares | Share | ||||||||||
| Net income attributable to common shareholders | $ | 266,808 | $ | 1,280,743 | |||||||||||
| Less dividends on participating securities | (855 | ) | (1,083 | ) | |||||||||||
| Net income per common share-basic | 265,953 | 356,898 | $ | 0.75 | 1,279,660 | 355,466 | $ | 3.60 | |||||||
| Add back: | |||||||||||||||
| Noncontrolling interest in earnings of unitholders | 2,507 | 3,374 | 11,892 | 3,310 | |||||||||||
| Other potentially dilutive securities | 855 | 2,279 | 1,083 | 3,013 | |||||||||||
| Net income attributable to common shareholders-diluted | $ | 269,315 | 362,551 | $ | 0.74 | $ | 1,292,635 | 361,789 | $ | 3.57 | |||||
| Reconciliation to FFO | |||||||||||||||
| Net income attributable to common shareholders | $ | 266,808 | 356,898 | $ | 1,280,743 | 355,466 | |||||||||
| Adjustments: | |||||||||||||||
| Depreciation and amortization | 153,361 | 154,885 | |||||||||||||
| Company share of joint venture depreciation, amortization and other | 4,280 | 5,096 | |||||||||||||
| Impairment charges - depreciable property | — | 859 | |||||||||||||
| Gains on depreciable property sales - discontinued operations | (3,021 | ) | (1,103,077 | ) | |||||||||||
| Gains on depreciable property sales - continuing operations | (194,848 | ) | (71,387 | ) | |||||||||||
| Income tax expense triggered by depreciable property sales | 10,392 | 19,658 | |||||||||||||
| Gains on depreciable property sales - unconsolidated joint ventures | (6,179 | ) | (50,731 | ) | |||||||||||
| Noncontrolling interest share of adjustments | (338 | ) | 9,640 | ||||||||||||
| NAREIT FFO attributable to common shareholders - basic | 230,455 | 356,898 | $ | 0.65 | 245,686 | 355,466 | $ | 0.69 | |||||||
| Noncontrolling interest in income of unitholders | 2,507 | 3,374 | 11,892 | 3,310 | |||||||||||
| Noncontrolling interest share of adjustments | 338 | (9,640 | ) | ||||||||||||
| Other potentially dilutive securities | 2,279 | 3,013 | |||||||||||||
| NAREIT FFO attributable to common shareholders - diluted | $ | 233,300 | 362,551 | $ | 0.64 | $ | 247,938 | 361,789 | $ | 0.69 | |||||
| Gains on land sales | (3,306 | ) | (2,784 | ) | |||||||||||
| Loss on debt extinguishment | 151 | 9,536 | |||||||||||||
| Gain on non-depreciable property sale - unconsolidated joint ventures | — | (119 | ) | ||||||||||||
| Promote income | — | (20,007 | ) | ||||||||||||
| Other income tax items | — | (2,619 | ) | ||||||||||||
| Core FFO attributable to common shareholders - diluted | $ | 230,145 | 362,551 | $ | 0.63 | $ | 231,945 | 361,789 | $ | 0.64 | |||||
| AFFO | |||||||||||||||
| Core FFO - diluted | $ | 230,145 | 362,551 | $ | 0.63 | $ | 231,945 | 361,789 | $ | 0.64 | |||||
| Adjustments: | |||||||||||||||
| Straight-line rental income and expense | (11,314 | ) | (8,044 | ) | |||||||||||
| Amortization of above/below market rents and concessions | (1,005 | ) | 663 | ||||||||||||
| Stock based compensation expense | 16,030 | 14,080 | |||||||||||||
| Noncash interest expense | 2,801 | 3,204 | |||||||||||||
| Second generation concessions | (135 | ) | (75 | ) | |||||||||||
| Second generation tenant improvements | (8,151 | ) | (7,497 | ) | |||||||||||
| Second generation leasing commissions | (11,792 | ) | (10,277 | ) | |||||||||||
| Building improvements | (1,748 | ) | (2,931 | ) | |||||||||||
| AFFO - diluted | $ | 214,831 | 362,551 | $ | 221,068 | 361,789 | |||||||||
| Duke Realty Corporation and Subsidiaries | ||||||||
| Reconciliation of Same Property Net Operating Income Growth | ||||||||
| (Unaudited and in thousands) | ||||||||
| Three Months Ended | ||||||||
| June 30, 2018 | June 30, 2017 | |||||||
| Income from continuing operations before income taxes | $ | 192,814 | $ | 124,620 | ||||
| Share of same property NOI from unconsolidated joint ventures | 3,904 | 3,934 | ||||||
| Income and expense items not allocated to segments | (44,117 | ) | 1,996 | |||||
| Earnings from service operations | (3,212 | ) | (1,202 | ) | ||||
| Properties not included and other adjustments | (33,085 | ) | (17,453 | ) | ||||
| Same property NOI | $ | 116,304 | $ | 111,895 | ||||
| Percent Change | 3.9 | % | ||||||
| Six Months Ended | ||||||||
| June 30, 2018 | June 30, 2017 | |||||||
| Income from continuing operations before income taxes | $ | 276,667 | $ | 193,442 | ||||
| Share of same property NOI from unconsolidated joint ventures | 7,909 | 7,894 | ||||||
| Income and expense items not allocated to segments | 15,508 | 64,461 | ||||||
| Earnings from service operations | (3,904 | ) | (2,977 | ) | ||||
| Properties not included and other adjustments | (65,282 | ) | (40,135 | ) | ||||
| Same property NOI | $ | 230,898 | $ | 222,685 | ||||
| Percent Change | 3.7 | % | ||||||
| Duke Realty Corporation and Subsidiaries | ||||||||
| Reconciliation of 2018 FFO Guidance | ||||||||
| (Unaudited) | ||||||||
| Pessimistic | Optimistic | |||||||
| Net income attributable to common shareholders - diluted | $ | 0.97 | $ | 1.12 | ||||
| Depreciation and gains on sales of depreciated property (including share of joint venture) | 0.32 | 0.25 | ||||||
| NAREIT FFO attributable to common shareholders - diluted | $ | 1.29 | $ | 1.37 | ||||
| Gains on land sales | — | (0.02 | ) | |||||
| Core FFO attributable to common shareholders - diluted | $ | 1.29 | $ | 1.35 | ||||