Duke Realty Prices Senior Notes

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Industrial, office and medical office real estate investment trust (:REIT) Duke Realty Corporation (DRE) declared the pricing of senior unsecured notes worth $250 million. The funds generated would help the company meet its near term debt maturities.

The offering has been priced particularly by the company’s operating partnership, Duke Realty Limited Partnership. The 3.875% senior notes, which are set to mature on Feb 15, 2021, were priced at 99.747% of the principal amount promising an yield to maturity of 3.914%. Duke Realty expects the offering to close by Dec 3, 2013, subject to the fulfillment of customary closing conditions.

Specifically, Duke Realty’s operating partnership will utilize the net proceeds from the offering along with cash in hand for the redemption of its outstanding 5.40% senior notes worth 250 million due on Aug 15, 2014.

A consortium of financial institutions was involved in this offering. J.P. Morgan Securities LLC, a subsidiary of JPMorgan Chase & Co. (JPM), RBC Capital Markets, LLC and Wells Fargo Securities, LLC, served as the joint book-running managers and several others, including Barclays Capital Inc., a subsidiary of Barclays PLC (BCS), acted as co-managers.

Duke Realty, whose total assets stood at $7.9 billion while cash stood at $24.1 million as of Sep 30, 2013, makes concerted efforts to strengthen its balance sheet and improve liquidity. The company also continues to reposition its portfolio to enhance its quality. Yet, we believe that its large development pipeline and exposure to weak office markets would increase its operational risks.

Duke Realty currently holds a Zacks Rank #4 (Sell). One can also look at The GEO Group, Inc. (GEO), which is a better ranked other REIT – equity trust stock with a Zacks Rank # 1 (Strong Buy).

Note: Funds from operations, a widely accepted and reported measure of REITs performance, are derived by adding depreciation, amortization and other non-cash expenses to net income.

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