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Duke Realty (DRE) Q1 FFO Misses Estimates, Revenues Beat

Zacks Equity Research

Duke Realty Corporation’s DRE first-quarter 2020 core funds from operations (FFO) per share of 33 cents missed the Zacks Consensus Estimate of 35 cents. Nonetheless, the reported tally remained unchanged from the year-ago quarter.

In light of the coronavirus pandemic and the resultant economic disruptions, the company has revised its 2020 guidance. Further, amid the pandemic, Duke Realty had to increase collectability reserves for straight line receivables by $5 million and this impacted its core FFO per share by more than 1 cent. Nonetheless, decent leasing activities, and strong rent growth on new and renewal leases drove the company’s same-property net operating income (NOI).

Rental and related revenues of $218.76 million increased 4.2% on a year-over-year basis. Also, the figure surpassed the Zacks Consensus Estimate of $218.43 million.

Quarter in Detail

Duke Realty leased 4 million square feet of space during the March-ended quarter. Tenant retention was 68.3%. Moreover, the company registered same-property NOI growth of 6.6% year over year. In fact, Duke Realty reported overall cash and annualized net effective rent growth on new and renewal leases of 17.1% and 32.7%, respectively, in the quarter.

As of Mar 31, 2020, the company’s total portfolio, including properties under development, was 94.3% leased, unchanged from the prior quarter end, and up 130 basis points (bps) from the prior-year end. In-service portfolio was 97.2% leased as of Mar 31, 2020, down from 97.8% leased on Dec 31, 2019, and from 98.4% on Mar 31, 2019.

Notably, during the first quarter, the company started two development projects, aggregating 991,000 square feet, with estimated costs of $96 million. Its building dispositions totaled $27 million in the first quarter.

Duke Realty exited first-quarter 2020 with $187.6 million of cash and cash equivalents, up from $110.9 million as of Dec 31, 2019.

2020 Guidance

Duke Realty revised its 2020 core FFO per share outlook to $1.41-$1.51 from the prior mentioned $1.48-$1.54. The Zacks Consensus Estimate for the same is currently pegged at $1.45.

The company estimates same-property NOI growth of 1.75-3.25%. The guidance for acquisitions of properties is upto $100 million. The projection for building dispositions is $125-$250 million.

Conclusion

In a bid to manage the global uncertainties, resulting from the ongoing crisis, Duke Realty borrowed $200 million on its unsecured line of credit in the first quarter. This boosted the company’s cash position, providing ample liquidity to continue its operations uninterrupted, fund dividend payment and finance development pipeline. As of Apr 29, the company collected more than 99% and 96% of its March and April rents, respectively.

However, the company has ceasednew speculative development starts and expects rent growth to diminish.

Duke Realty Corporation Price, Consensus and EPS Surprise
 

Duke Realty Corporation Price, Consensus and EPS Surprise

Duke Realty Corporation price-consensus-eps-surprise-chart | Duke Realty Corporation Quote

Zacks Rank

Currently, Duke Realty carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Other REIT Releases

Omega Healthcare Investors, Inc. OHI is slated to report first-quarter results on May 4.

Hannon Armstrong Sustainable Infrastructure Capital, Inc. HASI is scheduled to release earnings on May 7.

Americold Realty Trust COLD is expected to release earnings results on May 7.

Note: Anything related to earnings presented in this write-up represent funds from operations (FFO) — a widely used metric to gauge the performance of REITs.

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