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Duke Realty Reports Fourth Quarter and Full Year 2019 Results

32.1 Percent Growth in Rents on Fourth Quarter Leasing Activity

Significant Lease-Up of Speculative Projects

Development Pipeline Exceeding $1 Billion and 56 Percent Pre-Leased

2020 Guidance Issued

INDIANAPOLIS, Jan. 29, 2020 (GLOBE NEWSWIRE) -- Duke Realty Corporation (DRE), the largest domestic-only, logistics REIT, today reported results for the fourth quarter and full year 2019.

Jim Connor, Chairman and Chief Executive Officer, said, “We had a great fourth quarter, which was a strong finish to a year of superb operational performance.  Fourth quarter lease-up of speculative projects set the stage for further growth and a great start to 2020.  During the quarter, we executed 2.3 million square feet of first generation leasing of speculative development properties, stabilizing four in-service properties and leasing a one million square foot property that we began last March and is still under development.  This leasing activity outperformed our original underwriting, in both time to lease up and rental rates, and reduces our speculative exposure. Total leasing volume for the quarter, including build-to-suit and second generation leases, was 8.3 million square feet and is the first time that we’ve executed more than 7 million square feet of leases in three consecutive quarters.  As the result of this leasing activity, we increased both in-service occupancy and total occupancy by 40 basis points from September 30, 2019.

Same-property net operating income for the fourth quarter increased from the fourth quarter of 2018 by 3.7 percent.  Same property growth for the quarter was driven by continued strong rent growth which offset a 40 basis point decline in average commencement occupancy within our same-property portfolio from the fourth quarter of 2018.  We anticipate net operating income from non-same store properties, which was 18.5 percent of total net operating income for the quarter, will continue to be a source of growth as we lease up recently developed properties and keep up a robust pace of new development starts.

Rental rate growth on second generation leases continued at a strong pace at 32.1 percent on a net effective basis and 11.9 percent on a cash basis.  We renewed 69 percent of our expiring leases during the fourth quarter and, when considering lease expirations with an immediate backfill, our effective re-leasing percentage was 85 percent.  Our renewal percentage for the quarter was a little lower than our typical run rate as we’ve been focused on maximizing rent growth.

In summary, we had a great 2019 from an operational standpoint and expect strong demand for our assets to continue into 2020."

Mark Denien, Executive Vice President and Chief Financial Officer, stated, “In November 2019, we issued $400 million of unsecured notes at a 2.875 percent coupon rate, which mature in 2029.  These notes represent the first green bond issuance in the United States by an industrial REIT.

We enter 2020 with ample financing capacity to continue to fund development, finishing 2019 with $111 million of cash on hand, no borrowings on our line of credit and we received the final $110 million payment earlier this month on the seller notes from our 2017 medical office portfolio disposition.”

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 $0.23 per diluted share for the fourth quarter of 2019, compared to $0.18 per diluted share for the fourth quarter of 2018.  Net income per diluted share increased from the fourth quarter of 2018 as the result of gains on property sales.  Net income for the full year 2019 was $1.18 per diluted share compared to $1.07 per diluted share for the full year 2018.  Net income per share increased from 2018 as the result of continued growth in the company's asset base, operational performance and gains on property sales, which were partially offset by the impact of the accounting requirement in 2019 to immediately expense certain internal lease costs that were previously capitalizable.
     
  • FFO, as defined by NAREIT, was $0.34 per diluted share for the fourth quarter of 2019, compared to $0.36 per diluted share for the fourth quarter of 2018.  FFO per diluted share, as defined by NAREIT, decreased from the fourth quarter of 2018 due to a loss on debt extinguishment and the requirement to expense certain internal leasing costs in 2019.  FFO, as defined by NAREIT, was $1.40 per diluted share for the full year 2019 compared to $1.34 per diluted share for the full year 2018.  The increase from 2018 in FFO, as defined by NAREIT, was due to continued growth in the company's asset base and improved operational performance, which was partially offset by the 2019 requirement to expense certain internal leasing costs as well as debt extinguishment costs.
     
  • Core FFO was $0.38 per diluted share for the fourth quarter of 2019, compared to $0.35 per diluted share for the fourth quarter of 2018. Core FFO was $1.44 per diluted share for the full year 2019 compared to $1.33 per diluted share for the full year 2018.  The increase to Core FFO was due to continued growth in the company's asset base and improved operational performance.
     
  • Key indicators of the company's operating performance were as follows:

    • The company's stabilized portfolio was 97.8 percent leased at December 31, 2019, compared to 97.9 percent leased at September 30, 2019 and 98.0 percent leased at December 31, 2018.
    • The company's in-service portfolio was 96.6 percent leased at December 31, 2019 compared to 96.2 percent leased at September 30, 2019 and 96.3 percent leased at December 31, 2018.
    • The company's total portfolio, including properties under development, was 94.3 percent leased at December 31, 2019 compared to 93.9 percent leased at September 30, 2019 and 93.8 percent leased at December 31, 2018.
    • Tenant retention was 69.2 percent and 77.1 percent, respectively, for the three and twelve months ended December 31, 2019.
    • Same-property net operating income growth was 3.7 percent and 4.7 percent for the three and twelve month periods ended December 31, 2019 compared to the same periods in 2018.
    • Total leasing activity was 8.3 million square feet for the quarter and 25.6 million for the year.
    • Overall cash and annualized net effective rent growth on new and renewal leases was 11.9 percent and 32.1 percent, respectively, for the quarter and 12.0 percent and 28.6 percent, respectively, for the year.

  • Capital transactions included:

    • Started five new development projects with expected costs of $307 million that were 25 percent pre-leased, resulting in $1.1 billion of development starts for the full year;
    • Property acquisitions totaling $68 million for the quarter and $217 million for the year; and
    • Property dispositions totaling $110 million for the quarter and $494 million for the year

Real Estate Investment Activity

Mr. Connor further stated, “We started $307 million of developments in the fourth quarter of 2019 and finished the year with a $1.0 billion, 8.9 million square foot, development pipeline that was 56 percent leased.  We believe there to be significant future net operating income growth potential in this pipeline as the projects are completed through the end of 2020, especially rent growth potential considering that 74 percent of our pipeline is in coastal Tier 1 markets.”

Development

The fourth quarter included the following development activity:

Consolidated Properties

  • The company started five development projects, with expected costs of $307 million, totaling 2.6 million square feet.  These development starts included a 100 percent leased, 664,000 square foot project in Atlanta; a 1.1 million square foot speculative project in Southern California; a 622,000 square foot speculative project in Northern New Jersey; a  166,000 square foot speculative project in Raleigh and a 106,000 square foot expansion to an existing property in Savannah.
  • Two projects, totaling 937,000 square feet, were placed in service.  Both of these projects were vacant when placed in service, but one of the projects, totaling 662,000 square feet, was leased before the end of the year.

Acquisitions

Building acquisitions totaled $68 million in the fourth quarter and included the following consolidated properties:

  • A 241,000 square foot, 100 percent leased, project in South Florida; and
  • A 219,000 square foot, 100 percent leased, project in Northern California.

Building Dispositions
   
Building dispositions totaled $110 million in the fourth quarter and included the following:

Consolidated Property

A one million square foot, 100 percent leased, property in Indianapolis.

Unconsolidated Joint Venture Properties

  • A 972,000 square foot, 100 percent leased, property in Columbus that was sold by a 50 percent-owned joint venture.
  • A 708,000 square foot, 78 percent leased, property in Indianapolis that was sold by a 50 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 fourth quarter dividend will be payable on February 28, 2020 to shareholders of record on February 14, 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 guidance for net income of $0.92 to $1.14 per diluted share.  The company issued guidance for FFO, as defined by NAREIT, of $1.42 to $1.52 per diluted share.

"We are introducing 2020 guidance for Core FFO of $1.48 to $1.54 per diluted share as well as guidance for an increase in AFFO of between 3.1 percent and 7.7 percent on a share-adjusted basis. Our operating focus in 2020 will be to drive rent growth and minimize capital expenditures, possibly risking some occupancy as we continue to push for deal quality.  Due to speculative projects coming on-line and pending lease expirations, we expect occupancy to trend down slightly as the year progresses, although our range of guidance for average in-service occupancy in 2020 is between 95.1 percent and 97.1 percent, which is consistent with 2019.

Our range of guidance for average percent leased of our stabilized portfolio is between 96.0 percent and 98.0 percent.  The expected slight decrease in stabilized occupancy will be a drag on same property NOI growth.  We will continue to focus on rental rate growth and asset management, however, and expect rent growth to drive overall growth in same property net operating income to an expected range of between 3.6 percent and 4.4 percent.

We will also continue to focus on development opportunities which will include speculative projects in certain markets and a good prospect list for build-to-suit developments. Our overall development starts for 2020 will depend on maintaining our development pipeline near 50 percent leased, and our guidance for 2020 development starts is between $675 million and $875 million."

Ranges for the other key assumptions underlying this guidance are as follows:

  • Dispositions of properties, mostly in the Midwest and other targeted submarkets, in a range of $300 million to $500 million, with the proceeds used to fund development and acquisitions
  • Acquisitions of properties in a range of $100 million to $300 million
  • General and administrative expenses ranging from $55 million to $59 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.

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 December 31, 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 a member of the S&P 500 Index. More information about Duke Realty Corporation is available at www.dukerealty.com.

Fourth Quarter Earnings Call and Supplemental Information

Duke Realty Corporation is hosting a conference call tomorrow, January 30, 2020, at 3:00 p.m. ET to discuss its fourth 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   Twelve Months Ended
    December 31,   December 31,
      2019       2018       2019       2018  
Revenues:                
Rental and related revenue   $ 217,387     $ 202,858     $ 855,833     $ 785,319  
General contractor and service fee revenue     13,088       67,999       117,926       162,551  
      230,475       270,857       973,759       947,870  
Expenses:                
Rental expenses     18,161       17,878       75,584       71,436  
Real estate taxes     32,964       31,412       129,520       125,269  
General contractor and other services expenses     12,151       64,517       111,566       153,909  
Depreciation and amortization     84,303       80,001       327,223       312,217  
      147,579       193,808       643,893       662,831  
Other operating activities:                
Equity in earnings of unconsolidated joint ventures     18,812       5,923       31,406       21,444  
Gain on sale of properties     30,578       10,247       234,653       204,988  
Gain on land sales     876       3,113       7,445       10,334  
Other operating expenses     (803 )     (1,329 )     (5,318 )     (5,231 )
Non-incremental costs related to successful leases     (5,676 )           (12,402 )      
General and administrative expenses     (11,766 )     (12,777 )     (60,889 )     (56,218 )
      32,021       5,177       194,895       175,317  
                 
Operating income   114,917       82,226       524,761       460,356  
                 
Other income (expenses):                
Interest and other income, net     2,564       3,915       9,941       17,234  
Interest expense     (21,510 )     (22,869 )     (89,756 )     (85,006 )
Loss on debt extinguishment     (6,307 )     (148 )     (6,320 )     (388 )
Gain on involuntary conversion                 2,259        
Income from continuing operations, before income taxes     89,664       63,124       440,885       392,196  
Income tax (expense) benefit     (2,221 )     667       (8,686 )     (8,828 )
Income from continuing operations   87,443       63,791       432,199       383,368  
                 
Discontinued operations:                
Income before gain on sales                       108  
Gain on sale of properties     79       635       445       3,792  
Income from discontinued operations   79       635       445       3,900  
                 
Net income     87,522       64,426       432,644       387,268  
Net income attributable to noncontrolling interests     (720 )     (530 )     (3,672 )     (3,539 )
Net income attributable to common shareholders $ 86,802     $ 63,896     $ 428,972     $ 383,729  
                 
Basic net income per common share:                
Continuing operations attributable to common shareholders   $ 0.24     $ 0.18     $ 1.18     $ 1.06  
Discontinued operations attributable to common shareholders   $     $     $     $ 0.01  
Total   $ 0.24     $ 0.18     $ 1.18     $ 1.07  
                 
Diluted net income per common share:                
Continuing operations attributable to common shareholders   $ 0.23     $ 0.18     $ 1.18     $ 1.06  
Discontinued operations attributable to common shareholders   $     $     $     $ 0.01  
Total   $ 0.23     $ 0.18     $ 1.18     $ 1.07  
                 


 
Duke Realty Corporation and Subsidiaries
Consolidated Balance Sheets
(Unaudited and in thousands)
         
    December 31,   December 31,
      2019       2018  
Assets        
Real estate investments:        
Real estate assets   $ 7,993,377     $ 7,248,346  
Construction in progress     550,926       477,162  
Investments in and advances to unconsolidated joint ventures     133,074       110,795  
Undeveloped land     254,537       360,816  
      8,931,914       8,197,119  
Accumulated depreciation     (1,480,461 )     (1,344,176 )
Net real estate investments   7,451,453       6,852,943  
Real estate investments and other assets held-for-sale     18,463       1,082  
Cash and cash equivalents     110,891       17,901  
Accounts receivable     20,349       14,254  
Straight-line rents receivable     129,344       109,334  
Receivables on construction contracts, including retentions     25,607       41,215  
Deferred leasing and other costs, net     320,444       313,799  
Restricted cash held in escrow for like-kind exchange     1,673        
Notes receivable from property sales     110,000       272,550  
Other escrow deposits and other assets     232,338       180,946  
    $ 8,420,562     $ 7,804,024  
         
Liabilities and Equity        
Indebtedness:        
Secured debt, net of deferred financing costs   $ 34,023     $ 79,563  
Unsecured debt, net of deferred financing costs     2,880,742       2,548,938  
Unsecured line of credit           30,000  
      2,914,765       2,658,501  
Liabilities related to real estate investments held-for-sale     887        
Construction payables and amounts due subcontractors, including retentions     68,840       92,288  
Accrued real estate taxes     69,042       73,358  
Accrued interest     14,181       16,153  
Other liabilities     223,680       205,433  
Tenant security deposits and prepaid rents     48,907       45,048  
Total liabilities   3,340,302       3,090,781  
Shareholders' equity:        
Common shares     3,680       3,589  
Additional paid-in-capital     5,525,463       5,244,375  
Accumulated other comprehensive loss     (35,036 )     (4,676 )
Distributions in excess of net income     (475,992 )     (585,087 )
Total shareholders' equity   5,018,115       4,658,201  
Noncontrolling interests     62,145       55,042  
Total equity     5,080,260       4,713,243  
    $ 8,420,562     $ 7,804,024  
         


 
Duke Realty Corporation and Subsidiaries
Summary of EPS, FFO and AFFO
Three Months Ended December 31,
(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 $ 86,802         $ 63,896      
Less dividends on participating securities   (360 )         (425 )    
Net income per common share-basic   86,442   367,603 $ 0.24     63,471   358,561 $ 0.18
Add back:              
Noncontrolling interest in earnings of unitholders   707   3,122       526   3,111  
Other potentially dilutive securities   213   1,739         864  
Net income attributable to common shareholders-diluted $ 87,362   372,464 $ 0.23     63,997   362,536 $ 0.18
Reconciliation to FFO              
Net income attributable to common shareholders $ 86,802   367,603     $ 63,896   358,561  
Adjustments:              
Depreciation and amortization   84,303           80,001      
Depreciation, amortization and other - unconsolidated joint ventures   2,455           2,499      
Gains on sales of properties   (30,657 )         (10,882 )    
Gains on land sales   (876 )         (3,113 )    
Income tax expense (benefit) triggered by depreciable property sales   2,221           (667 )    
Gains on sales of real estate assets - unconsolidated joint ventures   (16,380 )         (3,908 )    
Impairment charges - unconsolidated joint ventures             2,214      
Noncontrolling interest share of adjustments   (346 )         (568 )    
NAREIT FFO attributable to common shareholders - basic   127,522   367,603 $ 0.35     129,472   358,561 $ 0.36
Noncontrolling interest in income of unitholders   707   3,122       526   3,111  
Noncontrolling interest share of adjustments   346           568      
Other potentially dilutive securities   2,342       2,811  
NAREIT FFO attributable to common shareholders - diluted $ 128,575   373,067 $ 0.34   $ 130,566   364,483 $ 0.36
Gain on involuntary conversion - including share of unconsolidated joint venture             (2,500 )    
Loss on debt extinguishment   6,307           148      
Non-incremental costs related to successful leases   5,676                
Core FFO attributable to common shareholders - diluted $ 140,558   373,067 $ 0.38   $ 128,214   364,483 $ 0.35
AFFO              
Core FFO - diluted $ 140,558   373,067 $ 0.38   $ 128,214   364,483 $ 0.35
Adjustments:              
Straight-line rental income and expense   (4,658 )         (8,278 )    
Amortization of above/below market rents and concessions   (3,020 )         (734 )    
Stock based compensation expense   2,543           1,960      
Noncash interest expense   1,327           1,544      
Second generation concessions   (665 )         (29 )    
Second generation tenant improvements   (6,877 )         (6,242 )    
Second generation leasing costs   (7,980 )         (9,703 )    
Building improvements   (5,938 )         (6,782 )    
AFFO - diluted $ 115,290   373,067     $ 99,950   364,483  
 


 
Duke Realty Corporation and Subsidiaries
Summary of EPS, FFO and AFFO
Twelve Months Ended December 31,
(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 $ 428,972         $ 383,729      
Less dividends on participating securities   (1,487 )         (1,675 )    
Net income per common share-basic   427,485   362,234 $ 1.18     382,054   357,569 $ 1.07
Add back:              
Noncontrolling interest in earnings of unitholders   3,678   3,118       3,528   3,290  
Other potentially dilutive securities   1,487   1,987       1,675   2,438  
Net income attributable to common shareholders-diluted $ 432,650   367,339 $ 1.18   $ 387,257   363,297 $ 1.07
Reconciliation to FFO              
Net income attributable to common shareholders $ 428,972   362,234     $ 383,729   357,569  
Adjustments:              
Depreciation and amortization   327,223           312,217      
Depreciation, amortization and other - unconsolidated joint ventures   10,083           9,146      
Gains on sales of properties   (235,098 )         (208,780 )    
Gains on land sales   (7,445 )         (10,334 )    
Income tax expense triggered by sales of real estate assets   8,686           8,828      
Gains on sales of real estate assets - unconsolidated joint ventures   (21,239 )         (12,094 )    
Impairment charges - unconsolidated joint ventures             2,214      
Noncontrolling interest share of adjustments   (702 )         (923 )    
NAREIT FFO attributable to common shareholders - basic   510,480   362,234 $ 1.41     484,003   357,569 $ 1.35
Noncontrolling interest in income of unitholders   3,678   3,118       3,528   3,290  
Noncontrolling interest share of adjustments   702           923      
Other potentially dilutive securities   1,987       2,438  
NAREIT FFO attributable to common shareholders - diluted $ 514,860   367,339 $ 1.40   $ 488,454   363,297 $ 1.34
Gains on involuntary conversion - including share of unconsolidated joint venture   (3,559 )         (3,897 )    
Loss on debt extinguishment   6,320           388      
Non-incremental costs related to successful leases   12,402                
Core FFO attributable to common shareholders - diluted $ 530,023   367,339 $ 1.44   $ 484,945   363,297 $ 1.33
AFFO              
Core FFO - diluted $ 530,023   367,339 $ 1.44   $ 484,945   363,297 $ 1.33
Adjustments:              
Straight-line rental income and expense   (20,724 )         (26,037 )    
Amortization of above/below market rents and concessions   (7,566 )         (2,332 )    
Stock based compensation expense   19,801           20,198      
Noncash interest expense   5,904           5,788      
Second generation concessions   (999 )         (164 )    
Second generation tenant improvements   (15,183 )         (18,436 )    
Second generation leasing commissions   (22,178 )         (25,935 )    
Building improvements   (12,685 )         (9,947 )    
AFFO - diluted $ 476,393   367,339     $ 428,080   363,297  
 


 
Duke Realty Corporation and Subsidiaries
Reconciliation of Same Property Net Operating Income Growth
(Unaudited and in thousands)
       
  Three Months Ended
  December 31, 2019   December 31, 2018
       
Income from continuing operations before income taxes $ 89,664     $ 63,124  
Share of same property NOI from unconsolidated joint ventures   4,368       4,171  
Income and expense items not allocated to segments   77,337       94,011  
Earnings from service operations   (937 )     (3,482 )
Properties not included and other adjustments   (38,271 )     (30,350 )
Same property NOI - Cash Basis $ 132,161     $ 127,474  
       
Percent Change   3.7 %    
       
  Twelve Months Ended
  December 31, 2019   December 31, 2018
       
Income from continuing operations before income taxes $ 440,885     $ 392,196  
Share of same property NOI from unconsolidated joint ventures   17,066       16,186  
Income and expense items not allocated to segments   215,218       209,032  
Earnings from service operations   (6,360 )     (8,642 )
Properties not included and other adjustments   (145,078 )     (110,226 )
Same property NOI - Cash Basis $ 521,731     $ 498,546  
       
Percent Change   4.7 %    
       
       
Duke Realty Corporation and Subsidiaries
Reconciliation of 2020 FFO Per Diluted Share Guidance
(Unaudited )
       
  Pessimistic   Optimistic
Net income attributable to common shareholders - diluted $ 0.92     $ 1.14  
Depreciation   0.97       0.93  
Gains on Sale of Properties   (0.49 )     (0.57 )
Share of Joint Venture Adjustments   0.02       0.02  
NAREIT FFO attributable to common shareholders - diluted $ 1.42     $ 1.52  
Non-incremental costs related to successful leases   0.04       0.02  
Other reconciling items   0.02       -  
Core FFO attributable to common shareholders - diluted $ 1.48     $ 1.54