Exhibit 99.1
For Immediate Release | For Investor Inquiries, contact: |
October 27, 2004 | Thomas K. Peck |
2004-15 | 317/808-6168 |
| |
| For Media Inquiries, contact: |
| Donna M. Hovey |
| 317/808-6137 |
Duke Realty Announces Third Quarter Earnings
Common and Preferred Stock Dividends Also Announced
Indianapolis - Duke Realty Corporation (NYSE/DRE) reported today that net income available for common shareholders for the third quarter of 2004 was $42.5 million on revenues of $212.4 million, compared to $40.2 million on revenues of $191.3 million for the third quarter last year. On a per share basis, third quarter net income available for common shareholders remained unchanged at $0.30 per share compared to the third quarter of 2003. All per share amounts reported are diluted with basic per share information also included in the financial table accompanying this press release.
Diluted funds from operations (“FFO”) were $98.0 million for the third quarter of 2004 versus $96.4 million for the same period in 2003. On a per share basis, third quarter FFO remained unchanged at $0.62 compared to the third quarter of 2003. FFO is a supplemental non-GAAP financial measurement used as a standard in the real estate industry to measure and compare the operating performance of real estate companies. FFO is defined by the National Association of Real Estate Investment Trusts (“NAREIT”) as net income or loss, excluding gains or losses from sales of depreciated property, plus operating property depreciation and amortization and adjustments for minority interest and unconsolidated companies on the same basis. A reconciliation of FFO to GAAP net income is included in the financial tables accompanying this press release.
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Additionally, the Company’s Board of Directors declared a quarterly dividend of $.465 per common share, or $1.86 per share on an annualized basis. The dividend is payable on November 30, 2004 to common shareholders of record on November 12, 2004.
The Board also declared today the following dividends on the Company’s outstanding preferred stock:
Class | | NYSE
Symbol | | Quarterly
Amount/Share | | Record Date | | Payment Date | |
| | | | | | | | | |
Series B | | Not Listed | | $ | .99875 | | December 17, 2004 | | December 31, 2004 | |
| | | | | | | | | |
Series I | | DREPRI | | $ | .52813 | | December 17, 2004 | | December 31, 2004 | |
| | | | | | | | | |
Series J | | DREPRJ | | $ | .41406 | | November 16, 2004 | | November 30, 2004 | |
| | | | | | | | | |
Series K | | DREPRK | | $ | .40625 | | November 16, 2004 | | November 30, 2004 | |
Commenting on Duke’s third quarter performance, Denny Oklak, President and Chief Executive Officer, stated,
“Against a slowly improving economy, we are satisfied with our performance during the third quarter. Notably, we had a good quarter of investment activity by attaining a higher expected return on $205 million of acquisitions of buildings with an average age of five years than we relinquished on $117 million of buildings that we sold that were 20 years old on average. With solid development and third-party construction activity, we were also able to increase our value creation pipeline more than 12 percent to $388 million from $345 million at June 30th. The profitability of our value creation pipeline also improved, with slightly higher expected development yields, and an increase of 45 basis points in the profit margin on our third party construction backlog. Additionally, I am pleased to announce that Dr. Martin Jischke, who was named as an advisory member of our Board of Directors last quarter, has been elected to the Board to fill the vacancy created by the recent departure of Gene Zink.”
Commenting on the Company’s expectations for the fourth quarter, Oklak continued,
In the fourth quarter, we expect per share FFO to be in the range of $0.65 to $0.67. After adjusting for $3.6 million of preferred stock redemption charges earlier in the year, our 2004 results should be near the mid-point of the guidance range that we first provided last December. We have performed well in 2004 against most of our key business drivers. Our
primary area of disappointment this year is that our occupancy has not increased as much as we originally believed was attainable.”
Property information at September 30, 2004 was as follows:
• The Company’s 873 stabilized in-service properties totaling 107.6 million square feet were 90.4 percent leased compared to 90.3 percent and 88.8 percent occupied at June 30, 2004 and September 30, 2003, respectively.
• The Company’s value creation pipeline increased to $388 million at September 30. The pipeline includes $115 million of developments with an expected stabilized return of 10.0 percent that Duke plans to own indefinitely after completion; $86 million of developments with an expected stabilized return of 9.3 percent that the Company intends to sell within approximately one year of completion; and a $187 million backlog of third-party construction volume with an overall pre-tax profit margin of 8.5 percent.
• Including recently completed developments that have not reached stabilization and developments still under construction, the Company’s total portfolio at the end of the third quarter consisted of 114.1 million square feet that were 88.5 percent leased.
The Company also disclosed the following information for the third quarter of 2004:
• Duke renewed 71.3 percent of leases up for renewal, totaling 1.9 million square feet, on which net effective rents increased by an average of 1.3 percent.
• Same property net operating income increased 4.0 percent and 1.4 percent for the three months and nine months ended September 30, 2004, respectively.
• The Company’s interest and fixed-charge coverage ratios in the third quarter were 4.0 and 3.0, respectively, and its debt-to-total market capitalization ratio was 32.0 percent at September 30, 2004.
When used in this press release, the word “believes,” “expects,” “estimates” and similar expressions are intended to identify forward-looking statements. Such statements, including estimates of our future operating performance, are subject to certain risks and uncertainties identified in our reports filed with the SEC that could cause actual results to differ materially. In particular, among the factors that could cause actual results to differ materially are continued qualification as a real estate investment trust, general business and economic conditions, competition, increases in real estate construction costs, interest rates, accessibility of debt and equity capital markets and other risks inherent in the real estate business including tenant defaults, potential liability relating to environmental matters and liquidity of real estate investments. Readers are also advised to refer to Duke’s Form 8-K Report as filed with the Securities and Exchange Commission on July 24, 2003 for additional information concerning risks about investing in our securities.
Duke Realty Corporation is the largest publicly traded office and industrial real estate company in the United States. Offering a complete range of real estate products and services, Duke produces approximately $800 million in annual revenue from more than 4,200 tenants and focuses on building dominant market positions in each of its 13 geographic platforms across the Midwest and the Southeast. Duke owns interests in more than 114 million square feet of properties, has over 1,000 employees and owns or controls approximately 4,600 acres of undeveloped land that can support more than 69 million square feet of future development. Visit Duke on the web at www.dukerealty.com.
A copy of the Company’s September 30, 2004 supplemental information fact book will be available after 6:00 p.m. EST today in the Investor Information section of the Company’s web site at www.dukerealty.com. Duke is also hosting a conference call tomorrow at 3:00 p.m. Eastern Daylight Time (New York time) to discuss its third quarter operating results. All investors are invited to listen to this call, which can be accessed through the Investor Information section of the Company’s web site at www.dukerealty.com.
Financial Highlights
(in thousands, except per share data)
| | Three Months Ended
September 30 | | Nine Months Ended
September 30 | |
Operating Results | | 2004 | | 2003 | | 2004 | | 2003 | |
| | | | | | | | | | | | | |
Revenues from continuing operations | | $ | 212,405 | | $ | 191,349 | | $ | 614,652 | | $ | 565,419 | |
Earnings from rental operations | | 35,727 | | 49,285 | | 124,602 | | 135,209 | |
Earnings from service operations | | 6,341 | | 4,471 | | 13,106 | | 11,407 | |
Net income for common shareholders - Basic | | 42,527 | | 40,185 | | 110,129 | | 112,200 | |
Net income for common shareholders - Diluted | | 46,717 | | 44,547 | | 121,142 | | 124,447 | |
Funds from operations - Basic | | 89,277 | | 84,730 | | 256,982 | | 242,252 | |
Funds from operations - Diluted | | 98,041 | | 96,370 | | 282,597 | | 276,046 | |
| | | | | | | | | |
Per Share: | | | | | | | | | |
Net income - common shareholders - Basic | | $ | 0.30 | | $ | 0.30 | | $ | 0.78 | | $ | 0.83 | |
Net income - common shareholders - Diluted | | $ | 0.30 | | $ | 0.30 | | $ | 0.77 | | $ | 0.82 | |
Funds from operations - Basic | | $ | 0.63 | | $ | 0.62 | | $ | 1.82 | | $ | 1.79 | |
Funds from operations - Diluted | | $ | 0.62 | | $ | 0.62 | | $ | 1.80 | | $ | 1.77 | |
Dividend payout ratio of funds from operations | | 75.0 | % | 74.2 | % | 77.2 | % | 77.7 | % |
Weighted average shares outstanding | | | | | | | | | |
Basic - Net income and Funds from operations | | 142,273 | | 135,706 | | 140,930 | | 135,423 | |
Diluted - Net income | | 157,105 | | 151,244 | | 156,956 | | 150,965 | |
Diluted - Funds from operations | | 157,105 | | 156,249 | | 156,983 | | 155,971 | |
Balance Sheet Data | | September 30
2004 | | December 31
2003 | |
| | | | | |
Net real estate investments | | $ | 5,089,014 | | $ | 4,851,248 | |
Total assets | | 5,882,080 | | 5,561,249 | |
Total debt | | 2,659,629 | | 2,335,536 | |
Shareholders’ equity | | 2,654,227 | | 2,666,749 | |
Common shares outstanding at end of period | | 142,550 | | 136,594 | |
| | | | | | | |
Reconciliation of Net Income to Funds From Operations
(in thousands, except per share data)
| | Three Months Ended
September 30 | |
| | 2004 | | 2003 | |
| | Amount | | Wtd.
Avg.
Shares | | Per
Share | | Amount | | Wtd.
Avg.
Shares | | Per
Share | |
Net Income Available for Common Shares | | $ | 42,527 | | 142,273 | | $ | 0.30 | | $ | 40,185 | | 135,706 | | $ | 0.30 | |
Add back: | | | | | | | | | | | | | |
Minority interest in earnings of unitholders | | 4,190 | | 13,938 | | | | 4,362 | | 14,667 | | | |
Other common stock equivalents | | | | 894 | | | | | | 871 | | | |
Fully Diluted Net Income | | 46,717 | | 157,105 | | $ | 0.30 | | 44,547 | | 151,244 | | $ | 0.30 | |
Adjustments: | | | | | | | | | | | | | |
Depreciation and Amortization | | 61,511 | | | | | | 48,250 | | | | | |
Company Share of Joint Venture Depreciation and amortization | | 4,686 | | | | | | 4,459 | | | | | |
(Earnings) loss from depreciable property sales | | (14,873 | ) | | | | | (3,349 | ) | | | | |
Dilutive effect of Convertible Preferred D Shares | | 0 | | | | | | 2,463 | | 5,005 | | | |
Fully Diluted Funds From Operations | | $ | 98,041 | | 157,105 | | $ | 0.62 | | $ | 96,370 | | 156,249 | | $ | 0.62 | |
| | Nine Months Ended
September 30 | |
| | 2004 | | 2003 | |
| | Amount | | Wtd.
Avg.
Shares | | Per
Share | | Amount | | Wtd.
Avg.
Shares | | Per
Share | |
Net Income Available for Common Shares | | $ | 110,129 | | 140,930 | | $ | 0.78 | | $ | 112,200 | | 135,423 | | $ | 0.83 | |
Add back: | | | | | | | | | | | | | |
Minority interest in earnings of unitholders | | 11,013 | | 13,975 | | | | 12,247 | | 14,740 | | | |
Dilutive effect of Convertible Preferred D Shares | | | | 1,170 | | | | | | | | | |
Other common stock equivalents | | | | 881 | | | | | | 802 | | | |
Fully Diluted Net Income | | 121,142 | | 156,956 | | $ | 0.77 | | 124,447 | | 150,965 | | $ | 0.82 | |
Adjustments: | | | | | | | | | | | | | |
Depreciation and Amortization | | 167,159 | | | | | | 142,539 | | | | | |
Company Share of Joint Venture Depreciation and amortization | | 13,883 | | | | | | 14,236 | | | | | |
(Earnings) loss from depreciable property sales | | (19,627 | ) | | | | | (12,567 | ) | | | | |
Dilutive effect of Convertible Preferred D Shares | | 40 | | 27 | | | | 7,391 | | 5,006 | | | |
Fully Diluted Funds From Operations | | $ | 282,597 | | 156,983 | | $ | 1.80 | | $ | 276,046 | | 155,971 | | $ | 1.77 | |
