RELIABLE. ANSWERS. 2011 BMO North American Real Estate Conference September 21– 22, 2011 Exhibit 99.1 |
RELIABLE. ANSWERS. 2 2009 2010 FOCUS: Liquidity More than $1.5 billion capital raised Strategy refined FOCUS: Strategy execution Operating fundamentals Balance sheet strength FOCUS: Asset quality Cash flow growth Shareholder return Where we’ve been and where we’re going… 2011 and beyond 2011 Duke Realty Corporation |
RELIABLE. ANSWERS. Suburban Office Market Still Challenging Economic and federal budget uncertainty limiting business investment and expansion decisions GDP growth below earlier projections again . . . Office sector recovery continuing, but slowly Medical Office Traction Remains Operators re-visiting expansion decisions Relationships are a key driver of on campus MOB business Demographics and economics positive growth drivers Medical office development and acquisition activity continues Market Outlook Weak economic growth and uncertainty returns . . . indicating tepid recovery into 2012 Industrial Recovery Taking Shape Net absorption in U.S. for Q2 2011 was positive for the 4th consecutive quarter Strong demand for high quality available space remains Manufacturing sector showing signs of rebounding; industrial capacity utilization up . . . |
RELIABLE. ANSWERS. 2011 Duke Realty Corporation 4 Strategy for Success Delivering on what we say we will do Focus on: Portfolio repositioning Strategic acquisitions & Dispositions Development opportunities Focus on: Increasing cash flow Maximizing return on Assets Focus on: Improving coverage ratios Improving ratings |
RELIABLE. ANSWERS. 2011 Duke Realty Corporation Strategic Focus 2011 Goals and Objectives Q2 2011 Update • Lease-up portfolio, manage cap ex; reach positive same property income growth • Balance execution with capital strategy relative to level and quality of cash flow and same property NOI; Debt to EBITDA <7.0x • Development starts of $100 to $200 million focus on medical office and Build-to-Suit • Total portfolio occupancy as of June 30, 2011 of 89.3%; industrial portfolio at 90.6% • More than 8.1 million square feet of leases completed; significant increase over Q2 2010 volume of 6.0 million square feet • Debt to EBITDA @ 6.7x;1.5% Same Property NOI growth • One 405,000sf expansion of an existing 100% leased industrial property in Phoenix, AZ started during the quarter. • Continue strong momentum from 2010 on repositioning of portfolio • Pursue acquisitions of medical and industrial assets • Planned asset dispositions of primarily Midwest office • Closed on over $116 million of acquisitions during the quarter, including our first operating asset in Southern California. • $62 million in dispositions of non-core assets. • Opportunistically access capital markets . . . push out maturity schedule further • Continue improving our coverage ratios • Maintain minimal balance on line of credit • Fixed charge ratio of 1.82x • Zero balance outstanding on line of credit, $118 million cash • Announced redemption of Series N Preferred shares Asset Strategy Operations Strategy Capital Strategy 5 Executing across all three aspects of our strategy |
2011 Duke Realty Corporation 6 Portfolio Strategy BY PRODUCT 2009 2013 BY GEOGRAPHY Q2 2011 ASSET STRATEGY 2009 2013 Q2 2011 Southeast 21% Southeast 27% Southeast 30% Midwest 53% West 1% South 12% East 13% East 12% South 11% West 2% Midwest 48% East 15% South 10% West 5% Midwest 40% Office 25% Medical Office 15% Industrial 60% Office 45% Medical Office 6% Industrial 45% Retail 4% Office 55% Medical Office 5% Industrial 36% Retail 4% |
2011 Duke Realty Corporation 7 Asset Strategy: Road Map ($ in millions) Investment 9/30/09 Investment 6/30/11 ACTION PLAN Investment 2013 PRODUCT TYPE Amount % Amount % Proceeds from Targeted Dispositions Acquisitions/ Developments/ Repositioning Amount % Industrial $2,930 36% $3,708 45% ($55) $1,130 $4,920 60% Office 4,515 55% 3,761 45% (495) (815) 2,050 25% Medical Office 440 5% 520 6% 0 730 1,230 15% Retail 290 4% 285 4% (305) 0 0 0% $8,175 100% $8,274 100% ($855) $1,045 $8,200 100 % REGION Midwest $4,310 53% $3,942 48% ($527) $131 $3,280 40% Southeast 1,755 21% 2,277 27% (163) 104 2,460 30% East 1,035 13% 971 12% (120) 354 1,230 15% South 970 12% 955 11% (45) 199 820 10% West 105 1% 129 2% 0 257 410 5% $8,175 100% $8,274 100% ($855) $1,045 $8,200 100% ASSET STRATEGY Significant progress to date . . . being highly selective and on target to meet 2013 goals |
2011 Duke Realty Corporation 8 ASSET STRATEGY Asset Strategy: Progress To Date BUILDING ACQUISITIONS BUILDING DISPOSITIONS Q4 2009 $15 Q4 2009 $144 2010 919 2010 499 2011 255 2011 514 Proforma Total $1,189 Proforma Total $1,157 PRO FORMA PROGRESS TO DATE TOTAL VALUE ASSUMED DEBT NET Dispositions $1,157 ($0) $1,157 Acquisitions $1,189 ($618) $571 Excess Cash $586 Matching acquisitions with dispositions … limiting earnings impact $ in millions Only 70 Bps difference in Cap Rates |
2011 Duke Realty Corporation 9 2010 PERFORMANCE $533.2 million of dispositions $919.1 million of acquisitions $130 million of development starts 2011 GOALS Strong backlog of dispositions & acquisitions $200 million of new development starts; $75 - $125 million medical office Continue to make significant progress on strategic plan ASSET STRATEGY Quality portfolio improving with asset strategy |
Demonstrated ability to maintain consistency through difficult operating environments Operations Strategy: Consistent Operating Performance Stabilized Occupancy (%) Strong historical stabilized occupancy – fundamentals improving Lease Renewals (%) Strong lease renewal percentages Stabilized occupancy In-service occupancy Leasing Activity New Leases and Renewals – Consistent Execution (in millions of square feet) Lease Maturity Schedule Lease maturities are well balanced with no one year accounting for more than 13% 95% 92% 92% 89% 88% 89% 89% 89% 89% 87% 10 OPERATIONS STRATEGY |
2011 Duke Realty Corporation 11 December 31 Historical Focus on Occupancy 2.3% Avg Technology Bust Market Downturn -4.00% -2.00% 0.00% 2.00% 4.00% 6.00% 8.00% 84.0% 86.0% 88.0% 90.0% 92.0% 94.0% 96.0% 98.0% 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 Office properties in service Industrial properties in service Same Property Growth OPERATIONS STRATEGY |
2011 Duke Realty Corporation Consistent NOI Growth Outperformance 4.4% 0.3% (3.5%) 0.5% (2.1%) 7.0% 3.3% 3.0% (2.7%) 0.9% 2.1% (1.5%) (2.6%) (1.5%) (1.3%) 1.4% 3.6% 0.8% (0.9%) (3.6%) 3.0% (1.7%) (1.3%) (2.4%) 2.1% 1.6% 3.9% 1.4% (4.3%) (4.3%) (6.0%) (4.0%) (2.0%) 0% 2% 4% 6% 8% 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 Suburban Office Peers Industrial Peers Annual Same-Store NOI Growth (1) %, y-y Source SNL and company filings (2) (3) Ten-Year Comparison vs. Peers Notes OPERATIONS STRATEGY 12 Based on straight-line average of year-over-year annual same-property NOI growth Suburban office includes BDN, CLI, HIW, LRY and PKY; weighted by historical market cap Industrial includes DCT, EGP, FR, FPO and PSB; weighted by historical market cap 1. 2. 3. |
2011 Duke Realty Corporation Consistent NOI Growth Outperformance (cont’d) Annual Same-Store NOI Growth (1) %, y-y Relative Performance vs. Peers Notes Source SNL and company filings OPERATIONS STRATEGY 13 4% 2% 0% (2%) (4%) (6%) 1.1% 2.3% 0.9% (0.4%) 0.2% 0.4% (3.6%) (0.3%) (4.3%) 10-Year Avg. 5-Year Avg. 1-Year Avg. Suburban Office Peers Industrial Peers (3) (2) Based on straight-line average of year-over-year annual same-property NOI growth Suburban office includes BDN, CLI, HIW, LRY and PKY; weighted by historical market cap Industrial includes DCT, EGP, FR, FPO and PSB; weighted by historical market cap 1. 2. 3. |
2011 Duke Realty Corporation 14 CAPITAL STRATEGY Current Liquidity Position $412 $372 $634 $351 $2,758 $0 $1,000 $2,000 $3,000 2011 2012 2013 2014 Thereafter Debt Maturity and Amortization Schedule ($ in millions) 6/30/11 • Provide for $290 Million 2011 Unsecured Bond Maturities $122 million due 8/15/11 $168 million due 12/1/11 |
2011 Duke Realty Corporation 15 Key Metrics & Goals 2009 Actual 2010 Actual Q2 2011 Actual Goal Debt to Gross Assets 44.5% 46.3% 46.2% 45.0% Debt + Preferred to Gross Assets 54.9% 55.5% 55.4% 50.0% Fixed Charge Coverage Ratio 1.79 : 1 1.79 : 1 1.82 : 1 2.00 : 1 Debt/EBITDA 6.65 7.31 6.67 < 6.00 Debt + Preferred/EBITDA 8.47 8.88 8.18 < 7.75 CAPITAL STRATEGY Progressing toward strategic plan goals |
2011 Duke Realty Corporation 16 Midwest Overview Industrial Office Average Age 11.7 years 16.5 years 239,000 SF 133,000 SF 51.8 million 16.3 million 93.8% 84.1% Indianapolis 94.9% 86.9% Chicago 98.0% 86.5% Cincinnati 89.6% 81.3% St. Louis 93.0% 79.7% Columbus 97.4% 82.5% Minneapolis 85.3% 98.2% Note: All information as of 6/30/11 MIDWEST OVERVIEW Location Product Type Medical Office 5% Industrial 45% Office 50% St. Louis 14% Concinnati 20% Columbus 13% Chicago 21% Indy 25% Minn. 7% Average Building Size Total Square Footage Current Occupancy |
2011 Duke Realty Corporation 17 Recent Leasing Highlights Signed a 123,000 SF, 10 year lease DukePort VI – St. Louis DukePort I – St. Louis Centre Pointe III - Cincinnati Signed a 551,200 SF, 11 year lease Butterfield 550 - Chicago Signed a 81,000 SF, 4 year lease Signed a 115,000 SF, 9.5 year lease MIDWEST OVERVIEW |
2011 Duke Realty Corporation 18 Repositioning Transaction Highlights Disposed of 29,000 SF Asset 8800 Governor’s Hill - Cincinnati Emerald III – Columbus 4000 Sussex Avenue - Chicago Disposed of 75,000 SF Asset Disposed of 46,000 SF Asset MIDWEST OVERVIEW |
2011 Duke Realty Corporation 19 Southwest Overview Location Product Type Industrial Office Average Age 8.5 years 6.8 years 260,000 SF 109,000 SF 21.0 million 2.1 million 85.5% 91.9% Dallas 84.5% 82.5% Nashville 80.9% 95.4% Houston 98.0% 100% Phoenix 86.7% N/A Seattle 100% N/A SoCal 100% N/A SOUTHWEST OVERVIEW Note: All information as of 6/30/11 Dallas 49% Phoenix 6% SoCal 3% Seattle 3% Houston 11% Nashville 28% Medical Office 15% Office 18% Industrial 67% Average Building Size Total Square Footage Current Occupancy |
2011 Duke Realty Corporation 20 Recent Leasing Highlights Signed a 263,625 SF, 7.5 year lease Signed a 125,000 SF, 3 year lease Signed a 201,000 SF, 2 year renewal lease Point West VI - Dallas Waters Ridge I - Dallas Freeport IV - Dallas SOUTHWEST OVERVIEW |
2011 Duke Realty Corporation 21 Repositioning Transaction Highlights Acquired 323,000 SF, 100% lease Development 405,000 SF, 100% pre-leased Acquired 604,000 SF building Century Business Center – Southern CA Riverside Business Center - Phoenix Buckeye Logistics Center - Phoenix SOUTHWEST OVERVIEW |
2011 Duke Realty Corporation 22 East and Southeast Overview Location Product Type Industrial Office Average Age 9.1 years 10.2 years 227,000 SF 107,000 SF 27.9 million 13.7 million 88.3% 86.7% Atlanta 83.1% 83.5% South Florida 80.9% 81.7% Raleigh 96.7% 91.0% Washington D.C./Baltimore 95.5% 91.3% Central Florida 92.4% 85.5% Savannah 92.3% NA EAST & SOUTHEAST OVERVIEW Note: All information as of 6/30/11 Office 53% Industrial 44% Medical Office 2% Atlanta 29% D.C./ Baltimore 10% Central Florida 12% Raleigh 18% South Florida 22% Savannah 9% Average Building Size Total Square Footage Current Occupancy |
2011 Duke Realty Corporation 23 Recent Leasing Highlights 3201 Centre Parkway - Atlanta 3630 Peachtree - Atlanta Signed 34,000 SF, 13 year lease Signed 405,000 SF, 6 year lease 5003 Holabird Avenue - Baltimore Signed 161,000 SF, 5 year lease EAST & SOUTHEAST OVERVIEW |
2011 Duke Realty Corporation EAST/SOUTHEAST OVERVIEW 24 Sold 57,000 SF Acquired 329,000 SF building Sold 223,000 SF Asset 1835 Shackelford Ct - Atlanta 240 Northpoint Parkway - Atlanta 2509 Dean Forest Rd - Savannah Repositioning Transaction Highlights |
2011 Duke Realty Corporation MEDICAL OFFICE OVERVIEW 25 Current Development Pipeline Baylor McKinney MOB McKinney, TX 114,000 SF Baylor 66% pre-leased WakeMed MOB - Sunnybrook Raleigh, NC 86,000 SF Wake Med Health and Hospital 58% pre-leased REX Holly Springs MOB Raleigh, NC 30,000 SF Rex Hospital 100% pre-leased Western Ridge MOB II Cincinnati, OH 29,000 SF TriHealth 80% pre-leased WakeMed MOB – Brier Creek Raleigh, NC 48,000 SF Wake Med Health and Hospital 80% pre-leased |
2011 Duke Realty Corporation CAPITAL STRATEGY 26 2011 Range of Estimates 2011 RANGE Metrics 2010 Actual Pessimistic Optimistic Key Assumptions Core FFO Per Share $1.15 $1.06 $1.18 AFFO Payout Ratio 89% 100% 85% • Annual dividend maintained at $0.68 per share Average Occupancy 88.2% 87.5% 90.5% • First half expirations cause dip in occupancy • Upside to guidance driven by higher occupancy • Downside assumes “worst case” scenario from unknown bankruptcies, defaults and terminations Same Property NOI 0.9% (3.0%) 1.0% • Rental rate pressure remains • Coming off higher year Building Acquisitions $875 $200 $400 • Aligned with long-term strategy • Focus on industrial and medical office • Includes $173 million remaining acquisition of Premier Building Dispositions $494 $400 $600 • Strong backlog of non-strategic assets under contract • 2011 pipeline consists primarily of office product • Includes $275 million sale to CBRERT Land Dispositions $35 $20 $50 • Selling identified non-strategic parcels • Local market demand still sluggish Construction and Development Starts $313 $200 $400 • Anticipate medical office starts in the $75 million to $125 million range • Remaining starts from industrial build-to-suit and third party construction Construction Volume $751 $600 $800 • BRAC volume consistent with 2010 General and Administrative Expenses $41 $45 $40 • 2011 total overhead expenses flat • No severance costs in 2011 guidance Leasing actions continue to drive upside |
RELIABLE. ANSWERS. 2011 Duke Realty Corporation 27 Positioned for NAV Growth KEY NAV GROWTH DRIVERS Lease up existing vacancy Increased management/ service fees Accretive future development Upside from land holdings Portfolio occupancy of 89%; 300-400 bps below historical levels Strong leasing pipeline Demonstrated track record of 70 – 80% renewal rate Will benefit from uptick in third party and JV partners development & construction activity Property management and leasing fees dependant on portfolio occupancy – will trend higher as occupancy improves Current pipeline of 307K SF of medical office and 1.7 million SF of industrial 2011 starts in the $200 million – $400 million range Attractive basis enhances accretive developments Potential upside from impaired carrying value Will opportunistically assess development and disposition alternatives |
RELIABLE. ANSWERS. 2011 Duke Realty Corporation 28 WHY DUKE REALTY? Quality portfolio improving with asset strategy Solid balance sheet improving with capital strategy Unmatched ability to execute on daily operations Development capabilities in place with existing land bank Talent and leadership depth to execute |
RELIABLE. ANSWERS. Forward-Looking Statement 29 This slide presentation contains statements that constitute “forward-looking statements” within the meaning of the Securities Act of 1933 and the Securities Exchange Act of 1934 as amended by the Private Securities Litigation Reform Act of 1995. These forward-looking statements include, among others, our statements regarding (1) strategic initiatives with respect to our assets, operations and capital and (2) the assumptions underlying our expectations. Prospective investors are cautioned that any such forward-looking statements are not guarantees of future performance and involve risks and uncertainties, and that actual results may differ materially from those contemplated by such forward-looking statements. A number of important factors could cause actual results to differ materially from those contemplated by forward-looking statements in this slide presentation. Many of these factors are beyond our ability to control or predict. Factors that could cause actual results to differ materially from those contemplated in this slide presentation include the factors set forth in our filings with the Securities and Exchange Commission, including our annual report on Form10-K, quarterly reports on Form 10-Q and current reports on Form 8-K. We believe these forward-looking statements are reasonable, however, undue reliance should not be placed on any forward-looking statements, which are based on current expectations. We do not assume any obligation to update any forward-looking statements as a result of new information or future developments or otherwise. 2011 Duke Realty Corporation |