Duke Realty Beats Estimates - Analyst Blog

Duke Realty Corp. (DRE), a real estate investment trust (REIT), reported third quarter 2010 FFO (fund from operations) of $129.0 million or 50 cents per share compared to an FFO loss of $236.2 million or $1.02 in the year-ago quarter. Fund from operations, a widely used metric to gauge the performance of REITs, is obtained after adding depreciation and amortization and other non-cash expenses to net income.

Excluding non-recurring items, FFO for the reported quarter was 30 cents per share compared to 32 cents in the year-earlier quarter. The recurring FFO for the quarter beat the Zacks Consensus Estimate by 4 cents. Total revenues were $371.3 million compared to $320.0 million in the year-ago quarter. Total revenues during the reported quarter surpassed the Zacks Consensus Estimate of $224 million.

During the quarter, Duke Realty reported a 1.5% increase in same-store net operating income (NOI). The overall portfolio occupancy of the company, including projects under development, was 88.9% at quarter-end. Tenant retention for the quarter was 78.5%. The company executed major leases during the quarter, totaling over 8.5 million square feet.

Duke Realty placed in service a 48,000 square foot office building during the quarter. The company acquired two suburban office properties spanning over 465,000 square feet in South Florida. During the quarter, Duke Realty also acquired a joint-venture portfolio including 106 industrial buildings, totaling 20.8 million square feet in the Midwest and Southeast markets. In addition, the company acquired a 50% interest in a joint venture property spanning 936,000 square feet in Columbus, Ohio.

At quarter-end, the company had two pre-leased medical office projects totaling over   250,000 square feet and a 1.3 million square foot 100% pre-leased build-to-suit industrial building under development at an estimated total cost of $109.4 million. In addition, Duke Realty had two joint venture medical office projects totaling 522,000 square feet under development and a 406,000 square foot industrial building expansion in Indianapolis. Total estimated cost of the joint venture development pipeline is $202.7 million. The company received proceeds of $42.6 million at a stabilized cap rate of 8.4% from the sale of three non-strategic assets during the quarter.

At quarter-end, the company had nearly $20.8 million of cash on hand and a total debt of $4.1 billion. The total-debt-to-undepreciated-assets covenant was 48.16% at quarter-end, while the debt service coverage ratio was 2.48x. Duke Realty updated its 2010 recurring FFO guidance from the range of $0.95 – $1.15 to $1.11 – $1.15 per share.