Duke Realty Sells New York Asset - Analyst Blog

Duke Realty Corp. (DRE), a real estate investment trust (REIT), recently sold the BlueCross BlueShield of Western New York headquarter building in downtown Buffalo, New York, for an undisclosed amount. The asset was sold to Cole Real Estate Investments, a Phoenix-based investment group that primarily focuses on high-quality, commercial real estate properties.

BlueCross BlueShield of Western New York is a division of HealthNow New York Inc., a leading healthcare company in New York. The asset sale will not affect the 1,300-strong workforce of the healthcare company as it has a long-term lease in place till 2024, with additional renewal options that could extend the lease well beyond that date.

The asset sale was part of the long-term strategy of Duke Realty to divest the building at a lucrative price. Duke Realty had invested $116 million for developing the property. The three-year old building has all the state-of-the-art facilities and features an adjoining 1,700-car six-story parking facility. The property also has a stable revenue-generating option through a long-term lease with BlueCross BlueShield. Consequently, the deal offered a win-win solution for all the parties involved in the transaction.

Duke Realty is one of the largest commercial real estate companies in the U.S. For over 35 years, the company has leveraged its local presence and its integrated platform to drive returns, establishing itself as a premier publicly traded real estate developer in the country.

Duke Realty is currently repositioning its portfolio and has exited certain markets in an attempt to concentrate in areas where it already has a strong presence. The company has temporarily closed its operations in some of its newest markets including Austin, San Antonio, Seattle and Newport Beach. The portfolio reshuffle is likely to improve Duke Reality's internal growth metrics and position it to emerge stronger once the real estate markets fully recover.

We maintain our ‘Neutral' rating on Duke Realty with a Zacks #3 Rank, which translates into a short-term ‘Hold' recommendation and indicates that the stock is expected to perform in line with the overall U.S. equity market for the next 1–3 months. We also have a ‘Neutral' rating on Nationwide Health Properties Inc. (NHP), one of the peers of Duke Realty.

 
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