Duke Realty Marginally Beats - Analyst Blog

Duke Realty Corp. (DRE), a real estate investment trust (REIT), reported fourth quarter 2010 FFO (fund from operations) of $73.9 million or 28 cents per share compared to $72.6 million or 33 cents 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.

The reported FFO for the quarter marginally beat the Zacks Consensus Estimate by a penny. Total revenues were $329.8 million compared to $327.6 million in the year-ago quarter. Total revenues during the reported quarter surpassed the Zacks Consensus Estimate of $230 million.

For full year 2010, Duke Realty reported FFO of $305.4 million or $1.23 per share, compared with $13.3 million or $0.06 per share in the year-ago period. Recurring FFO for fiscal 2010 was $1.15 per share compared with $1.45 in 2009. Recurring FFO for 2010 exceeded the Zacks Consensus Estimate by a penny. Total revenues during the year were $1.4 billion, compared with $1.3 billion in 2009. The fiscal 2010 revenues were ahead of the Zacks Consensus Estimate of $0.9 billion.

During the quarter, Duke Realty reported a 5.0% increase in same-store net operating income (NOI). The overall portfolio occupancy of the company, including projects under development, was 89.1% at quarter-end. Tenant retention for the quarter was 70.1%. The company executed nearly 26 million square feet of leases during the year – the         highest annual volume since 2007.

In accordance with its asset repositioning strategy, which provides for increasing investment in industrial and medical office assets, Duke Realty acquired $440.5 million worth of assets totaling over 5 million square feet in fourth quarter 2010, bringing the total acquisitions to $919.1 million for full year 2010. During the quarter, the company acquired 51 industrial and 5 office buildings totaling over 4.9 million square feet in South Florida; a 190,000 square foot medical office building in Charlotte; and 3 industrial assets in Houston, Texas totaling over 582,000 square feet.

At the same time, the company sold non-strategic assets, raising proceeds of $302.4 million during the quarter. Total asset sale for the year, including land sales, were $533 million. Duke Realty placed in service a 62,000 square foot medical office building during the quarter.

At quarter-end, the company had 5 pre-leased medical office projects totaling over   270,000 square feet and 2 pre-leased industrial buildings under development. In addition, Duke Realty had 1 joint venture medical office project totaling 460,000 square feet under development and a 406,000 square foot industrial building expansion in Indianapolis. The company started development of 4 medical office buildings and 1 bulk industrial project during the quarter.

At quarter-end, the company had nearly $18.4 million of cash on hand and a total debt of $4.2 billion. The total-debt-to-undepreciated-assets covenant was 48.37% at quarter-end, while the debt service coverage ratio was 2.45x. Duke Realty expects 2011 recurring FFO in the range of $1.06 – $1.18 per share.

We presently have a ‘Neutral' rating on Duke Realty, which currently has a Zacks #3 Rank that translate into a short-term ‘Hold' recommendation indicating 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' recommendation and a Zacks #3 Rank for Liberty Property Trust (LRY), a competitor of Duke Realty.

 
DUKE REALTY CP (DRE): Free Stock Analysis Report
 
LIBERTY PPTY TR (LRY): Free Stock Analysis Report
 
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