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DUKE REALTY CORP
Symbol U : DRE
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Duke Realty Reports Fourth Quarter and Full Year 2012 Results

2013-01-30 16:36 ET - News Release

INDIANAPOLIS, IN -- (Marketwire) -- 01/30/13

Duke Realty Corporation (NYSE: DRE), a leading industrial, office and medical office property REIT, today reported results for the fourth quarter and full year 2012.

"We finished 2012 with an exceptional fourth quarter and continued to make substantial progress towards our asset, operating and capital strategic objectives," said Dennis D. Oklak, chairman and chief executive officer. "For the fourth quarter, we closed $448 million in acquisitions, started $147 million in new development, primarily in the industrial sector, paid off $61 million of debt and executed $26 million of dispositions. Operationally, we achieved Core FFO of $0.27 per share and grew our in-service portfolio occupancy to 93.0 percent, a 230 basis points improvement over the prior year end. For the full year, we executed over 29 million square feet of leases, a near-record year in leasing volume achieved by our company. Consistent with our asset strategy, we closed over $800 million of acquisitions and $153 million of dispositions. We also accelerated activity in our best in class development platform with $520 million in new starts."

"In early January, we took advantage of stable market conditions and executed a common equity offering to significantly advance our capital strategy. We raised $572 million in net proceeds, which was used to pay off our $285 million year-end line of credit balance and leaves us with additional capital to redeem our 8.375% Series O Preferred Shares in February 2013. The transaction was executed at an efficient all-in cost and reduces our leverage in alignment with our plans."

"Finally, we are introducing 2013 Core FFO guidance in the range of $1.03 to $1.11 per share, reflective of anticipated earnings growth from our asset re-positioning, continued positive operating fundamentals and an expected strong year in development starts."

Operating Highlights

Core funds from operations per diluted share ("Core FFO") was $0.27 for the quarter and $1.02 for the year. Funds from Operations per diluted share ("FFO") as defined by the National Association of Real Estate Investment Trusts ("NAREIT") was $0.25 for the quarter and $0.98 for the year. FFO, as defined by NAREIT, for the quarter included $1.6 million of acquisition-related costs and $2.7 million of overhead restructuring charges, neither of which are included in Core FFO. FFO, as defined by NAREIT, for the year included a $5.7 million adjustment related to the redemption of our Series M Preferred Shares, $4.2 million of net acquisition costs and $2.7 million of overhead restructuring charges, none of which are included in Core FFO.

  • Strong operating momentum:

    • In-service portfolio occupancy increased to 93.0 percent;
    • Tenant retention rate was 84.6 percent for the quarter and 83.1 percent for the year;
    • Over 29.2 million square feet of leases were completed for the year;
    • Same property net operating income growth was positive 1.6 percent for the quarter and 2.5 percent for the year.

  • Significant asset strategy execution:

    • Closed $448 million of bulk industrial and medical office building acquisitions for the quarter, including the assumption of $78 million of debt; and $800 million for the year;
    • Generated $26 million of proceeds from dispositions during the quarter, and over $153 million for the year;
    • Continued progress on our investment concentration objectives with our gross investment dollars portfolio mix at 51 percent industrial, 29 percent office, 16 percent medical office and 4 percent retail versus our strategic goal of 60 percent industrial, 25 percent office and 15 percent medical office;
    • On a net operating income basis, our portfolio mix comprised 54 percent industrial, 30 percent office, 13 percent medical office and 3 percent retail.

  • Successful capital strategy achievement:

    • Refinanced $600 million in unsecured debt at weighted average yield of 4.20 percent and redeemed the 6.95 percent Series M Preferred Shares totaling $168 million during the year;
    • Generated $315 million of net proceeds from an at-the-market (ATM) equity program during the year;
    • Post year end, issued 41.4 million shares of common equity raising net proceeds of $572 million to reduce leverage and improve coverage ratios.

  • 2013 Core FFO guidance introduced at $1.03 to $1.11 per share.

Financial Performance

  • Core FFO per share for the fourth quarter of $0.27 compared with $0.30 for the fourth quarter of 2011. The change is primarily attributable to short term dilution from our repositioning activities and lower income from service operations as the result of reduced third party construction fees in the fourth quarter of 2012 compared to 2011. Core FFO per share for the year ended 2012 was $1.02, compared with $1.15 for the year ended 2011. The change is also primarily attributable to short term dilution from our repositioning activities, a decrease in property and service operations income and increase in share count to fund development for the year ended 2012 over 2011. A reconciliation of FFO, as defined by NAREIT, to Core FFO is included in the financial tables included in this release.

  • FFO as defined by NAREIT, of $0.25 compared with $0.24 for the fourth quarter of 2011 and $0.98 for the year, compared with $1.07 for the year ended 2011. Partially offsetting the impacts outlined in Core FFO above, FFO as defined by NAREIT was also reduced by impairment charges recognized during the fourth quarter of 2011. A reconciliation of FFO, as defined by NAREIT, to Core FFO is included in the financial tables included in this release.

  • Adjusted FFO ("AFFO") for the fourth quarter of $0.21 compared with $0.20 for the fourth quarter of 2011. This increase in AFFO is attributable to our shift in asset mix from suburban office properties to bulk distribution which resulted in significant reductions in second generation capital expenditures that more than offset the temporary earnings dilution from our asset repositioning. AFFO per share for the year ended 2012 was $0.82, compared with $0.78 for the year ended 2011. Similarly, our shift in asset mix from suburban office properties to bulk distribution resulted in significant reduction in second generation capital expenditures contributing to this AFFO increase. A reconciliation of FFO, as defined by NAREIT, to AFFO is included in the financial tables included in this release.

  • Net income per diluted share (EPS) for fourth quarter 2012 was ($0.12), as compared to $0.17 for the same quarter in 2011. EPS for the year was ($0.48) compared to a gain of $0.11 in 2011. Both fourth quarter and full year 2011 EPS were positively impacted by gains on sales of assets.

Operating Performance

Operational highlights include:

  • In-service portfolio occupancy was 93.0 percent at year end, up from 92.5 percent at September 30, 2012, and increased 230 basis points from year end 2011 occupancy of 90.7 percent.

  • In-service occupancy in the bulk distribution portfolio at year end was 94.6 percent, up from 94.0 percent at September 30, 2012, and increased 270 basis points from year end 2011 occupancy of 91.9 percent.

  • In-service occupancy in the medical office portfolio at year end was 91.3 percent, down from 91.9 percent at September 30, 2012, and increased 120 basis points from year-end 2011 occupancy of 90.1 percent.

  • In-service occupancy in the suburban office portfolio at year end was 86.3 percent, up from 86.1 percent at September 30, 2012, and increased 90 basis points from year-end 2011 occupancy of 85.4 percent.

  • Tenant retention rates for the fourth quarter and year ended 2012 were 84.6 percent and 83.0 percent, respectively.

  • Same-property net operating income for the three months ended December 31, 2012 increased 1.6 percent over the same period of 2011. For the twelve months ended December 31, 2012, same property net operating income increased by 2.5 percent over the same period of 2011.

Real Estate Investment Activity

Acquisitions

The company has a comprehensive asset strategy, which provides for increasing investment in industrial and medical office assets while reducing suburban office exposure. In alignment with this strategy, the company acquired over $448 million of industrial and medical office assets totaling over 2.9 million square feet in the fourth quarter of 2012, bringing the total acquisitions to $800 million for the year.

The fourth quarter included the following strategic acquisitions:

  • A portfolio of fourteen medical office buildings geographically diversified that were 89.2 percent leased and totaled 1.2 million square feet. The acquisition included the assumption of $58 million of secured debt;

  • A bulk industrial facility totaling 726,000 square feet in Modesto, CA, that was 100 percent leased;

  • A bulk industrial facility totaling 552,000 square feet in Manteca, CA, that was 100 percent leased;

  • A bulk industrial facility totaling 288,000 square feet in Chicago, IL, that was 66 percent leased;

  • A bulk industrial facility totaling 135,000 square feet in Houston, TX, that was 100 percent leased;

  • A 60,000 square foot medical office facility in Cincinnati, OH, that was 100 percent leased.

Development

Wholly Owned Properties

  • During the fourth quarter, the company started development of one bulk industrial facility, totaling 1.02 million square feet in greater Seattle, WA, that is 100 percent pre-leased, and three medical office buildings totaling 126,000 square feet, that were also 100 percent pre-leased.

  • The company's wholly owned development projects under construction at December 31, 2012 consisted of six industrial projects totaling 2.5 million square feet, nine medical office projects totaling 610,000 square feet and two suburban office buildings totaling 502,000 square feet. These projects were 83.8 percent pre-leased in the aggregate and have total expected costs upon completion of $469 million.

  • During the quarter, one industrial building totaling 1.02 million square feet, which was 100 percent leased, was placed into service.

Joint Venture Properties

  • The company had two joint venture development projects under construction at December 31, 2012, a 274,000 square foot medical office project which was 100 percent pre-leased, and a 600,000 square foot speculative bulk industrial facility.

  • During the quarter, one industrial building totaling 376,000 square feet was placed into service.

Dispositions

Proceeds from fourth quarter building dispositions totaled $24.3 million. Total dispositions for the year 2012, including land sales, were $152.8 million.

For the quarter, $4.6 million of proceeds was from a non-core suburban office building (100 percent occupied) and $19.7 million of proceeds was from a portfolio of non-core industrial assets (82 percent occupied). The office and industrial dispositions comprised approximately 26,000 and 446,500 square feet, respectively, with a weighted average age of over 25 years.

January 2013 Common Equity Offering

In January 2013, the company executed a common equity offering issuing 41.4 million shares raising net proceeds of $572 million. The net proceeds from this offering were used to repay outstanding indebtedness under our revolving credit facility, which had an outstanding balance of $285 million as of December 31, 2012, with the remaining proceeds to be used to redeem all of the outstanding shares of our 8.375 percent Series O Cumulative Redeemable Preferred Shares, which are redeemable as of February 22, 2013, and for general corporate purposes.

2013 Earnings Guidance

"We ended 2012 with another great year of success towards achieving our asset, operating and capital strategy objectives," Mr. Oklak stated. "Our outlook for 2013 reflects positive performance driven by our success in completing our asset re-positioning strategy. We anticipate acquisitions to be relatively balanced with dispositions and a continued healthy development pipeline which we expect to drive attractive total shareholder returns for our investors. Our guidance also reflects the common equity offering completed in January 2013 as part of our capital strategy to continue to de-lever our balance sheet."

The company announced full-year 2013 Core FFO guidance of $1.03 to $1.11 per share. The assumptions underlying the guidance are as follows:

1. Continued strong occupancy performance;
2. Same property net operating income growth;
3. Significant new development starts;
4. Progression of asset strategy execution through both dispositions and acquisitions;
5. Service operations income approximating 2012 level.

More specific assumptions and components of 2013 Core FFO will be available by 6:00 p.m. Eastern Time today through the Investor Relations-Financials section of the company's web-site.

Dividends Declared

The company's board of directors declared a quarterly cash dividend on the company's common stock of $0.17 per share, or $0.68 per share on an annualized basis. The fourth quarter dividend will be payable February 28, 2013, to shareholders of record as of February 13, 2013.

The board also declared the following dividends on the company's outstanding preferred stock:


                            Quarterly
   Class    NYSE Symbol   Amount/Share     Record Date        Payment Date
---------- ------------- -------------- -----------------  -----------------
 Series J      DREPRJ       $0.414063   February 13, 2013  February 28, 2013
 Series K      DREPRK       $0.406250   February 13, 2013  February 28, 2013
 Series L      DREPRL       $0.412500   February 13, 2013  February 28, 2013

FFO and AFFO Reporting Definitions

Funds from Operations ("FFO"): FFO is computed in accordance with standards established by the National Association of Real Estate Investment Trusts ("NAREIT"). NAREIT defines FFO as net income (loss) excluding gains (losses) on sales of depreciable property, impairment charges related to depreciable real estate assets, and extraordinary items (computed in accordance with generally accepted accounting principles ("GAAP")); plus real estate related depreciation and amortization, and after similar adjustments for unconsolidated joint ventures. The company believes FFO to be most directly comparable to net income as defined by GAAP. The company believes that FFO should be examined in conjunction with net income (as defined by GAAP) as presented in the financial statements accompanying this release. FFO does not represent a measure of liquidity, nor is it indicative of funds available for the company's cash needs, including the company's ability to make cash distributions to shareholders.

Core Funds from Operations ("Core FFO"): Core FFO is computed as FFO adjusted for certain items that are generally non-cash in nature and that materially distort the comparative measurement of company performance over time. The adjustments include impairment charges, tax expenses or benefit related to (i) changes in deferred tax asset valuation allowances, (ii) changes in tax exposure accruals that were previously established as the result of the adoption of new accounting principles, or (iii) taxable income (loss) related to other items excluded from FFO or Core FFO (collectively referred to as "other income tax items"), gains (losses) on debt transactions, adjustments on the repurchase of preferred stock, gains (losses) on and related costs of acquisitions, and severance charges related to overhead restructuring activities. Although the company's calculation of Core FFO differs from NAREIT's definition of FFO and may not be comparable to that of other REITs and real estate companies, the company believes it provides a meaningful supplemental measure of its operating performance.

Adjusted Funds from Operations ("AFFO"): AFFO is defined by the company as Core FFO (as defined above), less recurring building improvements and second generation capital expenditures (the leasing of vacant space that had previously been under lease by the company is referred to as second generation lease activity) and adjusted for certain non-cash items including straight line rental income, non-cash components of interest expense and stock compensation expense, and after similar adjustments for unconsolidated partnerships and joint ventures.

Same Property Performance

The company includes same-property net operating income growth as a property-level supplemental measure of performance. The company does not believe same-property net operating income growth to be a primary measure of overall company operating performance. The company utilizes same-property net income growth as a supplemental measure to evaluate property-level performance, without differentiating or making adjustment as to whether a property is consolidated or jointly controlled.

A description of the properties that are excluded from the company's same-property measure is included on page 21 of our December 31, 2012 supplemental information.

About Duke Realty

Duke Realty owns and operates more than 145 million rentable square feet of industrial and office, including medical office, space in 18 major U.S. cities. Duke Realty is publicly traded on the NYSE under the symbol DRE and is listed on the S&P MidCap 400 Index. More information about Duke Realty is available at www.dukerealty.com.

Fourth Quarter Earnings Call and Supplemental Information

Duke Realty is hosting a conference call tomorrow, January 31, 2013, at 3:00 p.m. Eastern Time to discuss its fourth quarter operating results and 2013 guidance. All investors and other interested parties are invited to listen to the call. Access is available through the Investor Relations section of the company's Web site.

A copy of the company's supplemental information and a summary of the key assumptions of its 2013 Core FFO guidance will be available by 6:00 p.m. Eastern Time today through the Investor Relations section of the company's Web site.

Cautionary Notice Regarding Forward-Looking Statements

This news release may contain forward-looking statements within the meaning of the federal securities laws. All statements, other than statements of historical facts, including, among others, statements regarding the company's future financial position or results, future dividends, and future performance, are forward-looking statements. Those statements include statements regarding the intent, belief or current expectations of the company, members of its management team, as well as the assumptions on which such statements are based, and generally are identified by the use of words such as "may," "will," "seeks," "anticipates," "believes," "estimates," "expects," "plans," "intends," "should," or similar expressions. Forward-looking statements are not guarantees of future performance and involve risks and uncertainties that actual results may differ materially from those contemplated by such forward-looking statements. Many of these factors are beyond the company's abilities to control or predict. Such factors include, but are not limited to, (i) general adverse economic and local real estate conditions; (ii) the inability of major tenants to continue paying their rent obligations due to bankruptcy, insolvency or a general downturn in their business; (iii) financing risks, such as the inability to obtain equity, debt or other sources of financing or refinancing on favorable terms, if at all; (iv) the company's ability to raise capital by selling its assets; (v) changes in governmental laws and regulations; (vi) the level and volatility of interest rates and foreign currency exchange rates; (vii) valuation of joint venture investments, (viii) valuation of marketable securities and other investments; (ix) valuation of real estate; (x) increases in operating costs; (xi) changes in the dividend policy for the company's common stock; (xii) the reduction in the company's income in the event of multiple lease terminations by tenants; (xiii) impairment charges, (xiv) the effects of geopolitical instability and risks such as terrorist attacks; (xv) the effects of weather and natural disasters such as floods, droughts, wind, tornados and hurricanes; and (xvi) the effect of any damage to our reputation resulting from developments relating to any of items (i) - (ix). Additional information concerning factors that could cause actual results to differ materially from those forward-looking statements is contained from time to time in the company's filings with the Securities and Exchange Commission. The company refers you to the section entitled "Risk Factors" contained in the company's Annual Report on Form 10-K for the year ended December 31, 2011. Copies of each filing may be obtained from the company or the Securities and Exchange Commission.

The risks included here are not exhaustive and undue reliance should not be placed on any forward-looking statements, which are based on current expectations. All written and oral forward-looking statements attributable to the company, its management, or persons acting on their behalf are qualified in their entirety by these cautionary statements. Further, forward-looking statements speak only as of the date they are made, and the company undertakes no obligation to update or revise forward-looking statements to reflect changed assumptions, the occurrence of unanticipated events or changes to future operating results over time unless otherwise required by law.


                          Duke Realty Corporation
                          Statement of Operations
                             December 31, 2012
                  (In thousands, except per share amounts)

                             ----------------------  ----------------------
                               Three Months Ended      Twelve Months Ended
                                  December 31,            December 31,
                             ----------------------  ----------------------
                                2012        2011        2012        2011
                             ----------  ----------  ----------  ----------
Revenues:
  Rental and related revenue $  220,988  $  190,891  $  834,369  $  742,883
  General contractor and
   service fee revenue           48,564     112,178     275,071     521,796
                             ----------  ----------  ----------  ----------
                                269,552     303,069   1,109,440   1,264,679
                             ----------  ----------  ----------  ----------
Expenses:
  Rental expenses                42,335      36,909     153,135     144,617
  Real estate taxes              28,715      22,791     113,643     102,277
  General contractor and
   other services expenses       45,351     101,299     254,870     480,480
  Depreciation and
   amortization                  98,220      85,596     375,965     326,226
                             ----------  ----------  ----------  ----------
                                214,621     246,595     897,613   1,053,600
                             ----------  ----------  ----------  ----------
Other operating activities:
  Equity in earnings of
   unconsolidated companies         618      (1,325)      4,674       4,565
  Gain on sale of properties         99       1,638         344      68,549
  Undeveloped land carrying
   costs                         (2,223)     (1,913)     (8,829)     (8,934)
  Impairment charges                  -     (12,931)          -     (12,931)
  Other operating expenses          (42)     (1,066)       (633)     (1,237)
  General and administrative
   expenses                     (14,057)    (13,876)    (46,424)    (43,107)
                             ----------  ----------  ----------  ----------
                                (15,605)    (29,473)    (50,868)      6,905
                             ----------  ----------  ----------  ----------

    Operating income             39,326      27,001     160,959     217,984

Other income (expenses):
  Interest and other income,
   net                              120         115         514         658
  Interest expense              (62,977)    (54,937)   (245,170)   (220,455)
  Acquisition-related
   activity                      (1,629)        337      (4,192)     (1,188)
                             ----------  ----------  ----------  ----------
Loss from continuing
 operations before income
 taxes                          (25,160)    (27,484)    (87,889)     (3,001)
  Income tax benefit                  0           0         103         194
                             ----------  ----------  ----------  ----------
Loss from continuing
 operations                     (25,160)    (27,484)    (87,786)     (2,807)

Discontinued operations:
  Income (loss) before gain
   on sales                         391       3,253      (1,549)     (1,766)
  Gain on sale of
   depreciable properties         2,288      84,478      13,467     100,882
                             ----------  ----------  ----------  ----------
    Income from discontinued
     operations                   2,679      87,731      11,918      99,116

Net income (loss)               (22,481)     60,247     (75,868)     96,309
Dividends on preferred
 shares                         (11,082)    (14,006)    (46,438)    (60,353)
Adjustments for
 redemption/repurchase of
 preferred shares                     -           -      (5,730)     (3,796)
Net (income) loss
 attributable to
 noncontrolling interests           520      (1,276)      1,891        (744)
                             ----------  ----------  ----------  ----------
    Net income (loss)
     attributable to common
     shareholders            $  (33,043) $   44,965  $ (126,145) $   31,416
                             ==========  ==========  ==========  ==========

Basic net income (loss) per
 common share:
  Continuing operations
   attributable to common
   shareholders              $    (0.13) $    (0.16) $    (0.53) $    (0.27)
  Discontinued operations
   attributable to common
   shareholders              $     0.01  $     0.33  $     0.05  $     0.38
                             ----------  ----------  ----------  ----------
Total                        $    (0.12) $     0.17  $    (0.48) $     0.11
                             ==========  ==========  ==========  ==========

Diluted net income (loss)
 per common share:
  Continuing operations
   attributable to common
   shareholders              $    (0.13) $    (0.16) $    (0.53) $    (0.27)
  Discontinued operations
   attributable to common
   shareholders              $     0.01  $     0.33  $     0.05  $     0.38
                             ----------  ----------  ----------  ----------
Total                        $    (0.12) $     0.17  $    (0.48) $     0.11
                             ==========  ==========  ==========  ==========



                           Duke Realty Corporation
                     Statement of Funds From Operations
                              December 31, 2012
                  (In thousands, except per share amounts)

                                        Three Months Ended
                                           December 31,
                                            (Unaudited)
                      ------------------------------------------------------
                                 2012                        2011
                      --------------------------  --------------------------
                                   Wtd.                        Wtd.
                                   Avg.    Per                 Avg.    Per
                        Amount    Shares  Share     Amount    Shares  Share
                      ---------  ------- -------  ---------  ------- -------
Net Income (Loss)
 Attributable to
 Common Shareholders  $ (33,043)                  $  44,965
Less: Dividends on
 participating
 securities                (689)                       (825)
                      ---------                   ---------
Net Income (Loss) Per
 Common Share- Basic    (33,732) 276,081 $ (0.12)    44,140  252,922 $  0.17
Add back:
  Noncontrolling
   interest in
   earnings of
   unitholders                -        -              1,228    6,950
  Other potentially
   dilutive
   securities                          -                           -
                      ---------  -------          ---------  -------
Net Income (Loss)
 Attributable to
 Common Shareholders-
 Diluted              $ (33,732) 276,081 $ (0.12) $  45,368  259,872 $  0.17
                      =========  =======          =========  =======

Reconciliation to
 Funds From
 Operations ("FFO")
Net Income (Loss)
 Attributable to
 Common Shareholders  $ (33,043) 276,081          $  44,965  252,922
Adjustments:
  Depreciation and
   amortization          99,081                      93,250
  Company share of
   joint venture
   depreciation and
   amortization           8,694                       8,889
  Earnings from
   depreciable
   property sales-
   wholly owned,
   discontinued
   operations            (2,288)                    (84,478)
  Earnings from
   depreciable
   property sales-
   wholly owned,
   continuing
   operations               (99)                     (1,638)
  Earnings from
   depreciable
   property sales-JV        158                           -
  Noncontrolling
   interest share of
   adjustments           (1,696)                       (438)
                      ---------  -------          ---------  -------
Funds From
 Operations- Basic       70,807  276,081 $  0.26     60,550  252,922 $  0.24
  Noncontrolling
   interest in loss
   of unitholders          (537)   4,493              1,228    6,950
  Noncontrolling
   interest share of
   adjustments            1,696                         438
  Other potentially
   dilutive
   securities                      3,428                       3,550
                      ---------  -------          ---------  -------
Funds From
 Operations- Diluted  $  71,966  284,002 $  0.25  $  62,216  263,422 $  0.24
  Impairment charges          -                      12,931
  Acquisition-related
   activity               1,629                        (337)
  Overhead
   restructuring
   charges                2,664                       3,407
                      ---------  -------          ---------  -------
Core Funds From
 Operations- Diluted  $  76,259  284,002 $  0.27  $  78,217  263,422 $  0.30
                      =========  =======          =========  =======

Adjusted Funds From
 Operations
Core Funds From
 Operations- Diluted  $  76,259  284,002 $  0.27  $  78,217  263,422 $  0.30
Adjustments:
  Straight-line
   rental income         (5,020)                     (5,956)
  Amortization of
   above/below market
   rents and
   concessions            3,114                       3,303
  Stock based
   compensation
   expense                2,472                       2,254
  Noncash interest
   expense                2,413                       1,521
  Second generation
   concessions             (180)                       (300)
  Second generation
   tenant
   improvements          (9,341)                    (13,525)
  Second generation
   leasing
   commissions           (6,291)                     (7,599)
  Building
   improvements          (3,018)                     (5,687)
                      ---------  -------          ---------  -------
Adjusted Funds From
 Operations - Diluted $  60,408  284,002 $  0.21  $  52,228  263,422 $  0.20
                      =========  =======          =========  =======



                                        Twelve Months Ended
                                           December 31,
                                            (Unaudited)
                      ------------------------------------------------------
                                 2012                        2011
                      --------------------------  --------------------------
                                   Wtd.                        Wtd.
                                   Avg.    Per                 Avg.    Per
                        Amount    Shares  Share     Amount    Shares  Share
                      ---------  ------- -------  ---------  ------- -------
Net Income (Loss)
 Attributable to
 Common Shareholders  $(126,145)                  $  31,416
Less: Dividends on
 participating
 securities              (3,075)                     (3,243)
                      ---------                   ---------
Net Income (Loss) Per
 Common Share- Basic   (129,220) 267,900 $ (0.48)    28,173  252,694 $  0.11
Add back:
  Noncontrolling
   interest in
   earnings of
   unitholders                -        -                859    6,904
  Other potentially
   dilutive
   securities                          -                           -
                      ---------  -------          ---------  -------
Net Income (Loss)
 Attributable to
 Common Shareholders-
 Diluted              $(129,220) 267,900 $ (0.48) $  29,032  259,598 $  0.11
                      =========  =======          =========  =======

Reconciliation to
 Funds From
 Operations ("FFO")
Net Income (Loss)
 Attributable to
 Common Shareholders  $(126,145) 267,900          $  31,416  252,694
Adjustments:
  Depreciation and
   amortization         379,419                     385,679
  Company share of
   joint venture
   depreciation and
   amortization          34,702                      33,687
  Earnings from
   depreciable
   property sales-
   wholly owned,
   discontinued
   operations           (13,467)                   (100,882)
  Earnings from
   depreciable
   property sales-
   wholly owned,
   continuing
   operations              (344)                    (68,549)
  Earnings from
   depreciable
   property sales-JV     (1,907)                        (91)
  Noncontrolling
   interest share of
   adjustments           (7,054)                     (6,644)
                      ---------  -------          ---------  -------
Funds From
 Operations- Basic      265,204  267,900 $  0.99    274,616  252,694 $  1.09
  Noncontrolling
   interest in income
   (loss) of
   unitholders           (2,273)   4,829                859    6,904
  Noncontrolling
   interest share of
   adjustments            7,054                       6,644
  Other potentially
   dilutive
   securities                      3,276                       3,588
                      ---------  -------          ---------  -------
Funds From
 Operations- Diluted  $ 269,985  276,005 $  0.98  $ 282,119  263,186 $  1.07
  Adjustments for
   redemption/
   repurchase of
   preferred shares       5,730                       3,796
  Impairment charges          -                      12,931
  Acquisition-related
   activity               4,192                       1,188
  Other income tax
   items                   (103)                       (194)
  Overhead
   restructuring
   charges                2,664                       3,407
                      ---------  -------          ---------  -------
Core Funds From
 Operations- Diluted  $ 282,468  276,005 $  1.02  $ 303,247  263,186 $  1.15
                      =========  =======          =========  =======

Adjusted Funds From
 Operations
Core Funds From
 Operations- Diluted  $ 282,468  276,005 $  1.02  $ 303,247  263,186 $  1.15
Adjustments:
  Straight-line
   rental income        (24,759)                    (28,622)
  Amortization of
   above/below market
   rents and
   concessions            8,867                      12,731
  Stock based
   compensation
   expense               12,940                      12,596
  Noncash interest
   expense                9,337                      11,261
  Second generation
   concessions           (1,113)                     (3,010)
  Second generation
   tenant
   improvements         (28,258)                    (54,409)
  Second generation
   leasing
   commissions          (25,027)                    (36,746)
  Building
   improvements          (6,842)                    (11,443)
                      ---------  -------          ---------  -------
Adjusted Funds From
 Operations - Diluted $ 227,613  276,005 $  0.82  $ 205,605  263,186 $  0.78
                      =========  =======          =========  =======



                          Duke Realty Corporation
                               Balance Sheet
                             December 31, 2012
                  (In thousands, except per share amounts)

                                                December 31,   December 31,
                                                    2012           2011
                                               -------------  -------------
ASSETS:

  Rental Property                              $   6,708,250  $   6,038,107
  Less: Accumulated Depreciation                  (1,296,685)    (1,127,595)
  Construction in Progress                           234,918         44,497
  Undeveloped Land                                   614,208        622,635
                                               -------------  -------------
    Net Real Estate Investments                    6,260,691      5,577,644

  Cash                                                33,889        213,809
  Accounts Receivable                                 22,367         22,428
  Straight-line Rents Receivable                     120,383        108,392
  Receivables on Construction Contracts               39,754         40,247
  Investments in and Advances to
   Unconsolidated Companies                          372,256        364,859
  Deferred Financing Costs, Net                       40,083         42,268
  Deferred Leasing and Other Costs, Net              503,527        463,983
  Escrow Deposits and Other Assets                   167,151        170,807
                                               -------------  -------------

    Total Assets                               $   7,560,101  $   7,004,437
                                               =============  =============

LIABILITIES AND EQUITY:

  Secured Debt                                 $   1,167,953  $   1,173,233
  Unsecured Notes                                  2,993,217      2,616,063
  Unsecured Lines of Credit                          285,000         20,293
  Construction Payables and Amounts due to
   Subcontractors                                     84,679         55,916
  Accrued Real Estate Taxes                           74,648         69,470
  Accrued Interest                                    59,215         58,904
  Accrued Expenses                                    57,892         60,230
  Other Liabilities                                  168,577        131,735
  Tenant Security Deposits and Prepaid Rents          42,802         38,935
                                               -------------  -------------

    Total Liabilities                              4,933,983      4,224,779
                                               -------------  -------------

  Preferred Stock                                    625,638        793,910
  Common Stock and Additional Paid-in Capital      3,956,291      3,597,117
  Accumulated Other Comprehensive Income               2,691            987
  Distributions in Excess of Net Income           (1,993,206)    (1,677,328)
                                               -------------  -------------

    Total Shareholders' Equity                     2,591,414      2,714,686

  Noncontrolling Interest                             34,704         64,972
                                               -------------  -------------

    Total Liabilities and Equity               $   7,560,101  $   7,004,437
                                               =============  =============

Contact Information:

Investors:
Ron Hubbard
317.808.6060

Media:
Helen McCarthy
317.708.8010


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