Duke Realty Corp. (DRE) reported second quarter 2011 FFO (fund from operations) of $75.7 million or 29 cents per share compared with $40.7 million or 17 cents per share 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. Reported FFO per share surpassed the Zacks Consensus Estimate by a penny.
Total revenue in the second quarter of 2011 was $363.0 million compared with $374.0 million in the year-ago quarter.
At quarter end, the overall portfolio occupancy of the company, including projects under development, was 89.3%. Tenant retention in the quarter was about 61%. Same-store net operating income (NOI) during the quarter inched up 0.5% on a year-over-year basis. The company leased approximately 8.1 million square feet of space during the reported quarter.
In accordance with its asset repositioning strategy, which provides for higher investment in industrial and medical office assets, Duke Realty raised proceeds of $62.5 million from the sale of non-strategic assets. These included property dispositions spanning over 1.4 million square feet. At the same time, the company acquired assets worth $116.4 million during the quarter.
At quarter end, the company had 5 medical office projects totaling over 308,000 square feet and 1 bulk industrial building under development totaling 1.3 million square feet. In addition, Duke Realty had a single joint venture project under development totaling 405,000 square feet.
During the quarter, the company placed a 300,000 square foot industrial building located in Houston, and a 40,000 square foot medical office building located in Atlanta in service.
At quarter-end, the company had nearly $117.6 million of cash on hand and a total debt of $4.0 billion. The total-debt-to-undepreciated-assets covenant was 48.11% while debt service coverage ratio was 2.48 x. Duke Realty reiterated its recurring FFO guidance in the range of $1.06 – $1.18 per share for fiscal 2011.
Duke Realty currently retains a Zacks #3 Rank, which translates into a short-term Hold rating. We are also maintaining our long-term Neutral recommendation on the stock. One of its competitors, Highwoods Properties Inc (HIW) currently retains a Zacks #3 Rank.
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