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Duke Realty (DRE) Beats Q4 FFO Estimates; Occupancy Up
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Duke Realty Corp.’s fourth-quarter 2016 core funds from operations (“FFO”) per share of 31 cents came a penny above the Zacks Consensus Estimate and 2 cents ahead of the prior-year quarter tally. The quarter witnessed in-service occupancy reaching record level of 97.5%.
Total rental and related revenue for the quarter was $204.3 million, up 2.9% year over year. The Zacks Consensus Estimate for the same was $205 million.
For full-year 2016, Duke Realty reported core FFO per share of $1.20, in line with the Zacks Consensus Estimate and 3 cents ahead of the prior-year tally of $1.17. However, total rental and related revenue for the year was marginally down (0.3%) from a year ago to $813.4 million.
Quarter in Detail
Duke Realty leased around 8.9 million square feet of space in the quarter. Its tenant retention for the quarter was 87%. Moreover, the company registered same-property net operating income growth of 4.5% compared to the same period in the prior year, driven by occupancy growth and rental rate increase. In fact, the company reported overall rent growth on new and renewal leases of 15.2%.
As of Dec 31, 2016, the company’s total occupancy, including properties under development, was 95.6%, up 40 basis points (bps) from 95.2% at the prior-quarter end. In-service occupancy as of the same date was 97.5%, up 20 bps from the prior-quarter end. In-service portfolio occupancy in bulk distribution portfolio expanded 30 bps from the prior-quarter end to 97.7%. The same in the medical office portfolio advanced 10 bps from the prior-quarter end to 95.3%.
Notably, the company concluded the year with a solid development pipeline, aggregating 9.4 million square feet, having total expected project costs of $734 million and 69% pre-leased.
Duke Realty exited the reported quarter with $12.6 million of cash and cash equivalents, down from $22.5 million as of Dec 31, 2015.
2017 Guidance
Duke Realty provided 2017 guidance for core FFO per share of $1.21–$1.27. The Zacks Consensus Estimate of $1.24 lies in this range.
Notably, the company’s guidance incorporates the persistent decrease in income from service operations from 2016. This comes amidst the company’s efforts to emphasis on wholly owned development and rental operations instead of third-party service fees.
Dividend Update
Concurrent with its earnings release, Duke Realty announced a quarterly cash dividend on common stock of 19 cents per share. The fourth-quarter dividend will be paid on Feb 28 to shareholders of record as of Feb 16, 2017.
Our Viewpoint
Duke Realty’s strategically located portfolio of industrial assets is likely to assist in leveraging on the growing demand for premium logistic facilities amid limited supply. Moreover, considering the dispositions of suburban office property accomplished in fourth-quarter 2016, the company has effectively concluded its exit from this asset category.
In addition, the rating upgrade by both Moody's and Standard & Poor's reflect the de-leveraging of the company’s balance sheet and would aid in reducing borrowing costs, which looks promising. Nevertheless, near-term dilutive effect of continued divestiture and any further rise in the interest rate pose concerns for Duke Realty.
Duke Realty Corporation Price, Consensus and EPS Surprise
We now look forward to the earnings releases of the other REITs, like Avalonbay Communities Inc. (AVB - Free Report) , Boston Properties Inc. (BXP - Free Report) and Simon Property Group, Inc. (SPG - Free Report) , which are slated to report results next week.
Note: All EPS numbers presented in this write up represent funds from operations (“FFO”) per share. FFO, 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.
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Duke Realty (DRE) Beats Q4 FFO Estimates; Occupancy Up
Duke Realty Corp.’s fourth-quarter 2016 core funds from operations (“FFO”) per share of 31 cents came a penny above the Zacks Consensus Estimate and 2 cents ahead of the prior-year quarter tally. The quarter witnessed in-service occupancy reaching record level of 97.5%.
Total rental and related revenue for the quarter was $204.3 million, up 2.9% year over year. The Zacks Consensus Estimate for the same was $205 million.
For full-year 2016, Duke Realty reported core FFO per share of $1.20, in line with the Zacks Consensus Estimate and 3 cents ahead of the prior-year tally of $1.17. However, total rental and related revenue for the year was marginally down (0.3%) from a year ago to $813.4 million.
Quarter in Detail
Duke Realty leased around 8.9 million square feet of space in the quarter. Its tenant retention for the quarter was 87%. Moreover, the company registered same-property net operating income growth of 4.5% compared to the same period in the prior year, driven by occupancy growth and rental rate increase. In fact, the company reported overall rent growth on new and renewal leases of 15.2%.
As of Dec 31, 2016, the company’s total occupancy, including properties under development, was 95.6%, up 40 basis points (bps) from 95.2% at the prior-quarter end. In-service occupancy as of the same date was 97.5%, up 20 bps from the prior-quarter end. In-service portfolio occupancy in bulk distribution portfolio expanded 30 bps from the prior-quarter end to 97.7%. The same in the medical office portfolio advanced 10 bps from the prior-quarter end to 95.3%.
Notably, the company concluded the year with a solid development pipeline, aggregating 9.4 million square feet, having total expected project costs of $734 million and 69% pre-leased.
Duke Realty exited the reported quarter with $12.6 million of cash and cash equivalents, down from $22.5 million as of Dec 31, 2015.
2017 Guidance
Duke Realty provided 2017 guidance for core FFO per share of $1.21–$1.27. The Zacks Consensus Estimate of $1.24 lies in this range.
Notably, the company’s guidance incorporates the persistent decrease in income from service operations from 2016. This comes amidst the company’s efforts to emphasis on wholly owned development and rental operations instead of third-party service fees.
Dividend Update
Concurrent with its earnings release, Duke Realty announced a quarterly cash dividend on common stock of 19 cents per share. The fourth-quarter dividend will be paid on Feb 28 to shareholders of record as of Feb 16, 2017.
Our Viewpoint
Duke Realty’s strategically located portfolio of industrial assets is likely to assist in leveraging on the growing demand for premium logistic facilities amid limited supply. Moreover, considering the dispositions of suburban office property accomplished in fourth-quarter 2016, the company has effectively concluded its exit from this asset category.
In addition, the rating upgrade by both Moody's and Standard & Poor's reflect the de-leveraging of the company’s balance sheet and would aid in reducing borrowing costs, which looks promising. Nevertheless, near-term dilutive effect of continued divestiture and any further rise in the interest rate pose concerns for Duke Realty.
Duke Realty Corporation Price, Consensus and EPS Surprise
Duke Realty Corporation Price, Consensus and EPS Surprise | Duke Realty Corporation Quote
Currently, Duke Realty has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
We now look forward to the earnings releases of the other REITs, like Avalonbay Communities Inc. (AVB - Free Report) , Boston Properties Inc. (BXP - Free Report) and Simon Property Group, Inc. (SPG - Free Report) , which are slated to report results next week.
Note: All EPS numbers presented in this write up represent funds from operations (“FFO”) per share. FFO, 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.
Zacks’ Best Private Investment Ideas
In addition to the recommendations that are available to the public on our website, how would you like to follow all Zacks' private buys and sells in real time?
Our experts cover all kinds of trades… from value to momentum . . . from stocks under $10 to ETF and option moves . . . from stocks that corporate insiders are buying up to companies that are about to report positive earnings surprises. You can even look inside exclusive portfolios that are normally closed to new investors. Starting today, for the next month, you can have unrestricted access. Click here for Zacks' private trades >>