Duke Realty to Shed Assets

Duke Realty Corporation (DRE - Analyst Report) recently entered into an agreement to dispose a 10.1 million square foot portfolio of suburban office properties spanning 7 markets across the Midwest and Southern regions. The company stated that an affiliate of Blackstone Real Estate Partners VII has agreed to purchase the 82 building portfolio for approximately $1.08 billion.

The Suburban Office Portfolio is currently 84.6% leased and the assumed debt in the transaction is expected to be $30 million. Duke Realty expects to close the transaction by December 2011.

Through this deal, Duke Realty intends to achieve an investment allocation of 60% industrial, 25% office and 15% medical office, consisting of the highest quality assets within each product sector.

This transaction is a long-term strategic move on the company’s part to reposition its portfolio from suburban office properties in the Midwest to industrial properties in existing and new markets, which have immense potential for long-term growth. This deal will likely generate over $1 billion in capital for the acquisition and development of industrial and medical office assets. With this deal, the company seeks to further reduce its leverage and strengthen its balance sheet.

Headquartered in Indiana, Duke Realty Corporation is a real estate investment trust (REIT), operating as a fully integrated owner, manager, and developer of industrial, office, and healthcare properties.

Duke Realty currently retains a Zacks #4 Rank, which translates into a short-term Sell rating. We are also maintaining our long-term Neutral recommendation on the stock. One of its competitors, Highwoods Properties Inc (HIW - Analyst Report) has a Zacks #3 Rank which translates into a short-term Hold rating.