DRE Prices 36M Stock Offering

Duke Realty Corp. (DRE - Analyst Report) has priced a public offering of 36 million common shares at $14.25 per share. The move comes as part of its effort to generate cash to repay its debt as well as for general corporate purposes. Moreover, the underwriters have been granted a 30-day option to purchase up to 5.4 million additional shares.

Particularly, Duke Realty plans to use the proceeds from this public offering to pay down debt, including all or part of its outstanding borrowings under its existing revolving credit facility that had unpaid balance of $285 million as of December 31, 2012.

Further, the company plans to use the fund raised from this offering for redeeming outstanding shares of its Series O Preferred Shares that are redeemable as of February 22, 2013, as well for other general corporate purposes.

The joint book running managers for this offering were Morgan Stanley & Co. LLC of Morgan Stanley (MS - Analyst Report) and UBS Securities LLC, a unit of UBS AG (UBS - Analyst Report). The offering is scheduled to close on January 15, 2013.

For Duke Realty, paying back debt is encouraging as it would lessen its interest expenses, though the resulting share dilution impact cannot be ignored.

Duke Realty is expected to release its fourth-quarter 2012 results on January 31, 2013. The Zacks Consensus Estimate for the company’s fourth quarter FFO is currently pegged at 26 cents per share.

The Earnings ESP (Expected Surprise Prediction), the percentage difference between the Most Accurate Estimate and the Zacks Consensus Estimate, for Duke Realty is nil. This, combined with its Zacks Rank #3 (Hold), reflects that the company is expected to report in line with the Zacks Consensus Estimate in the fourth quarter. Additionally, we have a long-term Neutral recommendation on the stock.