Duke Realty Corp.’s third-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 97.3%. The company also announced a 5.6% hike in its quarterly dividend payout.
Total rental and related revenue for third-quarter 2016 was $206.8 million, up 2.9% year over year. The Zacks Consensus Estimate for the same was $204 million.
Quarter In Detail
Duke Realty leased around 4.4 million square feet of space in the quarter. Its tenant retention for the quarter was 68.4%. Moreover, the company registered same-property net operating income growth of 5.7% compared to the same period in the prior year, driven by occupancy growth and strong rental rate increase. In fact, the company reported overall rent growth on new and renewal leases of 19.3%.
As of Sep 30, 2016, the company’s total occupancy, including properties under development, was 95.2%, 40 basis points (bps) below from 95.6% at the prior quarter end. In-service occupancy as of that date was 97.3%, up 60 bps from the prior-quarter end. In-service portfolio occupancy in bulk distribution portfolio expanded 70 bps sequentially to 97.4%. However, the same in medical office portfolio contracted 60 bps to 95.2%.
Notably, the company completed the quarter with a solid development pipeline aggregating 7.2 million square feet, having a total expected project costs of $574.9 million and 58% pre-leased.
Duke Realty exited the reported quarter with $110.2 million of cash and cash equivalents, up from $22.5 million as of Dec 31, 2015.
2016 Guidance
Duke Realty revised 2016 guidance for core FFO per share to $1.18–$1.20, from the earlier guidance of $1.16–$1.20. The Zacks Consensus Estimate of $1.19 for 2016 lies in this range.
Dividend Raised
Concurrent with its earnings release, Duke Realty announced a 5.6% hike in its quarterly cash dividend on common stock to 19 cents per share from 18 cents per share paid earlier. The third-quarter dividend will be paid on Nov 30, 2016 to shareholders of record as of Nov 16.
Our Viewpoint
Duke Realty’s initiatives to boost exposure in industrial assets and presence of healthcare assets augur well for the long term. Moreover, the company’s strategically located high-quality properties, along with a leveraged local presence, are encouraging.
Also, the company completed substantial disposition of office property during the quarter, with 11 suburban office properties being sold in Indianapolis. It also remains on track to dispose additional suburban office assets in the fourth quarter as well as in the next year and finally exit this asset category.
Nevertheless, operational risks related to large development pipeline, near-term dilutive effect of continued divestiture and any further rise in the interest rate pose concerns before Duke Realty.
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 General Growth Properties, Inc , Vornado Realty Trust (VNO - Free Report) and Taubman Centers, Inc. , scheduled 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 Corp.’s third-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 97.3%. The company also announced a 5.6% hike in its quarterly dividend payout.
Total rental and related revenue for third-quarter 2016 was $206.8 million, up 2.9% year over year. The Zacks Consensus Estimate for the same was $204 million.
Quarter In Detail
Duke Realty leased around 4.4 million square feet of space in the quarter. Its tenant retention for the quarter was 68.4%. Moreover, the company registered same-property net operating income growth of 5.7% compared to the same period in the prior year, driven by occupancy growth and strong rental rate increase. In fact, the company reported overall rent growth on new and renewal leases of 19.3%.
As of Sep 30, 2016, the company’s total occupancy, including properties under development, was 95.2%, 40 basis points (bps) below from 95.6% at the prior quarter end. In-service occupancy as of that date was 97.3%, up 60 bps from the prior-quarter end. In-service portfolio occupancy in bulk distribution portfolio expanded 70 bps sequentially to 97.4%. However, the same in medical office portfolio contracted 60 bps to 95.2%.
Notably, the company completed the quarter with a solid development pipeline aggregating 7.2 million square feet, having a total expected project costs of $574.9 million and 58% pre-leased.
Duke Realty exited the reported quarter with $110.2 million of cash and cash equivalents, up from $22.5 million as of Dec 31, 2015.
2016 Guidance
Duke Realty revised 2016 guidance for core FFO per share to $1.18–$1.20, from the earlier guidance of $1.16–$1.20. The Zacks Consensus Estimate of $1.19 for 2016 lies in this range.
Dividend Raised
Concurrent with its earnings release, Duke Realty announced a 5.6% hike in its quarterly cash dividend on common stock to 19 cents per share from 18 cents per share paid earlier. The third-quarter dividend will be paid on Nov 30, 2016 to shareholders of record as of Nov 16.
Our Viewpoint
Duke Realty’s initiatives to boost exposure in industrial assets and presence of healthcare assets augur well for the long term. Moreover, the company’s strategically located high-quality properties, along with a leveraged local presence, are encouraging.
Also, the company completed substantial disposition of office property during the quarter, with 11 suburban office properties being sold in Indianapolis. It also remains on track to dispose additional suburban office assets in the fourth quarter as well as in the next year and finally exit this asset category.
Nevertheless, operational risks related to large development pipeline, near-term dilutive effect of continued divestiture and any further rise in the interest rate pose concerns before Duke Realty.
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 General Growth Properties, Inc , Vornado Realty Trust (VNO - Free Report) and Taubman Centers, Inc. , scheduled 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.
Confidential from Zacks
Beyond this Analyst Blog, would you like to see Zacks' best recommendations that are not available to the public? Our Executive VP, Steve Reitmeister, knows when key trades are about to be triggered and which of our experts has the hottest hand. Click to see them now>>
Zacks Names "Single Best Pick to Double"
From thousands of stocks, 5 Zacks experts each have chosen their favorite to skyrocket +100% or more in months to come. From those 5, Director of Research Sheraz Mian hand-picks one to have the most explosive upside of all.
It’s a little-known chemical company that’s up 65% over last year, yet still dirt cheap. With unrelenting demand, soaring 2022 earnings estimates, and $1.5 billion for repurchasing shares, retail investors could jump in at any time.
This company could rival or surpass other recent Zacks’ Stocks Set to Double like Boston Beer Company which shot up +143.0% in little more than 9 months and NVIDIA which boomed +175.9% in one year.
Free: See Our Top Stock and 4 Runners Up >>
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