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Duke Realty's (DRE) Q3 FFO Surpasses Estimates, Dividend Up
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Duke Realty Corporation’s third-quarter 2020 core funds from operations (FFO) per share of 40 cents surpassed the Zacks Consensus Estimate of 39 cents. The figure also increased 8.1% from the year-ago tally of 37 cents.
Results reflect rent growth on new and renewal leases, higher in-service occupancy and leasing of new developments.
The company noted that despite the uncertain economic conditions, it has an optimistic outlook for current-year earnings compared with the guidance issued in July. This positive outlook is backed by a solid operational performance, and particularly strong rent collections so far. Notably, the company has collected or has executed deferral agreements for 99.9% of third-quarter rents and 99.8% of October rents.
Rental and related revenues of $235.4 million increased 9.3% on a year-over-year basis.
Quarter in Detail
Duke Realty leased 7.3 million square feet of space during the September-end quarter. Tenant retention was 45.7% for the reported quarter and 67.2% after considering immediate backfills.
Moreover, the company registered same-property net operating income (NOI) growth of 5% year over year. This uptick was backed by increased occupancy and rental rate growth as well as the expiration of free rent periods. Duke Realty reported overall cash and annualized net effective rent growth on new and renewal leases of 17.2% and 32.1%, respectively, during the third quarter.
As of Sep 30, 2020, the company’s total portfolio, including properties under development, was 95.6% leased, up 30 basis points (bps) from the previous-quarter end, and 170 bps from the prior-year quarter end.
Increase in total portfolio occupancy reflects leasing of speculative space in both in-service and under-development portfolios. In-service portfolio was 97.1% leased as of Sep 30, 2020, up from 96.7% as of Jun 30, 2020 and 96.2% as of Sep 30, 2019.
Duke Realty exited the third quarter with $6.7 million of cash and cash equivalents, down from $110.9 million as of Dec 31, 2019.
Portfolio Activity
During the July-September period, Duke Realty completed the acquisition of five properties amounting to $112 million. The company acquired three buildings in East Bay Submarket Northern Carolina, one in Northern New Jersey and one in Seattle, all of which are fully leased.
The company also sold a wholly-owned fully-leased property in Indianapolis spanning an area of 280,000 square feet for $18 million.
Notably, the company commenced four wholly-owned development projects, spanning an area of two million square feet. The projects are 28% leased in total.
Dividend Update
Duke Realty announced an 8.5% hike in quarterly cash dividend on common stock to 25.50 cents per share from 23.50 cents. The dividend for the third quarter will be paid out on Nov 30 to shareholders on record as of Nov 16, 2020.
2020 Guidance
Duke Realty revised the 2020 core FFO per share outlook to $1.50-$1.54 from the prior estimate of $1.48-$1.54.
The company estimates same-property NOI growth of 4.7-5.1% compared with the prior guidance of 3.5-4.5%. It has lowered its bad debt expense estimate and included improved leasing assumption compared with the July outlook. Moreover, the revised guidance for 2020 development starts is $650-$800 million compared with the prior range of $350-$550 million.
Duke Realty Corporation Price, Consensus and EPS Surprise
Boston Properties Inc.’s (BXP - Free Report) third-quarter 2020 FFO per share of $1.57 missed the Zacks Consensus Estimate of $1.64. The reported figure also decreased 4.3% from the year-ago quarter’s $1.64.
SITE Centers Corp.’s (SITC - Free Report) third-quarter operating FFO per share of 23 cents came in line with the Zacks Consensus Estimate. The reported figure, however, declined 23.3% year over year.
Highwoods Properties, Inc. (HIW - Free Report) third-quarter 2020 FFO per share of 86 cents missed the Zacks Consensus Estimate of 88 cents. The figure included 5 cents from debt extinguishment charges and non-cash straight-line credit losses. Nonetheless, the reported figure improved 3.6% from the 83 cents reported in the year-ago period.
Note: Anything related to earnings presented in this write-up represents funds from operations (FFO) — a widely used metric to gauge the performance of REITs.
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Duke Realty's (DRE) Q3 FFO Surpasses Estimates, Dividend Up
Duke Realty Corporation’s third-quarter 2020 core funds from operations (FFO) per share of 40 cents surpassed the Zacks Consensus Estimate of 39 cents. The figure also increased 8.1% from the year-ago tally of 37 cents.
Results reflect rent growth on new and renewal leases, higher in-service occupancy and leasing of new developments.
The company noted that despite the uncertain economic conditions, it has an optimistic outlook for current-year earnings compared with the guidance issued in July. This positive outlook is backed by a solid operational performance, and particularly strong rent collections so far. Notably, the company has collected or has executed deferral agreements for 99.9% of third-quarter rents and 99.8% of October rents.
Rental and related revenues of $235.4 million increased 9.3% on a year-over-year basis.
Quarter in Detail
Duke Realty leased 7.3 million square feet of space during the September-end quarter. Tenant retention was 45.7% for the reported quarter and 67.2% after considering immediate backfills.
Moreover, the company registered same-property net operating income (NOI) growth of 5% year over year. This uptick was backed by increased occupancy and rental rate growth as well as the expiration of free rent periods. Duke Realty reported overall cash and annualized net effective rent growth on new and renewal leases of 17.2% and 32.1%, respectively, during the third quarter.
As of Sep 30, 2020, the company’s total portfolio, including properties under development, was 95.6% leased, up 30 basis points (bps) from the previous-quarter end, and 170 bps from the prior-year quarter end.
Increase in total portfolio occupancy reflects leasing of speculative space in both in-service and under-development portfolios. In-service portfolio was 97.1% leased as of Sep 30, 2020, up from 96.7% as of Jun 30, 2020 and 96.2% as of Sep 30, 2019.
Duke Realty exited the third quarter with $6.7 million of cash and cash equivalents, down from $110.9 million as of Dec 31, 2019.
Portfolio Activity
During the July-September period, Duke Realty completed the acquisition of five properties amounting to $112 million. The company acquired three buildings in East Bay Submarket Northern Carolina, one in Northern New Jersey and one in Seattle, all of which are fully leased.
The company also sold a wholly-owned fully-leased property in Indianapolis spanning an area of 280,000 square feet for $18 million.
Notably, the company commenced four wholly-owned development projects, spanning an area of two million square feet. The projects are 28% leased in total.
Dividend Update
Duke Realty announced an 8.5% hike in quarterly cash dividend on common stock to 25.50 cents per share from 23.50 cents. The dividend for the third quarter will be paid out on Nov 30 to shareholders on record as of Nov 16, 2020.
2020 Guidance
Duke Realty revised the 2020 core FFO per share outlook to $1.50-$1.54 from the prior estimate of $1.48-$1.54.
The company estimates same-property NOI growth of 4.7-5.1% compared with the prior guidance of 3.5-4.5%. It has lowered its bad debt expense estimate and included improved leasing assumption compared with the July outlook. Moreover, the revised guidance for 2020 development starts is $650-$800 million compared with the prior range of $350-$550 million.
Duke Realty Corporation Price, Consensus and EPS Surprise
Duke Realty Corporation price-consensus-eps-surprise-chart | Duke Realty Corporation Quote
Currently, Duke Realty carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Performance of Other REITS
Boston Properties Inc.’s (BXP - Free Report) third-quarter 2020 FFO per share of $1.57 missed the Zacks Consensus Estimate of $1.64. The reported figure also decreased 4.3% from the year-ago quarter’s $1.64.
SITE Centers Corp.’s (SITC - Free Report) third-quarter operating FFO per share of 23 cents came in line with the Zacks Consensus Estimate. The reported figure, however, declined 23.3% year over year.
Highwoods Properties, Inc. (HIW - Free Report) third-quarter 2020 FFO per share of 86 cents missed the Zacks Consensus Estimate of 88 cents. The figure included 5 cents from debt extinguishment charges and non-cash straight-line credit losses. Nonetheless, the reported figure improved 3.6% from the 83 cents reported in the year-ago period.
Note: Anything related to earnings presented in this write-up represents funds from operations (FFO) — a widely used metric to gauge the performance of REITs.
Looking for Stocks with Skyrocketing Upside?
Zacks has just released a Special Report on the booming investment opportunities of legal marijuana.
Ignited by referendums and legislation, this industry is expected to blast from an already robust $17.7 billion in 2019 to a staggering $73.6 billion by 2027. Early investors stand to make a killing, but you have to be ready to act and know just where to look.
See the pot stocks we're targeting >>