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Duke Realty Corporation’s fourth-quarter 2020 core funds from operations (FFO) per share of 41 cents came in line with the Zacks Consensus Estimate. The figure also increased 7.9% from the year-ago tally of 38 cents.
Results reflect growth in rental rate, improved occupancy and leasing of new developments being placed into service.
Rental and related revenues of $248.7 million climbed 14.4% on a year-over-year basis. The figure also surpassed the Zacks Consensus Estimate of $241.1 million.
Rent collections remain strong, with the company collecting 99.9% of the fourth-quarter rents and 99.6% of January 2021 rents so far. It has collected or executed deferral agreements for 99.9% of all 2020 rents and collected all amounts due under rent deferral agreements through the end of 2020. Also, the mid-point of its 2021 guided range of $1.65 calls for an increase of 8.6% year on year.
For 2020, the company reported core FFO per share of $1.52, up 5.6% from the prior year’s $1.44 and in line with the Zacks Consensus Estimate. Total rental and related revenues of $929.2 million went up 8.6% year on year.
Quarter in Detail
Duke Realty leased 9.7 million square feet of space during the December-end quarter, highlighting the second highest quarter ever. Tenant retention was 79.9% for the reported quarter and 84.8% after considering immediate backfills.
Moreover, the company registered same-property net operating income (NOI) growth of 3.3% year over year. This uptick was backed by increased occupancy and rental rate growth. Duke Realty reported overall cash and annualized net effective rent growth on new and renewal leases of 12.9% and 27.3%, respectively, during the fourth quarter.
As of Dec 31, 2020, the company’s total portfolio, including properties under development, was 96.0% leased, up 40 basis points (bps) from the end of the previous quarter, and 170 bps from end of the prior-year quarter. Stabilized in-service portfolio was 98.1% leased as of Dec 31, 2020, up from 97.5% as of Sep 30, 2020 and 97.8% as of Dec 31, 2019.
Duke Realty exited 2020 with $6.3 million of cash and cash equivalents, down from $110.9 million as of Dec 31, 2019.
The company issued 1.7 million shares during the quarter, reaping $66 million of net proceeds, under its ATM program at an average price of $39.57 per share.
Portfolio Activity
During the October-December period, Duke Realty’s building acquisitions totaled $299 million, while building dispositions aggregated $276 million.
In addition, $420 million of development starts during the quarter included three new speculative projects in Southern California. The company exited the fourth quarter with a 7.4 million-square-foot development pipeline aggregating $1.1 billion in projected costs, which was 67% leased.
Dividend Update
Duke Realty announced aquarterly cash dividend on common stock of 25.50 cents per share. The dividend for the fourth quarter will be paid out on Feb 26, to shareholders on record as of Feb 16, 2021.
2021 Guidance
Duke Realty has issued 2021 guidance for core FFO per share of $1.62-$1.68. At the mid-point of $1.65, this projects an 8.6% increase year on year. The guidance is also ahead of the Zacks Consensus Estimate of $1.64.
The company estimates same-property NOI growth, on a cash basis, of 3.6-4.4%. Per Duke Realty, this will likely be driven by continued rental rate growth, partly offset by a slight decline in occupancy level.
Management noted that some tenants, concentrated in event planning and other industries have been significantly affected by the pandemic and are terminating in early 2021, which will lead to a slight near-term drag on occupancy. As a result, average percent leased of its stabilized portfolio, including the impact of these tenants, might decline from the current near-record levels to 96.6-98.6%.
Property dispositions are projected in the range of $500-$700 million, while property acquisitions are expected to be $200-$400 million, focused on in-fill coastal markets. Development starts for 2021 is projected at $700-$900 million.
Prologis, Inc. (PLD - Free Report) reported fourth-quarter 2020 core FFO per share of 95 cents, beating the Zacks Consensus Estimate of 92 cents. Results also compared favorably with the year-ago quarter figure of 84 cents. This better-than-anticipated performance was driven by decent growth in rental income. (Read more: Prologis' Q4 FFO Tops Estimates, Issues Strong '21 View)
We now look forward to the earnings releases of other two REITs — AvalonBay Communities, Inc. (AVB - Free Report) and Mid-America Apartment Communities, Inc. (MAA - Free Report) — both of which are slated to release fourth-quarter and full-year 2020 results on Feb 3.
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 (DRE) Meets Q4 FFO Estimates, Issues Solid '21 View
Duke Realty Corporation’s fourth-quarter 2020 core funds from operations (FFO) per share of 41 cents came in line with the Zacks Consensus Estimate. The figure also increased 7.9% from the year-ago tally of 38 cents.
Results reflect growth in rental rate, improved occupancy and leasing of new developments being placed into service.
Rental and related revenues of $248.7 million climbed 14.4% on a year-over-year basis. The figure also surpassed the Zacks Consensus Estimate of $241.1 million.
Rent collections remain strong, with the company collecting 99.9% of the fourth-quarter rents and 99.6% of January 2021 rents so far. It has collected or executed deferral agreements for 99.9% of all 2020 rents and collected all amounts due under rent deferral agreements through the end of 2020. Also, the mid-point of its 2021 guided range of $1.65 calls for an increase of 8.6% year on year.
For 2020, the company reported core FFO per share of $1.52, up 5.6% from the prior year’s $1.44 and in line with the Zacks Consensus Estimate. Total rental and related revenues of $929.2 million went up 8.6% year on year.
Quarter in Detail
Duke Realty leased 9.7 million square feet of space during the December-end quarter, highlighting the second highest quarter ever. Tenant retention was 79.9% for the reported quarter and 84.8% after considering immediate backfills.
Moreover, the company registered same-property net operating income (NOI) growth of 3.3% year over year. This uptick was backed by increased occupancy and rental rate growth. Duke Realty reported overall cash and annualized net effective rent growth on new and renewal leases of 12.9% and 27.3%, respectively, during the fourth quarter.
As of Dec 31, 2020, the company’s total portfolio, including properties under development, was 96.0% leased, up 40 basis points (bps) from the end of the previous quarter, and 170 bps from end of the prior-year quarter. Stabilized in-service portfolio was 98.1% leased as of Dec 31, 2020, up from 97.5% as of Sep 30, 2020 and 97.8% as of Dec 31, 2019.
Duke Realty exited 2020 with $6.3 million of cash and cash equivalents, down from $110.9 million as of Dec 31, 2019.
The company issued 1.7 million shares during the quarter, reaping $66 million of net proceeds, under its ATM program at an average price of $39.57 per share.
Portfolio Activity
During the October-December period, Duke Realty’s building acquisitions totaled $299 million, while building dispositions aggregated $276 million.
In addition, $420 million of development starts during the quarter included three new speculative projects in Southern California. The company exited the fourth quarter with a 7.4 million-square-foot development pipeline aggregating $1.1 billion in projected costs, which was 67% leased.
Dividend Update
Duke Realty announced aquarterly cash dividend on common stock of 25.50 cents per share. The dividend for the fourth quarter will be paid out on Feb 26, to shareholders on record as of Feb 16, 2021.
2021 Guidance
Duke Realty has issued 2021 guidance for core FFO per share of $1.62-$1.68. At the mid-point of $1.65, this projects an 8.6% increase year on year. The guidance is also ahead of the Zacks Consensus Estimate of $1.64.
The company estimates same-property NOI growth, on a cash basis, of 3.6-4.4%. Per Duke Realty, this will likely be driven by continued rental rate growth, partly offset by a slight decline in occupancy level.
Management noted that some tenants, concentrated in event planning and other industries have been significantly affected by the pandemic and are terminating in early 2021, which will lead to a slight near-term drag on occupancy. As a result, average percent leased of its stabilized portfolio, including the impact of these tenants, might decline from the current near-record levels to 96.6-98.6%.
Property dispositions are projected in the range of $500-$700 million, while property acquisitions are expected to be $200-$400 million, focused on in-fill coastal markets. Development starts for 2021 is projected at $700-$900 million.
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.
Duke Realty Corporation Price, Consensus and EPS Surprise
Duke Realty Corporation price-consensus-eps-surprise-chart | Duke Realty Corporation Quote
Performance of Another Industrial REIT
Prologis, Inc. (PLD - Free Report) reported fourth-quarter 2020 core FFO per share of 95 cents, beating the Zacks Consensus Estimate of 92 cents. Results also compared favorably with the year-ago quarter figure of 84 cents. This better-than-anticipated performance was driven by decent growth in rental income. (Read more: Prologis' Q4 FFO Tops Estimates, Issues Strong '21 View)
We now look forward to the earnings releases of other two REITs — AvalonBay Communities, Inc. (AVB - Free Report) and Mid-America Apartment Communities, Inc. (MAA - Free Report) — both of which are slated to release fourth-quarter and full-year 2020 results on Feb 3.
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 >>