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Duke Realty (DRE) Meets Q1 FFO Estimates, Raises '21 View

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Duke Realty Corporation’s (DRE - Free Report) first-quarter 2021 core funds from operations (FFO) per share of 39 cents came in line with the Zacks Consensus Estimate. The figure also increased 18.2% from the year-ago tally of 33 cents.

Results reflect improved occupancy, lower bad debt expense, rental rate growth and new developments being placed into service and leased up.

Rental and related revenues of $258.2 million climbed 18% on a year-over-year basis. The figure also surpassed the Zacks Consensus Estimate of $249.8 million.

Rent collections remained strong, with the company collecting 99.9% of first-quarter and April rents. There is $52,000 residual to be collected under deferral agreements.

Quarter in Detail

Duke Realty leased 7.4 million square feet of space during the March-end quarter. Tenant retention was 85% for the reported quarter and 94.1% after considering immediate backfills.

Moreover, the company registered same-property net operating income (NOI) growth of 6.3%, year over year. This upside was backed by increased occupancy, rental rate growth and the expiration of free rent periods.

Duke Realty reported overall cash and annualized net effective rent growth on new and renewal leases of 11.4% and 26.2%, respectively, during the first quarter.

As of Mar 31, 2021, the company’s total portfolio, including properties under development, was 95.5% leased, shrinking 50 basis points (bps) from the end of the previous quarter, but expanding 120 bps from end of the prior-year quarter. Stabilized in-service portfolio was 98.1% leased as of Mar 31, 2021, flat sequentially and up 90 bps from the prior-year quarter end.

Duke Realty exited first-quarter 2021 with $9 million of cash and cash equivalents, up from $6.3 million as of Dec 31, 2020.

The company issued 723,000 shares during the quarter, reaping $30 million of net proceeds, under its ATM program at an average price of $41.70 per share.

Portfolio Activity

During the January-March period, Duke Realty’s building acquisitions totaled $51 million, while building dispositions aggregated $94 million.

In addition, the company started 11 development projects, with projected costs of $412 million, aggregating 3.8 million square feet, which were 60% pre-leased.

Notably, the company’s $1.4 billion of developments under construction are 65% leased and the projects that are remaining to be leased are mainly located in coastal infill markets.

Dividend Update

Duke Realty announced aquarterly cash dividend on common stock of 25.50 cents per share. The dividend for the first quarter will be paid out on Jun 1, to shareholders on record as of May 14, 2021.

2021 Guidance

Duke Realty has revised the 2021 guidance for core FFO per share to $1.65-$1.71 from the $1.62-$1.68 provided earlier. At the mid-point, this projects a 10.5% increase year on year. The Zacks Consensus Estimate for the same is currently pinned at $1.67.

On anticipations of solid operational results, the company has revised the guidance for average percentage leased of its stabilized portfolio to 97.2-98.6% compared with the initial band of 96.6-98.6%.

Backed by these factors and along with strong rental rate growth on the recently-executed leases, management revised the same-property NOI growth estimates, on a cash basis, to 4.1-4.9% from 3.6-4.4%.

Property dispositions are projected in the range of $900 million-$1.10 billion compared with the initial outlook of $500-$700 million, while property acquisitions are expected to be $300-$500 million compared with $200-$400 million, focused on coastal in-fill markets.

Development starts for 2021 are now projected at $950 million-$1.15 billion compared with the initial guidance of $700-$900 million.

Currently, Duke Realty carries a Zacks Rank #2 (Buy). 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 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 first-quarter 2021 core FFO per share of 97 cents, beating the Zacks Consensus Estimate of 94 cents. Results also compared favorably with the year-ago quarter’s figure of 83 cents.The better-than-expected performance was driven by decent growth in rental income. Further, the industrial REIT raised the 2021 outlook on the strength of its results and the market. (Read more: Prologis Surpasses Q1 FFO Estimates, Raises 2021 View)

We now look forward to the earnings releases of other two REITs — Vornado Realty Trust (VNO - Free Report) and Realty Income Corporation (O - Free Report) — both of which are slated to release first-quarter results on May 3.

Note: Anything related to earnings presented in this write-up represent funds from operations (FFO) — a widely used metric to gauge the performance of REITs.

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