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Duke Realty (DRE) Tops Q3 FFO Estimates, Raises '21 View

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Duke Realty Corporation’s (DRE - Free Report) third-quarter 2021 core funds from operations (FFO) per share of 46 cents surpassed the Zacks Consensus Estimate of 44 cents. The figure also increased 15% from the year-ago tally of 40 cents.

Results reflect improved rental rate growth and new developments being leased. Moreover, Duke Realty raised the 2021 earnings and development guidance, backed by the impressive third-quarter performance and upbeat outlook for the rest of the year.

Revenues of $280.4 million climbed 7% on a year-over-year basis. The figure also surpassed the Zacks Consensus Estimate of $256.7 million.

Quarter in Detail

Duke Realty leased 9.5 million square feet of space during the September-end quarter. Tenant retention was 71.5% for the reported quarter and 86.2% after considering immediate backfills.

Additionally, the company registered same-property net operating income (NOI) growth on a cash basis of 3.8%, year over year. This upside was backed by rental rate growth, partially offset by an 80-basis point contraction in occupancy within the company’s same-property portfolio.

Duke Realty reported overall cash and annualized net effective rent growth on new and renewal leases of 21.9% and 34.8%, respectively, during the third quarter.

As of Sep 30, 2021, the company’s total portfolio, including properties under development, was 95.6% leased, expanding 100 basis points (bps) from the end of the previous quarter and in line with the prior-year quarter.

The stabilized in-service portfolio was 98.3% leased as of Sep 30, 2021, up 10 basis points sequentially and 80 bps from the prior-year quarter end.
Duke Realty exited third-quarter 2021 with $9.9 million of cash and cash equivalents, up from $6.3 million as of Dec 31, 2020.

The company issued 2.4 million shares during the quarter, reaping $123 million of net proceeds, under its ATM program at an average price of $51.62 per share.

Portfolio Activity

During the July-September period, Duke Realty’s income producing real estate acquisitions totaled $24 million, while building dispositions aggregated $738 million.

The company started eight new development projects, with expected costs of $349 million during the quarter. As of Sep 30, 2021, its development projects under construction were 60% leased.

Dividend Update

Duke Realty increased its quarterly cash dividend on common stock by 9.8% to 28 cents per share. The dividend for the third quarter will be paid out on Nov 30, to shareholders on record as of Nov 16, 2021.

2021 Guidance

Duke Realty revised the 2021 guidance for the core FFO per share to $1.71-$1.75 from the $1.69-$1.73 provided earlier. At the mid-point, this projects a 13.8% increase year on year. The Zacks Consensus Estimate for the same is currently pinned at $1.72.

For the remainder of the year, the company anticipates continued strong leasing activity, and minimal bad debt expense and tenant defaults.

On anticipations of solid operational results, the company has revised the guidance for the average percentage leased of its stabilized portfolio to 98.1-98.5% compared with the previous band of 97.8-98.6%.

Backed by these factors and along with strong rental rate growth on the recently-executed leases, management revised the same-property NOI growth estimate, on a cash basis, to 5-5.4% from 4.75-5.25%.

Property acquisitions are expected to be $450-$550 million compared with the $350-$550 million estimated earlier, focused on the coastal in-fill markets.

Development starts for 2021 are now projected at $1.30-$1.45 billion compared with the prior guidance of $1.10-$1.30 billion.

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

We now look forward to the earnings releases of other REITs like Apple Hospitality REIT, Inc. (APLE - Free Report) , CubeSmart  (CUBE - Free Report) and Sunstone Hotel Investors, Inc. (SHO - Free Report) scheduled for Nov 4.

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.