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Duke Realty (DRE) Q1 FFO In Line With Estimates, Revenues Fall

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Duke Realty Corporation’s first-quarter 2022 core funds from operations (FFO) per share of 44 cents met the Zacks Consensus Estimate. Moreover, the figure increased 12.8% from the year-ago tally of 39 cents.

Core FFO improvement was primarily driven by growth in the rental rate, increase in occupancy and highly leased new developments. However, lower revenues were a headwind.

Revenues of $278.2 million declined 3.8% on a year-over-year basis. Nonetheless, the figure surpassed the Zacks Consensus Estimate of $273.1 million.

According to Jim Connor, chairman and CEO, “We completed the first quarter of 2022 with record levels of in-service and stabilized occupancy and made significant leasing progress in our development pipeline."

Quarter in Detail

Duke Realty leased 7.7 million square feet of space during the March quarter. Tenant retention was 82.2% in the reported quarter and 95.7% after considering immediate backfills.

DRE registered same-property net operating income (NOI) of $178.1million, growing 7.3% year over year on a cash basis.

Duke Realty reported overall cash and annualized net effective rent growth on new and renewal leases of 29.5% and 49.2%, respectively, during the first quarter.

As of Mar 31, 2022, DRE’s total portfolio, including properties under development, was 95.8% leased, improving 70 basis points (bps) from the previous quarter’s end-level and 30 bps from the prior-year quarter’s reading.

The stabilized in-service portfolio was 99.4% leased as of Mar 31, 2022, up 70 bps sequentially and 130 bps from the year-ago level.

Balance Sheet

Duke Realty exited first-quarter 2022 with $9.2 million of cash and cash equivalents, down from $69.8 million as of Dec 31, 2021.

Portfolio Activity

During the first quarter, Duke Realty’s income-producing real-estate acquisitions totaled $34 million, while that from building dispositions was $325 million.

DRE started eight speculative development projects totaling 2.5 million square feet during the quarter, with expected costs of $339 million. As of Mar 31, 2022, its development pipeline was 50% leased.

Dividend Update

Duke Realty declared its quarterly cash dividend on common stock of 28 cents per share. The dividend will be paid out on May 31 to its shareholders on record as of May 16, 2022.

2022 Guidance

Duke Realty revised 2022 guidance. It now projects core FFO per share to lie in the range of $1.88-$1.94 instead of the prior expectation of $1.87-$1.93. The Zacks Consensus Estimate for the same is currently pegged at $1.90.

On the expectation of continuation in rental rate growth and demand for industrial space, management provided the same-property NOI growth (cash basis) estimate of 5.8-6.6%, up from 5.4-6.2% targeted earlier.
The target for building dispositions having DRE’s share was raised to $900-$1,100 million from $600-$800 million to fund a portion of increased development activities and to achieve overall exit capitalization rates below 4%.

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 and EPS Surprise

Duke Realty Corporation price-consensus-eps-surprise-chart | Duke Realty Corporation Quote

Performance of Notable REITs

UDR Inc. (UDR - Free Report) reported first-quarter 2022 FFO as adjusted per share of 55 cents, in line with the Zacks Consensus Estimate. The figure is 17% higher than the prior-year quarter’s 47 cents.

UDR’s quarterly revenues climbed 18.5% year over year to $357.3 million. The top line surpassed the Zacks Consensus Estimate of $353.8 million.

An increase in revenues from rental income fueled the quarter’s top-line growth. Robust operating trends and strong pricing power were major contributing factors.

Essex Property Trust Inc. (ESS - Free Report) reported first-quarter 2022 core FFO per share of $3.37, beating the Zacks Consensus Estimate of $3.34. The figure also improved 9.8% from the year-ago quarter. Additionally, total revenues of $381.9 million surpassed the Zacks Consensus Estimate of $376.3 million. The figure increased 7.5% year over year.

Improvement in same-property revenues and net operating income during the quarter supported growth in ESS’ core FFO.

Equity Residential’s (EQR - Free Report) reported first-quarter 2022 normalized FFO per share of 77 cents, missing the Zacks Consensus Estimate of 80 cents. Rental income came in at $653.3 million, lagging the consensus mark of $658.07 million. Nonetheless, on a year-over-year basis, normalized FFO per share improved 13.2%, while rental income climbed 9.3%.

EQR’s normalized FFO grew based on strong lease demand, while same-store revenue witnessed growth driven by strong physical occupancy and improvement in pricing power.

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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