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Is it Wise to Hold Duke Realty (DRE) Stock in Your Portfolio?
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Duke Realty Corp. is well-poised to bank on the rising demand for its strategically located high-quality industrial real estate. It is a domestic pure-play industrial real estate investment trust (REIT) in the United States with 50 years of experience in the operation and development of the industrial real estate.
The demand for industrial real estate space is soaring given the growth in industries, an e-commerce boom and companies striving to improve supply-chain efficiencies. Additionally, a rise in inventory levels of companies as a precautionary measure for any supply-chain disruption is expected to boost the long-term growth momentum for this sector, thereby serving a favorable market to industrial landlords.
DRE is witnessing a strong operating performance, as evident from its leasing activities. During the March-ended quarter, 7.7 million square feet of space was leased. Also, tenant retention in the quarter was recorded at 82.2%, and 95.7% after considering the immediate backfills. Same-property net operating income (NOI) growth increased 7.3% year over year on a cash basis, backed by rental-rate growth.
Duke Realty reported overall cash and annualized net effective rent growth on new and lease renewals of 29.5% and 49.2%, respectively, during the first quarter. The stabilized in-service portfolio was 99.4% leased as of Mar 31, 2022, up 70 basis points (bps) from the prior-quarter end and 130 bps from the year-ago quarter end.
Duke Realty is improving its portfolio with acquisitions and developments in strategic markets. The company acquired a facility in Southern California encompassing 75,000 square feet for roughly $34 million during the first quarter. Development starts for 2022 are projected at $1.45-$1.65 billion. During the first quarter, the company started eight new speculative development projects with expected costs of $339 million. As of Mar 31, 2022, it had a development pipeline of $1.6 billion. With a robust development pipeline of speculative projects, Duke Realty is well-poised to enhance its presence in the Tier-1 markets.
On the balance sheet front, there is an availability of ample liquidity and easy access to capital. DRE has no significant debt maturities until 2026. It also enjoys the investment-grade credit rating of BBB+ and Baa1 from Standard & Poor’s and Moody’s, respectively, enabling it to borrow at a favorable rate. This gives Duke Realty enough financial flexibility to continue its development activities.
Analysts seem bullish about this Zacks Rank #3 (Hold) stock. The estimate revisions trend for 2022 funds from operations (FFO) per share indicates a favorable outlook for the company as it has increased 1.1% over the past two months to $1.92. You can seethe complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
However, a development boom in several markets may increase competition and curb pricing power. Also, with a rising supply, vacancy levels might experience some pressure in the upcoming quarters.
A hike in interest rates is a concern as it will lead to higher borrowing costs for the company, which would affect its ability to purchase or develop real estate. As of Mar 31, 2022, Duke Realty had around $3.3 billion of unsecured debt. Moreover, the dividend payout might become less attractive than the yields on fixed income and money market accounts.
Shares of Duke Realty have declined 4.7% in the past three months compared with the industry’s fall of 3.5%.
Image Source: Zacks Investment Research
Stocks to Consider
Some better-ranked stocks in the REIT sector are Terreno Realty (TRNO - Free Report) , OUTFRONT Media (OUT - Free Report) and Cedar Realty Trust .
The Zacks Consensus Estimate for Terreno Realty’s 2022 FFO per share has marginally moved upward in the past month to $1.96. TRNO presently carries a Zacks Rank of 2 (Buy).
The Zacks Consensus Estimate for OUTFRONT Media’s ongoing year’s FFO per share has been raised 1.5% over the past month to $2.09. OUT carries a Zacks Rank #1, currently.
The Zacks Consensus Estimate for Cedar Realty Trust’s current-year FFO per share has moved 3.6% northward in the past month to $2.59. CDR carries a Zacks Rank of 2 at present.
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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Is it Wise to Hold Duke Realty (DRE) Stock in Your Portfolio?
Duke Realty Corp. is well-poised to bank on the rising demand for its strategically located high-quality industrial real estate. It is a domestic pure-play industrial real estate investment trust (REIT) in the United States with 50 years of experience in the operation and development of the industrial real estate.
The demand for industrial real estate space is soaring given the growth in industries, an e-commerce boom and companies striving to improve supply-chain efficiencies. Additionally, a rise in inventory levels of companies as a precautionary measure for any supply-chain disruption is expected to boost the long-term growth momentum for this sector, thereby serving a favorable market to industrial landlords.
DRE is witnessing a strong operating performance, as evident from its leasing activities. During the March-ended quarter, 7.7 million square feet of space was leased. Also, tenant retention in the quarter was recorded at 82.2%, and 95.7% after considering the immediate backfills. Same-property net operating income (NOI) growth increased 7.3% year over year on a cash basis, backed by rental-rate growth.
Duke Realty reported overall cash and annualized net effective rent growth on new and lease renewals of 29.5% and 49.2%, respectively, during the first quarter. The stabilized in-service portfolio was 99.4% leased as of Mar 31, 2022, up 70 basis points (bps) from the prior-quarter end and 130 bps from the year-ago quarter end.
Duke Realty is improving its portfolio with acquisitions and developments in strategic markets. The company acquired a facility in Southern California encompassing 75,000 square feet for roughly $34 million during the first quarter. Development starts for 2022 are projected at $1.45-$1.65 billion. During the first quarter, the company started eight new speculative development projects with expected costs of $339 million. As of Mar 31, 2022, it had a development pipeline of $1.6 billion. With a robust development pipeline of speculative projects, Duke Realty is well-poised to enhance its presence in the Tier-1 markets.
On the balance sheet front, there is an availability of ample liquidity and easy access to capital. DRE has no significant debt maturities until 2026. It also enjoys the investment-grade credit rating of BBB+ and Baa1 from Standard & Poor’s and Moody’s, respectively, enabling it to borrow at a favorable rate. This gives Duke Realty enough financial flexibility to continue its development activities.
Analysts seem bullish about this Zacks Rank #3 (Hold) stock. The estimate revisions trend for 2022 funds from operations (FFO) per share indicates a favorable outlook for the company as it has increased 1.1% over the past two months to $1.92. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
However, a development boom in several markets may increase competition and curb pricing power. Also, with a rising supply, vacancy levels might experience some pressure in the upcoming quarters.
A hike in interest rates is a concern as it will lead to higher borrowing costs for the company, which would affect its ability to purchase or develop real estate. As of Mar 31, 2022, Duke Realty had around $3.3 billion of unsecured debt. Moreover, the dividend payout might become less attractive than the yields on fixed income and money market accounts.
Shares of Duke Realty have declined 4.7% in the past three months compared with the industry’s fall of 3.5%.
Image Source: Zacks Investment Research
Stocks to Consider
Some better-ranked stocks in the REIT sector are Terreno Realty (TRNO - Free Report) , OUTFRONT Media (OUT - Free Report) and Cedar Realty Trust .
The Zacks Consensus Estimate for Terreno Realty’s 2022 FFO per share has marginally moved upward in the past month to $1.96. TRNO presently carries a Zacks Rank of 2 (Buy).
The Zacks Consensus Estimate for OUTFRONT Media’s ongoing year’s FFO per share has been raised 1.5% over the past month to $2.09. OUT carries a Zacks Rank #1, currently.
The Zacks Consensus Estimate for Cedar Realty Trust’s current-year FFO per share has moved 3.6% northward in the past month to $2.59. CDR carries a Zacks Rank of 2 at present.
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.