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Duke Realty Prices Notes

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Recently, Duke Realty Corp. (DRE - Free Report) unveiled the offering of $250 million in senior unsecured notes. It was made through its operating partnership – Duke Realty Limited Partnership.

The offering, which is expected to close on Mar 15, 2013, will help Duke Realty generate proceeds that will help increase its financial flexibility and meet near-term obligations.

Specifically, Duke Realty priced the offering of $250 million of its 3.625% senior unsecured notes, due Apr 15, 2023, at 99.179% of their face amount to yield 3.723% to maturity.

Duke Realty plans to utilize the proceeds for repaying its debt that has near-term maturities. This will include either whole or part of its borrowings that remain outstanding under its existing revolving credit facility. Funds may also be used for meeting other general corporate needs.

A number of companies have taken part in this offering. Barclays Capital Inc., J.P. Morgan Securities LLC of JPMorgan Chase & Co. (JPM - Free Report) , RBC Capital Markets, LLC and Wells Fargo Securities LLC of Wells Fargo & Company (WFC - Free Report) , acted as joint book-running managers. Moreover, U.S. Bancorp Investments Inc. of U.S. Bancorp (USB - Free Report) along with a host of other companies acted as co-managers.

In Conclusion

In January, Duke Realty reported its fourth quarter 2012 core FFO of 27 cents per share, in line with the Zacks Consensus Estimate but 3 cents down from the prior-year quarter, reflecting lower third party construction fees and short-term dilution effect arising out of the repositioning moves.

During 2012, the company generated net proceeds of $315 million from an at-the-market (ATM) equity program, refinanced $600 million in unsecured debt and redeemed 6.95% Series M Preferred Shares worth $168 million. At the end of fourth quarter 2012, Duke Realty had nearly $34 million in cash.

Furthermore, in Jan 2013, the company raised net proceeds of $572 million from a 41.4 million common equity offering to help lower its leverage and improve coverage ratios.

We believe that the short-term revenue headwinds will limit the stock’s upside potential to some extent. Nevertheless, Duke Realty’s strong leasing activity, strategic efforts to reposition its portfolio, focus on maintaining a balanced and flexible balance sheet with ample liquidity would enable it to operate efficiently, tide over the near term constraints and capitalize on potential acquisition opportunities.

Duke Realty currently retains a Zacks Rank #3 (Hold).

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