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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
|
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x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended September 30, 2017
OR
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o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission File Number: 1-9044 (Duke Realty Corporation) 0-20625 (Duke Realty Limited Partnership)
DUKE REALTY CORPORATION
DUKE REALTY LIMITED PARTNERSHIP
(Exact Name of Registrant as Specified in Its Charter)
|
| | |
Indiana (Duke Realty Corporation) | | 35-1740409 (Duke Realty Corporation) |
Indiana (Duke Realty Limited Partnership) | | 35-1898425 (Duke Realty Limited Partnership) |
(State or Other Jurisdiction of Incorporation or Organization) | | (I.R.S. Employer Identification Number) |
600 East 96thStreet, Suite 100 Indianapolis, Indiana | | 46240 |
(Address of Principal Executive Offices) | | (Zip Code) |
Registrant's Telephone Number, Including Area Code: (317) 808-6000
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. |
| | | | | | |
Duke Realty Corporation | Yes x | No o | | Duke Realty Limited Partnership | Yes x | No o |
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). |
| | | | | | |
Duke Realty Corporation | Yes x | No o | | Duke Realty Limited Partnership | Yes x | No o |
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Duke Realty Corporation: |
| | | | |
Large accelerated filer x | Accelerated filer o | Non-accelerated filer o | Smaller reporting company o | Emerging growth company o
|
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o
Duke Realty Limited Partnership: |
| | | | |
Large accelerated filer o | Accelerated filer o | Non-accelerated filer x | Smaller reporting company o | Emerging growth company o |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act):
|
| | | | | | |
Duke Realty Corporation | Yes o | No x | | Duke Realty Limited Partnership | Yes o | No x |
Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date:
|
| | |
Class | | Outstanding Common Shares of Duke Realty Corporation at October 25, 2017 |
Common Stock 0.01 par value per share | | 356,140,850 |
EXPLANATORY NOTE
This report (the "Report") combines the quarterly reports on Form 10-Q for the period ended September 30, 2017 of both Duke Realty Corporation and Duke Realty Limited Partnership. Unless stated otherwise or the context otherwise requires, references to "Duke Realty Corporation" or the "General Partner" mean Duke Realty Corporation and its consolidated subsidiaries, and references to the "Partnership" mean Duke Realty Limited Partnership and its consolidated subsidiaries. The terms the "Company," "we," "us" and "our" refer to the General Partner and the Partnership, collectively, and those entities owned or controlled by the General Partner and/or the Partnership.
Duke Realty Corporation is a self-administered and self-managed real estate investment trust ("REIT") and is the sole general partner of the Partnership, owning 99.1% of the common partnership interests of the Partnership ("General Partner Units") as of September 30, 2017. The remaining 0.9% of the common partnership interests ("Limited Partner Units" and, together with the General Partner Units, the "Common Units") are owned by Limited Partners. As the sole general partner of the Partnership, the General Partner has full, exclusive and complete responsibility and discretion in the day-to-day management and control of the Partnership.
The General Partner and the Partnership are operated as one enterprise. The management of the General Partner consists of the same members as the management of the Partnership. As the sole general partner with control of the Partnership, the General Partner consolidates the Partnership for financial reporting purposes, and the General Partner does not have any significant assets other than its investment in the Partnership. Therefore, the assets and liabilities of the General Partner and the Partnership are substantially the same.
We believe combining the quarterly reports on Form 10-Q of the General Partner and the Partnership into this single report results in the following benefits:
| |
• | enhances investors' understanding of the General Partner and the Partnership by enabling investors to view the business as a whole in the same manner as management views and operates the business; |
| |
• | eliminates duplicative disclosure and provides a more streamlined and readable presentation of information since a substantial portion of the Company's disclosure applies to both the General Partner and the Partnership; and |
| |
• | creates time and cost efficiencies through the preparation of one combined report instead of two separate reports. |
We believe it is important to understand the few differences between the General Partner and the Partnership in the context of how we operate as an interrelated consolidated company. The General Partner's only material asset is its ownership of partnership interests in the Partnership. As a result, the General Partner does not conduct business itself, other than acting as the sole general partner of the Partnership and issuing public equity from time to time. The General Partner does not issue any indebtedness, but does guarantee some of the unsecured debt of the Partnership. The Partnership holds substantially all the assets of the business, directly or indirectly, and holds the ownership interests related to certain of the Company's investments. The Partnership conducts the operations of the business and has no publicly traded equity. Except for net proceeds from equity issuances by the General Partner, which are contributed to the Partnership in exchange for General Partner Units or Preferred Units, the Partnership generates the capital required by the business through its operations, its incurrence of indebtedness and the issuance of Limited Partner Units to third parties.
Noncontrolling interests, shareholders' equity and partners' capital are the main areas of difference between the consolidated financial statements of the General Partner and those of the Partnership. The noncontrolling interests in the Partnership's financial statements include the interests in consolidated investees not wholly owned by the Partnership. The noncontrolling interests in the General Partner's financial statements include the same noncontrolling interests at the Partnership level, as well as the common limited partnership interests in the Partnership, which are accounted for as partners' capital by the Partnership.
In order to highlight the differences between the General Partner and the Partnership, there are separate sections in this report, as applicable, that separately discuss the General Partner and the Partnership, including separate financial statements and separate Exhibit 31 and 32 certifications. In the sections that combine disclosure of the General Partner and the Partnership, this report refers to actions or holdings as being actions or holdings of the collective Company.
DUKE REALTY CORPORATION/DUKE REALTY LIMITED PARTNERSHIP
INDEX |
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| Duke Realty Corporation: | |
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| Duke Realty Limited Partnership: | |
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| Duke Realty Corporation and Duke Realty Limited Partnership: | |
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PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
DUKE REALTY CORPORATION AND SUBSIDIARIES
Consolidated Balance Sheets
(in thousands, except per share amounts)
|
| | | | | | | |
| September 30, 2017 | | December 31, 2016 |
| (Unaudited) | | |
ASSETS | | | |
Real estate investments: | | | |
Real estate assets | $ | 6,091,861 |
| | $ | 5,144,805 |
|
Construction in progress | 441,005 |
| | 303,644 |
|
Investments in and advances to unconsolidated companies | 135,089 |
| | 197,807 |
|
Undeveloped land | 167,928 |
| | 237,436 |
|
| 6,835,883 |
| | 5,883,692 |
|
Accumulated depreciation | (1,159,493 | ) | | (1,042,944 | ) |
Net real estate investments | 5,676,390 |
| | 4,840,748 |
|
| | | |
Real estate investments and other assets held-for-sale | 63,604 |
| | 1,324,258 |
|
| | | |
Cash and cash equivalents | 27,315 |
| | 12,639 |
|
Accounts receivable, net of allowance of $1,020 and $1,391 | 20,605 |
| | 15,838 |
|
Straight-line rent receivable, net of allowance of $3,655 and $5,268 | 91,045 |
| | 82,554 |
|
Receivables on construction contracts, including retentions | 10,343 |
| | 6,159 |
|
Deferred leasing and other costs, net of accumulated amortization of $206,242 and $186,798 | 279,891 |
| | 258,741 |
|
Restricted cash held in escrow for like-kind exchange | 512,520 |
| | 40,102 |
|
Notes receivable from property sales | 426,678 |
| | 25,460 |
|
Other escrow deposits and assets | 189,080 |
| | 165,503 |
|
| $ | 7,297,471 |
| | $ | 6,772,002 |
|
LIABILITIES AND EQUITY | | | |
Indebtedness: | | | |
Secured debt, net of deferred financing costs of $699 and $969 | $ | 312,776 |
| | $ | 383,725 |
|
Unsecured debt, net of deferred financing costs of $18,583 and $22,083 | 1,814,104 |
| | 2,476,752 |
|
Unsecured line of credit | 5,000 |
| | 48,000 |
|
| 2,131,880 |
| | 2,908,477 |
|
| | | |
Liabilities related to real estate investments held-for-sale | 2,653 |
| | 56,291 |
|
| | | |
Construction payables and amounts due subcontractors, including retentions | 70,432 |
| | 44,250 |
|
Accrued real estate taxes | 83,152 |
| | 59,112 |
|
Accrued interest | 24,547 |
| | 23,633 |
|
Other liabilities | 195,147 |
| | 153,846 |
|
Tenant security deposits and prepaid rents | 36,285 |
| | 33,100 |
|
Total liabilities | 2,544,096 |
| | 3,278,709 |
|
Shareholders' equity: | | | |
Common shares ($0.01 par value); 600,000 shares authorized; 356,130 and 354,756 shares issued and outstanding, respectively | 3,561 |
| | 3,548 |
|
Additional paid-in capital | 5,195,151 |
| | 5,192,011 |
|
Accumulated other comprehensive income | — |
| | 682 |
|
Distributions in excess of net income | (488,328 | ) | | (1,730,423 | ) |
Total shareholders' equity | 4,710,384 |
| | 3,465,818 |
|
Noncontrolling interests | 42,991 |
| | 27,475 |
|
Total equity | 4,753,375 |
| | 3,493,293 |
|
| $ | 7,297,471 |
| | $ | 6,772,002 |
|
See accompanying Notes to Consolidated Financial Statements
DUKE REALTY CORPORATION AND SUBSIDIARIES
Consolidated Statements of Operations and Comprehensive Income
For the three and nine months ended September 30,
(in thousands, except per share amounts)
(Unaudited)
|
| | | | | | | | | | | | | | | |
| Three Months Ended | | Nine Months Ended |
| 2017 | | 2016 | | 2017 | | 2016 |
Revenues: | | | | | | | |
Rental and related revenue | $ | 169,611 |
| | $ | 162,322 |
| | $ | 507,123 |
| | $ | 480,819 |
|
General contractor and service fee revenue | 25,217 |
| | 19,351 |
| | 58,192 |
| | 68,546 |
|
| 194,828 |
| | 181,673 |
| | 565,315 |
| | 549,365 |
|
Expenses: | | | | | | | |
Rental expenses | 16,224 |
| | 16,933 |
| | 46,967 |
| | 54,685 |
|
Real estate taxes | 28,157 |
| | 26,001 |
| | 81,569 |
| | 75,687 |
|
General contractor and other services expenses | 24,079 |
| | 17,182 |
| | 54,077 |
| | 60,330 |
|
Depreciation and amortization | 67,992 |
| | 61,820 |
| | 197,028 |
| | 182,489 |
|
| 136,452 |
| | 121,936 |
| | 379,641 |
| | 373,191 |
|
Other operating activities: | | | | | | | |
Equity in earnings of unconsolidated companies | 1,841 |
| | 12,010 |
| | 58,523 |
| | 37,404 |
|
Gain on dissolution of unconsolidated company | — |
| | — |
| | — |
| | 30,697 |
|
Promote income | — |
| | 2,212 |
| | 20,007 |
| | 26,299 |
|
Gain on sale of properties | 21,952 |
| | 82,698 |
| | 93,339 |
| | 137,589 |
|
Gain on land sales | 5,665 |
| | 1,601 |
| | 8,449 |
| | 2,438 |
|
Other operating expenses | (770 | ) | | (1,424 | ) | | (2,226 | ) | | (3,496 | ) |
Impairment charges | (3,622 | ) | | (3,042 | ) | | (4,481 | ) | | (15,098 | ) |
General and administrative expenses | (10,075 | ) | | (12,534 | ) | | (41,165 | ) | | (42,216 | ) |
| 14,991 |
| | 81,521 |
| | 132,446 |
| | 173,617 |
|
Operating income | 73,367 |
| | 141,258 |
| | 318,120 |
| | 349,791 |
|
Other income (expenses): | | | | | | | |
Interest and other income, net | 6,404 |
| | 507 |
| | 9,197 |
| | 3,597 |
|
Interest expense | (20,835 | ) | | (27,283 | ) | | (65,401 | ) | | (87,255 | ) |
Loss on debt extinguishment | (16,568 | ) | | (6,243 | ) | | (26,104 | ) | | (8,673 | ) |
Acquisition-related activity | — |
| | (7 | ) | | — |
| | (82 | ) |
Income from continuing operations before income taxes | 42,368 |
| | 108,232 |
| | 235,812 |
| | 257,378 |
|
Income tax (expense) benefit | (359 | ) | | 359 |
| | (7,918 | ) | | 173 |
|
Income from continuing operations | 42,009 |
| | 108,591 |
| | 227,894 |
| | 257,551 |
|
Discontinued operations: | | | | | | | |
Income before gain on sales | 2,563 |
| | 4,249 |
| | 17,747 |
| | 9,062 |
|
Gain on sale of depreciable properties | 120,179 |
| | 319 |
| | 1,229,270 |
| | 485 |
|
Income tax (expense) benefit | 876 |
| | — |
| | (10,736 | ) | | — |
|
Income from discontinued operations | 123,618 |
| | 4,568 |
| | 1,236,281 |
| | 9,547 |
|
Net income | 165,627 |
| | 113,159 |
| | 1,464,175 |
| | 267,098 |
|
Net income attributable to noncontrolling interests | (358 | ) | | (1,145 | ) | | (18,163 | ) | | (2,710 | ) |
Net income attributable to common shareholders | $ | 165,269 |
| | $ | 112,014 |
| | $ | 1,446,012 |
| | $ | 264,388 |
|
Basic net income per common share: | | | | | | | |
Continuing operations attributable to common shareholders | $ | 0.12 |
| | $ | 0.31 |
| | $ | 0.63 |
| | $ | 0.72 |
|
Discontinued operations attributable to common shareholders | 0.34 |
| | 0.01 |
| | 3.43 |
| | 0.03 |
|
Total | $ | 0.46 |
| | $ | 0.32 |
| | $ | 4.06 |
| | $ | 0.75 |
|
Diluted net income per common share: | | | | | | | |
Continuing operations attributable to common shareholders | $ | 0.12 |
| | $ | 0.31 |
| | $ | 0.63 |
| | $ | 0.72 |
|
Discontinued operations attributable to common shareholders | 0.34 |
| | 0.01 |
| | 3.40 |
| | 0.03 |
|
Total | $ | 0.46 |
| | $ | 0.32 |
| | $ | 4.03 |
| | $ | 0.75 |
|
Weighted average number of common shares outstanding | 355,905 |
| | 351,856 |
| | 355,614 |
| | 348,341 |
|
Weighted average number of common shares and potential dilutive securities | 362,102 |
| | 358,981 |
| | 361,947 |
| | 355,405 |
|
| | | | | | | |
Comprehensive income: | | | | | | | |
Net income | $ | 165,627 |
| | $ | 113,159 |
| | $ | 1,464,175 |
| | $ | 267,098 |
|
Other comprehensive loss: | | | | | | | |
Amortization of interest contracts | — |
| | (255 | ) | | (682 | ) | | (845 | ) |
Other | — |
| | (23 | ) | | — |
| | (23 | ) |
Total other comprehensive loss | — |
| | (278 | ) | | (682 | ) | | (868 | ) |
Comprehensive income | $ | 165,627 |
| | $ | 112,881 |
| | $ | 1,463,493 |
| | $ | 266,230 |
|
See accompanying Notes to Consolidated Financial Statements
DUKE REALTY CORPORATION AND SUBSIDIARIES
Consolidated Statements of Cash Flows
For the nine months ended September 30,
(in thousands)
(Unaudited)
|
| | | | | | | | |
| 2017 | | 2016 |
Cash flows from operating activities: | | | |
Net income | $ | 1,464,175 |
| | $ | 267,098 |
|
Adjustments to reconcile net income to net cash provided by operating activities: | | | |
Depreciation of buildings and tenant improvements | 179,918 |
| | 191,554 |
|
Amortization of deferred leasing and other costs | 42,996 |
| | 47,093 |
|
Amortization of deferred financing costs | 4,049 |
| | 3,998 |
|
Straight-line rental income and expense, net | (12,021 | ) | | (10,832 | ) |
Impairment charges | 4,481 |
| | 15,098 |
|
Loss on debt extinguishment | 26,104 |
| | 8,673 |
|
Gain on dissolution of unconsolidated company | — |
| | (30,697 | ) |
Gains on land and depreciated property sales | (1,331,058 | ) | | (140,512 | ) |
Third-party construction contracts, net | 2,679 |
| | 5,601 |
|
Other accrued revenues and expenses, net | 24,474 |
| | 21,832 |
|
Equity in earnings in excess of operating distributions received from unconsolidated companies | (45,298 | ) | | (24,476 | ) |
Net cash provided by operating activities | 360,499 |
| | 354,430 |
|
Cash flows from investing activities: | | | |
Development of real estate investments | (421,702 | ) | | (308,199 | ) |
Acquisition of real estate investments and related intangible assets | (620,869 | ) | | (16,029 | ) |
Acquisition of undeveloped land | (127,662 | ) | | (77,593 | ) |
Second generation tenant improvements, leasing costs and building improvements | (34,350 | ) | | (39,169 | ) |
Other deferred leasing costs | (22,399 | ) | | (25,949 | ) |
Other assets | (492,982 | ) | | 164,450 |
|
Proceeds from land and depreciated property sales, net | 2,282,419 |
| | 369,118 |
|
Capital distributions from unconsolidated companies | 111,635 |
| | 52,514 |
|
Capital contributions and advances to unconsolidated companies | (6,303 | ) | | (54,853 | ) |
Net cash provided by investing activities | 667,787 |
| | 64,290 |
|
Cash flows from financing activities: | | | |
Proceeds from issuance of common shares, net | 7,309 |
| | 217,513 |
|
Proceeds from unsecured debt | — |
| | 375,000 |
|
Payments on unsecured debt | (691,492 | ) | | (285,339 | ) |
Payments on secured indebtedness including principal amortization | (71,154 | ) | | (352,723 | ) |
Repayments of line of credit, net | (43,000 | ) | | (71,000 | ) |
Distributions to common shareholders | (202,770 | ) | | (187,885 | ) |
Distributions to noncontrolling interests | (8,407 | ) | | (1,955 | ) |
Tax payments on stock-based compensation awards | (14,868 | ) | | (7,059 | ) |
Change in book overdrafts | 11,245 |
| | (11,025 | ) |
Deferred financing costs | (16 | ) | | (6,569 | ) |
Redemption of Limited Partner Units | (457 | ) | | — |
|
Net cash used for financing activities | (1,013,610 | ) | | (331,042 | ) |
Net increase in cash and cash equivalents | 14,676 |
| | 87,678 |
|
Cash and cash equivalents at beginning of period | 12,639 |
| | 22,533 |
|
Cash and cash equivalents at end of period | $ | 27,315 |
| | $ | 110,211 |
|
| | | |
Non-cash investing and financing activities: | | | |
Notes receivable from buyers in property sales | $ | 404,846 |
| | $ | 1,685 |
|
Conversion of Limited Partner Units to common shares | $ | 1,714 |
| — |
| $ | 1,015 |
|
See accompanying Notes to Consolidated Financial Statements
DUKE REALTY CORPORATION AND SUBSIDIARIES
Consolidated Statement of Changes in Equity
For the nine months ended September 30, 2017
(in thousands, except per share data)
(Unaudited)
|
| | | | | | | | | | | | | | | | | | | | | | | | |
| Common Shareholders | | | | |
| | Common Stock | | Additional Paid-in Capital | | Accumulated Other Comprehensive Income | | Distributions in Excess of Net Income | | Noncontrolling Interests | | Total |
Balance at December 31, 2016 | | $ | 3,548 |
| | $ | 5,192,011 |
| | $ | 682 |
| | $ | (1,730,423 | ) | | $ | 27,475 |
| | $ | 3,493,293 |
|
Net income | | — |
| | — |
| | — |
| | 1,446,012 |
| | 18,163 |
| | 1,464,175 |
|
Other comprehensive loss | | — |
| | — |
| | (682 | ) | | — |
| | — |
| | (682 | ) |
Issuance of common shares | | 3 |
| | 7,306 |
| | — |
| | — |
| | — |
| | 7,309 |
|
Stock-based compensation plan activity | | 9 |
| | (5,510 | ) | | — |
| | (1,147 | ) | | 7,562 |
| | 914 |
|
Conversion/redemption of Limited Partner Units | | 1 |
| | 1,344 |
| | — |
| | — |
| | (1,802 | ) | | (457 | ) |
Distributions to common shareholders ($0.57 per share) | | — |
| | — |
| | — |
| | (202,770 | ) | | — |
| | (202,770 | ) |
Distributions to noncontrolling interests | | — |
| | — |
| | — |
| | — |
| | (8,407 | ) | | (8,407 | ) |
Balance at September 30, 2017 | | $ | 3,561 |
| | $ | 5,195,151 |
| | $ | — |
| | $ | (488,328 | ) | | $ | 42,991 |
| | $ | 4,753,375 |
|
See accompanying Notes to Consolidated Financial Statements
DUKE REALTY LIMITED PARTNERSHIP AND SUBSIDIARIES
Consolidated Balance Sheets
(in thousands)
|
| | | | | | | |
| September 30, 2017 | | December 31, 2016 |
| (Unaudited) | | |
ASSETS | | | |
Real estate investments: | | | |
Real estate assets | $ | 6,091,861 |
| | $ | 5,144,805 |
|
Construction in progress | 441,005 |
| | 303,644 |
|
Investments in and advances to unconsolidated companies | 135,089 |
| | 197,807 |
|
Undeveloped land | 167,928 |
| | 237,436 |
|
| 6,835,883 |
| | 5,883,692 |
|
Accumulated depreciation | (1,159,493 | ) | | (1,042,944 | ) |
Net real estate investments | 5,676,390 |
| | 4,840,748 |
|
| | | |
Real estate investments and other assets held-for-sale | 63,604 |
| | 1,324,258 |
|
| | | |
Cash and cash equivalents | 27,315 |
| | 12,639 |
|
Accounts receivable, net of allowance of $1,020 and $1,391 | 20,605 |
| | 15,838 |
|
Straight-line rent receivable, net of allowance of $3,655 and $5,268 | 91,045 |
| | 82,554 |
|
Receivables on construction contracts, including retentions | 10,343 |
| | 6,159 |
|
Deferred leasing and other costs, net of accumulated amortization of $206,242 and $186,798 | 279,891 |
| | 258,741 |
|
Restricted cash held in escrow for like-kind exchange | 512,520 |
| | 40,102 |
|
Notes receivable from property sales | 426,678 |
| | 25,460 |
|
Other escrow deposits and other assets | 189,080 |
| | 165,503 |
|
| $ | 7,297,471 |
| | $ | 6,772,002 |
|
LIABILITIES AND EQUITY | | | |
Indebtedness: | | | |
Secured debt, net of deferred financing costs of $699 and $969 | $ | 312,776 |
| | $ | 383,725 |
|
Unsecured debt, net of deferred financing costs of $18,583 and $22,083 | 1,814,104 |
| | 2,476,752 |
|
Unsecured line of credit | 5,000 |
| | 48,000 |
|
| 2,131,880 |
| | 2,908,477 |
|
| | | |
Liabilities related to real estate investments held-for-sale | 2,653 |
| | 56,291 |
|
| | | |
Construction payables and amounts due subcontractors, including retentions | 70,432 |
| | 44,250 |
|
Accrued real estate taxes | 83,152 |
| | 59,112 |
|
Accrued interest | 24,547 |
| | 23,633 |
|
Other liabilities | 195,147 |
| | 153,846 |
|
Tenant security deposits and prepaid rents | 36,285 |
| | 33,100 |
|
Total liabilities | 2,544,096 |
| | 3,278,709 |
|
Partners' equity: | | | |
Common equity (356,130 and 354,756 General Partner Units issued and outstanding, respectively) | 4,710,384 |
| | 3,465,136 |
|
Limited Partners' common equity (3,288 and 3,408 Limited Partner Units issued and outstanding, respectively) | 41,994 |
| | 24,691 |
|
Accumulated other comprehensive income | — |
| | 682 |
|
Total partners' equity | 4,752,378 |
| | 3,490,509 |
|
Noncontrolling interests | 997 |
| | 2,784 |
|
Total equity | 4,753,375 |
| | 3,493,293 |
|
| $ | 7,297,471 |
| | $ | 6,772,002 |
|
See accompanying Notes to Consolidated Financial Statements
DUKE REALTY LIMITED PARTNERSHIP AND SUBSIDIARIES
Consolidated Statements of Operations and Comprehensive Income
For the three and nine months ended September 30,
(in thousands, except per unit amounts)
(Unaudited)
|
| | | | | | | | | | | | | | | |
| Three Months Ended | | Nine Months Ended |
| 2017 | | 2016 | | 2017 | | 2016 |
Revenues: | | | | | | | |
Rental and related revenue | $ | 169,611 |
| | $ | 162,322 |
| | $ | 507,123 |
| | $ | 480,819 |
|
General contractor and service fee revenue | 25,217 |
| | 19,351 |
| | 58,192 |
| | 68,546 |
|
| 194,828 |
| | 181,673 |
| | 565,315 |
| | 549,365 |
|
Expenses: | | | | | | | |
Rental expenses | 16,224 |
| | 16,933 |
| | 46,967 |
| | 54,685 |
|
Real estate taxes | 28,157 |
| | 26,001 |
| | 81,569 |
| | 75,687 |
|
General contractor and other services expenses | 24,079 |
| | 17,182 |
| | 54,077 |
| | 60,330 |
|
Depreciation and amortization | 67,992 |
| | 61,820 |
| | 197,028 |
| | 182,489 |
|
| 136,452 |
| | 121,936 |
| | 379,641 |
| | 373,191 |
|
Other operating activities: | | | | | | | |
Equity in earnings of unconsolidated companies | 1,841 |
| | 12,010 |
| | 58,523 |
| | 37,404 |
|
Gain on dissolution of unconsolidated company | — |
| | — |
| | — |
| | 30,697 |
|
Promote income | — |
| | 2,212 |
| | 20,007 |
| | 26,299 |
|
Gain on sale of properties | 21,952 |
| | 82,698 |
| | 93,339 |
| | 137,589 |
|
Gain on land sales | 5,665 |
| | 1,601 |
| | 8,449 |
| | 2,438 |
|
Other operating expenses | (770 | ) | | (1,424 | ) | | (2,226 | ) | | (3,496 | ) |
Impairment charges | (3,622 | ) | | (3,042 | ) | | (4,481 | ) | | (15,098 | ) |
General and administrative expenses | (10,075 | ) | | (12,534 | ) | | (41,165 | ) | | (42,216 | ) |
| 14,991 |
| | 81,521 |
| | 132,446 |
| | 173,617 |
|
Operating income | 73,367 |
| | 141,258 |
| | 318,120 |
| | 349,791 |
|
Other income (expenses): | | | | | | | |
Interest and other income, net | 6,404 |
| | 507 |
| | 9,197 |
| | 3,597 |
|
Interest expense | (20,835 | ) | | (27,283 | ) | | (65,401 | ) | | (87,255 | ) |
Loss on debt extinguishment | (16,568 | ) | | (6,243 | ) | | (26,104 | ) | | (8,673 | ) |
Acquisition-related activity | — |
| | (7 | ) | | — |
| | (82 | ) |
Income from continuing operations before income taxes | 42,368 |
| | 108,232 |
| | 235,812 |
| | 257,378 |
|
Income tax (expense) benefit | (359 | ) | | 359 |
| | (7,918 | ) | | 173 |
|
Income from continuing operations | 42,009 |
| | 108,591 |
| | 227,894 |
| | 257,551 |
|
Discontinued operations: | | | | | | | |
Income before gain on sales | 2,563 |
| | 4,249 |
| | 17,747 |
| | 9,062 |
|
Gain on sale of depreciable properties | 120,179 |
| | 319 |
| | 1,229,270 |
| | 485 |
|
Income tax (expense) benefit | 876 |
| | — |
| | (10,736 | ) | | — |
|
Income from discontinued operations | 123,618 |
| | 4,568 |
| | 1,236,281 |
| | 9,547 |
|
Net income | 165,627 |
| | 113,159 |
| | 1,464,175 |
| | 267,098 |
|
Net loss (income) attributable to noncontrolling interests | 1,177 |
| | (14 | ) | | (4,736 | ) | | (40 | ) |
Net income attributable to common unitholders | $ | 166,804 |
| | $ | 113,145 |
| | $ | 1,459,439 |
| | $ | 267,058 |
|
Basic net income per Common Unit: | | | | | | | |
Continuing operations attributable to common unitholders | $ | 0.12 |
| | $ | 0.31 |
| | $ | 0.63 |
| | $ | 0.72 |
|
Discontinued operations attributable to common unitholders | 0.34 |
| | 0.01 |
| | 3.43 |
| | 0.03 |
|
Total | $ | 0.46 |
| | $ | 0.32 |
| | $ | 4.06 |
| | $ | 0.75 |
|
Diluted net income per Common Unit: | | | | | | | |
Continuing operations attributable to common unitholders | $ | 0.12 |
| | $ | 0.31 |
| | $ | 0.63 |
| | $ | 0.72 |
|
Discontinued operations attributable to common unitholders | 0.34 |
| | 0.01 |
| | 3.40 |
| | 0.03 |
|
Total | $ | 0.46 |
| | $ | 0.32 |
| | $ | 4.03 |
| | $ | 0.75 |
|
Weighted average number of Common Units outstanding | 359,206 |
| | 355,351 |
| | 358,921 |
| | 351,840 |
|
Weighted average number of Common Units and potential dilutive securities | 362,102 |
| | 358,981 |
| | 361,947 |
| | 355,405 |
|
| | | | | | | |
Comprehensive income: | | | | | | | |
Net income | $ | 165,627 |
| | $ | 113,159 |
| | $ | 1,464,175 |
| | $ | 267,098 |
|
Other comprehensive loss: | | | | | | | |
Amortization of interest contracts | — |
| | (255 | ) | | (682 | ) | | (845 | ) |
Other | — |
| | (23 | ) | | — |
| | (23 | ) |
Total other comprehensive loss | — |
| | (278 | ) | | (682 | ) | | (868 | ) |
Comprehensive income | $ | 165,627 |
| | $ | 112,881 |
| | $ | 1,463,493 |
| | $ | 266,230 |
|
See accompanying Notes to Consolidated Financial Statements
DUKE REALTY LIMITED PARTNERSHIP AND SUBSIDIARIES
Consolidated Statements of Cash Flows
For the nine months ended September 30,
(in thousands)
(Unaudited)
|
| | | | | | | |
| 2017 | | 2016 |
Cash flows from operating activities: | | | |
Net income | $ | 1,464,175 |
| | $ | 267,098 |
|
Adjustments to reconcile net income to net cash provided by operating activities: | | | |
Depreciation of buildings and tenant improvements | 179,918 |
| | 191,554 |
|
Amortization of deferred leasing and other costs | 42,996 |
| | 47,093 |
|
Amortization of deferred financing costs | 4,049 |
| | 3,998 |
|
Straight-line rental income and expense, net | (12,021 | ) | | (10,832 | ) |
Impairment charges | 4,481 |
| | 15,098 |
|
Loss on debt extinguishment | 26,104 |
| | 8,673 |
|
Gain on dissolution of unconsolidated company | — |
| | (30,697 | ) |
Gains on land and depreciated property sales | (1,331,058 | ) | | (140,512 | ) |
Third-party construction contracts, net | 2,679 |
| | 5,601 |
|
Other accrued revenues and expenses, net | 24,474 |
| | 21,832 |
|
Equity in earnings in excess of operating distributions received from unconsolidated companies | (45,298 | ) | | (24,476 | ) |
Net cash provided by operating activities | 360,499 |
| | 354,430 |
|
Cash flows from investing activities: | | | |
Development of real estate investments | (421,702 | ) | | (308,199 | ) |
Acquisition of real estate investments and related intangible assets | (620,869 | ) | | (16,029 | ) |
Acquisition of undeveloped land | (127,662 | ) | | (77,593 | ) |
Second generation tenant improvements, leasing costs and building improvements | (34,350 | ) | | (39,169 | ) |
Other deferred leasing costs | (22,399 | ) | | (25,949 | ) |
Other assets | (492,982 | ) | | 164,450 |
|
Proceeds from land and depreciated property sales, net | 2,282,419 |
| | 369,118 |
|
Capital distributions from unconsolidated companies | 111,635 |
| | 52,514 |
|
Capital contributions and advances to unconsolidated companies | (6,303 | ) | | (54,853 | ) |
Net cash provided by investing activities | 667,787 |
| | 64,290 |
|
Cash flows from financing activities: | | | |
Contributions from the General Partner | 7,309 |
| | 217,513 |
|
Proceeds from unsecured debt | — |
| | 375,000 |
|
Payments on unsecured debt | (691,492 | ) | | (285,339 | ) |
Payments on secured indebtedness including principal amortization | (71,154 | ) | | (352,723 | ) |
Repayments of line of credit, net | (43,000 | ) | | (71,000 | ) |
Distributions to common unitholders | (204,654 | ) | | (189,764 | ) |
Distributions to noncontrolling interests | (6,523 | ) | | (76 | ) |
Tax payments on stock-based compensation awards | (14,868 | ) | | (7,059 | ) |
Change in book overdrafts | 11,245 |
| | (11,025 | ) |
Deferred financing costs | (16 | ) | | (6,569 | ) |
Redemption of Limited Partner Units | (457 | ) | | — |
|
Net cash used for financing activities | (1,013,610 | ) | | (331,042 | ) |
Net increase in cash and cash equivalents | 14,676 |
| | 87,678 |
|
Cash and cash equivalents at beginning of period | 12,639 |
| | 22,533 |
|
Cash and cash equivalents at end of period | $ | 27,315 |
| | $ | 110,211 |
|
| | | |
Non-cash investing and financing activities: | | | |
Notes receivable from buyers in property sales | $ | 404,846 |
| | $ | 1,685 |
|
Conversion of Limited Partner Units to common shares of the General Partner | $ | 1,714 |
| | $ | 1,015 |
|
See accompanying Notes to Consolidated Financial Statements
DUKE REALTY LIMITED PARTNERSHIP AND SUBSIDIARIES
Consolidated Statement of Changes in Equity
For the nine months ended September 30, 2017
(in thousands, except per unit data)
(Unaudited)
|
| | | | | | | | | | | | | | | | | | | | | | | |
| Common Unitholders | | | | |
| General | | Limited | | Accumulated | | | | | | |
| Partner's | | Partners' | | Other | | Total | | | | |
| Common Equity | | Common Equity | | Comprehensive Income | | Partners' Equity | | Noncontrolling Interests | | Total Equity |
Balance at December 31, 2016 | $ | 3,465,136 |
| | $ | 24,691 |
| | $ | 682 |
| | $ | 3,490,509 |
| | $ | 2,784 |
| | $ | 3,493,293 |
|
Net income | 1,446,012 |
| | 13,427 |
| | — |
| | 1,459,439 |
| | 4,736 |
| | 1,464,175 |
|
Other comprehensive loss | — |
| | — |
| | (682 | ) | | (682 | ) | | — |
| | (682 | ) |
Capital contribution from the General Partner | 7,309 |
| | — |
| | — |
| | 7,309 |
| | — |
| | 7,309 |
|
Stock-based compensation plan activity | (6,648 | ) | | 7,562 |
| | — |
| | 914 |
| | — |
| | 914 |
|
Conversion/redemption of Limited Partner Units | 1,345 |
| |