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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
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
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)
dukerealtylogostacka01a01a11.jpg
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
 
 
 
 
 
 
 
Page
 
 
 
 
 
 
 
 
 
 
 
 
Duke Realty Corporation:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Duke Realty Limited Partnership:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Duke Realty Corporation and Duke Realty Limited Partnership:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

2


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

3


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

4


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


5


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



6


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

7


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

8


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

9


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