Duke Realty Reports Higher FFO

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Indianapolis-based Duke Realty Corp. (NYSE: DRE) is reporting third quarter 2013 core funds from operations of $94.2 million, compared to $72 million during the same quarter in 2012. The company is also reporting a loss of $6.7 million, compared to net income of $28.9 million the previous year.

October 30, 2013

News Release

Indianapolis, Ind. - Duke Realty Corporation (NYSE: DRE), a leading industrial, suburban and medical office property REIT, today reported results for the third quarter of 2013.

Quarterly Highlights

-Core Funds from Operations (“Core FFO”) per diluted share was $0.28 for the quarter. Funds from Operations (“FFO”) per diluted share as defined by the National Association of Real Estate Investment Trusts (“NAREIT”) was $0.29 for the quarter.

-Solid operating results:

-Total portfolio occupancy of 93.4 percent and in-service portfolio occupancy of 93.5 percent;

-Total leasing activity of more than 6.2 million square feet;

-Same-property net operating income growth of 4.4 percent, as compared to the quarter ended September 30, 2012;

-Adjusted Funds from Operations ("AFFO") of $0.22 per diluted share, which represents a dividend pay-out ratio under 78 percent.

-Progress on asset and capital strategies:

-Began $76 million of new developments;

-Completed $39 million of modern bulk industrial acquisitions;

-Repaid six secured loans, totaling $77 million that bore interest at a weighted average effective rate of 5.6%.

Denny Oklak, Chairman and CEO said, "We saw continued excellent operational results across all product types in the third quarter with strong leasing activity that resulted in a 30 basis point improvement in our in-service occupancy to 93.5 percent and same property income growth of 4.4 percent. This performance and the success our asset repositioning contributed to increased Core Funds from Operations and continued strong results in Adjusted Funds from Operations."

Financial Performance

• Overall Core FFO per share for the third quarter of 2013 increased from the third quarter of 2012 because of improved rental operations, lower preferred dividends resulting from preferred share redemptions and lower interest expense through refinancing unsecured debt at lower rates during the past year. A reconciliation of FFO as defined by NAREIT to Core FFO is included in the financial tables included in this release.

• Net loss was $0.02 per diluted share for the third quarter of 2013 compared to net loss of $0.11 per diluted share for the same quarter in 2012. In addition to the above-mentioned factors driving Core FFO and FFO as defined by NAREIT, the lower net loss per share resulted from gains on depreciable property sales.

Portfolio Operating Performance

• In-service occupancy in the bulk distribution portfolio on September 30, 2013 of 94.6 percent compared to 94.4 percent on June 30, 2013.

• In-service occupancy in the suburban office portfolio of 87.2 percent on September 30, 2013 compared to 86.5 percent on June 30, 2013.

• In-service occupancy in the medical office portfolio of 93.6 percent on September 30, 2013 compared to 92.7 percent on June 30, 2013.

• Tenant retention of over 64 percent for the quarter, with overall positive renewal rental rate growth of 2.6 percent.

• Same-property net operating income growth of 4.3 percent for the twelve months ended September 30, 2013 and 4.4 percent for the three months ended September 30, 2013 as compared to the comparable periods ended September 30, 2012. The positive same-property performance was driven by increased occupancy and rent growth within our same property portfolio.

Real Estate Investment Activity

Acquisitions

The Company acquired $39 million (452,500 square feet) of high-quality modern bulk industrial facilities located in key distribution markets during the third quarter of 2013.

Acquisitions during the third quarter consisted of one industrial property totaling 342,500 square feet in Central Pennsylvania and one industrial property totaling 110,000 square feet in Southern California, both of which were 100 percent leased.

Development Oklak stated, "New development activity continued to be strong as we commenced $76 million of bulk distribution, suburban office and medical office projects during the third quarter. In total, when including one 50 percent-owned joint venture development project, we had 2.3 million square feet of development in progress across eighteen projects, which were 85 percent pre-leased in the aggregate, with total budgeted costs of $391 million and a projected stabilized yield near 8 percent."

The third quarter included the following development activity:

Wholly-Owned Properties

• During the quarter, four new developments were started. The Company started a 534,000 square foot industrial development, on our land in Columbus, Ohio, which was 100 percent pre-leased; a 52,000 square foot expansion to an existing industrial property in Chicago, which was 100 percent pre-leased; a 204,000 square foot suburban office development on our land in Raleigh, North Carolina, which was 64 percent pre-leased; and a 49,000 square foot medical office development in the greater Cincinnati area that was 100 percent pre-leased.

• Wholly-owned development projects under construction at September 30, 2013 consisted of 11 medical office projects totaling 543,000 square feet, three industrial projects totaling 826,000 square feet and three office projects totaling 611,000 square feet.

• Two industrial developments totaling 1.7 million square feet were placed in service, both of which were 100 percent pre-leased. Additionally, two 100 percent pre-leased medical office projects totaling 220,000 square feet were placed in service.

Joint Venture Properties

• One 273,000 square foot medical office project, which was 100 percent preleased, was under construction at September 30, 2013.

Oklak also stated, "In addition to the solid third quarter development activity, I am pleased to announce that we started a 1.0 million square foot industrial project for Amazon on our land in Baltimore, Maryland. This project continues our relationship with Amazon and demonstrates our continued ability to create value within our development platform and monetize our land holdings. This development is on the site of a former General Motors assembly plant which we acquired as a Brownfield site and redeveloped into a project that will ultimately consist of 2.2 million square feet of modern bulk industrial facilities adjacent to the Port of Baltimore."

Dispositions

• Proceeds from property dispositions totaled $73 million during the quarter, of which $44 million was from one 206,000 square foot medical office asset (approximately 60 percent occupied) and the remaining proceeds were from the sale of one non-core industrial asset and from the sale of 65 acres of whollyowned or jointly controlled undeveloped land.

Dividends Declared

Our board of directors declared a quarterly cash dividend on our common stock of $0.17 per share, or $0.68 per share on an annualized basis. The third quarter dividend will be payable November 29, 2013 to shareholders of record on November 14, 2013.

About Duke Realty Corporation

Duke Realty Corporation owns and operates approximately 149.3 million rentable square feet of industrial and office assets, including medical office, in 22 major U.S. metropolitan areas. Duke Realty Corporation is publicly traded on the NYSE under the symbol DRE and is listed on the S&P MidCap 400 Index. More information about Duke Realty Corporation is available at www.dukerealty.com.

Source: Duke Realty Corp.