Duke Realty FFO Increases

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Indianapolis-based Duke Realty Corp. (NYSE: DRE) is reporting first quarter core Funds From Operations of $93.2 million, compared to $83.2 million during the same period a year earlier. The company is also reporting net income of $18.3 million, compared to $27.7 million in 2013. May 1, 2014

News Release

INDIANAPOLIS, Ind. - Duke Realty Corporation (NYSE: DRE), a leading industrial, suburban and medical office property REIT, today reported results for the first quarter of 2014.

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 also $0.28 for the quarter.

Operating results:

Total portfolio occupancy of 93.6 percent and in-service portfolio occupancy of 94.0 percent;

Total leasing activity of 6.1 million square feet;

Same-property net operating income growth of 2.2 percent as compared to the quarter ended March 31, 2013 and 3.0 percent as compared to the twelve months ended March 31, 2013;

Adjusted Funds from Operations ("AFFO") of $0.25 per diluted share, which represents a dividend pay-out ratio of 68 percent.

Asset and capital activities:

Began $108 million of new developments;

Completed $79 million of non-strategic asset dispositions;

Completed one $18 million modern bulk industrial acquisition;

Repaid one secured loan, totaling $18 million that bore interest at a weighted average effective rate of 3.5 percent.

Denny Oklak, Chairman and CEO said, "We saw continued strong operational results in the first quarter and maintained a high level of occupancy. Additionally, we executed 2.0 million square feet of renewal leases during the quarter with an impressive 7.9 percent growth in net effective rent. Same property net operating income growth for the quarter was negatively affected by snow removal and utility costs from the harsh winter but we still expect annual same property net operating income growth to be within our guidance range of 2.0 percent to 4.0 percent."

Financial Performance

Core FFO for the first quarter of 2014 increased by $10 million, or $0.02 per share, from the first quarter of 2013 because of improved rental operations, lower interest expense as the result of refinancing unsecured debt at lower rates during 2013 and lower preferred dividends resulting from the redemption of the 8.375 percent Series O preferred shares in February 2013. A reconciliation of net income to FFO as defined by NAREIT, as well as to Core FFO, is included in the financial tables included in this release.

Net income was $0.06 per diluted share for the first quarter of 2014 compared to $0.09 per diluted share for the same quarter in 2013. The lower net income per share was the result of the company recognizing nearly $49 million during the first quarter of 2013 for its share of joint ventures' gains on sales of depreciable property, which was not included in FFO.

Portfolio Operating Performance

Strong overall operating performance across all product types:

In-service occupancy in the bulk distribution portfolio at March 31, 2014 of 95.0 percent compared to 95.3 percent at December 31, 2013.

In-service occupancy in the suburban office portfolio of 88.1 percent at March 31, 2014 compared to 87.8 percent at December 31, 2013.

In-service occupancy in the medical office portfolio of 93.7 percent at both March 31, 2014 and December 31, 2013.

Tenant retention of 65 percent for the quarter, with overall renewal rental rate growth of 7.9 percent.

Same-property net operating income growth of 3.0 percent for the twelve months ended March 31, 2014 and 2.2 percent for the three months ended March 31, 2014 as compared to the comparable periods ended March 31, 2013.

Real Estate Investment Activity

Acquisitions

The company acquired one 100 percent leased 407,000 square foot high-quality modern bulk industrial facility located in Atlanta for $18 million during the first quarter of 2014.

Development

Oklak stated, "New development activity continued to be strong as we began $108 million of bulk distribution projects during the first quarter, which will be primarily constructed on land that we already owned. Our $607 million development pipeline is 86 percent leased with an average expected initial stabilized yield of 7.6 percent. The pipeline of potential projects to start during the remainder of 2014 is also high."

The first quarter included the following development activity:

Wholly-Owned Properties

During the quarter, five new developments were started. The company started a 346,000 square foot industrial development on our land in Baltimore, Maryland; a 744,000 square foot industrial development in Columbus, Ohio; and a 257,000 square foot expansion to an industrial development on our land in Atlanta, Georgia, all of which were 100 percent pre-leased. We also started two speculative industrial developments, totaling a combined 473,000 square feet in Houston, Texas.

Wholly-owned development projects under construction at March 31, 2014 consisted of 13 industrial projects totaling 4.9 million square feet, eight medical office projects totaling 397,000 square feet and two suburban office projects totaling 452,000 square feet, which were 81 percent pre-leased in the aggregate.

One 100 percent leased suburban office development totaling 200,000 square feet was placed in service. Additionally, three 100 percent pre-leased medical office projects totaling 193,000 square feet were placed in service.

Joint Venture Properties

Joint venture development projects under construction at March 31, 2014 consisted of two industrial projects totaling nearly 1.8 million square feet, which are 100 percent pre-leased.

Dispositions

Proceeds from property dispositions totaled $79 million during the quarter, of which $57 million was from the sale of two medical office assets totaling 180,000 square feet (100 percent occupied) and $18 million was from the sale of a nine-building portfolio of flex-industrial assets in Indianapolis totaling 439,000 square feet (95 percent occupied). The remaining proceeds were from our share of the sale of a 20 percent-owned suburban office property as well as from the sale of seven acres of 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 first quarter dividend will be payable May 30, 2014 to shareholders of record on May 15, 2014. The board also declared the following dividends on our outstanding preferred stock:

Class

NYSE Symbol Quarterly Amount/Share Record Date Payment Date

Series J DREPRJ $0.4140625 May 15, 2014 May 30, 2014

Series K DREPRK $0.40625 May 15, 2014 May 30, 2014

Series L DREPRL $0.4125 May 15, 2014 May 30, 2014

2014 Earnings Guidance

The company revised its previous Core FFO guidance for 2014 to a range of $1.12 to $1.18 per share, compared to previous guidance of $1.11 to $1.19 per share.

FFO and AFFO Reporting Definitions

FFO: FFO is computed in accordance with standards established by NAREIT. NAREIT defines FFO as net income (loss) excluding gains (losses) on sales of depreciable property, impairment charges related to depreciable real estate assets, and extraordinary items (computed in accordance with generally accepted accounting principles ("GAAP")); plus real estate related depreciation and amortization, and after similar adjustments for unconsolidated joint ventures. The company believes FFO to be most directly comparable to net income as defined by GAAP. The company believes that FFO should be examined in conjunction with