Duke Realty (DRE) Q4 FFO and Revenues Fall Short of Estimates

Duke Realty Corporation’s DRE fourth-quarter 2021 core funds from operations (FFO) per share of 44 cents lagged the Zacks Consensus Estimate of 45 cents. However, the figure increased 7.3% from the year-ago tally of 41 cents.

Results reflect an improved rental rate growth and new developments being leased. However, the performance was partially offset by lower revenues.

Revenues of $264.6 million declined marginally on a year-over-year basis. The figure also lagged the Zacks Consensus Estimate of $276.2 million.

For 2021, DRE’s FFO per share of $1.73 lagged the Zacks Consensus Estimate of $1.89. However, the figure improved 13.8% from the prior year’s $1.52. The revenues of $1.1 billion improved 11.3% from the prior year’s $993.2 million. Nevertheless, the reported figure missed the Zacks Consensus Estimate of $1.12 billion.

Core FFO was $1.73 per diluted share for the full year 2021 compared to $1.52 per diluted share for the full year 2020.

Quarter in Detail

Duke Realty leased 8.9 million square feet of space during the December quarter. Tenant retention was 68.3% for the reported quarter and 87.7% after considering immediate backfills.

Additionally, DRE registered same-property net operating income (NOI) growth of 5.2%on a cash basis, year over year.

Duke Realty reported overall cash and annualized net effective rent growth on new and renewal leases of 20.6% and 40.8%, respectively, during the fourth quarter.

As of Dec 31, 2021, DRE’s total portfolio, including properties under development, was 95.1% leased, contracting 50 basis points (bps) from the previous quarter’s end-level and 90bps from the prior-year quarter’s reading.

The stabilized in-service portfolio was 98.7% leased as of Dec 31, 2021, up 40 basis points, sequentially, and 60 bps from the level at the prior-year quarter’s end.

Duke Realty exited fourth-quarter 2021 with $69.8 million of cash and cash equivalents, up from $6.3 million as of Dec 31, 2020.

DRE issued 1.7 million shares during the quarter, reaping $95 million of net proceeds under its ATM program at an average price of $56.90 per share.

Portfolio Activity

During the fourth quarter, Duke Realty’s income producing real-estate acquisitions totaled $206 million, while building dispositions included one fully leased, 517,000 square foot building in Columbus.

DRE started nine new speculative development projects during the quarter, with expected costs of $466 million. As of Dec 31, 2021, its development pipeline was 48% leased.

Dividend Update

Duke Realty declared its quarterly cash dividend on common stock of 28 cents per share. The sfor the fourth quarter will be paid out on Feb 28, to its shareholders of record as of Feb 16, 2021.

2022 Guidance

Duke Realty issued 2022 guidance of $1.87-$1.93for the core FFO per share. At the mid-point, this projects a 9.8% increase from the year-ago actuals. The Zacks Consensus Estimate for the same is currently pinned at $1.89.

DRE anticipates to maintaining a strong balance-sheet position and long-term strategic objectives.

With a full year of increased rents from leases signed in 2021 and an expected continuation of rental rate growth on leases to be signed in 2022, management provided the same-property NOI growth estimate of 5.4-6.2%. on a cash basis.

Property acquisitions are expected to be $300-$500 million, with focus on the coastal tier-one markets.
Development starts for 2022 are projected at $1.2-$1.4 billion.

Currently, Duke Realty carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Duke Realty Corporation Price, Consensus and EPS Surprise

Duke Realty Corporation Price, Consensus and EPS Surprise

Duke Realty Corporation price-consensus-eps-surprise-chart | Duke Realty Corporation Quote

It’s time to look forward to the earnings releases of REITs like Alexandria Real Estate Equities, Inc. ARE, Equity Residential EQR and Cousins Properties Incorporated CUZ .

Alexandria Real Estate is scheduled to report December-quarter earnings on Jan 31, while Equity Residential and Cousins Properties are slated to release fourth-quarter 2021 results on Feb 1 and Feb 3, respectively.

The Zacks Consensus Estimate for Alexandria Real Estate’s fourth-quarter 2021 FFO per share is pegged at $1.96, suggesting an increase of 6.5% from the year-ago quarter’s reported figure. ARE currently carries a Zacks Rank #2 (Buy).

The Zacks Consensus Estimate for Equity Residential’s fourth-quarter 2021 FFO per share stands at 80 cents, indicating an increase of 5.3% from the prior-year period’s reported figure. EQR currently has a Zacks Rank of 3.

The Zacks Consensus Estimate for Cousins Properties’ fourth-quarter 2021 FFO per share is pegged at 69 cents, implying an increase of 1.5% from the year-earlier quarter’s reported figure. CUZ currently carries a Zacks Rank #4 (Sell).

Note: Anything related to earnings presented in this write-up represent funds from operations (FFO) — a widely used metric to gauge the performance of REITs.

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