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Form 10-Q DUKE REALTY Ltd PARTNERS For: Jun 30 Filed by: DUKE REALTY CORP

August 8, 2022 4:35 PM EDT

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2022
OR
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)
dre-20220630_g1.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)
8711 River Crossing Boulevard 
Indianapolis,Indiana46240
        (Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, Including Area Code:
(317)808-6000
Securities registered pursuant to Section 12(b) of the Act:
Title of ClassTrading Symbol(s)Name of Exchange on Which Registered
Duke Realty CorporationCommon Stock, $0.01 par valueDRENew York Stock Exchange
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
 No  
Duke Realty Limited PartnershipYes
 
 No  
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 such files).
Duke Realty CorporationYes
 No  
Duke Realty Limited PartnershipYes
 
 No  
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
Accelerated filer  
Non-accelerated filer  
Smaller reporting company  
Emerging growth company
Duke Realty Limited Partnership:
Large accelerated filer
Accelerated filer  
Non-accelerated filer
 
Smaller reporting company  
Emerging growth company
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.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act):
Duke Realty CorporationYes
No  
Duke Realty Limited PartnershipYes
No  
The number of shares of Duke Realty Corporation's common stock outstanding at August 4, 2022 was 384,992,716.



EXPLANATORY NOTE
This report (the "Report") combines the quarterly reports on Form 10-Q for the period ended June 30, 2022 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 approximately 98.9% of the common partnership interests of the Partnership ("General Partner Units") as of June 30, 2022. The remaining 1.1% 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)
June 30,
2022
December 31,
2021
 (Unaudited) 
ASSETS
Real estate investments:
Real estate assets$9,994,446 $9,616,076 
Construction in progress997,320 744,871 
Investments in and advances to unconsolidated joint ventures207,977 168,336 
Undeveloped land600,292 473,317 
11,800,035 11,002,600 
Accumulated depreciation(1,808,388)(1,684,413)
Net real estate investments9,991,647 9,318,187 
Real estate investments and other assets held-for-sale 144,651 
Cash and cash equivalents44,195 69,752 
Accounts receivable13,208 13,449 
Straight-line rent receivable194,474 172,225 
Receivables on construction contracts, including retentions35,651 57,258 
Deferred leasing and other costs, net of accumulated amortization of $216,309 and $209,975341,923 337,936 
Other escrow deposits and other assets337,184 332,197 
        Total assets$10,958,282 $10,445,655 
LIABILITIES AND EQUITY
Indebtedness:
Secured debt, net of deferred financing costs of $285 and $304$57,150 $59,418 
Unsecured debt, net of deferred financing costs of $43,470 and $45,1363,831,530 3,629,864 
3,888,680 3,689,282 
Liabilities related to real estate investments held-for-sale 6,278 
Construction payables and amounts due subcontractors, including retentions123,428 107,009 
Accrued real estate taxes87,569 77,464 
Accrued interest22,925 20,815 
Other liabilities365,680 339,023 
Tenant security deposits and prepaid rents62,247 66,823 
Total liabilities4,550,529 4,306,694 
Shareholders' equity:
Common shares ($0.01 par value); 600,000 shares authorized; 384,821 and 382,513 shares issued and outstanding, respectively3,848 3,825 
Additional paid-in capital6,262,634 6,143,147 
Accumulated other comprehensive loss(26,233)(28,011)
Retained earnings (distributions in excess of net income)60,571 (75,210)
Total shareholders' equity6,300,820 6,043,751 
Noncontrolling interests106,933 95,210 
Total equity6,407,753 6,138,961 
          Total liabilities and equity $10,958,282 $10,445,655 
See accompanying Notes to Consolidated Financial Statements
3


DUKE REALTY CORPORATION AND SUBSIDIARIES
Consolidated Statements of Operations and Comprehensive Income
For the three and six months ended June 30,
(in thousands, except per share amounts)
(Unaudited)
Three Months EndedSix Months Ended
 2022202120222021
Revenues:
Rental and related revenue$280,145 $253,971 $555,359 $512,150 
General contractor and service fee revenue5,143 17,721 8,092 48,834 
285,288 271,692 563,451 560,984 
Expenses:
Rental expenses21,240 18,515 46,526 46,645 
Real estate taxes43,728 41,368 87,656 82,538 
General contractor and other services expenses3,730 14,066 5,199 43,529 
Depreciation and amortization93,944 91,729 187,945 185,302 
162,642 165,678 327,326 358,014 
Other operating activities:
Equity in earnings of unconsolidated joint ventures5,565 10,590 9,380 26,858 
Gain on sale of properties24,832 95,183 235,579 116,543 
Gain on land sales2,025 9,900 3,117 11,138 
Other operating expenses(531)(338)(1,310)(1,483)
Impairment charges(1,563) (1,563) 
Non-incremental costs related to successful leases(3,502)(4,027)(9,014)(6,985)
General and administrative expenses(27,496)(15,879)(51,409)(40,096)
(670)95,429 184,780 105,975 
Operating income121,976 201,443 420,905 308,945 
Other income (expenses):
Interest and other income, net939 1,673 1,764 2,136 
Interest expense(18,734)(21,072)(38,733)(43,579)
Loss on debt extinguishment (3,938)(21,948)(4,008)
Gain on involuntary conversion 3,222  3,222 
Income before income taxes104,181 181,328 361,988 266,716 
Income tax expense(493)(3,672)(6,823)(8,856)
Net income 103,688 177,656 355,165 257,860 
        Net income attributable to noncontrolling interests(1,218)(1,839)(3,774)(2,681)
Net income attributable to common shareholders$102,470 $175,817 $351,391 $255,179 
Weighted average number of common shares outstanding384,519 376,020 383,619 374,850 
Weighted average number of common shares and potential dilutive securities389,199 381,621 389,265 380,334 
Net income per common share attributable to common shareholders - basic$0.27 $0.47 $0.91 $0.68 
Net income per common share attributable to common shareholders - diluted$0.27 $0.47 $0.91 $0.68 
Comprehensive income:
Net income$103,688 $177,656 $355,165 $257,860 
Other comprehensive income:
Amortization of interest rate swap contracts889 890 1,778 1,779 
Comprehensive income$104,577 $178,546 $356,943 $259,639 
See accompanying Notes to Consolidated Financial Statements
4


DUKE REALTY CORPORATION AND SUBSIDIARIES
Consolidated Statements of Cash Flows
For the six months ended June 30,
(in thousands)
(Unaudited)
Six Months Ended
20222021
Cash flows from operating activities:
Net income$355,165 $257,860 
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation of buildings and tenant improvements158,194 156,470 
Amortization of deferred leasing and other costs29,751 28,832 
Amortization of deferred financing costs4,958 4,888 
Straight-line rental income and expense, net(21,808)(14,497)
Impairment charges1,563  
Loss on debt extinguishment21,948 4,008 
Gain on involuntary conversion (3,222)
Gain on land and property sales(238,696)(127,681)
Third-party construction contracts, net1,649 (1,588)
Other accrued revenues and expenses, net12,329 23,993 
Operating distributions received in excess of (less than) equity in earnings from unconsolidated joint ventures3,059 (17,113)
Net cash provided by operating activities328,112 311,950 
Cash flows from investing activities:
Development of real estate investments(353,492)(332,091)
Acquisition of buildings and related intangible assets(89,113)(218,788)
Acquisition of land and other real estate assets(308,554)(223,280)
Second generation tenant improvements, leasing costs and building improvements(33,457)(33,747)
Other deferred leasing costs(20,678)(16,448)
Other assets(11,525)(48,736)
Proceeds from land and property sales, net334,696 265,973 
Capital distributions from unconsolidated joint ventures33,645 20,503 
Capital contributions and advances to unconsolidated joint ventures(12,519)(8,986)
Net cash used for investing activities(460,997)(595,600)
Cash flows from financing activities:
Proceeds from issuance of common shares, net116,107 187,217 
Proceeds from unsecured debt500,000 446,634 
Payments on unsecured debt(320,110)(127,758)
Payments on secured indebtedness including principal amortization(2,143)(2,028)
Repayments on line of credit, net (30,000)
Distributions to common shareholders(214,824)(191,082)
Distributions to noncontrolling interests(2,532)(2,116)
Tax payments on stock-based compensation awards(7,254)(4,757)
Change in book cash overdrafts24,745 3,758 
Other financing activities48 (270)
Deferred financing costs(2,418)(9,961)
Redemption of Limited Partner Units (37)
Net cash provided by financing activities91,619 269,600 
Net decrease in cash, cash equivalents and restricted cash(41,266)(14,050)
Cash, cash equivalents and restricted cash at beginning of period103,164 67,223 
Cash, cash equivalents and restricted cash at end of period$61,898 $53,173 
Non-cash activities:
Lease liabilities arising from right-of-use assets$636 $18,257 
Assumption of indebtedness and other liabilities in real estate acquisitions$22,163 $84,354 
Contribution of properties to unconsolidated joint venture$67,148 $ 
Non-cash distribution of assets from unconsolidated joint ventures, net$ $11,124 
Issuance of Limited Partner Units for acquisition$ $11,576 
See accompanying Notes to Consolidated Financial Statements
5


DUKE REALTY CORPORATION AND SUBSIDIARIES
Consolidated Statements of Changes in Equity
For the three and six months ended June 30, 2022 and 2021
(in thousands, except per share data)
(Unaudited)
 Common Shareholders  
 Common
Stock
Additional
Paid-in
Capital
Accumulated
Other
Comprehensive
Loss
Retained Earnings (Distributions
in Excess of
Net Income)
Noncontrolling
Interests
Total
Balance at March 31, 2022$3,835 $6,185,119 $(27,122)$65,973 $106,719 $6,334,524 
Net income— — — 102,470 1,218 103,688 
Other comprehensive income— — 889 — — 889 
Issuance of common shares13 75,516 — — — 75,529 
Stock-based compensation plan activity 1,999 — (223)442 2,218 
Distributions to common shareholders ($0.28 per share)— — — (107,649)— (107,649)
Distributions to noncontrolling interests— — — — (1,446)(1,446)
Balance at June 30, 2022$3,848 $6,262,634 $(26,233)$60,571 $106,933 $6,407,753 
Balance at December 31, 2021$3,825 $6,143,147 $(28,011)$(75,210)$95,210 $6,138,961 
Net income— — — 351,391 3,774 355,165 
Other comprehensive income— — 1,778 — — 1,778 
Issuance of common shares20 116,087  — — 116,107 
Stock-based compensation plan activity3 3,400  (786)10,481 13,098 
Distributions to common shareholders ($0.56 per share)— — — (214,824)— (214,824)
Distributions to noncontrolling interests— — — — (2,532)(2,532)
Balance at June 30, 2022$3,848 $6,262,634 $(26,233)$60,571 $106,933 $6,407,753 

 Common Shareholders  
 Common
Stock
Additional
Paid-in
Capital
Accumulated
Other
Comprehensive
Loss
Distributions
in Excess of
Net Income
Noncontrolling
Interests
Total
Balance at March 31, 2021$3,743 $5,756,738 $(30,679)$(548,843)$78,182 $5,259,141 
Net income— — — 175,817 1,839 177,656 
Other comprehensive income— — 890 — — 890 
Issuance of common shares34 156,802 — — — 156,836 
Stock-based compensation plan activity2,687 — (278)3,234 5,643 
Issuance of Limited Partner Units— — — — 11,576 11,576 
Conversion of Limited Partner Units3 4,744   (4,747) 
Redemption of Limited Partner Units— (40)— — 3 (37)
Distributions to common shareholders ($0.255 per share)— — — (95,772)— (95,772)
Distributions to noncontrolling interests— — — — (1,024)(1,024)
Balance at June 30, 2021$3,780 $5,920,931 $(29,789)$(469,076)$89,063 $5,514,909 
Balance at December 31, 2020$3,733 $5,723,326 $(31,568)$(532,519)$71,476 $5,234,448 
Net income— — — 255,179 2,681 257,860 
Other comprehensive income— — 1,779 — — 1,779 
Issuance of common shares41 187,176 — — — 187,217 
Stock-based compensation plan activity3 5,426 — (654)10,489 15,264 
Conversion of Limited Partner Units3 5,043   (5,046) 
Issuance of Limited Partner Units— — — — 11,576 11,576 
Redemption of Limited Partner Units— (40)— — 3 (37)
Distributions to common shareholders ($0.51 per share)— — — (191,082)— (191,082)
Distributions to noncontrolling interests— — — — (2,116)(2,116)
Balance at June 30, 2021$3,780 $5,920,931 $(29,789)$(469,076)$89,063 $5,514,909 

See accompanying Notes to Consolidated Financial Statements
6


DUKE REALTY LIMITED PARTNERSHIP AND SUBSIDIARIES
Consolidated Balance Sheets
(in thousands)
June 30,
2022
December 31,
2021
(Unaudited)
ASSETS
Real estate investments:
Real estate assets$9,994,446 $9,616,076 
     Construction in progress997,320 744,871 
     Investments in and advances to unconsolidated joint ventures207,977 168,336 
     Undeveloped land600,292 473,317 
11,800,035 11,002,600 
Accumulated depreciation(1,808,388)(1,684,413)
              Net real estate investments9,991,647 9,318,187 
Real estate investments and other assets held-for-sale 144,651 
Cash and cash equivalents44,195 69,752 
Accounts receivable13,208 13,449 
Straight-line rent receivable194,474 172,225 
Receivables on construction contracts, including retentions35,651 57,258 
Deferred leasing and other costs, net of accumulated amortization of $216,309 and $209,975341,923 337,936 
Other escrow deposits and other assets337,184 332,197 
       Total assets $10,958,282 $10,445,655 
LIABILITIES AND EQUITY
Indebtedness:
Secured debt, net of deferred financing costs of $285 and $304$57,150 $59,418 
Unsecured debt, net of deferred financing costs of $43,470 and $45,1363,831,530 3,629,864 
3,888,680 3,689,282 
Liabilities related to real estate investments held-for-sale 6,278 
Construction payables and amounts due subcontractors, including retentions123,428 107,009 
Accrued real estate taxes87,569 77,464 
Accrued interest22,925 20,815 
Other liabilities365,680 339,023 
Tenant security deposits and prepaid rents62,247 66,823 
     Total liabilities4,550,529 4,306,694 
Partners' equity:
Common equity (384,821 and 382,513 General Partner Units issued and outstanding, respectively)6,327,053 6,071,762 
Limited Partners' common equity (4,088 and 3,663 Limited Partner Units issued and outstanding, respectively)102,579 90,679 
Accumulated other comprehensive loss(26,233)(28,011)
            Total partners' equity6,403,399 6,134,430 
Noncontrolling interests4,354 4,531 
     Total equity6,407,753 6,138,961 
          Total liabilities and equity$10,958,282 $10,445,655 
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 six months ended June 30,
(in thousands, except per unit amounts)
(Unaudited)
Three Months EndedSix Months Ended
 2022202120222021
Revenues:
Rental and related revenue$280,145 $253,971 $555,359 $512,150 
General contractor and service fee revenue5,143 17,721 8,092 48,834 
285,288 271,692 563,451 560,984 
Expenses:
Rental expenses21,240 18,515 46,526 46,645 
Real estate taxes43,728 41,368 87,656 82,538 
General contractor and other services expenses3,730 14,066 5,199 43,529 
Depreciation and amortization93,944 91,729 187,945 185,302 
162,642 165,678 327,326 358,014 
Other operating activities:
Equity in earnings of unconsolidated joint ventures5,565 10,590 9,380 26,858 
Gain on sale of properties24,832 95,183 235,579 116,543 
Gain on land sales2,025 9,900 3,117 11,138 
Other operating expenses(531)(338)(1,310)(1,483)
Impairment charges(1,563) (1,563) 
Non-incremental costs related to successful leases(3,502)(4,027)(9,014)(6,985)
General and administrative expenses(27,496)(15,879)(51,409)(40,096)
(670)95,429 184,780 105,975 
Operating income121,976 201,443 420,905 308,945 
Other income (expenses):
Interest and other income, net939 1,673 1,764 2,136 
Interest expense(18,734)(21,072)(38,733)(43,579)
Loss on debt extinguishment (3,938)(21,948)(4,008)
Gain on involuntary conversion 3,222  3,222 
Income before income taxes104,181 181,328 361,988 266,716 
Income tax expense(493)(3,672)(6,823)(8,856)
Net income103,688 177,656 355,165