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Duke Realty (DRE) Q2 FFO & Revenues Top Estimates, View Up
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Duke Realty Corporation’s second-quarter 2020 core funds from operations (FFO) per share of 38 cents surpassed the Zacks Consensus Estimate of 37 cents. The figure also increased from the year-ago tally of 36 cents.
Results reflect rent growth on new and renewal leases, higher in-service occupancy and leasing of new developments.
The company noted that despite the uncertain economic conditions, it has a more optimistic outlook for current-year earnings compared with the guidance issued in April. This positive outlook is backed by operational performance, and particularly strong rent collections so far. Notably, the company has collected or has executed deferral agreements for 99.9% of second-quarter rents and 99.9% of July rents.
Rental and related revenues of $226.4 million increased 6.2% on a year-over-year basis. Also, the figure surpassed the Zacks Consensus Estimate of $221.3 million.
Quarter in Detail
Duke Realty leased 7.6 million square feet of space during the June-end quarter, including 1.4 million square feet of short-term leases. Tenant retention was 75.1% for the second quarter and 95.9% after considering immediate backfills.
Moreover, the company registered same-property NOI growth of 5% year over year. This uptick was backed by increased occupancy and rental rate growth as well as the expiration of free rent periods. Duke Realty reported overall cash and annualized net effective rent growth on new and renewal leases of 10.7% and 26.6%, respectively, during the quarter.
As of Jun 30, 2020, the company’s total portfolio, including properties under development, was 95.3% leased, up 100 basis points (bps) from the previous-quarter end, and up 190 bps from the prior-year quarter end.
Increase in total portfolio occupancy reflects leasing of speculative space in both in-service and under-development portfolios. In-service portfolio was 96.7% leased as of Jun 30, 2020, up from 96.5% as of Mar 31, 2020 and 95.4% as of Jun 30, 2019.
Duke Realty exited the second quarter with $29.9 million of cash and cash equivalents, down from $110.9 million as of Dec 31, 2019.
Portfolio Activity
During the quarter, the company placed eight new consolidated projects, and one expansion to an existing project, aggregating 3.2 million square feet. These projects were 82% leased in total.
However, the company did not commence any new developments during the April-June quarter, as it made a temporary halt on speculative developments. Nonetheless, the company is working with a list of prospective tenants and anticipates more build-to-suit developments to be commenced in the second half of this year.
2020 Guidance
Duke Realty revised the 2020 core FFO per share outlook to $1.48-$1.54 from the prior estimate of $1.41-$1.51. The Zacks Consensus Estimate for the same is currently pegged at $1.44.
The company estimates same-property NOI growth of 3.5-4.5% compared with the prior guidance of 1.75-3.25%. It has lowered its bad debt expense estimate and included improved leasing assumption compared with the April outlook. Moreover, the revised guidance for 2020 development starts is $350-$550 million compared with the prior range of $275-$425 million.
Dividend Update
Concurrent with the second-quarter earnings release on Jul 29, 2020, Duke Realty announced a quarterly cash dividend on common stock of 23.50 cents per share. The dividend for the second quarter will be paid out on Aug 31 to shareholders on record as of Aug 14, 2020.
We now look forward to the earnings releases of other REITs like Vornado Realty Trust (VNO - Free Report) , Apartment Investment and Management Company (AIV - Free Report) and Essex Property Trust, Inc. (ESS - Free Report) . All three companies are scheduled to release quarterly numbers on Aug 3.
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.
5 Stocks Set to Double
Each was hand-picked by a Zacks expert as the #1 favorite stock to gain +100% or more in 2020. Each comes from a different sector and has unique qualities and catalysts that could fuel exceptional growth.
Most of the stocks in this report are flying under Wall Street radar, which provides a great opportunity to get in on the ground floor.
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Duke Realty (DRE) Q2 FFO & Revenues Top Estimates, View Up
Duke Realty Corporation’s second-quarter 2020 core funds from operations (FFO) per share of 38 cents surpassed the Zacks Consensus Estimate of 37 cents. The figure also increased from the year-ago tally of 36 cents.
Results reflect rent growth on new and renewal leases, higher in-service occupancy and leasing of new developments.
The company noted that despite the uncertain economic conditions, it has a more optimistic outlook for current-year earnings compared with the guidance issued in April. This positive outlook is backed by operational performance, and particularly strong rent collections so far. Notably, the company has collected or has executed deferral agreements for 99.9% of second-quarter rents and 99.9% of July rents.
Rental and related revenues of $226.4 million increased 6.2% on a year-over-year basis. Also, the figure surpassed the Zacks Consensus Estimate of $221.3 million.
Quarter in Detail
Duke Realty leased 7.6 million square feet of space during the June-end quarter, including 1.4 million square feet of short-term leases. Tenant retention was 75.1% for the second quarter and 95.9% after considering immediate backfills.
Moreover, the company registered same-property NOI growth of 5% year over year. This uptick was backed by increased occupancy and rental rate growth as well as the expiration of free rent periods. Duke Realty reported overall cash and annualized net effective rent growth on new and renewal leases of 10.7% and 26.6%, respectively, during the quarter.
As of Jun 30, 2020, the company’s total portfolio, including properties under development, was 95.3% leased, up 100 basis points (bps) from the previous-quarter end, and up 190 bps from the prior-year quarter end.
Increase in total portfolio occupancy reflects leasing of speculative space in both in-service and under-development portfolios. In-service portfolio was 96.7% leased as of Jun 30, 2020, up from 96.5% as of Mar 31, 2020 and 95.4% as of Jun 30, 2019.
Duke Realty exited the second quarter with $29.9 million of cash and cash equivalents, down from $110.9 million as of Dec 31, 2019.
Portfolio Activity
During the quarter, the company placed eight new consolidated projects, and one expansion to an existing project, aggregating 3.2 million square feet. These projects were 82% leased in total.
However, the company did not commence any new developments during the April-June quarter, as it made a temporary halt on speculative developments. Nonetheless, the company is working with a list of prospective tenants and anticipates more build-to-suit developments to be commenced in the second half of this year.
2020 Guidance
Duke Realty revised the 2020 core FFO per share outlook to $1.48-$1.54 from the prior estimate of $1.41-$1.51. The Zacks Consensus Estimate for the same is currently pegged at $1.44.
The company estimates same-property NOI growth of 3.5-4.5% compared with the prior guidance of 1.75-3.25%. It has lowered its bad debt expense estimate and included improved leasing assumption compared with the April outlook. Moreover, the revised guidance for 2020 development starts is $350-$550 million compared with the prior range of $275-$425 million.
Dividend Update
Concurrent with the second-quarter earnings release on Jul 29, 2020, Duke Realty announced a quarterly cash dividend on common stock of 23.50 cents per share. The dividend for the second quarter will be paid out on Aug 31 to shareholders on record as of Aug 14, 2020.
Currently, Duke Realty carries a Zacks Rank #2 (Buy). 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-eps-surprise-chart | Duke Realty Corporation Quote
We now look forward to the earnings releases of other REITs like Vornado Realty Trust (VNO - Free Report) , Apartment Investment and Management Company (AIV - Free Report) and Essex Property Trust, Inc. (ESS - Free Report) . All three companies are scheduled to release quarterly numbers on Aug 3.
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.
5 Stocks Set to Double
Each was hand-picked by a Zacks expert as the #1 favorite stock to gain +100% or more in 2020. Each comes from a different sector and has unique qualities and catalysts that could fuel exceptional growth.
Most of the stocks in this report are flying under Wall Street radar, which provides a great opportunity to get in on the ground floor.
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