Duke Realty — Investor Presentation (May 2021)
44 slides from Duke Realty's investor presentation, May 10, 2021
Slide 1: Second Quarter 2021 Investor Update
Second Quarter 2021 Investor Update Exhibit 99.1
Slide 2: Forward-Looking Statement
Forward-Looking Statement This slide presentation contains statements that constitute “forward-looking statements” within the meaning of the Securities Act of 1933 and the Securities Exchange Act of 1934 as amended by the Private Securities Litigation Reform Act of 1995. These forward-looking statem
Slide 3: Contents
Contents 3TABLE OF CONTENTS Who We Are | U.S. Logistics Real Estate Strategy 4 Q1 2021 Review & 2021 Guidance Highlights | Relative Operating Perf | Rel Equity Value 6 Business Drivers & Market Fundamentals 11 Operations - Customers and NOI Drivers 14 Logistics Real Estate Strategy | Capital Allocat
Slide 4: Who We Are – The Leading Domestic-only Logistics REIT
• Largest domestic-only logistics REIT in the business of developing, redeveloping, acquiring and managing premier logistics real estate facilities in key logistic nodes across 19 markets in the U.S. • Founded 1972, IPO 1993, S&P 500 component • Own or hold an interest in 543 facilities encompassing
Slide 5: Duke Realty is the Only REIT that Checks All the Boxes
Duke Realty is the Only REIT that “Checks All the Boxes” to be the Leading Pure-Play Domestic-Only Logistics REIT S&P 500 (Large Cap Firm) U.S. Industrial Only | Business Model focused on Rental Income Modern, High-Quality Logistics Facilities Majority Tier 1 Market Concentration Strong Deve
Slide 6: Q1 2021 Recap & 2021 Guidance Highlights | Relative Operating Performance | Relative Value
Q1 2021 RECAP & 2021 GUIDANCE HIGHLIGHTS | RELATIVE OPERATING PERFORMANCE | RELATIVE VALUE
Slide 7: Q1 2021 Review | FY 2021 Guidance Highlights
Q1 2021 Review | FY 2021 Guidance Highlights CAPITAL: Issued $450M 10-year green bond in Q1 at 1.83% yield; No significant debt maturities until 2023; Renewed $1.2B line of credit in Q1 reducing spread by 10 bps and added a sustainability-pricing metric; Issued $30M of equity above NAV; "A" level cr
Slide 8: Strong AFFO Performance and Improving FFO after significant re-positioning
RELIABLE. ANSWERS. Strong AFFO Performance and Improving FFO after significant re-positioning | 2021 FFO growth inflection 5.4% 7.0% 10.5% 6.4% 7.9% 10.2% 7.4% 8.4% 7.8% 5Y CAGR thru 2020 3Y CAGR thru 2020 1Y Implied to 2021 Guidance Average Annual Dispositions (2) $1.2 Bn $1.1 Bn $1.0 Bn (mid-point
Slide 9: Core Growth Metrics and Development Platform Outperformance Through Cycles
Core Growth Metrics and Development Platform Size and Pre-Leasing Support Outperformance Through Cycles 9 5.0% 3.2% 4.4% 3.2% 4.5% DRE PLD FR EGP REXR 2020 SPNOI Growth Source: Company reporting and DRE. “SPNOI” is “same-property NOI”, a non GAAP metric. REXR 2020 SPNOI excludes deferred rent. “Rent
Slide 10: Above Average Portfolio Performance and Development Growth Prospects – yet Discounted Relative Value
Above Average Portfolio Performance and Development Growth Prospects – yet Discounted Relative Value 7% 20% 4% 10% 22% 27% DRE PLD FR EGP REXR TRNO NAV Premium / (Disc) Source: consensus FFO and AFFO estimates for 2021 per S&P GMI “CIQ”, as of 5/5/2021. Consensus AFFO on median basis to reduce exces
Slide 11: Macroeconomic & Secular Drivers, Industrial Supply-Demand Fundamentals
MACROECONOMIC & SECULAR DRIVERS INDUSTRIAL SUPPLY-DEMAND FUNDAMENTALS
Slide 12: Market Fundamentals
MARKET FUNDAMENTALS REVERSE LOGISTICS INVENTORY EXPANSION CONSUMER FREQUENCY AND PENETRATION EXPANDING Sources: CBRE, CoStar, JLL, Cushman Wakefield, Green St, UBS, BofA, U.S. Census Bureau. E-comm penetration includes autos & gas in total retail sales. Most common I/S ratio is retail sales (excl fo
Slide 13: Supply-Demand-Vacancy Set Up Supportive of Continued Low Vacancy
4.6% 0% 2% 4% 6% 8% 10% -120 -60 0 60 120 180 240 300 360 2007 2009 2011 2013 2015 2017 2019 2021 9.7% peak GFC Average Vac - 6.5% 4.2% Vacancy D e m a n d S u p p ly 3.0% -2.4% -7.6% -4.5% 0.2% 3.6% 2.9% 3.9% 2.7% 6.1% 6.8% 7.4% 3.1% 8.3% 8.0% 2007 2009 2011 2013 2015 2017 2019 2021 DRE PORTFOLIO W
Slide 14: Operations: Customer Relationships & NOI Drivers
Legacy Commerce Center (Brownfield development), Linden, NJ OPERATIONS: CUSTOMER RELATIONSHIPS & NET OPERATING INCOME (NOI) DRIVERS
Slide 15: Diversified Customer Relationships by Company & Industry
Diversified Customer Relationships by Company & Industry TENANT INDUSTRIESTOP 15 TENANTS Note: Includes in-service portfolio only as of March 31, 2021; ANLV = Annualized Net Lease Value. (1) E-commerce tenants include tenants that complete the majority of their sales using the internet or they are u
Slide 16: NOI Performance and NOI Drivers
6.3% Q1 2021 actual 4.5% 2021 mid-point guidance -0.2% -0.0% +3.4% +1.3% Rent Escalations + 2nd Gen Leasing Growth Free Rent Burn Off Occup ancy Bad Debt / Defaults 2021 Mid-Point NOI PERFORMANCE NOI DRIVERS (1) Operating Metrics Supportive of Continued Growth SAME PROPERTY(“SP”) OCCUPANCY RENT GROW
Slide 17: Logistics Asset Strategy / Capital Allocation
LOGISTICS ASSET STRATEGY / CAPITAL ALLOCATION 1 Paddock Street (Amazon Last Mile), New Jersey Exit 10 Submarket (183,000 square feet)
Slide 18: National Platform with Growing Diversification into Tier 1 Markets
Seattle Northern California Southern California Dallas Houston Indianapolis Cincinnati Raleigh Atlanta Minneapolis-St. Paul Savannah Chicago Eastern Pennsylvania New Jersey South Florida Central Florida Washington DC/ Baltimore Nashville Columbus T1 T1 69% 37% 57% >70% 2010 2017 Q1 2021 YE 2021 Goal
Slide 19: Diversity of Facility Types & Sizes | Durable Long Term Lease
SIZE & PERFORMANCE LEASES LEASE ECONOMICS RE- LEASING # o f A s s e ts T o ta l S F % L e a s e d % o f N O I A v g L e a s e S iz e [T e rm ] N E R G ro w th T I’ s / L C ’s % o f N E R B u il d in g Im p ro v e m e n ts R e n e w a l % (T 4 .2 5 Y ) 83 63 M 99% 37% 596K [7.7 yrs] 30% 12% $0.03 100
Slide 20: Operations: Development Platform a Key Growth Driver
Turnpike Crossing Park, West Palm Beach, FL (6 buildings totaling 802,000 square feet) OPERATIONS: DEVELOPMENT PLATFORM A KEY GROWTH DRIVER
Slide 21: Development Strategic Advantages
(1) Value creation applies market cap rates per CBRE and internal records to initial projected stabilized NOI until projects are stabilized; (2) Based on initial stabilized cash yield (3) “infill” defined as submarket locations which have characteristics such as lack of developable land, close proxi
Slide 22: Development Pipeline - Relatively Low Risk, Tier Focus
Development Pipeline - Relatively Low Risk, Tier 1 Focus DEVELOPMENT PIPELINE $1.4B, 65% PRE-LEASED MARGIN 42% 2021 STARTS GUIDANCE $950 - 1,150M Currently an active build-to-suit prospect list better than pre-Covid levels. Coupled with national operating team and leading track record on infill rede
Slide 23: Liquidity and Capital Strategy
Lockport 16328 / 16410 / 16508 (3 buildings, 803,000 SF), I-55 Submarket, Chicago, IL LIQUIDITY AND CAPITAL STRATEGY Des M ines Creek 212 2, 24th Aven e South, Seattle, WA (Two buildings totaling 512,000 square feet)
Slide 24: Simplified and Disciplined Financial Profile
82% 18% Capitalization (in $ millions at 3/31/21, excludes unconsolidated JV debt) Unsecured Debt $3,509 Simplified and Disciplined Financial Profile 100% Fixed Rate Current ratings Baa1 / BBB+ Ample liquidity with disciplined use of $1.2B credit facility Conservative fixed rate borrower. Revolving
Slide 25: Corporate Responsibility
CORPORATE RESPONSIBILITY
Slide 26: Corporate Responsibility at Duke Realty
Corporate Responsibility at Duke Realty Corporate responsibility is a commitment to corporate practices that balance continuous improvement in environmental (E), social (S) and governance (G) initiatives that we believe are critical to our long-term success and to relationships with our stakeholders
Slide 27: Green Initiatives
$1.2B line of credit renewal includes sustainability- linked pricing (2021) Green Initiatives 27 $1.46B LEED developments since 2019 82 LEED projects since 2008* 87% of portfolio has energy efficient lighting CORP RESPONSIBILITYNote: Figure represents industrial, as well as previously owned office a
Slide 28: Green Initiatives – Smart Building and Solar Case Studies
• 18,000 solar panels installed across four buildings in Perth Amboy totaling 1M square feet of rooftop space • 11.1 megawatt system will produce a combined 13,500,000 kWh of clean electricity–enough to power more than 2,200 homes annually, 50% are low-to- moderate income households • Part of New Je
Slide 29: Commitment to Social and Governance
Commitment to Social and Governance Annual board of directors elections since 2002. By laws incorporate proxy access provision of “3% - 3 yrs - 20%”. 0 2 4 6 8 10 Governance Social Lower Risk Higher Risk ISS QualityScore** 24% women in upper management 50% diversity of independent directors 3,600 to
Slide 30: Industry Recognitions & Affiliations
Industry Recognitions & Affiliations • Listed on Forbes Global 2000 – one of 35 real estate companies • Gold winner of Brandon Hall Group’s Excellence Awards in the Best Inclusion and Diversity Strategy category • Global Real Estate Sustainability Benchmark (GRESB) member • 2020 Women on Boards for
Slide 31: Why Duke Realty? | 2021 Detailed Range of Estimates (Guidance)
WHY DUKE REALTY? | 2021 DETAILED RANGE OF ESTIMATES (GUIDANCE) Legacy Commerce Center (Brownfield development), Linden, NJ (3 buildings totaling 1.1 million square feet)
Slide 32: The Leading Domestic-Only Logistics REIT
The Leading Domestic-Only Logistics REIT Market leadership and trusted advisor to our customers with long-term relationships Portfolio suited for e-commerce and traditional distribution; concentrated in Tier 1 markets with newest portfolio in sector with low capex; strong tenants. Best-in-clas
Slide 33: 2021 Guidance: Range of Estimates and Key Assumptions
Metrics 2020 Actual 2021 YTD Range of Estimates Key Assumptions Pessimistic Optimistic Net Income per Share Attributable to Common Shareholders - Diluted $0.80 $0.21 $1.86 $2.24 – Original 2021 guidance in a range of $1.24 to $1.58 per share. – Higher gains on property sales in 2021 compared to 2020
Slide 34: Appendix: In-fill Development Case Studies
Lockport 16328 / 16410 / 16508 (3 buildings, 803,000 SF), I-55 Submarket, Chicago, IL APPENDIX IN-FILL DEVELOPMENT CASE STUDIES
Slide 35: Infill Redevelopment – Orange County Submarket
DEVELOPMENT • Acquired former Mitsubishi HDQ – one 2-story office building, four smaller R&D buildings and one 146,000sf warehouse • Within one hour of 10.5M residents; 5 miles from 5 major freeways – perfect last mile location • Leased for 10 yrs to e-comm user just after closing • 14 month entitle
Slide 36: Infill Redevelopment – South Bay Submarket
Infill Redevelopment – Southern California South Bay Submarket DEVELOPMENT • Acquired Class C industrial building on 13- acre brownfield site in Q4 2018 • 7 mi from LAX / 10 mi from the Ports of LA/LB • 17-month environmental remediation and demo • Speculative start August 2020 • Preleased for 100%
Slide 37: Infill Redevelopment – Northern California
• Located in San Jose’s Golden Triangle submarket with direct access to I-880 in the Silicon Valley with excellent access to the Peninsula and all of the Bay Area. • Acquired low coverage industrial facility on 13.7 acres of land in Q4 2019. Facility was leased to Univar for their chemical 3PL opera
Slide 38: Infill Redevelopment – Medley / Hialeah Submarket
• Direct access to U.S. Highway 27 to facilitate quick access to I-75, SR 826 and straight access to the cargo area of Miami International Airport and the Florida Turnpike. • Acquired former lumber yard site on 35 acres of land in Q1 2018, demolition of existing structure began Q1 2020 with pre-deve
Slide 39: Steel Run Logistics Center, Perth Amboy, NJ
Steel Run Logistics Center | Perth Amboy, NJ 1,254,000 SF New York City New Jersey 440 Toll Road Bridge Building 1 332,800 SF Building 2 921,100 SF DEVELOPMENT 39 • Acquired 83 acre site in Northern New Jersey along the Garden State Parkway in Q2 2019 that was under contract for 2 years. • Successfu
Slide 40: Infill Redevelopment — Newark Submarket
• 662,000 square foot fulfillment center being used for primarily last mile “quick delivery” for Northern NJ • The modern building features are truly unique to the submarket. • In this submarket, only 7 of 733 facilities (4.1%) have > 30’ clear height and built after 1997. • ~ 27% value creation DEV
Slide 41: Infill Build-to-Suit Developments – Atlanta Airport
Infill Build-to-Suit Developments – Atlanta Airport 2929 ROOSEVELT HIGHWAY | 500,000 SF HWC Logistics 1000 LOGISTICS WAY | 664,000 SF Home Depot Expected delivery Q1 2021 CAMP CREEK 4850 | 210,000 SF Porsche Cars NA DEVELOPMENT 41 Delivered Q2 2020 Delivered Q1 2020 Value creation expected ~ 25%
Slide 42: Definitions: Supplemental Performance Measures
Definitions Supplemental Performance Measures Funds from Operations (“FFO”): FFO is a non-GAAP performance measure computed in accordance with standards established by the National Association of Real Estate Investment Trusts (“Nareit”). It is calculated as net income attributable to common sharehol
Slide 43: FFO, Core FFO and AFFO
FFO, Core FFO and AFFO (in thousands) 2020 2019 2018 2017 2016 Actual Actual Actual Actual Actual Net income attributable to common shareholders $ 299,915 $ 428,972 $ 383,729 $ 1,634,431 $ 312,143 Less dividends on participating securities (1,447) (1,487) (1,675) (3,981) (2,356) Net Income per Commo
Slide 44: Reconciliation of 2021 FFO Per Diluted Share Guidance
Reconciliation of 2021 FFO Per Diluted Share Guidance (Unaudited ) Pessimistic Optimistic Net income attributable to common shareholders - diluted $ 1.86 $ 2.24 Depreciation 1.04 0.98 Gains on land and property sales, net of impairment charges (1.29) (1.49) Share of joint venture adjustments (0.01)