Duke Realty — Investor Presentation (June 2021)
58 slides from Duke Realty's investor presentation, Jun 7, 2021
Slide 1: June 2021 Investor Update
June 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 • Own or hold an interest in 543 facilities encompassing 162 milli
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
Strong AFFO Performance and Improving FFO after significant re-positioning and robust development accretion 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) Disposition Y
Slide 9: Core Growth Metrics and Development Platform Size/Pre-Leasing
Core Growth Metrics and Development Platform Size/ 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 Gr
Slide 10: Above Average Performance and Growth Prospects – Discounted Relative Value
Above Average Portfolio Performance and Development Growth Prospects – yet Discounted Relative Value 11% 26% 10% 17% 20% 28% DRE PLD FR EGP REXR TRNO NAV Premium / (Disc) Source: consensus FFO and AFFO estimates for 2021 per S&P GMI “CIQ”, as of 6/3/2021. Consensus AFFO on median basis to reduce exc
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.Q1 2021 penetration is TTM. Most common I/S rat
Slide 13: Supply-Demand-Vacancy Supportive of Continued Low Vacancy and Rent Growth
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 15 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 ar
Slide 16: Operating Metrics Supportive of Continued Growth
6.3% Q1 2021 actual 4.5% 2021 mid-point guidance -0.3% -0.1% +3.5% +1.4% 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: Proven NOI Growth and 2021 Expected NOI Growth
~$70M ~ ($10M) ~$16M ~$9M ~$30M ~$12M ~$2M ~$11M EscalatorsRent Growth on 2nd Gen2020 D v DeliveriesFRT BurnoffLease-up UnstabilizedNet DispositionsDevelopment Pipl Curr Yr 2021 Total NOI ~$757M Additional Growth Factor EstimatesGrowth from Stabilized Portfolio ( ~$67M) Proven Net Operating Income G
Slide 18: Logistics Asset Strategy / Capital Allocation
LOGISTICS ASSET STRATEGY / CAPITAL ALLOCATION 1 Paddock Street (Amazon Last Mile), New Jersey Exit 10 Submarket (185,000 square feet)
Slide 19: National Platform with Expanding 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 20: Diversification, Rent Growth & Low Capex
LEASE ECONOMICS RE- LEASING # o f A s s e ts T o ta l S F % o f N O I % L e a s e d A v g L e a s e S iz e [T e rm ] R e c e n t 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 % B a c k fi ll M o s . (f o r n o n -r e n e w a ls ) 83 63 M 37% 99% 596K
Slide 21: Modern Facilities & Tier 1 Concentration
Most Modern Facility Features for Today’s Logistics Customers | High Tier 1 Exposure with U.S.-only Diversification 21MODERN FACILTIES & TIER 1 CONCENTRATION 203K SF 124K 92K 74K 40K 40K B u il d in g S iz e ( in S F ) 12 yrs 18 19 20 34 38 A v g A g e ( in y e a rs ) 32 ft 29 29 25 24 23 C le a r H
Slide 22: Targeted Submarket Focus Across Markets
Targeted Submarket Focus Across 19 Markets | Minimal Risk to Supply (1) Higher supply submarkets defined per a mix of current and trending metrics such as under construction % of supply, deliveries % of supply, vacancy rate, demand, labor and barriers to entry; Current submarkets in this classificat
Slide 23: Recent Capital Allocation Achieving Geographic Objectives
Recent Capital Allocation Achieving Geographic Objectives and Strong Long Term Risk-Adjusted Returns 23 MARKETS CAPITAL DEPLOYMENT- ACQ. & DISP. CAPITAL DEPLOYMENT - DEVELOPMENT Net____ Activity (1) Expected IRR’s (2) Spec BTS BTS Lease term Combined Prelease % Est’d Value Creation ($MM’s) ($MM’s) (
Slide 24: Recent Opportunistic Acquisitions – Coastal T1 Markets
DEVELOPMENT 24 Recent Opportunistic Acquisitions – Coastal T1 Markets NNJ Meadowlands Submarket – 102,000 SF 5.1% Stabilized Yield | IRR estimate low 8’s % SoCal IE West Submarket – 8 bldgs, 82,000 SF 5.0% Stabilized Yield | IRR estimate mid 8‘s % Seattle Kent Valley Submarket – 63,000 SF 4.7% Stabi
Slide 25: 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 26: 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 27: Development Pipeline – Relatively Low Risk, Tier Focus
Development Pipeline - Relatively Low Risk, Tier 1 Focus 27DEVELOPMENT 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 re
Slide 28: 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 29: Capital Strategy
Capital Strategy Liquidity Access to Capital Liability Manage- ment Capital Fore- casting Develop- ment Ratings Capital Strategy Follow disciplined development practices with approximately 50% pre-leasing levels Development pipeline 65% pre-leased Will selectively consider spec projects in cer
Slide 30: 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 Ample liquidity with disciplined use of $1.2B credit facility Conservative fixed rate borrower. Revolving credit facility the main sou
Slide 31: Baa1/BBB+ Rated but Credit Metrics at A Quality Levels
PLD 26% EQR 29% AVB 30% CPT 31% DRE 32% O 35% PSA 35% SPG 53% Duke Realty is Baa1/BBB+(3) Rated but Credit Metrics are at “A” Quality Levels PLD 9.7 PSA 9.4 DRE 5.6 O 5.4 AVB 5.3 CPT 5.3 EQR 4.5 SPG 4.3 PSA 1.2 CPT 4.7 PLD 4.9 DRE 5.2 O 5.3 AVB 5.7 EQR 6.0 SPG 7.0 Debt + Preferred to Mkt Cap(1) Net
Slide 32: Corporate Responsibility
CORPORATE RESPONSIBILITY
Slide 33: 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 34: Green Initiatives
$1.2B line of credit renewal includes sustainability- linked pricing* (2021) Green Initiatives 34 $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
Slide 35: 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 36: Commitment to Social and Governance
Commitment to Social and Governance Annual board of directors elections since 2002. By laws incorporate proxy access provision of 3/3/20 3 0 2 4 6 8 10 Governance Social Lower Risk Higher Risk ISS QualityScore 2 24% women in upper management 55% diversity of independent directors 3,600 total hours v
Slide 37: 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 38: 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 39: 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 40: 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 41: 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 42: Infill Build-to-Suits and Spec Developments – Chicago
Infill Build-to-Suits and Spec Developments - Chicago • Three projects totaling 2.2 million square feet • Two (2) build-to-suits totaling 1.9 million square feet with top tier customers Wayfair and a leading home and commercial improvement retailer, with both customers having leading e-commerce stra
Slide 43: Infill Redevelopment – Orange County, Southern California
DEVELOPMENT • Acquired former Mitsubishi HDQ – one 2-story office building, four smaller R&D buildings and one 146,000 square foot 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 mon
Slide 44: 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 45: Infill Redevelopments – Los Angeles / Orange Co
Infill Redevelopments – Los Angeles / Orange Co Under construction and coming soon Orange Ave ~160,673 SF developable Long Beach, California 13215 Cambridge Street ~146,068 SF developable Santa Fe Springs, California 2871 E La Mesa St ~187,605 SF developable Anaheim, California Value creation expect
Slide 46: Infill Redevelopments – Inland Empire West
Infill Redevelopments – Inland Empire West Under construction and coming soon | 35% to 40% value creation expected 8978 HAVEN AVE | 120,628 SF Rancho Cucamonga, California Slover and Oleander ~185,400 SF developable Fontana, California Vineyard and Elm ~190,713 SF developable Ontario, California 46D
Slide 47: Land Acquisitions & Developments – Inland Empire East
3300 Indian Ave 1,224,874 SF 9180 ALABAMA ST | 1,079,236 SF Redlands, California 4501 PATTERSON AVENUE | 800,628 SF Perris, California 4375 N Perris Boulevard 1,008,648 SF 3500 Indian Ave 783,407 SF Land Acquisitions & Developments – Inland Empire East 4 45% to 50% value creation expected 728 W Ride
Slide 48: Infill Redevelopment – Northern California (San Jose)
• 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 49: Infill Redevelopment – Northern California (Fremont)
Infill Redevelopment – Northern California DEVELOPMENT Before After • In January 2019, acquired 12 acre site in Fremont, CA near I-880. Site was occupied by a 23-year old office/flex property. Received site plan approval in Q4 2019 and commenced demolition and grading work. • In Q2 2020 began shell
Slide 50: Infill Redevelopment – South Florida Medley / Hialeah
• 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 51: Infill Redevelopment – Northern New Jersey Exit 10 Submarket (Carteret/Avenel)
Infill Redevelopment — Northern New Jersey Exit 12 (Carteret / Avenel) Submarket One Paddock St 185,071 SF DEVELOPMENT 51 • 2018 infill acquisition of 9 net acres brownfield land site approximately 2 miles from the Exit 12 interchange off I-95; strategically located within 30 minutes of NYC and 15 m
Slide 52: 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 52 • 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 53: Infill Redevelopment – Northern New Jersey 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. • ~ 30% value creation DEV
Slide 54: Infill Redevelopment – Northern New Jersey Exit 10 Submarket
• Acquired 40 acre site in Northern New Jersey along the Exit 10 / I-287 Corridor in Q2 2019. • Successfully completed an environmental remediation plan and commenced construction in Q1 2020. In Q4 2020, also entered into ground lease for adjacent 8 acres for development of an excess storage lot ame
Slide 55: 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 CAMP CREEK 4850 | 210,000 SF Porsche Cars NA DEVELOPMENT 55 Delivered Q2 2020 Delivered Q1 2020 Value creation ~ 30% Delivered Q1 2021
Slide 56: 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 57: 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 58: 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)