Duke Realty — Investor Presentation (February 2021)
58 slides from Duke Realty's investor presentation, Feb 22, 2021
Slide 1: First Quarter 2021 Investor Update
First 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 3 Who We Are | U.S. Logistics Strategy 4 2020 Review | Performance | Relative Value 6 Business Drivers & Market Fundamentals 11 Operations - Customers and NOI Drivers 15 Logistics Asset Strategy | Capital Allocation 19 Development Strategy 27 Liquidity and Capital Strategy 30 Corporate Resp
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 20 markets in the U.S. • Founded 1972, IPO 1993, S&P 500 component • Own or hold an interest in 534 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: 2020 Recap / Long Term Performance / Relative Value
2020 RECAP / LONG TERM PERFORMANCE / RELATIVE VALUE
Slide 7: 2020 Review
2020 Review CAPITAL: Issued $675M of bonds at record spreads & rates; No significant debt maturities until 2023; Issued $177M of equity above NAV; "A" level credit profile INVESTMENT: Development starts $796M; Development pipeline $1.1B is 67% leased and margins > 30%; Land inventory is 78% Coastal
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% 8.6% 6.4% 7.9% 8.0% 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 $600 M (mid-point) D
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 – yet Discounted Relative Value
Above Average Portfolio Performance and Development Growth Prospects – yet Discounted Relative Value 12% 26% 4% 21% 29% DRE PLD FR EGP REXR NAV Premium / (Disc) Source: consensus FFO and AFFO estimates for 2021 per S&P GMI, as of 2/17/2021. Consensus AFFO on median basis to reduce excessive dispersi
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, JLL, Cushman Wakefield, Green St, UBS, BofA, U.S. Census Bureau. E-comm penetration includes autos & gas in total retail sales RE-SHORING EXPANDING CATEGORIES 12 Expanded purchase ca
Slide 13: Supply-Demand-Vacancy Supportive of Low Vacancy and Positive 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% 4.8% 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% 6.0% 2007 2009 2011 2013 2015 2017 2019 2021 DRE PORTFOLIO W
Slide 14: Evolution of Amazon Distribution Network Growth
Size & Clear Height Service Range 400K – 1.2M SF, 36’-40’ clear height ~ 250K-650K SF, 32’-36’ clear height ~ 70-200K SF, 18’ - 36’ clear height (newer are 32’), This newer prototype need 15ac of land for 600-800 cars/vans, or ~ 50% FAR ~ 5 to 600 miles N/A – provides zip code bundling sort for USPS
Slide 15: Operations: Customer Relationships & NOI Drivers
Legacy Commerce Center (Brownfield development), Linden, NJ OPERATIONS: CUSTOMER RELATIONSHIPS & NET OPERATING INCOME (NOI) DRIVERS
Slide 16: Diversified Customer Relationships by Company & Industry
Diversified Customer Relationships by Company & Industry TENANT INDUSTRIESTOP 15 TENANTS Note: Includes in-service portfolio only as of December 31, 2020; 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 17: Operating Metrics Supportive of Continued Growth
5.0% 2020 actual 4.0% 2021 mid-point guidance -0.5% -0.2%+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 GROWTH o
Slide 18: Proven Net Operating Income Growth
~$67M -$15M ~$16M ~$9M ~$28M ~$12M ~$3M ~$14M EscalatorsRent Growth on 2nd Gen2020 Acq & DevFRT BurnoffLease-up UnstabilizedNet DispositionsDevelopment Pipl Curr Yr 2021 Total NOI ~$754M Potential Additional GrowthEstimated Embedded Growth ( ~$65M) Proven Net Operating Income Growth 2020 Development
Slide 19: Logistics Asset Strategy / Capital Allocation
LOGISTICS ASSET STRATEGY / CAPITAL ALLOCATION 1 Paddock Street (Amazon Last Mile), New Jersey Exit 10 Submarket (183,000 square feet)
Slide 20: National Platform with Growing Diversification into Tier 1 Markets
Seattle Northern California Southern California Dallas Houston Indianapolis Cincinnati Raleigh Atlanta St. Louis Minneapolis-St. Paul Savannah Chicago Eastern Pennsylvania New Jersey South Florida Central Florida Washington DC/ Baltimore Nashville Columbus T1 T1 67% 37% 57% 70% 2010 2017 YE 2021 Goa
Slide 21: Recent Capital Allocation Achieving Geographic Objectives
21 Recent Capital Allocation Achieving Geographic Objectives and Strong Long Term Risk-Adjusted Returns MARKETS CAPITAL DEPLOYMENT- ACQ. & DISP. CAPITAL DEPLOYMENT - DEVELOPMENT Net____ Activity (1) Expected IRR’s (2) Spec BTS BTS Lease term Combined Prelease % Est’d Value Creation ($MM’s) ($MM’s) (
Slide 22: 2020 Acquisitions & Dispositions
Eastern Pennsylvania • 832,000 SF; $70M 2020 Acquisitions & Dispositions Indianapolis – Far NW Submarket • 3 buildings totaling 1.4M SF; $83M 2020 SUMMARY Square Feet % Leased Amount Stab Yield IRR’s* Acquisitions 2,560 81.0% $411,000 4.4% 6.7% Dispositions 4,350 77.5% $322,000 5.2% 5.9% New Jersey
Slide 23: Modern Portfolio Performs Across All Sizes and Markets
Modern Portfolio Performs Across All Sizes and Markets Proven experience that occupancy levels tend to stay higher in mid-to-large sized and newer properties in down cycle (see page 26). This dynamic played out in 2020. DRE’s recent strong rent growth almost exclusively from non-coastal markets. Lon
Slide 24: Diversity of Facility Types & Sizes
Diversity of Facility Types & Sizes >= 500K SF 250- 500K SF 100- 250K SF <100K SF REPRESENTATIVE DRE FACILITIES # OF ASSETS TOTAL SF % OF NOI AVG LEASE SIZE 83 63 M 37% 589K 136 49 M 29% 229K 208 33 M 27% 64K 90 7 M 7% 31K 144K B U IL D IN G S IZ E R A N G E Note: portfolio breakdown represents in-s
Slide 25: Focused Submarket Strategy | Minimal Risk to Supply
Focused Submarket Strategy | 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 classification where DRE ha
Slide 26: Durable & Strong Performance Across the Size Spectrum
86% 90% 90% 94% 91% 99% 97% 97% 100% 98% <100K 100- 249K 250- 499K >500K Total Occupancy Performance by Size (stabilized in-service) $0.13 $0.10 $0.06 $0.03 $0.06 <100K 100- 249K 250- 499K >500K Total $0.02 $0.08 $0.14 $0.06 0-10 10-20 20+ Total -- Size Stratification -- -- Age Stratification -- Dur
Slide 27: 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 28: Development Strategic Advantages
(1) Value creation uses market cap rates at start date, with cap rate sources per CBRE and internal records; (2) Based on initial stabilized cash yield (3) “infill” defined as submarket locations which have characteristics such as lack of developable land, close proximity to major population center,
Slide 29: Development Pipeline - Relatively Low Risk, Tier Focus
Development Pipeline - Relatively Low Risk, Tier 1 Focus DEVELOPMENT PIPELINE $1.1B, 67% PRE-LEASED MARGIN 32% 2021 STARTS GUIDANCE $700-900M Currently an active build-to-suit prospect list better than pre-Covid levels. Coupled with national operating team and leading track record on infill redevelo
Slide 30: 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 31: 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 67% pre-leased Will selectively consider spec projects in cer
Slide 32: Simplified and Disciplined Financial Profile
81% 19% Capitalization (in $ millions at 12/31/20, excludes unconsolidated JV debt) Unsecured Debt $3,354 Simplified and Disciplined Financial Profile 100% Fixed Rate Ability to fund over $700M of growth without equity and maintain current ratings (Baa1 / BBB+) Ample liquidity with disciplined use o
Slide 33: Funding Growth While Controlling Leverage
$54M (1) Construction in progress at December 31, 2021. (2) Represents average GAAP stabilized yield. (3) Represents 2021 forecast net debt to EBITDA - TTM at December 31, 2021. (4) Total occupancy of these projects is 29%. (5) Represents projected 12 months of funds available for reinvestment. (6)
Slide 34: Credit Metrics at A Quality Levels
PLD 27% EQR 30% AVB 31% CPT 31% DRE 32% PSA 33% O 36% FRT 46% SPG 54% Duke Realty is Baa1/BBB+(1) Rated but Credit Metrics are at “A” Quality Levels PLD 8.3 PSA 6.9 DRE 6.2 CPT 5.3 AVB 5.3 O 4.8 EQR 4.4 SPG 3.8 FRT 2.8 PSA 1.2 CPT 4.3 DRE 4.8 PLD 5.1 O 5.3 EQR 5.4 AVB 5.5 FRT 7.2 SPG 7.6 Debt + Pref
Slide 35: Corporate Responsibility
CORPORATE RESPONSIBILITY USGBC® and the related logo are trademarks owned by the U.S. Green Building Council and are used with permission.
Slide 36: Green Initiatives
Green Initiatives Commitment to 100% LEED certification on all new developments $850M of unsecured Green Bond issuances tied to Green Projects since 2019 More than $1.4B LEED developments since 2019 76 LEED projects since 2008* 87% of portfolio has energy efficient lighting tenant engagement ini
Slide 37: 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%”. • Incorporate elements of SASB disclosure framework in public filings. • Community service, wellness and diversity & inclusion part of culture for o
Slide 38: 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 39: Why Duke Realty?
WHY DUKE REALTY? Legacy Commerce Center (Brownfield development), Linden, NJ (3 buildings totaling 1.1 million square feet)
Slide 40: 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 41: 2021 Range of Estimates
2021 Range of Estimates (dollars in millions except per share amounts) Metrics 2020 Actual (Unaudited ) Range of Estimates Key AssumptionsPessimistic Optimistic Net Income per Share Attributable to Common Shareholders - Diluted $0.80 $1.24 $1.58 - Higher gains on property sales in 2021 compared to 2
Slide 42: 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 43: 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 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
Cherry Avenue Hemlock Avenue Beech Avenue Infill Redevelopments – Inland Empire West Under construction and coming soon | 25% to 30% value creation expected 10905 Beech Avenue ~170,000 SF developable Fontana, California 8978 HAVEN AVE | 120,628 SF Rancho Cucamonga, California Slover and Oleander ~18
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
• 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
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
• 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
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. • ~ 27% 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 Expected delivery Q1 2021 CAMP CREEK 4850 | 210,000 SF Porsche Cars NA DEVELOPMENT 55 Delivered Q2 2020 Delivered Q1 2020 Value creation expected ~ 25%
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 $ 299,91 5 $ 428,97 2 $ 383,72 9 $ 1,634,43 1 $ 312,14 3 Add back: Noncontrolling interest in earnings of unitholders 2,663 3,678 3,528 15,176 3,089 Net In
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 $ 1.24 $ 1.58 Depreciation 1.04 1.00 Gains on land and property sales, net of impairment charges (0.70) (0.88) Share of joint venture adjustments — (0.02