Duke Realty Announces First Quarter Earnings; Common and Preferred Sto

Duke Realty Announces First Quarter Earnings; Common and Preferred Stock Dividends Also Announced; Oklak Appointed Chairman

    Business Editors

    INDIANAPOLIS--(BUSINESS WIRE)--April 27, 2005--Duke Realty Corporation (NYSE:DRE) reported today that net income available for common shareholders for the first quarter of 2005 was $25.5 million compared to $32.9 million for the first quarter of 2004. On a per share basis, first quarter 2005 net income available for common shareholders was $0.18 per share compared with $0.23 per share for the first quarter of 2004. All per share amounts reported are diluted with basic per share information also included in the financial table accompanying this press release.
    Funds from operations ("FFO") increased to $81.6 million for the first quarter of 2005 versus $81.0 million for the same period in 2004. On a per share basis, first quarter FFO was unchanged at $0.57 per share compared to the first quarter of 2004. Both net income and FFO for the first quarter of 2005 included $2.8 million of impairment adjustments incurred on properties expected to be sold later this year. FFO is a supplemental non-GAAP financial measurement used as a standard in the real estate industry to measure and compare the operating performance of real estate companies. FFO is defined by the National Association of Real Estate Investment Trusts ("NAREIT") as net income or loss, excluding gains or losses from sales of depreciated property, plus operating property depreciation and amortization and adjustments for minority interest and unconsolidated companies on the same basis. A reconciliation of FFO to GAAP net income is included in the financial tables accompanying this press release.
    At the Company's Annual Meeting of Shareholders today, Denny Oklak, Chief Executive Officer, was appointed Chairman of the Board of Directors. Mr. Oklak replaces Tom Hefner, who is retiring from the Board this year. Oklak replaced Hefner as Chief Executive Officer last April, as part of the Company's previously announced succession plan.
    The Company also announced today at its annual meeting that all directors standing for re-election have been re-elected to the Board for a one-year term. As part of the Company's corporate governance policy, each director must stand for re-election annually. Shareholders also approved the proposed long-term compensation plans.
    Additionally, the Company's Board of Directors declared a quarterly dividend of $.465 per common share, or $1.86 per share on an annualized basis. The dividend is payable on May 31, 2005 to common shareholders of record on May 12, 2005.
    The Board also declared today the following dividends on the Company's outstanding preferred stock:

NYSE Quarterly Class Symbol Amount/Share Record Date Payment Date --------- ----------- -------------- -------------- --------------- Series B Not Listed $.99875 June 16, 2005 June 30, 2005 Series I DREPRI $.52813 June 16, 2005 June 30, 2005 Series J DREPRJ $.41406 May 17, 2005 May 31, 2005 Series K DREPRK $.40625 May 17, 2005 May 31, 2005

Series L DREPRL $.41250 May 17, 2005 May 31, 2005

    Denny Oklak, Chairman and Chief Executive Officer, commenting on Duke's first quarter performance, stated,

    "We had a good quarter with most areas of our business showing upward trends. We are especially pleased with our third-party construction activity, which was particularly strong with $142 million of new starts at a 12.1% profit margin. Occupancy of the existing portfolio was down slightly mainly due to a few anticipated larger terminations in the bulk portfolio at the end of the quarter.
    The first quarter results include an impairment charge of two cents per share. Even with that charge, our FFO results of $0.57 per share were at the mid-point of our earlier guidance. For the balance of the year we remain comfortable with our annual guidance of FFO per share of $2.43 to $2.55 and expect $0.61 to $0.63 per share in the second quarter."

    Property information at March 31, 2005 was as follows:

--	The Company's 879 in-service properties totaling 112.0 million square feet were 90.5 percent leased compared to 90.9 percent leased at December 31, 2004.
--	The Company's value creation pipeline, totaled $501 million, including $172 million of developments with an expected stabilized return of 10.2 percent that Duke plans to own indefinitely after completion; $67 million of developments with an expected stabilized return of 9.0 percent that the Company plans to sell within approximately one year of completion; and a $262 million backlog of third-party construction volume with a 10.7 percent pre-tax profit margin.
--	Including 3.2 million square feet of projects under development that were 52.0 percent pre-leased, the Company's total portfolio at the end of the first quarter consisted of 898 properties totaling more than 115 million square feet that were 89.4 percent leased.

    The Company also disclosed the following information for the first quarter of 2005:

    -- Duke renewed 75 percent of leases up for renewal, totaling 1.8
    million square feet, on which net effective rents increased
    2.5 percent.

    -- First quarter same property net operating income for 2005
    decreased 2.1 percent.

    -- Property sales in the first quarter totaled $47.3 million at
    an average stabilized capitalization rate of 7.0 percent.

    -- Acquisitions in the first quarter totaled $12.5 million at a
    stabilized capitalization rate of 10.8 percent.

    -- The Company's interest and fixed-charge coverage ratios in the
    first quarter were 3.9 and 2.7, respectively, and its
    debt-to-total market capitalization ratio was 33.0 percent at
    March 31, 2005.

    When used in this press release, the word "believes," "expects," "estimates" and similar expressions are intended to identify forward-looking statements. Such statements are subject to certain risks and uncertainties that could cause actual results to differ materially. In particular, among the factors that could cause actual results to differ materially are continued qualification as a real estate investment trust, general business and economic conditions, competition, increases in real estate construction costs, interest rates, accessibility of debt and equity capital markets and other risks inherent in the real estate business including tenant defaults, potential liability relating to environmental matters and liquidity of real estate investments. Readers are advised to refer to Duke's Form 8-K Report as filed with the Securities and Exchange Commission on July 24, 2003 for additional information concerning these risks.
    Duke Realty Corporation specializes in the ownership, construction, development, leasing and management of office and industrial real estate. Duke's properties encompass more than 115 million rentable square feet and are leased by a diverse and stable base of more than 4,200 tenants. Duke also provides these services through its Service Operations Group to approximately 300 tenants in more than 8.5 million square feet of space in properties owned by third-party clients. In addition, Duke owns or controls more than 4,400 acres of undeveloped land that can support more than 65 million square feet of future development.
    As one of the most vertically-integrated real estate companies in the U.S., Duke maintains a full construction management and leasing staff, constructing buildings for itself as well as for third-parties. Through a joint venture with Bremner Healthcare, Duke is well positioned to provide development expertise to medical office clients. In addition to its office and industrial focus in 13 primary operating platforms in the Midwest and Southeast United States, Duke selectively pursues retail development opportunities, as well as nationwide opportunities through it's National Development and Construction Group. Visit Duke on the web at www.dukerealty.com.
    A copy of the Company's March 31, 2005 supplemental information fact book will be available after 7:00 p.m. EDT today in the Investor Information section of the Company's web site at www.dukerealty.com. Duke is also hosting a conference call tomorrow at 3:00 p.m. Eastern Daylight Time (New York time) to discuss its first quarter operating results. All investors are invited to listen to this call, which can be accessed through the Investor Information section of the Company's web site at www.dukerealty.com.

Financial Highlights (in thousands, except per share data)

----------------------- Three Months Ended March 31 ----------------------- Operating Results 2005 2004 ----------------------------------------------------------------------

Revenues from continuing operations $217,931 $197,384 Earnings from rental operations 30,991 42,871 Earnings from service operations 10,920 2,042 Net income for common shareholders - Basic 25,481 32,886 Net income for common shareholders - Diluted 27,968 36,222 Funds from operations - Basic 81,625 80,981 Funds from operations - Diluted 89,549 89,238

Per Share: Net income - common shareholders - Basic $0.18 $0.24 Net income - common shareholders - Diluted $0.18 $0.23 Funds from operations - Basic $0.57 $0.59 Funds from operations - Diluted $0.57 $0.57 Dividend payout ratio of funds from operations 81.6% 80.7% Weighted average shares outstanding Basic - Net income and Funds from operations 143,089 138,398 Diluted - Net income 157,720 156,913 Diluted - Funds from operations 157,720 156,995

----------------------- March 31 December 31 Balance Sheet Data 2005 2004 ----------------------------------------------------------------------

Net real estate investments $5,105,836 $5,091,632 Total assets 5,945,877 5,896,643 Total debt 2,623,753 2,518,704 Shareholders' equity 2,800,374 2,825,869 Common shares outstanding at end of period 143,442 142,894

Reconciliation of Net Income to Funds From Operations (in thousands, except per share data)

Three Months Ended March 31 --------------------------------------------- 2005 2004 ---------------------- ---------------------- Wtd. Wtd. Avg. Per Avg. Per Amount Shares Share Amount Shares Share ---------------------- ---------------------- Net Income Available for Common Shares $25,481 143,089 $0.18 $32,886 138,398 $0.24 Add back: Minority interest in earnings of unitholders 2,487 13,858 3,336 14,046 Dilutive effect of Convertible Preferred D Shares 3,510 Other common stock equivalents 773 959 ---------------- ---------------- Diluted Net Income $27,968 157,720 $0.18 $36,222 156,913 $0.23 ====================== ======================

Reconciliation to Funds From Operations ("FFO") Net Income Available for Common Shares $25,481 143,089 $0.18 $32,886 138,398 $0.24 Add back: Depreciation and Amortization 63,226 52,397 Company Share of Joint Venture Depreciation and amortization 4,865 4,588 (Earnings) from depreciable property sales (6,510) (4,009) Minority interest share of add-backs (5,437) (4,881) ---------------- ---------------- Basic Funds From Operations 81,625 143,089 $0.57 80,981 138,398 $0.59 Minority interest in earnings of unitholders 2,487 13,858 3,336 14,046 Minority interest share of add-backs 5,437 4,881 Dilutive effect of Convertible Preferred D Shares 40 3,592 Other common stock equivalents 773 959 ---------------- ---------------- Diluted Funds From Operations $89,549 157,720 $0.57 $89,238 156,995 $0.57 ====================== =====================

--30--KR/cl*

CONTACT: Duke Realty Corporation For Investor Inquiries, contact: Thomas K. Peck, 317-808-6168 or For Media Inquiries, contact: Tom Wiser, 317-808-6137

KEYWORD: TEXAS TENNESSEE INDIANA ILLINOIS INDUSTRY KEYWORD: BUILDING/CONSTRUCTION REAL ESTATE EARNINGS DIVIDEND SOURCE: Duke Realty Corporation

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