Document
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2019
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from              to             
Commission File Number: 1-9044 (Duke Realty Corporation) 0-20625 (Duke Realty Limited Partnership)
dukerealtylogostacka01a01a15.jpg
DUKE REALTY CORPORATION
DUKE REALTY LIMITED PARTNERSHIP
(Exact Name of Registrant as Specified in Its Charter)
Indiana
(Duke Realty Corporation)
 
35-1740409
 (Duke Realty Corporation)
Indiana
(Duke Realty Limited Partnership)
 
35-1898425
 (Duke Realty Limited Partnership)
(State or Other Jurisdiction
of Incorporation or Organization)
 
(I.R.S. Employer
Identification Number)
600 East 96th Street, Suite 100
 
 
Indianapolis,
Indiana
 
46240
        (Address of Principal Executive Offices)
 
(Zip Code)
Registrant's Telephone Number, Including Area Code:
(317)
808-6000
Securities registered pursuant to Section 12(b) of the Act:
 
 
Title of Class
 
Trading Symbols
 
Name of Exchange on Which Registered
Duke Realty Corporation
 
Common Stock, $0.01 par value
 
DRE
 
New York Stock Exchange
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Duke Realty Corporation
Yes
 No  
 
Duke Realty Limited Partnership
Yes 
 No  
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Duke Realty Corporation
Yes
 No  
 
Duke Realty Limited Partnership
Yes 
 No  

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Duke Realty Corporation:
Large accelerated filer
Accelerated filer  
Non-accelerated filer  
Smaller reporting company  
Emerging growth company
Duke Realty Limited Partnership:
Large accelerated filer 
 

Accelerated filer  
Non-accelerated filer  
Smaller reporting company  
Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act):
Duke Realty Corporation
Yes
No  
 
Duke Realty Limited Partnership
Yes  
No  
The number of shares of Duke Realty Corporation's common stock outstanding at July 31, 2019 was 361,443,988.



EXPLANATORY NOTE
This report (the "Report") combines the quarterly reports on Form 10-Q for the period ended June 30, 2019 of both Duke Realty Corporation and Duke Realty Limited Partnership. Unless stated otherwise or the context otherwise requires, references to "Duke Realty Corporation" or the "General Partner" mean Duke Realty Corporation and its consolidated subsidiaries, and references to the "Partnership" mean Duke Realty Limited Partnership and its consolidated subsidiaries. The terms the "Company," "we," "us" and "our" refer to the General Partner and the Partnership, collectively, and those entities owned or controlled by the General Partner and/or the Partnership.
Duke Realty Corporation is a self-administered and self-managed real estate investment trust ("REIT") and is the sole general partner of the Partnership, owning 99.1% of the common partnership interests of the Partnership ("General Partner Units") as of June 30, 2019. The remaining 0.9% of the common partnership interests ("Limited Partner Units" and, together with the General Partner Units, the "Common Units") are owned by limited partners. As the sole general partner of the Partnership, the General Partner has full, exclusive and complete responsibility and discretion in the day-to-day management and control of the Partnership.
The General Partner and the Partnership are operated as one enterprise. The management of the General Partner consists of the same members as the management of the Partnership. As the sole general partner with control of the Partnership, the General Partner consolidates the Partnership for financial reporting purposes, and the General Partner does not have any significant assets other than its investment in the Partnership. Therefore, the assets and liabilities of the General Partner and the Partnership are substantially the same.
We believe combining the quarterly reports on Form 10-Q of the General Partner and the Partnership into this single report results in the following benefits:
enhances investors' understanding of the General Partner and the Partnership by enabling investors to view the business as a whole in the same manner as management views and operates the business;
eliminates duplicative disclosure and provides a more streamlined and readable presentation of information since a substantial portion of the Company's disclosure applies to both the General Partner and the Partnership; and
creates time and cost efficiencies through the preparation of one combined report instead of two separate reports.
 
We believe it is important to understand the few differences between the General Partner and the Partnership in the context of how we operate as an interrelated consolidated company. The General Partner's only material asset is its ownership of partnership interests in the Partnership. As a result, the General Partner does not conduct business itself, other than acting as the sole general partner of the Partnership and issuing public equity from time to time. The General Partner does not issue any indebtedness, but does guarantee some of the unsecured debt of the Partnership. The Partnership holds substantially all the assets of the business, directly or indirectly, and holds the ownership interests related to certain of the Company's investments. The Partnership conducts the operations of the business and has no publicly traded equity. Except for net proceeds from equity issuances by the General Partner, which are contributed to the Partnership in exchange for General Partner Units or Preferred Units, the Partnership generates the capital required by the business through its operations, its incurrence of indebtedness and the issuance of Limited Partner Units to third parties.
Noncontrolling interests, shareholders' equity and partners' capital are the main areas of difference between the consolidated financial statements of the General Partner and those of the Partnership. The noncontrolling interests in the Partnership's financial statements include the interests in consolidated investees not wholly owned by the Partnership. The noncontrolling interests in the General Partner's financial statements include the same noncontrolling interests at the Partnership level, as well as the common limited partnership interests in the Partnership, which are accounted for as partners' capital by the Partnership.
In order to highlight the differences between the General Partner and the Partnership, there are separate sections in this report, as applicable, that separately discuss the General Partner and the Partnership, including separate financial statements and separate Exhibit 31 and 32 certifications. In the sections that combine disclosure of the General Partner and the Partnership, this report refers to actions or holdings as being actions or holdings of the collective Company.




DUKE REALTY CORPORATION/DUKE REALTY LIMITED PARTNERSHIP
INDEX
 
 
 
 
 
 
 
Page
 
 
 
 
 
 
 
 
 
 
 
 
Duke Realty Corporation:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Duke Realty Limited Partnership:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Duke Realty Corporation and Duke Realty Limited Partnership:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

2


PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
DUKE REALTY CORPORATION AND SUBSIDIARIES
Consolidated Balance Sheets
(in thousands, except per share amounts)
 
June 30,
2019
 
December 31,
2018
 
(Unaudited)
 
 
ASSETS
 
 
 
Real estate investments:
 
 
 
Real estate assets
$
7,669,915

 
$
7,248,346

Construction in progress
423,460

 
477,162

Investments in and advances to unconsolidated joint ventures
113,987

 
110,795

Undeveloped land
368,621

 
360,816

 
8,575,983

 
8,197,119

Accumulated depreciation
(1,427,919
)
 
(1,344,176
)
Net real estate investments
7,148,064

 
6,852,943

 
 
 
 
Real estate investments and other assets held-for-sale
20,472

 
1,082

 
 
 
 
Cash and cash equivalents
8,664

 
17,901

Accounts receivable
21,229

 
14,254

Straight-line rent receivable
120,155

 
109,334

Receivables on construction contracts, including retentions
22,450

 
41,215

Deferred leasing and other costs, net of accumulated amortization of $204,793 and $200,744
316,624

 
313,799

Notes receivable from property sales
142,550

 
272,550

Other escrow deposits and other assets
213,919

 
180,946

 
$
8,014,127

 
$
7,804,024

LIABILITIES AND EQUITY
 
 
 
Indebtedness:
 
 
 
Secured debt, net of deferred financing costs of $189 and $238
$
36,053

 
$
79,563

Unsecured debt, net of deferred financing costs of $24,078 and $26,062
2,550,922

 
2,548,938

Unsecured line of credit
252,000

 
30,000

 
2,838,975

 
2,658,501

 
 
 
 
Liabilities related to real estate investments held-for-sale
633

 

 
 
 
 
Construction payables and amounts due subcontractors, including retentions
67,062

 
92,288

Accrued real estate taxes
76,085

 
73,358

Accrued interest
22,276

 
16,153

Other liabilities
263,839

 
205,433

Tenant security deposits and prepaid rents
43,136

 
45,048

Total liabilities
3,312,006

 
3,090,781

Shareholders' equity:
 
 
 
Common shares ($0.01 par value); 600,000 shares authorized; 360,625 and 358,851 shares issued and outstanding, respectively
3,606

 
3,589

Additional paid-in capital
5,290,382

 
5,244,375

Accumulated other comprehensive loss
(28,717
)
 
(4,676
)
Distributions in excess of net income
(624,674
)
 
(585,087
)
Total shareholders' equity
4,640,597

 
4,658,201

Noncontrolling interests
61,524

 
55,042

Total equity
4,702,121

 
4,713,243

 
$
8,014,127

 
$
7,804,024

See accompanying Notes to Consolidated Financial Statements

3


DUKE REALTY CORPORATION AND SUBSIDIARIES
Consolidated Statements of Operations and Comprehensive Income
For the three and six months ended June 30,
(in thousands, except per share amounts)
(Unaudited)
 
Three Months Ended
 
Six Months Ended
 
2019
 
2018
 
2019
 
2018
Revenues:
 
 
 
 
 
 
 
Rental and related revenue
$
213,107

 
$
192,093

 
$
423,072

 
$
385,549

General contractor and service fee revenue
23,919

 
18,465

 
78,883

 
59,566

 
237,026

 
210,558

 
501,955

 
445,115

Expenses:
 
 
 
 
 
 
 
Rental expenses
17,597

 
16,377

 
38,265

 
36,290

Real estate taxes
32,375

 
31,196

 
64,817

 
62,342

General contractor and other services expenses
23,189

 
15,253

 
75,775

 
55,662

Depreciation and amortization
83,004

 
75,832

 
158,996

 
153,361

 
156,165

 
138,658

 
337,853

 
307,655

Other operating activities:
 
 
 
 
 
 
 
Equity in earnings of unconsolidated joint ventures
4,143

 
1,682

 
8,858

 
9,969

Gain on sale of properties
30,592

 
149,962

 
30,429

 
194,848

Gain on land sales
1,950

 
357

 
2,700

 
3,306

Other operating expenses
(1,518
)
 
(1,529
)
 
(3,641
)
 
(2,798
)
Non-incremental costs related to successful leases
(3,447
)
 

 
(5,603
)
 

General and administrative expenses
(13,420
)
 
(13,459
)
 
(35,403
)
 
(34,482
)
 
18,300

 
137,013

 
(2,660
)
 
170,843

Operating income
99,161

 
208,913

 
161,442

 
308,303

Other income (expenses):
 
 
 
 
 
 
 
Interest and other income, net
2,534

 
4,727

 
5,292

 
9,190

Interest expense
(23,510
)
 
(20,675
)
 
(45,642
)
 
(40,675
)
Loss on debt extinguishment

 
(151
)
 
(13
)
 
(151
)
Gain on involuntary conversion

 

 
2,259

 

Income from continuing operations before income taxes
78,185

 
192,814

 
123,338

 
276,667

Income tax expense
(6,616
)
 
(63
)
 
(7,001
)
 
(10,392
)
Income from continuing operations
71,569

 
192,751

 
116,337

 
266,275

Discontinued operations:
 
 
 
 
 
 
 
Income before gain on sales

 
31

 

 
23

Gain on sale of properties
99

 
2,889

 
254

 
3,021

Income from discontinued operations
99

 
2,920

 
254

 
3,044

Net income
71,668

 
195,671

 
116,591

 
269,319

Net income attributable to noncontrolling interests
(615
)
 
(1,826
)
 
(987
)
 
(2,511
)
Net income attributable to common shareholders
$
71,053

 
$
193,845

 
$
115,604

 
$
266,808

Basic net income per common share:
 
 
 
 
 
 
 
Continuing operations attributable to common shareholders
$
0.20

 
$
0.53

 
$
0.32

 
$
0.74

Discontinued operations attributable to common shareholders

 
0.01

 

 
0.01

Total
$
0.20

 
$
0.54

 
$
0.32

 
$
0.75

Diluted net income per common share:
 
 
 
 
 
 
 
Continuing operations attributable to common shareholders
$
0.20

 
$
0.53

 
$
0.32

 
$
0.73

Discontinued operations attributable to common shareholders

 
0.01

 

 
0.01

Total
$
0.20

 
$
0.54

 
$
0.32

 
$
0.74

Weighted average number of common shares outstanding
359,681

 
357,054

 
359,412

 
356,898

Weighted average number of common shares and potential dilutive securities
362,926

 
362,741

 
362,615

 
362,551

 
 
 
 
 
 
 
 
Comprehensive income:
 
 
 
 
 
 
 
Net income
$
71,668

 
$
195,671

 
$
116,591

 
$
269,319

Other comprehensive loss:
 
 
 
 
 
 
 
Unrealized losses on interest rate swap contracts
(14,699
)
 

 
(24,041
)
 

Comprehensive income
$
56,969

 
$
195,671

 
$
92,550

 
$
269,319

   
See accompanying Notes to Consolidated Financial Statements

4


DUKE REALTY CORPORATION AND SUBSIDIARIES
Consolidated Statements of Cash Flows
For the six months ended June 30,
(in thousands)
(Unaudited)
 
2019
 
2018
Cash flows from operating activities:
 
 
 
Net income
$
116,591

 
$
269,319

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
Depreciation of buildings and tenant improvements
131,878

 
126,039

Amortization of deferred leasing and other costs
27,118

 
27,322

Amortization of deferred financing costs
3,121

 
2,840

Straight-line rental income and expense, net
(10,466
)
 
(10,931
)
Loss on debt extinguishment
13

 
151

Gain on involuntary conversion
(2,259
)
 

Gains on land and property sales
(33,383
)
 
(201,175
)
Third-party construction contracts, net
15,645

 
(5,122
)
Other accrued revenues and expenses, net
10,021

 
24,760

Equity in earnings in excess of operating distributions received from unconsolidated joint ventures
(487
)
 
(2,585
)
Net cash provided by operating activities
257,792

 
230,618

Cash flows from investing activities:
 
 
 
Development of real estate investments
(205,315
)
 
(227,186
)
Acquisition of real estate investments and related intangible assets
(108,201
)
 
(208,914
)
Acquisition of undeveloped land
(200,872
)
 
(98,486
)
Second generation tenant improvements, leasing costs and building improvements
(20,463
)
 
(26,337
)
Other deferred leasing costs
(11,152
)
 
(20,787
)
Other assets
(7,224
)
 
(4,590
)
Proceeds from the repayments of notes receivable from property sales
130,000

 
149,890

Proceeds from land and property sales, net
97,526

 
433,551

Capital distributions from unconsolidated joint ventures

 
17,439

Capital contributions and advances to unconsolidated joint ventures
(5,962
)
 
(2,617
)
Net cash (used for) provided by investing activities
(331,663
)
 
11,963

Cash flows from financing activities:
 
 
 
Proceeds from issuance of common shares, net
42,128

 
1,376

Payments on unsecured debt

 
(1,322
)
Payments on secured indebtedness including principal amortization
(43,502
)
 
(5,708
)
Borrowings on line of credit, net
222,000

 

Distributions to common shareholders
(154,550
)
 
(142,807
)
Distributions to noncontrolling interests, net
(1,180
)
 
(1,361
)
Tax payments on stock-based compensation awards
(5,469
)
 
(8,128
)
Change in book cash overdrafts
15,874

 
(35,331
)
Other financing activities
(9,920
)
 

Deferred financing costs

 
(285
)
Net cash provided by (used for) financing activities
65,381

 
(193,566
)
Net (decrease) increase in cash, cash equivalents and restricted cash
(8,490
)
 
49,015

Cash, cash equivalents and restricted cash at beginning of period
25,517

 
193,627

Cash, cash equivalents and restricted cash at end of period
$
17,027

 
$
242,642

 
 
 
 
Non-cash operating activities:
 
 
 
Liabilities and right-of-use assets - operating leases
$
37,810

 
$

Carrying amount of pre-existing ownership interest in acquired property
$

 
$
5,034

Conversion of Limited Partner Units to common shares
$

 
$
1,938

See accompanying Notes to Consolidated Financial Statements


5


DUKE REALTY CORPORATION AND SUBSIDIARIES
Consolidated Statements of Changes in Equity
For the three and six months ended June 30, 2019 and 2018
(in thousands, except per share data)
(Unaudited)
 
 
Common Shareholders
 
 
 
 
 
Common
Stock
 
Additional
Paid-in
Capital
 
Accumulated
Other
Comprehensive
Loss
 
Distributions
in Excess of
Net Income
 
Noncontrolling
Interests
 
Total
Balance at March 31, 2019
$
3,594

 
$
5,250,157

 
$
(14,018
)
 
$
(618,123
)
 
$
59,561

 
$
4,681,171

Net income

 

 

 
71,053

 
615

 
71,668

Other comprehensive loss

 

 
(14,699
)
 

 

 
(14,699
)
Issuance of common shares
12

 
37,624

 

 

 

 
37,636

Stock-based compensation plan activity

 
2,601

 

 
(291
)
 
2,023

 
4,333

Distributions to common shareholders ($0.215 per share)

 

 

 
(77,313
)
 

 
(77,313
)
Distributions to noncontrolling interests

 

 

 

 
(675
)
 
(675
)
Balance at June 30, 2019
$
3,606

 
$
5,290,382

 
$
(28,717
)
 
$
(624,674
)
 
$
61,524

 
$
4,702,121

Balance at December 31, 2018
$
3,589

 
$
5,244,375

 
$
(4,676
)
 
$
(585,087
)
 
$
55,042

 
$
4,713,243

Net income

 

 

 
115,604

 
987

 
116,591

Other comprehensive loss

 

 
(24,041
)
 

 

 
(24,041
)
Issuance of common shares
13

 
42,115

 

 

 

 
42,128

Contributions from noncontrolling interests

 

 

 

 
312

 
312

Stock-based compensation plan activity
4

 
3,892

 

 
(641
)
 
6,675

 
9,930

Distributions to common shareholders ($0.43 per share)

 

 

 
(154,550
)
 

 
(154,550
)
Distributions to noncontrolling interests

 

 

 

 
(1,492
)
 
(1,492
)
Balance at June 30, 2019
$
3,606

 
$
5,290,382

 
$
(28,717
)
 
$
(624,674
)
 
$
61,524

 
$
4,702,121


 
Common Shareholders
 
 
 
 
 
Common
Stock
 
Additional
Paid-in
Capital
 
Distributions
in Excess of
Net Income
 
Noncontrolling
Interests
 
Total
Balance at March 31, 2018
$
3,570

 
$
5,204,855

 
$
(674,920
)
 
$
47,679

 
$
4,581,184

Net income

 

 
193,845

 
1,826

 
195,671

Issuance of common shares
1

 
669

 

 

 
670

Stock-based compensation plan activity

 
2,144

 
(201
)
 
1,592

 
3,535

Conversion of Limited Partner Units
1

 
1,937

 

 
(1,938
)
 

Distributions to common shareholders ($0.20 per share)

 

 
(71,409
)
 

 
(71,409
)
Distributions to noncontrolling interests

 

 

 
(681
)
 
(681
)
Balance at June 30, 2018
$
3,572

 
$
5,209,605

 
$
(552,685
)
 
$
48,478

 
$
4,708,970

Balance at December 31, 2017
$
3,564

 
$
5,205,316

 
$
(676,036
)
 
$
41,534

 
$
4,574,378

Net income

 

 
266,808

 
2,511

 
269,319

Issuance of common shares
1

 
1,375

 

 

 
1,376

Stock-based compensation plan activity
6

 
977

 
(650
)
 
7,732

 
8,065

Conversion of Limited Partner Units
1

 
1,937

 

 
(1,938
)
 

Distributions to common shareholders ($0.40 per share)

 

 
(142,807
)
 

 
(142,807
)
Distributions to noncontrolling interests

 

 

 
(1,361
)
 
(1,361
)
Balance at June 30, 2018
$
3,572

 
$
5,209,605

 
$
(552,685
)
 
$
48,478

 
$
4,708,970


See accompanying Notes to Consolidated Financial Statements

6


DUKE REALTY LIMITED PARTNERSHIP AND SUBSIDIARIES
Consolidated Balance Sheets
(in thousands)

 
June 30,
2019
 
December 31, 2018
 
(Unaudited)
 
 
ASSETS
 
 
 
Real estate investments:
 
 
 
Real estate assets
$
7,669,915

 
$
7,248,346

     Construction in progress
423,460

 
477,162

     Investments in and advances to unconsolidated joint ventures
113,987

 
110,795

     Undeveloped land
368,621

 
360,816

 
8,575,983

 
8,197,119

     Accumulated depreciation
(1,427,919
)
 
(1,344,176
)
              Net real estate investments
7,148,064

 
6,852,943

 
 
 
 
Real estate investments and other assets held-for-sale
20,472

 
1,082

 
 
 
 
Cash and cash equivalents
8,664

 
17,901

Accounts receivable
21,229

 
14,254

Straight-line rent receivable
120,155

 
109,334

Receivables on construction contracts, including retentions
22,450

 
41,215

Deferred leasing and other costs, net of accumulated amortization of $204,793 and $200,744
316,624

 
313,799

Notes receivable from property sales
142,550

 
272,550

Other escrow deposits and other assets
213,919

 
180,946

 
$
8,014,127

 
$
7,804,024

LIABILITIES AND EQUITY
 
 
 
Indebtedness:
 
 
 
     Secured debt, net of deferred financing costs of $189 and $238
$
36,053

 
$
79,563

     Unsecured debt, net of deferred financing costs of $24,078 and $26,062
2,550,922

 
2,548,938

     Unsecured line of credit
252,000

 
30,000

 
2,838,975

 
2,658,501

 
 
 
 
Liabilities related to real estate investments held-for-sale
633

 

 
 
 
 
Construction payables and amounts due subcontractors, including retentions
67,062

 
92,288

Accrued real estate taxes
76,085

 
73,358

Accrued interest
22,276

 
16,153

Other liabilities
263,839

 
205,433

Tenant security deposits and prepaid rents
43,136

 
45,048

     Total liabilities
3,312,006

 
3,090,781

Partners' equity:
 
 
 
Common equity (360,625 and 358,851 General Partner Units issued and outstanding, respectively)
4,669,314

 
4,662,877

Limited Partners' common equity (3,143 and 2,920 Limited Partner Units issued and outstanding, respectively)
56,910

 
50,585

Accumulated other comprehensive loss
(28,717
)
 
(4,676
)
            Total partners' equity
4,697,507

 
4,708,786

Noncontrolling interests
4,614

 
4,457

     Total equity
4,702,121

 
4,713,243

 
$
8,014,127

 
$
7,804,024

See accompanying Notes to Consolidated Financial Statements

7


DUKE REALTY LIMITED PARTNERSHIP AND SUBSIDIARIES
Consolidated Statements of Operations and Comprehensive Income
For the three and six months ended June 30,
(in thousands, except per unit amounts)
(Unaudited)
 
Three Months Ended
 
Six Months Ended
 
2019
 
2018
 
2019
 
2018
Revenues:
 
 
 
 
 
 
 
Rental and related revenue
$
213,107

 
$
192,093

 
$
423,072

 
$
385,549

General contractor and service fee revenue
23,919

 
18,465

 
78,883

 
59,566

 
237,026

 
210,558

 
501,955

 
445,115

Expenses:
 
 
 
 
 
 
 
Rental expenses
17,597

 
16,377

 
38,265

 
36,290

Real estate taxes
32,375

 
31,196

 
64,817

 
62,342

General contractor and other services expenses
23,189

 
15,253

 
75,775

 
55,662

Depreciation and amortization
83,004

 
75,832

 
158,996

 
153,361

 
156,165

 
138,658

 
337,853

 
307,655

Other operating activities:
 
 
 
 
 
 
 
Equity in earnings of unconsolidated joint ventures
4,143

 
1,682

 
8,858

 
9,969

Gain on sale of properties
30,592

 
149,962

 
30,429

 
194,848

Gain on land sales
1,950

 
357

 
2,700

 
3,306

Other operating expenses
(1,518
)
 
(1,529
)
 
(3,641
)
 
(2,798
)
Non-incremental costs related to successful leases
(3,447
)
 

 
(5,603
)
 

General and administrative expenses
(13,420
)
 
(13,459
)
 
(35,403
)
 
(34,482
)
 
18,300

 
137,013

 
(2,660
)
 
170,843

Operating income
99,161

 
208,913

 
161,442

 
308,303

Other income (expenses):
 
 
 
 
 
 
 
Interest and other income, net
2,534

 
4,727

 
5,292

 
9,190

Interest expense
(23,510
)
 
(20,675
)
 
(45,642
)
 
(40,675
)
Loss on debt extinguishment

 
(151
)
 
(13
)
 
(151
)
Gain on involuntary conversion

 

 
2,259

 

Income from continuing operations before income taxes
78,185

 
192,814

 
123,338

 
276,667

Income tax expense
(6,616
)
 
(63
)
 
(7,001
)
 
(10,392
)
Income from continuing operations
71,569

 
192,751

 
116,337

 
266,275

Discontinued operations:
 
 
 
 
 
 
 
Income before gain on sales

 
31

 

 
23

Gain on sale of properties
99

 
2,889

 
254

 
3,021

           Income from discontinued operations
99

 
2,920

 
254

 
3,044

Net income
71,668

 
195,671

 
116,591

 
269,319

Net loss (income) attributable to noncontrolling interests
6

 
(2
)
 
16

 
(4
)
Net income attributable to common unitholders
$
71,674

 
$
195,669

 
$
116,607

 
$
269,315

Basic net income per Common Unit:
 
 
 
 
 
 
 
Continuing operations attributable to common unitholders
$
0.20

 
$
0.53

 
$
0.32

 
$
0.74

Discontinued operations attributable to common unitholders

 
0.01

 

 
0.01

Total
$
0.20

 
$
0.54

 
$
0.32

 
$
0.75

Diluted net income per Common Unit:
 
 
 
 
 
 
 
Continuing operations attributable to common unitholders
$
0.20

 
$
0.53

 
$
0.32

 
$
0.73

Discontinued operations attributable to common unitholders

 
0.01

 

 
0.01

Total
$
0.20

 
$
0.54

 
$
0.32

 
$
0.74

Weighted average number of Common Units outstanding
362,826

 
360,447

 
362,517

 
360,272

Weighted average number of Common Units and potential dilutive securities
362,926

 
362,741

 
362,615

 
362,551

Comprehensive income:
 
 
 
 
 
 
 
Net income
$
71,668

 
$
195,671

 
$
116,591

 
$
269,319

Other comprehensive loss:
 
 
 
 
 
 
 
Unrealized losses on interest rate swap contracts
(14,699
)
 

 
(24,041
)
 

Comprehensive income
$
56,969

 
$
195,671

 
$
92,550

 
$
269,319


See accompanying Notes to Consolidated Financial Statements

8


DUKE REALTY LIMITED PARTNERSHIP AND SUBSIDIARIES
Consolidated Statements of Cash Flows
For the six months ended June 30,
(in thousands)
(Unaudited)
 
2019
 
2018
Cash flows from operating activities:
 
 
 
Net income
$
116,591

 
$
269,319

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
Depreciation of buildings and tenant improvements
131,878

 
126,039

Amortization of deferred leasing and other costs
27,118

 
27,322

Amortization of deferred financing costs
3,121

 
2,840

Straight-line rental income and expense, net
(10,466
)
 
(10,931
)
Loss on debt extinguishment
13

 
151

Gain on involuntary conversion
(2,259
)
 

Gains on land and property sales
(33,383
)
 
(201,175
)
Third-party construction contracts, net
15,645

 
(5,122
)
Other accrued revenues and expenses, net
10,021

 
24,760

Equity in earnings in excess of operating distributions received from unconsolidated joint ventures
(487
)
 
(2,585
)
Net cash provided by operating activities
257,792

 
230,618

Cash flows from investing activities:
 
 
 
Development of real estate investments
(205,315
)
 
(227,186
)
Acquisition of real estate investments and related intangible assets
(108,201
)
 
(208,914
)
Acquisition of undeveloped land
(200,872
)
 
(98,486
)
Second generation tenant improvements, leasing costs and building improvements
(20,463
)
 
(26,337
)
Other deferred leasing costs
(11,152
)
 
(20,787
)
Other assets
(7,224
)
 
(4,590
)
        Proceeds from the repayments of notes receivable from property sales
130,000

 
149,890

Proceeds from land and property sales, net
97,526

 
433,551

Capital distributions from unconsolidated joint ventures

 
17,439

Capital contributions and advances to unconsolidated joint ventures
(5,962
)
 
(2,617
)
Net cash (used for) provided by investing activities
(331,663
)
 
11,963

Cash flows from financing activities:
 
 
 
Contributions from the General Partner
42,128

 
1,376

Payments on unsecured debt

 
(1,322
)
Payments on secured indebtedness including principal amortization
(43,502
)
 
(5,708
)
Borrowings on line of credit, net
222,000

 

Distributions to common unitholders
(155,903
)
 
(144,168
)
Contributions from noncontrolling interests, net
173

 

Tax payments on stock-based compensation awards
(5,469
)
 
(8,128
)
Change in book cash overdrafts
15,874

 
(35,331
)
Other financing activities
(9,920
)
 

Deferred financing costs

 
(285
)
Net cash provided by (used for) financing activities
65,381

 
(193,566
)
Net (decrease) increase in cash, cash equivalents and restricted cash
(8,490
)
 
49,015

Cash, cash equivalents and restricted cash at beginning of period
25,517

 
193,627

Cash, cash equivalents and restricted cash at end of period
$
17,027

 
$
242,642

 
 
 
 
Non-cash operating activities:
 
 
 
Liabilities and right-of-use assets - operating leases

$
37,810

 
$

Carrying amount of pre-existing ownership interest in acquired property
$

 
$
5,034

Conversion of Limited Partner Units to common shares of the General Partner
$

 
$
1,938

See accompanying Notes to Consolidated Financial Statements

9


DUKE REALTY LIMITED PARTNERSHIP AND SUBSIDIARIES
Consolidated Statements of Changes in Equity
For the three and six months ended June 30, 2019 and 2018
(in thousands, except per unit data)
(Unaudited)

 
Common Unitholders
 
 
 
 
 
General
 
Limited
 
Accumulated
 
 
 
 
 
 
 
 Partner's
 
Partners'
 
Other
 
Total
 
 
 
 
 
Common Equity
 
Common Equity
 
Comprehensive
Loss
 
Partners' Equity
 
Noncontrolling
Interests
 
Total Equity
Balance at March 31, 2019
$
4,635,628

 
$
54,941

 
$
(14,018
)
 
$
4,676,551

 
$
4,620

 
$
4,681,171

Net income
71,053

 
621

 

 
71,674

 
(6
)
 
71,668

Other comprehensive loss

 

 
(14,699
)
 
(14,699
)