Wells Fargo Real Estate Conference - February 23 - 24, 2022 - Seeking Alpha
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Wells Fargo Real Estate Conference February 23 - 24, 2022
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 statements
include, among others, our statements regarding (1) strategic initiatives with respect to our assets, operations and capital and (2) the
assumptions underlying our expectations. Prospective investors are cautioned that any such forward-looking statements are not guarantees
of future performance and involve risks and uncertainties, and that actual results may differ materially from those contemplated by such
forward-looking statements. A number of important factors could cause actual results to differ materially from those contemplated by forward-
looking statements in this slide presentation. Many of these factors are beyond our ability to control or predict. Factors that could cause
actual results to differ materially from those contemplated in this slide presentation include the factors set forth in our filings with the
Securities and Exchange Commission, including our annual report on Form10-K, quarterly reports on Form 10-Q and current reports on Form
8-K. We believe these forward-looking statements are reasonable, however, undue reliance should not be placed on any forward-looking
statements, which are based on current expectations. We do not assume any obligation to update any forward-looking statements as a
result of new information or future developments or otherwise.
Certain of the financial measures appearing in this slide presentation are or may be considered to be non-GAAP financial measures.
Management believes that these non-GAAP financial measures provide additional appropriate measures of our operating results. While we
believe these non-GAAP financial measures are useful in evaluating our company, the information should be considered supplemental in
nature and not a substitute for the information prepared in accordance with GAAP. We have provided for your reference supplemental
financial disclosure for these measures, including the most directly comparable GAAP measure and an associated reconciliation in the
appendix to this presentation as well as in our most recent quarter supplemental report and earnings release, the latter two of which are
available on our website at www.dukerealty.com. Our most recent quarter supplemental report also includes the information necessary to
recalculate certain operational ratios and ratios of financial position. The calculation of these non-GAAP measures may differ from the
methodology used by other REITs, and therefore, may not be comparable.
LEED® – an acronym for “Leadership in Energy and Environmental Design “ – is a registered trademark of the U.S. Green Building Council”.
2
Contents
Who We Are | U.S. Logistics Real Estate Strategy 4
2021 Review + 2022 Guidance Highlights |
6
Primary Drivers to a 10% FFO Growth Run Rate
Relative Peer Comparisons 10
Secular and Real Estate Fundamental Drivers 13
Operations - Customers and NOI Drivers 16
Portfolio Evolution and Profile 19
Development 23
Liquidity and Capital Strategy 26
Corporate Responsibility 30
Why Duke Realty and Guidance 37
Appendix: In-fill Development Case Studies 40
TABLE OF CONTENTS 3
Who We Are – The Leading Domestic-only Logistics REIT
• Largest domestic-only logistics REIT in Strategic Domestic Supply Chain Locations
business of developing, redeveloping,
acquiring and managing premier
facilities in key logistics nodes across
19 markets in U.S.
• Founded 1972, IPO 1993, S&P 500
• Own or hold an interest in 545 facilities
encompassing 162 million SF illustrative relative size of MSA
based on portfolio NOI. See
page 21 for additional detail.
o Newest portfolio amongst peers with unique facility and
site features essential to today’s customer supply chain
needs. 68% of total portfolio developed, generating
substantial premium returns over core acquisitions.
o 99% of earnings is derived only from rental income
Exceptional 10Y Total Return Track Record
• Enterprise value of ~$25 billion,
Baa1/BBB+ credit ratings
+444.1% DRE
• ESG aligned strategy and culture
+289.6% S&P 500
• Long term, proven success in +177.2% Russell 2000
delivering share outperformance. +143.7% RMS
Platform, strategy and market
conditions set up for ~10%+ earnings Feb-12 Feb-13 Feb-14 Feb-15 Feb-16 Feb-17 Feb-18 Feb-19 Feb-20 Feb-21 Feb-22
growth run rate in current conditions. Total Return Source: S&P Cap IQ Pro as of 2/18/2022.
WHO WE ARE 4
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 for Customer Supply Chains ✓
Majority Tier 1 Market Concentration ✓
Strong Development Capability ✓
Top Tier Sector FFO and AFFO Growth Outlook ✓
High BBB+ Rated Balance Sheet with Ample Liquidity ✓
ESG Embedded in Corporate Culture ✓
STRATEGIC OVERVIEW 5
11250 Poplar Avenue, Inland Empire West Submarket
(445,000 square feet)
2021 RECAP + 2022 GUIDANCE HIGHLIGHTS |
KEY GROWTH DRIVERS & EARNINGS RUN RATE |
PEER PORTFOLIO METRICS
& RELATIVE VALUE
FY 2021 Review | FY 2022 Guidance Highlights
EARNINGS: Core FFO growth 13.8%; AFFO growth 11.6%; Dividend growth 9.8%; Payout Ratio 68%
2022 GUIDANCE - Full Year 2022 FFO/sh mid-point 9.8%
OPERATIONAL PERFORMANCE*: Ending Stabilized In-Service Occupancy 98.1%; *
Full year average Stabilized In-Service Occupancy 97.6%; Same Property Cash NOI growth 5.3%; Rent
*
Growth 35% GAAP and 19% Cash
2022 GUIDANCE - Full year average Stabilized In-Service Occupancy* mid-point 97.6%; Full year
Same Property Cash and GAAP NOI growth mid-points 5.8% and 4.6%
INVESTMENT: Development starts $1.43B; Development pipeline $1.42B is 48% leased with value
creation margins ~68%; Land inventory is 94% Coastal Tier 1 markets
Acquisitions of $542M; Dispositions of $1.1B; Coastal Tier 1 GAV is 47% of portfolio, up from 41% at YE 2020
2022 GUIDANCE - Development Starts mid-point $1.30B; Net Acquisitions(Dispositions) mid-point ($300M)
CAPITAL: In early November issued $500M of 2.25% 2032 “Green” bonds;
No significant debt maturities until 2026; In January 2022 S&P (BBB+) raised outlook to “positive”;
Credit metrics effectively at "A" level with ample liquidity to fund development pipeline
2022 GUIDANCE - Net Debt-to-Core EBTIDA range of 5.2x – 4.8x
* ”Occupancy” metrics are commencement (physically occupied space) basis. RECENT PERF & GUIDANCE HIGHLIGHTS 7
Summary of Growth Drivers: Exceptional Industry Fundamentals,
Embedded Portfolio Growth and Premium Returns from Development
SECULAR SUPPLY CHAIN CONTINUED CORE PORTFOLIO GROWTH UPSIDE
FUNDAMENTALS
Driving incremental demand Improving Lease
Portfolio Lease Contractual Lease Same-property NOI
for modern logistics facilities Mark-to-Market Rollover Geography
Escalators Annual Growth Trends
(Cash / GAAP) (Portf Avg / New Contracts) (% of annual expiries Coastal T1*)
• E-Commerce sales requires
> SF than bricks n’ mortar
• Inventory “just in case”
39% ~3.3% 5.8% ~6.0% 44% !
29% 5.0%
to
expansion demand 4.5% ~5.0% 27%
2.8% 18%
• Reverse logistics
GAPP
Cash
• Re-shoring in early stages
2013 - 2019 - 2022 ~ Run
of providing regional Q1 2022 2019 - 2023- 2025
Q4 2021 2018 2021 Guide Rate 2022 2024
economic boost
*Coastal T1 markets = SoCal, NorCal,
N.NewJersey, SoFlorida & Seattle
CORE MARKET
FUNDAMENTALS
Consumer Spending, DEVELOPMENT DELIVERS VOLUME, PREMIUM YIELD with LOWER RISK
Real Estate Fundamentals
& Transport Indicators
stable or growing New Starts as Leasing % Development Deliveries – Accretive
% of Assets Performance Initial Yields & Long Term IRR’s
• Positive trending consumer
spending and retail sales ~12%
~75% ~12%
• 12% 11% 73%
Supply vs demand in
balance with record tight 50%
to
~8%
to
!
~8%
vacancy levels ~30%
at Delivery 6.1% 6.0%
at Delivery
• Trucking, Rail and
at Start
at Start
Est. IRR
Est. IRR
Industrial production
Yield
Yield
2017- 2022E
2017- 2022E
2021 2017- 2022E
2021
2021
8
~ 10% Projected Annual Run Rate of FFO, AFFO and NOI
2022 Initial FFO/sh Guidance +9.8% at midpoint
Components of
Annual FFO Growth General Assumptions
Development* 9.0% to 11.0% • $1.2 to $1.4B annual run rate;
~ 6% GAAP yield on new developments
Growth in FFO from • Portfolio lease MTM on GAAP basis** of ~39%;
Cash same property ~ 130 bps higher; Coastal T1 lease
same-property population 4.0% to 5.0% expirations begin to rise in 2023 growing to low 40s% by 2025.
(GAAP basis)
Other -1.0% to 1.0% • Non-property income growth
Dispositions / Acquisitions*, net -1.0% to 0.0% • Acquis and Dispos volumes to aproximate each other. Acquis in Coastal T1
markets w/ initital spreads to dispositions to be tighter than historical spreads
Cost of Financing -3.0 to -5.0% • Free cash flow and optimal mix of equity/debt capital markets to fund
growth (note this figure increases in correlation to growth above)
Represents impact to Core FFO from developments, acquisitions and dispositions, excluding the impact of finance costs; ** Represents the difference between current Market Net Effective Rent
(NER) compared to In-Place NER, divided by In-Place NER. Calculation is on a space-by-space basis and aggregated by the weighted by n-Place NER.
Note: ”Projected Annual Run Rate” are estimates and do not constitute formal guidance beyond what has been disclosed for the current year and incorporates the FLS language on page 2 of the
slide deck. Certain macroeconomic, industry specific and company specific qualifications to assumptions above could include, but are not limited to the following and are not mutually exclusive: A
GDP environment of > 2%; limited volatility and modest change in trajectory of long term interest rates; continued secular demand growth in e-commerce and necessity for facilities supply chain
resiliency investment; continuing ability to source accretively priced capital from property sales and from the public equity and debt capital markets; continuing ability to source/entitle infill oriented
land acquisitions; continuing ability to execute new development projects and generate accretive initial and long term returns; and maintaining continuity and top talent in human capital.
FFO RUN 9
FFO,RATE
AFFOBUILDUP
& DIVIDENDS
Repositioned Portfolio that is Geographically Diverse with High
Coastal Exposure | Unique State-of-the-Art Features in Coastal T1
NOI by Market versus Peers Top Tier State-of-the-Art
Characteristics in Coastal T1
DRE: 43% Coastal T1; 68% Total T1 266K
Building Size
Legend SF
179K
COASTAL T1 NON-COASTAL T1 OTHER INT’L
(in SF)
121K
105K
12% 69K 56K
19%
32% 34%
19%
69%
37 36
25% 29
20% 32% 25
Avg Age
17
(in yrs)
9
yrs
13% COASTAL TIER 1 –
43% 42% PEER FACILITY
34% 100% 88% COMPARISON
18%
Clear Height
34 ft
DRE
DRE PLD FR EGP REXR TRNO 29 29
(in ft)
26
24 24
NOTES/SOURCES:
Geographic “Market Type” Stratification per latest public quarterly NOI by MSA breakdown from company supplementals; Tier 1 (“T1”) Markets defined as
[Coastal T1 = SoCal, NorCal, N.NewJersey, SoFlorida & Seattle] + [Non-Coastal T1 = Dallas, Atlanta, Chicago & Eastern PA]. Other (major) U.S. Markets
include DC/Baltimore, Indy, Cincy, Columbus, Houston, Orlando/Tampa, Nashville, Raleigh, Phoenix, etc. Int’l Markets for PLD primarily include Mexico, UK,
Japan, Canada, France, Germany, Netherlands and Poland; DRE data reflects 4Q 2021 PNOI plus stabilized NOI for buildings not included in 4Q 2021 PNOI.
Building Features per CoStar and Duke Realty, building size is the weighted average, as of January 2022. PEER GEOGRAPHY & COASTAL TIER 1 FEATURES 10Strong Core Growth Metrics and Development Platform
Production versus Peers | Reduced Risk with Pre-Leasing
3-Year SPNOI 3-Year Second Gen
High Growth Rent Growth
(avg 2019 – 2021)
(avg 2019 – 2021)
Performing 7.2% 36%
Core Portfolio 4.9% 4.7%
4.0%
4.7% 31%
28% 29%
23%
Metrics
DRE PLD FR EGP REXR DRE PLD FR EGP REXR
4Q21 Development 3-Year Avg Development
Pipeline as % of Assets Pipeline as % of Assets
(Pre-leasing %) (Pre-leasing %)
Development
Platform Best in 0% 10% 20% 30% 40% 50% 60% 70% 80%
0% 10% 20% 30% 40% 50% 60% 70% 80%
DRE 12% (48%) DRE 10% (56%)
Class Risk Adjusted PLD 6% (58%) PLD 5% (51%)
Growth Driver FR 13% (39%) FR 7% (42%)
EGP 8% (37%) EGP 5% (23%)
REXR 0% (0%) REXR 0% (0%)
0% 2% 4% 6% 8% 10% 12% 14% 16% 18% 20% 22% 24%
0% 2% 4% 6% 8% 10% 12% 14% 16% 18% 20%
Source: Company reporting and DRE. “SPNOI” is “same-property NOI”, a non-GAAP metric. REXR 2020 SPNOI excludes deferred rent. “Rent Growth” is 2nd generation leasing activities and on a Net
Effective (GAAP) basis. PLD’s Rent Growth figure is “at share”. Development statistics for ground-up development or demolition/re-development.
PEER GROWTH METRICS 11Above Average 2022 FFO Growth Outlook
with Favorable Relative Share Value
DRE & Peers 2022 FFO NAV Premium / (Disc)
Growth Guidance
5%
21.7%
14.0% 3%
1%
9.8% 10.0%
8.6% 8.9% 9.1% -4%
-7%
-15%
DRE 2022 Growth Guidance 2022 AFFO Multiple
– FFO, AFFO, Divs
45x
43x
10.4%
36x
9.8% 9.8% 33x
31x 32x
(1)
Divis per sh
AFFO/sh
FFO/sh
* $5.05 mid-point less disclosed $0.55/sh in promotes. Peer guidance estimates per company supplementals, press releases and earnings call commentary. (1) reflects 10/27/2021
announcement to increase quarterly dividend from $0.255 to $0.28 per share. NAV/sh and AFFO estimates per S&P Cap IQ Pro and Green Street, as of 2/18/2022. RELATIVE VALUE 12MACROECONOMIC & SECULAR DRIVERS INDUSTRIAL SUPPLY-DEMAND FUNDAMENTALS
Pandemic Further Elevated E-comm Demand and Heightened
Necessity for Greater Supply Chain Resiliency
CONSUMER EXPANDING
REVERSE “JUST-in-CASE“ DIVERSIFYING
FREQUENCY AND CATEGORIES
LOGISTICS INVENTORY SUPPLY SOURCES
PENETRATION Expanded purchase categories with grocery, Online returns rate ranges
Supply chain bottlenecks from pandemic and Re-shoring of manufacturing to North America should
EXPANDING department store and furniture channels
experiencing spike in adoption. Grocery
from 15% to 30% of
purchases (2-3x of in-
increased geopolitical tension is driving a strategy for
supply chain inventory redundancy. In a Jan 2022
create need for more resources on-hand domestically,
likely benefitting manufacturing parts and consumer
penetration rose from the 8-10% range pre- store). Reverse logistics
Online user penetration rate and survey, UBS noted 55% of surveyed execs planned goods inventory resiliency in Southeast, Midwest and
pandemic to the 20% range with expenditures facilities requires an
frequency of online orders inventory expansion in 2023 and 2024. CBRE Texas. Since pandemic, corporate re-shoring
expected to grow 20% annually through 2023. average of up to 20% more
increasing; including an estimates up to 5% new facility square footage announcements are up 30-40%. Announcements
Other traditional goods categories (appar, elect, space and labor capacity
expanded age cohort of users. needed and contributing 400 to 500 msf of have been broadening past pharma/healthcare to
pharma, furn) expected to growth 10%+ annualy. per item than a forward
aggregate demand this decade. (e.g., many autos, household products, tech hardware and energy
(sources: UBS and MorganS, Oct-Nov 2021) logistics facility. wholesalers and 3PLs expect to raise supply onshore (source: UBS Nov 2021) . . .yet C&W estimates only a
guidelines from 15d to 30-60d going forward) modest contribution to demand (Market Fundamentals Dashboard: Secular Themes Should
Sustain Tight Supply-Demand and Elevated Rent Growth
FORECASTED
Annual DEMAND
Demand &
through 2026
of 1.4B SF in ♦
aggregate
Vacancy Construction
Supply Elevated,
(in square feet) 10%
500 M yet Balanced
Demand
400 M 8.0% 8% Outlook
6.9%
6%
Supply
300 M ➢ Heightened construction
levels with pre-leasing in
200 M 4.4% 4% 30-40% range, above
Demand
3.2% ~3.4% historical averages. CBRE
Supply
100 M 2% projects no negative
supply vs demand years
0M 0% out to 2032.
2003 2011 2016 2021 2022E ➢ 2021 deliveries of 270 msf
- 2007 - 2015 - 2020 were 80% leased at year-
end 2021.
Average Duke Realty
Annual Rent Exposure to
Growth 11.0% ~11.0%
(on avg yearly asking
Supply
rent per sf per CBRE) 7.1%
➢ Duke Realty
submarkets are
2.6%
1.4% exposed to only about
35% of the total
national supply
2003 2011 2016 2021 2022E pipeline.
- 2007 - 2015 - 2020
Notes/Sources: Historical and projection data a straight average of all CBRE covered markets, per CBRE-EA and per Duke Realty, January 2021. Submarket supply exposure comment of
35% per CoStar “Cluster” submarkets and excludes submarkets where DRE only has only 1 building. CoStar data per SF with a DRE modified estimate for an NOI-basis exposure). MARKET FUNDAMENTALS 15OPERATIONS: CUSTOMER RELATIONSHIPS &
NET OPERATING INCOME (NOI) DRIVERS
Legacy Commerce Center (Brownfield development), Linden, NJTop Tier Customer Relationships & Industry Diversification
TOP 15 TENANTS TENANT INDUSTRIES
Length of
Relationship
% of Total ANLV (yrs)
Amazon.com 5.9% Transportation 22%
15
Home Depot 4.5% 24 E-commerce(1) 17%
Wayfair Inc. 2.0% 6 Manuf. Products 17%
UPS of America 1.9% 24 Wholesale Goods 7%
GoPlus Corp 1.5% 6 Food Products 6%
Loctek Ergonomic 1.5% 1 Retail
(2)
6%
NFI Industries 1.1% 16
Lumber & Building 6%
Floor & Décor 1.1% 17
Consumer Services 5%
Deckers 0.9% 8
Textiles 3%
Bob's Furniture 0.9% 1
Technology 2%
Target 0.9% 24
Chemical Products 2%
Kiss Nail Products 0.8% 1
Publishing 2%
Samsung 0.7% 11
24 Health Services 2%
U.S. Gov. Agencies 0.7%
3 Other(3) 3%
Sonepar USA 0.7%
Note: Includes in-service portfolio only as of December 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 using the majority of their leased space for
fulfilling online sales. (2) Top Retail tenants by ANLV include: Bob's Discount Furniture, Target, The Container Store, Inditex.com, Electrolux, Starbucks, Walmart, Cotton On, and Goodwill Industries; in aggregate which represents 73% of total retail exposure.
(3) Other includes gov’t agencies, construction, financial services, utilities and agriculture.
CUSTOMERS 17Operating Metrics Supportive of Continued Growth
(1)
NOI DRIVERS 2022 SAME-PROPERTY
NOI GUIDANCE
98.7%
OCCUPANCY 95.1%
stabilized occupancy
total occupancy (incl under development)
BUILDUP
Contributing factors include magnitude of
2nd gen leasing rental growth from 2021
RENT GROWTH 35% GAAP | 19% cash FY 2021
on 2nd GEN
6.1 years average remaining; Embedded escalators 2.8% Total
LEASE TERMS 3.0% - 4.0% recently signed annual escalators 5.8%
+0.5%
+0.5%
+4.8%
SAME 5.3% FY 2021 actual
PROPERTY(“SP”) 5.8% 2022 mid-point guidance 2022 Same Property build-up (approx)
18% of Q4 2021 NOI not in SP pool
NON - SAME
77% occupancy in non SP pool(2)
PROPERTY $1.09B of development deliveries FY 2021, with lease-up of
vacant spec space averaging 2 months since 1/1/19 Rent Free Occupancy 2022
$1.42B development pipeline with future NOI ($82.8M) Escalations Rent Mid-Point
+ 2nd Gen Burn
… reflects substantial NOI upside Leasing Growth Off
(1) Figures as of 12/31/2021. Occupancy stats on lease-up basis.
( 2) Includes development pipeline. NOI PERFORMANCE 181 Paddock Street (Amazon Last Mile), New Jersey
Exit 10 Submarket
(185,000 square feet)
LOGISTICS ASSET STRATEGY
TO SUPPORT TODAY’S MODERN SUPPLY CHAIN:
PORTFOLIO EVOLUTION & PROFILEU.S.-only Platform in Major Population Centers and
Distribution Markets | Tier 1 and Selective Submarket Focus
Market Map by NOI size and Market Tier
Market Exposure
Evolution (NOI) 3%
Coastal T1 –
Seattle Coastal T1 -
Q4 Minneapolis- New Jersey
St. Paul T1 – T1 – Eastern
2010 2017 2021 3% Chicago Pennsylvania
3% 11%
T
Other
Major
Coastal T1 –
Northern 9% Columbus
3% 1
68%
California
Markets
5% 2% Washington DC/
4%
53% 3% Indianapolis Baltimore
2017 Tier 1
2021 Tier 1
Cincinnati
32% 2% Raleigh
2010 T1
Nashville 2%
Coastal T1 –
17% Southern
T1 – Dallas T1 –
Atlanta
6%
4% Savannah
7%
California
Central
Florida 3%
4% Houston
Coastal T1
9%
Selective – South
Florida
Submarket
Focus
60-90 Min Drive 60-90 Min Drive 1-Day Truck Drive
• 90% of company NOI Market NOI % metro average penetration % of average U.S.
popul capture total metro popul popul capture
focused in roughly 50 Coastal T1 43% 7.7M 52% 56M
of the 212 total U.S. Population Capture Non-Coastal T1 25% 6.0M 86% 98M
submarkets by Market Tier Other Major 32% 4.5M 100% 120M
“Tier 1” logistics real estate markets defined as major markets by population size and/or gateway port for domestic or global trade. Population capture metrics per CoStar and on a weighted average by DRE
stabilized NOI at MSA level for each market “Tier”. Within each Tier at the property level, out of simplicity data compiled for a single property in each submarket, then compiled as a straight average for each
MSA. Due to traffic and MPH algorithm, Other Major drive-time data at 90 min, Tier 1 at 60 min. CoStar population data per 2020 Census, ESRI and ESRI’s ArcGIS Network Analyst module. ASSET STRATEGY 20Diversity of Facility Types and Sizes for Modern Supply
Chains | Strong Performance across All Property Sizes
LEASE RE-
ECONOMICS LEASING
(as of 12/31/2021) (since 2017) (since 2017)
Size | Rem.Term
Recent NER
# of Assets
Improvements
Avg Lease
Backfill Mos.
(for non-renewals)
% of NOI
Renewal %
Growth*
% Leased
TI’s / LC’s
% of NER
Building
Total SF
>= 500K SF 85 65 M 36% 98% 615K 32% 11% $0.04 86% 3
7.4 yrs
250-500K 133 48 M 29% 98% 243K 32% 10% $0.08 73% 5
5.8 yrs
100-250K 202 33 M 28% 99% 66K 31% 11% $0.14 72% 3
5.0 yrsRecent Opportunistic Acquisitions – Coastal T1 Markets
SoCal IE West Submarket – 8 bldgs, 82,000 SF Newark Submarket – 53 acre Container Yard
5.0% Stabilized Yield | IRR estimate mid 8‘s % 4.6% Cap Rate | Rents 70% below market | low teens% IRR
Manhattan
1656 S Bon View Ave
81,500 SF
740 – 768 Doremus Ave
Covered land play; at lease expiration in 2025,
intend to re-develop into 104K SF Complementary logistics asset
NorCal Oakland/I-880 Submarket – 219,000 SF Seattle Kent Valley Submarket – 63,000 SF
5.3% Stabilized Yield | IRR estimate low 7’s % 4.7% Stabilized Yield | IRR estimate ~8’s %
San Leandro
Bay
1919 Williams St
219,000 SF
21214 66th Ave S
63,000 SF
M&A related divestiture; creative master lease
Sale-leaseback, with redevelopment option into 221K SF structure; main & main location, core asset
22
DEVELOPMENTPorts of LA / Long Beach
Turnpike Crossing Park, West Palm Beach, FL
(6 buildings totaling 802,000 square feet)
2851 Orange Avenue, Long Beach, CA
(3 buildings totaling 163,000 square feet)
DEVELOPMENT PLATFORM:
A KEY GROWTH DRIVERDevelopment Strategic Advantages
(figures 1/1/2018 – 12/31/2021, unless otherwise noted)
INVESTMENT RETURNS
6.0% initial stabilized
cash yield 8.5%-11.5% expected IRR’s
VALUE CREATION
value creation margins(1) estimated value
45-55+% and growing > $2.2B creation(1)
VOLUME DEVELOPMENT LEASING
$1.04B avg annual
starts(2) 43% average
pre-leased 2
mos avg spec lease-
up since beginning of 2019(3)
(4)
50% Infill starts since 2018
LAND LOCATION & INVENTORY
of land bank in
94% coastal markets(5) 4 years of land for development
(including “controlled” land)
REPEAT BUSINESS ENDURING QUALITY
repeat business, in-house construction of total owned SF
~65% & development a strategic advantage 68% developed by Duke
(1) Value creation applies market cap rates per CBRE and internal records at time of stabilization to initial projected stabilized NOI until projects are stabilized; (2) Annual average 2018 – 2021; (3) average months
lease up measured after in-service date; (4) defined as submarket locations which have characteristics such as the lack of developable land, close proximity to major population center or close proximity to a major
airport or seaport; (5) Land bank % based on latest quarter inventory. See Appendix for examples of high value creation infill developments. DEVELOPMENT 24Development Pipeline – Premium Returns with Modest Risk
Value Creation Margins
Pipeline $1.4B, 2022 Starts Guidance
~ 70%; 5.8% Stabilized Yield,
48% preleased $1.2B – 1.4B
8.5-11.5% IRR’s
Seattle
• 261,000 SF spec development
Chicago – I55 Submarket Columbus – New Jersey – Exit 10
• 2 build-to-suits totaling 1.9M SF
Chicago – Infill I-294 • 217,000 SF spec development
• Two spec developments totaling Rickenbacker Intermodal • 0% pre-leased
• 100% pre-leased
670,000 SF; 0% pre-leased; • Two spec developments totaling 1.2M SF
currently 100% leased
• 0% pre-leased; currently 50% leased
Northern California
• 157,000 SF spec redevelopment
New Jersey – Exit 12
• 267,000 SF build-to-suit
• 100% pre-leased
Northern California
• 141,000 SF build-to-suit redevelopment
• 100% pre-leased Philadelphia – Gloucester, NJ
• 574,000 SF spec development
Philadelphia – Airport Submarket
• 374,000 SF spec development near PHL airport
Southern California – South Bay, San
Southern California – Inland Empire
Gabriel Valley & Orange County
• 880,000 SF total spec developments
• 1.7M SF total spec developments Atlanta – Airport Submarket
• 0% pre-leased; currently 12% leased • 215,000 SF spec development
• 0% pre-leased; currently 65% leased
DEVELOPMENT 25Turnpike Crossing Park, West Palm Beach, FL
(6 buildings totaling 802,000 square feet)
Lockport
Des Moines16328
Creek/ 16410 / 16508
21202, (3 buildings,
24th Avenue South,803,000
Seattle,SF),
WA I-55 Submarket, Chicago, IL
(Two buildings totaling 512,000 square feet)
LIQUIDITY AND CAPITAL STRATEGYCapital Strategy
▪ Disciplined use of $1.2B credit facility
▪ Maintain high unencumbered asset pool
▪ Conservative 65-75% AFFO payout ratio
▪ Operate at a high Baa1 / BBB+ level (1)
▪ Generate “funds available for
reinvestment”
Ratings Liquidity
▪ Follow disciplined
development
practices with
approximately 50% ▪ Maintain strong and
pre-leasing levels diverse lender
Develop- Capital Access to relationships
▪ Development pipeline ment Strategy Capital
48% pre-leased ▪ Communicate regularly
with investors
▪ Will selectively
consider spec ▪ Multiple types of capital
projects in certain Capital Liability available
markets Fore- Manage-
casting ment
▪ Fund growth with “funds available for ▪ Maintain well-balanced debt maturities
reinvestment after dividends”, dispositions and minimize use of variable-rate debt
and opportunistic, modest equity issuance
▪ No significant debt maturities until 2026
(1) Moody’s / S&P, respectively. A securities rating is not a recommendation to buy, sell or hold securities and is subject to revision or withdrawal at any time by the
rating organization. CAPITAL 27Simplified and Disciplined Financial Profile
Balanced Debt Maturities
1
1) Maturities reduced to $8 million due to calling $300 million unsecured notes due 2024.
Capitalization
(in $ millions at 12/31/21, excludes
unconsolidated JV debt) Net Debt to Fixed Charge
EBITDA – TTM(1) Coverage - TTM(1)
Unsecured
Debt Secured Debt 6.5x
$3,675 $56 6.2x
5.0x 5.0x
13%
Common Equity
87% at Market Value 12/31/2021 2022 12/31/2021 2022
$25,349 Forecast Forecast
Commitment to a strong credit profile 1) Please refer to our website www.dukerealty.com for our 12/31/21
supplemental (pages 10-11) for the calculation of these metrics.
CAPITAL 28Duke Realty is Baa1/BBB+(3) Rated but Credit Metrics
are at “A” Quality Levels
REITs with “A” ratings:
Debt + Preferred Debt + Preferred Net Debt to Fixed Charge(1)(2)
to Mkt Cap(1) to GA(1) EBITDA(1)(2) Coverage
PLD 27% PSA 1.9 PLD 11.1
DRE 13%
PSA 14% EQR 29% CPT 4.5 PSA 8.7
PLD 16% CPT 30% DRE 4.8 DRE 6.4
CPT 19% AVB 30% SPG 5.0 SPG 5.9
PLD 5.1 O 5.6
AVB 21% DRE 31%
EQR 22% O 36% O 5.4 CPT 5.5
O 27% PSA 40% AVB 5.4 AVB 5.2
SPG 35% SPG 53% EQR 5.5 EQR 5.1
In January 2022, S&P (BBB+) raised outlook to “Positive”
1) Companies are per 9/30/21 SNL except PLD Net Debt to EBITDA and Fixed Charge which are per 9/30/21 company supplementals and DRE which is per our 12/31/21 Q4 supplemental report.
2) Quarter annualized; (3) Moody’s / S&P, respectively. A securities rating is not a recommendation to buy, sell or hold securities and is subject to revision or withdrawal at any time by the rating organization.
CAPITAL 29CORPORATE RESPONSIBILITY
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.
ESG Goals
• Goal of achieving carbon neutrality for our operations by 2025
• Develop sustainable buildings, including 100% of projects
attaining LEED certification
• Continue to evaluate renewable energy solutions for our
customers
• Impact communities where we do business
• Utilize materiality assessment results to refine long-term
strategy and goals
• Promote associate well-being and champion diversity, equity
and inclusion
• Continuously improve disclosure and publish additional KPI’s
and targets for controllable and non-controllable ESG factors
CORP RESPONSIBILITY 31Leadership in Green (“LEED”) Facilities and Financing
LEED % of NOI Trend Green Facilities
In-service, Completed LEED Certification % of NOI
LEED Certification in Progress % of NOI
Combined: LEED Completed % + In-progress %
27% $2.9B 95 89%
LEED developments since 2019. First LEED projects of portfolio has energy
logistics REIT to announce pursuit of since 2008* efficient lighting
100% LEED for new developments.
LEED v4 for Core and Shell Volume Program Precertification Level of
Gold. First logistics REIT to attain precertification on 4/20/21.
17%
15% ESG Data Investment in data management platform and processes
14% to enhance ESG data collection, tracking measurement
12% Management and progress, reporting and engagement
9%
8%
9% Solar Generate a total of 28.5 megawatts of clean
electricity annually across five U.S. markets
8%
5% Carbon Achieve carbon neutrality for our operations by
2025 and achieve carbon neutrality in alignment
4% 4%
Neutrality with Paris Climate Accords by 2040.
In-progress
Completed
2018 2019 2020 2021 Green Financing
$1.35B $1.2B
of green bonds line of credit
issued since 2019, renewal includes
first domestic issuer of sustainability -linked
Dark Gray bar = [latest quarterly NOI from in-service, completed LEED certification properties on a stabilized NOI basis] div by [total in- industrial REIT’s pricing** (2021).
service at stabilized NOI]; Light Gray bar outlined in gold = [latest quarterly stabilized NOI from total buildings currently in-progress of LEED *Figure represents industrial, as well as previously owned office and medical office LEED projects since 2008.
certification] div by [total building population at stabilized NOI, including development pipeline which essentially captures all in-progress **Pricing linked to growing the % of stabilized in-service LEED developed properties by building count.
LEED]. For global listed property benchmarking of LEED revenues, “NOI” for DRE essentially equates to property revenue (i.e., net leases).
CORP RESPONSIBILITY 32Duke Realty Carbon Neutral Goals & Strategy
NEAR-TERM Achieve carbon neutrality for our operations by 2025
• For Emissions where DRE has operational control (Scope 1 and 2)
LONG-TERM Achieve carbon neutrality by 2040 aligned with Paris Accords
• For all Emissions (Scope 1, 2 and 3)
STRATEGY Key steps to achieving goals
• Continue to build the most efficient buildings
• Optimize existing portfolio and engage with tenants
• Invest in renewable energy
DEFINITIONS Scope 1 and 2 Emissions
• Direct and indirect emissions such as purchased power to operate DRE offices
Scope 3 Emissions
• Emissions created from upstream and downstream activities including tenant-controlled utilities from DRE
owned assets, the development process, waste, company travel, etc.
CORP RESPONSIBILITY 33Green Initiatives – Smart Building and Solar Case Studies
• 529,000-square-foot Class A, multi-load • 18,000 solar panels installed across four
building in Southern California San buildings in New Jersey totaling 1M
Gabriel submarket (Irwindale, CA) square feet of rooftop space
• Close to major transportation routes • 11.1 megawatt system will produce a
servicing the Southern California LA Basin combined 13,500,000 kWh of clean
®
electricity - enough to power more than
• Built to pursue LEED Silver certification 2,200 homes annually, 50% are low-to-
moderate income households
• Smart building enhancements including
temperature and lighting controls, smart • Part of New Jersey’s Community Solar
metering and energy storage systems to Energy Pilot Program in Partnership with
ensure energy efficiency. Solar Landscape
CORP RESPONSIBILITY 34Commitment to Social and Governance
Top Nearly
20% 15 yrs. 24% 55%
governance and with well-being women in upper diversity of
social rankings
1 program in place management independent
directors
ISS QualityScore 2
Board of Directors
Annual board of directors elections since 2002. By 3
laws incorporate proxy access provision of 3-3-20
Social
Governance
0 2 4 6 8 10
Lower Risk Higher Risk Jim Connor David Stockert John Case Tamara Fischer Norman Jenkins Kelly
Chairman and CEO Lead Director Killingsworth
• Community service, wellness and diversity,
equity & inclusion part of culture. Wellness
program helps to reduce turnover and
create G&A savings.
•
Melanie Peter Scott Chris Michael Warren Lynn Thurber
Incorporate elements of SASB disclosure Sabelhaus Sultemeier Szymanczyk Thompson
framework in public filings.
Note: Figures represent latest QE data or FY 2020 activities. (1) Ranked by Green Street Advisors and ISS. (2) ISS QualityScore as of 2/1/2022 based on four “pillars” - Board Structure, Shareholder
Rights, Compensation and Audit. In aggregate, over 100 variables drive the composite score. Peer set for “G” S&P 500, for “S” is REIT GICS. (3) “3-3-20” is a group of up to 20 shareholders, owning
three percent or more of the company’s outstanding shares continuously for at least three years can require the company to include in its proxy materials director nominations for up to the greater of: (a)
20% of the number of directors up for election, rounding down to the nearest whole number; or (b) two directors. CORP RESPONSIBILITY 35Industry Recognitions & Affiliations
• GRESB Real Estate Sector Leader in the Development Benchmark
• Gold winner of Brandon Hall Group’s Excellence Awards in the Best
Advance for Leading Under a Crisis category
• Gold winner of NAREIT’s inaugural Dividends Through Diversity &
Inclusion award and individual award for Chairman and CEO
• First industrial REIT CEO to sign Action for Diversity & Inclusion pledge
• CEO signed CREW Network’s CRE Pledge for Action to Advance Women
and DEI
• Recognized as a 3+ company by 5050 Women on Boards
• Best Places to Work in Orange County (1st), Texas (1st), and Illinois (3rd)
• Designated as a Military Friendly® Employer
• American Red Cross partner and Disaster Responder member
Note: Information reflects 2020 and 2021 recognitions. 36
CORP RESPONSIBILITY429 Delancy Street, 662,000 SF
Newark NJ Submarket
(Amazon Last Mile Facility)
WHY DUKE REALTY? |
2022 DETAILED RANGE OF ESTIMATES (GUIDANCE)The Leading Domestic-Only Logistics REIT
▪ Market leadership and trusted advisor to our customers with long-term relationships
50 Years of Experience
Leading Developer and ▪ Portfolio suited for e-commerce and traditional distribution; 68% concentrated in T1 markets and 43% in
coastal T1 (on NOI basis); selectively focused on only ~23% of all local submarkets in U.S.
Owner of State-of-the-Art
▪ Best-in-class, vertically integrated development platform drives incremental growth; focus on infill
Logistics Facilities
▪ Shifting consumer habits creating growth ripple effect throughout the entire supply chain; global pandemic
Long Term Fundamentals resulted in supply chain bottlenecks driving strategies to significantly increase inventories
Outlook Very Strong ▪ Secular demand and traditional demand exceeding new supply and pushing vacancy to historical lows, with
forecast of continued net positive fundamentals through 2026; very strong pricing power
▪ Debt to Total Market Cap at Q4 2021 of 13%; 2022 expected mid-point of guidance for Fixed
Fortress Balance Sheet with Charge Coverage and Debt-to-Ebtida of 6.5x and 5.0x, respectively.
Ample Liquidity for Growth ▪ No significant debt maturities until 2026
▪ 2021 FFO Growth 13.8%; 2022 guidance mid-point 9.8%
▪ Improving embedded lease esclators, a higher level of annual development deliveries with
Proven Financial Performance strong margins and IRR’s and excellent market fundamentals supportive of FFO, AFFO and
NOI growth of 10 percent +/-
and Strong Outlook
▪ 9.8% dividend increase Q4 2021; quarterly dividend up 65% since 2015
▪ Rent collections during Covid were at top of entire REIT sector – indicative of quality
Responsible Corporate Citizen ▪ Developed 35 LEED-certified industrial facilities; 43 projects in pursuit of LEED
with ESG Embedded in Culture certification. 100% LEED commitment on all new developments. Carbon Neutrality
strategic goal announcement in Q4 2021
for 3 Decades
▪ Community service, wellness and DEI (diversity, equity and incl) programs for 20 years
▪ Top-tier governance per ISS and Green Street
WHY DUKE REALTY 382022 Range of Estimates Updated February 9, 2022
(dollars in millions except per share amounts)
Range of Estimates
2021
Metrics Actual Pessimistic Optimistic
(Unaudited) Key Assumptions
Net Income per Share Attributable to $2.25 $1.79 $2.07 – Lower volume and gains on property sales in 2022 compared to 2021.
Common Shareholders - Diluted
Nareit FFO per Share Attributable to $1.65 $1.77 $1.87 – Debt extinguishment costs of $0.05 per share.
Common Shareholders - Diluted – Lease up of new developments.
– Continued strong rent growth.
– Expense impact of internal leasing costs, $0.02 to $0.04.
Core FFO per Share Attributable to $1.73 $1.87 $1.93 – Continued strong rent growth
Common Shareholders - Diluted – Lease up of new developments.
Growth in AFFO - Share Adjusted 11.6% 8.4% 12.3% – Driven by same factors impacting Core FFO.
Average Percentage Leased 98.3% 97.9% 99.3% – Maintain existing high levels.
(stabilized portfolio)
Average Percentage Occupied 97.6% 96.9% 98.3% – Maintain existing high levels.
(stabilized portfolio)
Average Percentage Leased 97.8% 97.0% 98.4% – Speculative developments coming on-line.
(In-service portfolio)
Same Property NOI - Cash 5.3% 5.4% 6.2% – Strong rent growth and consistent occupancy.
Same Property NOI - Net Effective 4.5% 4.2% 5.0% – Strong rent growth and consistent occupancy.
Building Acquisitions $542 $300 $500 – Coastal markets focus.
(Duke share)
Building Dispositions $1,095 $600 $800 – Target lower growth properties.
(Duke share)
Development Starts $1,432 $1,200 $1,400 – Leasing success driving speculative activity.
(JVs at 100%)
Service Operations Income $12 $3 $5 – Lower third party construction volume.
General & Administrative Expense $66 $67 $63 – Consistent overhead levels.
Effective Leverage (Gross Book Basis) 31% 33% 29%
Fixed Charge Coverage (TTM) 6.2X 6.3X 6.7X
Net Debt to Core EBITDA (TTM) 5.0X 5.2X 4.8X - Maintain Baa1/BBB+ ratings.Lockport 16328 / 16410 / 16508 (3 buildings, 803,000 SF), I-55 Submarket, Chicago, IL
APPENDIX
IN-FILL DEVELOPMENT CASE STUDIESInfill Build-to-Suit - Chicago
• In Q4 2020, entered into a long-term ground lease for 49 acres of land in Bedford Park, IL,
with the Belt Railway of Chicago. In Q1 2021 commenced construction of a 655,000 build-to-
suit for Home Depot. Home Depot plans to use facility for replenishment of store inventory, as
well as a Flatbed Distribution Center for “B2B” delivery to job sites. Delivery Q2 2022.
• 50% value creation expected DEVELOPMENT 41Infill Spec Developments - Chicago
• Three projects totaling 874,000 square feet
• 110 North 25th in I-290 North submarket (~ 5% vacancy) with land
placed under contract Q4 2018, closed in Q1 2020. Demolished
existing structure and delivered facility in Q4 2020. In Q2 2021,
executed lease to food manufacturer for 100% of space. 60% value
creation expected.
• 5301 W. Roosevelt in the I-290 South submarket (~3% vacancy)
with site closed in Q4 2021. Covered land play with a one-year
sale-leaseback to a steel forging plant with speculative development
start in 2023 and delivery in 2024. Interim covered land yield 4%.
• 990 North Ave in the I-55 submarket (~ 7% vacancy) near the I-355
• 35% value creation expected intersection. Closed on land Q4 2017, delivered facility Q4 2018 and
leased 100% of space in Q4 2019 to an Asian contract
manufacturer. DEVELOPMENT 42Infill Redevelopment – South Bay Submarket
Long Beach, CA
• In Q4 2019, negotiated the purchase of a 7.8 (net) acre infill site in Long Beach, CA, historically used for oil
and gas processing until the plant was decommissioned in 2010. Since 2012, previous owner executed
various environmental remediation and approval procedures, including a requirement from the city and
condition to DRE’s purchase tied to receiving proper entitlements, soil excavation, grading and retaining walls.
Contingencies and environmental approvals were completed during 2020 with closing on site Q4 2020.
• In Q1 2021, commenced development of three speculative class A, light industrial buildings, totaling 163,000
SF, with either 30’ - 32’ clear height ceiling, single-load that will be built to LEED Silver standards.
• Strategically located in South Bay submarket 4 miles from the Ports of LA/LB, 19 miles from LAX and roughly
halfway between Orange County and the city of Los Angeles; and within 0.5 miles from I-405 and 1.5 miles
from I-110. Building 1 pre-leased Q4 2021; Delivery expected early Q2 2022.
• ~ 70% value creation expected
DEVELOPMENT
43Infill Redevelopments — Northern New Jersey
Exit 12 (Carteret / Avenel) Submarket
• One Paddock 9 acre
brownfield site originally 1 Paddock
(Amazon)
acquired from PQ 1 Paddock 185,000 SF
Redevelopment
(Amazon last mile),
delivered Q3 2020
Manufacturing in 2018. 185,000 SF
Worked through site Underway
remediation and gov’t
approvals to develop a Before 2 Paddock
267,000 SF
185,000 SF build-to-suit for Previous PQ
Manufacturing site,
an Amazon last mile acquired Q4 2019
facility, including 3 acres
for extra parking.
Delivered in Q3 2020.
• During construction of 1 Paddock, PQ announced a closing of After
operations on adjacent 15 (net) acre site. In Q4 2019, negotiated a
short-term sale leaseback (“covered land”) while PQ decommissioned
and demolished the facility. During the lease, completed entitlements
and environmental remediation, with the lease terminated in Q3 2021.
• In Q3 2021, commenced construction of a 267,000 build-to-suit facility
for FreezPak, to be operated (by FreezPak) as cold storage facility.
• 1 and 2 Paddock are located approximately 2 miles from the Exit 12
interchange off I-95; strategically located within 30 minutes of NYC and
15 minutes of Newark International Airport and Port of New Jersey.
• ~ 50% value creation 1 Paddock; ~65% value creation expected
Paddock 2 DEVELOPMENT 44Infill Redevelopment – San Gabriel Valley Submarket
Irwindale, CA
13131 Los Angeles Street 13131 Los Angeles
529,000 SF Street
529,000 SF
• 25-acre infill redevelopment site with I-
605 freeway frontage
• Rare large infill building with large
yard to accommodate 80+ trailer stalls
• 28 month entitlement process; • $2M invested in “Smart Building” features (see pg 33)
construction/ demo started Dec ‘20
• 100% leased in Q3 2021 to a leading home and
• Only 10% class A product in commercial improvement retailer. Delivery Q3 2022
submarket (totals 170 msf)
• ~ 90% value creation expected
DEVELOPMENT 45Infill Redevelopment – Orange County Submarket
Cypress, CA
6450 Katella Ave| 146,000 SF
Cypress, California
• Acquired former Mitsubishi HDQ – one 2-story
office building, four smaller R&D buildings and
one 146,000 SF 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 entitlement / Conditional Use Permit
process
• Delivered Q4 2021.
• > 70% value creation
DEVELOPMENT 46Infill Redevelopments – Inland Empire West
Under construction and coming soon | > 80% value creation expected
8978 HAVEN AVE | 121,000 SF
Rancho Cucamonga, California
1532 S. Vineyard Ave.
199,000 SF under development
10905 Beech Avenue Ontario, California
~173,000 SF under development
Fontana, California
Slover and Oleander
~185,000 SF developable
Fontana, California
DEVELOPMENT 47Land Acquisitions & Developments – Inland Empire East
4
Value creation ~ 60%
4375 N PERRIS BLVD | 1,008,646 SF 4501 PATTERSON AVENUE | 800,628 SF 9180 ALABAMA ST | 1,079,236 SF
Perris, California Perris, California Redlands, California
Start Feb 2019 | Preleased Nov 2019 | Delivered May 2020 Start Sept 2019 | Preleased Apr 2020 | Delivered Sept 2020 Start Dec 2019 | Preleased Sep 2020 | Delivered April 2021
4375 N Perris
Boulevard 3500 Indian Ave
1,009,000 SF 783,000 SF 3300 Indian Ave
1,225,000 SF
728 W Rider St
1,203,000 SF
ENTITLEMENT NOTE: IE East entitlement
process ranges from 15 to 36 months
DEVELOPMENT 48Infill Redevelopment – Northern California
San Jose, CA
• 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 operations through Q2 2020.
• Upon Univar’s lease expiration, building began
redevelopment into a 141,000 SF last mile delivery station
and 100% leased to a major e-comm retailer; delivery
expected 2nd Quarter 2022.
• Mid 40’s% value creation expected
2256 Junction Ave. | Former Univar Chemical Plant
San Jose, CA
2256 Junction Ave. | Proposed Last Mile Delivery Station
San Jose, CA
DEVELOPMENT 49Infill Redevelopment – Northern California
Fremont, CA
• In January 2019, acquired 12 acre site in Before
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 construction for a After
210,000 SF, 36’ clear speculative facility;
delivered Q1 2021 and fully leased in Q2
2021.
• Submarket vacancy 5.5% with 5-year rent
growth ~ 9.8% annually
• > 50% value creation
DEVELOPMENT 50Infill Redevelopment – South Florida
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.
• First building 72% preleased to a distributor of technology
products prior to start of construction and 100% preleased at
delivery; Second building commenced construction in 2021
Miami 27
Business Park
with strong leasing interest.
• Submarket vacancy 6.0%; recent historical and projected
Miami
market rent growth of 3.1%.
International
Airport • Mid 60’s% value creation expected
(10 miles)
10310 NW 121ST Way | Former Lumber Yard
Medley, FL
Building 2
10310 Building 1
10300
DEVELOPMENT 51Infill Redevelopment — Northern New Jersey
Perth Amboy Submarket
• Acquired 83 acre site in Northern New Jersey along the Garden State
Parkway in Q2 2019 that was under contract for 2 years.
• Successfully completed a remediation plan with government agencies;
including demolishing an old steel manufacturing facility. Remediated the
site and completed the entitlement process.
• Developed two industrial build-to-suits with 20-year leases for a major
home improvement retailer. Building 1 delivered Q3 2020 as an “FDC”
(flatbed distribution center) and Building 2 an ‘MDC” (market delivery
center), delivered Q4 2020. Both facilities provide same-day and next-day
delivery, with the flatbed delivery center delivering larger bulk orders to
contractor work sites and stores in the area.
• > 55% value creation
New York City New Jersey 440 Toll Road Bridge
Building 1
333,000 SF
Building 2
921,000 SF
Steel Run Logistics Center | Perth Amboy, NJ
1,254,000 SF
DEVELOPMENT 52Infill Redevelopment — Northern New Jersey
Newark Submarket
Before After
• As part of the 2017
“Bridge” acquisition, DRE 429 Delancy Street
662,000 SF Speculative Built
acquired the right to Delivered Q4 2019; 100% Leased
develop a 32 acre infill
location in the Newark
submarket
• Commenced development
in late 2018 for 40’ clear
height, speculative facility.
In Q4 2019, facility
2 miles from Newark Intl. Airport
delivered and leased for and Ports of Newark and Elizabeth
12 years to a major e-
commerce retailer.
After
• 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
DEVELOPMENT 53Infill Build-to-Suit Developments – Atlanta Airport
2000 CENTRE COURT | 239,000 SF 1000 LOGISTICS WAY | 664,000 SF CAMP CREEK 6200 | 318,000 SF
FedEx Home Depot Piedmont Healthcare
Delivered Q4 2021 Delivered Q1 2021 Delivered Q4 2021
Value creation ~ 40% DEVELOPMENT 54Definitions
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 shareholders computed in accordance with generally accepted accounting principles (“GAAP"), excluding depreciation
and amortization related to real estate, gains and losses on sales of real estate assets (including real estate assets incidental to our business) and related taxes, gains and losses from
change in control, impairment charges related to real estate assets (including real estate assets incidental to our business) and similar adjustments for unconsolidated joint ventures and
partially owned consolidated entities, all net of related taxes. We believe FFO to be most directly comparable to net income attributable to common shareholders as defined by GAAP. FFO
does not represent a measure of liquidity, nor is it indicative of funds available for our cash needs, including our ability to make cash distributions to shareholders.
Core Funds from Operations (“Core FFO”): Core FFO is computed as FFO adjusted for certain items that can create significant earnings volatility and do not directly relate to our core
business operations. The adjustments include gains or losses on debt transactions, gains or losses from involuntary conversion from weather events or natural disasters, promote income,
severance and other charges related to major overhead restructuring activities, the expense impact of non-incremental costs attributable to successful leases and similar adjustments for
unconsolidated joint ventures and partially owned consolidated entities. Although our calculation of Core FFO differs from Nareit’s definition of FFO and may not be comparable to that of
other REITs and real estate companies, we believe it provides a meaningful supplemental measure of our operating performance.
Non-Incremental Costs Attributable to Successful Leases: Non-incremental costs attributable to successful leases represent internal costs allocable to successful leasing activities and
exclude estimated costs related to downtime and/or unsuccessful deals. These costs primarily consist of compensation and other benefits for internal leasing and legal personnel. These
costs are not capitalizable "incremental costs" in the context of the applicable lease accounting rules, but we believe including them as an adjustment when computing Core FFO provides
useful information for purposes of comparability with economically similar success-based costs incurred by other organizations that outsource their leasing functions, which are generally
capitalizable.
Adjusted Funds from Operations (“AFFO”): AFFO is defined by the Company as the Core FFO (as defined above), less recurring building improvements and total second generation
capital expenditures (the leasing of vacant space that had previously been under lease by the Company is referred to as second generation lease activity) related to leases commencing
during the reporting period, and adjusted for certain non-cash items including straight line rental income and expense, non-cash components of interest expense including interest rate hedge
amortization, stock compensation expense and after similar adjustments for unconsolidated partnerships and joint ventures.
EBITDA for Real Estate ("EBITDAre"): EBITDAre is a non-GAAP supplemental performance measure, which is defined by Nareit as net income (computed in accordance with GAAP),
before interest, taxes, depreciation and amortization ("EBITDA") adjusted to exclude gains and losses on sales of real estate assets (including real estate assets incidental to our business),
gains and losses from change of control, impairment charges related to real estate assets (including real estate assets incidental to our business) and to include share of EBITDAre of
unconsolidated joint ventures. We believe EBITDAre to be most directly comparable to net income computed in accordance with GAAP and consider it to be a useful supplemental
performance measure for investors to evaluate our operating performance and ability to meet interest payment obligations.
Core EBITDA: Core EBITDA is defined by the Company as the EBITDAre, adjusted for the same reasons as Core FFO, to exclude gains or losses on debt transactions, gains or losses
from involuntary conversion from weather events or natural disasters, the expense impact of costs attributable to successful leasing activities, promote income and severance charges related
to major overhead restructuring activities.
Property Level Net Operating Income - Cash Basis ("PNOI"): PNOI is a non-GAAP performance measure, which is comprised of rental revenues from continuing operations (computed in
accordance with GAAP) less rental expenses and real estate taxes from continuing operations, along with adjustments to exclude the straight line rental income and expense, amortization of
above and below market rents, amortization of lease concessions and lease termination fees as well as an adjustment to add back intercompany rent. PNOI, as we calculate it, may not be
directly comparable to similarly titled, but differently calculated, measures for other REITs. We believe that PNOI to be most directly comparable to income from continuing operations defined
by GAAP and that PNOI is another useful supplemental performance measure, as it is an input in many REIT valuation models and it provides a means by which to evaluate the performance
of the properties within our Rental Operations segments.
Same Property Performance Net Operating Income ("SPNOI"): We evaluate the performance of our properties, including our share of properties we jointly control, on a "same property"
basis, using PNOI with certain minor adjustments. The same property pool of properties is defined once a year at the beginning of the current calendar year, and includes buildings that were
in the stabilized portfolio throughout both the current and prior calendar years in both periods. The same property pool is adjusted for dispositions subsequent to its initial establishment.
SPNOI also excludes termination fees. SPNOI is a non-GAAP supplemental performance measure that we believe is useful because it improves comparability between periods by eliminating
the effects of changes in the composition of our portfolio.
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