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(Exact Name of Registrant as Specified in Its Charter)
iIndiana
(Duke
Realty Corporation)
i35-1740409
(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)
i8711 River Crossing Boulevard
iIndianapolis,
iIndiana
i46240
(Address
of Principal Executive Offices)
(Zip Code)
Registrant's Telephone Number, Including Area Code:
i(317)
i808-6000
Securities
registered pursuant to Section 12(b) of the Act:
Title of Class
Trading Symbol(s)
Name of Exchange on Which Registered
Duke Realty Corporation
iCommon
Stock, $0.01 par value
iDRE
iNew York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
Indicate
by check mark whether the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
Duke Realty Corporation
iYes
☒
No
☐
Duke
Realty Limited Partnership
Yes
☒
No
☐
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.
Duke
Realty Corporation
Yes
☐
iNo
☒
Duke Realty Limited Partnership
Yes
☐
No
☒
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
iYes
☒
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
iYes
☒
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. (Check one):
Duke Realty Corporation:
iLarge
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. o
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. o
Indicate by check mark whether the registrant has filed a report on and attestation to its management's assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C 7262(b)) by the registered public accounting firm that prepared or issued its audit report.
Duke
Realty Corporation
Yes
i☒
No
☐
Duke Realty Limited Partnership
Yes
☒
No
☐
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
i☐
No
☒
Duke
Realty Limited Partnership
Yes
☐
No
☒
The aggregate market value of the voting shares of Duke Realty Corporation's outstanding common shares held by non-affiliates of Duke Realty Corporation is $i18.01 billion based on the last reported sale price on June 30, 2021.
The
number of common shares of Duke Realty Corporation, $i0.01 par value outstanding as of February 16, 2022 wasi382,767,539.
Certain portions of Duke Realty Corporation's Definitive Proxy Statement for its 2022 Annual Meeting of Shareholders (the "2022 Proxy Statement") to be filed pursuant to Rule 14a-6 of the Securities Exchange Act of 1934, as amended, are incorporated by reference into this Form 10-K. Other than those portions of the 2022 Proxy Statement specifically incorporated by reference pursuant to Items 10 through 14 of Part III hereof, no other portions of the 2022 Proxy Statement shall be deemed so incorporated.
EXPLANATORY
NOTE
This report (the "Report") combines the annual reports on Form 10-K for the year ended December 31, 2021 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 December 31, 2021. 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 annual reports on Form 10-K 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.
Certain statements contained in or incorporated by reference into this Report on Form 10-K for the General Partner and the Partnership, including, without limitation, those related to our future operations, constitute "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. The words "believe,""estimate,""expect,""anticipate,""intend,""plan,""strategy,""continue,""seek,""may,""could" and similar expressions or statements regarding future periods are intended to identify forward-looking statements, although not all forward-looking statements
may contain such words.
These forward-looking statements involve known and unknown risks, uncertainties and other important factors that could cause our actual results, performance or achievements, or industry results, to differ materially from any predictions of future results, performance or achievements that we express or imply in this Report or in the information incorporated by reference into this Report. Some of the risks, uncertainties and other important factors that may affect future results include, among others:
•The impact of the COVID-19 pandemic on our business, our tenants and the economy in general, including the measures taken by governmental authorities to address it;
•Changes in general economic and business conditions,
including the financial condition of our tenants and the value of our real estate assets;
•Changes to U.S. laws, regulations, rules and policies;
•The General Partner's continued qualification as a REIT for U.S. federal income tax purposes;
•Heightened competition for tenants and potential decreases in property occupancy;
•Adverse events concerning our major tenants;
•Potential changes in the financial markets and interest rates;
•Volatility in the General Partner's stock price and trading volume;
•Our
continuing ability to raise funds on favorable terms;
•Our ability to successfully identify, acquire, develop and/or manage properties on terms that are favorable to us;
•Potential increases in real estate construction costs including construction cost increases as the result of inflation and supply chain constraints;
•Our real estate asset concentration in the industrial sector and potential volatility in this sector;
•Our ability to successfully dispose of properties on terms that are favorable to us;
•Our ability to successfully integrate our acquired properties;
•Our
ability to retain our current credit ratings;
•Inherent risks related to disruption of information technology networks and related systems and cyber security attacks;
•Inherent risks in the real estate business, including, but not limited to, tenant defaults, potential liability relating to environmental matters and liquidity of real estate investments; and
•Other risks and uncertainties described herein, as well as those risks and uncertainties discussed from time to time in our other reports and other public filings with the Securities and Exchange Commission (the "SEC").
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Although
we presently believe that the plans, expectations and anticipated results expressed in or suggested by the forward-looking statements contained in or incorporated by reference into this Report are reasonable, all forward-looking statements are inherently subjective, uncertain and subject to change, as they involve substantial risks and uncertainties, including those beyond our control. New factors emerge from time to time, and it is not possible for us to predict the nature, or assess the potential impact, of each new factor on our business. Given these uncertainties, we caution you not to place undue reliance on these forward-looking statements. We undertake no obligation to update or revise any of our forward-looking statements for events or circumstances that arise after the statement is made, except as otherwise may be required by law.
The above list of risks and uncertainties
is only a summary of some of the most important factors and is not intended to be exhaustive. Additional information regarding risk factors that may affect us is included under the caption "Risk Factors" in this Report, and is updated by us from time to time in Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and other filings that we make with the SEC.
PART I
Item 1. Business
Company Overview
The General Partner and Partnership collectively specialize in the ownership, management and development of industrial
real estate.
The General Partner is a self-administered and self-managed REIT, which began operations upon completion of an initial public offering in February 1986.
The Partnership was formed in October 1993, when the General Partner contributed all of its properties and related assets and liabilities, together with the net proceeds from an offering of additional shares of its common stock, to the Partnership. Simultaneously, the Partnership completed the acquisition of Duke Associates, a full-service commercial real estate firm operating in the Midwest whose operations began in 1972. The General Partner is the sole general partner of the Partnership, owning 99.1% of the Common Units at December 31, 2021. The remaining 0.9% of the Common Units are owned by limited partners. Limited partners have the right to redeem their Limited
Partner Units, subject to certain restrictions. Pursuant to the Fifth Amended and Restated Agreement of Limited Partnership, as amended (the "Partnership Agreement"), the General Partner is obligated to redeem the Limited Partner Units in shares of its common stock, unless it determines in its reasonable discretion that the issuance of shares of its common stock could cause it to fail to qualify as a REIT. Each Limited Partner Unit shall be redeemed for one share of the General Partner's common stock, or, in the event that the issuance of shares could cause the General Partner to fail to qualify as a REIT, cash equal to the fair market value of one share of the General Partner's common stock at the time of redemption, in each case, subject to certain adjustments described in the Partnership Agreement. The Limited Partner Units are not required, per the terms of the Partnership Agreement, to be redeemed in registered shares of the General Partner.
At
December 31, 2021, we owned or jointly controlled 548 primarily industrial properties which encompassed 162.7 million rentable square feet (including 40 unconsolidated joint venture in-service properties with 12.9 million square feet, 29 consolidated properties under development with 8.5 million square feet and two unconsolidated joint venture properties under development with 1.2 million square feet). Our properties are leased by a diverse base of more than 800 tenants whose businesses include logistics, e-commerce, manufacturing, wholesale trade and retailing. We have one tenant, to whom we both lease a significant amount of space and also provide general contractor and construction management services, from whom we derived greater than 10.0% of our total revenues.
We also owned, including through ownership interests in unconsolidated joint ventures
(with acreage not adjusted for our percentage ownership interest), 431 acres of land and controlled an additional 925 acres through purchase options.
Our headquarters and executive offices are located in Indianapolis, Indiana. We additionally have regional offices or significant operations in 18 other geographic or metropolitan areas including Atlanta, Georgia; Chicago, Illinois;
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Cincinnati, Ohio; Columbus, Ohio; Dallas, Texas; Houston, Texas; Minneapolis/St. Paul, Minnesota; Nashville, Tennessee; Raleigh, North Carolina; Savannah, Georgia; Seattle, Washington; Washington D.C./Baltimore, Maryland; Central Florida; New Jersey; Northern and Southern California; Pennsylvania and South Florida.
Company
Strategies
Our overall strategy is to maximize cash flows from operations, increase our investment in Coastal Tier 1 markets (we define "Coastal Tier 1" markets as Southern California, Northern California, Seattle, Northern New Jersey and South Florida) and to maintain a strong balance sheet.
Operational Strategy
Our operational focus is to drive profitability by maximizing cash from operations and earnings through (i) maintaining property occupancy, increasing rental rates and prioritizing timely collection of monthly rental payments, while also keeping lease-related capital costs contained, by effectively managing our portfolio of existing properties and (ii) providing a broad line of real estate services to our tenants and to third parties.
Asset Strategy
Our
strategic objectives include (i) increasing our investment in quality industrial properties through development, with sustainable design features that will meet customer needs; (ii) acquiring properties primarily in Coastal Tier 1 markets, which we believe provide the best potential for future rental growth; and (iii) maintaining an optimal land inventory through selected strategic land acquisitions to support new development activity. We continue to execute our asset strategy through a disciplined approach by identifying development opportunities and identifying select acquisition targets where the asset quality and pricing meet our objectives.
Capital Strategy
Our capital strategy is to maintain a strong balance sheet by actively managing the components of our capital structure in coordination with the execution of our overall operational and asset strategies. We are focused
on maintaining our current investment grade ratings from our credit rating agencies. As of December 31, 2021, our senior unsecured notes have been assigned a rating of Baa1 by Moody's Investors Services and BBB+ by Standard & Poor's Ratings Group and we are focused on maintaining such ratings in order to maintain access to liquidity. 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.
In support of our capital strategy, we continually evaluate our portfolio and regularly identify and dispose of assets that no longer meet our long-term objectives.
We continue to focus on maintaining a balanced and flexible capital structure which includes: (i) extending and sequencing the maturity dates of our outstanding debt obligations;
(ii) borrowing primarily at fixed rates; and (iii) issuing common equity as needed to maintain appropriate leverage parameters or support significant strategic developments or acquisitions. With our successes to date and continued focus on maintaining a strong balance sheet, we expect to be opportunistic in our investment opportunities.
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Competitive Conditions
As a fully integrated commercial real estate firm, we provide in-house leasing, management, development and construction services which we believe, coupled with our significant base of commercially zoned and unencumbered land in existing business parks, should give us a competitive advantage as a real estate operator and
in future development activities.
We believe that the management of real estate opportunities and risks can be done most effectively at regional or on local levels. As a result, we intend to continue our emphasis on increasing our market share, to the extent it is in markets that align with our asset strategy, and effective rents in the primary markets where we own properties. We believe that this regional focus will allow us to assess market supply and demand for real estate more effectively as well as to capitalize on the strong relationships with our tenant base. In addition, we seek to further capitalize on our many strong relationships with customers that operate on a national level. As a fully integrated real estate company, we are able to arrange for or provide to our tenants not only well located and well maintained facilities, but also the capability for build-to-suit construction, tenant finish construction, and
expansion flexibility.
All of our properties are located in areas that include competitive properties. Institutional investors, other REITs or local real estate operators generally own such properties; however, no single competitor or small group of competitors is dominant in our current markets. The supply of and demand for similar available rental properties may affect the rental rates we will receive on our properties. Other competitive factors include the attractiveness of the property location, the quality of the property and tenant services provided, and the reputation of the owner and operator.
Environmental, Social and Corporate Governance ("ESG")
We are focused on promoting our growth in a sustainable way, one that succeeds by delivering long-term value for our stakeholders. As part of our vision to deliver sustainable excellence
in logistics real estate, we have a long-standing commitment to sustainable practices in environmental, social and corporate governance initiatives.
Environmental
We continuously look for new and better ways to minimize our environmental impact as well as that of our tenants. We are especially focused on energy consumption, water consumption and greenhouse gas emissions.
On December 17, 2019, we adopted a Sustainable Development Policy intended to increase the operational efficiency of our buildings and promote sustainable design principles. We are committed to integrating innovative, sustainable building design features in alignment with the U.S. Green Building Council® ("USGBC®")
Leadership in Energy and Environmental Design (or LEED®), of which we have been a member of since 2008. In April 2021, we achieved acceptance into the USGBC® volume certification program to help streamline our sustainable development process. Specifically, we invest in sustainable practices, such as water usage reduction measures, efficient lighting, high efficient HVAC and renewable energy, construction waste reduction, recycling and user well-being attributes with the goal of positively impacting the experience of our tenants and increasing the value of our assets.
We do not have access to approximately 95% of the utility usage at our properties but, for the utilities in our control, we have been partnering with a third party data management provider to help monitor and manage usage.
Below
is a chart showing our information for the applicable sustainability metrics that we monitor and report on in alignment with the Sustainability Accounting Standards Board standard for real estate:
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Topic
Accounting Metric
Code
Our Information
Energy
Management
Description of how building energy management considerations are integrated into property investment analysis and operational strategy
IF-RE-130a.5
We integrate energy usage reduction measures on all new developments, incorporating LEED certification requirements and applicable aspects of our own sustainability policies/programs. These measures include energy modeling, high efficiency equipment (HVAC and lighting), and climate zone appropriate design factors. We have an ongoing lighting retrofit program, replacing outdated light fixtures with LED fixtures.
Water Management
Description of water management risks and discussion of strategies and practices to mitigate those risks
IF-RE-140a.4
We
integrate water reduction measures on all new developments and renovation, incorporating LEED water efficient credit criteria or applicable aspects of our own sustainability policies/programs. These measures include the use of WaterSense® fixtures for all domestic usage, xeriscaping to minimize or eliminate the need for irrigation, and water usage monitoring, where available and appropriate.
Climate Change Adaptation
Area of properties located in 100-year flood zones, by property subsector
IF-RE-450a.1
4.5 million square feet.
In November 2021, in an effort to mitigate and reduce our greenhouse
gas emissions, we set a goal to achieve carbon neutrality for our own operations by 2025 and to achieve carbon neutrality in alignment with the Paris Climate Accords by 2040. Carbon emissions from our operations are calculated as scope 1 and 2 emissions, which are direct and indirect emissions such as purchased power to operate our Duke Realty offices. Scope 3 emissions are the largest category and include the emissions created from our upstream and downstream activities including but not limited to tenant utilities from our owned buildings, the development process, waste and company travel. We have a comprehensive strategy to meet our goals by reducing carbon emissions, replacing energy sources with renewable energy and offsetting energy consumption.
We issued two green bonds in 2021 including an issuance of $500.0 million of senior unsecured notes in November 2021 with a stated interest rate of 2.25% due
January 15, 2032 and an issuance of $450.0 million of senior unsecured notes in January 2021 with a stated interest rate of 1.75% due February 1, 2031.We now hold three green bonds totaling $1.35 billion. The net proceeds from these offerings will be used to finance future or refinance recently completed “eligible green projects”. These projects may include green buildings, energy efficiency projects, sustainable water and wastewater management systems, renewable energy projects, clean transportation solutions and pollution prevention and control. Green buildings are new development, redevelopment, or acquisitions of buildings, that have or are expected to receive Certified, Silver or Gold LEED certification through a 3rd party review and validation process by USGBC’s Green Building Certification Institute. In 2021,
we also added a sustainability metric to our line of credit tied to growing the percentage of our LEED® developed projects.
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Social
We are committed to social responsibility by developing and maintaining strong relationships with our associates, customers, business partners, investors as well as the communities in which we operate and invest. We are committed to fair compensation and pay equity, fostering a dynamic and balanced work environment and providing associates with developmental opportunities to perform well and derive satisfaction from their
work. We support and encourage our associates to participate in volunteer and community activities by providing each associate with two paid community days per year. We also have charitable contribution programs, such as our dollars for doers program (matching dollars for volunteer hours spent) and our matching gifts program (matching dollars for associates donations to charities). In addition, we partner with various charitable organizations, including the American Red Cross since 2017. Our sustainable development, energy, and resource usage policies help to create a cleaner and healthier environment for the communities we serve. In 2021, we completed a community solar project where we partnered with solar developers to install solar panels on the rooftops of several buildings we own to enable the capture of solar energy for the neighboring community. Through all of these initiatives and others, we endeavor to make a positive impact on the communities in which we
conduct business.
Corporate Governance
Since our inception, we not only have strived to be a top-performer operationally, but also to lead in issues important to investors such as disclosure and corporate governance. The General Partner's system of governance reinforces this commitment and, as a limited partnership that has one general partner owning over 90% of the Partnership's common interest, the governance of the Partnership is necessarily linked to the corporate governance of the General Partner. Summarized below are the highlights of the General Partner's Corporate Governance initiatives.
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Board
Composition
• The General Partner's board is controlled by a supermajority (91.7%) of "Independent Directors," as such term is defined under the rules of the New York Stock Exchange (the "NYSE") • 55% of the Independent Directors are female or people of color and the General Partner's compensation and human capital and finance committees are both chaired by females
Board Committees
• The General Partner's board committee members are all Independent Directors
Lead
Director
• The Lead Director is independent, serves as the Chairman of the General Partner's corporate governance committee and presides at all meetings of the board at which the Chair is not present, including executive sessions of the independent directors (among other responsibilities)
Board Policies
- General Partner's Bylaws include proxy access - Board Diversity, Equity and Inclusion Policy - No Shareholder Rights Plan (Poison Pill) - Code of Business Ethics applies to all directors and employees of the General Partner, including the Chief Executive Officer and senior financial officers; waivers applied to executive officers require
the approval of (i) the General Partner's board of directors or (ii) the General Partner's corporate governance committee - Orientation program for new directors of the General Partner - Independence of directors of the General Partner is reviewed annually - Independent Directors of the General Partner meet at least quarterly in executive sessions - Independent Directors of the General Partner receive no compensation from the General Partner other than as directors - Equity-based compensation plans require the approval of the General Partner's shareholders - Board effectiveness and performance are reviewed annually by the General Partner's corporate governance committee - Individual director evaluations are performed annually - The General Partner's corporate governance committee conducts an annual review of the Chief Executive Officer succession plan - Independent Directors and all board committees of the General Partner may retain
outside advisors, as they deem appropriate - Prohibition on repricing of outstanding stock options of the General Partner - Directors of the General Partner required to offer resignation upon job change - Majority voting for election of directors of the General Partner - Human Rights Policy - Shareholder Communications Policy
Ownership
Minimum Stock Ownership Guidelines apply to all directors and executive officers of the General Partner
The General Partner's Code of Business Ethics (which applies to all directors and associates of the General Partner, including the Chief Executive Officer and senior financial officers) and the Corporate Governance
Guidelines are available in the Investor Relations/Corporate Governance section of the General Partner's website at www.dukerealty.com. A copy of these documents may also be obtained without charge by writing to Duke Realty Corporation, 8711 River Crossing Boulevard, Indianapolis, Indiana46240, Attention: Investor Relations. If we amend our Code of Business Ethics as it applies to the directors and all executive officers of the General Partner or grant a waiver from any provision of the Code of Business Ethics to any such person, we may, rather than filing a current report on
Form 8-K, disclose such amendment or waiver in the Investor Relations/Corporate Governance section of the General Partner's website at www.dukerealty.com.
Since 2020, we implemented a Vendor Code of Conduct that outlines our expectations and standards for how our vendors operate while doing business on our behalf.
Further, we publish an annual Corporate Responsibility Report which formally communicates our commitments and leadership around ESG issues.
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Through all of our environmental, social and corporate governance efforts, we demonstrate that operating and developing
commercial real estate can be conducted with a conscious regard for the environment and community, while also benefiting our investors, associates, tenants and the communities in which we operate.
Human Capital
We had approximately 340 associates at December 31, 2021 and our average associate tenure was 12.2 years. We are committed to increasing transparency in the diversity of our workforce, so in 2021 we disclosed our 2020 EEO-1 report on our corporate website. The composition of our workforce and upper management at December 31, 2021 were as follows:
Workforce
Upper
Management
Female
46
%
24
%
Male
54
%
76
%
People of color
16
%
12
%
Other
84
%
88
%
Our
compensation and human capital committee, a board committee, reviews associate turnover and diversity, as well as associate development and engagement programs. We also routinely conduct associate engagement surveys and have received numerous awards for being a great place to work. While attracting, developing and retaining our talent, we are dedicated to fair compensation, fostering an inclusive and diverse culture and a dynamic and balanced work environment, which provides associates with opportunities to perform well and derive satisfaction from their work. The compensation structures of many of our senior associates are directly tied to metrics or other objectives that support our corporate strategy.
We require ethical conduct by our associates and all associates are required to complete annual Code of Business Ethics training sessions, and associates and directors must sign off on our Code of Business
Ethics every year.
Additional Information
For additional information regarding our investments and operations, see Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations" and Item 8, "Financial Statements and Supplementary Data." For additional information about our business segments, see Item 8, "Financial Statements and Supplementary Data - Notes to Consolidated Financial Statements - (9) Segment Reporting."
Available Information
In addition to this Report, we file quarterly and current reports, proxy statements and other information with the SEC. All documents that are filed with the SEC are available free of charge on the General Partner's corporate website, which is www.dukerealty.com.
We are not incorporating the information on the General Partner's website into this Report, and the General Partner's website and the information appearing on the General Partner's website is not included in, and is not part of, this Report. You may also access any document filed through the SEC's home page on the Internet (http://www.sec.gov).
Item 1A. Risk Factors
In addition to the other information contained in this Report, you should carefully consider, in consultation with your legal, financial and other professional advisors, the risks described below, as well as the risk factors and uncertainties discussed in our other public filings with the SEC under the caption "Risk Factors" in evaluating us and our business
before making a decision regarding an investment in the General Partner's securities.
The risks contained in this Report are not the only risks that we face. Additional risks that are not presently known, or that we presently deem to be immaterial, also could have a material adverse effect on our financial condition, results of operations, business and prospects. The trading price of the General Partner's securities could decline due
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to the materialization of any of these risks, and its shareholders and/or the Partnership's unitholders may lose all or part of their investment.
This Report also contains forward-looking statements that may not be realized as a result of certain
factors, including, but not limited to, the risks described herein and in our other public filings with the SEC. Please refer to the section in this Report entitled "Cautionary Notice Regarding Forward-Looking Statements" for additional information regarding forward-looking statements.
Risks Related to the COVID-19 Pandemic
The full effects of the COVID-19 pandemic are highly uncertain and cannot be predicted.
The outbreak of COVID-19, a respiratory disease caused by a novel corona virus, has spread globally since being declared a pandemic by the World Health Organization in March 2020. Although vaccines have been developed and are widely distributed in the United States, newer and more contagious variants of COVID-19 have further amplified the impact of the pandemic while significant components of the United States population are resistant
to vaccination efforts.
The COVID-19 pandemic has also coincided with labor shortages and increased staffing costs for many companies operating in the United States. COVID-19 related disruptions to the international supply chain, including transportation and distribution delays, longer lead times for construction materials and increased construction costs have resulted in shortages of certain goods and inflationary conditions. These developments, as well as other ramifications of the COVID-19 pandemic may result in prolonged inflationary conditions that could have a detrimental impact on our tenant base, our ability to lease vacant space and our ability to grow through development and acquisition. Future adverse impacts to the economy caused by COVID-19 may also result in market volatility and large swings in global stock prices that may negatively impact our share price. These potential risks could
also negatively impact our future ability to access capital, which would negatively impact our liquidity and our ability to execute our strategic plans.
The impacts of the outbreak could, among other things, negatively affect (i) the operation of our properties, (ii) the effectiveness of our strategic decision making, (iii) the operation of an effective cyber security function, (iv) the operation of our key information systems, (v) our ability to make timely filings with the SEC and (vi) our ability to maintain an effective control environment.
Risks Related to Our Business
Our use of debt financing could have a material adverse effect on our financial condition.
We are subject to the risks normally associated with debt financing, including the risk that our cash flow will
be insufficient to meet required principal and interest payments and the long-term risk that we will be unable to refinance our existing indebtedness, or that the terms of such refinancing will not be as favorable as the terms of existing indebtedness. Additionally, we may not be able to refinance borrowings by our unconsolidated subsidiaries on favorable terms or at all. If our debt cannot be paid, refinanced or extended, we may not be able to make distributions to shareholders and unitholders at expected levels. Further, if prevailing interest rates or other factors at the time of a refinancing result in higher interest rates or other restrictive financial covenants upon the refinancing, then such refinancing would adversely affect our cash flow and funds available for operation, development and distribution.
We also have incurred, and may incur in the future, indebtedness that bears interest at variable rates. Thus, if
market interest rates increase, so will our interest expense, which could reduce our cash flow and our ability to make distributions to shareholders and unitholders at expected levels.
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Debt financing may not be available and equity issuances could be dilutive to our shareholders and unitholders.
Our ability to execute our business strategy depends on our access to an appropriate blend of debt financing, including unsecured lines of credit and other forms of secured and unsecured debt, and equity financing, including common equity and, at times, preferred equity issued by the General Partner. Debt financing may not be available over a longer period
of time in sufficient amounts, on favorable terms or at all. If the General Partner issues additional equity securities, instead of debt, to manage capital needs, the interests of our existing shareholders and unitholders could be diluted.
Financial and other covenants under existing credit agreements could limit our flexibility and adversely affect our financial condition.
The terms of our various credit agreements and other indebtedness require that we comply with a number of customary financial and other covenants, such as maintaining debt service coverage and leverage ratios and maintaining insurance coverage. These covenants may limit our flexibility in our operations, and breaches of these covenants could result in defaults under the instruments governing the applicable indebtedness even if we have satisfied our payment obligations. As a result, we would also likely be unable
to borrow any further amounts under our other debt instruments and other debt obligations may be accelerated, which could adversely affect our ability to fund operations.
Downgrades in our credit ratings could increase our borrowing costs or reduce our access to funding sources in the credit and capital markets.
We have a significant amount of debt outstanding, consisting mostly of unsecured debt. We are currently assigned corporate credit ratings from Moody's Investors Service, Inc. and Standard and Poor's Ratings Group based on their evaluation of our creditworthiness. All of our debt ratings remain investment grade, but there can be no assurance that we will not be downgraded or that any of our ratings will remain investment grade. If our credit ratings are downgraded or other negative action is taken, we could be required, among other things, to pay additional interest and
fees on outstanding borrowings under our revolving credit agreement.
Credit rating reductions by one or more rating agencies could also adversely affect our access to funding sources, the cost and other terms of obtaining funding as well as our overall financial condition, operating results and cash flow.
If we are unable to generate sufficient capital and liquidity, then we may be unable to pursue future development projects and other strategic initiatives.
To complete our ongoing and planned development projects, and to pursue our other strategic initiatives, we must continue to generate sufficient capital and liquidity to fund those activities. To generate that capital and liquidity, we rely upon funds from our existing operations, as well as funds that we raise through our capital raising activities. In the event that we are unable
to generate sufficient capital and liquidity to meet our long-term needs, or if we are unable to generate capital and liquidity on terms that are favorable to us, then we may not be able to pursue development projects, acquisitions, or our other long-term strategic initiatives.
Our use of joint ventures may negatively impact our jointly-owned investments.
We have, and may continue to develop properties in, or contribute properties to, joint ventures with other persons or entities when circumstances warrant the use of these structures. Our participation in joint ventures is subject to the risks that:
•We could become engaged in a dispute, or have conflicts of interests, with any of our joint venture partners that might affect our ability to develop or operate a property; and
•Our
joint venture partners may have different objectives than we have regarding the appropriate timing and terms of any sale or refinancing of properties.
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Risks Related to the Real Estate Industry
Our net earnings available for investment or distribution to shareholders and unitholders could decrease as a result of factors related to the ownership and operation of commercial real estate, many of which are outside of our control.
Our business is subject to the risks incident to the ownership and operation of commercial real estate, many of which involve circumstances not within our control. Such risks include the following:
•Changes
in the general economic climate;
•The availability of capital on favorable terms, or at all;
•Increases in interest rates;
•Local conditions such as oversupply of property or a reduction in demand;
•Competition for tenants;
•Changes in market rental rates;
•Delay or inability to collect rent from tenants who are bankrupt, insolvent or otherwise unwilling or unable to pay;
•Difficulty in leasing or re-leasing space quickly or on favorable terms;
•Costs
associated with periodically renovating, repairing and reletting rental space;
•Our ability to provide adequate maintenance and insurance on our properties;
•Our ability to control variable operating costs;
•Changes in government regulations; and
•Potential liability under, and changes in, environmental, zoning, tax and other laws.
Any one or more of these factors could result in a reduction in our net earnings available for investment or distribution to shareholders and unitholders.
Many real estate costs are fixed, even if income from properties decreases.
Our financial
results depend on leasing space in our real estate to tenants on terms favorable to us. Our income and funds available for distribution to our shareholders and unitholders will decrease if a significant number of our tenants cannot meet their lease obligations to us or we are unable to lease properties on favorable terms. In addition, if a tenant does not pay its rent, we may not be able to enforce our rights as landlord without delays and we may incur substantial legal costs. Costs associated with real estate investment, such as real estate taxes, insurance, maintenance costs and our debt service payments, generally are not reduced when circumstances cause a reduction in income from the investment. As a result, we may have a reduction in our net earnings available for investment or distribution to our shareholders and unitholders.
Our real estate development activities are subject to risks particular to development.
We
continue to selectively develop new properties for rental operations in our existing markets when accretive returns are present. These development activities generally require various government and other approvals, which we may not receive. In addition, we also are subject to the following risks associated with development activities:
•Unsuccessful development opportunities could result in direct expenses to us;
•Construction costs could increase as the result of inflation and supply chain constraints;
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•Construction costs of a project may exceed original estimates, possibly making the project less profitable
than originally estimated, or possibly unprofitable;
•Time required to complete the construction of a project or to lease up the completed project may be greater than originally anticipated, thereby adversely affecting our cash flow and liquidity;
•Occupancy rates and rents of a completed project may not be sufficient to make the project profitable; and
•Favorable sources to fund our development activities may not be available.
We may be unsuccessful in operating completed real estate projects.
We face the risk that the real estate projects we develop or acquire will not perform in accordance with our expectations. This risk exists because of factors such as the following:
•Prices
paid for acquired facilities are based upon a series of market judgments; and
•Costs of any improvements required to bring an acquired facility up to standards to establish the market position intended for that facility might exceed budgeted costs.
As a result, we may develop or acquire projects that are not profitable.
Our investments are concentrated in the industrial sector and our business would be adversely affected by an economic downturn in that sector.
Our investments in real estate assets are concentrated in the industrial sector. This concentration may expose us to the risk of economic downturns in this sector to a greater extent than if our business activities were more diversified.
We are exposed to the risks of
defaults by tenants.
Any of our tenants may experience a downturn in their businesses that may weaken their financial condition. In the event of default or the insolvency of a significant number of our tenants, we may experience a substantial loss of rental revenue and/or delays in collecting rent and incur substantial costs in enforcing our rights as landlord. If a tenant files for bankruptcy protection, a court could allow the tenant to reject and terminate its lease with us. Our income and distributable cash flow would be adversely affected if a significant number of our tenants became unable to meet their obligations to us, became insolvent or declared bankruptcy.
A default by one of our largest tenants could have a more significant negative financial impact on our operations. As of December 31, 2021, our 10 largest tenants
accounted for 21.3% of our total annualized net rental revenue and the two largest of these tenants accounted for 10.4% of our total annualized net rental revenue. Annualized net rental revenue equals the average annual rental property revenue over the terms of the respective leases excluding operating expenses and additional rent due as operating expense reimbursements. Annualized net rental revenue, for the purpose of this risk factor, also includes leases to our largest tenants in properties owned by unconsolidated joint ventures at their ownership percentage.
We may be unable to renew leases or relet space.
When our tenants decide not to renew their leases upon their expiration, we may not be able to relet the space. Even if our tenants do renew or we are able to relet the space, the terms of renewal or reletting (including the cost of renovations, if necessary) may be less
favorable than current lease terms. If we are unable to promptly renew the leases or relet the space, or if the rental rates upon such renewal or reletting are significantly lower than current rates, then our income and distributable cash flow would be adversely affected, especially if we were unable to lease a significant amount of the space vacated by tenants in our properties.
Our insurance coverage on our properties may be inadequate.
We maintain comprehensive insurance on each of our facilities, including property, liability and environmental coverage. We believe this coverage is of the type and amount customarily obtained for real property. However, there are certain types of losses, generally of a catastrophic nature, such as hurricanes, earthquakes and floods or
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acts
of war or terrorism that may be uninsurable or not economically insurable. We use our discretion when determining amounts, coverage limits and deductibles for insurance. These terms are determined based on retaining an acceptable level of risk at a reasonable cost. This may result in insurance coverage that in the event of a substantial loss would not be sufficient to pay the full current replacement cost of the damaged assets. Inflation, changes in building codes and ordinances, environmental considerations, acts of a governmental authority and other factors also may make it unfeasible to collect insurance proceeds to replace a facility after it has been damaged or destroyed. If an uninsured or underinsured loss occurred, we could lose both our investment in and anticipated profits and cash flow from a property, and we would continue to be obligated on any mortgage indebtedness or other obligations related to the property. We are also subject to the risk that our insurance
providers may be unwilling or unable to pay our claims when made.
Our asset strategy may lead to long-term dilution.
Our asset strategy is to increase our investment concentration in Coastal Tier 1 markets. There can be no assurance that we will be able to execute our strategy or that our execution of such strategy will lead to improved results.
Acquired properties may expose us to unknown liability.
From time to time, we may acquire properties subject to liabilities and without any recourse, or with only limited recourse, with respect to unknown liabilities. As a result, if a liability were asserted against us based upon ownership of those properties, we might have to pay substantial sums to settle or contest it, which could adversely affect our results of operations and cash flow. Unknown liabilities
with respect to acquired properties might include:
•liabilities for clean-up of undisclosed environmental contamination;
•claims by tenants, vendors or other persons against the former owners of the properties;
•liabilities incurred in the ordinary course of business; and
•claims for indemnification by general partners, directors, officers and others indemnified by the former owners of the properties.
We could be exposed to significant environmental liabilities as a result of conditions of which we currently are not aware.
As an owner and operator of real property, we may be liable
under various federal, state and local laws for the costs of removal or remediation of certain hazardous substances released on or in our property. Such laws often impose liability without regard to whether the owner or operator knew of, or was responsible for, the release of the hazardous substances. In addition, we could have greater difficulty in selling real estate on which hazardous substances were present or in obtaining borrowings using such real estate as collateral. It is our general policy to have Phase I environmental audits performed for all of our properties and land by qualified environmental consultants at the time of purchase. These Phase I environmental audits have not revealed any environmental liability that would have a material adverse effect on our business. However, a Phase I environmental audit does not involve invasive procedures such as soil sampling or ground water analysis, and we cannot be sure that the Phase I environmental audits did not
fail to reveal a significant environmental liability or that a prior owner did not create a material environmental condition on our properties or land which has not yet been discovered. We could also incur environmental liability as a result of future uses or conditions of such real estate or changes in applicable environmental laws.
We are exposed to the potential impacts of future climate change and climate-change related risks.
We are exposed to potential physical risks from possible future changes in climate. We have a significant investment in properties in coastal markets such as Southern California, Northern California and South Florida and have also targeted those markets for future growth. Those coastal markets have historically experienced severe weather events, such as storms and drought, as well as other natural catastrophes such as wildfires and floods. If the frequency
of extreme weather and other natural events increases due to climate change, our exposure to these events
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could increase. We may also be adversely impacted as a real estate owner, manager and developer in the future by stricter energy and water efficiency standards, water access for our buildings or greenhouse gas regulations.
Compliance with new laws or regulations relating to climate change, including compliance with “green” building codes, may require us to make improvements to our existing properties or result in increased operating costs that we may not be able to effectively pass on to our tenants. Any such laws or regulations could also impose substantial costs on our tenants, thereby impacting the financial
condition of our tenants and their ability to meet their lease obligations and to lease or re-lease our properties. We cannot give any assurance that other such conditions do not exist or may not arise in the future. The potential impacts of future climate change on our real estate properties could adversely affect our ability to lease, develop or sell such properties.
Risks Related to Our Organization and Structure
If the General Partner were to cease to qualify as a REIT, it would lose significant tax benefits.
The General Partner intends to continue to operate so as to qualify as a REIT under the Internal Revenue Code of 1986, as amended (the "Code"). Qualification as a REIT provides significant tax advantages to the General Partner. However, in order for the General Partner to continue to qualify as a REIT, it must satisfy
numerous requirements established under highly technical and complex Code provisions for which there are only limited judicial and administrative interpretations. Satisfaction of these requirements also depends on various factual circumstances not entirely within our control. The fact that the General Partner holds its assets through the Partnership further complicates the application of the REIT requirements. Even a technical or inadvertent mistake could jeopardize the General Partner's REIT status. Although we believe that the General Partner can continue to operate so as to qualify as a REIT, we cannot offer any assurance that it will continue to do so or that legislation, new regulations, administrative interpretations or court decisions will not significantly change the qualification requirements or the federal income tax consequences of qualification. If the General Partner were to fail to qualify as a REIT in any taxable year, it would have the following effects:
•The
General Partner would not be allowed a deduction for dividends distributed to shareholders and would be subject to federal corporate income tax (and any applicable state and local income taxes) on its taxable income at regular corporate income tax rates;
•Unless the General Partner was entitled to relief under certain statutory provisions, it would be disqualified from treatment as a REIT for the four taxable years following the year during which it ceased to qualify as a REIT;
•The General Partner's net earnings available for investment or distribution to its shareholders would decrease due to the additional tax liability for the year or years involved; and
•The General Partner would no longer be required to make any distributions to shareholders in order to qualify
as a REIT.
As such, the General Partner's failure to qualify as a REIT would likely have a significant adverse effect on the value of the General Partner's securities and, consequently, the Partnership's Units.
REIT distribution requirements limit the amount of cash we have available for other business purposes, including amounts that we need to fund our future capital needs.
To maintain its qualification as a REIT under the Code, the General Partner must annually distribute to its shareholders at least 90% of its REIT taxable income, determined without regard to the dividends-paid deduction and excluding net capital gains. The General Partner intends to continue to make distributions to its shareholders to comply with the 90% distribution requirement. However, this requirement limits our ability to accumulate capital for use for other
business purposes. If we do not have sufficient cash or other liquid assets to meet the distribution requirements of the General Partner, we may have to borrow funds or sell properties on adverse terms in order to meet the distribution requirements. If the General Partner fails to satisfy the distribution requirement, it would cease to qualify as a REIT.
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U.S. federal income tax treatment of REITs and investments in REITs may change in a manner that could adversely affect us or shareholders.
Legislative, regulatory or administrative changes could be enacted or promulgated at any time, either prospectively or with retroactive effect, and may adversely affect us and/or shareholders.
General
Risk Factors
Our business and operations could suffer in the event of system failures or cyber security attacks.
Our systems are vulnerable to damages from any number of sources, including energy blackouts, natural disasters, terrorism, war, telecommunication failures and cyber security attacks, such as computer viruses, computer hacking, acts of vandalism or theft, malware or other malicious codes, ransomware, phishing, employee error or malfeasance, or other unauthorized access. In July 2021 we determined our computer network was affected by a cyber security incident, for which we conducted an investigation that is now closed. This incident did not result in any evidence of data belonging to us being misused and did not result in a material interruption to our business or operations, material costs or other adverse material consequences but any future system
failure or accident that causes interruptions in our operations could result in a material disruption to our business. We may also incur additional costs to remedy damages caused by such disruptions. Any future significant compromise or breach of our data security, whether external or internal, or misuse of customer, associate, supplier or company data, could result in significant costs, lost sales, fines, lawsuits, and damage to our reputation. Any compromise of our security could also result in a violation of applicable privacy and other laws, unauthorized access to information of ours and others, significant legal and financial exposure, damage to our reputation, loss or misuse of the information and a loss of confidence in our security measures, which could harm our business.
We have programs in place to detect, contain and respond to data security incidents. However, the ever-evolving threats mean
we and our third-party service providers and vendors must continually evaluate and adapt our respective systems and processes and overall security environment. Even the most well protected information, networks, systems and facilities remain potentially vulnerable when considering the rapid pace of change in this area. There can be no assurance that our efforts to maintain the security and integrity of our systems will be effective, or that we will be able to maintain our systems free from security breaches, system compromises, misuses of data, or other operational interruptions. Accordingly, we may be unable to prevent major security breaches or entirely mitigate the risk of other system interruptions or failures.
We could also be negatively impacted by similar disruptions to the operations of our vendors or outsourced service providers.
The
General Partner's stock price and trading volume may be volatile, which could result in substantial losses to its shareholders and to the Partnership's unitholders, if and when they convert their Limited Partner Units to shares of the General Partner's common stock.
The market price of the General Partner's common stock could change in ways that may or may not be related to our business, our industry or our operating performance and financial condition. In addition, the trading volume in the General Partner's common stock may fluctuate and cause significant price variations to occur. Some of the factors that could negatively affect the General Partner's share price, or result in fluctuations in the price or trading volume of the General Partner's common stock, include uncertainty in the markets, general market and economic conditions, as well as those factors described in these "Risk Factors" and in other reports that
we file with the SEC.
Many of these factors are beyond our control, and we cannot predict their potential effects on the price of the General Partner's common stock. If the market price of the General Partner's common stock declines, then its shareholders and the Partnership's unitholders, respectively, may be unable to resell their shares and units upon terms that are attractive to them. We cannot assure that the market price of the General Partner's common stock will not fluctuate or decline significantly in the future. In addition, the securities markets in general may experience considerable unexpected price and volume fluctuations.
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We are subject to certain provisions that could discourage change-of-control transactions,
which may reduce the likelihood of the General Partner's shareholders receiving a control premium for their shares.
Indiana anti-takeover legislation and certain provisions in our governing documents, as we discuss below, may discourage potential acquirers from pursuing a change-of-control transaction with us. As a result, the General Partner's shareholders may be less likely to receive a control premium for their shares.
Ownership Restriction. Subject to certain exceptions, the General Partner's charter provides that no person or entity may beneficially own, or be deemed to own by virtue of the applicable constructive ownership provisions of the Code, more than 9.8% (in value or by number of shares, whichever is more restrictive) of the General Partner's outstanding common stock or 9.8% in value of its outstanding stock.
Unissued
Preferred Stock. The General Partner's charter permits its board of directors to classify unissued preferred stock by setting the rights and preferences of the shares at the time of issuance. This power enables the General Partner's board to adopt a shareholder rights plan, also known as a poison pill. Although the General Partner has repealed its previously existing poison pill and its current board of directors has adopted a policy not to adopt a shareholder rights plan without shareholder approval, the General Partner's board can change this policy at any time. The adoption of a poison pill would discourage a potential bidder from acquiring a significant position in the General Partner without the approval of its board.
Business-Combination Provisions of Indiana Law. The General Partner has not opted out of the business-combination provisions of the Indiana Business Corporation
Law. As a result, potential bidders may have to negotiate with the General Partner's board of directors before acquiring 10% of its stock. Without securing board approval of the proposed business combination before crossing the 10% ownership threshold, a bidder would not be permitted to complete a business combination for five years after becoming a 10% shareholder. Even after the five-year period, a business combination with the significant shareholder would either be required to meet certain per share price minimums as set forth in the Indiana Business Corporation Law or to receive the approval of a majority of the disinterested shareholders.
Control-Share-Acquisition Provisions of Indiana Law. The General Partner has not opted out of the provisions of the Indiana Business Corporation Law regarding acquisitions of control shares. Therefore, those who acquire a significant block (at least 20%) of the
General Partner's shares may only vote a portion of their shares unless its other shareholders vote to accord full voting rights to the acquiring person. Moreover, if the other shareholders vote to give full voting rights with respect to the control shares and the acquiring person has acquired a majority of the General Partner's outstanding shares, the other shareholders would be entitled to special dissenters' rights.
Supermajority Voting Provisions. The General Partner's charter prohibits business combinations or significant disposition transactions with a holder of 10% of its shares unless:
•The holders of 80% of the General Partner's outstanding shares of capital stock approve the transaction;
•The transaction has been approved by three-fourths of those directors
who served on the General Partner's board before the shareholder became a 10% owner; or
•The significant shareholder complies with the "fair price" provisions of the General Partner's charter.
Among the transactions with large shareholders requiring the supermajority shareholder approval are dispositions of assets with a value greater than or equal to $1,000,000 and business combinations.
Operating Partnership Provisions. The limited partnership agreement of the Partnership contains provisions that could discourage change-of-control transactions, including a requirement that holders of at least 90% of the outstanding Common Units approve:
•Any voluntary sale, exchange, merger, consolidation or other disposition
of all or substantially all of the assets of the Partnership in one or more transactions other than a disposition occurring upon a financing or refinancing of the Partnership;
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•The General Partner's merger, consolidation or other business combination with another entity unless after the transaction substantially all of the assets of the surviving entity are contributed to the Partnership in exchange for Common Units;
•The General Partner's assignment of its interests in the Partnership other than to one of its wholly owned subsidiaries; and
•Any reclassification or recapitalization or change of outstanding
shares of the General Partner's common stock other than certain changes in par value, stock splits, stock dividends or combinations.
We are dependent on key personnel.
The General Partner's executive officers and other senior officers have a significant role in the success of our Company. Our ability to retain our management group or to attract suitable replacements should any members of the management group leave our Company is dependent on the competitive nature of the employment market. The loss of services from key members of the management group or a limitation in their availability could adversely impact our financial condition and cash flow. Further, such a loss could be negatively perceived in the capital markets.
Item 1B. Unresolved
Staff Comments
We have no unresolved comments with the SEC staff regarding our periodic or current reports under the Exchange Act.
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Item 2. Properties
Product Review
As of December 31, 2021, we own interests in 548 primarily industrial properties encompassing 162.7 million net rentable square feet (including 40 unconsolidated joint venture in-service properties with 12.9 million square feet, 29 consolidated properties under development with 8.5 million square feet and
two unconsolidated joint venture properties under development with 1.2 million square feet).
Industrial Properties: We own interests in 545 industrial properties encompassing 162.4 million square feet (99.9% of our total square feet). These properties are primarily logistics facilities with clear ceiling heights of 28 feet or more.
Non-reportable: We own interests in three buildings, which are not industrial properties and are not presented within our reportable segments, totaling 211,000 square feet (0.1% of our total square feet).
See Consolidated Financial Statement Schedule III - Real Estate Properties and Accumulated Depreciation for a detailed listing of the Company’s properties and related encumbrances.
Land: We own, including
through ownership interests in unconsolidated joint ventures (with acreage not adjusted for our percentage ownership interest), 431 acres of land and control an additional 925 acres through purchase options. All of the land that we directly own is intended to be used for the development of industrial properties and can support over 6.9 million square feet of industrial developments.
Property Descriptions
The following tables represent the geographic highlights of consolidated and unconsolidated joint venture in-service properties in our primary markets.
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Consolidated
Properties
Square
Feet
Annual Net Effective Rent (1)
Annual Net Effective Rent per Square Foot (2)
Percent of Annual Net Effective Rent
Industrial
Non-Reportable
Overall
Percent of Overall
Primary
Market
Southern California
16,586,113
—
16,586,113
11.8
%
$
125,697,500
$
7.58
15.8
%
New
Jersey
8,555,906
—
8,555,906
6.1
%
90,344,759
10.56
11.4
%
South
Florida
9,249,136
—
9,249,136
6.6
%
68,868,913
8.09
8.7
%
Chicago
13,853,198
—
13,853,198
9.9
%
64,512,452
4.66
8.1
%
Atlanta
13,299,470
—
13,299,470
9.5
%
56,346,766
4.25
7.1
%
Dallas
11,164,016
—
11,164,016
8.0
%
43,939,307
3.94
5.5
%
Cincinnati
9,114,047
91,843
9,205,890
6.5
%
38,375,871
4.20
4.8
%
Savannah
7,329,816
—
7,329,816
5.2
%
35,369,045
4.83
4.4
%
Indianapolis
9,345,171
—
9,345,171
6.7
%
35,217,401
3.77
4.4
%
Pennsylvania
5,685,384
—
5,685,384
4.1
%
31,994,324
5.63
4.0
%
Houston
5,824,310
—
5,824,310
4.2
%
29,107,288
5.15
3.7
%
Minneapolis-St.
Paul
5,143,303
—
5,143,303
3.7
%
29,063,212
5.79
3.7
%
Central
Florida
4,332,233
—
4,332,233
3.1
%
24,742,911
5.84
3.1
%
Seattle
3,709,836
—
3,709,836
2.6
%
23,984,257
7.53
3.0
%
Columbus
5,319,877
—
5,319,877
3.8
%
20,760,897
3.90
2.6
%
Nashville
3,645,266
—
3,645,266
2.6
%
20,620,521
6.54
2.6
%
Northern
California
2,890,235
—
2,890,235
2.1
%
19,467,999
7.65
2.4
%
Raleigh
2,849,794
—
2,849,794
2.0
%
18,722,309
6.57
2.4
%
DC-Baltimore
1,918,738
—
1,918,738
1.4
%
15,446,846
8.23
1.9
%
Other
(3)
—
119,030
119,030
0.1
%
3,487,188
29.30
0.4
%
Total
139,815,849
210,873
140,026,722
100.0
%
$
796,069,766
$
5.79
100.0
%
Percent
of Overall
99.8
%
0.2
%
100.0
%
Annual Net Effective Rent per Square Foot (2)
$
5.77
$
22.55
$
5.79
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Unconsolidated
Joint Venture Properties
Square Feet
Annual Net Effective Rent (1)
Annual
Net Effective Rent per Square Foot (2)
Percent of Annual Net Effective Rent
Industrial
Percent of Overall
Primary Market
Dallas
6,047,818
46.8
%
$
30,217,889
$
5.00
50.9
%
Indianapolis
4,056,398
31.4
%
14,524,969
3.82
24.5
%
DC-Baltimore
1,363,958
10.5
%
7,691,934
5.64
12.9
%
Chicago
954,720
7.4
%
4,822,609
5.05
8.1
%
Atlanta
301,200
2.3
%
1,263,298
4.19
2.1
%
Cincinnati
57,886
0.4
%
398,667
6.89
0.7
%
Other
(3)
152,944
1.2
%
472,951
3.09
0.8
%
Total
12,934,924
100.0
%
$
59,392,317
$
4.68
100.0
%
Percent
of Overall
100.0
%
Annual Net Effective Rent per Square Foot (2)
$
4.68
Percent
Leased
Consolidated Properties
Unconsolidated Properties
Industrial
Non-Reportable
Overall
Industrial
Overall
Primary
Market
Southern California
100.0
%
—
100.0
%
—
—
New
Jersey
100.0
%
—
100.0
%
—
—
South Florida
92.1
%
—
92.1
%
—
—
Chicago
100.0
%
—
100.0
%
100.0
%
100.0
%
Atlanta
99.7
%
—
99.7
%
100.0
%
100.0
%
Dallas
100.0
%
—
100.0
%
100.0
%
100.0
%
Cincinnati
99.4
%
85.9
%
99.3
%
100.0
%
100.0
%
Savannah
100.0
%
—
100.0
%
—
—
Indianapolis
100.0
%
—
100.0
%
93.7
%
93.7
%
Pennsylvania
100.0
%
—
100.0
%
—
—
Houston
97.1
%
—
97.1
%
—
—
Minneapolis-St.
Paul
97.7
%
—
97.7
%
—
—
Central Florida
97.8
%
—
97.8
%
—
—
Seattle
85.8
%
—
85.8
%
—
—
Columbus
100.0
%
—
100.0
%
—
—
Nashville
86.5
%
—
86.5
%
—
—
Northern
California
88.0
%
—
88.0
%
—
—
Raleigh
100.0
%
—
100.0
%
—
—
DC-Baltimore
97.8
%
—
97.8
%
100.0
%
100.0
%
Other
(3)
—
100.0
%
100.0
%
100.0
%
100.0
%
Total
98.1
%
93.8
%
98.1
%
98.0
%
98.0
%
(1)Represents the average annual base rental payments, on a straight-line basis for the term of each lease, from space leased to tenants as of December 31, 2021, excluding amounts paid by tenants as reimbursement for operating expenses. Unconsolidated joint venture properties are shown at 100% of square feet and net effective rents, without regard to our ownership percentage.
(2)Annual net effective rent per leased square foot.
(3)Represents properties not located in our primary markets.
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Item 3. Legal
Proceedings
We are not subject to any pending legal proceedings, other than routine litigation arising in the ordinary course of business. We do not expect these legal proceedings to have a material adverse effect on our financial condition, results of operations, or liquidity.
Item 4. Mine Safety Disclosures
Not applicable.
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PART II
Item 5. Market
for the Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
Market Information and Holders
The General Partner's common stock is listed for trading on the NYSE under the symbol "DRE." There is no established trading market for the Partnership's Common Units. As of February 16, 2022, there were 4,402 record holders of the General Partner's common stock and 73 record holders of the Partnership's Common Units.
Stock Performance Graph
The following line graph compares the change in the General Partner's cumulative total shareholders' return on shares of its common stock to the cumulative
total return of the Standard and Poor's 500 Stock Index ("S&P 500") and the FTSE NAREIT Equity REITs Index ("NAREIT Index") from December 31, 2016 to December 31, 2021. The graph assumes an initial investment of $100 in the common stock of the General Partner and each of the indices on December 31, 2016, and the reinvestment of all dividends. The performance graph is not necessarily indicative of future performance.
This graph and the accompanying text are not “soliciting material,” are not deemed filed with the SEC and are not to be incorporated
by reference in any filing by the company under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, whether made before or after the date hereof and irrespective of any general incorporation language in any such filing.
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Tax Characterization of Dividends
A summary of the tax characterization of the dividends paid per common share of the General Partner for the years ended December 31, 2021, 2020 and 2019 follows:
2021
2020
2019
Total
dividends paid per share
$
1.045
$
0.96
$
0.88
Ordinary income
91.5
%
74.6
%
80.7
%
Capital
gains
8.5
%
25.4
%
19.3
%
100.0
%
100.0
%
100.0
%
See Item 7, "Management's Discussion and Analysis of Financial Condition and
Results of Operations - Liquidity and Capital Resources - Uses of Liquidity - Dividend and Distribution Requirements", below, for more information on our dividend policy.
Sales of Unregistered Securities
The General Partner did not sell any of its securities during the year ended December 31, 2021 that were not registered under the Securities Act.
Issuer Purchases of Equity Securities
From time to time, we may repurchase our securities under a repurchase program that initially was approved by the General Partner's board of directors and publicly announced in October 2001 (the "Repurchase Program").
During 2021 we did not repurchase any equity securities under the Repurchase Program.
On January 26, 2022 the General Partner's board of directors adopted a resolution that amended and restated the Repurchase Program and delegated authority to management to repurchase a maximum of $300.0 million of the General Partner's common shares, $750.0 million of the Partnership's debt securities and $500.0 million of the General Partner's preferred shares, subject to the prior notification of the Chairperson of the finance committee of the board of directors of planned repurchases within these limits.
Item 6. Reserved
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Item 7.
Management's Discussion and Analysis of Financial Condition and Results of Operations
The following discussion should be read in conjunction with the Consolidated Financial Statements included in Item 15. Exhibits and Financial Statement Schedules of this report and the matters described under Item 1A. Risk Factors.
A discussion regarding our financial condition and results of operations for 2021 compared to 2020 is under the Results of Operations section below. Our financial condition for 2019 and results of operations for 2020 compared to 2019 can be found under Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations, which is incorporated herein by this reference to our Annual Report on Form 10-K
for the fiscal year ended December 31, 2020, filed with the SEC on February 19, 2021, and is available on the SEC’s website at www.sec.gov and the Investor Relations section of our website at www.dukerealty.com.
Business Overview
The General Partner and Partnership collectively specialize in the ownership, management and development of industrial real estate. The General Partner is a self-administered and self-managed REIT that began operations in 1986 and is the sole general partner of the Partnership. The Partnership is a limited partnership formed in 1993, at which time all of the properties and related assets and liabilities of the General Partner, as well
as proceeds from a secondary offering of the General Partner's common shares, were contributed to the Partnership. Simultaneously, the Partnership completed the acquisition of Duke Associates, a full-service commercial real estate firm operating in the Midwest whose operations began in 1972. We operate the General Partner and the Partnership as one enterprise, and therefore, our discussion and analysis refers to the General Partner and its consolidated subsidiaries, including the Partnership, collectively.
Our business operations primarily consist of two reportable operating segments: rental operations of industrial properties and service operations. Rental operations of industrial properties represent the ownership and development of industrial properties and is the primary component of our revenues and earnings. Service operations generate additional revenues from providing various real estate services primarily relating
to development, construction management and property management services to customers, unconsolidated joint ventures and third-party owners.
Nationwide demand for industrial properties continues to be strong in the current economic environment as the COVID-19 pandemic has accelerated both consumer acceptance of e-commerce and the requirements of many retailers to increase inventory levels. Our operational focus is to maintain occupancy at high levels and to focus on rental rate growth. The occupancy of our consolidated industrial portfolio increased to 98.1% at December 31, 2021 as compared to 97.4% at December 31, 2020. Our annualized net effective rents for both renewals and new second generation leases, on a combined basis, executed in 2021 for consolidated properties grew by 34.8% over the previous leases. In the current environment
of rising rental rates for industrial properties in most of the markets in which we operate, we believe there is potential for continued future rental rate growth to the extent we are able to renew or backfill expiring leases and maintain high levels of occupancy.
-25-
Year in Review
We finished 2021 in strong financial condition and recorded improved year-over-year operating results. Despite the challenges of the COVID-19 variants throughout the year, the United States economy recovered earlier than many
economists predicted in 2021, highlighted by vaccine rollouts and business re-openings. As the year progressed, however, inflation in the United States reached the highest levels seen since 1982. The combination of supply chain disruptions induced by COVID-19, government spending and pent-up demand caused by shutdowns led to demand outpacing supply in a number of industries, including logistics real estate. Significant congestion in major ports, most notably the Ports of Los Angeles and Long Beach, and a generalized disruption throughout the nation's logistics network have also contributed to these recent levels of inflation.
These supply chain issues have also impacted our construction and development activities as lead times for materials lengthened significantly and construction prices on materials have increased significantly. In order to adapt to the disruptions in the global supply chain, many companies are attempting to increase
inventory levels and accumulate safety stock. We continued to maintain high occupancy levels through 2021 and quickly lease a significant portion of our speculative development projects.
The COVID-19 pandemic's impact on the overall global economy is continuing and the ultimate impact cannot be predicted at this time. Please see Part I, Item 1A, "Risk Factors" for additional information about the potential impacts the pandemic may have on our business and results of operations.
Highlights of our 2021 strategic and operational activities are as follows:
•We generated $1.07 billion of total net cash proceeds from the disposition of 30 consolidated properties and 283 acres of wholly owned undeveloped land during the year ended December 31, 2021. As
part of the dispositions, four industrial buildings and two trailer storage lots were contributed to a 20% owned unconsolidated joint venture.
•We acquired eight industrial properties for $447.6 million during the year ended December 31, 2021.
•We acquired 536 acres of land and one container storage lot under long term lease for $700.6 million during the year ended December 31, 2021.
•We started new development projects with expected total costs of $1.39 billion, which included $41.9 million of expected total costs for development projects started within two unconsolidated
joint ventures, at our ownership share. The development projects started in 2021 were, in aggregate, 43.2% leased at December 31, 2021.
•We placed 18 newly completed consolidated development projects in service, which totaled 7.7 million square feet with total costs of $957.7 million at December 31, 2021. One fully leased, 517,000 square foot property was sold shortly after completion. The remaining new developments were 88.1% leased at December 31, 2021.
•The estimated cost of our properties under construction at December 31, 2021, including costs for unconsolidated properties shown at our ownership share, totaled $1.42 billion,
with $709.1 million of such costs already incurred. The total estimated cost for two unconsolidated joint venture properties under construction at December 31, 2021 was $41.9 million, with $16.0 million of such costs already incurred. The consolidated properties under construction were 47.3% pre-leased, while the unconsolidated joint venture property under construction was 50.3% pre-leased.
•Income from continuing operations before income taxes was $880.2 million and $297.5 million for the twelve months ended December 31, 2021 and 2020, respectively.
•Same-property net operating income, on a cash basis, as defined hereafter under "Supplemental Performance Measures", increased
by 5.3% for the twelve months ended December 31, 2021, as compared to the twelve months ended December 31, 2020.
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•As the result of leasing up space in speculative developments throughout 2021, the percentage of total square feet leased for our in-service portfolio of consolidated properties increased from 97.4% at December 31, 2020 to 98.1% at December 31, 2021.
•Total leasing activity for our consolidated properties totaled 31.7 million square feet in 2021 compared to 25.5 million
square feet in 2020.
•Total leasing activity for our consolidated and unconsolidated joint venture properties in 2021 included 12.6 million and 326,000, respectively, square feet of lease renewals (excludes early renewals and short term renewals), which represented 76.8% and 34.9%, respectively, retention rates on a square foot basis. New second generation and renewal leases, on a combined basis, executed for consolidated properties and unconsolidated joint venture properties during the year resulted in 34.8% and 46.7%, respectively, increases to net effective rents ("net effective rents" is defined hereafter in the "Key Performance Indicators" section) when compared to the previous leases of the same space.
We utilized the capital generated from dispositions during the year to reduce debt and to fund our acquisition and development activities. Highlights
of our key financing activities are as follows:
•During 2021, the General Partner issued 8.2 million common shares under its at the market ("ATM") equity program, generating gross proceeds of $408.3 million and, after deducting commissions and other costs, net proceeds of $403.6 million.
•In January 2021, we issued $450.0 million of senior unsecured notes that bear interest at a stated interest rate of 1.75%, have an effective interest rate of 1.83% and mature on February 1, 2031, the proceeds for which were allocated to finance or refinance eligible green projects.
•In June 2021, we redeemed $83.7 million of senior unsecured notes bearing a stated interest rate of 3.88% and with
a scheduled maturity in 2022. In connection with the early redemption of these notes, we recognized a loss of $3.9 million consisting of a prepayment premium and the write-off of unamortized deferred financing costs.
•In August 2021, we repaid $250.0 million of senior unsecured notes bearing a stated interest rate of 3.63% and with a scheduled maturity in 2023. In connection with the early redemption of these notes, we recognized a loss of $13.9 million consisting of a prepayment premium and the write-off of unamortized deferred financing costs.
•In November 2021, we issued $500.0 million of senior unsecured notes that bear interest at a stated interest rate of 2.25%, have an effective interest rate of 2.38% and mature on January 15, 2032, the proceeds for which will be allocated to
finance or refinance eligible green projects.
-27-
Supplemental Performance Measures
The following table shows a reconciliation of net income attributable to common shareholders or common unitholders to the calculation of funds from operations ("FFO") attributable to common shareholders
or common unitholders for the years ended December 31, 2021, 2020 and 2019, respectively (in thousands):
2021
2020
2019
Net income
attributable to common shareholders of the General Partner
$
852,895
$
299,915
$
428,972
Add back: Net income attributable to noncontrolling interests - common limited partnership interests in the Partnership
8,354
2,663
3,678
Net
income attributable to common unitholders of the Partnership
861,249
302,578
432,650
Adjustments:
Depreciation and amortization
362,148
353,013
327,223
Company
share of unconsolidated joint venture depreciation and amortization
9,383
9,265
10,083
Partnership share of gains on property sales
(585,685)
(127,811)
(235,098)
Gains on land sales
(12,917)
(10,458)
(7,445)
Income
tax expense (benefit) not allocable to FFO
18,549
(5,112)
8,686
Impairment charges
—
5,626
—
Gains on sales of real estate assets - share of unconsolidated joint ventures
(20,106)
(822)
(21,239)
FFO
attributable to common unitholders of the Partnership (1)
$
632,621
$
526,279
$
514,860
Additional General Partner Adjustments:
Net income attributable to noncontrolling interests - common limited partnership interests in the Partnership
(8,354)
(2,663)
(3,678)
Noncontrolling
interest share of adjustments
2,222
(1,979)
(702)
FFO attributable to common shareholders of the General Partner (1)
$
626,489
$
521,637
$
510,480
(1)
FFO is a non-GAAP measure used in the real estate industry and is computed in accordance with standards established by the National Association of Real Estate Investment Trusts ("Nareit"). Nareit FFO is used by industry analysts and investors as a supplemental operating performance measure of a REIT. Nareit FFO is calculated as net income attributable to the common shareholders of the General Partner in accordance with 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), 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 partnerships and joint ventures, all net of related taxes.
The most comparable GAAP measure to Nareit FFO is net income attributable to common
shareholders or common unitholders. Management believes it is a useful indicator of consolidated operating performance, which improves the understanding of operating results of REITs among the investing public, makes comparisons of REIT operating results more meaningful and enables investors and analysts to readily identify the operating results of the long-term assets that form the core of a REIT's activity.
Net income attributable to the common shareholders of the General Partner for the year ended December 31, 2021, was $852.9 million, compared to net income of $299.9 million for the year ended December 31, 2020. Net income attributable to the common unitholders of the Partnership for the year ended December 31, 2021, was $861.2 million, compared to net income of $302.6
million for the year ended December 31, 2020. The increase in net income in 2021 for the General Partner and the Partnership, when compared to 2020, was primarily the result of higher gains on property sales, rental rate growth and increased occupancy.
NareitFFO attributable to common shareholders of the General Partner totaled $626.5 million for the year ended December 31, 2021, compared to $521.6 million for 2020. Nareit FFO attributable to common unitholders of the Partnership totaled $632.6 million for the year ended December 31, 2021, compared to $526.3 million for 2020. The increase to Nareit FFO from 2020 for the General Partner and the Partnership was primarily driven by improved occupancy, rental rate growth, new developments
being placed into service and leased up, and lower loss on debt extinguishment.
In addition to Nareit FFO we use (i) Property Level Net Operating Income - Cash Basis ("PNOI") and (ii) Same-Property Net Operating Income - Cash Basis ("SPNOI") as supplemental non-GAAP performance measures. Management believes that the use of PNOI and SPNOI combined with net income (which remains the primary measure of performance), improves the understanding of operating results of REITs among the investing public and
-28-
makes comparisons of REIT operating results more meaningful. The most comparable GAAP measure to PNOI and SPNOI is income from continuing operations before income taxes.
PNOI
and SPNOI each exclude expenses that materially impact our overall results of operations and, therefore, should not be considered as a substitute for income from continuing operations before income taxes, or any other measures derived in accordance with GAAP. Furthermore, these metrics may not be comparable to other similarly titled measures of other companies.
Property Level Net Operating Income - Cash Basis
PNOI is comprised of rental revenues from continuing operations less rental expenses and real estate taxes from continuing operations, along with certain other adjusting items. As a performance metric that consists of only the cash-based revenues and expenses directly related to ongoing real estate rental operations, PNOI is narrower in scope than Nareit FFO.
PNOI, as we calculate it, may not be directly comparable to similarly
titled, but differently calculated, measures for other REITs. We believe 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. The operations of our industrial properties, as well as our non-reportable Rental Operations (our residual non-industrial properties that have not yet been sold, referred to throughout as "non-reportable"), are collectively referred to as "Rental Operations."
The major factors influencing PNOI are occupancy levels, acquisitions and sales, development properties that achieve stabilized operations, rental rate increases or decreases, and the recoverability of operating expenses.
Note 9 to the consolidated financial statements included in Part IV, Item 15 of this Report
shows a calculation of our PNOI for the years ended December 31, 2021, 2020 and 2019 and provides a reconciliation of PNOI for our Rental Operations segments to income from continuing operations before income taxes.
Same-Property Net Operating Income - Cash Basis
We also evaluate the performance of our properties, including our share of properties we jointly control, on a "same-property" basis, using a metric referred to as SPNOI. We view SPNOI as a useful supplemental performance measure because it improves comparability between periods by eliminating the effects of changes in the composition of our portfolio.
On an individual property basis, SPNOI is generally computed in a
consistent manner as PNOI.
We define our "same-property" population once a year at the beginning of the current calendar year and include buildings that were stabilized (the term "stabilized" means properties that have reached 90% leased or that have been in-service for at least one year since development completion or acquisition) as of January 1 of the prior calendar year. The "same-property" pool is also adjusted to remove properties that were sold subsequent to the beginning of the current calendar year. As such, the "same-property" population for the period ended December 31, 2021 includes all properties that we owned or jointly controlled at January 1, 2021, which had both been owned or jointly controlled and had reached stabilization by January 1, 2020,
and have not been sold.
A reconciliation of income from continuing operations before income taxes to SPNOI is presented as follows (in thousands, except percentage data):
-29-
Three
Months Ended December 31,
Percent
Twelve Months Ended December 31,
Percent
2021
2020
Change
2021
2020
Change
Income from continuing operations before income taxes
$
107,305
$
166,418
$
880,167
$
297,537
Share
of SPNOI from unconsolidated joint ventures
5,627
5,582
22,505
21,880
PNOI excluded from the "same-property" population
(30,619)
(13,508)
(95,678)
(31,005)
Earnings
from Service Operations
(2,327)
(1,218)
(12,142)
(6,028)
Rental Operations revenues and expenses excluded from PNOI
(11,192)
(26,254)
(66,902)
(85,813)
Non-Segment
Items
94,482
24,133
(88,940)
410,541
SPNOI
$
163,276
$
155,153
5.2
%
$
639,010
$
607,112
5.3
%
The
composition of the line items titled "Rental Operations revenues and expenses excluded from PNOI" and "Non-Segment Items" from the table above are shown in greater detail in Note 9 to the consolidated financial statements included in Part IV, Item 15 of this Report.
We believe that the factors that impact SPNOI are generally the same as those that impact PNOI. The following table details the number of properties, square feet, average commencement occupancy and average cash rental rate for the properties included in SPNOI for the respective periods:
(1) Includes
the total square feet of the consolidated properties that are in the "same-property" population as well as 5.4 million square feet of space for unconsolidated joint ventures, which represents our ratable share of the 12.4 million total square feet of space for buildings owned by unconsolidated joint ventures that are in the "same-property" population.
(2) Commencement occupancy represents the percentage of total square feet where the leases have commenced.
(3) Represents the average annualized contractual rent per square foot for the three and twelve months ended December 31, 2021 and 2020 for tenants in occupancy in properties in the "same-property" population. Cash rent does not include the tenant's obligation to pay property
operating expenses and real estate taxes. If a tenant was within a free rent period, its rent would equal zero for purposes of this metric.
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Key Performance Indicators
Our operating results depend primarily upon rental income from our Rental Operations. The following discussion highlights the metrics that drive the performance of our Rental Operations, which management uses to operate the business, and that we consider to be critical drivers of future revenues.
Occupancy Analysis
Occupancy
is an important metric for management and our investors for understanding our financial performance. Our ability to maintain high occupancy rates is among the principal drivers of maintaining and increasing rental revenue. The following table sets forth percent leased and average net effective rent information regarding our in-service portfolio of rental properties at December 31, 2021 and 2020, respectively:
Total
Square Feet (in thousands)
Percent of Total Square Feet
Percent Leased*
Average Annual Net Effective Rent**
Type
2021
2020
2021
2020
2021
2020
2021
2020
Industrial
139,816
140,511
99.8
%
99.9
%
98.1
%
97.4
%
$5.77
$5.30
Non-reportable
Rental Operations
211
211
0.2
%
0.1
%
93.8
%
96.8
%
$22.55
$22.31
Total
Consolidated
140,027
140,722
100.0
%
100.0
%
98.1
%
97.4
%
$5.79
$5.32
Unconsolidated
Joint Ventures
12,935
11,467
98.0
%
98.7
%
$4.68
$4.32
Total Including Unconsolidated Joint Ventures
152,962
152,189
98.1
%
97.5
%
*
Represents the percentage of total square feet leased based on executed leases and without regard to whether the leases have commenced.
** Average annual net effective rent represents average annual base rental payments per leased square foot, on a straight-line basis for the term of each lease, from space leased to tenants at the end of the most recent reporting period. This amount excludes additional amounts paid by tenants as reimbursement for operating expenses.
The increase in occupancy at December 31, 2021 within our industrial portfolio, when compared to December 31, 2020, primarily resulted from leasing up recently delivered speculative developments while renewing or backfilling existing leases to maintain the
occupancy level within our existing base of properties.
Vacancy Activity
The following table sets forth vacancy activity, shown in square feet, from our in-service rental properties for the year ended December 31, 2021 (in thousands):
Consolidated Properties
Unconsolidated Joint Venture Properties
Total
Including Unconsolidated Joint Venture Properties
Our ability to maintain and improve occupancy and net effective rents primarily depends upon our continuing ability to lease vacant space. The volume and quality of our leasing activity is closely scrutinized by management in operation of the business and provides useful
information regarding future performance. The initial leasing of development projects or vacant space in acquired properties is referred to as first generation lease activity. The leasing of such space that we have previously held under lease to a tenant is referred to as second generation lease activity. Second generation lease activity may be in the form of renewals of existing leases or new leases of previously leased space. The total leasing activity for our consolidated and unconsolidated industrial rental properties, expressed in square feet of leases signed, is as follows for the years ended December 31, 2021 and 2020 (in thousands):
2021
2020
New
Leasing Activity - First Generation
7,058
7,917
New Leasing Activity - Second Generation
6,313
4,797
Renewal Leasing Activity
12,581
6,147
Early Renewal Leasing Activity *
2,841
2,671
Short-Term
New Leasing Activity **
582
1,889
Short-Term Renewal Leasing Activity **
2,313
2,077
Non-Reportable Rental Operations Leasing Activity
1
36
Total Consolidated Leasing Activity
31,689
25,534
Unconsolidated
Joint Venture Leasing Activity
1,823
3,154
Total Including Unconsolidated Joint Venture Leasing Activity
33,512
28,688
* Early renewals represent renewals executed more than two years in advance of a lease's originally scheduled end date.
** Short-term leases represent leases with a term of less than twelve months.
Second
Generation Leases
The following table sets forth the estimated costs of tenant improvements and leasing costs, on a per square foot basis, that we are obligated to fulfill under the second generation industrial leases signed for our rental properties, during the years ended December 31, 2021 and 2020:
Square
Feet of Leases (in thousands)
Percent of Expiring Leases Renewed
Average Term in Years
Estimated Tenant Improvement Cost per Square Foot
Leasing Commissions per Square Foot
Leasing Concessions per Square Foot
2021
2020
2021
2020
2021
2020
2021
2020
2021
2020
2021
2020
Consolidated
- New Second Generation
6,313
4,797
5.9
5.4
$
2.07
$
1.79
$
2.59
$
2.87
$
0.11
$
0.05
Unconsolidated
Joint Ventures - New Second Generation
577
527
7.1
3.3
$
3.78
$
1.56
$
2.87
$
1.12
$
0.03
$
—
Total
- New Second Generation
6,890
5,324
6.0
5.2
$
2.21
$
1.92
$
2.61
$
2.73
$
0.10
$
0.04
Consolidated
- Renewal
12,581
6,147
76.8
%
65.6
%
5.8
4.6
$
0.81
$
0.99
$
1.54
$
1.50
$
0.20
$
0.03
Unconsolidated
Joint Ventures - Renewal
326
1,142
34.9
%
86.8
%
7.4
4.7
$
1.64
$
0.93
$
2.84
$
1.53
$
—
$
—
Total
- Renewal
12,907
7,289
74.5
%
69.5
%
5.8
4.6
$
0.84
$
0.98
$
1.58
$
1.50
$
0.20
$
0.03
Growth
in average annual net effective rents for new second generation and renewal leases, on a combined basis, for our consolidated and unconsolidated industrial rental properties, is as follows for the years ended December 31:
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2021
2020
Ownership Type
Consolidated
properties
34.8
%
28.2
%
Unconsolidated joint venture properties
46.7
%
33.8
%
Lease Expirations
The table below reflects our consolidated in-service portfolio lease expiration schedule at December 31, 2021
(in thousands, except percentage data and number of leases):
Total
Consolidated Portfolio
Industrial
Non-Reportable
Year of Expiration
Square Feet
Annual Rental Revenue*
Number of Leases
Square Feet
Annual Rental Revenue*
Square Feet
Annual Rental Revenue*
2022
9,063
$
40,799
99
9,046
$
40,607
17
$
192
2023
14,968
75,664
147
14,947
75,372
21
292
2024
14,536
78,307
154
14,529
78,225
7
82
2025
15,401
86,168
144
15,399
86,143
2
25
2026
17,193
90,196
142
17,181
90,047
12
149
2027
16,046
84,248
73
16,041
84,191
5
57
2028
11,068
74,015
53
10,949
70,528
119
3,487
2029
9,208
48,671
33
9,208
48,671
—
—
2030
7,411
47,832
34
7,411
47,832
—
—
2031
6,262
47,406
23
6,247
47,229
15
177
2032
and Thereafter
16,244
122,764
46
16,244
122,764
—
—
Total Leased
137,400
$
796,070
948
137,202
$
791,609
198
$
4,461
Total
Portfolio Square Feet
140,027
139,816
211
Percent Leased
98.1
%
98.1
%
93.8
%
*
Annualized rental revenue represents average annual base rental payments, on a straight-line basis for the term of each lease, from space leased to tenants at the end of the most recent reporting period. Annualized rental revenue excludes additional amounts paid by tenants as reimbursement for operating expenses.
Property Acquisitions
Our decision process in determining whether or not to acquire a property or portfolio of properties involves several factors, including expected rent growth, multiple yield metrics, property locations and expected demographic growth in each location, current occupancy of the properties, tenant profile and remaining terms of the in-place leases in the properties. It is difficult to predict which markets may present acquisition opportunities that align with our strategy. Because of the numerous factors considered in our acquisition
decisions, we do not establish specific target yields for future acquisitions.
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We acquired nine in-service buildings, including one property received through an asset distribution from an unconsolidated joint venture, and one container storage lot under long-term lease during the year ended December 31, 2021 and ten buildings during the year ended December 31, 2020. The following table summarizes the acquisition price, percent leased at time of acquisition and in-place yields of property acquisitions (in thousands, except percentage data):
2021
Acquisitions
2020 Acquisitions
Type
Fair Value of Acquired Assets*
In-Place Yield (Mark to Market)**
Percent Leased at Acquisition Date***
Fair Value of Acquired Assets*
In-Place Yield (Mark to Market)**
Percent Leased at Acquisition Date***
Industrial
$
609,241
4.4
%
100.0
%
$
424,941
3.5
%
80.6
%
*
Includes fair value of real estate assets and acquired in-place lease intangible assets.
** In-place yields of completed acquisitions are calculated as the current annualized net rental payments from space leased to tenants at the date of acquisition, including the amortization of above or below market leases, less current annualized operating expenses not recovered through tenant reimbursements, divided by the fair value of the acquired real estate assets.
*** Represents percentage of total square feet leased based on executed leases and without regard to whether the leases have commenced, at the date of acquisition, including lease-backs with sellers executed in connection with the acquisition(s).
Building Dispositions
We
dispose of properties on a basis that is generally consistent with our strategic plans. Our ability to dispose of properties, from time to time, on favorable terms is a key performance indicator from the perspective of management, as a source of capital to fund future investment. We believe that evaluating our disposition activity is also useful to investors.
We sold 30 consolidated properties including two trailer storage lots during the year ended December 31, 2021 and seven consolidated properties during the year ended December 31, 2020. The following table summarizes the sales prices, in-place yields and percent leased of industrial properties dispositions (in thousands, except percentage data):
2021
Dispositions
2020 Dispositions
Type
Sales Price
In-Place Yield*
Percent Leased**
Sales Price
In-Place Yield*
Percent Leased**
Industrial
$
1,069,120
4.6
%
100.0
%
$
321,800
3.8
%
77.5
%
*
In-place yields of completed dispositions are calculated as annualized net operating income from space leased to tenants at the date of sale on a lease-up basis, including full rent from all executed leases, even if currently in a free rent period, divided by the sales price. Annualized net operating income is comprised of base rental payments, excluding reimbursement of operating expenses, less current annualized operating expenses not recovered through tenant reimbursements.
** Represents percentage of total square feet leased based on executed leases and without regard to whether the leases have commenced, at the date of sale.
Development
We expect to generate future earnings from Rental Operations as development properties are placed in service and leased. Development activities, and our ability
to lease those developments, are viewed by management as key indicators of future earnings growth and provide useful information to investors for the same reasons.
We had 9.7 million square feet of properties under development with total estimated costs upon completion of $1.42 billion at December 31, 2021 compared to 7.4 million square feet with total estimated costs upon completion of $1.07 billion at December 31, 2020. The square footage includes both consolidated properties and unconsolidated joint venture development activity at 100% while estimated costs include consolidated properties and unconsolidated joint venture development activity at our 50% ownership share.
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The
following table summarizes our properties under development at December 31, 2021 (in thousands, except percentage data and number of buildings):
Ownership
Type
Number of Buildings
Square Feet
Percent Leased
Total Estimated Project Costs
Total Incurred to Date
Amount Remaining to be Spent
Consolidated properties
29
8,538
47.3
%
$
1,378,289
$
693,116
$
685,173
Unconsolidated
joint venture properties
2
1,157
50.3
%
41,911
15,967
25,944
Total
31
9,695
47.7
%
$
1,420,200
$
709,083
$
711,117
Results
of Operations
A summary of our operating results and property statistics for each of the years in the three-year period ended December 31, 2021, is as follows (in thousands, except number of properties):
2021
2020
2019
Rental
and related revenue from continuing operations
$
1,025,663
$
929,194
$
855,833
General contractor and service fee revenue
80,260
64,004
117,926
Operating
income
975,238
417,846
524,761
General Partner
Net income attributable to common shareholders
$
852,895
$
299,915
$
428,972
Partnership
Net
income attributable to common unitholders
$
861,249
$
302,578
$
432,650
Number
of in-service consolidated properties at end of year
477
480
459
In-service consolidated square footage at end of year
140,027
140,722
135,451
Number of in-service unconsolidated joint venture properties at end of year
40
40
38
In-service
unconsolidated joint venture square footage at end of year
The following table sets forth rental and related revenue from continuing operations (in thousands):
2021
2020
Rental
and related revenue:
Industrial
$
1,019,342
$
921,612
Non-reportable Rental Operations and non-segment revenues
6,321
7,582
Total rental and related revenue from continuing operations
$
1,025,663
$
929,194
The
primary reasons for the increase in rental and related revenue from continuing operations were:
•We acquired 20 properties and placed 36 developments in service from January 1, 2020 to December 31, 2021, which provided incremental revenues from continuing operations of $94.2 million during the year ended December 31, 2021 as compared to the same period in 2020.
•Rental and related revenue from our "same-property" portfolio increased by $38.0 million during the twelve months ended December 31, 2021, as compared to the same period in 2020. These increased revenues were primarily driven by rental rate growth.
•The
sale of 37 in-service properties since January 1, 2020, which did not meet the criteria to be classified within discontinued operations, resulted in a decrease of $36.1 million to rental and related revenue from continuing operations during the year ended December 31, 2021, as compared to the same period in 2020,
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which partially offset the aforementioned increases to rental and related revenue from continuing operations.
Rental Expenses and Real Estate Taxes
The following table sets forth rental expenses and real estate taxes from continuing operations (in thousands):
2021
2020
Rental
expenses:
Industrial
$
85,297
$
75,345
Non-reportable Rental Operations and non-segment expenses
485
1,294
Total rental expenses from continuing operations
$
85,782
$
76,639
Real
estate taxes:
Industrial
$
159,171
$
148,252
Non-reportable Rental Operations and non-segment expenses
409
1,043
Total real estate tax expense from continuing operations
$
159,580
$
149,295
Overall,
rental expenses from continuing operations increased by $9.1 million in 2021 compared to 2020. The increase to rental expenses was primarily due to higher snow removal costs compared to the same period in 2020.
Overall, real estate tax expense from continuing operations increased by $10.3 million in 2021 compared to 2020. The increase to real estate tax expenses was mainly due to higher real estate tax assessments in certain of our markets and the result of acquisitions and developments placed in service from January 1, 2020 to December 31, 2021, which have generally been concentrated in markets with higher tax rates and/or assessed values. These increases were partially offset by the impact of property sales that did not meet the criteria to be classified within discontinued operations.
Service
Operations
The following table sets forth the components of net earnings from the Service Operations reportable segment for the years ended December 31, 2021 and 2020, respectively (in thousands):
2021
2020
Service Operations:
General
contractor and service fee revenue
$
80,260
$
64,004
General contractor and other services expenses
(68,118)
(57,976)
Net earnings from Service Operations
$
12,142
$
6,028
Service
Operations primarily consist of the development, construction management and general contractor services, leasing, property management and asset management for unconsolidated joint venture properties and properties owned by third parties. Service Operations are heavily influenced by the current state of the economy, as construction and development services rely on the expansion of business operations of third-party property owners and joint venture partners, while leasing and property management fees are dependent upon occupancy.
Net earnings from service operations increased as the result of higher fee-based third party construction activity during 2021 compared to 2020.
Depreciation and Amortization
Depreciation and amortization expense from continuing operations was $362.1 million and $353.0 million for the years ended December 31,
2021 and 2020, respectively. The increase in depreciation and amortization expense for the year ended December 31, 2021 was primarily the result of continued growth in our portfolio through development and acquisitions placed in service from January 1, 2020 to December 31, 2021, partially offset by the impact of property sales that did not meet the criteria to be classified within discontinued operations.
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Equity in Earnings of Unconsolidated Joint Ventures
Equity in earnings of unconsolidated joint ventures represents our
ownership share of net income from investments in unconsolidated joint ventures that generally own and operate rental properties. Equity in earnings of unconsolidated joint ventures was $32.8 million and $11.9 million for the years ended December 31, 2021 and 2020, respectively. In 2021, we recognized $10.6 million of equity in earnings of unconsolidated joint ventures related to gains on the distribution of joint venture assets to our partner in two unconsolidated joint ventures made in connection with a plan of dissolution (see Note 5 to the consolidated financial statements). We also recognized $10.0 million of equity in earnings related to our share of gains on the sale of properties to unrelated parties by unconsolidated
joint ventures during 2021.
There were no property sales by unconsolidated joint ventures during 2020.
Gain on Sale of Properties - Continuing Operations
We sold 30 properties during 2021 that were classified in continuing operations, recognizing total gains on sale of $585.7 million. These properties did not meet the criteria for inclusion in discontinued operations.
We sold seven properties during 2020 that were classified in continuing operations, recognizing total gains on sale of $127.7 million. These properties did not meet the criteria for inclusion in discontinued operations.
Gain on Sale of Land
Gains on sale of land totaled $12.9 million and $10.5 million for the years ended December 31,
2021 and 2020, respectively. We sold 283 acres of undeveloped land in 2021 compared to 157 acres of undeveloped land in 2020.
Impairment Charges
We did not recognize any impairment charges in 2021.
We recognized $5.6 million of impairment charges during the first quarter of 2020, related to writing off pre-acquisition costs, primarily non-refundable purchase deposits, for certain planned purchases of undeveloped land that we elected not to pursue due to the uncertain economic outlook at the onset of the COVID-19 pandemic.
General and Administrative Expenses
General and administrative expenses consist
of two components. The first component includes general corporate expenses, and the second component represents the indirect operating costs not allocated to, or absorbed by, either the development, leasing and operation of our consolidated properties or our Service Operations. Such indirect operating costs are primarily comprised of employee compensation, including related costs such as benefits and wage-related taxes, but also include other ancillary costs such as travel and information technology support. Total indirect operating costs, prior to any allocation or absorption, and general corporate expenses are collectively referred to as our overall pool of overhead costs.
Those indirect costs not allocated to or absorbed by these operations are charged to general and administrative expenses. We regularly review our total overhead cost structure relative to our leasing, development and construction volume and adjust
the level of total overhead, generally through changes in our level of staffing in various functional departments, as necessary, in order to control overall general and administrative expenses.
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General and administrative expenses were $69.6 million and $62.4 million for the years ended December 31, 2021 and 2020, respectively. The following table sets forth the factors that led to the increase in general and administrative expenses from 2020 to 2021 (in millions):
General
and administrative expenses - 2020
$
62.4
Increase to overall pool of overhead costs
12.4
Decrease in overhead restructuring charges (1)
(1.0)
Impact of increased allocation of costs to leasing and development activities (2)
(2.3)
Increased allocation of costs to Service Operations and Rental Operations (3)
(1.9)
General
and administrative expenses - 2021
$
69.6
(1) We recognized approximately $3.5 million of overhead restructuring costs, primarily related to reorganizing our construction business during the year ended December 31, 2021, compared to $4.5 million of overhead restructuring charges during the year ended December 31, 2020.
(2) We capitalized $7.9 million and $28.6 million of our total overhead costs to leasing and development, respectively, for consolidated properties during 2021, compared to capitalizing $6.5 million and $28.8 million of
such costs, respectively, for 2020. Non-capitalizable leasing costs were $13.3 million and $12.3 million for the years ended December 31, 2021 and 2020 (these costs are presented separately in the line item "Non-Incremental Costs Related to Successful Leases" on the Consolidated Statements of Operations). Combined overhead costs capitalized to leasing and development totaled 25.2% and 26.7% of our overall pool of overhead costs for 2021 and 2020, respectively.
(3) The increase in allocation of costs to Service Operations and Rental Operations resulted from a higher volume of third-party construction projects during 2021.
Interest Expense
Interest expense from continuing operations was $84.8 million and $93.4
million for the years ended December 31, 2021 and 2020, respectively. The decrease in interest expense from continuing operations for the year ended December 31, 2021 was primarily due to lower average interest rates resulting from refinancing unsecured notes and higher capitalization of interest expense, partially offset by increased overall borrowings.
We capitalized $35.0 million and $24.3 million of interest costs during 2021 and 2020, respectively.
Debt Extinguishment
In January 2021, the Partnership assumed and immediately repaid $40.2 million of unsecured debt related to the dissolution of two unconsolidated joint ventures (see Note 5 to the consolidated financial statements).
In
June 2021, the Partnership redeemed $83.7 million of its remaining 3.88% unsecured notes due October 2022. A loss of $3.9 million was recognized in connection with the redemption of these notes including the prepayment premium and write-off of the unamortized deferred financing costs.
In August 2021, the Partnership redeemed $250.0 million of its unsecured notes due April 2023, which had a stated interest rate of 3.63%. A loss of $13.9 million was recognized in connection with the redemption of these notes including the prepayment premium and write-off of the unamortized deferred financing costs.
During 2020, the Partnership redeemed $300.0 million of unsecured notes with a stated interest rate of 4.38% and repurchased and canceled $216.3 million of unsecured notes with a stated interest rate of 3.88% pursuant to a tender offer completed by the Partnership. In
connection with the redemption and repurchase of these unsecured notes, we recognized a total loss of $32.9 million including the redemption/repayment premium and write-off of the unamortized deferred financing costs.
Critical Accounting Estimates
The preparation of our consolidated financial statements in conformity with GAAP requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reported period. Certain estimates, judgments and assumptions are inherently subjective and based on the existing
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business
and market conditions, and are therefore continually evaluated based upon available information and experience. Based on the nature of our business, current economic conditions and the value of our real estate assets, we have concluded that our financial statements for all periods presented have not been materially impacted by individual accounts or classes of transaction that rely on estimates. Further, we have concluded that our financial statements for all periods presented are not materially impacted by estimates of fair value that rely upon non-observable inputs.
We have determined that judgments regarding the impairment of real estate assets represent a critical accounting estimate that has the potential to be material in future periods and has been material in certain periods prior to those presented in this Form 10-K. As the result of the strong demand, and generally appreciating values, for industrial real estate
assets, we have not recognized any material impairment charges in any of the periods presented in our consolidated financial statements. As described below in our description of Critical Accounting Policies, determining whether a triggering event has taken place requires an evaluation of assumptions including occupancy levels, rental rates, capitalization rates and anticipated holding periods when evaluating real estate assets for potential impairment. We do not believe that the conclusions we reached regarding the assessment of our real estate assets for impairment, in the current economic and operating environment, would result in a materially different conclusion within any reasonable range of assumptions that could have been applied. Should economic conditions worsen, and the values of industrial assets decline in future periods, then the assumptions and estimates we may make in future impairment analyses, and potential future measurement of impairment charges,
could be sensitive and could result in a material change in the range of potential outcomes.
Critical Accounting Policies
Note 2 to the Consolidated Financial Statements includes further discussion of our significant accounting policies. Our management has assessed the accounting policies used in the preparation of our financial statements and discussed them with our audit committee and independent auditors. The following accounting policies are considered critical based upon materiality to the financial statements, and to a lesser extent, the degree of judgment involved in estimating reported amounts and sensitivity to changes in industry and economic conditions:
Impairment of Real Estate Assets: We evaluate our real estate assets, with the exception of those that are classified as held-for-sale, for impairment
whenever events or changes in circumstances indicate that their carrying amounts may not be recoverable. If such an evaluation is considered necessary, we compare the carrying amount of that real estate asset, or asset group, with the expected undiscounted cash flows that are directly associated with, and that are expected to arise as a direct result of, the use and eventual disposition of that asset, or asset group. Our estimate of the expected future cash flows used in testing for impairment is based on, among other things, our estimates regarding future market conditions, rental rates, occupancy levels, costs of tenant improvements, leasing commissions and other tenant concessions, assumptions regarding the residual value of our properties at the end of our anticipated holding period and the length of our anticipated holding period and is, therefore, subjective by nature. These assumptions could differ materially from actual results. If our strategy changes or
if market conditions otherwise dictate a reduction in the holding period and an earlier sale date, an impairment loss could be recognized and such loss could be material. To the extent the carrying amount of a real estate asset, or asset group, exceeds the associated estimate of undiscounted cash flows, an impairment loss is recorded to reduce the carrying value of the asset to its fair value.
The determination of the fair value of real estate assets is also highly subjective, especially in markets where there is a lack of recent comparable transactions. We primarily utilize the income approach to estimate the fair value of our income producing real estate assets. To the extent that the assumptions used in testing long-lived assets for impairment differ from those of a marketplace participant, the assumptions are modified in order to estimate the fair value of a real estate asset when an impairment charge is measured. In
addition to determining future cash flows, which make the estimation of a real estate asset's undiscounted cash flows highly subjective, the selection of the discount rate and exit capitalization rate used in applying the income approach is also highly subjective.
To the extent applicable marketplace data is available, we generally use the market approach in estimating the fair value of undeveloped land that is determined to be impaired.
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Real estate assets that are classified as held-for-sale are reported at the lower of their carrying value or their fair value, less estimated costs to sell.
Acquisition of Real Estate Property and Related Assets: We generally account
for real estate acquisitions as asset acquisitions as opposed to business combinations. We allocate the purchase price of acquired properties to tangible and identified intangible assets based on their relative fair values, using all pertinent information available at the date of acquisition. The allocation of the purchase price to tangible assets (buildings, tenant improvements and land) is based upon management's determination of the value of the property as if it were vacant. This “as-if vacant” value is estimated using an income, or discounted cash flow, approach that relies upon internally determined assumptions that we believe are consistent with current market conditions for similar properties. The most important assumptions in determining the allocation of the purchase price to tangible assets are the exit capitalization rate, estimated market rents and the fair value of the underlying land.
The
purchase price of real estate assets is also allocated to intangible assets consisting of the above or below market component of in-place leases and the value of in-place leases. The value allocable to the above or below market component of an acquired in-place lease is determined based upon the present value (using a discount rate which reflects the risks associated with the acquired leases) of the difference between (i) the contractual amounts to be received pursuant to the lease over its remaining term and (ii) management's estimate of the amounts that would be received using fair market rates over the remaining term of the lease. The amounts allocated to above market leases are included in deferred leasing and other costs in the balance sheet and below market leases are included in other liabilities in the balance sheet; both are amortized to rental income over the remaining terms of the respective leases. Factors considered in determining the value allocable to
in-place leases include estimates, during hypothetical lease up periods, related to space that is actually leased at the time of acquisition. These estimates include (i) lost rent at market rates, (ii) fixed operating costs that will be recovered from tenants and (iii) theoretical leasing commissions required to execute similar leases. These intangible assets are included in deferred leasing and other costs in the balance sheet and are amortized over the remaining term of the existing lease.
The audit committee has reviewed the critical accounting policies identified by management.
Liquidity and Capital Resources
Overview
We expect to meet our
short-term liquidity requirements over the next 12 months, which include payments of dividends and distributions, completion of development projects that are currently under construction and capital expenditures needed to maintain our current real estate assets, through working capital, net cash provided by operating activities and short term borrowings on the Partnership's unsecured line of credit. We had no outstanding borrowings on the Partnership's $1.20 billion unsecured line of credit and had $69.8 million of cash on hand at December 31, 2021.
In addition to our existing sources of liquidity, we expect to meet long-term liquidity requirements, such as scheduled mortgage and unsecured debt maturities, financing of development activities, acquisitions and other capital improvements, through multiple sources of capital including operating cash flow, proceeds from property
dispositions and accessing the public debt and equity markets.
Sources of Liquidity
Rental Operations
Cash flows from Rental Operations is our primary source of liquidity and provides a stable source of cash flow to fund operational expenses. We believe that this cash-based revenue stream is substantially aligned with revenue recognition (except for items such as periodic straight-line rental income accruals and amortization of above or below market rents) as cash receipts from the leasing of rental properties are generally received in advance of, or a short time following, the actual revenue recognition.
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We are subject to a number
of risks related to general economic conditions, including reduced occupancy, tenant defaults and bankruptcies and potential reduction in rental rates upon renewal or re-letting of properties, any of which would result in reduced cash flow from operations.
Debt and Equity Securities
Our unsecured line of credit at December 31, 2021 is described as follows (in thousands):
In March 2021, the Partnership amended and restated its existing $1.20 billion unsecured line of credit, which was set to mature in January 2022 with two six-month extension options. The amended and restated unsecured line of credit bears interest at one-month LIBOR plus 0.775% with a reduction in borrowing costs if certain sustainability
linked metrics are achieved each year. The amended and restated line of credit matures on March 31, 2025 with two six-month extension options to extend until March 31, 2026. Subject to certain conditions, the terms also include an option to increase the facility by up to an additional $800.0 million, for a total of up to $2.00 billion. This line of credit provides us with an option to obtain borrowings from financial institutions that participate in the line at rates that may be lower than the stated interest rate, subject to certain restrictions.
This line of credit contains financial covenants that require us to meet certain financial ratios and defined levels of performance, including those related to fixed charge coverage, unsecured interest expense coverage and debt-to-asset value (with asset value being defined in the
Partnership's unsecured line of credit agreement). At December 31, 2021, we were in compliance with all covenants under this line of credit.
In 2017, the Alternative Reference Rates Committee proposed that the Secured Overnight Funding Rate replace LIBOR. In March 2021, the administrator of LIBOR announced that the publication of LIBOR will cease for one-week and two-month USD LIBOR settings immediately after December 31, 2021, and the remaining USD LIBOR settings immediately after June 30, 2023. As the Partnership's unsecured line of credit agreement has provisions that allow for automatic transition to a new rate, and the Partnership has no other material debt arrangements that are indexed to LIBOR, we believe that the transition will not have a material impact on our consolidated
financial statements.
At December 31, 2021, we had on file with the SEC an automatic shelf registration statement on Form S-3 relating to the offer and sale, from time to time, of an indeterminate amount of debt and equity securities (including guarantees of the Partnership's debt securities by the General Partner). Equity securities are offered and sold by the General Partner, and the net proceeds of such offerings are contributed to the Partnership in exchange for additional General Partner Units or Preferred Units. From time to time, we expect to issue additional securities under this automatic shelf registration statement to fund the repayment of debt, development and future acquisitions and for other general corporate purposes.
In February 2021, the General Partner terminated its previous equity distribution agreement for
its previous ATM equity program and entered into a new equity distribution agreement pursuant to which the General Partner may sell from time to time up to an aggregate offering price of $400.0 million of its common stock through sales agents or forward sellers. During the three months ended December 31, 2021, the General Partner issued 1.7 million common shares pursuant to its new ATM equity program, resulting in net proceeds of $94.6 million after paying total compensation of $955,000 to the applicable sales agents. During the year ended December 31, 2021, the General Partner issued 8.0 million common shares under its new ATM equity program, generating net proceeds of $396.0 million after paying total compensation of $4.0 million to the applicable sales agents. In addition, during the year ended December 31, 2021, the
General Partner issued 210,000 common shares under its predecessor ATM equity program, resulting in net proceeds of $8.3 million after paying total compensation of $84,000 to the applicable sales agents. These issuances under both ATM programs resulted in net proceeds of $403.6 million during 2021, after deducting the commissions and other fees paid, totaling $626,000. As of December 31, 2021, substantially all of the ATM equity program has been utilized.
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In January 2021, the Partnership issued $450.0 million of senior unsecured notes, which bear interest at a stated interest rate of 1.75%, have an effective interest rate of 1.83%, and mature on February 1,
2031, for cash proceeds of $446.6 million.
In November 2021, the Partnership issued $500.0 million of senior unsecured notes, which bear interest at a stated interest rate of 2.25%, have an effective interest rate of 2.38%, and mature on January 15, 2032, for cash proceeds of $494.1 million.
The Partnership has issued debt securities pursuant to certain indentures and related supplemental indentures, which also require us to comply with financial ratios and other covenants regarding our operations. We were in compliance with all such covenants at December 31, 2021.
Sale of Real Estate Assets
We dispose of certain properties in a manner consistent with our strategic plans.
Our ability to dispose of such properties on favorable terms is dependent upon a number of factors including the availability of credit to potential buyers to purchase properties at prices that we consider acceptable. Although we believe that we have demonstrated our ability to generate significant liquidity through property dispositions, potential future adverse changes to market and economic conditions could negatively impact our further ability to dispose of properties that no longer meet our long-term objectives.
Sales of buildings and land provided $1.07 billion in net proceeds in 2021, compared to $336.3 million in 2020 and $432.7 million in 2019.
Transactions with Unconsolidated Joint Ventures
Transactions with unconsolidated joint ventures also provide a source of liquidity. From time to time we will sell properties to unconsolidated
joint ventures, while retaining a continuing interest in that entity, and receive proceeds commensurate to those interests that we do not own. Additionally, unconsolidated joint ventures will from time to time obtain debt financing or sell properties and will then distribute to us, and our joint venture partners, all or a portion of the proceeds from such transactions. During 2021, our share of sale and capital distributions from unconsolidated joint ventures totaled $61.6 million. As part of closings of the contribution of properties to the recently formed 20% owned unconsolidated joint venture, we received $41.1 million for our ownership share of proceeds from third party mortgage loans originated by this joint venture during 2021.
Uses of Liquidity
Our principal uses of liquidity include the following:
•property
investment;
•leasing/capital costs;
•dividends and distributions to shareholders and unitholders;
•debt service and maturities;
•opportunistic repurchases of outstanding debt; and
•other contractual obligations.
Property Investment
Our overall strategy is to continue to increase our investment in quality industrial properties, primarily through development, on both a speculative and build-to-suit basis, supplemented with acquisitions in Coastal Tier 1 markets. Pursuant to this strategy, we evaluate development and acquisition opportunities
based upon our market outlook, including general economic conditions, supply and long-term growth potential. Our ability to make future property investments is dependent upon identifying suitable acquisition and development opportunities, and our continued access to our longer-term sources of liquidity, including issuances of debt or equity securities as well as generating cash flow by disposing of selected properties.
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Leasing/Capital Costs
Tenant improvements and lease-related costs pertaining to our initial leasing of newly completed space, or vacant space in acquired properties, are referred to as first generation expenditures. Such first generation expenditures for tenant improvements
are included within "development of real estate investments" in our Consolidated Statements of Cash Flows, while such expenditures for capitalizable lease-related costs are included within "other deferred leasing costs."
Cash expenditures related to the construction of a building's shell, as well as the associated site improvements, are also included within "development of real estate investments" in our Consolidated Statements of Cash Flows.
Tenant improvements and leasing costs to renew or re-let rental space that we previously leased to tenants for second generation leases are referred to as second generation expenditures. Building improvements that are not specific to any tenant, but serve to improve integral components of our real estate properties, are also second generation expenditures. One of the principal uses of our liquidity is to fund the second
generation leasing/capital expenditures of our real estate investments.
The following table summarizes our second generation capital expenditures by type of expenditure, as well as capital expenditures for the development of real estate investments and for other deferred leasing costs (in thousands):
2021
2020
2019
Second
generation tenant improvements
$
23,270
$
17,126
$
12,165
Second generation leasing costs
36,691
23,808
28,467
Building improvements
8,484
4,103
12,505
Total
second generation capital expenditures
$
68,445
$
45,037
$
53,137
Development of real estate investments
$
661,416
$
573,544
$
446,801
Other
deferred leasing costs
$
42,214
$
41,607
$
32,921
We had consolidated properties under development with an expected total cost of $1.38 billion at December 31, 2021, compared to projects with an expected cost of $1.04 billion and $1.05 billion at December 31, 2020 and 2019, respectively. We had $685.2 million of remaining costs to complete
for consolidated properties under development at December 31, 2021.
The capital expenditures in the table above include the capitalization of internal overhead costs. We capitalized $7.9 million, $6.5 million and $6.8 million of overhead costs that are incremental to executing leases, including both first and second generation leases, during the years ended December 31, 2021, 2020 and 2019, respectively. We capitalized $28.6 million, $28.8 million and $24.2 million of overhead costs related to development activities, including both development and tenant improvement projects on first and second generation space, during the years ended December 31, 2021, 2020
and 2019, respectively. Combined overhead costs capitalized to leasing and development totaled 25.2%, 26.7% and 22.8% of our overall pool of overhead costs at December 31, 2021, 2020 and 2019, respectively.
Further discussion of the capitalization of overhead costs can be found herein, in the year-to-year comparison of general and administrative expenses of this Item 7.
In addition to the capitalization of overhead costs, the totals for development of real estate assets in the table above include the capitalization of $35.0 million, $24.3 million and $26.5 million of interest costs during the years ended December 31, 2021, 2020
and 2019, respectively.
Both our first and second generation expenditures vary significantly between leases on a per square foot basis, dependent upon several factors including the nature of a tenant's operations, the specific physical characteristics of each individual property and the market in which the property is located.
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Dividend and Distribution Requirements
The General Partner is required to meet the distribution requirements of the Code in order to maintain its REIT status. We paid regular dividends or distributions of $1.045, $0.96 and $0.88 per common share or Common Unit for the years ended December 31,
2021, 2020 and 2019, respectively.
We expect to continue to distribute at least an amount equal to our taxable earnings, to meet the requirements to maintain the General Partner's REIT status, and additional amounts as determined by the General Partner's board of directors. Distributions are declared at the discretion of the General Partner's board of directors and are subject to actual cash available for distribution, our financial condition, capital requirements and such other factors as the General Partner's board of directors deems relevant.
Debt Service and Maturities
Debt outstanding at December 31, 2021 had a face value totaling $3.73 billion with a weighted average interest
rate of 3.02% and maturities at various dates through 2050. Of this total amount, we had $3.68 billion of unsecured debt, $56.2 million of secured debt and no outstanding borrowings on our unsecured line of credit at December 31, 2021. Scheduled principal amortization, maturities and repayments of unsecured debt, outstanding line of credit balances and assumed joint venture debt totaled $673.4 million for the year ended December 31, 2021.
The following table is a summary of the scheduled future amortization and maturities of our indebtedness at December 31, 2021 (in thousands, except percentage data):
Future
Repayments
Year
Scheduled Amortization
Maturities
Total
Weighted Average Interest Rate of Future Repayments
2022
$
4,646
$
—
$
4,646
5.19%
2023
4,893
—
4,893
5.22%
2024
5,155
300,000
305,155
3.92%
2025
5,102
—
5,102
5.09%
2026
3,238
375,000
378,238
3.38%
2027
1,615
475,000
476,615
3.18%
2028
1,307
500,000
501,307
4.45%
2029
1,359
400,000
401,359
2.88%
2030
1,413
350,000
351,413
1.86%
2031
1,469
450,000
451,469
1.84%
Thereafter
3,261
847,734
850,995
2.74%
$
33,458
$
3,697,734
$
3,731,192
3.02%
We
anticipate generating capital to fund our debt maturities by using undistributed cash generated from our Rental Operations and property dispositions and by raising additional capital from future debt or equity transactions.
On January 14, 2022, we provided notice of redemption to the holders of our $300.0 million of 3.75% unsecured notes, which are scheduled to mature in December 2024. This redemption will be funded with the proceeds of the contribution of third tranche of assets to a 20% owned joint venture which closed in January 2022.
Repayments of Outstanding Debt
To the extent that it supports our overall capital strategy, we may purchase or redeem some of our outstanding unsecured notes prior to their stated maturities.
In January 2021,
the Partnership assumed, and immediately repaid $40.2 million of unsecured debt associated with the properties received as a result of the dissolution of two unconsolidated joint ventures.
In June 2021, we redeemed $83.7 million of unsecured notes that were scheduled to mature in October 2022.
In August 2021, we redeemed $250.0 million of unsecured notes that were scheduled to mature in April 2023.
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Lease Commitments
As of December 31, 2021, we have total future payment obligations of $223.5 million on our ground leases and $25.5 million on our office leases and other lease arrangements, over their
non-cancellable lease periods including applicable lease extension and renewal options when deemed reasonably certain of exercise. No payments on these leases are material in any individual year.
Guarantee Obligations
We are subject to various guarantee obligations in the normal course of business and, in most cases, do not anticipate these obligations to result in significant cash payments. At December 31, 2021, we guaranteed the repayment of a $4.8 million loan associated with one of our unconsolidated joint ventures.
Additionally, as of December 31, 2021, we guaranteed the repayment of $18.5 million of economic development bonds issued by various municipalities in connection with certain commercial developments.
Historical
Cash Flows
Cash, cash equivalents and restricted cash were $103.2 million, $67.2 million and $121.4 million at December 31, 2021, 2020, and 2019, respectively. The following table highlights significant changes in net cash associated with our operating, investing and financing activities (in millions):
Cash flows from operating activities provide the cash necessary to meet our operational requirements and the receipt of rental income from Rental Operations continues to be our primary source of operating cash flows. The increase in net cash provided by operating activities, from 2019 to 2020 and from 2020 to 2021, was driven by increasing occupancy and rental rates within our existing portfolio and increasing our asset base through acquisitions and development, financed through equity or low cost debt issuances.
Investing Activities
Highlights of significant cash sources and uses are as follows (in millions):
Repurchase
of and repayments on debt (including extinguishment costs)
Secured debt
$
—
$
(9.0)
$
(41.7)
Senior unsecured debt
(390.9)
(547.0)
(255.8)
$
(390.9)
$
(556.0)
$
(297.5)
(Repayments)
borrowings on line of credit, net
Unsecured line of credit
$
(295.0)
$
295.0
$
(30.0)
Impact of Changes in Credit Ratings on Our Liquidity
We are currently assigned investment grade corporate credit ratings on our senior unsecured notes from Moody's
Investors Service and Standard & Poor's Ratings Group. Our senior unsecured notes have been assigned a rating of Baa1 by Moody's Investors Service. In addition, our senior unsecured notes have been assigned a rating of BBB+ by Standard & Poor's Ratings Group. 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.
The ratings of our senior unsecured notes could change based upon, among other things, the impact that prevailing economic conditions may have on our results of operations and financial condition. If our credit ratings are downgraded or other negative action is taken, we could be required, among other things, to pay additional interest and fees on outstanding borrowings under our revolving credit agreement. Credit rating reductions by one or more rating agencies could also adversely affect
our access to funding sources, the cost and other terms of obtaining funding, as well as our overall financial condition, operating results and cash flow.
Financial Instruments
We are exposed to capital market risk, such as changes in interest rates. In order to reduce the volatility relating to interest rate risk, we may enter into interest rate hedging arrangements from time to time. We do not utilize derivative financial instruments for trading or speculative purposes.
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Item 7A. Quantitative
and Qualitative Disclosures About Market Risk
We are exposed to market risks, including interest rates, in the ordinary course of business.
Interest Rate Risk
We are exposed to interest rate changes primarily as a result of our line of credit and long-term borrowings. Our interest rate risk management objective is to limit the impact of interest rate changes on earnings and cash flows and to lower overall borrowing costs. To achieve our objectives, we borrow primarily at fixed rates and may enter into derivative financial instruments such as interest rate swaps in order to mitigate our interest rate risk on a related financial instrument. We do not enter into derivative or interest rate transactions for speculative purposes.
Our interest
rate risk is monitored using a variety of techniques. The table below presents the principal amounts (in thousands) of the expected annual maturities, weighted average interest rates for the average debt outstanding in the specified period and fair values (in thousands).
2022
2023
2024
2025
2026
Thereafter
Total
Fair
Value
Long-Term Debt:
Fixed rate secured debt
$
4,346
$
4,593
$
4,855
$
4,702
$
3,238
$
33,158
$
54,892
$
59,989
Weighted
average interest rate
5.54
%
5.55
%
5.56
%
5.51
%
5.27
%
4.08
%
4.64
%
Variable
rate secured debt
$
300
$
300
$
300
$
400
$
—
$
—
$
1,300
$
1,300
Weighted
average interest rate
0.12
%
0.12
%
0.12
%
0.12
%
N/A
N/A
0.12
%
Fixed rate unsecured debt
$
—
$
—
$
300,000
$
—
$
375,000
$
3,000,000
$
3,675,000
$
3,779,465
Weighted
average interest rate
N/A
N/A
3.90
%
N/A
3.36
%
2.86
%
3.00
%
On
January 14, 2022, we provided notice of redemption to the holders of our $300.0 million of 3.75% unsecured notes, which are scheduled to mature in December 2024.
As the above table incorporates only those exposures that existed at December 31, 2021, it does not consider those exposures or positions that could arise after that date. As a result, the ultimate impact of interest rate fluctuations will depend on future exposures that arise, our hedging strategies at that time, to the extent we are party to interest rate derivatives, and interest rates. Interest expense on our unsecured line of credit, to the extent there are outstanding borrowings, will be affected by fluctuations in the one-month LIBOR indices or applicable replacement rates, changes in our credit rating as well as certain sustainability linked metrics achieved
each year. The interest rate at such point in the future as we may renew, extend or replace our unsecured line of credit will be heavily dependent upon the state of the credit environment.
At December 31, 2021, the face value of our unsecured debt was $3.68 billion and we estimated the fair value of that unsecured debt to be $3.78 billion. At December 31, 2020, the face value of our unsecured debt was $3.06 billion and we estimated the fair value of that unsecured debt to be $3.39 billion.
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Item 8. Financial
Statements and Supplementary Data
The financial statements and supplementary data are included under Item 15 of this Report and are incorporated herein by reference.
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
There was no change or disagreement with our accountants related to our accounting and financial disclosures.
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Item 9A. Controls
and Procedures
Controls and Procedures (General Partner)
We conducted an evaluation of the effectiveness of the design and operation of our "disclosure controls and procedures" as of the end of the period covered by this Report. The controls evaluation was done under the supervision and with the participation of management, including the Chief Executive Officer and the Chief Financial Officer.
Attached as exhibits to this Report are certifications of our Chief Executive Officer and Chief Financial Officer, which are required in accordance with Rule 13a-14 of the Securities Exchange Act of 1934. This Controls and Procedures section includes the information concerning the controls evaluation referred to in the certifications and it should be read in conjunction with the certifications for a more complete understanding of the topics
presented.
Disclosure controls and procedures (as defined in Rule 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 (the "Exchange Act")) are controls and other procedures that are designed to ensure that information required to be disclosed in our reports filed under the Exchange Act, such as this Report, is recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms. Disclosure controls and procedures are also designed to ensure that such information is accumulated and communicated to our management, including our principal executive and principal financial officers, as appropriate, to allow timely decisions regarding required disclosure.
Based on the disclosure controls and procedures evaluation referenced above, our Chief Executive Officer and Chief Financial Officer have concluded that as of the end of the
period covered by this Report, our disclosure controls and procedures were effective.
Management's annual report on internal control over financial reporting and the audit report of our independent registered public accounting firm are included in Item 15 of Part IV under the headings "Management's Report on Internal Control" and "Report of Independent Registered Public Accounting Firm," respectively, and are incorporated herein by reference.
There were no changes in our internal control over financial reporting during the quarter ended December 31, 2021 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Controls and Procedures (Partnership)
We
conducted an evaluation of the effectiveness of the design and operation of our "disclosure controls and procedures" as of the end of the period covered by this Report. The controls evaluation was done under the supervision and with the participation of management, including the General Partner's Chief Executive Officer and Chief Financial Officer.
Attached as exhibits to this Report are certifications of the General Partner's Chief Executive Officer and Chief Financial Officer, which are required in accordance with Rule 13a-14 of the Securities Exchange Act of 1934. This Controls and Procedures section includes the information concerning the controls evaluation referred to in the certifications and it should be read in conjunction with the certifications for a more complete understanding of the topics presented.
Disclosure controls and procedures (as defined in Rule 13a-15(e)
and 15d-15(e) under the Exchange Act) are controls and other procedures that are designed to ensure that information required to be disclosed in our reports filed under the Exchange Act, such as this Report, is recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms. Disclosure controls and procedures are also designed to ensure that such information is accumulated and communicated to management, including the General Partner's principal executive and principal financial officers, as appropriate, to allow timely decisions regarding required disclosure.
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Based on the disclosure controls and procedures evaluation referenced above, the General Partner's Chief Executive Officer and Chief Financial Officer have concluded
that as of the end of the period covered by this Report, our disclosure controls and procedures were effective.
Management's annual report on internal control over financial reporting and the audit report of our independent registered public accounting firm are included in Item 15 of Part IV under the headings "Management's Report on Internal Control" and "Report of Independent Registered Public Accounting Firm," respectively, and are incorporated herein by reference.
There were no changes in our internal control over financial reporting during the quarter ended December 31, 2021 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Item 9B. Other
Information
There was no information required to be disclosed in a report on Form 8-K during the fourth quarter of 2021 for which no Form 8-K was filed.
Our discussion of federal income tax considerations in Exhibit 99.1 attached hereto, which is incorporated herein by reference, supersedes and replaces, in its entirety, (i) the disclosure under the heading “Federal Income Tax Considerations” in the prospectus dated July 25, 2019, which is a part of our Registration Statement on Form S-3 (File No. 333-232816), as amended or supplemented, (ii) the disclosure under the heading “Federal Income Tax Considerations”
in the prospectus dated April 30, 2021, which is a part of our Registration Statement on Form S-3 (File No. 333-255633), as amended or supplemented, and (iii) similarly titled sections in the prospectuses contained in our other Registration Statements on Form S-3 (File Nos. 333-128132, 333-108556, 333-70678, 333-59138, 333-51344, 333-39498,
333-35008, 333-85009, 333-82063, 333-66919, 333-50081, 333-26833, 333-24289, and 033-64659), as amended or supplemented. Our updated discussion addresses recent tax law changes.
Item 10. Directors, Executive Officers and Corporate Governance
The following is a summary of the executive officers of the General Partner:
James B. Connor, age 63. Mr. Connor was named the General Partner's Chairman and Chief Executive Officer, commencing
April 26, 2017, and joined the General Partner's Board of Directors in 2015. Prior to being named Chairman and Chief Executive Officer, Mr. Connor held various senior management positions with the General Partner, including President and Chief Executive Officer from January 1, 2016 to April 25, 2017; Senior Executive Vice President and Chief Operating Officer from 2013 to 2015; Senior Regional Executive Vice President from 2011 to 2013; Executive Vice President of the Midwest Region from 2003 to 2011; and Senior Vice President between 1998 and 2003. Prior to joining the General Partner in 1998, Mr. Connor held numerous executive and brokerage positions with Cushman & Wakefield, most recently serving as Senior Managing Director for the Midwest area. In 2019, Mr. Connor joined the Board of Trustees of EPR Properties,
a publicly traded REIT. Mr. Connor also serves on the Board of Trustees of Roosevelt University.
Mark A. Denien, age 54. Mr. Denien was appointed the General Partner's Executive Vice President and Chief Financial Officer on May 17, 2013. Prior to being named Executive Vice President and Chief Financial Officer, Mr. Denien was Senior Vice President and Chief Accounting Officer from 2009 to 2013 and, prior to that, served as Senior Vice President, Corporate Controller. Prior to joining the General Partner in 2005, Mr. Denien spent 16 years with KPMG LLP. Mr. Denien serves as a director of Goodwill Industries of Central Indiana, Inc.
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Steven
W. Schnur, age48. Mr. Schnur has served as the General Partner's Executive Vice President and Chief Operating Officer since September 2019. Prior to being named Executive Vice President and Chief Operating Officer, Mr. Schnur served as Senior Regional Executive Vice President from May 2017 until September 2019; Executive Vice President, Central Region from January 2015 until May 2017; Senior Regional, Senior Vice President from August 2014 until January 2015; Senior Vice President, Midwest Region from December 2013 until August 2014; and Senior Vice President, Chicago from October 2004 until December 2013. Mr. Schnur began his career with the General Partner as a Vice President, Leasing in September 2003. Prior to that, Mr. Schnur was Director of Real Estate for Opus North Corporation.
Nicholas C. Anthony, age56. Mr. Anthony was appointed the General Partner's Executive Vice President and Chief Investment Officer on June 17, 2013. His responsibilities include overseeing the General Partner's acquisition and disposition activity, as well as the overall management of its joint venture business. Prior to being named Executive Vice President and Chief Investment Officer, Mr. Anthony held various senior management positions with the General Partner, including Senior Vice President, Capital Transactions and Joint Ventures from 2010 until 2013. Mr. Anthony began his career with the General Partner in 1989 as a staff accountant.
Ann C. Dee, age62. Ms. Dee was appointed the General Partner's Executive Vice President, General Counsel and Corporate Secretary
on June 17, 2013. Prior to being named Executive Vice President, General Counsel and Corporate Secretary, Ms. Dee held the position of Senior Vice President, General Counsel and Corporate Secretary from January 1, 2013 until June 17, 2013 and the position of Deputy General Counsel and Senior Vice President from June 23, 2008 until January 1, 2013. Ms. Dee joined the General Partner in 1996 as a Corporate Attorney. Prior to joining the General Partner, Ms. Dee serves as a member of the Board of Directors of First Internet Bancorp, a bank holding company in Fishers, Indiana and the Center for Performing Arts in Carmel, Indiana.
All other information
required by this item will be included in the General Partner's 2022 proxy statement (the "2022 Proxy Statement") for the General Partner's Annual Meeting of Shareholders to be held on April 14, 2022, and is incorporated herein by reference. In addition, the General Partner's Code of Business Ethics (which applies to each of our associates, officers and directors) and the General Partner's Corporate Governance Guidelines are available in the investor information/corporate governance section of our website at www.dukerealty.com. A copy of these documents may also be obtained without charge by writing to Duke Realty Corporation, 8711 River Crossing Boulevard, Indianapolis,
Indiana46240, Attention: Investor Relations.
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Item 11. Executive Compensation
The information required by Item 11 of this Report will be included in our 2022 Proxy Statement, which information is incorporated herein by this reference.
Item 12. Security Ownership of Certain
Beneficial Owners and Management and Related Stockholder Matters
The information required by Item 12 of this Report will be included in our 2022 Proxy Statement, which information is incorporated herein by this reference.
Item 13. Certain Relationships and Related Transactions, and Director Independence
The information required to be furnished pursuant to Item 13 of this Report will be included in our 2022 Proxy Statement, which information is incorporated herein by this reference.
Item 14. Principal Accountant
Fees and Services
iKPMG LLP (iIndianapolis, Indiana; PCAOB ID#i185) is
the independent registered public accounting firm for both the General Partner and the Partnership. The information required to be furnished pursuant to Item 14 of this Report will be included in our 2022 Proxy Statement, which information is incorporated herein by this reference.
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PART IV
Item 15. Exhibits and Financial Statement Schedules
(a)The following documents are filed as part of this
Annual Report:
1. Consolidated Financial Statements
The following Consolidated Financial Statements, together with the Management's Report on Internal Control and the Report of Independent Registered Public Accounting Firm are listed below:
The
exhibits required to be filed with this Report pursuant to Item 601 of Regulation S-K are listed on pages 115 to 119 of this Report and are incorporated herein by reference.
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Management's Report on Internal Control
We, as management of Duke Realty Corporation and its subsidiaries (the "General Partner"), are responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rule 13a-15(f) under the Securities Exchange Act of 1934, as amended).
Pursuant to the rules and regulations of the Securities and Exchange Commission, internal control over financial reporting is a process designed by, or under the supervision of, the company's principal executive and principal financial officers, or persons performing similar functions, and effected by the company's board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States of America and includes those policies and procedures that:
•Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of assets of the company;
•Provide
reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and
•Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the company's assets that could have a material effect on the financial statements.
Management has evaluated the effectiveness of its internal control over financial reporting as of December 31, 2021 based on the control criteria established in a report entitled Internal Control – Integrated Framework (2013), issued by the Committee of Sponsoring Organizations of the Treadway
Commission. Based on such evaluation, we have concluded that, as of December 31, 2021, our internal control over financial reporting is effective based on these criteria.
The independent registered public accounting firm of KPMG LLP, as auditors of the General Partner's consolidated financial statements, has also issued an audit report on the General Partner's internal control over financial reporting.
Executive Vice President and Chief Financial Officer
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Report of Independent
Registered Public Accounting Firm
To the Shareholders and Board of Directors
Duke Realty Corporation:
Opinions on the Consolidated Financial Statements and Internal Control Over Financial Reporting
We have audited the accompanying consolidated balance sheets of Duke Realty Corporation and subsidiaries (the Company) as of December 31, 2021 and 2020, the related consolidated statements of operations and comprehensive income, cash flows, and changes in equity for each of the years in the three-year period ended December 31, 2021, and the related notes and financial statement schedule III - real estate and accumulated depreciation (collectively,
the consolidated financial statements). We also have audited the Company's internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2021 and 2020, and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, 2021, in conformity with U.S. generally accepted accounting principles. Also in
our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.
Basis for Opinions
The Company’s management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management's Report on Internal Control. Our responsibility is to express an opinion on the Company’s consolidated financial statements and an opinion on the Company’s internal control over financial reporting
based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.
Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial
statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.
Definition and
Limitations of Internal Control Over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company;
and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
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Critical Audit Matter
The critical audit matter
communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of a critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
Assessment of certain values assigned to acquired assets and liabilities in certain asset acquisitions
As discussed in Notes 2 and 5 to the consolidated financial statements, the Company acquired
approximately $571 million of real estate assets in 2021. For asset acquisitions, the Company records the purchase price to the tangible and identified intangible assets based on its “as-if vacant” fair value and other valuation techniques.
We identified the assessment of the fair value of land and the below market component of in-place leases in certain asset acquisitions as a critical audit matter. There is a high degree of subjective auditor judgment in determining the fair value of land and market rents used to determine the below market component of in-place leases.
The primary procedures we performed to address this critical audit matter included the following. We tested certain internal controls over the Company’s asset allocation process, including controls to identify and select publicly
available comparable land sales and market rents used to estimate the fair value of land and the below market component of in-place leases, respectively. We involved valuation professionals with specialized skills and knowledge, who assisted in comparing:
•the Company’s estimated fair value of land to a range of independently developed estimates based on publicly available and comparable land sales: and
•the market rents used in the Company’s estimated fair value of the below market component of in-place leases to publicly available market data for similar properties.
We, as management of Duke Realty
Limited Partnership and its subsidiaries (the "Partnership"), are responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rule 13a-15(f) under the Securities Exchange Act of 1934, as amended). Pursuant to the rules and regulations of the Securities and Exchange Commission, internal control over financial reporting is a process designed by, or under the supervision of the principal executive and principal financial officers, or persons performing similar functions, of Duke Realty Corporation (the "General Partner"), and effected by the General Partner's board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States of America and includes those policies and procedures that:
•Pertain
to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of assets of the Partnership;
•Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the General Partner; and
•Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Partnership's assets that could have a material effect on the financial statements.
Management has evaluated the effectiveness of its internal control over financial reporting as of
December 31, 2021 based on the control criteria established in a report entitled Internal Control – Integrated Framework (2013), issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on such evaluation, we have concluded that, as of December 31, 2021, our internal control over financial reporting is effective based on these criteria.
The independent registered public accounting firm of KPMG LLP, as auditors of the Partnership's consolidated financial statements, has also issued an audit report on the Partnership's internal control over financial reporting.
Executive Vice President and Chief Financial Officer
of the General Partner
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Report
of Independent Registered Public Accounting Firm
To the Unitholders of Duke Realty Limited Partnership and the Board of Directors of Duke Realty Corporation:
Opinions on the Consolidated Financial Statements and Internal Control Over Financial Reporting
We have audited the accompanying consolidated balance sheets of Duke Realty Limited Partnership and subsidiaries (the Partnership) as of December 31, 2021 and 2020, the related consolidated statements of operations and comprehensive income, cash flows, and changes in equity for each of the years in the three-year period ended December 31, 2021, and the related notes and financial statement schedule III - real estate and accumulated depreciation
(collectively, the consolidated financial statements). We also have audited the Partnership's internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Partnership as of December 31, 2021 and 2020, and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, 2021, in conformity with U.S. generally accepted accounting
principles. Also in our opinion, the Partnership maintained, in all material respects, effective internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.
Basis for Opinions
The Partnership’s management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management's Report on Internal Control. Our responsibility is to express an opinion on the Partnership’s consolidated financial statements and an opinion on the Partnership’s
internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Partnership in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.
Our audits of the consolidated financial statements included performing procedures to assess the risks of material
misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.
Definition
and Limitations of Internal Control Over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company;
and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
-58-
Critical Audit Matter
The critical audit matter communicated below is a matter arising
from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of a critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
Assessment of certain values assigned to acquired assets and liabilities in certain asset acquisitions
As discussed in Notes 2 and 5 to the consolidated financial statements, the Partnership acquired approximately $571 million of real
estate assets in 2021. For asset acquisitions, the Partnership records the purchase price to the tangible and identified intangible assets based on its “as-if vacant” fair value and other valuation techniques.
We identified the assessment of the fair value of land and the below market component of in-place leases in certain asset acquisitions as a critical audit matter. There is a high degree of subjective auditor judgment in determining the fair value of land and market rents used to determine the below market component of in-place leases.
The primary procedures we performed to address this critical audit matter included the following. We tested certain internal controls over the Partnership’s asset allocation process, including controls to identify and select publicly available comparable land
sales and market rents used to estimate the fair value of land and the below market component of in-place leases, respectively. We involved valuation professionals with specialized skills and knowledge, who assisted in comparing:
•the Partnership’s estimated fair value of land to a range of independently developed estimates based on publicly available and comparable land sales: and
•the market rents used in the Partnership’s estimated fair value of the below market component of in-place leases to publicly available market data for similar properties.
See
accompanying Notes to Consolidated Financial Statements.
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DUKE REALTY CORPORATION AND DUKE REALTY LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1)iThe
Company
The General Partner was formed in 1985, and we believe that it qualifies as a REIT under the provisions of the Code. The Partnership was formed on October 4, 1993, when the General Partner contributed all of its properties and related assets and liabilities, together with the net proceeds from an offering of additional shares of its common stock, to the Partnership. Simultaneously, the Partnership completed the acquisition of Duke Associates, a full-service commercial real estate firm operating in the Midwest whose operations began in 1972.
The General Partner is the sole general partner of the Partnership, owning approximately i99.1%
of the Common Units at iDecember 31, 2021. The remaining i0.9% of 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.
Limited partners have the right to redeem their Limited Partner Units, subject to certain restrictions. Pursuant to the Partnership Agreement, the General Partner is obligated to redeem the Limited Partner Units in shares
of its common stock, unless it determines in its reasonable discretion that the issuance of shares of its common stock could cause it to fail to qualify as a REIT. Each Limited Partner Unit shall be redeemed for one share of the General Partner's common stock, or, in the event that the issuance of shares could cause the General Partner to fail to qualify as a REIT, cash equal to the fair market value of one share of the General Partner's common stock at the time of redemption, in each case, subject to certain adjustments described in the Partnership Agreement. The Limited Partner Units are not required, per the terms of the Partnership Agreement, to be redeemed in registered shares of the General Partner.
As of iDecember 31,
2021, we owned and operated a portfolio primarily consisting of industrial properties and provided real estate services to third-party owners, customers and joint ventures.
Substantially all of our Rental Operations (see Note 9) are conducted through the Partnership. We conduct our Service Operations (see Note 9) through Duke Realty Services, LLC, Duke Realty Services Limited Partnership and Duke Construction Limited Partnership ("DCLP"), which are consolidated entities that are 100% owned by a combination of the General Partner and the Partnership. DCLP is owned through a taxable REIT subsidiary.
(2)iSummary
of Significant Accounting Policies
i
Principles of Consolidation
The consolidated financial statements include our accounts and the accounts of our majority-owned or controlled subsidiaries. The equity interests in these controlled subsidiaries not owned by us are reflected as noncontrolling interests in the consolidated financial statements. All significant intercompany balances and transactions have been eliminated in the consolidated financial statements. Investments in
entities that we do not control, and variable interest entities ("VIEs") in which we are not the primary beneficiary (to the extent applicable), are not consolidated and are reflected as investments in unconsolidated joint ventures under the equity method of reporting.
Due to the fact that the Limited Partners do not have kick out rights, or substantive participating rights, the Partnership is a VIE. Because the General Partner holds majority ownership and exercises control over every aspect of the Partnership's operations, the General Partner has been determined as the primary beneficiary of the Partnership and, therefore, consolidates the Partnership.
The assets and liabilities of the General Partner and the Partnership are substantially the same, as the General Partner does not have any significant assets other than its investment in the Partnership.
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DUKE
REALTY CORPORATION AND DUKE REALTY LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
i
Reclassifications
Certain amounts in the accompanying consolidated financial statements have been reclassified to conform to the 2021 consolidated financial statement presentation.
i
Real
Estate Investments
Rental real property, including land, land improvements, buildings and tenant improvements, are included in real estate investments and are generally stated at cost. Construction in process and undeveloped land are included in real estate investments and are stated at cost. Real estate investments also include our equity interests in unconsolidated joint ventures that own and operate rental properties and hold land for development.
Depreciation
Buildings and land improvements are depreciated on the straight-line method over their estimated lives not to exceed i40
and i15 years, respectively, for properties that we develop, and not to exceed i30 and i10
years, respectively, for acquired properties. Tenant improvement costs are depreciated using the straight-line method over the shorter of the useful life of the asset or term of the related lease.
Cost Capitalization
Direct and certain indirect costs, including interest, clearly associated with the development, construction or expansion of real estate investments are capitalized as a cost of the property. Direct costs include all leasing commissions paid to third parties for new leases or lease renewals. We capitalize a portion of our indirect costs associated with our construction and development efforts. Costs that are incremental to executing a lease are capitalized. In assessing the amount of direct and indirect costs to be capitalized, allocations are made based on estimates of the actual amount of time spent in each activity. We do not capitalize any costs attributable to
downtime or to unsuccessful projects.
We capitalize interest and direct and indirect project costs during the period when we commence activities necessary to get the property ready for its intended use, including land entitlement and preconstruction activities, up to the time the property is substantially complete and ready for its intended use. In addition, we capitalize costs, including real estate taxes, insurance and utilities, that have been allocated to vacant space based on the square footage of the portion of the building not held available for immediate occupancy during the extended lease-up periods after construction of the building shell has been completed if costs are being incurred to ready the vacant space for its intended use. If costs and activities incurred to ready the vacant space cease, then cost capitalization is also discontinued until such activities are resumed. Once necessary work has been completed
on a vacant space, project costs are no longer capitalized.
We cease capitalization of all project costs on extended lease-up periods when significant activities have ceased, which does not exceed the shorter of a one-year period after the completion of the building shell or when the property attains i90% occupancy.
Impairment
We evaluate our real estate assets, with the exception of those that are classified as held-for-sale, for impairment whenever events or changes in circumstances
indicate that their carrying amounts may not be recoverable. If such an evaluation is considered necessary, we compare the carrying amount of that real estate asset, or asset group, with the expected undiscounted cash flows that are directly associated with, and that are expected to arise as a direct result of, the use and eventual disposition of that asset, or asset group. Our estimate of the expected future cash flows used in testing for impairment is based on, among other things, our estimates regarding future market conditions, rental rates, occupancy levels, costs of tenant improvements, leasing commissions and other tenant concessions, assumptions regarding the residual value of our properties at the end of our anticipated holding period and the length of our anticipated holding period and is, therefore, subjective by nature. These assumptions could differ materially from actual results. If our strategy changes or if market conditions otherwise dictate a reduction
in the holding period and an earlier sale date, an impairment loss could be recognized and such loss could be material.
/
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DUKE REALTY CORPORATION AND DUKE REALTY LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
To the extent the carrying amount of a real estate asset, or asset group, exceeds the associated estimate of undiscounted cash flows, an impairment loss is recorded to reduce the carrying value of the asset to its fair value.
The determination of the fair value of real estate assets is also
highly subjective, especially in markets where there is a lack of recent comparable transactions. We primarily utilize the income approach to estimate the fair value of our income producing real estate assets. We utilize marketplace participant assumptions to estimate the fair value of a real estate asset when an impairment charge is required to be measured. The estimation of future cash flows, as well as the selection of the discount rate and exit capitalization rate used in applying the income approach, are highly subjective measures in estimating fair value.
Real estate assets classified as held-for-sale are reported at the lower of their carrying value or their fair value, less estimated costs to sell. Once a property is designated as held-for-sale, no further depreciation expense is recorded.
Asset Acquisitions
Our acquisitions of
properties have been accounted for as asset acquisitions as they have not met the definition of a business. Transaction costs related to asset acquisitions are capitalized. To the extent that we gain control of real estate properties that are accounted for as asset acquisitions, as opposed to business combinations, we accumulate the costs of any pre-existing equity interests and consideration paid for additional interest acquired and we do not remeasure our pre-existing equity interest. Generally contingencies arising from an asset acquisition are only recognized when probable.
We allocate the purchase price of asset acquisitions to tangible and identified intangible assets based on their relative fair values, using all pertinent information available at the date of acquisition. Capitalized acquisition costs are also included in the total cost basis of acquired properties that are asset acquisitions.
The allocation to tangible assets (buildings, tenant improvements and land) is based upon management's determination of the value of the property as if it were vacant. This “as-if vacant” value is estimated using an income, or discounted cash flow, approach that relies upon internally determined assumptions that we believe are consistent with current market conditions for similar properties. The most important assumptions in determining the allocation of the purchase price to tangible assets are the exit capitalization rate, estimated market rents and the fair value of the underlying land. The purchase price of real estate assets is also allocated to intangible assets consisting of the above or below market component of in-place leases and the value of in-place leases.
The value allocable to the above or below market component of an acquired in-place lease is determined based upon the present value (using a discount
rate which reflects the risks associated with the acquired leases) of the difference between (i) the contractual amounts to be received pursuant to the lease over its remaining term and (ii) management's estimate of the amounts that would be received using fair market rates over the remaining term of the lease. The amounts allocated to above market leases are included in deferred leasing and other costs in the balance sheet and below market leases are included in other liabilities in the balance sheet; both are amortized to rental income over the remaining terms of the respective leases.
Factors considered in determining the value allocable to in-place leases include estimates, during hypothetical expected lease-up periods, of space that is actually leased at the time of acquisition, of lost rent at market rates, fixed operating costs that will be recovered from tenants and theoretical leasing commissions required to execute
similar leases. These intangible assets are included in deferred leasing and other costs in the balance sheet and are amortized over the remaining term of the existing lease.
i
Joint Ventures
We have equity interests in unconsolidated joint ventures that are primarily engaged in the operation and development of industrial real estate properties.
We consolidate joint ventures that are considered to be VIEs where we are the primary beneficiary. We analyze
our investments in joint ventures to determine if the joint venture is considered a VIE and would require consolidation. We (i) evaluate the sufficiency of the total equity investment at risk, (ii) review the voting rights and decision-making authority of the equity investment holders as a group and whether there are limited partners (or similar
-70-
DUKE REALTY CORPORATION AND DUKE REALTY LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
owning entities) that lack substantive participating or kick out rights, guaranteed returns, protection against losses, or capping of residual returns within the group and (iii) establish whether activities within the venture are
on behalf of an investor with disproportionately few voting rights in making this VIE determination.
To the extent that we own interests in a VIE and we (i) have the power to direct the activities that most significantly impact the economic performance of the VIE and (ii) have the obligation or rights to absorb losses or receive benefits that could potentially be significant to the VIE, then we would be determined to be the primary beneficiary and would consolidate the VIE. To the extent that we own interests in a VIE, then at each reporting period, we re-assess our conclusions as to which, if any, party within the VIE is considered the primary beneficiary. Consolidated joint ventures that are VIE's were not significant in any period presented in these consolidated financial statements.
To the extent that our joint ventures do not qualify as VIEs, they are consolidated if we control
them through majority ownership interests or if we are the managing entity (general partner or managing member) and our partner does not have substantive participating rights. Control is further demonstrated by our ability to unilaterally make significant operating decisions, refinance debt and sell the assets of the joint venture without the consent of the non-managing entity and the inability of the non-managing entity to remove us from our role as the managing entity. Consolidated joint ventures that are not VIEs are not significant in any period presented in these consolidated financial statements.
We use the equity method of accounting for those joint ventures where we exercise significant influence but do not have control. Under the equity method of accounting, our investment in each joint venture is included on our balance sheet; however, the assets and liabilities of the joint ventures for which we use the equity
method are not included on our balance sheet.
When we sell or contribute properties to unconsolidated joint ventures and retain a non-controlling ownership interest in such assets, we recognize the difference between the consideration received and the carrying amount of the asset sold or contributed when its derecognition criteria are met. The equity method investment we retain in such partial sale transactions is noncash consideration and is measured at fair value. As a result, the accounting for a partial sale results in the recognition of a full gain or loss.
When circumstances indicate there may have been a reduction in the value of an equity investment, we evaluate whether the loss in value is other than temporary. If we conclude it is other than temporary, we recognize an impairment charge to reflect the equity investment at fair value.
In
July 2021, we entered into a i20%-owned unconsolidated joint venture with CBRE Global Investors ("CBREGI") with plans to contribute ithree tranches of properties.
We contributed two separate tranches of properties to the joint venture during 2021 (see Note 5) while the third tranche was closed in January 2022 (see Note 14). The joint venture financed the acquisition of these properties with a combination of third party first mortgage loans and equity contributions from our partner in this joint venture.
There were no unconsolidated joint ventures, in which we have any recognized assets or liabilities or have retained any economic exposure to loss at December 31, 2021 that met the criteria to be considered VIEs. At December 31, 2021, we guaranteed the repayment of a loan associated with ione
of our unconsolidated joint ventures. The maximum guarantee exposure for the loan was approximately $i4.8 million.
i
Cash Equivalents
Investments
with an original maturity of three months or less are classified as cash equivalents.
i
Valuation of Receivables
Our determination of the adequacy of our allowances for tenant receivables includes a binary assessment of whether or not the amounts due under a tenant’s lease agreement are probable of collection. For such amounts that are deemed probable of collection, revenue continues to be recorded on a straight-line basis over the lease term. For such amounts that are deemed not probable of collection,
revenue is recorded as the lesser of (i) the amount which would be recognized on a straight-line basis or (ii) cash that has been received from the tenant, with any tenant and
-71-
DUKE REALTY CORPORATION AND DUKE REALTY LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
deferred rent receivable balances charged as a direct write-off against rental income in the period of the change in the collectability determination.
i
Deferred
Costs
Deferred Financing Costs
Costs incurred in connection with obtaining financing are deferred and are amortized to interest expense over the term of the related loan. The costs for issuing debt, other than lines of credit, are presented on the consolidated balance sheets as a direct deduction from the debt's carrying value, while debt issuance costs related to the Partnership's unsecured line of credit are presented as assets on the consolidated balance sheets, as part of other escrow deposits and other assets.
Lease Related Costs and Acquired Lease-Related Intangible Assets
Costs that are directly incremental to executing a lease are capitalized.
Acquired lease-related intangible assets consist of above market lease assets and the value allocable to
in-place leases. Above market lease assets are amortized as a reduction to rental income over the remaining terms of the respective leases. In-place lease intangible assets are amortized on a straight-line basis and included within depreciation and amortization in the consolidated statements of operations and comprehensive income.
i
Deferred leasing costs and acquired lease-related intangible assets at December 31, 2021 and 2020,
excluding amounts classified as held-for-sale, were as follows (in thousands):
Amounts
recorded related to amortization expense for in-place leases for the years ended December 31, 2021, 2020 and 2019 totaled $i20.4 million, $i19.5
million and $i22.0 million, respectively. Charges to rental income related to the amortization of above market lease assets for the years ended December 31, 2021, 2020 and 2019 totaled $i367,000,
$i639,000 and $i703,000, respectively.
/
-72-
DUKE
REALTY CORPORATION AND DUKE REALTY LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
i
The expected future amortization, or charge to rental income, of acquired lease-related intangible assets is summarized in the table below (in thousands):
Year
Amortization
Expense
Charge to Rental Income
2022
$
i18,168
$
i352
2023
i15,271
i353
2024
i11,986
i59
2025
i9,789
i—
2026
i7,574
i—
Thereafter
i20,576
i—
$
i83,364
$
i764
/i
Noncontrolling
Interests
Noncontrolling interests relate to the minority ownership interests in the Partnership and interests in consolidated property partnerships that are not wholly owned by the General Partner or the Partnership. Noncontrolling interests are subsequently adjusted for additional contributions, distributions to noncontrolling holders and the noncontrolling holders' proportionate share of the net earnings or losses of each respective entity. We report noncontrolling interests as a component of total equity.
When a Common Unit of the Partnership is redeemed (Note 1), the change in ownership is treated as an equity transaction by the General Partner and there is no effect on its earnings or net assets.
i
Revenue
Recognition
Rental and Related Revenue
Rental income from leases to customers is recognized on a straight-line basis. If a lease provides for tenant improvements, we determine whether we or the tenant is the owner of the tenant improvements. When we are the owner of the tenant improvements, any tenant improvements funded by the tenant are treated as lease payments which are deferred and amortized as revenue over the lease term. When the tenant is the owner of the tenant improvements, and we fund such improvements, we record such tenant improvement allowances as lease incentives and amortize as a reduction of revenue over the lease term.
We record lease termination fees when a tenant has executed a definitive termination agreement with us and the payment of the termination fee is not subject to any material conditions that must be met
or waived before the fee is due to us.
General Contractor and Service Fee Revenue
General contractor and service fee revenues are comprised primarily of construction and development related revenues earned from third parties while acting in capacity of a developer, as a general contractor or a construction manager. We evaluate the goods and services provided in these construction arrangements to determine whether we are acting as principal or agent and, accordingly, recognize revenue on a gross or net basis based on that evaluation. There are other ancillary streams of revenue included in general contractor and service fee revenues (see Note 9), such as management fees earned from unconsolidated joint ventures in accordance with the terms specific to each arrangement, which are not significant.
Our construction arrangements are typically
structured with only one performance obligation, which generally represents an obligation either to construct a new building or to construct fixtures in an existing building, and these single performance obligations are satisfied over time as construction progresses. We recognize revenue as we satisfy such performance obligations using the percentage of completion method, which is an input method. Using this method, profits are recorded based on our estimates of the percentage of completion of individual contracts, commencing when the work performed under the contracts reaches a point where the final costs can be estimated with reasonable accuracy. The percentage of completion estimates are based on a comparison of the contract expenditures incurred to the estimated final costs. We believe the percentage of completion method is a faithful
-73-
DUKE
REALTY CORPORATION AND DUKE REALTY LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
depiction of the transfer of goods and services as changes in job performance and estimated profitability, which result in revisions to costs and income and are recognized in the period in which the revisions are determined, have not historically been significant. We typically receive regular progress payments on the majority of our construction arrangements and such arrangements generally have an original duration of less than one year. As the result of the relatively short duration of our construction arrangements, we apply the optional disclosure exemptions, related to our remaining performance obligations for our in-process construction projects, for which any future variable consideration is not material. Changes in job performance, job conditions
and estimated profitability may result in revisions to costs and income and are recognized in the period in which the revisions are determined. To the extent that a fixed-price contract is estimated to result in a loss, the loss is recorded immediately.
Opening and closing balances of construction receivables are presented separately on the Consolidated Balance Sheets. Under billed and over billed receivables on construction contracts totaled $i45.8 million and
$i1.9 million, respectively, at iDecember 31, 2021 and $i16.6
million and $i105,000, respectively, at December 31, 2020. Over billed receivables are included in other liabilities in the Consolidated Balance Sheets. We generally do not have any contract assets associated with our construction arrangements.
Management fees are based on a percentage of rental receipts of properties managed and are recognized as the rental receipts are collected. Maintenance fees are based upon established hourly rates and are recognized as the services are performed.
i
Property
Sales
Only disposals representing a strategic shift in operations (for example, a disposal of a major geographic area or a major line of business) should be presented as discontinued operations in accordance with ASC 205-20, without consideration of significant continuing involvement.
We recognize gains on sales of properties, including partial sales, of non-financial assets (and in-substance non-financial assets) when the recognition criteria are met. In the typical course of our business, sales of non-financial assets represent only one performance obligation and are recognized when an enforceable contract is in place, collectability is ensured and control is transferred to the buyer.
i
Leases
As
a lessor, our primary business is the development, acquisition, and operation of industrial real estate properties that are held for investment and leased to tenants. We manage residual risk through investing in properties that we believe will appreciate in value over time. We also evaluate the collectability of the cash flows of our leases prior to their execution, and on an ongoing basis, to ensure collectability is probable prior to recognizing lease revenues on an accrual basis.
We only capitalize the incremental costs of signing a lease. Non-incremental costs attributable to successful leases, as presented in the Consolidated Statements of Operations, 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 separate presentation on the Consolidated Statements of Operations 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.
We exclude certain lessor costs, such as real estate taxes and insurance, that are paid directly by lessees to third parties, from rental revenue and the associated rental expense. Lessor costs that are paid by the lessor and reimbursed by the lessee continue to be recorded through rental revenue and the associated rental expense.
The applicable lease accounting rules allow a practical expedient for lessors to not separate rental recovery revenue related to lease-related services from the associated
rental revenue related to the lease when certain criteria are met. The lease-related services provided to our tenants include property management, common area maintenance ("CAM") and utilities. We assessed the applicable criteria, concluding that the timing and straight-line pattern of
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DUKE REALTY CORPORATION AND DUKE REALTY LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
transfer to the lessees for rental recovery revenue from our lease-related services and revenue from the underlying leases are the same and that lease classification does not change, and we have consistently applied this practical expedient in all periods presented.
As
a lessee, we apply a dual approach, classifying leases as either finance or operating leases based on the principle of whether or not the lease is effectively a financed purchase of the leased asset. This classification determines whether the lease expense is recognized based on an effective interest method or on a straight-line basis over the term of the lease. In the capacity of a lessee, we record a right-of-use ("ROU") asset and a lease liability for all leases with a term of greater than 12 months regardless of classification.
See Note 3 for further disclosure on our leases as a lessor and lessee.
i
Net
Income Per Common Share or Common Unit
Basic net income per common share or Common Unit is computed by dividing net income attributable to common shareholders or common unitholders, less dividends or distributions on share-based awards expected to vest (referred to as "participating securities" and primarily composed of unvested restricted stock units), by the weighted average number of common shares or Common Units outstanding for the period.
Diluted net income per common share is computed by dividing the sum of net income attributable to common shareholders and the noncontrolling interest in earnings allocable to Limited Partner Units (to the extent the Limited Partner Units are dilutive), less dividends or distributions on participating securities that are anti-dilutive, by the sum of the weighted average number of common shares outstanding and, to the extent they are
dilutive, weighted average number of Limited Partner Units outstanding and any potential dilutive securities for the period. Diluted net income per Common Unit is computed by dividing the net income attributable to common unitholders, less dividends or distributions on participating securities that are anti-dilutive, by the sum of the weighted average number of Common Units outstanding and any potential dilutive securities for the period.
i
The following table reconciles the components of basic and diluted net income per common share or Common Unit (in
thousands):
2021
2020
2019
General Partner
Net income attributable to
common shareholders
$
i852,895
$
i299,915
$
i428,972
Less:
Dividends on participating securities
(i1,356)
(i1,447)
(i1,487)
Basic
net income attributable to common shareholders
i851,539
i298,468
i427,485
Add
back dividends on dilutive participating securities
i1,356
i—
i1,487
Noncontrolling
interest in earnings of common unitholders
i8,354
i2,663
i3,678
Diluted
net income attributable to common shareholders
$
i861,249
$
i301,131
$
i432,650
Weighted
average number of common shares outstanding
i377,673
i370,057
i362,234
Weighted
average Limited Partner Units outstanding
i3,708
i3,303
i3,118
Other
potential dilutive shares
i2,095
i796
i1,987
Weighted
average number of common shares and potential dilutive securities
i383,476
i374,156
i367,339
Partnership
Net
income attributable to common unitholders
$
i861,249
$
i302,578
$
i432,650
Less:
Distributions on participating securities
(i1,356)
(i1,447)
(i1,487)
Basic
net income attributable to common unitholders
$
i859,893
$
i301,131
$
i431,163
Add
back distributions on dilutive participating securities
i1,356
i—
i1,487
Diluted
net income attributable to common unitholders
$
i861,249
$
i301,131
$
i432,650
Weighted
average number of Common Units outstanding
i381,381
i373,360
i365,352
Other
potential dilutive units
i2,095
i796
i1,987
Weighted
average number of Common Units and potential dilutive securities
i383,476
i374,156
i367,339
//
-75-
DUKE
REALTY CORPORATION AND DUKE REALTY LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
i
The following table summarizes the data that is excluded from the computation of net income per common share or Common Unit as a result of being anti-dilutive (in thousands):
2021
2020
2019
General
Partner and Partnership
Other potential dilutive shares or units:
Anti-dilutive outstanding potential shares or units under fixed stock option and other stock-based compensation plans
The General Partner has elected to be taxed as a REIT under the Code, as amended. To qualify as a REIT, the General Partner must meet a number of organizational and operational requirements, including a requirement to distribute at least i90% of its REIT taxable income to its shareholders. Management intends to continue to adhere to these requirements and to maintain the General Partner's REIT status. As a REIT, the General Partner is entitled to a tax deduction
for the dividends it pays to shareholders. Accordingly, the General Partner generally will not be subject to federal income taxes as long as it currently distributes to shareholders an amount equal to or in excess of its taxable income. The General Partner is, however, generally subject to federal income taxes on any taxable income that is not currently distributed to its shareholders. If the General Partner fails to qualify as a REIT in any taxable year, it will be subject to federal income taxes and may not be able to qualify as a REIT for four subsequent taxable years.
REIT qualification reduces, but does not eliminate, the amount of state and local taxes we pay. In addition, our financial statements include the operations of taxable corporate subsidiaries that are not entitled to a dividends paid deduction and are subject to federal, state and local income taxes. As a REIT, the General Partner may also be subject to certain
federal excise taxes if it engages in certain types of transactions.
i
The following table reconciles the General Partner's net income to taxable income before the dividends paid deduction, and subject to the i90%
distribution requirement, for the years ended iDecember 31, 2021, 2020 and 2019 (in thousands):
2021
2020
2019
Net
income
$
i861,618
$
i302,760
$
i432,644
Book/tax
differences
(i467,205)
i63,838
(i120,421)
Taxable
income before the dividends paid deduction
i394,413
i366,598
i312,223
Less:
capital gains
(i33,652)
(i62,165)
(i62,513)
Adjusted
taxable income subject to the 90% distribution requirement
$
i360,761
$
i304,433
$
i249,710
/i
The
General Partner's dividends paid deduction is summarized below (in thousands):
2021
2020
2019
Cash dividends paid
$
i394,487
$
i355,287
$
i318,702
Cash
dividends declared and paid in subsequent year that apply to current year
i26,886
i22,960
i6,521
Cash
dividends declared and paid in current year that apply to previous year
(i22,960)
(i6,521)
(i9,286)
Dividends
paid deduction
i398,413
i371,726
i315,937
Less:
Capital gain distributions
(i33,652)
(i62,165)
(i62,513)
Dividends
paid deduction attributable to adjusted taxable income subject to the 90% distribution requirement
$
i364,761
$
i309,561
$
i253,424
/
Our
tax return for the year ended iDecember 31, 2021 has not been filed. The taxability information presented for our dividends paid in 2021 is based upon management’s estimate. Consequently, the taxability of dividends is subject to change. iA
summary of the designated tax characterization of the dividends paid by the General Partner for the years ended iDecember 31, 2021, 2020 and 2019 is as follows:/
/
-76-
DUKE REALTY CORPORATION
AND DUKE REALTY LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
2021
2020
2019
Common Shares
Ordinary
income
i91.5
%
i74.6
%
i80.7
%
Capital
gains
i8.5
%
i25.4
%
i19.3
%
i100.0
%
i100.0
%
i100.0
%
Partnership
For
the Partnership, the allocated share of income and loss other than the operations of its taxable REIT subsidiary is included in the income tax returns of its partners; accordingly the only federal income taxes included in the accompanying consolidated financial statements of the Partnership are in connection with its taxable REIT subsidiary.
Income taxes are not material to our operating results or financial position. Our taxable REIT subsidiary has no significant net deferred income tax positions or unrecognized tax benefit items.
Cash Paid for Income Taxes
We paid federal, state and local income taxes, net of income tax refunds, of $i22.2
million and $i7.8 million in 2021 and 2019, respectively. We received income tax refunds, net of federal, state and local income tax payments, of $i308,000 in 2020.
i
Fair
Value Measurements
We estimate fair value using available market information and valuation methodologies. Assets and liabilities recorded at fair value on the consolidated balance sheets are categorized based on the inputs to the valuation techniques as follows:
Level 1 inputs utilize quoted prices (unadjusted) in active markets for identical assets or liabilities to which we have access.
Level 2 inputs are inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly. Level 2 inputs may include quoted prices for similar assets and liabilities in active markets, as well as inputs that are observable for the asset or liability (other than quoted prices), such as interest rates and yield curves that are observable at commonly quoted intervals.
Level
3 inputs are unobservable inputs for the asset or liability, which are typically based on an entity's own assumptions, as there is little, if any, related market activity.
In instances where the determination of the fair value measurement is based on inputs from different levels of the fair value hierarchy, the level in the fair value hierarchy within which the entire fair value measurement falls is based on the lowest level input that is significant to the fair value measurement in its entirety. Our assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the asset or liability.
i
Derivative
Financial Instruments
We periodically enter into certain interest rate protection agreements to effectively convert or cap floating rate debt to a fixed rate, and to hedge anticipated future financing transactions, both of which qualify for cash flow hedge accounting treatment. We do not utilize derivative financial instruments for trading or speculative purposes. The entire effect of any hedging instruments and hedged items are presented in the same income statement line item.
If a derivative qualifies as a cash flow hedge, the gain or loss on the derivative is recorded in accumulated other comprehensive income or loss and subsequently reclassified into interest expense in the same period during which the hedged forecasted transaction affects earnings. For all hedging relationships, we formally document the hedging relationship and its risk-management objective and strategy
for undertaking the hedge, the hedging instrument, the hedged item, the nature of the risk being hedged and how the hedging instrument’s effectiveness in offsetting the hedged risk will be assessed prospectively and retrospectively.
-77-
DUKE REALTY CORPORATION AND DUKE REALTY LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
i
Use of Estimates
The preparation
of the financial statements requires management to make a number of estimates and assumptions that affect the reported amount of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the period. Actual results could differ from those estimates.
(3)iLeases
Lease
Income
Our leases generally include scheduled rent increases, but do not include variable payments based on indexes. Our rental revenue is primarily based on fixed, non-cancelable leases. Our variable rental revenue primarily consists of amounts recovered from lessees for property tax, insurance and CAM.
All revenues related to lease and lease-related services are included in, and comprise substantially all of, the caption "Rental and Related Revenue" on the Consolidated Statements of Operations and Comprehensive Income. iThe
components of Rental and Related Revenue are as follows (in thousands):
As of iDecember 31, 2021, our lease arrangements, where we are the lessee, primarily consisted of office and ground leases. For these lease arrangements, we recognized ROU assets and the corresponding lease liabilities representing the discounted value of future lease payments required. In determining these amounts, we elected an available practical expedient that allows us, as a lessee, to not separate lease and non-lease components. Expenses recognized on these leases for the year ended iDecember 31,
2021 were not material.
-78-
DUKE REALTY CORPORATION AND DUKE REALTY LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Our operating leases primarily include all of our office leases and itwo ground leases. As
of iDecember 31, 2021, a $i36.8 million ROU asset associated with operating leases was included within Other Escrow Deposits and Other Assets and a corresponding lease liability of $i41.4
million was included in Other Liabilities on our Consolidated Balance Sheets. As of December 31, 2020, total ROU assets and liabilities for operating leases were $i38.9 million and $i42.9 million, respectively.
iThe following table summarizes the future lease payments (in thousands) to be made under non-cancellable operating lease arrangements:
The weighted average remaining lease term for our operating lease arrangements, on a combined basis as of December 31, 2021, was i34.3
years. The weighted average discount rate for our operating lease arrangements as of December 31, 2021 was i4.42%. As the discount rates implied in our operating lease arrangements were not readily determinable, we utilized our current credit ratings and credit yields observed from market traded securities with similar credit ratings to form a reasonable basis to establish secured borrowing rates when determining the present value of future operating lease payments.
Our
finance leases include itwo long term ground leases. As of December 31, 2021, a $i37.5 million
ROU asset associated with finance leases was included within Other Escrow Deposits and Other Assets and a corresponding $i39.2 million lease liability was included within Other Liabilities on our Consolidated Balance Sheets. As of December 31, 2020, total finance lease related ROU assets and liabilities were $i19.2
million and $i19.4 million, respectively. iThe future lease payments (in thousands) under our finance leases as of iDecember 31,
2021 for five years and thereafter are as follows:/
The ground lease payment obligation for ione
ground lease is subject to an annual consumer price index increase limited within a minimum i2% and a maximum i3% increase. The contractual obligations for both leases included above assume the minimum annual increase for the remainder of the lease term since we cannot
predict future adjustments. The weighted average remaining lease term for our finance lease arrangements, on a combined basis as of December 31, 2021 was i54.2 years. The weighted average discount rate for our finance lease arrangements as of December 31, 2021 was i5.12%.
The lessors' implicit rates in the leases were readily determinable when the leases were commenced.
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DUKE REALTY CORPORATION AND DUKE REALTY LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(4)iRestricted
Cash
Restricted cash primarily consists of cash proceeds from dispositions but restricted only for qualifying like-kind exchange transactions and cash held in escrow related to acquisition and disposition holdbacks. iThe following table provides a reconciliation of cash, cash equivalents, and restricted cash reported within the Consolidated Balance Sheets that sum to the total of the same such amounts shown in the Consolidated Statements of Cash Flows (in thousands):
Restricted
cash held in escrow for like-kind exchange
i—
i47,682
Restricted
cash included in other escrow deposits and other assets
i33,412
i13,232
Total
cash, cash equivalents, and restricted cash shown in the Consolidated Statements of Cash Flows
$
i103,164
$
i67,223
Restricted
cash held in escrow for like-kind exchange on the Consolidated Balance Sheets consists of cash received from property dispositions intended to be used for qualifying like-kind exchange transactions.
(5)iAcquisitions and Dispositions
Acquisitions and dispositions for the periods presented were completed
in accordance with our strategy to reposition our investment concentration among the markets in which we operate and to increase our overall investment concentration in Coastal Tier 1 markets. Transaction costs related to asset acquisitions are capitalized.
Acquisitions
i
The following table summarizes our real estate acquisition activities for the years ended December 31 (dollars in thousands):
2021
2020
2019
Buildings:
Number
of buildings
i8
i10
i6
Cash
paid at time of acquisition
$
i447,584
$
i383,672
$
i210,224
Land
and other real estate assets:
Acres of land
i536
i250
i517
Cash
paid at time of acquisition (1)
$
i700,632
$
i248,413
$
i388,202
/
(1)
Includes the cash acquisition cost of other real estate investments totaling $i163.7 million, $i13.1 million and $i160.4
million for the years ended December 31, 2021, 2020 and 2019, respectively. See Note 7 for information on other real estate investments.
During 2021, we acquired a container storage lot in Northern New Jersey for a combination of $i64.0 million of cash and Limited Partner Units with a fair value of $i11.6
million. This income producing acquisition is included as part of land and other real estate assets above and also included in the table below.
i
The following table summarizes amounts recognized for each major class of assets and liabilities (in thousands) for acquisitions of income producing properties during the years ended December 31:
2021
2020
2019
Real
estate assets
$
i570,820
$
i410,481
$
i205,390
Lease
related intangible assets
i11,796
i14,460
i11,716
Total
acquired assets
$
i582,616
$
i424,941
$
i217,106
Secured
debt
i—
i25,455
i—
Below
market lease liabilities
i57,441
i14,124
i—
/
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DUKE
REALTY CORPORATION AND DUKE REALTY LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The leases in the acquired properties had a weighted average remaining life at acquisition of approximately i11.0 years, i6.4
years and i6.5 years during 2021, 2020 and 2019, respectively.
Distribution of Joint Venture Properties
As part of a plan of dissolution, we received a non-cash distribution of real estate assets from itwoi50%-owned unconsolidated joint ventures. These joint ventures distributed their ownership in itwo in-service properties and certain parcels of undeveloped land to our partner,
who shares control with us over both joint ventures, while distributing their ownership interest in an in-service property, a property under construction and a parcel of undeveloped land to us. These distributions were based on values negotiated between us and our partner on an arms-length basis and we determined that these negotiated values represented the fair value of the assets at their highest and best use, as determined from the perspective of a market participant. Concurrent with these asset distributions, both we and our partner assumed and repaid all of the joint ventures' unsecured debt, with each party paying off an amount necessary for the value of the assets distributed, net of debt repayments, to be equal.
As the result of this dissolution transaction, we recognized a gain of $i10.6 million
(included in equity in earnings in the Consolidated Statements of Operations), which was related to the properties distributed to our partner. We did not recognize a gain to remeasure our existing ownership interest in the assets we received in distribution and we recognized such assets at a combined basis of $i52.2 million in the Consolidated Balance Sheets (not included in the 2021 Acquisitions table above). We assumed and immediately repaid unsecured debt of the joint ventures totaling $i40.2 million.
Fair
Value Measurements
We determine the fair value of the individual components of income producing real estate asset acquisitions primarily through calculating the "as-if vacant" value of a building, using an income approach, which relies significantly upon internally determined assumptions. We have determined that these estimates primarily rely on Level 3 inputs, which are unobservable inputs based on our own assumptions. iThe most significant assumptions used
in calculating the "as-if vacant" value for acquisition activity during 2021 and 2020, respectively, are as follows:
2021
2020
Low
High
Low
High
Exit
capitalization rate
i3.50%
i5.00%
i3.98%
i5.46%
Annual
net rental rate per square foot on acquired buildings
$i6.62
$i17.16
$i5.28
$i18.11
Annual
net rental rate per acre on acquired ground lease
$i182,136
$i182,136
$i—
$i—
The
estimate of the portion of the "as-if vacant" value that is allocated to the land underlying the acquired real estate relies on Level 3 inputs and is primarily determined by reference to recent comparable transactions.
Capitalized acquisition costs were insignificant and the fair value of net assets acquired from unrelated parties during the year ended December 31, 2021 was substantially the same as the cost of acquisition.
Dispositions
Dispositions of buildings (see Note 7 for the number of buildings sold in each year) and undeveloped land generated net cash proceeds of $i1.07
billion, $i336.3 million and $i432.7 million in 2021, 2020 and 2019, respectively.
On
July 22, 2021, we closed on the sale of i14 wholly-owned buildings and i15 acres of undeveloped land, for net cash proceeds of $i286.3
million, which completed our previously announced exit from the St. Louis market. This sale did not represent a strategic shift in operations.
In addition, in July 2021 we entered into a i20%-owned unconsolidated joint venture with plans to contribute ithree
tranches of properties for a total of inine properties. Pursuant to the terms of the joint venture, on July 27, 2021, we contributed to the joint venture the first tranche of ithree
properties, which consisted of itwo buildings and ione trailer storage lot in Chicago and Atlanta, for net cash proceeds of $i115.7
million. On September 21, 2021, we contributed
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DUKE REALTY CORPORATION AND DUKE REALTY LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
the second tranche of ithree properties, which consisted of itwo
buildings and ione trailer storage lot in Baltimore, to the joint venture for net cash proceeds of $i172.9 million. The
joint venture financed the acquisition of these properties with a combination of third party first mortgage loans and equity contributions from our partner. we received $i41.1 million for our ownership share of proceeds from such third party first mortgage loans, which was included in capital distributions from unconsolidated joint ventures in the Consolidated Statements of Cash Flows for the year ended December 31,
2021. We closed on the contribution of the third tranche in January 2022 (see Note 14).
During 2020, we collected the remaining $i110.0 million of principal on our outstanding notes receivable, which was related to the sale of our medical office portfolio during 2017.
In September 2019, we completed the sale of i18
non-strategic industrial properties for $i217.5 million in proceeds and recorded a gain on sale of $i146.3 million. These properties totaled
i4.1 million square feet and were located in primarily Midwest markets.
All other dispositions were not individually material.
(6)iInvestments
in Unconsolidated Joint Ventures
Summarized Financial Information
As of iDecember 31, 2021, we had equity interests in inine
unconsolidated joint ventures that primarily own and operate rental properties.
i
Combined summarized financial information for the unconsolidated joint ventures at iDecember 31, 2021 and 2020,
and for the years ended iDecember 31, 2021, 2020 and 2019, are as follows (in thousands):
2021
2020
2019
Rental
revenue
$
i67,142
$
i57,952
$
i59,905
Gains
on land and property sales - continuing operations
$
i64,480
$
i2,076
$
i24,099
Net
income
$
i85,323
$
i19,183
$
i40,134
Equity
in earnings of unconsolidated joint ventures
$
i32,804
$
i11,944
$
i31,406
Land,
buildings and tenant improvements, net
$
i625,206
$
i321,803
Construction
in progress
i31,745
i23,507
Undeveloped
land
i3,326
i23,653
Other
assets
i106,521
i79,842
$
i766,798
$
i448,805
Indebtedness
$
i286,430
$
i155,539
Other
liabilities
i45,580
i31,946
i332,010
i187,485
Owners'
equity
i434,788
i261,320
$
i766,798
$
i448,805
Investments
in and advances to unconsolidated joint ventures (1)
$
i168,336
$
i131,898
(1)
Differences between the net investment in our unconsolidated joint ventures and our underlying equity in the net assets of the ventures are primarily a result of basis differences associated with the sales of properties to joint ventures in which we retained an ownership interest. These adjustments have resulted in an aggregate difference increasing our investments in unconsolidated joint ventures by $i3.8 million and $i2.7
million as of iDecember 31, 2021 and 2020, respectively. Differences between historical cost basis and the basis reflected at the joint venture level (other than loans and impairments) are typically depreciated over the life of the related asset.
/
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DUKE REALTY CORPORATION AND DUKE REALTY LIMITED PARTNERSHIP
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
i
The scheduled principal payments of long term debt for the unconsolidated joint ventures, at our ratable ownership percentage, for each of the next five years and thereafter as of iDecember 31,
2021 are as follows (in thousands):
Year
Future Repayments
2022
$
i121
2023
i126
2024
i2,525
2025
i30,885
2026
i47,341
Thereafter
i—
$
i80,998
During
2021, a i20% owned joint venture partially financed acquisitions of properties from us with third party mortgage loans and our proportional share of such borrowings was $i41.5
million with maturity dates in 2026 (see Note 5). In January 2022, this unconsolidated joint venture financed an additional acquisition of assets from us with $i34.0 million, at our proportional share, of third party mortgage loans that mature in 2025 (see Note 14).
/
(7)iReal
Estate Assets, Discontinued Operations and Assets Held-for-Sale
Real Estate Assets
i
Real estate assets, excluding assets held-for-sale, consisted of the following (in thousands):
(1)
Includes underutilized in-fill sites, which may have had buildings/structures on site when we acquired them, that are either (i) under lease to a third party and, after the lease ends, are expected to be redeveloped or will require significant capital expenditures before re-leasing; or (ii) industrial/logistics properties that we intend to re-lease after significant retrofitting and/or environmental remediation is completed. The leases on these assets are usually short term in nature.
/
Allocation of Noncontrolling Interests - General Partner
i
The
following table illustrates the General Partner's share of the income attributable to common shareholders from continuing operations and discontinued operations, reduced by the allocation of income between continuing and discontinued operations to noncontrolling interests, for the years ended iDecember 31, 2021, 2020 and 2019, respectively (in thousands):
2021
2020
2019
Income
from continuing operations attributable to common shareholders
$
i852,895
$
i299,805
$
i428,531
Income
from discontinued operations attributable to common shareholders
i—
i110
i441
Net
income attributable to common shareholders
$
i852,895
$
i299,915
$
i428,972
/
Allocation
of Noncontrolling Interests - Partnership
Substantially all of the income from discontinued operations for all periods presented in the Partnership's Consolidated Statements of Operations and Comprehensive Income is attributable to the common unitholders.
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DUKE REALTY CORPORATION AND DUKE REALTY LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Assets Sold or Held-for-Sale
i
The
following table illustrates the number of sold or held-for-sale properties:
These
held-for-sale properties were wholly-owned and leased by our largest tenant, which was the third tranche of assets to be contributed to a i20% owned unconsolidated joint venture (see Note 5). The contribution was closed in January 2022 (see Note 14).
At December 31, 2021, ithree
in-service properties were classified as held-for-sale, but did not meet the criteria to be classified within discontinued operations. iThe following table illustrates aggregate balance sheet information for properties held-for-sale (in thousands):
Held-for-Sale
Properties Included in Continuing Operations
All
debt is issued directly or indirectly by the Partnership. The General Partner does not have any indebtedness, but does guarantee some of the unsecured debt of the Partnership.
i
Indebtedness at iDecember 31, 2021 and 2020 consists of the following (in thousands):
Maturity
Date
Weighted Average Interest Rate
Weighted Average Interest Rate
2021
2020
2021
2020
Fixed rate secured debt
2025 to 2035
i4.51
%
i4.56
%
$
i58,422
$
i62,817
Variable
rate secured debt
2025
i0.12
%
i0.08
%
i1,300
i1,600
Unsecured
debt
2024 to 2050
i3.00
%
i3.35
%
i3,675,000
i3,058,740
Unsecured
line of credit
2026
i—
%
i1.03
%
i—
i295,000
$
i3,734,722
$
i3,418,157
Less:
Deferred financing costs
i45,440
i33,106
Total
indebtedness as reported on consolidated balance sheets
$
i3,689,282
$
i3,385,051
/
Secured
Debt
At iDecember 31, 2021, our secured debt was collateralized by rental properties with a carrying value of $i158.9 million and by a letter of credit in the amount of $i1.3
million.
The fair value of our fixed rate secured debt at iDecember 31, 2021 was $i60.0
million. Because our fixed rate secured debt is not actively traded in any marketplace, we utilized a discounted cash flow methodology to determine
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DUKE REALTY CORPORATION AND DUKE REALTY LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
its fair value. Accordingly, we calculated fair value by applying an estimate of the current market rate to discount the debt's remaining contractual cash flows. Our estimate of a current market rate, which is the most significant input in the discounted cash flow calculation, is intended to replicate debt of similar maturity and loan-to-value relationship. The estimated market rates for all of our current fixed rate secured debt
are between i2.40% and i2.90%, depending on the attributes of the specific loans. The current market rates we utilized were internally estimated; therefore, we have concluded
that our determination of fair value for our fixed rate secured debt was primarily based upon Level 3 inputs.
In February 2020, a consolidated joint venture obtained an $i18.4 million secured loan from a third party financial institution, with a fixed annual interest rate of i3.41%
and a maturity date of March 1, 2035.
In September 2020, we assumed two secured loans in conjunction with a itwo-building asset acquisition. These assumed loans had a total face value of $i21.5
million and fair value of $i25.5 million. These assumed loans had a weighted average remaining term at acquisition of i11.8 years and carried a weighted average stated interest rate of i4.54%.
The difference between the fair value and the face value of loans assumed in connection with the acquisition is recorded as a premium and amortized to interest expense over the life of the loans assumed. We used an estimated market interest rate of i2.50% in determining the fair values of these loans.
During 2020, we repaid ione
fixed rate secured loan, totaling $i9.0 million, which had a stated interest rate of i5.61%.
Unsecured Debt
At December 31,
2021, all of our unsecured debt bore interest at fixed rates and primarily consisted of unsecured notes that are publicly traded. We utilized broker estimates in estimating the fair value of our fixed rate unsecured debt. The broker estimates took into account any recent trades within the same series of our fixed rate unsecured debt, comparisons to recent trades of other series of our fixed rate unsecured debt, trades of fixed rate unsecured debt from companies with profiles similar to ours, as well as overall economic conditions. We reviewed these broker estimates for reasonableness and accuracy, considering whether the estimates were based upon market participant assumptions within the principal and most advantageous market and whether any other observable inputs would be more accurate indicators of fair value than the broker estimates. We concluded that the broker estimates were representative of fair value. We have determined that our estimation of the fair value
of our fixed rate unsecured debt was primarily based upon Level 3 inputs. The estimated trading values of our fixed rate unsecured debt, depending on the maturity and coupon rates, ranged from i95.00% to i125.00%
of face value.
The indentures (and related supplemental indentures) governing our outstanding series of unsecured notes also require us to comply with financial ratios and other covenants regarding our operations. iWe were in compliance with all such financial covenants atDecember 31, 2021.
We took the following actions during 2021 and 2020 as they pertain to our unsecured indebtedness:
•In November 2021, the Partnership issued $i500.0
million of senior unsecured notes that bear a stated interest rate of i2.25%, have an effective interest rate of i2.38% and mature on January
15, 2032. Proceeds from this unsecured notes offering will be allocated to finance or refinance eligible green projects.
•In August 2021, we redeemed $i250.0 million of i3.63%
senior unsecured notes due April 2023. We recognized a loss of $i13.9 million in connection with the redemption of these notes including the prepayment premium and write-off of unamortized deferred financing costs.
•In June 2021, we redeemed $i83.7 million
of i3.88% senior unsecured notes due October 2022. In connection with the early repayment of these notes, we recognized a loss of $i3.9 million, including
the prepayment premium and the write-off of unamortized deferred financing costs.
•In January 2021, the Partnership issued $i450.0 million of senior unsecured notes that bear a stated interest rate of i1.75%,
have an effective interest rate of i1.83%, and mature on February 1, 2031. Proceeds from the unsecured notes offering were allocated to finance or refinance eligible green projects. In addition, in January 2021, the Partnership assumed and immediately repaid $i40.2 million
of unsecured debt related to the assets received as part of the dissolution of unconsolidated joint ventures (see Note 5).
•In June 2020, we issued $i350.0 million of senior unsecured notes, which bear interest at a stated interest rate of i1.75%,
have an effective interest rate of i1.85% and mature on July 1, 2030. Proceeds from the unsecured notes offering were primarily used to repurchase and cancel $i216.3
million of i3.88% senior
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DUKE REALTY CORPORATION AND DUKE REALTY LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
unsecured notes due 2022 pursuant to a tender offer completed by the Partnership in June 2020. In connection with the early cancellation of these notes, we recognized
a loss of $i15.1 million consisting of a repayment premium and the write-off of unamortized deferred financing costs.
•In February 2020, we issued $i325.0
million of senior unsecured notes that bear interest at a stated interest rate of i3.05%, have an effective interest rate of i3.19%, and mature on March 1, 2050. Proceeds from
the unsecured notes offering were primarily used to repay the $i300.0 million of senior unsecured notes bearing a stated interest rate of i4.38% due 2022. In connection with
the early redemption of these notes, we recognized a loss of $i17.8 million consisting of a prepayment premium and the write-off of unamortized deferred financing costs.
Unsecured Line of Credit
i
Our
unsecured line of credit at iDecember 31, 2021 is described as follows (in thousands):
In March 2021, the Partnership amended and restated its existing $i1.20
billion unsecured line of credit, which was set to mature in January 2022 with with options to extend until January 30, 2023. The amended and restated line of credit bears interest at one-month iLIBOR plus i0.775%
with a reduction in borrowing costs if certain sustainability linked metrics are achieved each year. In addition, the amended and restated line of credit matures on iMarch 31, 2025 with options to extend until March 31, 2026. Subject to certain conditions, the terms also include an option to increase the facility by up to an additional $i800.0
million, for a total of up to $i2.00 billion. This line of credit provides us with an option to obtain borrowings from financial institutions that participate in the line at rates that may be lower than the stated interest rate, subject to certain restrictions. The line of credit also allows automatic transition to an alternative rate of interest in the event that the one-month LIBOR ceases to publish and needs to be replaced. As a result of amending and restating the unsecured line of credit, we incurred $i6.2
million of deferred financing costs through December 31, 2021.
This line of credit contains financial covenants that require us to meet certain financial ratios and defined levels of performance, including those related to fixed charge coverage, unsecured interest expense coverage and debt-to-asset value (with asset value being defined in the Partnership's unsecured line of credit agreement). At iDecember 31, 2021, iwe
were in compliance with all financial covenants under this line of credit.
We utilized a discounted cash flow methodology in order to estimate the fair value of outstanding borrowings on our unsecured line of credit. To the extent that credit spreads have changed since the origination of the line of credit, the net present value of the difference between future contractual interest payments and future interest payments based on our estimate of a current market rate would represent the difference between the book value and the fair value. This estimate of a current market rate is based upon the rate, considering current market conditions and our specific credit profile, at which we estimate we could obtain similar borrowings. As our credit spreads have not changed appreciably, we believe that the contractual interest rate and the current market rate on any outstanding borrowings
on the line of credit are the same. The current market rate is internally estimated and therefore is primarily based upon a Level 3 input.
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DUKE REALTY CORPORATION AND DUKE REALTY LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Changes in Fair Value
i
As
all of our fair value debt disclosures relied primarily on Level 3 inputs, the following table summarizes the book value and changes in the fair value of our debt for the year ended iDecember 31, 2021 (in thousands):
Book
Value at 12/31/2020
Book Value at 12/31/2021
Fair Value at 12/31/2020
Issuances and Assumptions
Payments/Payoffs
Adjustments to Fair Value
Fair Value at 12/31/2021
Fixed rate secured debt
$
i62,817
$
i58,422
$
i65,848
$
i—
$
(i4,113)
$
(i1,746)
$
i59,989
Variable
rate secured debt
i1,600
i1,300
i1,600
i—
(i300)
i—
i1,300
Unsecured
debt
i3,058,740
i3,675,000
i3,387,913
i990,226
(i373,966)
(i224,708)
i3,779,465
Unsecured
line of credit
i295,000
i—
i295,000
i—
(i295,000)
i—
i—
Total
$
i3,418,157
$
i3,734,722
$
i3,750,361
$
i990,226
$
(i673,379)
$
(i226,454)
$
i3,840,754
Less:
Deferred financing costs
i33,106
i45,440
Total
indebtedness as reported on the consolidated balance sheets
$
i3,385,051
$
i3,689,282
/
Scheduled
Maturities and Interest Paid
i
At iDecember 31, 2021, the scheduled amortization and maturities of all indebtedness, excluding fair value adjustment, for the next five years and thereafter were as follows (in thousands):
Year
Amount
2022
$
i4,646
2023
i4,893
2024
i305,155
2025
i5,102
2026
i378,238
Thereafter
i3,033,158
$
i3,731,192
/
The amount of interest paid in 2021, 2020 and 2019 was $i107.9 million, $i104.6 million and $i111.8
million, respectively. The amount of interest capitalized in 2021, 2020 and 2019 was $i35.0 million, $i24.3 million and $i26.5
million, respectively.
(9)iSegment Reporting
Reportable Segments
As of December 31, 2021, we had itwo
reportable operating segments, the first consisting of the ownership and rental of industrial real estate investments. We continue to increase our investments in quality industrial properties largely based on anticipated geographic trends in supply and demand for industrial buildings, as well as the real estate needs of our major tenants that operate on a national level. We treat our industrial properties as a single operating and reportable segment based on our method of internal reporting. Properties not included in this reportable segment, because they are not industrial properties and do not by themselves meet the quantitative thresholds for separate presentation as a reportable segment, are generally referred to as non-reportable Rental Operations. Our non-reportable Rental Operations primarily include our remaining office properties and medical office property at December 31,
2021. The operations of our industrial properties, as well as our non-reportable Rental Operations, are collectively referred to as "Rental Operations."
Our second reportable segment consists of various real estate services such as development, general contracting, construction management, property management, asset management, maintenance and leasing to third-party property customers, owners and joint ventures, and is collectively referred to as "Service Operations." The Service Operations segment is identified as one single operating segment because the lowest level of financial results reviewed by our chief operating decision maker are the results for the Service Operations segment in total. Further,
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DUKE REALTY CORPORATION AND DUKE
REALTY LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
our reportable segments are managed separately because each segment requires different operating strategies and management expertise.
Revenues by Reportable Segment
i
The following table shows the revenues for each of the reportable segments, as well as a reconciliation
to consolidated revenues, for the years ended iDecember 31, 2021, 2020 and 2019 (in thousands):
2021
2020
2019
Revenues
Rental
Operations:
Industrial
$
i1,019,342
$
i921,612
$
i848,806
Non-reportable
Rental Operations
i5,506
i5,995
i5,794
Service
Operations
i80,260
i64,004
i117,926
Total
segment revenues
i1,105,108
i991,611
i972,526
Other
revenue
i815
i1,587
i1,233
Consolidated
revenue
$
i1,105,923
$
i993,198
$
i973,759
/
Major
Customer
i
The table below shows the revenues from a major customer from each of our reportable segments (in thousands):
We
generated more than i10% of our total revenues from this customer for the year ended iDecember 31, 2021. Revenues from Rental Operations related to leasing properties to this customer. Revenues from Service Operations for this customer pertained primarily to general
contractor and fee based construction management services.
Supplemental Performance Measure
PNOI is the non-GAAP supplemental performance measure that we use to evaluate the performance of, and to allocate resources among, the real estate investments in the reportable and operating segments that comprise our Rental Operations. PNOI for our Rental Operations segments is comprised of rental revenues from continuing operations less rental expenses and real estate taxes from continuing operations, along with certain other adjusting items (collectively referred to as "Rental Operations revenues and expenses excluded from PNOI," as shown in the following table). Additionally, we do not allocate interest expense, depreciation expense and certain other non-property specific revenues and expenses (collectively referred to as "Non-Segment Items," as shown in the following
table) to our individual operating segments.
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DUKE REALTY CORPORATION AND DUKE REALTY LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
We evaluate the performance of our Service Operations reportable segment using net income or loss, as allocated to that segment ("Earnings from Service Operations").iThe
following table shows a reconciliation of our segment-level measures of profitability to consolidated income from continuing operations before income taxes, for the years ended iDecember 31, 2021, 2020 and 2019 (in thousands and excluding discontinued operations):/
2021
2020
2019
PNOI
Industrial
$
i706,956
$
i611,217
$
i550,399
Non-reportable
Rental Operations
i5,227
i5,020
i3,811
PNOI,
excluding all sold properties
i712,183
i616,237
i554,210
PNOI
from sold properties included in continuing operations
i24,834
i49,574
i63,911
PNOI,
continuing operations
i737,017
i665,811
i618,121
Earnings
from Service Operations
i12,142
i6,028
i6,360
Rental
Operations revenues and expenses excluded from PNOI:
Straight-line rental income and expense, net
i32,081
i25,865
i21,197
Revenues
related to lease buyouts
i323
i2,863
i1,611
Amortization
of lease concessions and above and below market rents
i12,368
i8,984
i7,802
Intercompany
rents and other adjusting items
(i2,704)
(i1,473)
i1,012
Non-Segment
Items:
Equity in earnings of unconsolidated joint ventures
i32,804
i11,944
i31,406
Interest
expense
(i84,843)
(i93,442)
(i89,756)
Depreciation
and amortization expense
(i362,148)
(i353,013)
(i327,223)
Gain
on sale of properties
i585,685
i127,700
i234,653
Impairment
charges
i—
(i5,626)
i—
Interest
and other income, net
i4,451
i1,721
i9,941
General
and administrative expenses
(i69,554)
(i62,404)
(i60,889)
Gain
on land sales
i12,917
i10,458
i7,445
Other
operating expenses
(i3,607)
(i8,209)
(i5,318)
Loss
on extinguishment of debt
(i17,901)
(i32,900)
(i6,320)
Gain
on involuntary conversion
i3,222
i4,312
i2,259
Non-incremental
costs related to successful leases
(i13,302)
(i12,292)
(i12,402)
Other
non-segment revenues and expenses, net
i1,216
i1,210
i986
Income
from continuing operations before income taxes
$
i880,167
$
i297,537
$
i440,885
The
most comparable GAAP measure to PNOI is income from continuing operations before income taxes. PNOI excludes expenses that materially impact our overall results of operations and, therefore, should not be considered as a substitute for income from continuing operations before income taxes or any other measures derived in accordance with GAAP. Furthermore, PNOI may not be comparable to other similarly titled measures of other companies.
Assets by Reportable Segment
iThe
assets for each of the reportable segments at iDecember 31, 2021 and 2020 were as follows (in thousands):/
DUKE
REALTY CORPORATION AND DUKE REALTY LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In addition to revenues and PNOI, we also review our second generation capital expenditures in measuring the performance of our individual Rental Operations segments. We review these expenditures to determine the costs associated with re-leasing vacant space and maintaining the condition of our properties. Our second generation capital expenditures are included within "second generation tenant improvements, leasing costs and building improvements" in our consolidated statements of Cash Flows and are primarily attributable to the industrial segment for the years ended iDecember 31,
2021, 2020 and 2019.
(10)iEmployee Benefit Plans
We maintain a 401(k) plan for our eligible employees. We make matching contributions of i50%
of the employee salary deferral contributions up to i6% of eligible compensation and may also make annual discretionary contributions. A discretionary contribution was declared at the end of 2021, 2020 and 2019. The total expense recognized for this plan was $i2.6
million, $i2.2 million and $i2.1 million for the years ended December 31,
2021, 2020 and 2019, respectively.
Effective January 1, 2022, we have increased the matching contribution of i50% of employee salary deferral contributions to up to i10%
of employees' eligible compensation.
(11)iShareholders' Equity of the General Partner and Partners' Capital of the Partnership
General Partner
The General Partner has an at the market ("ATM") equity program that allows it to issue and sell its common
shares through sales agents from time to time. Actual sales under the ATM equity program depend on a variety of factors to be determined by the General Partner, including, among others, market conditions, the trading price of the General Partner’s common stock, determinations by the General Partner of the appropriate sources of funding and potential uses of funding available.
In February 2021, the General Partner terminated its previous equity distribution agreement for the ATM equity program and entered into a new equity distribution agreement pursuant to which the General Partner may sell from time to time up to an aggregate offering price of $i400.0
million of its common stock through sales agents or forward sellers. No forward sales were executed in 2021 and substantially all of the capacity of this ATM program was utilized as of December 31, 2021.
During 2021, the General Partner issued i8.2 million common shares pursuant to its ATM equity programs, generating gross proceeds of $i408.3
million and, after deducting commissions and other costs, net proceeds of $i403.6 million. The proceeds from these offerings were contributed to the Partnership and used to fund development activities.
During 2020, the General Partner issued i4.6
million common shares pursuant to its ATM equity programs, generating gross proceeds of $i177.1 million and, after deducting commissions and other costs, net proceeds of $i175.0
million. The proceeds from these offerings were contributed to the Partnership and used to fund development activities.
During 2019, the General Partner issued i8.0 million common shares pursuant to its ATM equity program, generating gross proceeds of approximately $i266.3
million and, after deducting commissions and other costs, net proceeds of approximately $i263.3 million. The proceeds from these offerings were contributed to the Partnership and used to fund development activities.
Partnership
For each common share or preferred share that the General Partner issues, the Partnership issues a corresponding General Partner Unit or Preferred Unit, as applicable, to the General Partner in exchange for the contribution of the proceeds from the
stock issuance. Similarly, when the General Partner redeems or repurchases common shares or preferred shares, the Partnership redeems the corresponding General Partner Units or Preferred Units held by the General Partner at the same price.
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DUKE REALTY CORPORATION AND DUKE REALTY LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(12)iStock
Based Compensation
We are authorized to issue up to i9.7 million shares of the General Partner's common stock under our stock-based employee and non-employee compensation plans. Executive officers may elect to receive Long-Term Incentive Plan Units ("LTIP Units"), which represent an interest in the Partnership, in lieu of stock based compensation awards denominated in the General Partner's
common stock.
Restricted Stock Units ("RSUs")
Under our 2015 Long-Term Incentive Plan, which was approved by the General Partner's shareholders in April 2015, and our 2015 Non-Employee Directors Compensation Plan (collectively, the "Compensation Plans"), RSUs may be granted to non-employee directors, executive officers and selected employees. An RSU is economically equivalent to a share of the General Partner's common stock, and RSUs are valued based on the market price of the General Partner's common stock on the date of the award. Amounts disclosed below include both RSUs and any elected LTIP Units, which have the same vesting schedule as RSUs.
RSUs granted to employees from 2015 to 2021 vest ratably in most cases over a ithree-year
period and are payable in shares of our common stock with a new share of such common stock issued upon each RSU's vesting. RSUs granted to existing non-employee directors vest i100% over ione
year and have contractual lives of ione year.
To the extent that a recipient of an RSU grant is not determined to be retirement eligible, as defined by the Compensation Plans, we recognize expense on a straight-line basis over the vesting period. Expense is recognized immediately at the date of grant to the extent a recipient is retirement eligible and expense
is accelerated to the extent that a participant will become retirement eligible prior to the end of the contractual life of granted RSUs.
i
The following table summarizes transactions for our unvested RSUs, excluding dividend equivalents, for 2021:
Compensation
cost recognized for RSUs totaled $i12.5 million, $i12.1 million and $i11.0
million for the years ended iDecember 31, 2021, 2020 and 2019, respectively.
As of iDecember 31, 2021, there was $i6.3
million of total unrecognized compensation expense related to nonvested RSUs granted under the Plan, which is expected to be recognized over a weighted average period of i1.7 years.
The total intrinsic value (which is equal to the value of a share of the General Partner's common stock on the date of vesting) of RSUs vested during the years ended iDecember 31,
2021, 2020 and 2019 was $i11.7 million, $i15.4
million and $i17.7 million, respectively.
The weighted average grant-date fair value of RSUs granted during 2020 and 2019 was $i37.28
and $i29.98, respectively.
The weighted average grant-date fair value of nonvested RSUs as of December 31, 2019 was $i27.73.
-91-
DUKE
REALTY CORPORATION AND DUKE REALTY LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Performance-Based Awards
A portion of the annual stock-based compensation awards granted to our executive officers annually include performance conditions, measured over a three-year performance period, based on pre-established goals for growth in a defined adjusted funds from operations (“AFFO”) metric. These performance-based awards disclosed below include awards denominated in both common shares of the General Partner or LTIP Units. The total number of instruments issued at the end of each performance period may be earned in a range from i0%
to i200% of the target value of the award depending on our AFFO performance relative to the pre-established goals.
To the extent that a recipient of these performance-based awards is not determined to be retirement eligible, as defined by the Compensation Plans, we recognize expense on a straight-line basis over the performance period based on the most likely payout percentage at each reporting period for each grant
to the extent that a payout is determined to be probable. Expense is recognized immediately at the date of grant, based on the most likely payout percentage to the extent that a payout is determined to be probable, when a recipient is retirement eligible, and expense is accelerated to the extent that a participant will become retirement eligible prior to the end of the performance period of an award.
i
Details on the unvested amounts of these annual grants by performance period are as follows:
Compensation cost recognized for these performance-based awards totaled $i8.5
million, $i7.8 million and $i6.2 million for the years ended iDecember 31,
2021, 2020 and 2019, respectively.
As of iDecember 31, 2021, there was $i760,000
of total unrecognized compensation expense related to nonvested performance-based awards, which is expected to be recognized over a weighted average period of i1.5 years.
The weighted average grant-date fair value, per instrument, for these performance-based awards granted during 2020 and 2019 was $i37.29
and $i29.98.
The weighted average grant-date fair value of these nonvested performance-based awards as of December 31, 2019 was $i27.50.
-92-
DUKE
REALTY CORPORATION AND DUKE REALTY LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(13)iCommitments and Contingencies
Legal
We are subject to various legal proceedings and claims that arise in the ordinary course of
business. In the opinion of management, the amount of any ultimate liability with respect to these actions is not expected to materially affect our consolidated financial statements or results of operations.
Environmental
We generally perform environmental site assessments at properties we are considering acquiring. The properties, particularly land parcels, we acquire may have been subject to adverse environmental conditions as a result of previous owners’ operations, which require remediation prior to development of land by the applicable environmental laws or regulations.
At the time of acquisition, we establish a liability for the costs associated with environmental remediation when such obligation has been incurred and can be reasonably estimated. Subsequently we adjust the liability as appropriate when
additional information becomes available. We record such environmental liabilities in other liabilities on the Consolidated Balance Sheets. We purchase various environmental insurance policies to mitigate our exposure to environmental liabilities. As of December 31, 2021, we are not aware of any environmental liabilities that would have a material adverse effect on our consolidated financial condition, results of operations or cash flows.
Off-Balance Sheet Liabilities
The Partnership has guaranteed the repayment of $i18.5
million of economic development bonds issued by various municipalities in connection with certain commercial developments. We may be required to make payments under our guarantees to the extent that incremental taxes from specified developments are not sufficient to pay the bond debt service. Management does not believe that it is probable that we will be required to make any significant payments in satisfaction of these guarantees.
The Partnership also has guaranteed the repayment of a loan associated with ione
of our unconsolidated joint ventures. At iDecember 31, 2021, the maximum guarantee exposure for the loan was approximately $i4.8 million.
(14)iSubsequent
Events
Declaration of Dividends/Distributions
i
The General Partner's board of directors declared the following dividends/distributions at its regularly scheduled board meeting held on January 26, 2022:
In January 2022, we contributed ithree
buildings to an unconsolidated joint venture. The joint venture financed the acquisition of these properties with a combination of third party first mortgage loans and equity contributions from our partner and we received approximately $i289.7 million of net cash proceeds, including our share of the proceeds from the joint venture's first mortgage loans.
Debt Extinguishment
/
OnJanuary 14, 2022, we provided notice of redemption to the holders of our $i300.0 million of i3.75% unsecured notes,
which are scheduled to mature in December 2024. This redemption occurred on February 13, 2022 and resulted in a loss on debt extinguishment of approximately $i22.0 million, which is comprised of the prepayment premium and the write-off of unamortized deferred financing costs.
-93-
DUKE
REALTY CORPORATION AND DUKE REALTY LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
i
Duke
Realty Corporation and Duke Realty Limited Partnership Real Estate and Accumulated Depreciation December 31, 2021 (in thousands of U.S. dollars, as applicable)
Schedule III
Initial Cost
Cost Capitalized Subsequent to Development or Acquisition
Gross Book Value at 12/31/2021
Name
Asset
Type
Encumbrances
Land
Buildings
Land/Land Imp
Bldgs/TI
Total (1)
Accum. Depr. (2)
Year Constructed/Renovated
Year Acquired
Atlanta, Georgia
Airport
Distribution 3781
Industrial
i—
i4,064
i11,383
i320
i4,064
i11,703
i15,767
i3,683
2002
2014
Aurora,
Illinois
Meridian Business 880
Industrial
i—
i963
i4,625
i1,467
i963
i6,092
i7,055
i3,376
2000
2000
4220
Meridian Parkway
Industrial
i—
i970
i3,512
i102
i970
i3,614
i4,584
i1,544
2004
2004
Butterfield
2805
Industrial
i—
i9,185
i10,795
i5,847
i9,272
i16,555
i25,827
i11,623
2008
2008
Butterfield
4000
Industrial
i—
i3,132
i12,639
i70
i3,132
i12,709
i15,841
i3,870
2016
2016
Butterfield
2850
Industrial
i—
i11,317
i18,305
i130
i11,317
i18,435
i29,752
i6,561
2016
2016
Butterfield
4200
Industrial
i—
i5,777
i13,108
i68
i5,967
i12,986
i18,953
i3,493
2016
2016
Austell,
Georgia
Hartman Business 7545
Industrial
i—
i2,640
i21,471
i20
i2,640
i21,491
i24,131
i8,725
2008
2012
240
The Bluffs
Industrial
i—
i6,138
i15,447
i3,086
i6,138
i18,533
i24,671
i2,314
2018
2018
Avenel,
New Jersey
Paddock 1
Industrial
i—
i20,861
i15,408
i91
i20,861
i15,499
i36,360
i1,644
2020
2020
Baltimore,
Maryland
Chesapeake Commerce 5901
Industrial
i—
i3,345
i1,355
i3,855
i3,365
i5,190
i8,555
i3,834
2008
2008
Chesapeake
Commerce 5003
Industrial
i—
i6,488
i7,087
i5,767
i6,546
i12,796
i19,342
i6,739
2008
2008
Chesapeake
Commerce 1500
Industrial
i—
i8,289
i10,109
i108
i8,333
i10,173
i18,506
i4,326
2016
2016
Chesapeake
Commerce 5900
Industrial
i—
i5,567
i6,100
i876
i5,567
i6,976
i12,543
i2,373
2017
2017
Chesapeake
Commerce 6000
Industrial
i—
i2,418
i10,369
i362
i2,418
i10,731
i13,149
i835
2020
2020
Batavia,
Ohio
S Afton Industrial Park 3001
Industrial
i—
i5,729
i20,717
i—
i5,729
i20,717
i26,446
i2,881
2019
2019
Bloomingdale,
Georgia
Morgan Business Center 400
Industrial
i—
i18,385
i44,455
i539
i18,385
i44,994
i63,379
i9,004
2017
2017
Bolingbrook,
Illinois
250 East Old Chicago Road
Industrial
i—
i1,229
i4,038
i253
i1,229
i4,291
i5,520
i1,723
2005
2005
Crossroads
2
Industrial
i—
i1,134
i5,434
i1,407
i1,134
i6,841
i7,975
i2,375
1998
2010
Crossroads
375
Industrial
i—
i1,064
i4,371
i497
i1,064
i4,868
i5,932
i1,848
2000
2010
Crossroads
Parkway 370
Industrial
i—
i2,409
i4,236
i912
i2,409
i5,148
i7,557
i2,383
1989
2011
Crossroads
Parkway 605
Industrial
i—
i3,656
i7,587
i3,550
i3,656
i11,137
i14,793
i3,970
1998
2011
Crossroads
Parkway 335
Industrial
i—
i2,574
i8,342
i1,032
i2,574
i9,374
i11,948
i3,533
1997
2012
/
-94-
DUKE
REALTY CORPORATION AND DUKE REALTY LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Duke
Realty Corporation and Duke Realty Limited Partnership Real Estate and Accumulated Depreciation December 31, 2021 (in thousands of U.S. dollars, as applicable)
Schedule III
Initial Cost
Cost Capitalized Subsequent to Development or Acquisition
Gross Book Value at 12/31/2021
Name
Asset
Type
Encumbrances
Land
Buildings
Land/Land Imp
Bldgs/TI
Total (1)
Accum. Depr. (2)
Year Constructed/Renovated
Year Acquired
Boynton Beach, Florida
Gateway
Center 1103
Industrial
i—
i3,701
i5,300
i1,712
i3,702
i7,011
i10,713
i2,920
2002
2010
Gateway
Center 3602
Industrial
i—
i1,738
i4,584
i265
i1,739
i4,848
i6,587
i1,789
2002
2010
Gateway
Center 3402
Industrial
i—
i2,063
i3,218
i471
i2,064
i3,688
i5,752
i1,485
2002
2010
Gateway
Center 2055
Industrial
i—
i1,560
i2,583
i175
i1,560
i2,758
i4,318
i1,036
2000
2010
Gateway
Center 2045
Industrial
i—
i1,073
i1,541
i835
i1,073
i2,376
i3,449
i922
2000
2010
Gateway
Center 2035
Industrial
i—
i1,073
i1,304
i699
i1,073
i2,003
i3,076
i772
2000
2010
Gateway
Center 2025
Industrial
i—
i1,560
i2,658
i145
i1,560
i2,803
i4,363
i1,048
2000
2010
Gateway
Center 1926
Industrial
i—
i4,143
i9,900
i1,458
i4,144
i11,357
i15,501
i4,653
2004
2010
Braselton,
Georgia
Braselton Business 920
Industrial
i—
i1,365
i7,713
i4,921
i1,529
i12,470
i13,999
i7,001
2001
2001
625
Braselton Pkwy
Industrial
i—
i4,355
i21,010
i5,726
i5,417
i25,674
i31,091
i11,360
2006
2005
1350
Braselton Parkway
Industrial
i—
i8,227
i8,856
i2,158
i8,227
i11,014
i19,241
i8,839
2008
2008
Brentwood,
Tennessee
Brentwood South Business 7104
Industrial
i—
i1,065
i4,410
i2,084
i1,065
i6,494
i7,559
i3,469
1987
1999
Brentwood
South Business 7106
Industrial
i—
i1,065
i1,844
i1,974
i1,065
i3,818
i4,883
i2,100
1987
1999
Brentwood
South Business 7108
Industrial
i—
i848
i3,233
i1,392
i848
i4,625
i5,473
i2,650
1989
1999
Brooklyn
Park, Minnesota
7300 Northland Drive
Industrial
i—
i700
i5,289
i862
i703
i6,148
i6,851
i3,398
1999
1998
Crosstown
North 9201
Industrial
i—
i835
i4,433
i1,501
i1,121
i5,648
i6,769
i3,168
1998
1999
Crosstown
North 8400
Industrial
i—
i2,079
i4,926
i3,044
i2,233
i7,816
i10,049
i4,003
1999
1999
Crosstown
North 9100
Industrial
i—
i1,079
i3,743
i999
i1,166
i4,655
i5,821
i2,591
2000
2000
Crosstown
North 9200
Industrial
i—
i1,222
i2,674
i2,690
i1,256
i5,330
i6,586
i2,262
2005
2005
Crosstown
North 7601
Industrial
i—
i2,998
i7,472
i885
i2,998
i8,357
i11,355
i3,366
2005
2005
Buena
Park, California
6280 Artesia Boulevard
Industrial
i—
i28,582
i5,010
i871
i28,582
i5,881
i34,463
i1,253
2005
2017
Carol
Stream, Illinois
Carol Stream 815
Industrial
i—
i3,037
i11,210
i1,849
i3,037
i13,059
i16,096
i6,008
2004
2003
Carol
Stream 640
Industrial
i—
i876
i3,200
i495
i876
i3,695
i4,571
i1,534
1999
2010
Carol
Stream 370
Industrial
i—
i1,319
i5,960
i1,053
i1,332
i7,000
i8,332
i2,561
2002
2010
250
Kehoe Boulevard
Industrial
i—
i1,715
i7,552
i136
i1,715
i7,688
i9,403
i2,843
2008
2011
Carol
Stream 720
Industrial
i—
i3,362
i17,759
i1,020
i4,083
i18,058
i22,141
i6,592
1999
2011
-95-
DUKE
REALTY CORPORATION AND DUKE REALTY LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Duke
Realty Corporation and Duke Realty Limited Partnership Real Estate and Accumulated Depreciation December 31, 2021 (in thousands of U.S. dollars, as applicable)
Schedule III
Initial Cost
Cost Capitalized Subsequent to Development or Acquisition
Gross Book Value at 12/31/2021
Name
Asset
Type
Encumbrances
Land
Buildings
Land/Land Imp
Bldgs/TI
Total (1)
Accum. Depr. (2)
Year Constructed/Renovated
Year Acquired
Carson, California
20915
S Wilmington Ave
Industrial
i—
i24,350
i7,934
i545
i24,350
i8,479
i32,829
i346
1996
2020
Carteret,
New Jersey
900 Federal Blvd.
Industrial
i—
i2,088
i24,712
i36
i2,088
i24,748
i26,836
i4,503
2017
2017
Chino,
California
13799 Monte Vista
Industrial
i—
i14,046
i8,236
i2,252
i14,046
i10,488
i24,534
i6,983
2013
2013
Cincinnati,
Ohio
Kenwood Commons 8230
Office
i663
i638
i35
i2,460
i638
i2,495
i3,133
i769
1986
1993
Kenwood
Commons 8280
Office
i637
i638
i275
i2,059
i638
i2,334
i2,972
i1,241
1986
1993
World
Park 5389
Industrial
i—
i963
i5,550
i1,464
i963
i7,014
i7,977
i2,616
1994
2010
World
Park 5232
Industrial
i—
i1,078
i5,074
i818
i1,077
i5,893
i6,970
i2,139
1997
2010
World
Park 5399
Industrial
i—
i739
i5,251
i896
i740
i6,146
i6,886
i2,605
1998
2010
World
Park 5265
Industrial
i—
i2,118
i11,569
i4,480
i2,118
i16,049
i18,167
i5,889
2015
2010
City
of Industry, California
825 Ajax Ave
Industrial
i—
i38,930
i27,627
i8,133
i38,930
i35,760
i74,690
i6,546
2017
2017
14508
Nelson Ave
Industrial
i—
i26,162
i25,210
i950
i26,162
i26,160
i52,322
i1,147
2010
2020
College
Park, Georgia
2929 Roosevelt Highway
Industrial
i—
i9,419
i17,205
i65
i9,419
i17,270
i26,689
i1,696
2020
2020
College
Station, Texas
Baylor College Station MOB
Medical Office
i—
i5,551
i33,770
i5,293
i5,551
i39,063
i44,614
i17,731
2013
2013
Columbus,
Ohio
RGLP Intermodal North 9224
Industrial
i—
i1,550
i19,873
i985
i1,550
i20,858
i22,408
i4,100
2016
2016
RGLP
Intermodal S 9799
Industrial
i—
i13,065
i44,159
i239
i13,065
i44,398
i57,463
i6,695
2018
2018
Coppell,
Texas
Freeport X
Industrial
i—
i2,145
i12,784
i3,624
i2,145
i16,408
i18,553
i7,325
2004
2004
Point
West 400
Industrial
i—
i10,181
i12,803
i9,041
i10,475
i21,550
i32,025
i14,092
2008
2008
Point
West 240
Industrial
i—
i6,785
i11,700
i6,299
i7,519
i17,265
i24,784
i10,965
2008
2008
Point
West 120
Industrial
i—
i3,267
i8,695
i147
i3,267
i8,842
i12,109
i4,058
2015
2015
Corona,
California
1283 Sherborn Street
Industrial
i—
i7,231
i13,575
i428
i7,231
i14,003
i21,234
i4,690
2005
2011
Cranbury,
New Jersey
311 Half Acre Road
Industrial
i—
i6,600
i14,106
i317
i6,600
i14,423
i21,023
i4,886
2004
2013
315
Half Acre Road
Industrial
i—
i14,100
i29,188
i6,998
i14,100
i36,186
i50,286
i10,481
2004
2013
-96-
DUKE
REALTY CORPORATION AND DUKE REALTY LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Duke
Realty Corporation and Duke Realty Limited Partnership Real Estate and Accumulated Depreciation December 31, 2021 (in thousands of U.S. dollars, as applicable)
Schedule III
Initial Cost
Cost Capitalized Subsequent to Development or Acquisition
Gross Book Value at 12/31/2021
Name
Asset
Type
Encumbrances
Land
Buildings
Land/Land Imp
Bldgs/TI
Total (1)
Accum. Depr. (2)
Year Constructed/Renovated
Year Acquired
Cypress, California
6450
Katella Ave
Industrial
i—
i85,984
i2,517
i—
i85,984
i2,517
i88,501
i204
2021
2021
Davenport,
Florida
Park 27 Distribution 210
Industrial
i—
i1,143
i5,052
i600
i1,198
i5,597
i6,795
i2,698
2003
2003
Park
27 Distribution 220
Industrial
i—
i4,374
i5,066
i5,850
i4,502
i10,788
i15,290
i6,664
2007
2007
Davie,
Florida
Westport Business Park 2555
Industrial
i—
i1,040
i951
i69
i1,040
i1,020
i2,060
i366
1991
2011
Westport
Business Park 2501
Industrial
i—
i943
i629
i239
i943
i868
i1,811
i401
1991
2011
Westport
Business Park 2525
Industrial
i—
i2,048
i5,774
i1,472
i2,048
i7,246
i9,294
i2,725
1991
2011
Deer
Park, Texas
801 Seaco Court
Industrial
i—
i2,331
i4,673
i627
i2,331
i5,300
i7,631
i2,240
2006
2012
Des
Moines, Washington
21202 24th Ave South
Industrial
i—
i18,720
i36,496
i43
i18,720
i36,539
i55,259
i4,946
2018
2018
21402
24th Ave South
Industrial
i—
i18,970
i31,048
i1,176
i18,970
i32,224
i51,194
i4,140
2018
2018
Duluth,
Georgia
Sugarloaf 2775
Industrial
i—
i560
i4,298
i1,185
i560
i5,483
i6,043
i2,989
1997
1999
Sugarloaf
3079
Industrial
i—
i776
i4,536
i3,482
i776
i8,018
i8,794
i4,260
1998
1999
Sugarloaf
2855
Industrial
i—
i765
i2,618
i1,906
i765
i4,524
i5,289
i2,301
1999
1999
Sugarloaf
6655
Industrial
i—
i1,651
i6,804
i879
i1,651
i7,683
i9,334
i3,591
1998
2001
2625
Pinemeadow Court
Industrial
i—
i732
i3,096
i889
i732
i3,985
i4,717
i1,389
1994
2010
2660
Pinemeadow Court
Industrial
i—
i459
i1,670
i118
i459
i1,788
i2,247
i699
1996
2010
2450
Satellite Boulevard
Industrial
i—
i473
i1,730
i414
i473
i2,144
i2,617
i886
1994
2010
DuPont,
Washington
2700 Center Drive
Industrial
i—
i34,413
i37,943
i520
i34,582
i38,294
i72,876
i16,473
2013
2013
2800
Center Drive
Industrial
i—
i21,025
i48,060
i1,794
i21,025
i49,854
i70,879
i2,420
2020
2020
2900
Center Drive
Industrial
i—
i34,692
i71,066
i34
i34,692
i71,100
i105,792
i3,872
2020
2020
2980
Center Drive
Industrial
i—
i15,956
i17,527
(i63)
i15,956
i17,464
i33,420
i861
1996
2020
Center
Drive trailer lot
Grounds
i—
i3,252
i—
i1
i3,253
i—
i3,253
i80
n/a
2020
Durham,
North Carolina
Centerpoint Raleigh 1805
Industrial
i—
i3,574
i10,339
i5,260
i3,574
i15,599
i19,173
i6,791
2000
2011
Centerpoint
Raleigh 1757
Industrial
i—
i2,607
i8,722
i125
i2,607
i8,847
i11,454
i2,990
2007
2011
Eagan,
Minnesota
Apollo 920
Industrial
i—
i866
i3,234
i2,036
i895
i5,241
i6,136
i3,178
1997
1997
Apollo
940
Industrial
i—
i474
i2,092
i784
i474
i2,876
i3,350
i1,624
2000
2000
Apollo
950
Industrial
i—
i1,432
i5,988
i127
i1,432
i6,115
i7,547
i3,333
2000
2000
2015
Silver Bell Road
Industrial
i—
i1,740
i4,180
i2,997
i1,740
i7,177
i8,917
i4,135
1999
1999
-97-
DUKE
REALTY CORPORATION AND DUKE REALTY LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Duke
Realty Corporation and Duke Realty Limited Partnership Real Estate and Accumulated Depreciation December 31, 2021 (in thousands of U.S. dollars, as applicable)
Schedule III
Initial Cost
Cost Capitalized Subsequent to Development or Acquisition
Gross Book Value at 12/31/2021
Name
Asset
Type
Encumbrances
Land
Buildings
Land/Land Imp
Bldgs/TI
Total (1)
Accum. Depr. (2)
Year Constructed/Renovated
Year Acquired
Trapp 1279
Industrial
i—
i671
i3,441
i1,054
i691
i4,475
i5,166
i2,494
1996
1998
Trapp
1245
Industrial
i—
i1,250
i5,424
i1,784
i1,250
i7,208
i8,458
i4,048
1998
1998
East
Point, Georgia
Camp Creek 2400
Industrial
i—
i296
i627
i2,267
i300
i2,890
i3,190
i1,517
1988
2001
Camp
Creek 2600
Industrial
i—
i364
i824
i1,702
i368
i2,522
i2,890
i1,416
1990
2001
Camp
Creek 3201
Industrial
i—
i1,937
i7,426
i2,901
i1,937
i10,327
i12,264
i4,610
2004
2004
Camp
Creek 3900
Industrial
i—
i287
i2,919
i2,191
i286
i5,111
i5,397
i2,487
2005
2005
Camp
Creek 3909
Industrial
i—
i2,403
i1,309
i18,177
i3,583
i18,306
i21,889
i6,660
2014
2006
Camp
Creek 3000
Industrial
i—
i1,163
i1,020
i1,450
i1,258
i2,375
i3,633
i1,942
2007
2007
Camp
Creek 4800
Industrial
i—
i2,476
i3,906
i2,380
i2,740
i6,022
i8,762
i3,944
2008
2008
Camp
Creek 4100
Industrial
i—
i3,130
i9,115
i553
i3,327
i9,471
i12,798
i4,292
2013
2013
Camp
Creek 3700
Industrial
i—
i1,878
i3,016
i100
i1,883
i3,111
i4,994
i1,526
2014
2014
Camp
Creek 4909
Industrial
i—
i7,807
i14,321
i3,826
i7,851
i18,103
i25,954
i6,534
2016
2016
Camp
Creek 3707
Industrial
i—
i7,282
i20,538
i3
i7,282
i20,541
i27,823
i7,128
2017
2017
Camp
Creek 4505
Industrial
i—
i4,505
i9,697
i3,708
i4,505
i13,405
i17,910
i2,991
2017
2017
Camp
Creek 4900
Industrial
i—
i3,244
i7,758
i778
i3,244
i8,536
i11,780
i1,359
2019
2019
Camp
Creek 4850
Industrial
i—
i5,428
i7,169
i197
i5,428
i7,366
i12,794
i911
2020
2020
1000
Logistics Way
Industrial
i—
i10,599
i41,030
i—
i10,599
i41,030
i51,629
i1,709
2021
2021
Camp
Creek 6200
Industrial
i—
i5,609
i15,301
i—
i5,609
i15,301
i20,910
i177
2021
2021
2000
Centre Court
Industrial
i—
i3,938
i10,297
i—
i3,938
i10,297
i14,235
i43
2021
2021
East
Rutherford, New Jersey
66-96 East Union Avenue
i—
i18,043
i3,954
i—
i18,043
i3,954
i21,997
i186
1969
2021
Easton,
Pennsylvania
33 Logistics Park 1610
Industrial
i—
i24,752
i55,500
i1,982
i24,896
i57,338
i82,234
i19,386
2016
2016
33
Logistics Park 1611
Industrial
i—
i17,979
i20,882
i1,970
i17,979
i22,852
i40,831
i8,385
2017
2017
33
Logistics Park 1620
Industrial
i—
i29,786
i33,023
i1,352
i29,791
i34,370
i64,161
i7,449
2018
2018
Elk
Grove Village, Illinois
1717 Busse Road
Industrial
i—
i3,602
i18,065
i494
i3,602
i18,559
i22,161
i6,631
2004
2011
901
Chase Avenue
Industrial
i—
i10,405
i8,961
i39
i10,405
i9,000
i19,405
i1,101
2020
2020
Ellenwood,
Georgia
2529 Old Anvil Block
Industrial
i—
i4,664
i9,265
i446
i4,664
i9,711
i14,375
i4,133
2014
2014
Fairfield,
Ohio
Union Centre Industrial 6019
Industrial
i—
i5,635
i6,576
i2,534
i5,635
i9,110
i14,745
i6,111
2008
2008
Union
Centre Industrial 5855
Industrial
i—
i3,009
i15,387
i2,063
i3,009
i17,450
i20,459
i4,745
2016
2016
Fairfield
Logistics Ctr 7940
Industrial
i—
i4,679
i8,237
i2,180
i4,689
i10,407
i15,096
i1,889
2018
2018
-98-
DUKE
REALTY CORPORATION AND DUKE REALTY LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Duke
Realty Corporation and Duke Realty Limited Partnership Real Estate and Accumulated Depreciation December 31, 2021 (in thousands of U.S. dollars, as applicable)
Schedule III
Initial Cost
Cost Capitalized Subsequent to Development or Acquisition
Gross Book Value at 12/31/2021
Name
Asset
Type
Encumbrances
Land
Buildings
Land/Land Imp
Bldgs/TI
Total (1)
Accum. Depr. (2)
Year Constructed/Renovated
Year Acquired
Flower Mound, Texas
Lakeside
Ranch 550
Industrial
i—
i4,619
i19,299
i488
i4,619
i19,787
i24,406
i6,730
2007
2011
Lakeside
Ranch 1001
Industrial
i—
i5,662
i23,061
i2,317
i5,662
i25,378
i31,040
i3,724
2019
2019
Lakeside
Ranch 350
Industrial
i—
i3,665
i10,105
i4,312
i3,665
i14,417
i18,082
i1,452
2019
2019
Fontana,
California
14970 Jurupa Ave
Grounds
i—
i17,306
i—
i—
i17,306
i—
i17,306
i1,158
n/a
2016
7953
Cherry Ave
Industrial
i—
i6,704
i12,521
i824
i6,704
i13,345
i20,049
i3,305
2017
2017
9988
Redwood Ave
Industrial
i—
i7,755
i16,326
i695
i7,755
i17,021
i24,776
i4,692
2016
2017
11250
Poplar Ave
Industrial
i—
i18,138
i33,586
i—
i18,138
i33,586
i51,724
i8,206
2016
2017
16171
Santa Ana Ave
Industrial
i—
i13,681
i13,331
i112
i13,681
i13,443
i27,124
i2,377
2018
2018
Fort
Lauderdale, Florida
Interstate 95 2200
Industrial
i—
i9,332
i13,401
i2,123
i9,332
i15,524
i24,856
i3,319
2017
2017
Interstate
95 2100
Industrial
i—
i10,948
i18,681
i—
i10,948
i18,681
i29,629
i3,513
2017
2017
Fort
Worth, Texas
Riverpark 3300
Industrial
i—
i1,673
i10,633
i856
i1,674
i11,488
i13,162
i5,016
2007
2011
Franklin,
Tennessee
Aspen Grove Business 277
Industrial
i—
i936
i2,919
i3,954
i936
i6,873
i7,809
i3,852
1996
1999
Aspen
Grove Business 320
Industrial
i—
i1,151
i5,824
i1,628
i1,151
i7,452
i8,603
i4,065
1996
1999
Aspen
Grove Business 305
Industrial
i—
i970
i4,677
i1,300
i970
i5,977
i6,947
i3,245
1998
1999
Aspen
Grove Business 400
Industrial
i—
i492
i1,677
i1,218
i492
i2,895
i3,387
i1,298
2002
2002
Brentwood
South Business 119
Industrial
i—
i569
i1,063
i1,625
i569
i2,688
i3,257
i1,485
1990
1999
Brentwood
South Business 121
Industrial
i—
i445
i1,563
i614
i445
i2,177
i2,622
i1,124
1990
1999
Brentwood
South Business 123
Industrial
i—
i489
i962
i1,347
i489
i2,309
i2,798
i1,391
1990
1999
Franklin
Park, Illinois
11501 West Irving Park Road
Industrial
i—
i3,900
i2,702
i1,835
i3,900
i4,537
i8,437
i2,321
2007
2007
Fremont,
California
48401 Fremont Blvd
i—
i33,621
i19,407
i—
i33,621
i19,407
i53,028
i708
2021
2021
Fullerton,
California
500 Burning Tree Rd
Industrial
i—
i7,336
i4,435
i42
i7,336
i4,477
i11,813
i1,269
1991
2018
700
Burning Tree Rd
Industrial
i—
i5,001
i4,915
i—
i5,001
i4,915
i9,916
i869
1991
2018
Garner,
North Carolina
Greenfield North 600
Industrial
i—
i519
i2,448
i536
i520
i2,983
i3,503
i1,224
2006
2011
-99-
DUKE
REALTY CORPORATION AND DUKE REALTY LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Duke
Realty Corporation and Duke Realty Limited Partnership Real Estate and Accumulated Depreciation December 31, 2021 (in thousands of U.S. dollars, as applicable)
Schedule III
Initial Cost
Cost Capitalized Subsequent to Development or Acquisition
Gross Book Value at 12/31/2021
Name
Asset
Type
Encumbrances
Land
Buildings
Land/Land Imp
Bldgs/TI
Total (1)
Accum. Depr. (2)
Year Constructed/Renovated
Year Acquired
Greenfield North 700
Industrial
i—
i407
i2,054
i295
i408
i2,348
i2,756
i919
2007
2011
Greenfield
North 800
Industrial
i—
i381
i5,772
i858
i383
i6,628
i7,011
i2,232
2004
2011
Greenfield
North 900
Industrial
i—
i367
i5,792
i1,764
i370
i7,553
i7,923
i2,746
2007
2011
Greenfield
North 1000
Industrial
i—
i1,897
i6,026
i96
i1,979
i6,040
i8,019
i2,323
2016
2016
Greenfield
North 1001
Industrial
i—
i2,517
i5,494
i2,523
i2,610
i7,924
i10,534
i2,462
2017
2017
N.
Greenfield Pkwy
Grounds
i—
i189
i222
i10
i189
i232
i421
i259
n/a
2015
Greenfield
North 1100
Industrial
i—
i1,870
i5,623
(i1)
i1,870
i5,622
i7,492
i514
2020
2020
Greenfield
North 1201
Industrial
i—
i3,462
i6,867
i3,292
i3,462
i10,159
i13,621
i967
2020
2020
Greenfield
North 1300
Industrial
i—
i6,112
i—
i—
i6,112
i—
i6,112
i217
2021
2021
Geneva,
Illinois
1800 Averill Road
Industrial
i—
i3,189
i11,582
i7,640
i4,778
i17,633
i22,411
i6,317
2013
2011
Gibsonton,
Florida
Tampa Regional Ind Park 13111
Industrial
i—
i10,547
i8,662
i2,011
i10,547
i10,673
i21,220
i3,515
2017
2017
Tampa
Regional Ind Park 13040
Industrial
i—
i13,184
i13,475
i2,987
i13,184
i16,462
i29,646
i3,468
2018
2018
Glendale
Heights, Illinois
990 North Avenue
Industrial
i—
i12,144
i5,933
i3,854
i12,324
i9,607
i21,931
i1,850
2018
2018
Grand
Prairie, Texas
Grand Lakes 4003
Industrial
i—
i3,206
i9,124
i14,038
i4,361
i22,007
i26,368
i6,487
2017
2006
Grand
Lakes 3953
Industrial
i—
i11,853
i11,851
i13,674
i11,853
i25,525
i37,378
i16,448
2008
2008
1803
W. Pioneer Parkway
Industrial
i—
i3,158
i15,389
i97
i3,158
i15,486
i18,644
i5,203
2008
2011
Grand
Lakes 4053
Industrial
i—
i2,468
i6,599
i1,242
i2,468
i7,841
i10,309
i1,656
2018
2018
Groveport,
Ohio
Groveport Commerce Center 6200
Industrial
i—
i1,049
i5,123
i2,816
i1,049
i7,939
i8,988
i4,685
1999
1999
Groveport
Commerce Center 6300
Industrial
i—
i510
i2,395
i2,321
i510
i4,716
i5,226
i2,507
2000
2000
Groveport
Commerce Center 6295
Industrial
i—
i435
i5,435
i2,160
i435
i7,595
i8,030
i3,983
2000
2000
Groveport
Commerce Center 6405
Industrial
i—
i1,207
i10,322
i992
i1,207
i11,314
i12,521
i4,780
2005
2005
RGLP
North 2842
Industrial
i—
i5,680
i22,366
i843
i5,680
i23,209
i28,889
i6,905
2008
2010
Hebron,
Kentucky
Hebron 2305
Industrial
i—
i3,789
i10,797
i18,591
i3,789
i29,388
i33,177
i20,695
2006
2006
Hebron
2285
Industrial
i—
i6,790
i6,730
i5,138
i6,813
i11,845
i18,658
i8,333
2007
2007
Skyport
2350
Industrial
i—
i898
i5,777
i1,423
i1,428
i6,670
i8,098
i2,415
1997
2010
Skyport
2250
Industrial
i—
i1,190
i8,680
i1,714
i1,393
i10,191
i11,584
i3,562
1999
2010
Skyport
2245
Industrial
i—
i1,714
i8,305
i1,167
i1,714
i9,472
i11,186
i3,637
2000
2010
Skyport
2265
Industrial
i—
i1,153
i6,038
i846
i1,153
i6,884
i8,037
i2,783
2006
2010
Southpark
1990
Industrial
i—
i366
i7,701
i2
i366
i7,703
i8,069
i1,373
2016
2016
Hialeah,
Florida
Countyline Corporate Park 3740
Industrial
i—
i18,934
i11,560
i45
i18,934
i11,605
i30,539
i3,331
2018
2018
-100-
DUKE
REALTY CORPORATION AND DUKE REALTY LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Duke
Realty Corporation and Duke Realty Limited Partnership Real Estate and Accumulated Depreciation December 31, 2021 (in thousands of U.S. dollars, as applicable)
Schedule III
Initial Cost
Cost Capitalized Subsequent to Development or Acquisition
Gross Book Value at 12/31/2021
Name
Asset
Type
Encumbrances
Land
Buildings
Land/Land Imp
Bldgs/TI
Total (1)
Accum. Depr. (2)
Year Constructed/Renovated
Year Acquired
Countyline Corporate Park 3780
Industrial
i—
i21,445
i22,144
i166
i21,445
i22,310
i43,755
i4,379
2018
2018
Countyline
Corporate Park 3760
Industrial
i—
i32,802
i52,633
i153
i32,802
i52,786
i85,588
i8,949
2018
2018
Countyline
Corporate Park 3840
Industrial
i—
i15,906
i14,953
i266
i15,906
i15,219
i31,125
i3,202
2018
2018
Countyline
Corporate Park 3850
Industrial
i—
i18,270
i17,567
i179
i18,270
i17,746
i36,016
i2,549
2019
2019
Countyline
Corporate Park 3870
Industrial
i—
i17,605
i17,068
i91
i17,605
i17,159
i34,764
i2,408
2019
2019
Hialeah
Gardens, Florida
Miami Ind Logistics Ctr 15002
Industrial
i—
i10,671
i14,071
i1,828
i10,671
i15,899
i26,570
i4,130
2017
2017
Miami
Ind Logistics Ctr 14802
Industrial
i—
i10,800
i14,236
i3,635
i10,800
i17,871
i28,671
i4,574
2017
2017
Miami
Ind Logistics Ctr 10701
Industrial
i—
i13,048
i17,204
i2,366
i13,048
i19,570
i32,618
i5,432
2017
2017
Hopkins,
Minnesota
Cornerstone 401
Industrial
i—
i1,454
i7,623
i2,462
i1,454
i10,085
i11,539
i6,062
1996
1997
Houston,
Texas
Point North 8210
Industrial
i—
i3,125
i2,178
i2,293
i3,125
i4,471
i7,596
i3,373
2008
2008
Point
North 8120
Industrial
i—
i4,210
i2,108
i4,616
i4,581
i6,353
i10,934
i3,266
2013
2013
Point
North 8111
Industrial
i—
i3,957
i15,093
i642
i3,957
i15,735
i19,692
i5,631
2014
2014
Point
North 8411
Industrial
i—
i5,333
i6,946
i1,271
i5,333
i8,217
i13,550
i3,246
2015
2015
Westland
8323
Industrial
i—
i4,183
i2,574
i3,675
i4,417
i6,015
i10,432
i4,591
2008
2008
Westland
13788
Industrial
i—
i3,246
i8,338
i989
i3,246
i9,327
i12,573
i5,314
2011
2011
Gateway
Northwest 20710
Industrial
i—
i7,204
i8,028
i4,167
i7,204
i12,195
i19,399
i5,217
2014
2014
Gateway
Northwest 20702
Industrial
i—
i2,981
i3,122
i1,173
i2,981
i4,295
i7,276
i1,896
2014
2014
Gateway
Northwest 20502
Industrial
i—
i2,987
i5,342
i21
i2,987
i5,363
i8,350
i2,206
2016
2016
22008
N Berwick Drive
Industrial
i—
i2,981
i4,949
i905
i2,981
i5,854
i8,835
i1,611
2002
2015
Gateway
Northwest 20510
Industrial
i—
i6,787
i11,501
i792
i6,787
i12,293
i19,080
i3,098
2018
2018
Point
North 8221
Industrial
i—
i6,503
i10,357
i1,441
i6,503
i11,798
i18,301
i2,117
2019
2019
Huntley,
Illinois
14100 Weber Drive
Industrial
i—
i7,539
i34,069
i78
i7,539
i34,147
i41,686
i8,068
2015
2015
Hutchins,
Texas
801 Wintergreen Road
Industrial
i—
i2,288
i9,115
i1,482
i2,288
i10,597
i12,885
i3,926
2006
2006
Prime
Pointe 1005
Industrial
i—
i5,865
i19,420
i59
i5,865
i19,479
i25,344
i5,340
2016
2016
Prime
Pointe 1015
Industrial
i—
i8,356
i16,319
i2,257
i8,170
i18,762
i26,932
i3,704
2018
2018
Indianapolis,
Indiana
Park 100 5550
Industrial
i—
i1,171
i12,611
i678
i1,424
i13,036
i14,460
i8,704
1997
1995
Park
100 Bldg 121 Land Lease
Grounds
i—
i3
i—
i—
i3
i—
i3
i—
n/a
2003
West
79th St. Parking Lot LL
Grounds
i—
i164
i—
i—
i164
i—
i164
i—
n/a
2006
North
Airport Park 7750
Industrial
i—
i1,620
i4,279
i810
i1,620
i5,089
i6,709
i2,168
1997
2010
Park
100 5010
Industrial
i—
i621
i1,687
i568
i621
i2,255
i2,876
i1,144
1984
2010
Park
100 5134
Industrial
i—
i578
i1,904
i299
i578
i2,203
i2,781
i867
1984
2010
-101-
DUKE
REALTY CORPORATION AND DUKE REALTY LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Duke
Realty Corporation and Duke Realty Limited Partnership Real Estate and Accumulated Depreciation December 31, 2021 (in thousands of U.S. dollars, as applicable)
Schedule III
Initial Cost
Cost Capitalized Subsequent to Development or Acquisition
Gross Book Value at 12/31/2021
Name
Asset
Type
Encumbrances
Land
Buildings
Land/Land Imp
Bldgs/TI
Total (1)
Accum. Depr. (2)
Year Constructed/Renovated
Year Acquired
Park 100 5302
Industrial
i—
i384
i998
i325
i384
i1,323
i1,707
i604
1989
2010
Park
100 5303
Industrial
i—
i384
i1,515
i348
i384
i1,863
i2,247
i772
1989
2010
Park
100 7225
Industrial
i—
i1,037
i13,332
i998
i1,037
i14,330
i15,367
i5,667
1996
2010
Park
100 4925
Industrial
i—
i1,152
i8,569
i2,319
i1,152
i10,888
i12,040
i4,471
2000
2010
8711
North River Crossing Blvd
HQ/Core Portfolio
i17,387
i1,211
i24,259
i70
i1,211
i24,329
i25,540
i2,108
2020
2020
Katy,
Texas
3900 Peek Road
Industrial
i—
i8,584
i14,385
i4,645
i8,584
i19,030
i27,614
i1,351
2020
2020
Kent,
Washington
21214 66th Ave South
Industrial
i—
i3,813
i9,767
i—
i3,813
i9,767
i13,580
i662
2016
2020
Kutztown,
Pennsylvania
West Hills 9645
Industrial
i—
i15,340
i47,981
i623
i15,340
i48,604
i63,944
i16,192
2014
2014
West
Hills 9677
Industrial
i—
i5,218
i13,029
i68
i5,218
i13,097
i18,315
i4,482
2015
2015
La
Mirada, California
16501 Trojan Way
Industrial
i—
i23,503
i30,945
i225
i23,503
i31,170
i54,673
i11,572
2002
2012
16301
Trojan Way
Industrial
i—
i39,645
i22,164
i45
i39,645
i22,209
i61,854
i3,615
2018
2018
Lancaster,
Texas
Lancaster 2820
Industrial
i—
i9,786
i22,270
i8
i9,786
i22,278
i32,064
i4,953
2018
2018
LaPorte,
Texas
Bayport Container Lot
Grounds
i—
i3,334
i—
i1,041
i4,375
i—
i4,375
i—
n/a
2010
Lathrop,
California
16825 Murphy Parkway
Industrial
i—
i10,121
i20,959
i—
i10,121
i20,959
i31,080
i—
2021
2021
Lawrenceville,
Georgia
175 Alcovy Industrial Road
Industrial
i—
i1,480
i2,935
i45
i1,487
i2,973
i4,460
i1,268
2004
2004
Lebanon,
Indiana
Lebanon Park 185
Industrial
i—
i177
i8,664
i1,554
i177
i10,218
i10,395
i6,116
2000
1997
Lebanon
Park 322
Industrial
i—
i340
i6,230
i1,479
i340
i7,709
i8,049
i4,360
1999
1999
Lebanon
Park 500
Industrial
i—
i816
i10,741
i2,471
i815
i13,213
i14,028
i5,821
2005
2005
Lebanon
Park 210
Industrial
i—
i156
i3,427
i109
i156
i3,536
i3,692
i1,379
1996
2010
Lebanon
Park 311
Industrial
i—
i349
i7,604
i767
i350
i8,370
i8,720
i3,380
1998
2010
Lebanon,
Tennessee
Park 840 West 14840
Industrial
i—
i2,367
i8,449
i4,907
i2,367
i13,356
i15,723
i4,897
2006
2006
Park
840 East 1009
Industrial
i—
i7,731
i12,462
i1,782
i7,852
i14,123
i21,975
i7,216
2013
2013
Linden,
New Jersey
Legacy Commerce Center 801
Industrial
i—
i22,134
i23,645
i2,198
i22,134
i25,843
i47,977
i6,905
2014
2014
-102-
DUKE
REALTY CORPORATION AND DUKE REALTY LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Duke
Realty Corporation and Duke Realty Limited Partnership Real Estate and Accumulated Depreciation December 31, 2021 (in thousands of U.S. dollars, as applicable)
Schedule III
Initial Cost
Cost Capitalized Subsequent to Development or Acquisition
Gross Book Value at 12/31/2021
Name
Asset
Type
Encumbrances
Land
Buildings
Land/Land Imp
Bldgs/TI
Total (1)
Accum. Depr. (2)
Year Constructed/Renovated
Year Acquired
Legacy Commerce Center 301
Industrial
i—
i6,933
i8,575
i335
i6,933
i8,910
i15,843
i2,845
2015
2015
Legacy
Commerce Center 901
Industrial
i—
i25,935
i19,806
i2,311
i25,937
i22,115
i48,052
i6,802
2016
2016
Lithia
Springs, Georgia
2601 Skyview Drive
Industrial
i—
i4,282
i9,534
i58
i4,282
i9,592
i13,874
i2,816
2016
2017
Lockport,
Illinois
Lockport 16328
Industrial
i—
i3,339
i17,446
i460
i3,339
i17,906
i21,245
i3,659
2016
2017
Lockport
16410
Industrial
i—
i2,677
i16,117
i285
i2,677
i16,402
i19,079
i3,249
2016
2017
Lockport
16508
Industrial
i—
i4,520
i17,472
i2,616
i4,520
i20,088
i24,608
i4,362
2017
2017
Lockbourne,
Ohio
Creekside 2120
Industrial
i—
i2,868
i15,406
i1,031
i2,868
i16,437
i19,305
i6,312
2008
2012
Creekside
4555
Industrial
i—
i1,947
i11,453
i294
i1,947
i11,747
i13,694
i4,339
2005
2012
Lodi,
New Jersey
65 Industrial Road
Industrial
i—
i20,063
i899
i40
i20,063
i939
i21,002
i106
1965
2020
Logan
Township, New Jersey
1130 Commerce Boulevard
Industrial
i—
i3,770
i18,699
i1,158
i3,770
i19,857
i23,627
i6,240
2002
2013
Long
Beach, California
3700 Cover Street
Industrial
i—
i7,280
i6,954
i—
i7,280
i6,954
i14,234
i3,464
2012
2013
189
W Victoria St
Industrial
i—
i16,905
i2,373
i—
i16,905
i2,373
i19,278
i—
1979
2021
Los
Angeles, California
13344 S Main Street
Industrial
i—
i39,678
i23,978
i—
i39,678
i23,978
i63,656
i403
2021
2021
Lynwood,
California
2700 East Imperial Highway
Industrial
i—
i15,230
i17,865
i56
i15,230
i17,921
i33,151
i6,338
1999
2011
11600
Alameda Street
Industrial
i—
i10,705
i10,979
i1,949
i10,958
i12,675
i23,633
i2,503
2017
2017
Manteca,
California
600 Spreckels Avenue
Industrial
i—
i4,851
i18,985
i416
i4,851
i19,401
i24,252
i7,117
1999
2012
Maple
Grove, Minnesota
Arbor Lakes 10500
Industrial
i—
i4,803
i9,891
i4,090
i4,912
i13,872
i18,784
i1,975
2018
2018
Arbor
Lakes 10501
Industrial
i—
i5,363
i17,713
i85
i5,363
i17,798
i23,161
i2,727
2019
2019
Park
81 10750
Industrial
i—
i3,971
i9,262
i1
i3,971
i9,263
i13,234
i1,143
2019
2019
McDonough,
Georgia
Liberty Distribution 120
Industrial
i—
i615
i8,117
i733
i615
i8,850
i9,465
i4,925
1997
1999
Liberty
Distribution 250
Industrial
i—
i2,273
i10,910
i7,946
i3,416
i17,713
i21,129
i8,521
2001
2001
-103-
DUKE
REALTY CORPORATION AND DUKE REALTY LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Duke
Realty Corporation and Duke Realty Limited Partnership Real Estate and Accumulated Depreciation December 31, 2021 (in thousands of U.S. dollars, as applicable)
Schedule III
Initial Cost
Cost Capitalized Subsequent to Development or Acquisition
Gross Book Value at 12/31/2021
Name
Asset
Type
Encumbrances
Land
Buildings
Land/Land Imp
Bldgs/TI
Total (1)
Accum. Depr. (2)
Year Constructed/Renovated
Year Acquired
Mechanicsburg,
Pennsylvania
500 Independence Avenue
Industrial
i—
i4,494
i15,007
i883
i4,499
i15,885
i20,384
i5,099
2008
2013
Medley,
Florida
Miami 27 Business Park 10300
Industrial
i—
i34,758
i16,913
i—
i34,758
i16,913
i51,671
i298
2021
2021
Miami
27 Business Park 10310
Industrial
i—
i15,275
i11,412
i—
i15,275
i11,412
i26,687
i255
2021
2021
Melrose
Park, Illinois
1600 North 25th Avenue
Industrial
i—
i5,907
i17,516
i299
i5,907
i17,815
i23,722
i7,744
2000
2010
Miami,
Florida
9601 NW 112 Avenue
Industrial
i—
i11,626
i14,651
i8
i11,626
i14,659
i26,285
i5,599
2003
2013
Minooka,
Illinois
Midpoint Distribution 801
Industrial
i—
i6,282
i30,802
i627
i6,282
i31,429
i37,711
i9,838
2008
2013
Modesto,
California
1000 Oates Court
Industrial
i—
i10,115
i16,944
i428
i10,115
i17,372
i27,487
i8,440
2002
2012
Monroe
Twp., New Jersey
773 Cranbury South River Road
Industrial
i—
i3,001
i36,527
i199
i3,001
i36,726
i39,727
i7,609
2016
2017
Moreno
Valley, California
17791 Perris Boulevard
Industrial
i—
i67,806
i74,531
i38
i67,806
i74,569
i142,375
i14,331
2018
2017
15810
Heacock Street
Industrial
i—
i9,727
i18,882
i2,770
i9,727
i21,652
i31,379
i3,389
2017
2017
24975
Nandina Ave
Industrial
i—
i13,322
i17,214
i214
i13,322
i17,428
i30,750
i2,172
2019
2019
24960
San Michele
Industrial
i—
i8,336
i13,699
i—
i8,336
i13,699
i22,035
i2,430
2019
2019
Morgans
Point, Texas
Barbours Cut 1200
Industrial
i—
i889
i7,140
i90
i889
i7,230
i8,119
i2,661
2004
2010
Barbours
Cut 1000
Industrial
i—
i868
i7,311
i168
i868
i7,479
i8,347
i2,756
2005
2010
Morrisville,
North Carolina
Perimeter Park 3000
Industrial
i—
i482
i1,982
i1,688
i491
i3,661
i4,152
i2,018
1989
1999
Perimeter
Park 2900
Industrial
i—
i235
i1,314
i1,644
i241
i2,952
i3,193
i1,662
1990
1999
Perimeter
Park 2800
Industrial
i—
i777
i4,151
i1,511
i791
i5,648
i6,439
i3,039
1992
1999
Perimeter
Park 2700
Industrial
i—
i662
i1,081
i2,270
i662
i3,351
i4,013
i1,761
2001
2001
Woodlake
100
Industrial
i—
i633
i3,183
i2,080
i1,132
i4,764
i5,896
i2,824
1994
1999
Woodlake
101
Industrial
i—
i615
i3,868
i530
i615
i4,398
i5,013
i2,411
1997
1999
Woodlake
200
Industrial
i—
i357
i3,688
i932
i357
i4,620
i4,977
i2,539
1999
1999
Woodlake
501
Industrial
i—
i640
i5,477
i1,032
i640
i6,509
i7,149
i3,283
1999
1999
Woodlake
400
Industrial
i—
i390
i1,055
i443
i390
i1,498
i1,888
i685
2004
2004
-104-
DUKE
REALTY CORPORATION AND DUKE REALTY LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Duke
Realty Corporation and Duke Realty Limited Partnership Real Estate and Accumulated Depreciation December 31, 2021 (in thousands of U.S. dollars, as applicable)
Schedule III
Initial Cost
Cost Capitalized Subsequent to Development or Acquisition
Gross Book Value at 12/31/2021
Name
Asset
Type
Encumbrances
Land
Buildings
Land/Land Imp
Bldgs/TI
Total (1)
Accum. Depr. (2)
Year Constructed/Renovated
Year Acquired
Myerstown, Pennsylvania
Central
Logistics Park 100
Industrial
i—
i16,936
i29,564
i83
i16,936
i29,647
i46,583
i2,742
2020
2020
Central
Logistics Park 60
Industrial
i—
i16,058
i26,546
i—
i16,058
i26,546
i42,604
i807
2021
2021
Naperville,
Illinois
1835 W. Jefferson
Industrial
i—
i2,209
i7,921
i1,651
i2,213
i9,568
i11,781
i4,182
2005
2003
175
Ambassador Drive
Industrial
i—
i3,822
i11,252
i11
i3,822
i11,263
i15,085
i4,540
2006
2010
1860
West Jefferson
Industrial
i—
i7,016
i35,581
i1,113
i7,016
i36,694
i43,710
i16,272
2000
2012
Nashville,
Tennessee
Airpark East 800
Industrial
i—
i1,564
i2,129
i1,985
i1,564
i4,114
i5,678
i1,814
2002
2002
Nashville
Business 3300
Industrial
i—
i936
i4,773
i1,914
i936
i6,687
i7,623
i3,822
1997
1999
Nashville
Business 3438
Industrial
i—
i3,048
i8,165
i2,221
i3,048
i10,386
i13,434
i4,758
2005
2005
Four-Forty
Business 700
Industrial
i—
i938
i6,354
i706
i938
i7,060
i7,998
i4,036
1997
1999
Four-Forty
Business 684
Industrial
i—
i1,812
i6,561
i2,207
i1,812
i8,768
i10,580
i4,923
1998
1999
Four-Forty
Business 782
Industrial
i—
i1,522
i4,820
i1,796
i1,522
i6,616
i8,138
i3,705
1997
1999
Four-Forty
Business 784
Industrial
i—
i471
i2,153
i1,698
i471
i3,851
i4,322
i2,404
1999
1999
Four-Forty
Business 701
Industrial
i—
i997
i4,763
i107
i997
i4,870
i5,867
i1,838
1996
2010
Newark,
New Jersey
429 Delancy Street
Industrial
i—
i60,393
i85,359
i959
i60,486
i86,225
i146,711
i8,090
2019
2019
740-768
Doremus Avenue
Grounds
i—
i106,552
i—
i—
i106,552
i—
i106,552
i—
n/a
2021
Northlake,
Illinois
Northlake Distribution 635
Industrial
i—
i5,721
i9,008
i1,574
i5,721
i10,582
i16,303
i4,991
2002
2002
Northlake
Distribution 599
Industrial
i—
i2,823
i5,685
i3,400
i2,823
i9,085
i11,908
i2,988
2014
2006
200
Champion Way
Industrial
i—
i3,554
i11,528
i832
i3,554
i12,360
i15,914
i4,576
1997
2011
Oakland,
California
1905 Dennison Street
Industrial
i15,063
i12,118
i20,518
i2
i12,118
i20,520
i32,638
i1,131
1956
2020
955
Kennedy Street
Industrial
i9,519
i13,053
i9,764
i—
i13,053
i9,764
i22,817
i736
1966
2020
Ontario,
California
1656 Bon View
Industrial
i—
i9,551
i250
i—
i9,551
i250
i9,801
i23
1991
2021
2151
S Vintage Ave
Industrial
i—
i105,589
i82,630
i—
i105,589
i82,630
i188,219
i1,828
1991
2021
Orange,
California
210 W Baywood Ave
Industrial
i—
i5,066
i4,515
i1,816
i5,066
i6,331
i11,397
i1,049
1989
2018
Orlando,
Florida
2502 Lake Orange
Industrial
i—
i2,331
i3,235
i319
i2,331
i3,554
i5,885
i1,698
2003
2003
-105-
DUKE
REALTY CORPORATION AND DUKE REALTY LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Duke
Realty Corporation and Duke Realty Limited Partnership Real Estate and Accumulated Depreciation December 31, 2021 (in thousands of U.S. dollars, as applicable)
Schedule III
Initial Cost
Cost Capitalized Subsequent to Development or Acquisition
Gross Book Value at 12/31/2021
Name
Asset
Type
Encumbrances
Land
Buildings
Land/Land Imp
Bldgs/TI
Total (1)
Accum. Depr. (2)
Year Constructed/Renovated
Year Acquired
Parksouth Distribution 2500
Industrial
i—
i565
i4,360
i1,714
i570
i6,069
i6,639
i3,287
1996
1999
Parksouth
Distribution 2490
Industrial
i—
i493
i4,170
i654
i498
i4,819
i5,317
i2,764
1997
1999
Parksouth
Distribution 2491
Industrial
i—
i593
i3,150
i1,963
i597
i5,109
i5,706
i2,719
1998
1999
Parksouth
Distribution 9600
Industrial
i—
i649
i4,111
i1,128
i653
i5,235
i5,888
i3,091
1997
1999
Parksouth
Distribution 9550
Industrial
i—
i1,030
i4,207
i3,521
i1,035
i7,723
i8,758
i3,813
1999
1999
Parksouth
Distribution 2481
Industrial
i—
i725
i2,245
i1,567
i730
i3,807
i4,537
i2,142
2000
2000
Parksouth
Distribution 9592
Industrial
i—
i623
i1,646
i99
i623
i1,745
i2,368
i845
2003
2003
Crossroads
Business Park 301
Industrial
i—
i1,653
i2,804
i4,070
i1,653
i6,874
i8,527
i2,891
2006
2006
Crossroads
Business Park 601
Industrial
i—
i2,701
i3,571
i2,059
i2,701
i5,630
i8,331
i3,244
2007
2007
7133
Municipal Drive
Industrial
i—
i5,817
i6,820
i29
i5,817
i6,849
i12,666
i1,296
2018
2018
Otsego,
Minnesota
Gateway North 6301
Industrial
i—
i1,543
i6,515
i6,009
i2,783
i11,284
i14,067
i2,828
2017
2015
Gateway
North 6651
Industrial
i—
i3,667
i16,249
i129
i3,748
i16,297
i20,045
i4,548
2015
2015
Gateway
North 6701
Industrial
i—
i3,266
i10,996
i237
i3,374
i11,125
i14,499
i3,219
2014
2014
Gateway
North 6651
Grounds
i—
i1,521
i—
i—
i1,521
i—
i1,521
i536
n/a
2016
Pasadena,
Texas
Interport 13001
Industrial
i—
i5,715
i30,961
i781
i5,655
i31,802
i37,457
i10,451
2007
2013
Bayport
4035
Industrial
i—
i3,772
i10,255
i188
i3,772
i10,443
i14,215
i2,264
2008
2017
Bayport
4331
Industrial
i—
i7,638
i30,213
i125
i7,638
i30,338
i37,976
i6,970
2008
2017
Perris,
California
3500 Indian Avenue
Industrial
i—
i16,210
i27,759
i8,884
i18,716
i34,137
i52,853
i12,137
2015
2015
3300
Indian Avenue
Industrial
i—
i39,012
i43,280
i1,870
i38,989
i45,173
i84,162
i16,181
2017
2017
4323
Indian Ave
Industrial
i—
i20,525
i30,125
i470
i20,525
i30,595
i51,120
i4,644
2019
2019
4375
N Perris Blvd
Industrial
i—
i26,830
i69,527
i57
i26,830
i69,584
i96,414
i6,415
2020
2020
4501
Patterson Avenue
Industrial
i—
i28,211
i49,869
i2,621
i28,211
i52,490
i80,701
i5,042
2020
2020
728
W. Rider Street
Industrial
i—
i69,056
i62,459
i—
i69,056
i62,459
i131,515
i616
2021
2021
Piscataway,
New Jersey
141 Circle Drive North
Grounds
i—
i5,237
i—
i29
i5,266
i—
i5,266
i—
n/a
2020
150
Old New Brunswick Road
Industrial
i—
i52,134
i45,883
i—
i52,134
i45,883
i98,017
i1,090
2021
2021
600
Ridge Road
Industrial
i—
i102,080
i63,847
i—
i102,080
i63,847
i165,927
i114
2019
2021
Plymouth,
Minnesota
Waterford Innovation Center
Industrial
i—
i2,689
i9,897
i113
i2,689
i10,010
i12,699
i2,221
2017
2017
Pomona,
California
1589 E 9th St.
Industrial
i—
i7,386
i14,745
i652
i7,386
i15,397
i22,783
i3,552
2016
2017
-106-
DUKE
REALTY CORPORATION AND DUKE REALTY LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Duke
Realty Corporation and Duke Realty Limited Partnership Real Estate and Accumulated Depreciation December 31, 2021 (in thousands of U.S. dollars, as applicable)
Schedule III
Initial Cost
Cost Capitalized Subsequent to Development or Acquisition
Gross Book Value at 12/31/2021
Name
Asset
Type
Encumbrances
Land
Buildings
Land/Land Imp
Bldgs/TI
Total (1)
Accum. Depr. (2)
Year Constructed/Renovated
Year Acquired
468 S Humane Way
Industrial
i—
i11,959
i13,044
i—
i11,959
i13,044
i25,003
i125
2017
2021
1941
Mission Blvd
Industrial
i—
i7,405
i8,249
i—
i7,405
i8,249
i15,654
i—
2017
2021
1943
Mission Blvd
Industrial
i—
i8,364
i10,203
i—
i8,364
i10,203
i18,567
i—
2017
2021
Perth
Amboy, New Jersey
ePort 960
Industrial
i—
i14,425
i23,463
i2,014
i14,425
i25,477
i39,902
i4,674
2017
2017
ePort
980
Industrial
i—
i43,778
i87,019
i273
i43,778
i87,292
i131,070
i15,950
2017
2017
ePort
1000
Industrial
i—
i19,726
i41,229
i1,040
i19,726
i42,269
i61,995
i7,244
2017
2017
Steel
Run Logistics Ctr Bldg 1
Industrial
i—
i31,987
i23,948
i388
i32,318
i24,005
i56,323
i2,277
2020
2020
Steel
Run Logistics Ctr Bldg 2
Industrial
i—
i73,056
i68,473
i4,145
i73,974
i71,700
i145,674
i4,412
2020
2020
Plainfield,
Indiana
Plainfield 1551
Industrial
i—
i1,097
i7,772
i10,831
i1,097
i18,603
i19,700
i8,380
2015
2000
Plainfield
1581
Industrial
i—
i1,094
i7,279
i2,506
i1,094
i9,785
i10,879
i5,013
2000
2000
Plainfield
2209
Industrial
i—
i2,016
i8,717
i2,639
i2,016
i11,356
i13,372
i5,334
2002
2002
Plainfield
1390
Industrial
i—
i998
i5,817
i986
i998
i6,803
i7,801
i2,887
2004
2004
Plainfield
2425
Industrial
i—
i1,917
i10,908
i1,979
i1,918
i12,886
i14,804
i5,052
2006
2006
Home
Depot trailer parking lot
Grounds
i—
i310
i—
i—
i310
i—
i310
i—
2018
2018
AllPoints
Midwest Bldg. 1
Industrial
i—
i6,692
i51,152
i2,056
i6,692
i53,208
i59,900
i12,143
2008
2016
AllPoints
Midwest Bldg. 4
Industrial
i—
i4,111
i9,943
i22
i4,053
i10,023
i14,076
i6,293
2012
2013
AllPoints
Midwest Bldg. 10
Industrial
i—
i2,867
i22,335
i—
i2,867
i22,335
i25,202
i1,017
2018
2021
Pompano
Beach, Florida
Atlantic Business 1700
Industrial
i—
i2,743
i8,821
i1,849
i2,743
i10,670
i13,413
i4,259
2000
2010
Atlantic
Business 1800
Industrial
i—
i2,308
i8,381
i564
i2,308
i8,945
i11,253
i3,439
2001
2010
Atlantic
Business 1855
Industrial
i—
i2,395
i8,162
i234
i2,395
i8,396
i10,791
i3,107
2001
2010
Atlantic
Business 2022
Industrial
i—
i1,563
i5,885
i41
i1,563
i5,926
i7,489
i2,190
2002
2010
Atlantic
Business 1914
Industrial
i—
i1,589
i5,332
i31
i1,589
i5,363
i6,952
i1,982
2002
2010
Atlantic
Business 2003
Industrial
i—
i1,716
i5,918
i831
i1,716
i6,749
i8,465
i2,876
2002
2010
Atlantic
Business 1901
Industrial
i—
i1,729
i6,199
i381
i1,729
i6,580
i8,309
i2,397
2004
2010
Atlantic
Business 2200
Industrial
i—
i1,732
i6,012
i843
i1,732
i6,855
i8,587
i2,802
2004
2010
Atlantic
Business 2100
Industrial
i—
i1,723
i6,130
i141
i1,723
i6,271
i7,994
i2,306
2002
2010
Atlantic
Business 2201
Industrial
i—
i1,901
i4,050
i121
i1,901
i4,171
i6,072
i1,534
2005
2010
Atlantic
Business 2101
Industrial
i—
i1,790
i6,682
i122
i1,791
i6,803
i8,594
i2,479
2004
2010
Atlantic
Business 2103
Industrial
i—
i1,400
i3,628
i118
i1,401
i3,745
i5,146
i1,412
2005
2010
Copans
Business Park 1571
Industrial
i—
i1,482
i3,646
i367
i1,482
i4,013
i5,495
i1,480
1989
2010
Copans
Business Park 1521
Industrial
i—
i1,543
i3,101
i309
i1,544
i3,409
i4,953
i1,305
1989
2010
Park
Central 3250
Industrial
i—
i1,463
i1,997
i10
i1,463
i2,007
i3,470
i799
1999
2010
-107-
DUKE
REALTY CORPORATION AND DUKE REALTY LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Duke
Realty Corporation and Duke Realty Limited Partnership Real Estate and Accumulated Depreciation December 31, 2021 (in thousands of U.S. dollars, as applicable)
Schedule III
Initial Cost
Cost Capitalized Subsequent to Development or Acquisition
Gross Book Value at 12/31/2021
Name
Asset
Type
Encumbrances
Land
Buildings
Land/Land Imp
Bldgs/TI
Total (1)
Accum. Depr. (2)
Year Constructed/Renovated
Year Acquired
Park Central 3760
Industrial
i—
i2,685
i2,491
i1,682
i2,685
i4,173
i6,858
i1,647
1995
2010
Pompano
Commerce Center 2901
Industrial
i—
i2,177
i3,896
i789
i2,178
i4,684
i6,862
i1,758
2010
2010
Pompano
Commerce Center 3101
Industrial
i—
i2,905
i4,095
i571
i2,916
i4,655
i7,571
i1,805
2015
2015
Pompano
Commerce Center 2951
Industrial
i—
i2,177
i4,465
i37
i2,178
i4,501
i6,679
i1,720
2010
2010
Pompano
Commerce Center 3151
Industrial
i—
i2,897
i3,939
i121
i2,908
i4,049
i6,957
i1,369
2015
2015
Sample
95 Business Park 3101
Industrial
i—
i2,860
i6,115
i565
i2,860
i6,680
i9,540
i2,464
1999
2010
Sample
95 Business Park 3001
Industrial
i—
i2,568
i6,135
i121
i2,568
i6,256
i8,824
i2,264
1999
2011
Sample
95 Business Park 3035
Industrial
i—
i3,218
i4,288
i411
i3,218
i4,699
i7,917
i1,759
1999
2011
Sample
95 Business Park 3135
Industrial
i—
i1,463
i4,890
i858
i1,463
i5,748
i7,211
i2,441
1999
2010
Copans
Business Park 1551
Industrial
i—
i1,608
i3,146
i667
i1,609
i3,812
i5,421
i1,636
1989
2011
Copans
Business Park 1501
Industrial
i—
i1,723
i3,367
i365
i1,723
i3,732
i5,455
i1,339
1989
2011
Park
Central 1700
Industrial
i—
i3,584
i6,361
i863
i3,585
i7,223
i10,808
i2,760
1998
2011
Park
Central 2101
Industrial
i—
i2,336
i5,756
i1,135
i2,337
i6,890
i9,227
i2,736
1998
2011
Park
Central 3300
Industrial
i—
i1,417
i2,846
i434
i1,417
i3,280
i4,697
i1,309
1996
2011
Park
Central 100
Industrial
i—
i1,300
i1,992
i660
i1,300
i2,652
i3,952
i1,083
1998
2011
Park
Central 1300
Industrial
i—
i2,113
i3,021
i2,178
i2,113
i5,199
i7,312
i2,484
1997
2011
Copans
95 1731
Industrial
i—
i3,511
i5,889
i1,749
i3,518
i7,631
i11,149
i864
2019
2019
Port
Wentworth, Georgia
100 Logistics Way
Industrial
i4,019
i1,975
i11,043
i2,283
i2,005
i13,296
i15,301
i5,561
2006
2006
500
Expansion Boulevard
Industrial
i1,903
i649
i5,842
i144
i649
i5,986
i6,635
i2,202
2006
2008
400
Expansion Boulevard
Industrial
i—
i1,636
i13,186
i2,798
i1,636
i15,984
i17,620
i5,223
2007
2008
605
Expansion Boulevard
Industrial
i—
i1,615
i6,852
i5,273
i1,615
i12,125
i13,740
i2,833
2020
2008
405
Expansion Boulevard
Industrial
i—
i535
i3,192
i50
i535
i3,242
i3,777
i1,088
2008
2009
600
Expansion Boulevard
Industrial
i—
i1,248
i9,392
i33
i1,248
i9,425
i10,673
i3,139
2008
2009
602
Expansion Boulevard
Industrial
i—
i1,840
i10,981
i88
i1,859
i11,050
i12,909
i3,617
2009
2009
Raleigh,
North Carolina
Walnut Creek 540
Industrial
i—
i419
i1,651
i1,054
i419
i2,705
i3,124
i1,287
2001
2001
Walnut
Creek 4000
Industrial
i—
i456
i2,078
i492
i456
i2,570
i3,026
i1,287
2001
2001
Walnut
Creek 3080
Industrial
i—
i679
i2,766
i1,534
i679
i4,300
i4,979
i2,055
2001
2001
Walnut
Creek 3070
Industrial
i—
i913
i1,187
i1,500
i913
i2,687
i3,600
i1,198
2004
2004
Walnut
Creek 3071
Industrial
i—
i1,718
i2,746
i618
i1,718
i3,364
i5,082
i2,321
2008
2008
Rancho
Cucamonga, California
9189 Utica Ave
Industrial
i—
i5,794
i12,646
i265
i5,794
i12,911
i18,705
i3,278
2016
2017
10415
8th Street
Industrial
i—
i8,641
i9,790
i—
i8,641
i9,790
i18,431
i144
2021
2021
-108-
DUKE
REALTY CORPORATION AND DUKE REALTY LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Duke
Realty Corporation and Duke Realty Limited Partnership Real Estate and Accumulated Depreciation December 31, 2021 (in thousands of U.S. dollars, as applicable)
Schedule III
Initial Cost
Cost Capitalized Subsequent to Development or Acquisition
Gross Book Value at 12/31/2021
Name
Asset
Type
Encumbrances
Land
Buildings
Land/Land Imp
Bldgs/TI
Total (1)
Accum. Depr. (2)
Year Constructed/Renovated
Year Acquired
Rancho
Dominguez, California
18700 Laurel Park Rd
Industrial
i—
i8,080
i2,987
i456
i8,438
i3,085
i11,523
i913
1971
2017
Redlands,
California
2300 W. San Bernadino Ave
Industrial
i—
i20,031
i17,968
i1,911
i20,031
i19,879
i39,910
i8,710
2001
2013
9180
Alabama St.
Industrial
i—
i52,999
i52,226
i—
i52,999
i52,226
i105,225
i1,958
2021
2021
Richmond,
California
2041 Factory Street
Industrial
i—
i8,132
i22,266
i—
i8,132
i22,266
i30,398
i2,723
2000
2019
Romeoville,
Illinois
875 W. Crossroads Parkway
Industrial
i—
i4,113
i7,274
i1,685
i4,113
i8,959
i13,072
i3,665
2005
2005
Crossroads
1255
Industrial
i—
i2,350
i9,217
i3,090
i2,350
i12,307
i14,657
i5,250
1999
2010
Crossroads
801
Industrial
i—
i2,622
i6,184
i305
i2,622
i6,489
i9,111
i4,522
2009
2010
1341-1343
Enterprise Drive
Industrial
i—
i3,076
i12,150
i394
i3,076
i12,544
i15,620
i2,930
2015
2015
50-56
N. Paragon
Industrial
i—
i3,985
i5,433
i1,212
i3,985
i6,645
i10,630
i2,174
2017
2017
Airport
Logistics Center I
Industrial
i—
i9,133
i17,187
i5,843
i11,282
i20,881
i32,163
i2,998
2019
2019
Roseville,
Minnesota
2215 Highway 36 West
Industrial
i—
i1,132
i5,931
i1,283
i1,132
i7,214
i8,346
i2,852
1998
2011
2420
Long Lake Road
Industrial
i—
i939
i4,135
i1,078
i939
i5,213
i6,152
i1,983
2000
2011
San
Leandro, California
1919 Williams Street
Grounds
i—
i27,739
i2,038
i493
i27,739
i2,531
i30,270
i574
n/a
2019
Santa
Fe Springs, California
13215 Cambridge Street
Industrial
i—
i3,558
i10,167
i—
i3,558
i10,167
i13,725
i122
2021
2021
Savannah,
Georgia
198 Gulfstream
Industrial
i—
i475
i3,650
i956
i476
i4,605
i5,081
i1,706
1997
2006
194
Gulfstream
Industrial
i—
i358
i2,359
i285
i358
i2,644
i3,002
i1,058
1998
2006
190
Gulfstream
Industrial
i—
i599
i4,134
i372
i599
i4,506
i5,105
i1,849
1999
2006
250
Grange Road
Industrial
i—
i771
i7,776
i51
i771
i7,827
i8,598
i3,130
2002
2006
248
Grange Road
Industrial
i—
i529
i3,180
i8
i529
i3,188
i3,717
i1,278
2002
2006
318
Grange Road
Industrial
i—
i759
i4,131
i892
i759
i5,023
i5,782
i1,900
2001
2006
246
Grange Road
Industrial
i2,096
i972
i7,486
i744
i972
i8,230
i9,202
i3,123
2006
2006
163
Portside Court
Industrial
i—
i5,260
i7,746
i260
i5,260
i8,006
i13,266
i3,212
2004
2006
151
Portside Court
Industrial
i—
i840
i7,117
i1,398
i790
i8,565
i9,355
i3,298
2003
2006
175
Portside Court
Industrial
i4,206
i3,740
i13,344
i1,619
i4,229
i14,474
i18,703
i5,831
2005
2006
-109-
DUKE
REALTY CORPORATION AND DUKE REALTY LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Duke
Realty Corporation and Duke Realty Limited Partnership Real Estate and Accumulated Depreciation December 31, 2021 (in thousands of U.S. dollars, as applicable)
Schedule III
Initial Cost
Cost Capitalized Subsequent to Development or Acquisition
Gross Book Value at 12/31/2021
Name
Asset
Type
Encumbrances
Land
Buildings
Land/Land Imp
Bldgs/TI
Total (1)
Accum. Depr. (2)
Year Constructed/Renovated
Year Acquired
235 Jimmy Deloach Parkway
Industrial
i—
i934
i7,201
i1,277
i893
i8,519
i9,412
i3,529
2001
2006
239
Jimmy Deloach Parkway
Industrial
i—
i934
i6,424
i732
i934
i7,156
i8,090
i2,961
2001
2006
246
Jimmy Deloach Parkway
Industrial
i1,274
i863
i4,878
i33
i806
i4,968
i5,774
i1,999
2006
2006
200
Logistics Way
Industrial
i2,955
i878
i9,274
i1,337
i883
i10,606
i11,489
i3,513
2006
2008
2509
Dean Forest Road
Industrial
i—
i2,080
i5,987
i2,477
i2,602
i7,942
i10,544
i3,236
2008
2011
276
Jimmy Deloach Parkway
Industrial
i—
i6,772
i6,405
i327
i6,772
i6,732
i13,504
i1,211
2019
2019
Sea
Brook, Texas
Bayport Logistics 5300
Industrial
i—
i1,578
i11,361
i195
i1,577
i11,557
i13,134
i4,304
2009
2010
Bayport
Logistics 5801
Industrial
i—
i5,116
i7,663
i251
i5,116
i7,914
i13,030
i3,021
2015
2015
Shakopee,
Minnesota
3880 4th Avenue East
Industrial
i—
i1,023
i6,102
i36
i1,049
i6,112
i7,161
i2,083
2000
2011
Gateway
South 2301
Industrial
i—
i2,648
i11,898
i91
i2,647
i11,990
i14,637
i2,881
2016
2016
Gateway
South 2101
Industrial
i—
i4,273
i16,252
i90
i4,273
i16,342
i20,615
i3,406
2017
2017
Sharonville,
Ohio
Mosteller 11400
Industrial
i—
i408
i2,705
i3,773
i408
i6,478
i6,886
i3,190
1997
1997
South
Brunswick, New Jersey
10 Broadway Road
Industrial
i—
i15,168
i13,916
i1,226
i15,168
i15,142
i30,310
i4,445
2017
2017
Stafford,
Texas
10225 Mula Road
Industrial
i—
i3,502
i2,656
i3,845
i3,502
i6,501
i10,003
i3,987
2008
2008
Sterling,
Virginia
TransDulles Centre 22601
Industrial
i—
i1,700
i5,001
i602
i1,700
i5,603
i7,303
i3,022
2004
2016
TransDulles
Centre 22620
Industrial
i—
i773
i1,957
i16
i773
i1,973
i2,746
i1,063
1999
2016
TransDulles
Centre 22626
Industrial
i—
i1,544
i3,874
i321
i1,544
i4,195
i5,739
i2,198
1999
2016
TransDulles
Centre 22633
Industrial
i—
i702
i1,586
i34
i702
i1,620
i2,322
i861
2004
2016
TransDulles
Centre 22635
Industrial
i—
i1,753
i4,182
i17
i1,753
i4,199
i5,952
i2,270
1999
2016
TransDulles
Centre 22645
Industrial
i—
i1,228
i3,411
i379
i1,228
i3,790
i5,018
i1,985
2005
2016
TransDulles
Centre 22714
Industrial
i—
i3,973
i3,535
i1,251
i3,973
i4,786
i8,759
i3,045
2007
2007
TransDulles
Centre 22750
Industrial
i—
i2,068
i4,970
i357
i2,068
i5,327
i7,395
i2,802
2003
2016
TransDulles
Centre 22815
Industrial
i—
i7,685
i5,713
i414
i7,685
i6,127
i13,812
i3,634
2000
2016
TransDulles
Centre 22825
Industrial
i—
i1,758
i4,951
i305
i1,758
i5,256
i7,014
i2,761
1997
2016
TransDulles
Centre 22879
Industrial
i—
i2,828
i8,425
i399
i2,828
i8,824
i11,652
i4,648
1989
2016
TransDulles
Centre 22880
Industrial
i—
i2,311
i4,922
i10
i2,311
i4,932
i7,243
i2,785
1998
2016
TransDulles
Centre 46213
Industrial
i—
i5,912
i3,965
i462
i5,912
i4,427
i10,339
i2,105
2015
2015
Sumner,
Washington
13501 38th Street East
Industrial
i—
i16,032
i4,954
i332
i16,032
i5,286
i21,318
i5,277
2005
2007
4800
E Valley Highway
Industrial
i—
i12,567
i21,838
i—
i12,567
i21,838
i34,405
i3,707
2004
2019
-110-
DUKE
REALTY CORPORATION AND DUKE REALTY LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Duke
Realty Corporation and Duke Realty Limited Partnership Real Estate and Accumulated Depreciation December 31, 2021 (in thousands of U.S. dollars, as applicable)
Schedule III
Initial Cost
Cost Capitalized Subsequent to Development or Acquisition
Gross Book Value at 12/31/2021
Name
Asset
Type
Encumbrances
Land
Buildings
Land/Land Imp
Bldgs/TI
Total (1)
Accum. Depr. (2)
Year Constructed/Renovated
Year Acquired
1510 Puyallup Street
Industrial
i—
i12,040
i13,225
i—
i12,040
i13,225
i25,265
i175
2021
2021
Suwanee,
Georgia
Horizon Business 90
Industrial
i—
i153
i1,143
i221
i153
i1,364
i1,517
i497
2002
2010
Horizon
Business 225
Industrial
i—
i388
i2,048
i703
i389
i2,750
i3,139
i1,289
1990
2010
Horizon
Business 250
Industrial
i—
i1,381
i5,660
i1,172
i1,381
i6,832
i8,213
i2,848
1997
2010
Horizon
Business 70
Industrial
i—
i813
i3,397
i1,015
i812
i4,413
i5,225
i1,779
1998
2010
Horizon
Business 2780
Industrial
i—
i972
i5,576
i2,128
i972
i7,704
i8,676
i2,718
1997
2010
Horizon
Business 25
Industrial
i—
i615
i2,390
i2,007
i614
i4,398
i5,012
i2,008
1999
2010
Horizon
Business 2790
Industrial
i—
i780
i4,952
i—
i780
i4,952
i5,732
i1,899
2006
2010
1000
Northbrook Parkway
Industrial
i—
i643
i2,974
i729
i643
i3,703
i4,346
i1,618
1986
2010
Tampa,
Florida
Fairfield Distribution 8640
Industrial
i—
i483
i2,359
i1,080
i487
i3,435
i3,922
i1,733
1998
1999
Fairfield
Distribution 4720
Industrial
i—
i530
i4,624
i590
i534
i5,210
i5,744
i2,854
1998
1999
Fairfield
Distribution 4758
Industrial
i—
i334
i2,658
i756
i338
i3,410
i3,748
i1,792
1999
1999
Fairfield
Distribution 8600
Industrial
i—
i600
i1,185
i2,084
i604
i3,265
i3,869
i1,921
1999
1999
Fairfield
Distribution 4901
Industrial
i—
i488
i2,425
i1,136
i488
i3,561
i4,049
i1,875
2000
2000
Fairfield
Distribution 4727
Industrial
i—
i555
i3,348
i1,785
i555
i5,133
i5,688
i2,299
2001
2001
Fairfield
Distribution 4701
Industrial
i—
i394
i1,350
i2,244
i394
i3,594
i3,988
i1,509
2001
2001
Fairfield
Distribution 4661
Industrial
i—
i444
i1,640
i879
i444
i2,519
i2,963
i1,191
2004
2004
Eagle
Creek Business 8701
Industrial
i—
i1,286
i2,331
i2,702
i1,287
i5,032
i6,319
i2,407
2006
2006
Eagle
Creek Business 8651
Industrial
i—
i2,354
i1,661
i1,660
i2,354
i3,321
i5,675
i2,975
2007
2007
Eagle
Creek Business 8601
Industrial
i—
i2,332
i2,229
i892
i2,332
i3,121
i5,453
i2,596
2007
2007
Pinebrooke
Bus Center 10350
Industrial
i—
i2,457
i6,211
i393
i2,457
i6,604
i9,061
i517
2020
2020
Teterboro,
New Jersey
1 Catherine Street
Industrial
i—
i14,376
i18,788
i11
i14,376
i18,799
i33,175
i4,652
2016
2017
Tracy,
California
1400 Pescadero Avenue
Industrial
i—
i9,633
i39,644
i—
i9,633
i39,644
i49,277
i15,142
2008
2013
1124
E Pescadero Ave
Grounds
i—
i24,944
i—
i—
i24,944
i—
i24,944
i768
2021
2021
West
Chester, Ohio
World Park Union Centre 9287
Industrial
i—
i582
i827
i7,518
i582
i8,345
i8,927
i3,364
2006
2006
World
Park Union Centre 9271
Industrial
i—
i557
i5,923
i528
i557
i6,451
i7,008
i2,804
2004
2004
World
Park Union Centre 9266
Industrial
i—
i956
i5,951
i440
i956
i6,391
i7,347
i2,535
1999
2010
World
Park Union Centre 9451
Industrial
i—
i1,036
i6,053
i873
i1,036
i6,926
i7,962
i2,685
1999
2010
World
Park Union Centre 5443
Industrial
i—
i935
i4,753
i429
i935
i5,182
i6,117
i2,019
2005
2010
World
Park Union Centre 9107
Industrial
i—
i986
i5,962
i1,578
i986
i7,540
i8,526
i3,305
1999
2010
World
Park Union Centre 9245
Industrial
i—
i1,011
i5,535
i782
i1,010
i6,318
i7,328
i2,515
2001
2010
-111-
DUKE
REALTY CORPORATION AND DUKE REALTY LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Duke
Realty Corporation and Duke Realty Limited Partnership Real Estate and Accumulated Depreciation December 31, 2021 (in thousands of U.S. dollars, as applicable)
Schedule III
Initial Cost
Cost Capitalized Subsequent to Development or Acquisition
Gross Book Value at 12/31/2021
Name
Asset
Type
Encumbrances
Land
Buildings
Land/Land Imp
Bldgs/TI
Total (1)
Accum. Depr. (2)
Year Constructed/Renovated
Year Acquired
West Palm Beach, Florida
Park
of Commerce 5655
Industrial
i—
i1,417
i1,728
i310
i1,417
i2,038
i3,455
i757
2010
2010
Park
of Commerce 5720
Industrial
i—
i1,872
i3,633
i844
i2,032
i4,317
i6,349
i1,636
2010
2010
Airport
Center 1701
Industrial
i—
i2,112
i5,844
i689
i2,112
i6,533
i8,645
i2,628
2002
2010
Airport
Center 1805
Industrial
i—
i1,478
i4,445
i251
i1,479
i4,695
i6,174
i1,785
2002
2010
Airport
Center 1865
Industrial
i—
i1,300
i4,168
i773
i1,300
i4,941
i6,241
i1,843
2002
2010
Park
of Commerce #4
Grounds
i—
i5,882
i—
i—
i5,882
i—
i5,882
i—
n/a
2011
Park
of Commerce #5
Grounds
i—
i6,258
i—
i—
i6,258
i—
i6,258
i—
n/a
2011
Turnpike
Crossing 1315
Industrial
i—
i7,390
i5,391
i353
i7,390
i5,744
i13,134
i2,393
2016
2016
Turnpike
Crossing 1333
Industrial
i—
i6,255
i4,560
i975
i6,255
i5,535
i11,790
i2,439
2016
2016
Turnpike
Crossing 6747
Industrial
i—
i10,607
i7,112
i2,786
i10,607
i9,898
i20,505
i3,301
2017
2017
Turnpike
Crossing 6729
Industrial
i—
i8,576
i7,506
i723
i8,576
i8,229
i16,805
i1,902
2018
2018
Turnpike
Crossing 6711
Industrial
i—
i8,328
i7,210
i38
i8,340
i7,236
i15,576
i927
2019
2019
Turnpike
Crossing 6717
Industrial
i—
i7,849
i9,542
i1,378
i7,850
i10,919
i18,769
i947
2020
2020
Wilmer,
TX
110 Sunridge Blvd
Industrial
i—
i5,692
i18,751
i—
i5,692
i18,751
i24,443
i407
2021
2021
Wind
Gap, Pennsylvania
1380 Jacobsburg Road
Industrial
i—
i15,500
i25,247
i753
i15,500
i26,000
i41,500
i4,555
2017
2019
Wood-Ridge,
New Jersey
5 Ethel Boulevard
Industrial
i—
i18,776
i24,752
i32
i18,776
i24,784
i43,560
i3,009
2019
2019
Accum.
Depr. on Improvements of Undeveloped Land
i
i
i
i
i
i
i
i561
Eliminations
i
i
i
(i20)
(i16)
(i4)
(i20)
i9
Properties
held-for-sale
(i67,818)
(i102,867)
(i170,685)
(i36,785)
i59,722
i3,480,500
i5,473,564
i660,060
i3,435,591
i6,007,848
i9,443,439
i1,684,413
(1)The
tax basis (in thousands) of our real estate assets at iDecember 31, 2021 was approximately $i8,734,029 (unaudited) for federal income tax purposes.
(2)Depreciation
of real estate is computed using the straight-line method not to exceed i40 years for buildings and i15 years for land improvements for properties that we develop, and not to exceed i30
years for buildings and i10 years for land improvements for properties that we acquire. Tenant improvements are depreciated over shorter periods based on lease terms (generally i3 to i10
years).
-112-
DUKE REALTY CORPORATION AND DUKE REALTY LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Real
Estate Assets
Accumulated Depreciation
2021
2020
2019
2021
2020
2019
Balance at beginning of year
$
i8,768,432
$
i7,851,278
$
i7,248,346
$
i1,665,284
$
i1,487,593
$
i1,345,060
Acquisitions
i595,719
i410,003
i205,390
Construction
costs and tenant improvements
i979,367
i796,312
i635,173
Depreciation
expense
i304,935
i297,158
i272,422
Cost
of real estate sold or contributed
(i598,445)
(i203,502)
(i176,603)
(i118,072)
(i33,808)
(i68,861)
Write-off
of fully depreciated assets
(i130,949)
(i85,659)
(i61,028)
(i130,949)
(i85,659)
(i61,028)
Balance
at end of year including held-for-sale
$
i9,614,124
$
i8,768,432
$
i7,851,278
$
i1,721,198
$
i1,665,284
$
i1,487,593
Properties
held-for-sale
(i170,685)
(i72,754)
(i23,401)
(i36,785)
(i5,976)
(i7,132)
Balance
at end of year excluding held-for-sale
$
i9,443,439
$
i8,695,678
$
i7,827,877
$
i1,684,413
$
i1,659,308
$
i1,480,461
Other
real estate investments
i172,637
i49,477
i165,500
Real
estate assets
$
i9,616,076
$
i8,745,155
$
i7,993,377
See
Accompanying Notes to Independent Auditors' Report
-113-
DUKE REALTY CORPORATION AND DUKE REALTY LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Item 16. Form 10-K Summary
Not applicable.
-114-
DUKE
REALTY CORPORATION AND DUKE REALTY LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The following exhibits are filed with this Form 10-K or incorporated herein by reference to the listed document previously filed with the SEC. Previously unfiled documents are noted with an asterisk (*).
Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document
104
Cover Page Interactive Data File (embedded within the Inline XBRL document and contained in Exhibit 101)
-118-
DUKE REALTY CORPORATION
AND DUKE REALTY LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
# Represents management contract or compensatory plan or arrangement.
** The certifications attached as Exhibits 32.1, 32.2, 32.3 and 32.4 accompany this Report and are "furnished" to the Securities and Exchange Commission pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and shall not be deemed "filed" by the General Partner or the Partnership, respectively, for purposes of Section 18 of the Securities Exchange Act of 1934, as amended.
We will furnish to any security holder, upon written request, copies of any exhibit incorporated
by reference, for a fee of 15 cents per page, to cover the costs of furnishing the exhibits. Written requests should include a representation that the person making the request was the beneficial owner of securities entitled to vote at the Annual Meeting of Shareholders.
-119-
DUKE REALTY CORPORATION AND DUKE REALTY LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant
has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
DUKE REALTY CORPORATION AND DUKE REALTY LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Pursuant to the requirements of the Securities
Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
