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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(Mark One)
{X} Annual report pursuant to section 13 or 15(d) of the
Securities Exchange Act of 1934 (Fee Required) for the fiscal
year ended DECEMBER 31, 1995
or
{ } Transition report pursuant to section 13 or 15(d) of the
Securities Exchange Act of 1934 (No Fee Required) for
the transition period from ___________ to ___________
Commission file number 1-9044
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DUKE REALTY INVESTMENTS, INC.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
INDIANA 35-1740409
- ---------------------------------- ------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
8888 Keystone Crossing, Suite 1200
Indianapolis, Indiana 46240
- ---------------------------------- -------------------------------
(Address of principal executive offices) (Zip Code)
(317) 846-4700
----------------------------------------
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class: Name of each exchange on which registered:
Common Stock ($.01 par value) New York Stock Exchange
- ----------------------------------- ------------------------------------------
Securities registered pursuant to Section 12(g) of the Act: None.
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. Yes X No
----- -----
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
Regulation S-K is not contained herein, and will not be contained, to the best
of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. ( )
The aggregate market value of the voting shares of the Registrant's outstanding
shares held by non-affiliates of the Registrant is $757,799,716 based on the
last reported sale price on February 12, 1996.
The number of Common Shares outstanding as of February 12, 1996 was 24,152,979.
DOCUMENTS INCORPORATED BY REFERENCE
Part III incorporates by reference the Registrant's Proxy Statement related to
the Annual Meeting of Shareholders to be held April 25, 1996. Part IV
incorporates by reference the Registrant's Form 8-K dated August 26, 1994.
TABLE OF CONTENTS
FORM 10-K
Item No. Page(s)
- -------- -------
PART I
1. Business . . . . . . . . . . . . . . . . . . . . . . . . . . 1 - 3
2. Properties . . . . . . . . . . . . . . . . . . . . . . . . . 3 - 10
3. Legal Proceedings . . . . . . . . . . . . . . . . . . . . . 11
4. Submission of Matters to a Vote of Security Holders. . . . . 11
PART II
5. Market for the Registrant's Common Stock and Related
Security Holder Matters.. . . . . . . . . . . . . . . . . . 11
6. Selected Financial Data. . . . . . . . . . . . . . . . . . . 12
7. Management's Discussion and Analysis of Financial Condition
and Results of Operations . . . . . . . . . . . . . . . . . 12 - 20
8. Financial Statements and Supplementary Data. . . . . . . . . 20
9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure. . . . . . . . . . . . . . . . . . 20
PART III
10. Directors and Executive Officers of the Registrant . . . . . 20 - 22
11. Executive Compensation........ . . . . . . . . . . . . . . . 22
12. Security Ownership of Certain Beneficial Owners and
Management. . . . . . . . . . . . . . . . . . . . . . . . . 22
13. Certain Relationships and Related Transactions . . . . . . . 22
PART IV
14. Exhibits, Financial Statement Schedules and Reports on
Form 8-K. . . . . . . . . . . . . . . . . . . . . . . . . . 23 - 44
Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45 - 46
Exhibits
PART I
ITEM 1. BUSINESS
Duke Realty Investments, Inc. (the "Company") is a self-administered and self-
managed real estate investment trust ("REIT"). The Company began operations
upon completion of its initial public offering in February 1986. In October
1993, the Company completed an additional common stock offering and acquired
the rental real estate and service businesses of Duke Associates whose
operations began in 1972. The Company's primary business segment is the
ownership and rental of industrial, office and retail properties throughout
the Midwest. As of December 31, 1995, it owned interests in a diversified
portfolio of 215 rental properties comprising 23.5 million square feet
(including 13 properties and two expansions comprising 3.4 million square feet
under development). Substantially all of these properties are located in the
Company's primary markets of Indianapolis, Indiana; Cincinnati, and Columbus,
Ohio; Detroit, Michigan; St. Louis, Missouri and Nashville, Tennessee. In
addition to its Rental Operations, the Company through its Service Operations
provides, on a fee basis, leasing, management, construction, development and
other real estate services for approximately 9.7 million square feet of
properties owned by third-parties. See Item 7, "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and Item 8,"
Financial Statements and Supplementary Data" for financial information of these
industry segments. The Company's rental operations are conducted through Duke
Realty Limited Partnership. In addition, the Company conducts operations
through Duke Realty Services Limited Partnership and Duke Construction Limited
Partnership, in which the Company's wholly-owned subsidiary, Duke
Services, Inc., is the sole general partner. The Company has the largest
commercial real estate operations in Indianapolis and Cincinnati and is one
of the largest real estate companies in the Midwest.
The Company's corporate headquarters and executive offices are located in
Indianapolis, Indiana. In addition, the Company has six regional offices located
in Cincinnati, Ohio; Columbus, Ohio; Decatur, Illinois; Detroit, Michigan;
Nashville, Tennessee and St. Louis, Missouri. The Company had 425 employees as
of December 31, 1995.
BUSINESS STRATEGY
The Company's business objective is to increase its Funds From Operations by (i)
maintaining and increasing property occupancy and rental rates through the
aggressive management of its portfolio of existing properties; (ii) expanding
existing properties; (iii) developing and acquiring new properties; and (iv)
providing a full line of real estate services to the Company's tenants and to
third-parties. As a fully integrated commercial real estate firm, the Company
believes that its in-house leasing, management, development and construction
services and the Company's significant base of commercially zoned and
unencumbered land in existing business parks should give the Company a
competitive advantage in its future development activities.
The Company believes that the analysis of real estate opportunities and risks
can be done most effectively at regional or local levels. As a result, the
Company intends to continue its emphasis on increasing its market share and
effective rents in its primary markets within the Midwest. The Company also
expects to utilize its approximately 1,150 acres of unencumbered land and its
many business relationships with more than 2,600 commercial tenants to expand
its build-to-suit business (development projects substantially pre-leased to
a single tenant) and to pursue other development and acquisition
opportunities in its primary markets and elsewhere, in the Midwest. The
Company believes that this regional focus will allow it to assess market
supply and demand for real estate more effectively as well as to capitalize
on its strong relationships with its tenant base.
-1-
The Company's policy is to seek to develop and acquire Class A commercial
properties located in markets with high growth potential for Fortune 500
companies and other quality regional and local firms. The Company's industrial
and suburban office development focuses on business parks and mixed-use
developments suitable for development of multiple projects on a single site
where the Company can create and control the business environment. These
business parks and mixed-use developments generally include restaurants and
other amenities which the Company believes will create an atmosphere that is
particularly efficient and desirable. The Company's retail development focuses
on community, power and neighborhood centers in its existing markets. As a fully
integrated real estate company, the Company is able to arrange for or provide to
its industrial, office and retail tenants not only well located and well
maintained facilities, but also additional services such as build-to-suit
construction, tenant finish construction, expansion flexibility and advertising
and marketing services.
Consistent with its business strategy of expanding in attractive Midwestern
markets, the Company carefully analyzed the real estate investment potential of
several major Midwestern metropolitan areas. Based on this analysis, management
concluded that the St. Louis and Cleveland markets offer attractive real estate
investment returns in the industrial and suburban office markets based on the
following factors: (i) fragmented competition; (ii) strong real estate
fundamentals; and (iii) favorable economic conditions.
In 1995, the Company established a regional office in St. Louis and acquired
463,000 square feet of suburban office properties and 153 acres of land for the
future development of industrial properties. In February 1996, the Company
acquired a 782,000 square foot suburban office portfolio and the operating
personnel of an independent real estate developer and operator in Cleveland.
The Company intends to aggressively pursue the development and acquisition of
additional rental properties in both the St. Louis and Cleveland markets.
All of the Company's properties are located in areas that include competitive
properties. Such properties are generally owned by institutional investors or
other local real estate operators; however, no single competitor or small group
of competitors is dominant in the Company's markets. The supply and demand of
similar available rental properties may affect the rental rates the Company will
receive on its properties. Based upon the current occupancy rates in the Company
and competitive properties, the Company believes there will not be significant
competitive pressure to lower rental rates in the near future.
FINANCING STRATEGY
The Company seeks to maintain a well-balanced, conservative and flexible capital
structure by: (i) currently targeting a ratio of long-term debt to total market
capitalization in the range of 25% to 40%; (ii) extending and sequencing the
maturity dates of its debt; (iii) borrowing primarily at fixed rates; (iv)
generally pursuing current and future long-term debt financings and refinancings
on an unsecured basis; and (v) maintaining conservative debt service and fixed
charge coverage ratios. Management believes that these strategies have enabled
and should continue to enable the Company to access the debt and equity
capital markets for their long-term requirements such as debt refinancings
and financing development and acquisitions of additional rental properties.
In October 1993, the Company received $309.3 million of net proceeds from the
- 2 -
issuance of common stock (the "Offering"), in September 1994, the Company
received $92.1 million of net proceeds from the issuance of common stock (the
"1994 Offering"), in May 1995, the Company received $96.3 million of net
proceeds from the issuance of common stock (the "1995 Offering") and in
September 1995, the Company issued $150.0 million of unsecured debt (the "1995
Debt Offering"). Based on these offerings, the Company has demonstrated its
abilities to access the public markets as a source of capital to fund future
growth. In addition, as discussed under Item 7, "Management's Discussion and
Analysis of Financial Condition and Results of Operations," the Company has a
$150.0 million line of credit available for short-term fundings of
development and acquisition of additional rental properties.
OTHER
The Company's operations are not dependent on a single or few customers as no
single customer accounts for more than 3% of the Company's total revenue. The
Company's operations are not subject to any significant seasonal fluctuations.
The Company believes it is in compliance with environmental regulations and does
not anticipate material effects of continued compliance.
For additional information regarding the Company's 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 the Company's business segments see Item
8, "Financial Statements and Supplementary Data."
ITEM 2. PROPERTIES
The Company owns an interest in a diversified portfolio of 215 commercial
properties encompassing approximately 23.5 million net rentable square feet
located primarily in five states and approximately 1,150 acres of land for
future development. (See Notes 4 and 5 to Financial Statements, Item 8
hereof.) The properties are described on the following pages.
-3-
PERCENT
OCCUPIED AT
NAME/ OWNERSHIP COMPANY'S YEAR LAND AREA NET RENTABLE DECEMBER 31,
LOCATION INTEREST OWNERSHIP CONSTRUCTED (ACRES) AREA (SQ.FT.) 1995
- -------- --------- --------- ----------- --------- ------------- ------------
INDUSTRIAL
- ----------
INDIANAPOLIS, INDIANA
PARK 100 BUSINESS PARK
Building 38 Fee 100% 1978 1.11 6,000 100%
Building 48 Fee 50% (1) 1984 8.63 127,410 100%
Building 49 Fee 50% (1) 1982 4.55 89,600 100%
Building 50 Fee 50% (1) 1982 4.09 51,200 100%
Building 52 Fee 50% (1) 1983 2.70 34,800 100%
Building 53 Fee 50% (1) 1984 4.23 76,800 100%
Building 54 Fee 50% (1) 1984 4.42 76,800 100%
Building 55 Fee 50% (1) 1984 3.83 43,200 100%
Building 56 Fee 50% (1) 1984 15.94 300,000 100%
Building 57 Fee 50% (1) 1984 7.70 128,800 100%
Building 58 Fee 50% (1) 1984 8.03 128,800 100%
Building 59 Fee 50% (1) 1985 5.14 83,200 100%
Building 60 Fee 50% (1) 1985 4.78 83,200 100%
Building 62 Fee 50% (1) 1986 7.70 128,800 100%
Building 67 Fee 50% (1) 1987 4.23 72,350 100%
Building 68 Fee 50% (1) 1987 4.23 72,360 100%
Building 71 Fee 50% (1) 1987 9.06 193,400 100%
Building 74 Fee 10%-50% (2) 1988 12.41 257,400 100%
Building 76 Fee 10%-50% (2) 1988 5.10 81,695 100%
Building 78 Fee 10%-50% (2) 1988 21.80 512,777 100%
Building 79 Fee 100% 1988 4.47 66,000 100%
Building 80 Fee 100% 1988 4.47 66,000 100%
Building 83 Fee 100% 1989 5.34 96,000 100%
Building 84 Fee 100% 1989 5.34 96,000 100%
Building 85 Fee 10%-50% (2) 1989 9.70 180,100 100%
Building 89 Fee 10%-50% (2) 1990 11.28 311,600 100%
Building 91 Fee 10%-50% (2) 1990 7.53 144,000 80%
Building 92 Fee 10%-50% (2) 1991 4.38 45,917 100%
Building 95 Fee 100% 1993 15.23 336,000 100%
Building 96 Fee 100% 1994 27.69 553,900 100%
Building 97 Fee 100% 1994 13.38 280,800 100%
Building 98 Fee 100% 1968 37.34 508,306 100%
Building 99 Fee 50% (3) 1994 18.00 364,800 100%
Building 100 Fee 100% 1995 7.00 117,500 100%
Building 101 Fee 50% (1) 1983 4.37 45,000 86%
Building 105 Fee 50% (1) 1983 4.64 41,400 100%
Building 106 Fee 50% (1) 1978 4.64 41,400 94%
Building 107 Fee 100% 1984 3.56 58,783 97%
Building 108 Fee 50% (1) 1983 6.36 60,300 81%
Building 109 Fee 100% 1985 4.80 46,000 100%
Building 113 Fee 50% (1) 1987 6.20 72,000 100%
Building 114 Fee 50% (1) 1987 6.20 56,700 98%
Building 117 Fee 10%-50% (2) 1988 13.36 135,600 100%
Building 120 Fee 10%-50% (2) 1989 4.54 54,982 100%
Building 122 Fee 100% 1990 6.17 73,274 100%
Building 125 Fee 100% (4) 1994 13.81 195,080 100%
Building 126 Fee 100% 1984 4.04 60,100 100%
Building 127 Fee 100% 1995 6.50 93,600 100%
PARK FLETCHER
Building 2 Fee 50% (1) 1970 1.31 20,160 0%
Building 4 Fee 50% (1) 1974 1.73 23,000 100%
Building 6 Fee 50% (1) 1971 3.13 36,180 85%
Building 7 Fee 50% (1) 1974 3.00 41,900 100%
Building 8 Fee 50% (1) 1974 2.11 18,000 100%
Building 14 Fee 100% 1978 1.39 19,480 100%
Building 15 Fee 50% (1) 1979 5.74 72,800 100%
Building 16 Fee 50% (1) 1979 3.17 35,200 100%
Building 18 Fee 50% (1) 1980 5.52 43,950 100%
Building 21 Fee 50% (1) 1983 2.95 37,224 66%
Building 22 Fee 50% (1) 1983 2.96 48,635 100%
-4-
PERCENT
OCCUPIED AT
NAME/ OWNERSHIP COMPANY'S YEAR LAND AREA NET RENTABLE DECEMBER 31,
LOCATION INTEREST OWNERSHIP CONSTRUCTED (ACRES) AREA (SQ.FT.) 1995
- -------- --------- --------- ----------- --------- ------------- ------------
Building 26 Fee 50% (1) 1983 2.91 28,340 100%
Building 27 Fee 25% (1) 1985 3.01 39,178 100%
Building 28 Fee 25% (1) 1985 7.22 93,880 90%
Building 29 Fee 50% (1) 1987 7.16 92,044 83%
Building 30 Fee 50% (1) 1989 5.93 78,568 100%
Building 31 Fee 50% (1) 1990 2.62 33,029 100%
Building 32 Fee 50% (1) 1990 5.43 67,297 64%
SHADELAND STATION
Buildings 204 & 205 Fee 100% 1984 4.09 48,600 100%
HUNTER CREEK BUSINESS PARK
Building 1 Fee 10%-50% (2) 1989 5.97 86,500 100%
Building 2 Fee 10%-50% (2) 1989 8.86 202,560 87%
HILLSDALE TECHNECENTER
Building 1 Fee 50% (1) 1986 9.16 73,436 90%
Building 2 Fee 50% (1) 1986 5.50 83,600 100%
Building 3 Fee 50% (1) 1987 5.50 84,050 100%
Building 4 Fee 100% 1987 7.85 73,874 100%
Building 5 Fee 100% 1987 5.44 67,500 98%
Building 6 Fee 100% 1987 4.25 64,000 100%
Franklin Road
Business Center Fee 100% 1962, 28.00 367,065 90%
1971,
1974
Palomar Business
Center Fee 100% 1973 4.50 99,350 100%
Nampac Fee 100% 1974 6.20 83,200 100%
CARMEL, INDIANA
HAMILTON CROSSING
Building 1 Fee 100% 1989 4.70 51,825 93%
GREENWOOD, INDIANA
SOUTH PARK BUSINESS CENTER
Building 2 Fee 100% 1990 7.10 86,806 92%
CINCINNATI, OHIO
PARK 50 TECHNECENTER
Building 20 Fee 100% 1987 8.37 96,000 100%
Building 25 Fee 100% 1989 12.20 78,328 89%
GOVERNOR'S POINTE
4700 Building Fee 100% 1987 5.51 76,400 94%
4800 Building Fee 100% 1989 7.07 80,000 92%
4900 Building Fee 100% 1987 9.41 76,400 100%
WORLD PARK
Building 5 Fee 100% 1987 5.00 59,700 79%
Building 6 Fee 100% 1987 7.26 92,400 100%
Building 7 Fee 100% 1987 8.63 96,000 100%
Building 8 Fee 100% 1989 14.60 192,000 100%
Building 9 Fee 100% 1989 4.47 58,800 84%
Building 11 Fee 100% 1989 8.98 96,000 100%
Building 14 Fee 100% 1989 8.91 166,400 100%
Building 15 Fee 100% 1990 6.50 93,600 100%
Building 16 Fee 100% 1989 7.00 93,600 100%
MicroAge Fee 50% (1) 1994 15.10 304,000 100%
-5-
PERCENT
OCCUPIED AT
NAME/ OWNERSHIP COMPANY'S YEAR LAND AREA NET RENTABLE DECEMBER 31,
LOCATION INTEREST OWNERSHIP CONSTRUCTED (ACRES) AREA (SQ.FT.) 1995
- -------- --------- --------- ----------- --------- ------------- ------------
ENTERPRISE BUSINESS PARK
Building 1 Fee 100% 1990 7.52 87,400 85%
Building 2 Fee 100% 1990 7.52 84,940 97%
Building A Fee 100% 1987 2.65 20,888 100%
Building B Fee 100% 1988 2.65 34,940 95%
Building D Fee 100% 1989 5.40 60,322 100%
TRI-COUNTY BUSINESS PARK
Xetron Fee 10% (5) 1994 29.00 100,193 100%
FAIRFIELD BUSINESS CENTER
Building D Fee 100% 1990 3.23 40,223 89%
Building E Fee 100% 1990 6.07 75,600 83%
OTHER INDUSTRIAL - CINCINNATI
U.S. Post Office Building Fee 40% (6) 1992 2.60 57,886 100%
University Moving Fee 100% 1991 4.95 70,000 100%
COLUMBUS, OHIO
Pet Foods Building Fee 100% 1993 16.22 276,000 100%
MBM Building Fee 100% 1978 3.98 83,000 100%
South Pointe A Fee 100% 1995 14.06 293,824 70%
HEBRON, KENTUCKY
SOUTHPARK BUSINESS CENTER
Building 1 Fee 100% 1990 7.90 96,000 57%
Building 3 Fee 100% 1991 10.79 192,000 87%
CR Services Fee 100% 1994 22.50 214,840 100%
Redken Laboratories Fee 100% 1994 28.79 166,400 100%
LOUISVILLE, KENTUCKY
Dayco Fee 50% (1) 1995 30.00 282,539 100%
DECATUR, ILLINOIS
PARK 101 BUSINESS CENTER
Building 3 Fee 100% 1979 5.76 75,600 80%
Building 8 Fee 100% 1980 3.16 50,400 95%
NASHVILLE, TENNESSEE
HAYWOOD OAKS TECHNECENTER
Building 2 Fee 100% 1988 2.94 50,400 91%
Building 3 Fee 100% 1988 2.94 52,800 100%
Building 4 Fee 100% 1988 5.23 46,800 83%
Building 5 Fee 100% 1988 5.23 61,171 100%
Building 6 Fee 100% 1989 10.53 113,400 100%
Building 7 Fee 100% 1995 8.24 66,873 57%
Greenbriar Business Park Fee 100% 1986 10.73 134,759 96%
Keebler Building Fee 100% 1985 4.39 36,150 100%
MILWAUKEE, WISCONSIN
S.F. Music Box Building Fee 33% (7) 1993 8.90 153,600 100%
OFFICE
INDIANAPOLIS, INDIANA
PARK 100 BUSINESS PARK
Building 34 Fee 100% 1979 2.00 22,272 93%
Building 116 Fee 100% 1988 5.28 35,700 91%
Building 118 Fee 100% 1988 6.50 35,700 100%
Building 119 Fee 100% 1989 6.50 53,300 100%
CopyRite Building Fee 50% (8) 1992 3.88 48,000 100%
-6-
PERCENT
OCCUPIED AT
NAME/ OWNERSHIP COMPANY'S YEAR LAND AREA NET RENTABLE DECEMBER 31,
LOCATION INTEREST OWNERSHIP CONSTRUCTED (ACRES) AREA (SQ.FT.) 1995
- -------- --------- --------- ----------- --------- ------------- -----------
WOODFIELD AT THE CROSSING
Two Woodfield Crossing Fee 100% 1987 7.50 117,818 94%
Three Woodfield Crossing Fee 100% 1989 13.30 259,777 94%
PARKWOOD CROSSING
One Parkwood Fee 100% 1989 5.93 108,281 100%
SHADELAND STATION
7240 Shadeland Station Fee 67%(9) 1985 2.14 45,585 95%
7330 Shadeland Station Fee 100% 1988 4.50 42,619 100%
7340 Shadeland Station Fee 100% 1989 2.50 32,235 100%
7351 Shadeland Station Fee 100% 1983 2.14 27,740 98%
7369 Shadeland Station Fee 100% 1989 2.20 15,551 100%
7400 Shadeland Station Fee 100% 1990 2.80 49,544 100%
KEYSTONE AT THE CROSSING
F.C. Tucker Building (10) Fee/ Ground Lease 100% 1978 N/A 4,840 100%
3520 Commerce Crossing (11) Ground/Bldg.Lease 100% 1976 N/A 30,000 100%
8465 Keystone Fee 100% 1983 1.31 28,298 92%
CARMEL, INDIANA
CARMEL MEDICAL CENTER
Building I (12) Fee/Ground Lease 100% 1985 N/A 40,060 87%
Building II (12) Fee/Ground Lease 100% 1989 N/A 39,973 91%
GREENWOOD, INDIANA
SOUTH PARK BUSINESS CENTER
Building 1 Fee 100% 1989 5.40 39,715 100%
Building 3 Fee 100% 1990 3.25 35,900 95%
St. Francis Medical Building(13) Fee/Ground Lease 100% 1995 N/A 95,579 75%
Community MOB Fee 100% 1995 4.00 38,193 100%
CINCINNATI, OHIO
GOVERNOR'S HILL
8600 Governor's Hill Fee 100% 1986 10.79 200,584 93%
8700 Governor's Hill Fee 100% 1985 4.98 58,617 100%
8790 Governor's Hill Fee 100% 1985 5.00 58,177 72%
8800 Governor's Hill Fee 100% 1985 2.13 28,700 100%
GOVERNOR'S POINTE
4605 Governor's Pointe Fee 100% 1990 8.00 175,485 100%
4705 Governor's Pointe Fee 100% 1988 7.50 140,984 98%
4770 Governor's Pointe Fee 100% 1986 4.50 76,037 88%
PARK 50 TECHNECENTER
SDRC Building Fee 100% 1991 13.00 221,215 100%
Building 17 Fee 100% 1985 8.19 70,644 91%
DOWNTOWN CINCINNATI
311 Elm Street (14) Ground/Bldg. Lease 100% 1902/1986(15) N/A 90,127 100%
312 Plum Street Fee 100% 1987 .69 230,489 89%
312 Elm Street Fee 100% 1992 1.10 378,786 92%
KENWOOD COMMONS
Building I Fee 50%(16) 1986 2.09 46,470 99%
Building II Fee 50%(16) 1986 2.09 46,434 90%
OTHER OFFICE - CINCINNATI
Triangle Office Park Fee 100% 1965/1985(17) 15.64 172,650 61%
Fidelity Drive Building Fee 100% 1972 8.34 38,000 100%
Tri-County Office Park Fee 100% 1971, 1973, 11.27 102,166 81%
1982 (18)
-7-
PERCENT
OCCUPIED AT
NAME/ OWNERSHIP COMPANY'S YEAR LAND AREA NET RENTABLE DECEMBER 31,
LOCATION INTEREST OWNERSHIP CONSTRUCTED (ACRES) AREA (SQ.FT.) 1995
- -------- --------- --------- ----------- --------- ------------- -----------
COLUMBUS, OHIO
TUTTLE CROSSING
4600 Lakehurst (Sterling 1) Fee 100% 1990 7.66 106,300 100%
4650 Lakehurst (Litel) Fee 100% 1990 13.00 164,639 100%
5555 Parkcenter (Xerox) Fee 100% 1992 6.09 83,971 100%
4700 Lakehurst (Indiana Insurance) Fee 100% 1994 3.86 49,600 100%
Sterling 2 Fee 100% 1995 3.33 57,660 100%
John Alden Fee 100% 1995 6.51 101,200 100%
Cardinal Health Fee 100% 1995 10.95 132,854 100%
Veterans Administration Clinic Fee 100% 1994 4.98 118,000 100%
LIVONIA, MICHIGAN
SEVEN MILE CROSSING
38705 Seven Mile (19) Fee/Ground Lease 100% 1988 N/A 113,066 95%
38701 Seven Mile (19) Fee/Ground Lease 100% 1989 N/A 132,153 85%
ST. LOUIS, MISSOURI
Laumeier I Fee 100% 1987 4.29 113,852 99%
Laumeier II Fee 100% 1988 4.64 110,541 100%
Westview Place Fee 100% 1988 2.69 114,722 98%
Westmark Fee 100% 1987 6.95 123,889 100%
RETAIL
INDIANAPOLIS, INDIANA
PARK 100 BUSINESS PARK
Building 121 Fee 100% 1989 2.27 19,716 76%
Building 32 Fee 100% 1978 .82 14,504 89%
CASTLETON CORNER
Michael's Plaza Fee 100% 1984 4.50 46,374 98%
Cub Plaza Fee 100% 1986 6.83 60,136 89%
FORT WAYNE, INDIANA
Coldwater Crossing Fee 100% 1990 35.38 246,365 95%
GREENWOOD, INDIANA
GREENWOOD CORNER
First Indiana Bank Branch Fee 100% 1988 1.00 2,400 100%
Greenwood Corner Shoppes Fee 100% 1986 7.45 50,840 50%
DAYTON, OHIO
Sugarcreek Plaza Fee 100% 1988 17.46 77,940 92%
CINCINNATI, OHIO
Governor's Plaza Fee 100% 1990 35.00 181,493 100%
King's Mall Shopping Center I Fee 100% 1990 5.68 52,661 100%
King's Mall Shopping Center II Fee 100% 1988 8.90 67,725 85%
Steinberg's Fee 100% 1993 1.90 21,008 100%
Park 50 Plaza Fee 100% 1989 2.20 18,000 42%
Kohl's Fee 100% 1994 12.00 80,684 100%
Sports Unlimited Fee 100% 1994 7.00 67,148 100%
Eastgate Square (20) Fee 100% 1990 11.60 94,182 100%
Office Max Fee 100% 1995 2.25 23,484 100%
Sofa Express - Governor's Plaza Fee 100% 1995 1.13 15,000 100%
ELLISVILLE, MISSOURI
Ellisville Plaza (21) Fee 100% 1987 3.70 32,754 96%
-8-
PERCENT
OCCUPIED AT
NAME/ OWNERSHIP COMPANY'S YEAR LAND AREA NET RENTABLE DECEMBER 31,
LOCATION INTEREST OWNERSHIP CONSTRUCTED (ACRES) AREA (SQ.FT.) 1995
- -------- --------- --------- ----------- --------- ------------- -----------
BLOOMINGTON, ILLINOIS
Lakewood Plaza Fee 100% 1987 11.23 87,010 98%
CHAMPAIGN, ILLINOIS
Market View Fee 100% 1985 8.50 86,553 100%
LIVONIA, MICHIGAN
Cooker Restaurant Ground Lease (22) 100% N/A N/A N/A 100%
COLUMBUS, OHIO
Galyans Trading Company Fee 100% 1994 4.90 74,636 100%
Best Buy Fee 100% 1995 7.00 68,400 85%
UNDER CONSTRUCTION
Expected
In-service Percent
Date Pre-leased
---------- ----------
INDUSTRIAL
INDIANAPOLIS, INDIANA
PARK 100 BUSINESS PARK
Building 128 Fee 100% February 1996 14.40 322,000 100%
Thomson Consumer Electronics Fee 100%(23) February 1996 52.00 599,040 100%
LEBANON, INDIANA
American Air Filter Fee 100% April 1996 10.40 153,600 100%
Little, Brown and Company Fee 100%(23) September 1996 31.60 500,455 100%
COLUMBUS, OHIO
South Pointe B Fee 100% April 1996 13.16 307,200 0%
OFFICE
INDIANAPOLIS, INDIANA
Two Parkwood Fee 100% February 1996 5.96 93,300 88%
CINCINNATI, OHIO
Ohio National Fee 100% September 1996 9.00 212,125 67%
COLUMBUS, OHIO
TUTTLE CROSSING
Nationwide Fee 100% July 1996 17.90 315,102 100%
Sterling 3 Fee 100% September 1996 3.56 64,500 100%
MIAMI, FLORIDA
John Alden Fee 100% January/ 7.81 251,316 100%
March 1996
RETAIL
CINCINNATI, OHIO
Bigg's Supercenter Fee 100% August 1996 14.00 160,000 100%
Fountain Place Fee 25% September 1997 1.98 209,585 79%
COLUMBUS, OHIO
TUTTLE CROSSING
WalMart Fee 100% April 1996 13.00 149,429 100%
-------- ----------
1,632.23 23,520,898
-------- ----------
-------- ----------
-9-
(1) These buildings are owned by a limited liability company in which the
Company is a 50% partner. The Company shares in the profit or loss from such
buildings in accordance with the Company's ownership interest. This limited
liability company owns a 50% general partnership interest in Park Fletcher
Buildings 27 and 28 and shares in the profit or loss from these buildings in
accordance with the limited liability company's interest.
(2) These buildings are owned by a partnership in which the Company is a
partner. The Company owns a 10% capital interest in the partnership and
receives a 50% interest in the residual cash flow after payment of a 9%
preferred return to the other partner on its capital interest.
(3) This building is owned in partnership with a tenant of the building. The
Company owns a 50% general partnership interest in the partnership. The Company
shares in the profit or loss from the building in accordance with such ownership
interest.
(4) The square footage of this building and the percent occupied includes a
100% pre-leased expansion of 97,080 square feet which is under construction
as of December 31, 1995.
(5) This building is owned by a partnership in which the Company owns a 10%
limited partnership interest. The Company shares in the cash flow from the
building in accordance with such ownership interest.
(6) This building is owned by a limited partnership in which the Company has a
1% general partnership interest and a 39% limited partnership interest. The
Company shares in the profit or loss from such building in accordance with the
Company's ownership interest.
(7) This building is owned by a partnership in which the Company owns a 33.33%
limited partnership interest. The Company shares in the profit or loss from the
building in accordance with such ownership interest.
(8) This building is owned in partnership with a tenant of the building. The
Company owns a 50% general partnership interest in the partnership. The Company
shares in the profit or loss from the building in accordance with such ownership
interest.
(9) The Company owns a 66.67% general partnership interest in the partnership
owning this building. The Company shares in the profit or loss of this building
in accordance with the Company's partnership interest.
(10) The Company owns the building and has a leasehold interest in the land
underlying this building with a lease term expiring October 31, 2067.
(11) The Company has a leasehold interest in this building with a lease term
expiring May 9, 2006.
(12) The Company owns these buildings and has a leasehold interest in the land
underlying these buildings, with the lease term expiring November 16, 2043.
(13) The Company owns this building and has a leasehold interest in the land
underlying this building with a lease term expiring August 2045, with two 20-
year options.
(14) The Company has a leasehold interest in the building and the underlying
land with a lease term expiring December 31, 2020. The Company has an option
to purchase the fee interest in the property throughout the term of the lease.
(15) This building was renovated in 1986.
(16) These buildings are owned by a partnership in which the Company has a 50%
general partnership interest. The Company shares in the profit or loss from
such buildings in accordance with the Company's ownership interest.
(17) This building was renovated in 1985.
(18) Tri-County Office Park consists of four buildings. One was built in 1971,
two were built in 1973, and one was built in 1982.
(19) The Company owns these buildings and has a leasehold interest in the land
underlying these buildings, with a lease term expiring May 31, 2057.
(20) The square footage of this building and the percent occupied includes
a 100% pre-leased expansion of 13,500 square feet which is under construction
as of December 31, 1995.
(21) This building was sold in January 1996.
(22) The Company has a leasehold interest in the land with the lease term
expiring May 31, 2057 and subleases the land to the tenant with the sublease
term expiring on August 31, 2009.
(23) These two buildings will be contributed to the limited liability company
referenced in footnote (1) upon completion.
-10-
ITEM 3. LEGAL PROCEEDINGS
There are no pending legal proceedings to which the Company or any subsidiary
was a party or to which any of their property is subject other than routine
litigation incidental to the Company's business. In the opinion of management,
such litigation is not material to the Company's business operations or
financial condition.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders during the fourth
quarter of the year ended December 31, 1995.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED SECURITY HOLDER
MATTERS
The Company's Common Shares are listed for trading on the New York Stock
Exchange, symbol DRE. Set forth below are the high and low reported sales prices
on the New York Stock Exchange and the cash dividends per share declared during
each quarter. Comparable cash dividends are expected in the future. As of
February 12, 1996, there were 2,269 record holders of Common Shares.
On February 1, 1996, the Company declared a quarterly cash dividend of $0.49 per
share payable on February 29, 1996 to shareholders of record on February 15,
1996.
1995 1994
------------------------ ------------------------
QUARTER ENDED HIGH LOW DIVIDEND HIGH LOW DIVIDEND
- ------------ ---- --- -------- ---- --- --------
December 31 $31.75 $27.63 $ .49 $28.25 $23.50 $ .47
September 30 31.63 27.63 .49 27.25 24.75 .47
June 30 29.25 26.25 .47 27.25 23.25 .45
March 31 27.88 25.13 .47 26.00 20.25 .45
Of the total dividends for 1995 of $1.92 per share, 85.51% was taxable to
shareholders as ordinary income, .82% was taxable as long-term capital gains and
13.67% was a return of capital to shareholders. Of the total dividends for 1994
of $1.84 per share, 78.18% was taxable to shareholders as ordinary income and
21.82% was a return of capital to shareholders. Dividends per share of $1.50
and $1.27 were required for the Company to maintain its REIT status in 1995 and
1994, respectively.
-11-
ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA
The following sets forth selected consolidated financial and operating
information on a historical basis for the Company for each of the years ended
December 31, 1995, 1994, 1993, 1992, and 1991. The following information should
be read in conjunction with Item 7, "Management's Discussion and Analysis of
Financial Condition and Results of Operations" for the Company and Item 8,
"Financial Statements and Supplementary Data" included in this Form 10-K.
(in thousands, except per share amounts)
1995 1994 1993 1992 1991
---- ---- ---- ---- ----
RESULTS OF OPERATIONS:
Revenues:
Rental Operations $ 113,641 $ 89,299 $ 33,648 $ 17,675 $ 16,789
Service Operations 17,777 18,473 5,654 - -
--------- -------- ------- ------- -------
TOTAL REVENUES $ 131,418 $ 107,772 $ 39,302 $ 17,675 $ 16,789
--------- -------- ------- ------- -------
--------- -------- ------- ------- -------
NET INCOME (LOSS) $ 35,019 $ 26,216 $ 5,013 $ (653) $ (1,607)
--------- -------- ------- ------- -------
--------- -------- ------- ------- -------
PER SHARE DATA (1):
Net Income (Loss) per Share $ 1.54 $ 1.53 $ 0.92 $ (0.32) $ (0.79)
Dividends Declared per Share 1.92 1.84 1.68 1.68 1.68
Weighted Average Shares
Outstanding 22,679 17,139 5,459 2,045 2,045
BALANCE SHEET DATA:
Total Assets $1,045,588 $ 774,901 $632,885 $121,881 $126,917
Total Debt $ 454,820 $ 298,640 $248,433 $ 80,707 $ 80,808
Total Shareholders' Equity $ 534,789 $ 445,384 $347,038 $ 36,129 $ 40,220
Total Shares Outstanding
at end of year (1) 24,152 20,391 16,046 2,045 2,045
OTHER DATA:
Funds From Operations (2) $ 56,476 $ 39,415 $ 11,205 $ 3,764 $ 2,420
Cash Flow Provided by (Used by):
Operating activities $ 78,620 51,873 14,363 5,453 2,451
Investing activities (289,569) (116,238) (315,025) (710) (845)
Financing activities 176,243 94,733 310,717 (4,952) (1,387)
(1) All such information has been adjusted for the 1 for 4.2 reverse stock
split effected prior to the completion of the 1993 Offering. The number of
shares excludes the outstanding minority interest partnership units which
are exchangeable on a one-for-one basis for shares of Common Stock.
(2) Funds From Operations is defined by the National Association of Real Estate
Investment Trusts as net income or loss excluding gains or losses from debt
restructuring and sales of property plus depreciation and amortization,
and after adjustments for minority interest, unconsolidated partnerships
and joint ventures (adjustments for minority interest, unconsolidated
partnerships and joint ventures are calculated to reflect Funds From
Operations on the same basis). Funds From Operations does not represent
cash flow from operations as defined by generally accepted accounting
principles, should not be considered as an alternative to net income as an
indicator of the Company's operating performance, and is not indicative of
cash available to fund all cash flow needs. The calculation of Funds From
Operations for the years ended December 31, 1994 and 1993 has been revised
to conform with the presentation of Funds From Operations for the year
ended December 31, 1995 which excludes amounts attributable to minority
interests.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
OVERVIEW
The Company's operating results depend primarily upon income from the rental
operations of its industrial, office and retail properties located in its
primary markets. This income from rental operations is substantially influenced
by the supply and demand for the Company's rental space in its primary markets.
-12-
In addition, the Company's continued growth is dependent upon its ability to
maintain occupancy rates and increase rental rates on its in-service portfolios
and to continue development and acquisition of additional rental properties. The
Company's primary markets in the Midwest have continued to offer strong and
stable local economies compared to other regions of the United States and have
provided attractive new development opportunities because of their central
location, established manufacturing base, skilled work force and moderate labor
costs. Consequently, the Company's overall occupancy rate of its in-service
portfolio has exceeded 93% the last two years and was at 95.4% at December 31,
1995. The Company expects to continue to maintain its overall occupancy levels
at comparable levels and also expects to be able to increase rental rates as
leases are renewed or new leases are executed. This stable occupancy as well as
increasing rental rates should improve the Company's results of operations from
its in-service properties. The Company's strategy for continued growth also
includes developing and acquiring additional rental properties in its primary
markets and expanding into other attractive Midwestern markets.
The following table sets forth information regarding the Company's in-service
portfolio of rental properties as of December 31, 1995 and 1994 (in thousands,
except percentages):
Total Percent of
Square Feet Total Square Feet Percent Occupied
---------------- ------------------ ----------------
TYPE 1995 1994 1995 1994 1995 1994
---- ---- ---- ---- ---- ---- ----
INDUSTRIAL
Service Centers 2,802 2,051 14.0% 15.9% 94.7% 93.4%
Bulk 10,890 5,573 54.3% 43.2% 96.5% 97.5%
OFFICE
Suburban 3,874 3,090 19.3% 24.0% 94.7% 90.5%
CBD 699 699 3.5% 5.4% 92.3% 87.2%
Medical 332 198 1.6% 1.5% 90.3% 100.0%
RETAIL 1,476 1,285 7.3% 10.0% 93.8% 95.8%
------ ------ ------ ------ ----- ------
Total 20,073 12,896 100.0% 100.0% 95.4% 94.5%
------ ------ ------ ------ ----- ------
------ ------ ------ ------ ----- ------
RESULTS OF OPERATIONS
Following is a summary of the Company's operating results and property
statistics for each of the years in the three-year period ended December 31,
1995 (in thousands, except number of properties and per share amounts):
1995 1994 1993
---- ---- ----
Rental Operations revenue $113,641 $89,299 $33,648
Service Operations revenue 17,777 18,473 5,654
Earnings from Rental Operations 36,700 26,580 5,483
Earnings from Service Operations 5,746 6,308 1,536
Operating income 40,277 30,743 6,282
Minority interest in earnings 7,441 7,840 1,950
Net income 35,019 26,216 5,013
Weighted average shares outstanding 22,679 17,139 5,459
Net income per share $ 1.54 $ 1.53 $ 0.92
Number of in-service properties at end of year 202 128 113
In-service square footage at end of year 20,073 12,896 10,850
Under development square footage at year end 3,448 2,362 1,270
-13-
COMPARISON OF YEAR ENDED DECEMBER 31, 1995 TO YEAR ENDED DECEMBER 31, 1994
RENTAL OPERATIONS
The Company increased its in-service portfolio of rental properties from 128
properties comprising 12.9 million square feet at December 31, 1994 to 202
properties comprising 20.1 million square feet at December 31, 1995 through the
acquisition of 60 properties totaling 4.6 million square feet and the placement
in service of 17 properties and two building expansions totaling 3.2 million
square feet developed by the Company. The Company also disposed of three
properties totaling 570,000 square feet. These 74 net additional rental
properties primarily account for the $24.3 million increase in revenues from
Rental Operations from 1994 to 1995.
The increase from 1994 to 1995 in rental expenses, real estate taxes and
depreciation and amortization expense is also a result of the additional 74 in-
service rental properties.
Interest expense increased by approximately $2.5 million. This increase was
primarily because of interest expense on the $150 million of unsecured notes
which the Company issued in September 1995. These notes bear interest at an
effective rate of 7.46%. The proceeds from these notes were used to (i) retire
the outstanding balance of $35.0 million on the Company's line of credit;
(ii) retire $39.5 million of mortgage debt which had a weighted average
interest rate of 6.08% and was scheduled to reset at a market interest rate in
the fourth quarter of 1995; and (iii) to fund development and acquisition
of additional rental properties during the fourth quarter of 1995.
As a result of the above-mentioned items, earnings from rental operations
increased $10.1 million from $26.6 million for the year ended December 31, 1994
to $36.7 million for the year ended December 31, 1995.
Management expects occupancy of the in-service property portfolio to remain
stable because (i) only 10.3% and 8.2% of the Company's occupied square footage
is subject to leases expiring in 1996 and 1997, respectively, and (ii) the
Company's renewal percentage averaged 65%, 73% and 65% in 1995, 1994 and 1993,
respectively. The following table reflects the Company's lease expiration
schedule as of December 31, 1995, including properties under development, by
product type indicating square footage and annualized net effective rents under
expiring leases:
(in thousands) Industrial Office Retail Total
--------------------- ------------------ ------------------ -------------------
Year of Square Square Square Square
Expiration Feet Dollar Feet Dollar Feet Dollar Feet Dollar
- ------------ ------ ------ ------ ------ ------ ------ ------ ------
1996 1,825 $ 7,232 382 $ 3,662 83 $ 838 2,290 $ 11,732
1997 1,269 5,851 458 4,648 92 1,031 1,819 11,530
1998 2,262 8,466 549 5,631 109 1,165 2,920 15,262
1999 1,862 7,724 626 6,602 125 1,280 2,613 15,607
2000 1,849 7,238 441 5,454 124 1,442 2,414 14,134
2001 1,490 5,696 293 3,148 60 633 1,843 9,477
2002 265 1,115 595 6,333 88 792 948 8,240
2003 40 442 131 1,627 36 329 207 2,399
2004 810 3,128 89 1,043 13 136 912 4,306
2005 703 2,556 498 6,494 160 1,487 1,361 10,536
Thereafter 2,460 7,582 1,413 19,060 981 6,983 4,854 33,625
------ ------ ----- ------ ----- ------ ------ -------
Total Leased 14,835 $57,030 5,475 $63,702 1,871 $16,116 22,181 $136,848
------ ------ ----- ------ ----- ------ ------ -------
------ ------ ----- ------ ----- ------ ------ -------
Total Portfolio 15,672 5,841 2,008 23,521
------ ----- ----- ------
------ ----- ----- ------
Annualized net
effective rent
per square foot $ 3.84 $ 11.63 $ 8.61 $ 6.16
------ ------ ------ -------
------ ------ ------ -------
- 14 -
This stable occupancy, along with stable rental rates in each of the Company's
markets, will allow the in-service portfolio to continue to provide a comparable
or increasing level of earnings from rental operations. The Company also expects
to realize growth in earnings from rental operations through (i) the placement
in-service of the 3.4 million square feet of properties under development at
December 31, 1995 over the next seven quarters; (ii) the development and
acquisition of additional rental properties in its primary markets; and (iii)
the expansion into other attractive Midwestern markets.
SERVICE OPERATIONS
Earnings from Service Operations decreased by approximately $600,000 in 1995
as compared to 1994. This decrease results primarily from a decrease in
construction fees even though total construction volume remained consistent.
This decrease in fees resulted from certain contracts with above-market fees
in 1994 which were not obtained in 1995. Property management, maintenance and
leasing fees remained consistent from 1994 to 1995. Payroll expense
decreased from 1994 to 1995 as a result of the allocation of a greater
portion of these costs to the Company's Rental Operations segment. Other
operating expenses did not change materially.
At December 31, 1995, the backlog of construction fees on signed construction
contracts was $3.9 million as compared to $1.7 million at December 31, 1994.
As a result of the acquisition by an unconsolidated subsidiary of the Company
of 2.2 million square feet of managed property, the Company anticipates a
slight decrease in management, leasing and maintenance fee revenues in 1996
as well as a decrease in the operating expenses of the segment.
OTHER INCOME (EXPENSE)
Interest income increased from $1.1 million for the year ended December 31, 1994
to $1.9 million for the year ended December 31, 1995 as a result of the
temporary short-term investment of excess proceeds from the 1995 Offering as
well as the 1995 Debt Offering.
As part of its October 1993 acquisition of Duke Associates, the Company
acquired an option to purchase an interest in an entity which provided
telecommunication services to tenants in properties owned and managed by the
Company. At the time the option was acquired, the option was not considered to
have value because of recurring net operating losses being incurred by such
entity. Subsequent to the acquisition of the option, the entity made changes
in its operations, principally entering into new contracts for the purchase of
telecommunication services and the provision of billing services, which
significantly improved its operating results. As a result of these improvements
in operating results, the entity entered into an agreement to sell its
telecommunications business to an unaffiliated third party at an amount
significantly in excess of the Company's option price. The net proceeds from
the sale were then loaned to a subsidiary of the Company with a mortgage on
certain property. The Company subsequently exercised its option to acquire the
interest in this entity and recognized a gain of approximately $2.0 million
based on the difference between its option price and the net proceeds received
from the sale to the unaffiliated third-party. Such gain is included in
earnings from property sales in 1994.
NET INCOME
Net income for the year ended December 31, 1995 was $35.0 million compared to
net income of $26.2 million for the year ended December 31, 1994. This increase
results primarily from the operating result fluctuations in rental and service
operations explained above.
- 15 -
COMPARISON OF YEAR ENDED DECEMBER 31, 1994 TO YEAR ENDED DECEMBER 31, 1993
RENTAL OPERATIONS
As of December 31, 1992, the Company owned 30 properties totaling approximately
2.0 million square feet. In October 1993, the Company acquired substantially all
of the properties of Duke Associates, a full-service commercial real estate firm
operating primarily in the Midwest. In connection with the acquisition, the
Company effected a 1 for 4.2 reverse stock split relating to its existing shares
and subsequently issued an additional 14,000,833 shares of Common Stock through
an offering. Substantially all of the approximately $309.2 million of net
proceeds of the Offering were used to repay property indebtedness of Duke
Associates assumed by the Company as part of its acquisition. The Company
acquired 83 in-service properties as part of this transaction. The operating
results of the acquired properties have been included in the Company's
consolidated operating results subsequent to the date of acquisition. As a
result of the acquisition in October 1993, the 1993 results of operations
include nine months of operations of the original 30 property portfolio and
three months of operations of the 113 property portfolio.
Also, during 1994, the Company developed and placed in service and acquired a
total of 15 properties to bring its total portfolio of in-service properties to
128 as of December 31, 1994. A full year of operations for the 113 properties as
well as the addition of the 15 properties account for the increase in Rental
Operation revenues and operating expenses from 1993 to 1994.
SERVICE OPERATIONS
The Company acquired its Service Operations as part of its acquisition of Duke
Associates in October 1993. Service Operation revenues and operating expenses
subsequent to the date of acquisition are included in the Company's 1993
operations. The increase in Service Operation revenue, operating expenses and
earnings from 1993 to 1994 results from the inclusion of a full year of such
operations in 1994.
GENERAL AND ADMINISTRATIVE
General and administrative expense increased from 1993 to 1994 primarily as a
result of the increase in the size of the Company through the acquisition of
Duke Associates' Rental and Service Operations and the placement in-service of
15 developed or acquired properties in 1994.
OTHER INCOME (EXPENSE)
Interest income increased from 1993 to 1994 primarily as a result of an increase
in temporary cash investments because of the increased size of the Company as
well as the temporary short-term investment of excess proceeds from the 1994
Offering.
Earnings from property sales increased from 1993 to 1994 primarily as a result
of the gain recognized on the exercise by the Company of an option to acquire
an interest in a telecommunications entity as discussed above under Other
Income (Expense) in the comparison of 1994 to 1995.
Minority interest in earnings of subsidiaries resulted from the acquisition of
Duke Associates in October 1993. The increase from 1993 to 1994 results from
allocation of a full year's income to the minority interests in 1994.
- 16 -
NET INCOME
Primarily as a result of the items discussed above, net income increased
from $5.0 million for the year ended December 31, 1993 to $26.2 million for
the year ended December 31, 1994.
LIQUIDITY AND CAPITAL RESOURCES
Net cash provided by operating activities totaling $78.6 million, $51.9 million
and $14.4 million for the years ended December 31, 1995, 1994 and 1993,
respectively, represents the primary source of liquidity to fund distributions
to shareholders, unitholders and the other minority interests and to fund
recurring costs associated with the renovation and re-letting of the Company's
properties. The primary reason for the increases in net cash provided by
operating activities is, as discussed above under "Results of Operations", the
increase in net income each year resulting from the expansion of the in-service
portfolio through development and acquisitions of additional rental properties.
Net cash used by investing activities totaling $289.6 million, $116.2 million
and $315.0 million for the years ended December 31, 1995, 1994 and 1993,
respectively, represents the investment of funds by the Company to expand its
portfolio of rental properties through the development and acquisition of
additional rental properties. Of the $315.0 million used in investing
activities in 1993, $302.1 million related to acquisition of
the Duke Associates' rental properties and service businesses. In 1994, $107.4
million was invested in the development and acquisition of additional rental
properties and $12.4 million was used for tenant improvements, leasing costs and
other deferred assets. In 1995, the development and acquisition of additional
rental properties increased to $251.0 million with $24.1 million being used for
recurring tenant improvements, leasing costs and other deferred assets. In
addition, in 1995, $16.7 million was invested in rental operations of a newly
formed, 50% owned, joint venture which also included the contribution of rental
property and undeveloped land with a carrying value of approximately $42.7
million.
Net cash provided by financing activities totaling $176.2 million, $94.7
million and $310.7 million for the years ended December 31, 1995, 1994 and
1993, respectively, is comprised of debt and equity issuances net of
distributions to shareholders and unitholders and repayments of outstanding
indebtedness. In 1993, the Company received $309.3 million from the 1993
Offering which was used primarily for the acquisition of Duke Associates. In
1994, the Company received $92.1 million from the 1994 Offering and $60.0
million from a seven-year mortgage loan. Of the $152.1 million of these
proceeds, $60.0 million were used to repay the balance outstanding on the
line of credit, $6.0 million were used to retire outstanding mortgage
indebtedness, and the remainder were used primarily to fund development and
acquisition of additional rental properties. In 1995, the Company received
$96.3 million from the 1995 Offering of which $11.0 million were used to
repay the balance outstanding on the line of credit and the remainder was
used to fund development and acquisition of additional rental properties.
The Company also received $150.0 million from the 1995 Debt Offering and used
$39.5 million to retire outstanding mortgage indebtedness, $35.0 million to
repay the balance outstanding on the line of credit, and the remainder to
fund acquisition and development of additional rental properties.
The recurring capital needs of the Company are funded primarily through the
undistributed net cash provided by operating activities. Following is an
analysis of the Company's recurring capital expenditures:
(in thousands) 1995 1994 1993
---- ---- ----
Tenant improvements $ 4,312 $ 3,056 $ 2,015
Leasing costs 3,519 2,407 636
Building improvements 757 474 136
------ ------ ------
Total $ 8,588 $ 5,937 $ 2,787
------ ------ ------
------ ------ ------
- 17 -
In March 1994, the Company obtained a $60 million secured credit facility
which was available to fund development and acquisition of additional rental
properties and to provide working capital as needed. In April 1995, the
Company replaced the secured line of credit with a $100 million unsecured
line of credit which matures in April 1998. Borrowings of $45 million under
this line of credit as of December 31, 1995 bear interest at one month LIBOR
plus 2.00%, which ranged from 7.7500% to 7.9375%. In January 1996, the
Company increased the unsecured line of credit to $150 million and reduced
the borrowing rate to LIBOR plus 1.625%. The current effective interest rate
on the line of credit based on the 30-day LIBOR rate as of February 12, 1996
is 6.94%.
The Company currently has on file two Form S-3 Registration Statements with the
Securities and Exchange Commission ("Shelf Registrations") which have remaining
availability as of December 31, 1995 of approximately $330 million to issue
additional common stock, preferred stock or unsecured debt securities. The
Company intends to issue additional securities under such Shelf Registrations to
fund the development and acquisition of additional rental properties.
The total debt outstanding at December 31, 1995 consists of notes totaling
$454.8 million with a weighted average interest rate of 7.50% maturing at
various dates through 2018. Scheduled principal amortization of such debt
totaled $1.65 million for the year ended December 31, 1995. Following is a
summary of the scheduled future amortization and maturities of the Company's
indebtedness:
Weighted Average
Interest Rate of
Year Repayments Future Repayments
---- ---------------------------------------- -----------------
(in thousands)
Scheduled
Amortization Maturities Total
------------ ---------- -----
1996 $ 1,855 $ 59,619 $ 61,474 5.31%
1997 2,156 - 2,156 8.04%
1998 2,410 90,216 92,626 7.49%
1999 2,625 - 2,625 8.25%
2000 2,637 4,852 7,489 7.86%
2001 2,291 59,454 62,245 8.72%
2002 2,494 50,000 52,494 7.37%
2003 252 68,313 69,065 8.48%
2004 274 - 274 5.20%
2005 300 100,000 100,300 7.51%
Thereafter 4,072 - 4,072
------ ------- -------
Total $21,366 $433,454 $454,820
------ ------- -------
------ ------- -------
The 1996 maturities of $59.6 million indicated above occur in October through
December. The Company currently intends to repay this debt through the issuance
of either common or preferred equity or unsecured debt securities available
under its Shelf Registrations. The Company estimates that if unsecured debt
securities are issued, based on current market interest rates, the rate on such
debt would increase by approximately 1.6%. Of the 1998 maturities, $45.0
million represents the outstanding balance as of December 31, 1995 on the
Company's line of credit.
- 18 -
The Company intends to pay regular quarterly dividends from net cash provided by
operating activities. A quarterly dividend of $.49 per Common Share was declared
on February 1, 1996 which represents an annualized dividend of $1.96 per share.
FUNDS FROM OPERATIONS
Management believes that Funds From Operations ("FFO"), which is defined by the
National Association of Real Estate Investment Trusts as net income or loss
excluding gains or losses from debt restructuring and sales of property plus
depreciation and amortization, and after adjustments for minority interest,
unconsolidated partnerships and joint ventures (adjustments for minority
interest, unconsolidated partnerships and joint ventures are calculated to
reflect FFO on the same basis), is the industry standard for reporting the
operations of real estate investment trusts.
The following table reflects the calculation of the Company's FFO for the years
ended December 31, as follows (in thousands):
1995 1994 1993
------ ------ ------
Net income $35,019 $ 26,216 $ 5,013
Add back:
Depreciation and amortization 23,118 16,785 7,075
Amortization of deferred financing costs and
depreciation of non-rental real estate assets 1,918 1,453 327
Share of joint venture depreciation and amortization 411 352 60
Gain on property sales ( 283) ( 2,198) ( 517)
Adjustment for minority interest share of add-backs ( 3,707) ( 3,193) ( 753)
------ ------ ------
FUNDS FROM OPERATIONS $56,476 $ 39,415 $ 11,205
------ ------ ------
------ ------ ------
CASH FLOW PROVIDED BY (USED BY):
Operating activities $ 78,620 $ 51,873 $ 14,363
Investing activities (289,569) (116,238) (315,025)
Financing activities 176,243 94,733 310,717
The increase in FFO for the three year period results primarily from the
increased in-service rental property portfolio as discussed above under "Results
of Operations." The following table indicates components of such growth for
each of the years ended December 31, as follows (in thousands):
1995 1994 1993
------ ------ ------
Rental operations:
Original portfolio $ 59,399 $58,201 $23,300
Development 10,668 2,240 -
Acquisitions 12,014 2,463 -
Investments in unconsolidated companies 1,121 1,407 357
Interest expense (21,424) (18,920) (10,334)
------ ------ ------
Net rental operations 61,778 45,391 13,323
Service operations, net of minority interest 4,767 5,389 1,277
Minority interest of unitholders ( 6,530) ( 6,751) ( 1,657)
Other, net 168 ( 1,421) ( 985)
Adjustment for minority interest share of add-backs ( 3,707) ( 3,193) ( 753)
------ ------ ------
FUNDS FROM OPERATIONS $56,476 $39,415 $11,205
------ ------ ------
------ ------ ------
- 19 -
In March 1995, NAREIT issued a clarification of its definition of FFO effective
for years beginning after December 31, 1995. The clarification provides that
amortization of deferred financing costs and depreciation of non-rental real
estate assets are no longer to be added back to net income in arriving at FFO.
The Company's FFO under the new method of calculation would have been $54.7
million, $38.2 million, and $11.1 million for the three years ended December 31,
1995, 1994, and 1993, respectively.
The calculation of FFO for the years ended December 31, 1994 and 1993 has been
revised to conform with the presentation of FFO for the year ended December 31,
1995 which excludes amounts attributable to minority interests.
While management believes that FFO is the most relevant and widely used measure
of the Company's operating performance, such amount does not represent cash flow
from operations as defined by generally accepted accounting principles, should
not be considered as an alternative to net income as an indicator of the
Company's operating performance, and is not indicative of cash available to fund
all cash flow needs.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The financial statements and supplementary data are included under Item 14 of
this Report.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS AND ON ACCOUNTING
FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information required by this Item for Directors and certain Executive
Officers will be contained in a definitive proxy statement which the Registrant
anticipates will be filed no later than April 29, 1996, which proxy statement is
incorporated herein by reference, and thus this part has been omitted in
accordance with General Instruction G(3) to Form 10-K.
The following information is provided regarding the executive officers of the
Company who do not serve as Directors of the Company:
GARY A. BURK
Age 44, President of Construction Services and Executive Vice President of Duke
Services, Inc. - Mr. Burk joined the Company in 1979, and has been responsible
for the Company's construction management operations since 1986.
ROSS C. FARRO
Age 52, Vice President, Cleveland Group - Mr. Farro joined the Company in
January 1996 and is responsible for the Cleveland activities of the Company.
Prior to joining the Company, Mr. Farro was an independent real estate
developer and operator.
- 20 -
ROBERT D. FESSLER
Age 38, Vice President, Ohio Industrial Group - Mr. Fessler joined the Company
in 1987 and is responsible for the Cincinnati industrial activities of the
Company. Prior to joining the Company, Mr. Fessler was a leasing
representative with Trammel Crow.
JOHN R. GASKIN
Age 34, Vice President, General Counsel and Secretary - Mr. Gaskin joined the
Company in 1990. Prior to joining the Company, Mr. Gaskin worked as an
associate attorney in a mid-size Indianapolis, Indiana law firm.
RICHARD W. HORN
Age 38, Vice President of Acquisitions - Mr. Horn joined the Company in 1984.
Mr. Horn is responsible for the acquisition activities of the Company and
also oversees the Nashville and Michigan operations of the Company.
DONALD J. HUNTER
Age 36, Vice President, Columbus Group - Mr. Hunter joined the Company in 1989
and is responsible for the Columbus activities of the Company. Prior to
joining the Company, Mr. Hunter was with Cushman and Wakefield, a national
real estate firm.
STEVEN R. KENNEDY
Age 39, Vice President of Construction Services - Mr. Kennedy joined the
Company in 1986. Prior to that time, Mr. Kennedy was a Project Manager for
Charles Pankow Builders, Inc.
WAYNE H. LINGAFELTER
Age 36, Vice President, Indiana Office Group - Mr. Lingafelter joined the
Company in 1987 and is responsible for the Indiana office activities of the
Company. Prior to that time, Mr. Lingafelter was with the management
consulting firm of DRI, Inc.
WILLIAM E. LINVILLE, III
Age 41, Vice President, Indiana Industrial Group - Mr. Linville joined the
Company in 1987 and is responsible for the Indianapolis industrial activities
of the Company. Prior to that time, Mr. Linville was Vice President
and Regional Manager of the CB Commercial Brokerage Office in Indianapolis.
DAVID R. MENNEL
Age 41, General Manager of Services Operations and President of Duke Services,
Inc.- Mr. Mennel was with the accounting firm of Peat, Marwick & Mitchell Co.
and the property development firm of Melvin Simon & Associates before joining
the Company in 1978.
DAVID P. MINTON
Age 38, Vice President, St. Louis Group - Mr. Minton joined the Company in 1995
and is responsible for the St. Louis activities of the Company. Prior to
joining the Company, Mr. Minton was Vice President of the Paragon Group, a
national real estate development and management firm.
- 21 -
MICHAEL L. MYRVOLD
Age 40, Vice President, Retail Group - Mr. Myrvold joined the Company in 1995
and is responsible for retail activities of the Company. Prior to
joining the Company, Mr. Myrvold was Vice President of Real Estate of the
Melville Realty Co., Inc.
JOHN M. NEMECEK
Age 40, President of Asset and Property Management - Mr. Nemecek joined the
Company in 1994. Prior to joining the Company, Mr. Nemecek was the Senior Vice
President/Florida Division of Compass Real Estate.
DENNIS D. OKLAK
Age 42, Vice President and Treasurer - Mr. Oklak joined the Company in 1986 and
has served as Tax Manager and Controller of Development. Prior to joining the
Company, Mr. Oklak was a Senior Manager with the public accounting firm of
Deloitte Haskins + Sells.
JEFFREY G. TULLOCH
Age 50, Vice President and General Manager, Cincinnati Group - Mr. Tulloch
joined the Company in 1995 and is responsible for the all Cincinnati
activities of the Company. Mr. Tulloch was Senior Vice President of the
Galbreath Company before joining the Company.
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires the
Company's officers and directors, and persons who own more than 10% of the
Company's Common Stock, to file reports of ownership and changes in ownership
with the Securities and Exchange Commission. Officers, directors and greater
than 10% shareholders are required by Securities and Exchange Commission
regulation to furnish the Company with copies of all Section 16(a) forms they
file. Information regarding Section 16(a) filings will be contained in a
definitive proxy statement which the Registrant anticipates will be filed no
later than April 29, 1996, which proxy statement is incorporated herein by
reference, and thus this part has been omitted in accordance with General
Instruction G(3) to Form 10-K.
ITEM 11, 12, 13 EXECUTIVE COMPENSATION, SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT AND CERTAIN RELATIONSHIPS AND RELATED
TRANSACTIONS.
The information required by Item 11, Item 12 and Item 13 will be contained in a
definitive proxy statement which the Registrant anticipates will be filed no
later than April 29, 1996, which proxy statement is incorporated herein by
reference, and thus this part has been omitted in accordance with General
Instruction G(3) to Form 10-K.
- 22 -
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) DOCUMENTS FILED AS PART OF THIS REPORT.
1. CONSOLIDATED FINANCIAL STATEMENTS:
Index
-----
Independent Auditors' Report
Consolidated Balance Sheets, December 31, 1995 and 1994
Consolidated Statements of Operations, Years Ended December 31, 1995, 1994
and 1993
Consolidated Statements of Cash Flows, Years Ended December 31, 1995, 1994
and 1993
Consolidated Statements of Shareholders' Equity, Years Ended December 31,
1995, 1994 and 1993
Notes to Consolidated Financial Statements
2. CONSOLIDATED FINANCIAL STATEMENT SCHEDULES
INDEX
-----
Schedule III - Real Estate and Accumulated Depreciation
EDGAR FINANCIAL DATA SCHEDULE
Exhibit 27 - Financial Data Schedule for year ended December 31, 1995
(EDGAR filing only)
Other schedules are omitted for the reasons that they are not required, are
not applicable, or the required information is set forth in the financial
statements or notes thereto.
- 23 -
INDEPENDENT AUDITORS' REPORT
The Shareholders and Directors
Duke Realty Investments, Inc.:
We have audited the consolidated financial statements of Duke Realty
Investments, Inc. and Subsidiaries as listed in the accompanying index. In
connection with our audits of the consolidated financial statements, we also
have audited the financial statement schedule as listed in the accompanying
index. These consolidated financial statements and the financial statement
schedule are the responsibility of the Company's management. Our responsibility
is to express an opinion on the consolidated financial statements and the
financial statement schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Duke Realty
Investments, Inc. and Subsidiaries as of December 31, 1995 and 1994 and the
results of their operations and their cash flows for each of the years in the
three-year period ended December 31, 1995, in conformity with generally accepted
accounting principles. Also, in our opinion, the related financial statement
schedule, when considered in relation to the basic consolidated financial
statements taken as a whole, presents fairly, in all material respects, the
information set forth therein.
KPMG PEAT MARWICK LLP
Indianapolis, Indiana
January 31, 1996
- 24 -
DUKE REALTY INVESTMENTS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
DECEMBER 31,
----------------------------
1995 1994
------ ------
ASSETS
Real estate investments:
Land and improvements $ 91,550 $ 72,758
Buildings and tenant improvements 712,614 580,794
Construction in progress 96,698 22,967
Land held for development 62,637 47,194
--------- -------
963,499 723,713
Accumulated depreciation (56,335) ( 38,058)
--------- -------
Net real estate investments 907,164 685,655
Cash and cash equivalents 5,727 40,433
Accounts receivable from tenants, net of allowance of $624 and $450 5,184 4,257
Accrued straight-line rents, net of allowance of $841 8,101 5,030
Receivables on construction contracts 9,462 7,478
Investments in unconsolidated companies 67,771 8,418
Deferred financing costs, net of accumulated amortization of $2,072 and $1,755 8,141 6,390
Deferred leasing and other costs, net of accumulated amortization of $4,959 and $2,702 20,620 11,856
Escrow deposits and other assets 13,418 5,384
--------- -------
$1,045,588 $ 774,901
--------- -------
--------- -------
LIABILITIES AND SHAREHOLDERS' EQUITY
Indebtedness:
Mortgage debt $ 259,820 $ 298,640
Unsecured notes 150,000 -
Line of credit 45,000 -
--------- -------
454,820 298,640
Construction payables and amounts due subcontractors 21,410 9,464
Accounts payable 1,132 869
Accrued real estate taxes 10,374 8,983
Accrued interest 3,461 314
Other accrued expenses 5,504 2,877
Other liabilities 5,490 3,564
Tenant security deposits and prepaid rents 3,872 3,472
--------- -------
Total liabilities 506,063 328,183
--------- -------
Minority interest 4,736 1,334
--------- -------
Common shares ($.01 par value); 45,000 authorized;
24,152 and 20,391 shares issued and outstanding 241 204
Additional paid-in capital 578,288 481,101
Distributions in excess of net income (43,740) (35,921)
--------- -------
Total shareholders' equity 534,789 445,384
--------- -------
$1,045,588 $ 774,901
--------- -------
--------- -------
See accompanying Notes to Consolidated Financial Statements.
- 25 -
DUKE REALTY INVESTMENTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
Year ended December 31,
----------------------------------------------
1995 1994 1993
------ ------ ------
RENTAL OPERATIONS:
Revenues:
Rental income $112,931 $88,243 $33,351
Equity in earnings of unconsolidated companies 710 1,056 297
------- ------ ------
113,641 89,299 33,648
------- ------ ------
Operating expenses:
Rental expenses 21,497 17,507 7,059
Real estate taxes 9,683 8,256 3,403
Interest expense 21,424 18,920 10,334
Depreciation and amortization 24,337 18,036 7,369
------- ------ ------
76,941 62,719 28,165
------- ------ ------
Earnings from rental operations 36,700 26,580 5,483
------- ------ ------
SERVICE OPERATIONS:
Revenues:
Property management, maintenance and leasing fees 11,138 11,084 3,000
Construction management and development fees 5,582 6,107 2,501
Other income 1,057 1,282 153
------- ------ ------
17,777 18,473 5,654
------- ------ ------
Operating expenses:
Payroll 8,236 8,723 2,688
Maintenance 1,344 1,069 473
Office and other 2,451 2,373 957
------- ------ ------
12,031 12,165 4,118
------- ------ ------
Earnings from service operations 5,746 6,308 1,536
------- ------ ------
General and administrative expense (2,169) (2,145) ( 737)
------- ------ ------
Operating income 40,277 30,743 6,282
OTHER INCOME (EXPENSE):
Interest income 1,900 1,115 164
Earnings from property sales 283 2,198 517
Minority interest in earnings of subsidiaries ( 7,441) ( 7,840) ( 1,950)
------- ------ ------
Net income $ 35,019 $26,216 $ 5,013
------- ------ ------
------- ------ ------
Net income per share $ 1.54 $ 1.53 $ .92
------- ------ ------
------- ------ ------
Weighted average number of shares outstanding 22,679 17,139 5,459
------- ------ ------
------- ------ ------
See accompanying Notes to Consolidated Financial Statements.
- 26 -
DUKE REALTY INVESTMENTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
YEAR ENDED DECEMBER 31,
----------------------------------------------
1995 1994 1993
------ ------ ------
Cash flows from operating activities:
Net income $35,019 $ 26,216 $ 5,013
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation of buildings and tenant improvements 20,416 15,068 6,459
Amortization of deferred financing costs 1,218 1,251 294
Amortization of deferred leasing and other costs 2,703 1,717 616
Minority interest in earnings of subsidiaries 7,441 7,840 1,950
Straight-line rent adjustment (3,198) (2,307) (570)
Allowance for straight-line rent receivable - 748 93
Earnings from property sales, net (283) (2,198) (517)
Construction contracts, net 8,722 2,405 (919)
Other accrued revenues and expenses, net 6,771 1,352 2,075
Equity in earnings of unconsolidated companies (189) (219) (131)
------ ------- -------
NET CASH PROVIDED BY OPERATING ACTIVITIES 78,620 51,873 14,363
------ ------- -------
Cash flows from investing activities:
Proceeds from property sales, net 5,281 3,337 1,306
Rental property development costs and building improvements (129,636) (56,293) (7,304)
Acquisition of rental properties,undeveloped land and businesses (121,408) (51,125) (302,070)
Recurring tenant improvements (4,312) (3,056) (2,015)
Recurring leasing costs (3,519) (2,407) (636)
Other deferred costs and other assets (16,225) (6,971) (4,106)
Net investment in and advances to unconsolidated companies (19,750) 277 (200)
------ ------- -------
NET CASH USED BY INVESTING ACTIVITIES (289,569) (116,238) (315,025)
------- ------- -------
Cash flows from financing activities:
Proceeds from issuance of common shares, net 96,297 92,145 309,334
Proceeds from indebtedness 195,051 61,504 88,945
Payments on indebtedness (60,030) (16,149) (78,496)
Distributions to shareholders (42,838) (31,565) (3,438)
Distributions to minority interest (8,940) (9,140) -
Deferred financing costs (3,297) (2,062) (5,628)
------ ------- -------
NET CASH PROVIDED BY FINANCING ACTIVITIES 176,243 94,733 310,717
------ ------- -------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (34,706) 30,368 10,055
Cash and cash equivalents at beginning of year 40,433 10,065 10
------ ------- -------
Cash and cash equivalents at end of year $ 5,727 $ 40,433 $ 10,065
------ ------- -------
------ ------- -------
See accompanying Notes to Consolidated Financial Statements.
- 27 -
DUKE REALTY INVESTMENTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
Additional Distributions
Common Paid-in in Excess of
Shares Capital Net Income
-------- ---------- -------------
BALANCE AT DECEMBER 31, 1992 $ 86 $ 68,190 $(32,147)
Reverse stock split (66) 66 -
Proceeds from issuance of common shares,
net of underwriting discounts and offering
costs of $23,394 140 309,194 -
Net income - - 5,013
Distributions to shareholders ($1.68 per share) - - (3,438)
------ --------