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Duke Realty on the Industrial Lane; Does this Signify Growth? - Analyst Blog

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Duke Realty Corp. ( DRE ), the real estate investment trust (REIT), is in a strong development and operational platform to take advantage of growth opportunities. The company is making concerted efforts to lower its suburban office assets, as the fundamentals of this market remain weak, and on the contrary strengthening its bulk industrial business in key markets.

Recently, there has been a spate of deals by Duke Realty to boost its portfolio-expansion efforts. Last month, the company disclosed a new industrial development on an 18.1 acre site at 1341 Enterprise Drive in I-55 submarket in Romeoville (read: Duke Realty Boosts Industrial Assets, Develops New Property ). Also, Duke Realty inked a new deal with B&G Foods Inc. ( BGS ) for leasing 445,942 square feet of space in Park 840 Logistics Center Building 653 in Lebanon (read: Duke Realty Inks Deal with B&G Foods to Lease Lebanon Asset ). Improving fundamentals in the U.S. industrial market is aiding Duke Realty accomplish its portfolio-expansion activities.

In July, Duke Realty reported second-quarter 2014 core FFO per share of 30 cents, a penny ahead of the Zacks Consensus Estimate and 3 cents above the prior-year quarter figure. The performance was driven by a notable rise in revenues and occupancy growth.

However, although Duke Realty's large development pipeline is encouraging for its future growth, it increases operational risks. Also, while the company is shedding its suburban office portfolio, it still has exposure to weak assets, which consequently exert pressure on rent and occupancies. Moreover, an expected rise in interest rates in the long term remains a matter of concern.

To gain deeper insight into Duke Realty, you can refer to our updated research report, which was issued on Sep 9, 2014.

Over the last 60 days, the Zacks Consensus Estimate for both 2014 and 2015 FFO per share moved up by a penny to $1.17 and $1.25, respectively. The stock currently has a Zacks Rank #3 (Hold).

Stocks That Warrant a Look

Investors interested in the REIT industry may also consider stocks like Sotherly Hotels Inc. ( SOHO ) and Government Properties Income Trust ( GOV ). Both stocks carry a Zacks Rank #1 (Strong Buy).

Note: FFO, a widely used metric to gauge the performance of REITs, are obtained after adding depreciation, amortization and other non-cash expenses to net income.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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