UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |||||
For the quarterly period ended March 31, 2022
OR
| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |||||
For the transition period from to
Commission File Number: 1-9044 (Duke Realty Corporation) 0-20625 (Duke Realty Limited Partnership)
(Exact Name of Registrant as Specified in Its Charter)
| (Duke Realty Corporation) | (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) | ||||||||||||||||
| (Address of Principal Executive Offices) | (Zip Code) | ||||||||||||||||
Registrant's Telephone Number, Including Area Code:
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 | ||||||||||||||||||||
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 | ☒ | No ☐ | Duke Realty Limited Partnership | ☒ | 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 | ☒ | No ☐ | Duke Realty Limited Partnership | ☒ | No ☐ | |||||||||||||||||||||
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Duke Realty Corporation:
☒ | Accelerated filer ☐ | Non-accelerated filer ☐ | Smaller reporting company ☐ | Emerging growth company ☐ | |||||||||||||
Duke Realty Limited Partnership:
| Large accelerated filer | ☐ | Accelerated filer ☐ | ☒ | Smaller reporting company ☐ | Emerging growth company ☐ | |||||||||||||||
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act):
| Duke Realty Corporation | Yes | ☐ | Duke Realty Limited Partnership | Yes | ☐ | |||||||||||||||||||||
The number of shares of Duke Realty Corporation's common stock outstanding at April 27, 2022 was 384,455,127 .
EXPLANATORY NOTE
This report (the "Report") combines the quarterly reports on Form 10-Q for the period ended March 31, 2022 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 approximately 99.0% of the common partnership interests of the Partnership ("General Partner Units") as of March 31, 2022. The remaining 1.0% of the common partnership interests ("Limited Partner Units" and, together with the General Partner Units, the "Common Units") are owned by limited partners. As the sole general partner of the Partnership, the General Partner has full, exclusive and complete responsibility and discretion in the day-to-day management and control of the Partnership.
The General Partner and the Partnership are operated as one enterprise. The management of the General Partner consists of the same members as the management of the Partnership. As the sole general partner with control of the Partnership, the General Partner consolidates the Partnership for financial reporting purposes, and the General Partner does not have any significant assets other than its investment in the Partnership. Therefore, the assets and liabilities of the General Partner and the Partnership are substantially the same.
We believe combining the quarterly reports on Form 10-Q of the General Partner and the Partnership into this single report results in the following benefits:
•enhances investors' understanding of the General Partner and the Partnership by enabling investors to view the business as a whole in the same manner as management views and operates the business;
•eliminates duplicative disclosure and provides a more streamlined and readable presentation of information since a substantial portion of the Company's disclosure applies to both the General Partner and the Partnership; and
•creates time and cost efficiencies through the preparation of one combined report instead of two separate reports.
We believe it is important to understand the few differences between the General Partner and the Partnership in the context of how we operate as an interrelated consolidated company. The General Partner's only material asset is its ownership of partnership interests in the Partnership. As a result, the General Partner does not conduct business itself, other than acting as the sole general partner of the Partnership and issuing public equity from time to time. The General Partner does not issue any indebtedness, but does guarantee some of the unsecured debt of the Partnership. The Partnership holds substantially all the assets of the business, directly or indirectly, and holds the ownership interests related to certain of the Company's investments. The Partnership conducts the operations of the business and has no publicly traded equity. Except for net proceeds from equity issuances by the General Partner, which are contributed to the Partnership in exchange for General Partner Units or Preferred Units, the Partnership generates the capital required by the business through its operations, its incurrence of indebtedness and the issuance of Limited Partner Units to third parties.
Noncontrolling interests, shareholders' equity and partners' capital are the main areas of difference between the consolidated financial statements of the General Partner and those of the Partnership. The noncontrolling interests in the Partnership's financial statements include the interests in consolidated investees not wholly owned by the Partnership. The noncontrolling interests in the General Partner's financial statements include the same noncontrolling interests at the Partnership level, as well as the common limited partnership interests in the Partnership, which are accounted for as partners' capital by the Partnership.
In order to highlight the differences between the General Partner and the Partnership, there are separate sections in this report, as applicable, that separately discuss the General Partner and the Partnership, including separate financial statements and separate Exhibit 31 and 32 certifications. In the sections that combine disclosure of the General Partner and the Partnership, this report refers to actions or holdings as being actions or holdings of the collective Company.
DUKE REALTY CORPORATION/DUKE REALTY LIMITED PARTNERSHIP
INDEX
| Page | |||||||||||
| Duke Realty Corporation: | |||||||||||
| Duke Realty Limited Partnership: | |||||||||||
| Duke Realty Corporation and Duke Realty Limited Partnership: | |||||||||||
2
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
DUKE REALTY CORPORATION AND SUBSIDIARIES
Consolidated Balance Sheets
(in thousands, except per share amounts)
| March 31, 2022 | December 31, 2021 | ||||||||||
| (Unaudited) | |||||||||||
| ASSETS | |||||||||||
| Real estate investments: | |||||||||||
| Real estate assets | $ | $ | |||||||||
| Construction in progress | |||||||||||
| Investments in and advances to unconsolidated joint ventures | |||||||||||
| Undeveloped land | |||||||||||
| Accumulated depreciation | ( | ( | |||||||||
| Net real estate investments | |||||||||||
| Real estate investments and other assets held-for-sale | |||||||||||
| Cash and cash equivalents | |||||||||||
| Accounts receivable | |||||||||||
| Straight-line rent receivable | |||||||||||
| Receivables on construction contracts, including retentions | |||||||||||
| Deferred leasing and other costs, net of accumulated amortization of $213,796 and $209,975 | |||||||||||
| Other escrow deposits and other assets | |||||||||||
| Total assets | $ | $ | |||||||||
| LIABILITIES AND EQUITY | |||||||||||
| Indebtedness: | |||||||||||
| Secured debt, net of deferred financing costs of $295 and $304 | $ | $ | |||||||||
| Unsecured debt, net of deferred financing costs of $42,222 and $45,136 | |||||||||||
| Unsecured line of credit | |||||||||||
| Liabilities related to real estate investments held-for-sale | |||||||||||
| Construction payables and amounts due subcontractors, including retentions | |||||||||||
| Accrued real estate taxes | |||||||||||
| Accrued interest | |||||||||||
| Other liabilities | |||||||||||
| Tenant security deposits and prepaid rents | |||||||||||
| Total liabilities | |||||||||||
| Shareholders' equity: | |||||||||||
| Common shares ($0.01 par value); 600,000 shares authorized; 383,494 and 382,513 shares issued and outstanding, respectively | |||||||||||
| Additional paid-in capital | |||||||||||
| Accumulated other comprehensive loss | ( | ( | |||||||||
| Retained earnings (distributions in excess of net income) | ( | ||||||||||
| Total shareholders' equity | |||||||||||
| Noncontrolling interests | |||||||||||
| Total equity | |||||||||||
| Total liabilities and equity | $ | $ | |||||||||
See accompanying Notes to Consolidated Financial Statements
3
DUKE REALTY CORPORATION AND SUBSIDIARIES
Consolidated Statements of Operations and Comprehensive Income
For the three months ended March 31,
(in thousands, except per share amounts)
(Unaudited)
| Three Months Ended | |||||||||||
| 2022 | 2021 | ||||||||||
| Revenues: | |||||||||||
| Rental and related revenue | $ | $ | |||||||||
| General contractor and service fee revenue | |||||||||||
| Expenses: | |||||||||||
| Rental expenses | |||||||||||
| Real estate taxes | |||||||||||
| General contractor and other services expenses | |||||||||||
| Depreciation and amortization | |||||||||||
| Other operating activities: | |||||||||||
| Equity in earnings of unconsolidated joint ventures | |||||||||||
| Gain on sale of properties | |||||||||||
| Gain on land sales | |||||||||||
| Other operating expenses | ( | ( | |||||||||
| Non-incremental costs related to successful leases | ( | ( | |||||||||
| General and administrative expenses | ( | ( | |||||||||
| Operating income | |||||||||||
| Other income (expenses): | |||||||||||
| Interest and other income, net | |||||||||||
| Interest expense | ( | ( | |||||||||
| Loss on debt extinguishment | ( | ( | |||||||||
| Income before income taxes | |||||||||||
| Income tax expense | ( | ( | |||||||||
| Net income | |||||||||||
| Net income attributable to noncontrolling interests | ( | ( | |||||||||
| Net income attributable to common shareholders | $ | $ | |||||||||
| Weighted average number of common shares outstanding | |||||||||||
| Weighted average number of common shares and potential dilutive securities | |||||||||||
| Net income per common share attributable to common shareholders - basic | $ | $ | |||||||||
| Net income per common share attributable to common shareholders - diluted | $ | $ | |||||||||
| Comprehensive income: | |||||||||||
| Net income | $ | $ | |||||||||
| Other comprehensive income: | |||||||||||
| Amortization of interest rate swap contracts | |||||||||||
| Comprehensive income | $ | $ | |||||||||
See accompanying Notes to Consolidated Financial Statements
4
DUKE REALTY CORPORATION AND SUBSIDIARIES
Consolidated Statements of Cash Flows
For the three months ended March 31,
(in thousands)
(Unaudited)
| Three Months Ended | |||||||||||
| 2022 | 2021 | ||||||||||
| Cash flows from operating activities: | |||||||||||
| Net income | $ | $ | |||||||||
| Adjustments to reconcile net income to net cash provided by operating activities: | |||||||||||
| Depreciation of buildings and tenant improvements | |||||||||||
| Amortization of deferred leasing and other costs | |||||||||||
| Amortization of deferred financing costs | |||||||||||
| Straight-line rental income and expense, net | ( | ( | |||||||||
| Loss on debt extinguishment | |||||||||||
| Gain on land and property sales | ( | ( | |||||||||
| Third-party construction contracts, net | |||||||||||
| Other accrued revenues and expenses, net | ( | ||||||||||
| Operating distributions received in excess of (less than) equity in earnings from unconsolidated joint ventures | ( | ||||||||||
| Net cash provided by operating activities | |||||||||||
| Cash flows from investing activities: | |||||||||||
| Development of real estate investments | ( | ( | |||||||||
| Acquisition of buildings and related intangible assets | ( | ( | |||||||||
| Acquisition of land and other real estate assets | ( | ( | |||||||||
| Second generation tenant improvements, leasing costs and building improvements | ( | ( | |||||||||
| Other deferred leasing costs | ( | ( | |||||||||
| Other assets | ( | ( | |||||||||
| Proceeds from land and property sales, net | |||||||||||
| Capital distributions from unconsolidated joint ventures | |||||||||||
| Capital contributions and advances to unconsolidated joint ventures | ( | ||||||||||
| Net cash used for investing activities | ( | ( | |||||||||
| Cash flows from financing activities: | |||||||||||
| Proceeds from issuance of common shares, net | |||||||||||
| Proceeds from unsecured debt | |||||||||||
| Payments on unsecured debt | ( | ( | |||||||||
| Payments on secured indebtedness including principal amortization | ( | ( | |||||||||
| Borrowings (repayments) on line of credit, net | ( | ||||||||||
| Distributions to common shareholders | ( | ( | |||||||||
| Distributions to noncontrolling interests | ( | ( | |||||||||
| Tax payments on stock-based compensation awards | ( | ( | |||||||||
| Change in book cash overdrafts | ( | ||||||||||
| Other financing activities | ( | ||||||||||
| Deferred financing costs | ( | ( | |||||||||
| Net cash (used for) provided by financing activities | ( | ||||||||||
| Net decrease in cash, cash equivalents and restricted cash | ( | ( | |||||||||
| Cash, cash equivalents and restricted cash at beginning of period | |||||||||||
| Cash, cash equivalents and restricted cash at end of period | $ | $ | |||||||||
| Non-cash activities: | |||||||||||
| Lease liabilities arising from right-of-use assets | $ | $ | |||||||||
| Assumption of indebtedness and other liabilities in real estate acquisitions | $ | $ | |||||||||
| Contribution of properties to unconsolidated joint venture | $ | $ | |||||||||
| Non-cash distribution of assets from unconsolidated joint ventures, net | $ | $ | |||||||||
See accompanying Notes to Consolidated Financial Statements
5
DUKE REALTY CORPORATION AND SUBSIDIARIES
Consolidated Statements of Changes in Equity
For the three months ended March 31, 2022 and 2021
(in thousands, except per share data)
(Unaudited)
| Common Shareholders | |||||||||||||||||||||||||||||||||||
| Common Stock | Additional Paid-in Capital | Accumulated Other Comprehensive Loss | Retained Earnings (Distributions in Excess of Net Income) | Noncontrolling Interests | Total | ||||||||||||||||||||||||||||||
| Balance at December 31, 2021 | $ | $ | $ | ( | $ | ( | $ | $ | |||||||||||||||||||||||||||
| Net income | — | — | — | ||||||||||||||||||||||||||||||||
| Other comprehensive income | — | — | — | — | |||||||||||||||||||||||||||||||
| Issuance of common shares | — | — | — | ||||||||||||||||||||||||||||||||
| Stock-based compensation plan activity | — | ( | |||||||||||||||||||||||||||||||||
| Distributions to common shareholders ($0.28 per share) | — | — | — | ( | — | ( | |||||||||||||||||||||||||||||
| Distributions to noncontrolling interests | — | — | — | — | ( | ( | |||||||||||||||||||||||||||||
| Balance at March 31, 2022 | $ | $ | $ | ( | $ | $ | $ | ||||||||||||||||||||||||||||
| Common Shareholders | |||||||||||||||||||||||||||||||||||
| Common Stock | Additional Paid-in Capital | Accumulated Other Comprehensive Loss | Distributions in Excess of Net Income | Noncontrolling Interests | Total | ||||||||||||||||||||||||||||||
| Balance at December 31, 2020 | $ | $ | $ | ( | $ | ( | $ | $ | |||||||||||||||||||||||||||
| Net income | — | — | — | ||||||||||||||||||||||||||||||||
| Other comprehensive income | — | — | — | — | |||||||||||||||||||||||||||||||
| Issuance of common shares | — | — | — | ||||||||||||||||||||||||||||||||
| Stock-based compensation plan activity | — | ( | |||||||||||||||||||||||||||||||||
| Distributions to common shareholders ($0.255 per share) | — | — | — | ( | — | ( | |||||||||||||||||||||||||||||
| Distributions to noncontrolling interests | — | — | — | — | ( | ( | |||||||||||||||||||||||||||||
| Balance at March 31, 2021 | $ | $ | $ | ( | $ | ( | $ | $ | |||||||||||||||||||||||||||
See accompanying Notes to Consolidated Financial Statements
6
DUKE REALTY LIMITED PARTNERSHIP AND SUBSIDIARIES
Consolidated Balance Sheets
(in thousands)
| March 31, 2022 | December 31, 2021 | ||||||||||
| (Unaudited) | |||||||||||
| ASSETS | |||||||||||
| Real estate investments: | |||||||||||
| Real estate assets | $ | $ | |||||||||
| Construction in progress | |||||||||||
| Investments in and advances to unconsolidated joint ventures | |||||||||||
| Undeveloped land | |||||||||||
| Accumulated depreciation | ( | ( | |||||||||
| Net real estate investments | |||||||||||
| Real estate investments and other assets held-for-sale | |||||||||||
| Cash and cash equivalents | |||||||||||
| Accounts receivable | |||||||||||
| Straight-line rent receivable | |||||||||||
| Receivables on construction contracts, including retentions | |||||||||||
| Deferred leasing and other costs, net of accumulated amortization of $213,796 and $209,975 | |||||||||||
| Other escrow deposits and other assets | |||||||||||
| Total assets | $ | $ | |||||||||
| LIABILITIES AND EQUITY | |||||||||||
| Indebtedness: | |||||||||||
| Secured debt, net of deferred financing costs of $295 and $304 | $ | $ | |||||||||
| Unsecured debt, net of deferred financing costs of $42,222 and $45,136 | |||||||||||
| Unsecured line of credit | |||||||||||
| Liabilities related to real estate investments held-for-sale | |||||||||||
| Construction payables and amounts due subcontractors, including retentions | |||||||||||
| Accrued real estate taxes | |||||||||||
| Accrued interest | |||||||||||
| Other liabilities | |||||||||||
| Tenant security deposits and prepaid rents | |||||||||||
| Total liabilities | |||||||||||
| Partners' equity: | |||||||||||
| Common equity (383,494 and 382,513 General Partner Units issued and outstanding, respectively) | |||||||||||
| Limited Partners' common equity (3,879 and 3,663 Limited Partner Units issued and outstanding, respectively) | |||||||||||
| Accumulated other comprehensive loss | ( | ( | |||||||||
| Total partners' equity | |||||||||||
| Noncontrolling interests | |||||||||||
| Total equity | |||||||||||
| Total liabilities and equity | $ | $ | |||||||||
See accompanying Notes to Consolidated Financial Statements
7
DUKE REALTY LIMITED PARTNERSHIP AND SUBSIDIARIES
Consolidated Statements of Operations and Comprehensive Income
For the three months ended March 31,
(in thousands, except per unit amounts)
(Unaudited)
| Three Months Ended | |||||||||||
| 2022 | 2021 | ||||||||||
| Revenues: | |||||||||||
| Rental and related revenue | $ | $ | |||||||||
| General contractor and service fee revenue | |||||||||||
| Expenses: | |||||||||||
| Rental expenses | |||||||||||
| Real estate taxes | |||||||||||
| General contractor and other services expenses | |||||||||||
| Depreciation and amortization | |||||||||||
| Other operating activities: | |||||||||||
| Equity in earnings of unconsolidated joint ventures | |||||||||||
| Gain on sale of properties | |||||||||||
| Gain on land sales | |||||||||||
| Other operating expenses | ( | ( | |||||||||
| Non-incremental costs related to successful leases | ( | ( | |||||||||
| General and administrative expenses | ( | ( | |||||||||
| Operating income | |||||||||||
| Other income (expenses): | |||||||||||
| Interest and other income, net | |||||||||||
| Interest expense | ( | ( | |||||||||
| Loss on debt extinguishment | ( | ( | |||||||||
| Income before income taxes | |||||||||||
| Income tax expense | ( | ( | |||||||||
| Net income | |||||||||||
| Net income attributable to noncontrolling interests | ( | ( | |||||||||
| Net income attributable to common unitholders | $ | $ | |||||||||
| Weighted average number of Common Units outstanding | |||||||||||
| Weighted average number of Common Units and potential dilutive securities | |||||||||||
| Net income per Common Unit attributable to common unitholders - basic | $ | $ | |||||||||
| Net income per Common Unit attributable to common unitholders - diluted | $ | $ | |||||||||
| Comprehensive income: | |||||||||||
| Net income | $ | $ | |||||||||
| Other comprehensive income: | |||||||||||
| Amortization of interest rate swap contracts | |||||||||||
| Comprehensive income | $ | $ | |||||||||
See accompanying Notes to Consolidated Financial Statements
8
DUKE REALTY LIMITED PARTNERSHIP AND SUBSIDIARIES
Consolidated Statements of Cash Flows
For the three months ended March 31,
(in thousands)
(Unaudited)
| Three Months Ended | |||||||||||
| 2022 | 2021 | ||||||||||
| Cash flows from operating activities: | |||||||||||
| Net income | $ | $ | |||||||||
| Adjustments to reconcile net income to net cash provided by operating activities: | |||||||||||
| Depreciation of buildings and tenant improvements | |||||||||||
| Amortization of deferred leasing and other costs | |||||||||||
| Amortization of deferred financing costs | |||||||||||
| Straight-line rental income and expense, net | ( | ( | |||||||||
| Loss on debt extinguishment | |||||||||||
| Gain on land and property sales | ( | ( | |||||||||
| Third-party construction contracts, net | |||||||||||
| Other accrued revenues and expenses, net | ( | ||||||||||
| Operating distributions received in excess of (less than) equity in earnings from unconsolidated joint ventures | ( | ||||||||||
| Net cash provided by operating activities | |||||||||||
| Cash flows from investing activities: | |||||||||||
| Development of real estate investments | ( | ( | |||||||||
| Acquisition of buildings and related intangible assets | ( | ( | |||||||||
| Acquisition of land and other real estate assets | ( | ( | |||||||||
| Second generation tenant improvements, leasing costs and building improvements | ( | ( | |||||||||
| Other deferred leasing costs | ( | ( | |||||||||
| Other assets | ( | ( | |||||||||
| Proceeds from land and property sales, net | |||||||||||
| Capital distributions from unconsolidated joint ventures | |||||||||||
| Capital contributions and advances to unconsolidated joint ventures | ( | ||||||||||
| Net cash used for investing activities | ( | ( | |||||||||
| Cash flows from financing activities: | |||||||||||
| Contributions from the General Partner | |||||||||||
| Proceeds from unsecured debt | |||||||||||
| Payments on unsecured debt | ( | ( | |||||||||
| Payments on secured indebtedness including principal amortization | ( | ( | |||||||||
| Borrowings (repayments) on line of credit, net | ( | ||||||||||
| Distributions to common unitholders | ( | ( | |||||||||
| Distributions to noncontrolling interests | ( | ||||||||||
| Tax payments on stock-based compensation awards | ( | ( | |||||||||
| Change in book cash overdrafts | ( | ||||||||||
| Other financing activities | ( | ||||||||||
| Deferred financing costs | ( | ( | |||||||||
| Net cash (used for) provided by financing activities | ( | ||||||||||
| Net decrease in cash, cash equivalents and restricted cash | ( | ( | |||||||||
| Cash, cash equivalents and restricted cash at beginning of period | |||||||||||
| Cash, cash equivalents and restricted cash at end of period | $ | $ | |||||||||
| Non-cash activities: | |||||||||||
| Lease liabilities arising from right-of-use assets | $ | $ | |||||||||
| Assumption of indebtedness and other liabilities in real estate acquisitions | $ | $ | |||||||||
| Contribution of properties to unconsolidated joint venture | $ | $ | |||||||||
| Non-cash distribution of assets from unconsolidated joint ventures, net | $ | $ | |||||||||
See accompanying Notes to Consolidated Financial Statements
9
DUKE REALTY LIMITED PARTNERSHIP AND SUBSIDIARIES
Consolidated Statements of Changes in Equity
For the three months ended March 31, 2022 and 2021
(in thousands, except per unit data)
(Unaudited)
| Common Unitholders | |||||||||||||||||||||||||||||||||||
| General | Limited | Accumulated | |||||||||||||||||||||||||||||||||
| Partner's | Partners' | Other | Total | ||||||||||||||||||||||||||||||||
| Common Equity | Common Equity | Comprehensive Loss | Partners' Equity | Noncontrolling Interests | Total Equity | ||||||||||||||||||||||||||||||
| Balance at December 31, 2021 | $ | $ | $ | ( | $ | $ | $ | ||||||||||||||||||||||||||||
| Net income | — | ||||||||||||||||||||||||||||||||||
| Other comprehensive income | — | — | — | ||||||||||||||||||||||||||||||||
| Capital contribution from the General Partner | — | — | — | ||||||||||||||||||||||||||||||||
| Stock-based compensation plan activity | — | — | |||||||||||||||||||||||||||||||||
| Distributions to common unitholders ($0.28 per Common Unit) | ( | ( | — | ( | — | ( | |||||||||||||||||||||||||||||
| Balance at March 31, 2022 | $ | $ | $ | ( | $ | $ | $ | ||||||||||||||||||||||||||||
| Common Unitholders | |||||||||||||||||||||||||||||||||||
| General | Limited | Accumulated | |||||||||||||||||||||||||||||||||
| Partner's | Partners' | Other | Total | ||||||||||||||||||||||||||||||||
| Common Equity | Common Equity | Comprehensive Loss | Partners' Equity | Noncontrolling Interests | Total Equity | ||||||||||||||||||||||||||||||
| Balance at December 31, 2020 | $ | $ | $ | ( | $ | $ | $ | ||||||||||||||||||||||||||||
| Net income | — | ||||||||||||||||||||||||||||||||||
| Other comprehensive income | — | — | — | ||||||||||||||||||||||||||||||||
| Capital contribution from the General Partner | — | — | — | ||||||||||||||||||||||||||||||||
| Stock-based compensation plan activity | — | — | |||||||||||||||||||||||||||||||||
| Distributions to common unitholders ($0.255 per Common Unit) | ( | ( | — | ( | — | ( | |||||||||||||||||||||||||||||
| Distributions to noncontrolling interests | — | — | — | — | ( | ( | |||||||||||||||||||||||||||||
| Balance at March 31, 2021 | $ | $ | $ | ( | $ | $ | $ | ||||||||||||||||||||||||||||
See accompanying Notes to Consolidated Financial Statements
10
DUKE REALTY CORPORATION AND DUKE REALTY LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. General Basis of Presentation
The interim consolidated financial statements included herein have been prepared by the General Partner and the Partnership. The 2021 year-end consolidated balance sheet data included in this Report was derived from the audited financial statements in the combined Annual Report on Form 10-K of the General Partner and the Partnership for the year ended December 31, 2021 (the "2021 Annual Report"), but does not include all disclosures required by accounting principles generally accepted in the United States of America ("GAAP"). The financial statements have been prepared in accordance with GAAP for interim financial information and in accordance with Rule 10-01 of Regulation S-X of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation have been included. GAAP requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and revenue and expenses during the reporting period. Our actual results could differ from those estimates and assumptions. These financial statements should be read in conjunction with Management's Discussion and Analysis of Financial Condition and Results of Operations included herein and the consolidated financial statements and notes thereto included in the 2021 Annual Report.
The General Partner was formed in 1985, and we believe that it qualifies as a REIT under the provisions of the Internal Revenue Code of 1986, as amended (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 99.0 % of the Common Units as of March 31, 2022. The remaining 1.0 % 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 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.
11
2. Leases
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 common area maintenance ("CAM").
If we conclude that collection of lease payments is not probable, any difference between the revenue that would have been recognized under the straight-line method and the lease payments that have been collected is recognized as a current period adjustment to rental revenues. Any other changes in collectability reserves for leases not subject to the collectability constraint are also recorded as a current period adjustment to rental revenues.
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. The components of Rental and Related Revenue are as follows (in thousands):
| Three Months Ended March 31, | ||||||||||||||
| 2022 | 2021 | |||||||||||||
| Rental revenue - fixed payments | $ | $ | ||||||||||||
| Rental revenue - variable payments (1) | ||||||||||||||
| Rental and related revenue | $ | $ | ||||||||||||
(1) Primarily includes tenant recoveries for real estate taxes, insurance and CAM.
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