Duke Realty sells 62 office buildings for $1.12 billion

Duke Realty Corp. has agreed to sell a huge package of suburban U.S. office properties for $1.12 billion to a joint venture comprised of affiliates of Starwood Capital Group, Vanderbilt Partners and Trinity Capital Advisors.

Indianapolis-based Duke announced the sale Wednesday at the same time it released a quarterly financial report that mostly met analyst expectations.

The deal consists of 62 buildings with 6.9 million square feet of combined space and 57 acres of undeveloped land.

The portfolio includes all of Duke's wholly owned suburban office properties in Nashville, Tennessee; Raleigh, North Carolina; South Florida and St. Louis.

The portfolio is 91.0-percent leased and the buildings have an average age of 15.5 years, Duke said.

The sale will reduce the net operating income Duke gets from office properties from 22 percent to 12 percent, it said.

“This transaction is a continuation of our strategy to increase our focus on bulk industrial and medical-office properties and to reduce our investment in suburban office assets,” Duke CEO Denny Oklak said in a written statement.

Fourth quarter results

Duke had funds from operations of $104.8 million, or 30 cents per share, in the fourth quarter ended Dec. 31, matching the average estimate of analysts surveyed by Zacks Investment Research.

Funds from operations is a key performance measure in the real estate investment trust industry.

The company lost $3.7 million, or 1 cent per share, in the quarter, compared with a profit of $69.9 million, or 21 cents per share, in the fourth quarter of 2013.

Duke posted revenue of $238 million, just off the $241 million expected by analysts, according to Zacks.

Duke said it expects full-year funds from operations in the range of $1.12 to $1.20 per share.

The company's shares have increased 10 percent since the start of the year. Shares closed at $22.30 each Wednesday prior to the earnings release, an increase of 52 percent in the last year.