Duke Realty to unload local land holdings at auction

Duke Realty Corp. has assembled a self-styled SWAT team of local real estate brokers to auction off several of its land
holdings across central Indiana.

The locally based company plans to raise millions of dollars by selling nine undeveloped
tracts in Indianapolis, Fishers, Plainfield and Lebanon on Nov. 10 at the Renaissance Indianapolis North Hotel in Carmel.
All told, the roughly 60 acres of properties have room for up to 600,000 square feet of industrial space and about 150,000
square feet of office space.

The auction, which sets a minimum bid on only two properties, is an unusual approach
designed to prod potential buyers to act after months of cautious waiting.

Few tracts of raw land have changed
hands in the past year as companies instead hoarded cash and banks stopped financing the purchase of just about any real estate
that doesn’t produce income. Market observers are eager to see how much the parcels fetch, in part because sales could
establish some precedent on price.

Fewer than 5 percent of listed parcels are selling within 12 to 18 months, said
G. Ross Reller, a land broker with locally based Resource Commercial Real Estate.

“We don’t know what
the right price is anymore,” he said. “We don’t know if free is the right price.”

Duke
wants to sell dozens of what it now sees as surplus properties across the country in a bid to strengthen its balance sheet
and pay down some of its roughly $3.7 billion in debt. The company, which owns 140 million square feet of office, industrial
and health care properties in 20 U.S. cities, also is making progress raising new cash from investors: It sold $500 million
in notes in August.

If the auction in Carmel goes well, Duke may launch similar efforts elsewhere, said Wes Podell,
the company’s manager of land disposition.

Reller sees the company’s decision to unload land it had
banked for future development as an unfortunate nod to a fickle Wall Street. The markets want Duke and every other publicly
traded developer to raise cash and pay down debt at the same time—leaving few active buyers.

“When
a company of Duke’s stature decides they need to raise capital at the worst possible time to sell land, in my mind it
raises some red flags about the nature of being a public company,” Reller said.

But Podell says the property
sale is far from an everything-must-go event. The sites Duke is selling don’t match its short-term focus on leasing
up existing properties and in general are more appropriate for owner-occupants or smaller developers.

“For
us, this is purely about getting activity and momentum in these parks and hopefully getting some new tenants,” he said.
“It’s a tactical way of accomplishing our financial goals.”

The company is keeping larger land
holdings, including at the Parkwood office complex at Meridian and 96th streets and the AllPoints Midwest and AllPoints Anson
projects, which are joint ventures with locally based Browning Investments.

The offerings for sale include four
parcels ranging from about four acres to 12 acres at the Lebanon Business Park, a 6.5-acre spread behind Deflecto Corp. at
the Exit 5 Business Park in Fishers, and a seven-acre site in the heart of Plainfield’s industrial alley. It also includes
an industrial site in Park Fletcher and a 13-acre office site in Woodland Corporate Park.

The properties could
be particularly compelling for small and midsize business owners who can buy land and construct their own buildings in parks
that traditionally were controlled by a developer, said Patrick B. Lindley, an executive vice president in the local office
of Colliers Turley Martin Tucker who is coordinating the industrial portion of the sale.

The property sale could
benefit Duke beyond the sum the land fetches. The company expects to compete for construction business from buyers. And adding
growing companies to its business parks could result in new leasing opportunities down the road as the firms expand.

“It’s our own way of stimulating the industrial marketplace,” Lindley said.

Other brokers working
on the offering are Gus Miller of NAI Olympia Partners and Bryan Chandler of Eclipse Real Estate, both locally based. The
auctioneer is the local office of Irvine, Calif.-based Sperry Van Ness.

“It’s a good group we have
helping us,” Podell said. “Their networks are large and their buyer pools are vast.”

And Duke
plans to compensate them well—the company is offering commission rates up to 4 percent to brokers representing buyers,
even for properties that sell at auction.•