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As a subscriber you can listen to articles at work, in the car, or while you work out. Subscribe NowIndianapolis-based Duke Realty Corp. exceeded analysts’ expectations in the fourth quarter, generating funds from operations of 69 cents per share – more than a nickel better than the consensus estimate.
Funds from operations is a common measure of financial performance for real estate investment trusts like Duke.
Excluding one-time items, funds from operations were 71 cents per share, Duke said late yesterday. Analysts surveyed by Thompson Financial expected results of 63 cents per share, down from 80 cents per share in the prior-year period.
For the full year, funds for operations were $2.53 excluding special items, compared to $2.74 for 2007. Analysts expected $2.47.
Investors weren’t impressed. Duke shares were down 10 percent, to $10.86, about 11:30 a.m., likely in response to lower-than-expected financial projections for 2009 and the company’s decision to reduce its 2009 dividend on common stock from $1.94 to $1.
“Duke’s dividend has increased every year since becoming a public company in 1993,” CEO Dennis D. Oklak said in a statement. “In view of the unprecedented state of the capital markets, we believe that it is prudent to reduce the dividend.”
The company touted recent efforts to improve its cash position: It sold property for $265 million in the fourth quarter, for example, and will use that money to pay down debt. And the dividend reduction will save the company $150 million a year.
Duke also took steps to reduce operating expenses last year, trimming staff by 19 percent, freezing management salaries and scaling back some operations. The company halted retail and national build-to-suit development activities in 2008 and discontinued operations in startup markets including Seattle, San Antonio and Austin, Texas.
This year, the company expects funds from operations of $1.85 to $2.15, lower than the analysts’ consensus of $2.26.
“Duke’s long-term strategy as a fully integrated national owner, manager and developer of industrial, office, and health care properties remains sound,” CEO Dennis D. Oklak said in a statement, adding that maintaining liquidity is the company’s highest priority.
Occupancy rates at the company’s existing buildings dropped slightly to 92.4 percent from 93.8 percent at the end of September. Duke attributed the difference to new properties coming online.
“The fundamentals of our portfolio held up well during 2008,” Oklak said. “Looking ahead, we expect 2009 to be much more challenging from a leasing perspective.”
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