Duke Realty Corporation

First-quarter core FFO was $0.44 per share, up 12.8% from Q1 2021. AFFO totaled $156 million. Same-property NOI growth was 7.3% cash basis and 5.2% net effective. The company ended the quarter at 99.1% leased in the total in-service portfolio and 99.4% leased in the stabilized portfolio. Second-generation rents increased 29% cash and 49% GAAP, and the lease mark-to-market was 48% GAAP / 35% cash. For 2022, management raised core FFO guidance to $1.88-$1.94 per share from $1.87-$1.93, with the $1.91 midpoint implying more than 10.4% growth versus 2021. AFFO share-adjusted growth guidance moved to 9.1%-13% with an 11% midpoint. Same-property NOI growth guidance was raised to 5.8%-6.6% cash basis. Development starts guidance increased to $1.45 billion-$1.65 billion from $1.2 billion-$1.4 billion, and disposition guidance increased to $900 million-$1.1 billion.

Jim Connor said the quarter reflected record fundamentals across occupancy, rent growth, development starts and mark-to-market, and that these supported higher 2022 guidance. He emphasized that even with inflation, rates and geopolitical headwinds, secular drivers like e-commerce, inventory resiliency and overall GDP/consumer spending should keep leasing and development strong. His tone was confident and constructive, with repeated references to embedded rent growth and long-term double-digit FFO/AFFO growth.

Mark Denien highlighted Q1 core FFO of $0.44 per share, AFFO of $156 million, and same-property NOI growth of 7.3% cash / 5.2% net effective. He said the higher 2022 FFO outlook to $1.88-$1.94 per share and AFFO growth midpoint of 11% came from stronger occupancy, rent growth and development contributions. He also noted development starts guidance of $1.45 billion-$1.65 billion and said the higher disposition guidance is modestly dilutive in 2022 but accretive longer term because it funds higher-yielding development assets.

Analysts pressed management on whether higher dispositions and development starts could weigh on near-term FFO; Mark Denien said the main drag was the increased disposition plan, though it is intentional funding for higher-return development. They also asked how the portfolio would hold up in a recession, and Jim Connor pointed to the pandemic as a stress test, 99.99% rent collection two years ago, and the 48% mark-to-market as buffers. On development risk, management said speculative starts are supported by 99%+ occupancy, strong leasing volume and a development pipeline still about 52% preleased, while materials are being watched closely and labor has been less of an issue.