EDGAR 10-K Filing

Company CIK: 783280
Filing Year: 2022
Filename: 783280_10-K_2022_0000783280-22-000010.json

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ITEM 1. BUSINESS
Item 1. Business
Company Overview
The General Partner and Partnership collectively specialize in the ownership, management and development of industrial real estate.
The General Partner is a self-administered and self-managed REIT, which began operations upon completion of an initial public offering in February 1986.
The Partnership was formed in October 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 99.1% of the Common Units at December 31, 2021. The remaining 0.9% of the Common Units are owned by limited partners. 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.
At December 31, 2021, we owned or jointly controlled 548 primarily industrial properties which encompassed 162.7 million rentable square feet (including 40 unconsolidated joint venture in-service properties with 12.9 million square feet, 29 consolidated properties under development with 8.5 million square feet and two unconsolidated joint venture properties under development with 1.2 million square feet). Our properties are leased by a diverse base of more than 800 tenants whose businesses include logistics, e-commerce, manufacturing, wholesale trade and retailing. We have one tenant, to whom we both lease a significant amount of space and also provide general contractor and construction management services, from whom we derived greater than 10.0% of our total revenues.
We also owned, including through ownership interests in unconsolidated joint ventures (with acreage not adjusted for our percentage ownership interest), 431 acres of land and controlled an additional 925 acres through purchase options.
Our headquarters and executive offices are located in Indianapolis, Indiana. We additionally have regional offices or significant operations in 18 other geographic or metropolitan areas including Atlanta, Georgia; Chicago, Illinois;
Cincinnati, Ohio; Columbus, Ohio; Dallas, Texas; Houston, Texas; Minneapolis/St. Paul, Minnesota; Nashville, Tennessee; Raleigh, North Carolina; Savannah, Georgia; Seattle, Washington; Washington D.C./Baltimore, Maryland; Central Florida; New Jersey; Northern and Southern California; Pennsylvania and South Florida.
Company Strategies
Our overall strategy is to maximize cash flows from operations, increase our investment in Coastal Tier 1 markets (we define "Coastal Tier 1" markets as Southern California, Northern California, Seattle, Northern New Jersey and South Florida) and to maintain a strong balance sheet.
Operational Strategy
Our operational focus is to drive profitability by maximizing cash from operations and earnings through (i) maintaining property occupancy, increasing rental rates and prioritizing timely collection of monthly rental payments, while also keeping lease-related capital costs contained, by effectively managing our portfolio of existing properties and (ii) providing a broad line of real estate services to our tenants and to third parties.
Asset Strategy
Our strategic objectives include (i) increasing our investment in quality industrial properties through development, with sustainable design features that will meet customer needs; (ii) acquiring properties primarily in Coastal Tier 1 markets, which we believe provide the best potential for future rental growth; and (iii) maintaining an optimal land inventory through selected strategic land acquisitions to support new development activity. We continue to execute our asset strategy through a disciplined approach by identifying development opportunities and identifying select acquisition targets where the asset quality and pricing meet our objectives.
Capital Strategy
Our capital strategy is to maintain a strong balance sheet by actively managing the components of our capital structure in coordination with the execution of our overall operational and asset strategies. We are focused on maintaining our current investment grade ratings from our credit rating agencies. As of December 31, 2021, our senior unsecured notes have been assigned a rating of Baa1 by Moody's Investors Services and BBB+ by Standard & Poor's Ratings Group and we are focused on maintaining such ratings in order to maintain access to liquidity. A securities rating is not a recommendation to buy, sell, or hold securities and is subject to revision or withdrawal at any time by the rating organization.
In support of our capital strategy, we continually evaluate our portfolio and regularly identify and dispose of assets that no longer meet our long-term objectives.
We continue to focus on maintaining a balanced and flexible capital structure which includes: (i) extending and sequencing the maturity dates of our outstanding debt obligations; (ii) borrowing primarily at fixed rates; and (iii) issuing common equity as needed to maintain appropriate leverage parameters or support significant strategic developments or acquisitions. With our successes to date and continued focus on maintaining a strong balance sheet, we expect to be opportunistic in our investment opportunities.
Competitive Conditions
As a fully integrated commercial real estate firm, we provide in-house leasing, management, development and construction services which we believe, coupled with our significant base of commercially zoned and unencumbered land in existing business parks, should give us a competitive advantage as a real estate operator and in future development activities.
We believe that the management of real estate opportunities and risks can be done most effectively at regional or on local levels. As a result, we intend to continue our emphasis on increasing our market share, to the extent it is in markets that align with our asset strategy, and effective rents in the primary markets where we own properties. We believe that this regional focus will allow us to assess market supply and demand for real estate more effectively as well as to capitalize on the strong relationships with our tenant base. In addition, we seek to further capitalize on our many strong relationships with customers that operate on a national level. As a fully integrated real estate company, we are able to arrange for or provide to our tenants not only well located and well maintained facilities, but also the capability for build-to-suit construction, tenant finish construction, and expansion flexibility.
All of our properties are located in areas that include competitive properties. Institutional investors, other REITs or local real estate operators generally own such properties; however, no single competitor or small group of competitors is dominant in our current markets. The supply of and demand for similar available rental properties may affect the rental rates we will receive on our properties. Other competitive factors include the attractiveness of the property location, the quality of the property and tenant services provided, and the reputation of the owner and operator.
Environmental, Social and Corporate Governance ("ESG")
We are focused on promoting our growth in a sustainable way, one that succeeds by delivering long-term value for our stakeholders. As part of our vision to deliver sustainable excellence in logistics real estate, we have a long-standing commitment to sustainable practices in environmental, social and corporate governance initiatives.
Environmental
We continuously look for new and better ways to minimize our environmental impact as well as that of our tenants. We are especially focused on energy consumption, water consumption and greenhouse gas emissions.
On December 17, 2019, we adopted a Sustainable Development Policy intended to increase the operational efficiency of our buildings and promote sustainable design principles. We are committed to integrating innovative, sustainable building design features in alignment with the U.S. Green Building Council® ("USGBC®") Leadership in Energy and Environmental Design (or LEED®), of which we have been a member of since 2008. In April 2021, we achieved acceptance into the USGBC® volume certification program to help streamline our sustainable development process. Specifically, we invest in sustainable practices, such as water usage reduction measures, efficient lighting, high efficient HVAC and renewable energy, construction waste reduction, recycling and user well-being attributes with the goal of positively impacting the experience of our tenants and increasing the value of our assets.
We do not have access to approximately 95% of the utility usage at our properties but, for the utilities in our control, we have been partnering with a third party data management provider to help monitor and manage usage.
Below is a chart showing our information for the applicable sustainability metrics that we monitor and report on in alignment with the Sustainability Accounting Standards Board standard for real estate:
Topic Accounting Metric Code Our Information
Energy Management Description of how building energy management considerations are integrated into property investment analysis and operational strategy
IF-RE-130a.5 We integrate energy usage reduction measures on all new developments, incorporating LEED certification requirements and applicable aspects of our own sustainability policies/programs. These measures include energy modeling, high efficiency equipment (HVAC and lighting), and climate zone appropriate design factors. We have an ongoing lighting retrofit program, replacing outdated light fixtures with LED fixtures.
Water Management Description of water management risks and discussion of strategies and practices to mitigate those risks
IF-RE-140a.4 We integrate water reduction measures on all new developments and renovation, incorporating LEED water efficient credit criteria or applicable aspects of our own sustainability policies/programs. These measures include the use of WaterSense® fixtures for all domestic usage, xeriscaping to minimize or eliminate the need for irrigation, and water usage monitoring, where available and appropriate.
Climate Change Adaptation Area of properties located in 100-year flood zones, by property subsector IF-RE-450a.1 4.5 million square feet.
In November 2021, in an effort to mitigate and reduce our greenhouse gas emissions, we set a goal to achieve carbon neutrality for our own operations by 2025 and to achieve carbon neutrality in alignment with the Paris Climate Accords by 2040. Carbon emissions from our operations are calculated as scope 1 and 2 emissions, which are direct and indirect emissions such as purchased power to operate our Duke Realty offices. Scope 3 emissions are the largest category and include the emissions created from our upstream and downstream activities including but not limited to tenant utilities from our owned buildings, the development process, waste and company travel. We have a comprehensive strategy to meet our goals by reducing carbon emissions, replacing energy sources with renewable energy and offsetting energy consumption.
We issued two green bonds in 2021 including an issuance of $500.0 million of senior unsecured notes in November 2021 with a stated interest rate of 2.25% due January 15, 2032 and an issuance of $450.0 million of senior unsecured notes in January 2021 with a stated interest rate of 1.75% due February 1, 2031. We now hold three green bonds totaling $1.35 billion. The net proceeds from these offerings will be used to finance future or refinance recently completed “eligible green projects”. These projects may include green buildings, energy efficiency projects, sustainable water and wastewater management systems, renewable energy projects, clean transportation solutions and pollution prevention and control. Green buildings are new development, redevelopment, or acquisitions of buildings, that have or are expected to receive Certified, Silver or Gold LEED certification through a 3rd party review and validation process by USGBC’s Green Building Certification Institute. In 2021, we also added a sustainability metric to our line of credit tied to growing the percentage of our LEED® developed projects.
Social
We are committed to social responsibility by developing and maintaining strong relationships with our associates, customers, business partners, investors as well as the communities in which we operate and invest. We are committed to fair compensation and pay equity, fostering a dynamic and balanced work environment and providing associates with developmental opportunities to perform well and derive satisfaction from their work. We support and encourage our associates to participate in volunteer and community activities by providing each associate with two paid community days per year. We also have charitable contribution programs, such as our dollars for doers program (matching dollars for volunteer hours spent) and our matching gifts program (matching dollars for associates donations to charities). In addition, we partner with various charitable organizations, including the American Red Cross since 2017. Our sustainable development, energy, and resource usage policies help to create a cleaner and healthier environment for the communities we serve. In 2021, we completed a community solar project where we partnered with solar developers to install solar panels on the rooftops of several buildings we own to enable the capture of solar energy for the neighboring community. Through all of these initiatives and others, we endeavor to make a positive impact on the communities in which we conduct business.
Corporate Governance
Since our inception, we not only have strived to be a top-performer operationally, but also to lead in issues important to investors such as disclosure and corporate governance. The General Partner's system of governance reinforces this commitment and, as a limited partnership that has one general partner owning over 90% of the Partnership's common interest, the governance of the Partnership is necessarily linked to the corporate governance of the General Partner. Summarized below are the highlights of the General Partner's Corporate Governance initiatives.
Board Composition • The General Partner's board is controlled by a supermajority (91.7%) of "Independent Directors," as such term is defined under the rules of the New York Stock Exchange (the "NYSE")
• 55% of the Independent Directors are female or people of color and the General Partner's compensation and human capital and finance committees are both chaired by females
Board Committees • The General Partner's board committee members are all Independent Directors
Lead Director • The Lead Director is independent, serves as the Chairman of the General Partner's corporate governance committee and presides at all meetings of the board at which the Chair is not present, including executive sessions of the independent directors (among other responsibilities)
Board Policies - General Partner's Bylaws include proxy access
- Board Diversity, Equity and Inclusion Policy
- No Shareholder Rights Plan (Poison Pill)
- Code of Business Ethics applies to all directors and employees of the General Partner, including the Chief Executive Officer and senior financial officers; waivers applied to executive officers require the approval of (i) the General Partner's board of directors or (ii) the General Partner's corporate governance committee
- Orientation program for new directors of the General Partner
- Independence of directors of the General Partner is reviewed annually
- Independent Directors of the General Partner meet at least quarterly in executive sessions
- Independent Directors of the General Partner receive no compensation from the General Partner other than as directors
- Equity-based compensation plans require the approval of the General Partner's shareholders
- Board effectiveness and performance are reviewed annually by the General Partner's corporate governance committee
- Individual director evaluations are performed annually
- The General Partner's corporate governance committee conducts an annual review of the Chief Executive Officer succession plan
- Independent Directors and all board committees of the General Partner may retain outside advisors, as they deem appropriate
- Prohibition on repricing of outstanding stock options of the General Partner
- Directors of the General Partner required to offer resignation upon job change
- Majority voting for election of directors of the General Partner
- Human Rights Policy
- Shareholder Communications Policy
Ownership Minimum Stock Ownership Guidelines apply to all directors and executive officers of the General Partner
The General Partner's Code of Business Ethics (which applies to all directors and associates of the General Partner, including the Chief Executive Officer and senior financial officers) and the Corporate Governance Guidelines are available in the Investor Relations/Corporate Governance section of the General Partner's website at www.dukerealty.com. A copy of these documents may also be obtained without charge by writing to Duke Realty Corporation, 8711 River Crossing Boulevard, Indianapolis, Indiana 46240, Attention: Investor Relations. If we amend our Code of Business Ethics as it applies to the directors and all executive officers of the General Partner or grant a waiver from any provision of the Code of Business Ethics to any such person, we may, rather than filing a current report on Form 8-K, disclose such amendment or waiver in the Investor Relations/Corporate Governance section of the General Partner's website at www.dukerealty.com.
Since 2020, we implemented a Vendor Code of Conduct that outlines our expectations and standards for how our vendors operate while doing business on our behalf.
Further, we publish an annual Corporate Responsibility Report which formally communicates our commitments and leadership around ESG issues.
Through all of our environmental, social and corporate governance efforts, we demonstrate that operating and developing commercial real estate can be conducted with a conscious regard for the environment and community, while also benefiting our investors, associates, tenants and the communities in which we operate.
Human Capital
We had approximately 340 associates at December 31, 2021 and our average associate tenure was 12.2 years. We are committed to increasing transparency in the diversity of our workforce, so in 2021 we disclosed our 2020 EEO-1 report on our corporate website. The composition of our workforce and upper management at December 31, 2021 were as follows:
Workforce Upper Management
Female 46 % 24 %
Male 54 % 76 %
People of color 16 % 12 %
Other 84 % 88 %
Our compensation and human capital committee, a board committee, reviews associate turnover and diversity, as well as associate development and engagement programs. We also routinely conduct associate engagement surveys and have received numerous awards for being a great place to work. While attracting, developing and retaining our talent, we are dedicated to fair compensation, fostering an inclusive and diverse culture and a dynamic and balanced work environment, which provides associates with opportunities to perform well and derive satisfaction from their work. The compensation structures of many of our senior associates are directly tied to metrics or other objectives that support our corporate strategy.
We require ethical conduct by our associates and all associates are required to complete annual Code of Business Ethics training sessions, and associates and directors must sign off on our Code of Business Ethics every year.
Additional Information
For additional information regarding our investments and operations, see Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations" and Item 8, "Financial Statements and Supplementary Data." For additional information about our business segments, see Item 8, "Financial Statements and Supplementary Data - Notes to Consolidated Financial Statements - (9) Segment Reporting."
Available Information
In addition to this Report, we file quarterly and current reports, proxy statements and other information with the SEC. All documents that are filed with the SEC are available free of charge on the General Partner's corporate website, which is www.dukerealty.com. We are not incorporating the information on the General Partner's website into this Report, and the General Partner's website and the information appearing on the General Partner's website is not included in, and is not part of, this Report. You may also access any document filed through the SEC's home page on the Internet (http://www.sec.gov).

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ITEM 1A. RISK FACTORS
Item 1A. Risk Factors
In addition to the other information contained in this Report, you should carefully consider, in consultation with your legal, financial and other professional advisors, the risks described below, as well as the risk factors and uncertainties discussed in our other public filings with the SEC under the caption "Risk Factors" in evaluating us and our business before making a decision regarding an investment in the General Partner's securities.
The risks contained in this Report are not the only risks that we face. Additional risks that are not presently known, or that we presently deem to be immaterial, also could have a material adverse effect on our financial condition, results of operations, business and prospects. The trading price of the General Partner's securities could decline due
to the materialization of any of these risks, and its shareholders and/or the Partnership's unitholders may lose all or part of their investment.
This Report also contains forward-looking statements that may not be realized as a result of certain factors, including, but not limited to, the risks described herein and in our other public filings with the SEC. Please refer to the section in this Report entitled "Cautionary Notice Regarding Forward-Looking Statements" for additional information regarding forward-looking statements.
Risks Related to the COVID-19 Pandemic
The full effects of the COVID-19 pandemic are highly uncertain and cannot be predicted.
The outbreak of COVID-19, a respiratory disease caused by a novel corona virus, has spread globally since being declared a pandemic by the World Health Organization in March 2020. Although vaccines have been developed and are widely distributed in the United States, newer and more contagious variants of COVID-19 have further amplified the impact of the pandemic while significant components of the United States population are resistant to vaccination efforts.
The COVID-19 pandemic has also coincided with labor shortages and increased staffing costs for many companies operating in the United States. COVID-19 related disruptions to the international supply chain, including transportation and distribution delays, longer lead times for construction materials and increased construction costs have resulted in shortages of certain goods and inflationary conditions. These developments, as well as other ramifications of the COVID-19 pandemic may result in prolonged inflationary conditions that could have a detrimental impact on our tenant base, our ability to lease vacant space and our ability to grow through development and acquisition. Future adverse impacts to the economy caused by COVID-19 may also result in market volatility and large swings in global stock prices that may negatively impact our share price. These potential risks could also negatively impact our future ability to access capital, which would negatively impact our liquidity and our ability to execute our strategic plans.
The impacts of the outbreak could, among other things, negatively affect (i) the operation of our properties, (ii) the effectiveness of our strategic decision making, (iii) the operation of an effective cyber security function, (iv) the operation of our key information systems, (v) our ability to make timely filings with the SEC and (vi) our ability to maintain an effective control environment.
Risks Related to Our Business
Our use of debt financing could have a material adverse effect on our financial condition.
We are subject to the risks normally associated with debt financing, including the risk that our cash flow will be insufficient to meet required principal and interest payments and the long-term risk that we will be unable to refinance our existing indebtedness, or that the terms of such refinancing will not be as favorable as the terms of existing indebtedness. Additionally, we may not be able to refinance borrowings by our unconsolidated subsidiaries on favorable terms or at all. If our debt cannot be paid, refinanced or extended, we may not be able to make distributions to shareholders and unitholders at expected levels. Further, if prevailing interest rates or other factors at the time of a refinancing result in higher interest rates or other restrictive financial covenants upon the refinancing, then such refinancing would adversely affect our cash flow and funds available for operation, development and distribution.
We also have incurred, and may incur in the future, indebtedness that bears interest at variable rates. Thus, if market interest rates increase, so will our interest expense, which could reduce our cash flow and our ability to make distributions to shareholders and unitholders at expected levels.
Debt financing may not be available and equity issuances could be dilutive to our shareholders and unitholders.
Our ability to execute our business strategy depends on our access to an appropriate blend of debt financing, including unsecured lines of credit and other forms of secured and unsecured debt, and equity financing, including common equity and, at times, preferred equity issued by the General Partner. Debt financing may not be available over a longer period of time in sufficient amounts, on favorable terms or at all. If the General Partner issues additional equity securities, instead of debt, to manage capital needs, the interests of our existing shareholders and unitholders could be diluted.
Financial and other covenants under existing credit agreements could limit our flexibility and adversely affect our financial condition.
The terms of our various credit agreements and other indebtedness require that we comply with a number of customary financial and other covenants, such as maintaining debt service coverage and leverage ratios and maintaining insurance coverage. These covenants may limit our flexibility in our operations, and breaches of these covenants could result in defaults under the instruments governing the applicable indebtedness even if we have satisfied our payment obligations. As a result, we would also likely be unable to borrow any further amounts under our other debt instruments and other debt obligations may be accelerated, which could adversely affect our ability to fund operations.
Downgrades in our credit ratings could increase our borrowing costs or reduce our access to funding sources in the credit and capital markets.
We have a significant amount of debt outstanding, consisting mostly of unsecured debt. We are currently assigned corporate credit ratings from Moody's Investors Service, Inc. and Standard and Poor's Ratings Group based on their evaluation of our creditworthiness. All of our debt ratings remain investment grade, but there can be no assurance that we will not be downgraded or that any of our ratings will remain investment grade. If our credit ratings are downgraded or other negative action is taken, we could be required, among other things, to pay additional interest and fees on outstanding borrowings under our revolving credit agreement.
Credit rating reductions by one or more rating agencies could also adversely affect our access to funding sources, the cost and other terms of obtaining funding as well as our overall financial condition, operating results and cash flow.
If we are unable to generate sufficient capital and liquidity, then we may be unable to pursue future development projects and other strategic initiatives.
To complete our ongoing and planned development projects, and to pursue our other strategic initiatives, we must continue to generate sufficient capital and liquidity to fund those activities. To generate that capital and liquidity, we rely upon funds from our existing operations, as well as funds that we raise through our capital raising activities. In the event that we are unable to generate sufficient capital and liquidity to meet our long-term needs, or if we are unable to generate capital and liquidity on terms that are favorable to us, then we may not be able to pursue development projects, acquisitions, or our other long-term strategic initiatives.
Our use of joint ventures may negatively impact our jointly-owned investments.
We have, and may continue to develop properties in, or contribute properties to, joint ventures with other persons or entities when circumstances warrant the use of these structures. Our participation in joint ventures is subject to the risks that:
•We could become engaged in a dispute, or have conflicts of interests, with any of our joint venture partners that might affect our ability to develop or operate a property; and
•Our joint venture partners may have different objectives than we have regarding the appropriate timing and terms of any sale or refinancing of properties.
Risks Related to the Real Estate Industry
Our net earnings available for investment or distribution to shareholders and unitholders could decrease as a result of factors related to the ownership and operation of commercial real estate, many of which are outside of our control.
Our business is subject to the risks incident to the ownership and operation of commercial real estate, many of which involve circumstances not within our control. Such risks include the following:
•Changes in the general economic climate;
•The availability of capital on favorable terms, or at all;
•Increases in interest rates;
•Local conditions such as oversupply of property or a reduction in demand;
•Competition for tenants;
•Changes in market rental rates;
•Delay or inability to collect rent from tenants who are bankrupt, insolvent or otherwise unwilling or unable to pay;
•Difficulty in leasing or re-leasing space quickly or on favorable terms;
•Costs associated with periodically renovating, repairing and reletting rental space;
•Our ability to provide adequate maintenance and insurance on our properties;
•Our ability to control variable operating costs;
•Changes in government regulations; and
•Potential liability under, and changes in, environmental, zoning, tax and other laws.
Any one or more of these factors could result in a reduction in our net earnings available for investment or distribution to shareholders and unitholders.
Many real estate costs are fixed, even if income from properties decreases.
Our financial results depend on leasing space in our real estate to tenants on terms favorable to us. Our income and funds available for distribution to our shareholders and unitholders will decrease if a significant number of our tenants cannot meet their lease obligations to us or we are unable to lease properties on favorable terms. In addition, if a tenant does not pay its rent, we may not be able to enforce our rights as landlord without delays and we may incur substantial legal costs. Costs associated with real estate investment, such as real estate taxes, insurance, maintenance costs and our debt service payments, generally are not reduced when circumstances cause a reduction in income from the investment. As a result, we may have a reduction in our net earnings available for investment or distribution to our shareholders and unitholders.
Our real estate development activities are subject to risks particular to development.
We continue to selectively develop new properties for rental operations in our existing markets when accretive returns are present. These development activities generally require various government and other approvals, which we may not receive. In addition, we also are subject to the following risks associated with development activities:
•Unsuccessful development opportunities could result in direct expenses to us;
•Construction costs could increase as the result of inflation and supply chain constraints;
•Construction costs of a project may exceed original estimates, possibly making the project less profitable than originally estimated, or possibly unprofitable;
•Time required to complete the construction of a project or to lease up the completed project may be greater than originally anticipated, thereby adversely affecting our cash flow and liquidity;
•Occupancy rates and rents of a completed project may not be sufficient to make the project profitable; and
•Favorable sources to fund our development activities may not be available.
We may be unsuccessful in operating completed real estate projects.
We face the risk that the real estate projects we develop or acquire will not perform in accordance with our expectations. This risk exists because of factors such as the following:
•Prices paid for acquired facilities are based upon a series of market judgments; and
•Costs of any improvements required to bring an acquired facility up to standards to establish the market position intended for that facility might exceed budgeted costs.
As a result, we may develop or acquire projects that are not profitable.
Our investments are concentrated in the industrial sector and our business would be adversely affected by an economic downturn in that sector.
Our investments in real estate assets are concentrated in the industrial sector. This concentration may expose us to the risk of economic downturns in this sector to a greater extent than if our business activities were more diversified.
We are exposed to the risks of defaults by tenants.
Any of our tenants may experience a downturn in their businesses that may weaken their financial condition. In the event of default or the insolvency of a significant number of our tenants, we may experience a substantial loss of rental revenue and/or delays in collecting rent and incur substantial costs in enforcing our rights as landlord. If a tenant files for bankruptcy protection, a court could allow the tenant to reject and terminate its lease with us. Our income and distributable cash flow would be adversely affected if a significant number of our tenants became unable to meet their obligations to us, became insolvent or declared bankruptcy.
A default by one of our largest tenants could have a more significant negative financial impact on our operations. As of December 31, 2021, our 10 largest tenants accounted for 21.3% of our total annualized net rental revenue and the two largest of these tenants accounted for 10.4% of our total annualized net rental revenue. Annualized net rental revenue equals the average annual rental property revenue over the terms of the respective leases excluding operating expenses and additional rent due as operating expense reimbursements. Annualized net rental revenue, for the purpose of this risk factor, also includes leases to our largest tenants in properties owned by unconsolidated joint ventures at their ownership percentage.
We may be unable to renew leases or relet space.
When our tenants decide not to renew their leases upon their expiration, we may not be able to relet the space. Even if our tenants do renew or we are able to relet the space, the terms of renewal or reletting (including the cost of renovations, if necessary) may be less favorable than current lease terms. If we are unable to promptly renew the leases or relet the space, or if the rental rates upon such renewal or reletting are significantly lower than current rates, then our income and distributable cash flow would be adversely affected, especially if we were unable to lease a significant amount of the space vacated by tenants in our properties.
Our insurance coverage on our properties may be inadequate.
We maintain comprehensive insurance on each of our facilities, including property, liability and environmental coverage. We believe this coverage is of the type and amount customarily obtained for real property. However, there are certain types of losses, generally of a catastrophic nature, such as hurricanes, earthquakes and floods or
acts of war or terrorism that may be uninsurable or not economically insurable. We use our discretion when determining amounts, coverage limits and deductibles for insurance. These terms are determined based on retaining an acceptable level of risk at a reasonable cost. This may result in insurance coverage that in the event of a substantial loss would not be sufficient to pay the full current replacement cost of the damaged assets. Inflation, changes in building codes and ordinances, environmental considerations, acts of a governmental authority and other factors also may make it unfeasible to collect insurance proceeds to replace a facility after it has been damaged or destroyed. If an uninsured or underinsured loss occurred, we could lose both our investment in and anticipated profits and cash flow from a property, and we would continue to be obligated on any mortgage indebtedness or other obligations related to the property. We are also subject to the risk that our insurance providers may be unwilling or unable to pay our claims when made.
Our asset strategy may lead to long-term dilution.
Our asset strategy is to increase our investment concentration in Coastal Tier 1 markets. There can be no assurance that we will be able to execute our strategy or that our execution of such strategy will lead to improved results.
Acquired properties may expose us to unknown liability.
From time to time, we may acquire properties subject to liabilities and without any recourse, or with only limited recourse, with respect to unknown liabilities. As a result, if a liability were asserted against us based upon ownership of those properties, we might have to pay substantial sums to settle or contest it, which could adversely affect our results of operations and cash flow. Unknown liabilities with respect to acquired properties might include:
•liabilities for clean-up of undisclosed environmental contamination;
•claims by tenants, vendors or other persons against the former owners of the properties;
•liabilities incurred in the ordinary course of business; and
•claims for indemnification by general partners, directors, officers and others indemnified by the former owners of the properties.
We could be exposed to significant environmental liabilities as a result of conditions of which we currently are not aware.
As an owner and operator of real property, we may be liable under various federal, state and local laws for the costs of removal or remediation of certain hazardous substances released on or in our property. Such laws often impose liability without regard to whether the owner or operator knew of, or was responsible for, the release of the hazardous substances. In addition, we could have greater difficulty in selling real estate on which hazardous substances were present or in obtaining borrowings using such real estate as collateral. It is our general policy to have Phase I environmental audits performed for all of our properties and land by qualified environmental consultants at the time of purchase. These Phase I environmental audits have not revealed any environmental liability that would have a material adverse effect on our business. However, a Phase I environmental audit does not involve invasive procedures such as soil sampling or ground water analysis, and we cannot be sure that the Phase I environmental audits did not fail to reveal a significant environmental liability or that a prior owner did not create a material environmental condition on our properties or land which has not yet been discovered. We could also incur environmental liability as a result of future uses or conditions of such real estate or changes in applicable environmental laws.
We are exposed to the potential impacts of future climate change and climate-change related risks.
We are exposed to potential physical risks from possible future changes in climate. We have a significant investment in properties in coastal markets such as Southern California, Northern California and South Florida and have also targeted those markets for future growth. Those coastal markets have historically experienced severe weather events, such as storms and drought, as well as other natural catastrophes such as wildfires and floods. If the frequency of extreme weather and other natural events increases due to climate change, our exposure to these events
could increase. We may also be adversely impacted as a real estate owner, manager and developer in the future by stricter energy and water efficiency standards, water access for our buildings or greenhouse gas regulations.
Compliance with new laws or regulations relating to climate change, including compliance with “green” building codes, may require us to make improvements to our existing properties or result in increased operating costs that we may not be able to effectively pass on to our tenants. Any such laws or regulations could also impose substantial costs on our tenants, thereby impacting the financial condition of our tenants and their ability to meet their lease obligations and to lease or re-lease our properties. We cannot give any assurance that other such conditions do not exist or may not arise in the future. The potential impacts of future climate change on our real estate properties could adversely affect our ability to lease, develop or sell such properties.
Risks Related to Our Organization and Structure
If the General Partner were to cease to qualify as a REIT, it would lose significant tax benefits.
The General Partner intends to continue to operate so as to qualify as a REIT under the Internal Revenue Code of 1986, as amended (the "Code"). Qualification as a REIT provides significant tax advantages to the General Partner. However, in order for the General Partner to continue to qualify as a REIT, it must satisfy numerous requirements established under highly technical and complex Code provisions for which there are only limited judicial and administrative interpretations. Satisfaction of these requirements also depends on various factual circumstances not entirely within our control. The fact that the General Partner holds its assets through the Partnership further complicates the application of the REIT requirements. Even a technical or inadvertent mistake could jeopardize the General Partner's REIT status. Although we believe that the General Partner can continue to operate so as to qualify as a REIT, we cannot offer any assurance that it will continue to do so or that legislation, new regulations, administrative interpretations or court decisions will not significantly change the qualification requirements or the federal income tax consequences of qualification. If the General Partner were to fail to qualify as a REIT in any taxable year, it would have the following effects:
•The General Partner would not be allowed a deduction for dividends distributed to shareholders and would be subject to federal corporate income tax (and any applicable state and local income taxes) on its taxable income at regular corporate income tax rates;
•Unless the General Partner was entitled to relief under certain statutory provisions, it would be disqualified from treatment as a REIT for the four taxable years following the year during which it ceased to qualify as a REIT;
•The General Partner's net earnings available for investment or distribution to its shareholders would decrease due to the additional tax liability for the year or years involved; and
•The General Partner would no longer be required to make any distributions to shareholders in order to qualify as a REIT.
As such, the General Partner's failure to qualify as a REIT would likely have a significant adverse effect on the value of the General Partner's securities and, consequently, the Partnership's Units.
REIT distribution requirements limit the amount of cash we have available for other business purposes, including amounts that we need to fund our future capital needs.
To maintain its qualification as a REIT under the Code, the General Partner must annually distribute to its shareholders at least 90% of its REIT taxable income, determined without regard to the dividends-paid deduction and excluding net capital gains. The General Partner intends to continue to make distributions to its shareholders to comply with the 90% distribution requirement. However, this requirement limits our ability to accumulate capital for use for other business purposes. If we do not have sufficient cash or other liquid assets to meet the distribution requirements of the General Partner, we may have to borrow funds or sell properties on adverse terms in order to meet the distribution requirements. If the General Partner fails to satisfy the distribution requirement, it would cease to qualify as a REIT.
U.S. federal income tax treatment of REITs and investments in REITs may change in a manner that could adversely affect us or shareholders.
Legislative, regulatory or administrative changes could be enacted or promulgated at any time, either prospectively or with retroactive effect, and may adversely affect us and/or shareholders.
General Risk Factors
Our business and operations could suffer in the event of system failures or cyber security attacks.
Our systems are vulnerable to damages from any number of sources, including energy blackouts, natural disasters, terrorism, war, telecommunication failures and cyber security attacks, such as computer viruses, computer hacking, acts of vandalism or theft, malware or other malicious codes, ransomware, phishing, employee error or malfeasance, or other unauthorized access. In July 2021 we determined our computer network was affected by a cyber security incident, for which we conducted an investigation that is now closed. This incident did not result in any evidence of data belonging to us being misused and did not result in a material interruption to our business or operations, material costs or other adverse material consequences but any future system failure or accident that causes interruptions in our operations could result in a material disruption to our business. We may also incur additional costs to remedy damages caused by such disruptions. Any future significant compromise or breach of our data security, whether external or internal, or misuse of customer, associate, supplier or company data, could result in significant costs, lost sales, fines, lawsuits, and damage to our reputation. Any compromise of our security could also result in a violation of applicable privacy and other laws, unauthorized access to information of ours and others, significant legal and financial exposure, damage to our reputation, loss or misuse of the information and a loss of confidence in our security measures, which could harm our business.
We have programs in place to detect, contain and respond to data security incidents. However, the ever-evolving threats mean we and our third-party service providers and vendors must continually evaluate and adapt our respective systems and processes and overall security environment. Even the most well protected information, networks, systems and facilities remain potentially vulnerable when considering the rapid pace of change in this area. There can be no assurance that our efforts to maintain the security and integrity of our systems will be effective, or that we will be able to maintain our systems free from security breaches, system compromises, misuses of data, or other operational interruptions. Accordingly, we may be unable to prevent major security breaches or entirely mitigate the risk of other system interruptions or failures.
We could also be negatively impacted by similar disruptions to the operations of our vendors or outsourced service providers.
The General Partner's stock price and trading volume may be volatile, which could result in substantial losses to its shareholders and to the Partnership's unitholders, if and when they convert their Limited Partner Units to shares of the General Partner's common stock.
The market price of the General Partner's common stock could change in ways that may or may not be related to our business, our industry or our operating performance and financial condition. In addition, the trading volume in the General Partner's common stock may fluctuate and cause significant price variations to occur. Some of the factors that could negatively affect the General Partner's share price, or result in fluctuations in the price or trading volume of the General Partner's common stock, include uncertainty in the markets, general market and economic conditions, as well as those factors described in these "Risk Factors" and in other reports that we file with the SEC.
Many of these factors are beyond our control, and we cannot predict their potential effects on the price of the General Partner's common stock. If the market price of the General Partner's common stock declines, then its shareholders and the Partnership's unitholders, respectively, may be unable to resell their shares and units upon terms that are attractive to them. We cannot assure that the market price of the General Partner's common stock will not fluctuate or decline significantly in the future. In addition, the securities markets in general may experience considerable unexpected price and volume fluctuations.
We are subject to certain provisions that could discourage change-of-control transactions, which may reduce the likelihood of the General Partner's shareholders receiving a control premium for their shares.
Indiana anti-takeover legislation and certain provisions in our governing documents, as we discuss below, may discourage potential acquirers from pursuing a change-of-control transaction with us. As a result, the General Partner's shareholders may be less likely to receive a control premium for their shares.
Ownership Restriction. Subject to certain exceptions, the General Partner's charter provides that no person or entity may beneficially own, or be deemed to own by virtue of the applicable constructive ownership provisions of the Code, more than 9.8% (in value or by number of shares, whichever is more restrictive) of the General Partner's outstanding common stock or 9.8% in value of its outstanding stock.
Unissued Preferred Stock. The General Partner's charter permits its board of directors to classify unissued preferred stock by setting the rights and preferences of the shares at the time of issuance. This power enables the General Partner's board to adopt a shareholder rights plan, also known as a poison pill. Although the General Partner has repealed its previously existing poison pill and its current board of directors has adopted a policy not to adopt a shareholder rights plan without shareholder approval, the General Partner's board can change this policy at any time. The adoption of a poison pill would discourage a potential bidder from acquiring a significant position in the General Partner without the approval of its board.
Business-Combination Provisions of Indiana Law. The General Partner has not opted out of the business-combination provisions of the Indiana Business Corporation Law. As a result, potential bidders may have to negotiate with the General Partner's board of directors before acquiring 10% of its stock. Without securing board approval of the proposed business combination before crossing the 10% ownership threshold, a bidder would not be permitted to complete a business combination for five years after becoming a 10% shareholder. Even after the five-year period, a business combination with the significant shareholder would either be required to meet certain per share price minimums as set forth in the Indiana Business Corporation Law or to receive the approval of a majority of the disinterested shareholders.
Control-Share-Acquisition Provisions of Indiana Law. The General Partner has not opted out of the provisions of the Indiana Business Corporation Law regarding acquisitions of control shares. Therefore, those who acquire a significant block (at least 20%) of the General Partner's shares may only vote a portion of their shares unless its other shareholders vote to accord full voting rights to the acquiring person. Moreover, if the other shareholders vote to give full voting rights with respect to the control shares and the acquiring person has acquired a majority of the General Partner's outstanding shares, the other shareholders would be entitled to special dissenters' rights.
Supermajority Voting Provisions. The General Partner's charter prohibits business combinations or significant disposition transactions with a holder of 10% of its shares unless:
•The holders of 80% of the General Partner's outstanding shares of capital stock approve the transaction;
•The transaction has been approved by three-fourths of those directors who served on the General Partner's board before the shareholder became a 10% owner; or
•The significant shareholder complies with the "fair price" provisions of the General Partner's charter.
Among the transactions with large shareholders requiring the supermajority shareholder approval are dispositions of assets with a value greater than or equal to $1,000,000 and business combinations.
Operating Partnership Provisions. The limited partnership agreement of the Partnership contains provisions that could discourage change-of-control transactions, including a requirement that holders of at least 90% of the outstanding Common Units approve:
•Any voluntary sale, exchange, merger, consolidation or other disposition of all or substantially all of the assets of the Partnership in one or more transactions other than a disposition occurring upon a financing or refinancing of the Partnership;
•The General Partner's merger, consolidation or other business combination with another entity unless after the transaction substantially all of the assets of the surviving entity are contributed to the Partnership in exchange for Common Units;
•The General Partner's assignment of its interests in the Partnership other than to one of its wholly owned subsidiaries; and
•Any reclassification or recapitalization or change of outstanding shares of the General Partner's common stock other than certain changes in par value, stock splits, stock dividends or combinations.
We are dependent on key personnel.
The General Partner's executive officers and other senior officers have a significant role in the success of our Company. Our ability to retain our management group or to attract suitable replacements should any members of the management group leave our Company is dependent on the competitive nature of the employment market. The loss of services from key members of the management group or a limitation in their availability could adversely impact our financial condition and cash flow. Further, such a loss could be negatively perceived in the capital markets.

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ITEM 1B. UNRESOLVED STAFF COMMENTS
Item 1B. Unresolved Staff Comments
We have no unresolved comments with the SEC staff regarding our periodic or current reports under the Exchange Act.

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ITEM 2. PROPERTIES
Item 2. Properties
Product Review
As of December 31, 2021, we own interests in 548 primarily industrial properties encompassing 162.7 million net rentable square feet (including 40 unconsolidated joint venture in-service properties with 12.9 million square feet, 29 consolidated properties under development with 8.5 million square feet and two unconsolidated joint venture properties under development with 1.2 million square feet).
Industrial Properties: We own interests in 545 industrial properties encompassing 162.4 million square feet (99.9% of our total square feet). These properties are primarily logistics facilities with clear ceiling heights of 28 feet or more.
Non-reportable: We own interests in three buildings, which are not industrial properties and are not presented within our reportable segments, totaling 211,000 square feet (0.1% of our total square feet).
See Consolidated Financial Statement Schedule III - Real Estate Properties and Accumulated Depreciation for a detailed listing of the Company’s properties and related encumbrances.
Land: We own, including through ownership interests in unconsolidated joint ventures (with acreage not adjusted for our percentage ownership interest), 431 acres of land and control an additional 925 acres through purchase options. All of the land that we directly own is intended to be used for the development of industrial properties and can support over 6.9 million square feet of industrial developments.
Property Descriptions
The following tables represent the geographic highlights of consolidated and unconsolidated joint venture in-service properties in our primary markets.
Consolidated Properties
Square Feet Annual Net
Effective
Rent (1) Annual Net
Effective
Rent per Square Foot (2) Percent of
Annual Net
Effective
Rent
Industrial Non-Reportable Overall Percent of Overall
Primary Market
Southern California 16,586,113 - 16,586,113 11.8 % $ 125,697,500 $ 7.58 15.8 %
New Jersey 8,555,906 - 8,555,906 6.1 % 90,344,759 10.56 11.4 %
South Florida 9,249,136 - 9,249,136 6.6 % 68,868,913 8.09 8.7 %
Chicago 13,853,198 - 13,853,198 9.9 % 64,512,452 4.66 8.1 %
Atlanta 13,299,470 - 13,299,470 9.5 % 56,346,766 4.25 7.1 %
Dallas 11,164,016 - 11,164,016 8.0 % 43,939,307 3.94 5.5 %
Cincinnati 9,114,047 91,843 9,205,890 6.5 % 38,375,871 4.20 4.8 %
Savannah 7,329,816 - 7,329,816 5.2 % 35,369,045 4.83 4.4 %
Indianapolis 9,345,171 - 9,345,171 6.7 % 35,217,401 3.77 4.4 %
Pennsylvania 5,685,384 - 5,685,384 4.1 % 31,994,324 5.63 4.0 %
Houston 5,824,310 - 5,824,310 4.2 % 29,107,288 5.15 3.7 %
Minneapolis-St. Paul 5,143,303 - 5,143,303 3.7 % 29,063,212 5.79 3.7 %
Central Florida 4,332,233 - 4,332,233 3.1 % 24,742,911 5.84 3.1 %
Seattle 3,709,836 - 3,709,836 2.6 % 23,984,257 7.53 3.0 %
Columbus 5,319,877 - 5,319,877 3.8 % 20,760,897 3.90 2.6 %
Nashville 3,645,266 - 3,645,266 2.6 % 20,620,521 6.54 2.6 %
Northern California 2,890,235 - 2,890,235 2.1 % 19,467,999 7.65 2.4 %
Raleigh 2,849,794 - 2,849,794 2.0 % 18,722,309 6.57 2.4 %
DC-Baltimore 1,918,738 - 1,918,738 1.4 % 15,446,846 8.23 1.9 %
Other (3) - 119,030 119,030 0.1 % 3,487,188 29.30 0.4 %
Total 139,815,849 210,873 140,026,722 100.0 % $ 796,069,766 $ 5.79 100.0 %
Percent of Overall 99.8 % 0.2 % 100.0 %
Annual Net Effective Rent per Square Foot (2) $ 5.77 $ 22.55 $ 5.79
Unconsolidated Joint Venture Properties
Square Feet Annual Net
Effective
Rent (1) Annual Net
Effective
Rent per Square Foot (2) Percent of
Annual Net
Effective
Rent
Industrial Percent of
Overall
Primary Market
Dallas 6,047,818 46.8 % $ 30,217,889 $ 5.00 50.9 %
Indianapolis 4,056,398 31.4 % 14,524,969 3.82 24.5 %
DC-Baltimore 1,363,958 10.5 % 7,691,934 5.64 12.9 %
Chicago 954,720 7.4 % 4,822,609 5.05 8.1 %
Atlanta 301,200 2.3 % 1,263,298 4.19 2.1 %
Cincinnati 57,886 0.4 % 398,667 6.89 0.7 %
Other (3) 152,944 1.2 % 472,951 3.09 0.8 %
Total 12,934,924 100.0 % $ 59,392,317 $ 4.68 100.0 %
Percent of Overall 100.0 %
Annual Net Effective Rent per Square Foot (2) $ 4.68
Percent Leased
Consolidated Properties Unconsolidated Properties
Industrial Non-Reportable Overall Industrial Overall
Primary Market
Southern California 100.0 % - 100.0 % - -
New Jersey 100.0 % - 100.0 % - -
South Florida 92.1 % - 92.1 % - -
Chicago 100.0 % - 100.0 % 100.0 % 100.0 %
Atlanta 99.7 % - 99.7 % 100.0 % 100.0 %
Dallas 100.0 % - 100.0 % 100.0 % 100.0 %
Cincinnati 99.4 % 85.9 % 99.3 % 100.0 % 100.0 %
Savannah 100.0 % - 100.0 % - -
Indianapolis 100.0 % - 100.0 % 93.7 % 93.7 %
Pennsylvania 100.0 % - 100.0 % - -
Houston 97.1 % - 97.1 % - -
Minneapolis-St. Paul 97.7 % - 97.7 % - -
Central Florida 97.8 % - 97.8 % - -
Seattle 85.8 % - 85.8 % - -
Columbus 100.0 % - 100.0 % - -
Nashville 86.5 % - 86.5 % - -
Northern California 88.0 % - 88.0 % - -
Raleigh 100.0 % - 100.0 % - -
DC-Baltimore 97.8 % - 97.8 % 100.0 % 100.0 %
Other (3) - 100.0 % 100.0 % 100.0 % 100.0 %
Total 98.1 % 93.8 % 98.1 % 98.0 % 98.0 %
(1)Represents the average annual base rental payments, on a straight-line basis for the term of each lease, from space leased to tenants as of December 31, 2021, excluding amounts paid by tenants as reimbursement for operating expenses. Unconsolidated joint venture properties are shown at 100% of square feet and net effective rents, without regard to our ownership percentage.
(2)Annual net effective rent per leased square foot.
(3)Represents properties not located in our primary markets.

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ITEM 3. LEGAL PROCEEDINGS
Item 3. Legal Proceedings
We are not subject to any pending legal proceedings, other than routine litigation arising in the ordinary course of business. We do not expect these legal proceedings to have a material adverse effect on our financial condition, results of operations, or liquidity.

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ITEM 4. MINE SAFETY DISCLOSURE
Item 4. Mine Safety Disclosures
Not applicable.
PART II

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ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY
Item 5. Market for the Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
Market Information and Holders
The General Partner's common stock is listed for trading on the NYSE under the symbol "DRE." There is no established trading market for the Partnership's Common Units. As of February 16, 2022, there were 4,402 record holders of the General Partner's common stock and 73 record holders of the Partnership's Common Units.
Stock Performance Graph
The following line graph compares the change in the General Partner's cumulative total shareholders' return on shares of its common stock to the cumulative total return of the Standard and Poor's 500 Stock Index ("S&P 500") and the FTSE NAREIT Equity REITs Index ("NAREIT Index") from December 31, 2016 to December 31, 2021. The graph assumes an initial investment of $100 in the common stock of the General Partner and each of the indices on December 31, 2016, and the reinvestment of all dividends. The performance graph is not necessarily indicative of future performance.
This graph and the accompanying text are not “soliciting material,” are not deemed filed with the SEC and are not to be incorporated by reference in any filing by the company under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, whether made before or after the date hereof and irrespective of any general incorporation language in any such filing.
Tax Characterization of Dividends
A summary of the tax characterization of the dividends paid per common share of the General Partner for the years ended December 31, 2021, 2020 and 2019 follows:
2021 2020 2019
Total dividends paid per share $ 1.045 $ 0.96 $ 0.88
Ordinary income 91.5 % 74.6 % 80.7 %
Capital gains 8.5 % 25.4 % 19.3 %
100.0 % 100.0 % 100.0 %
See Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and Capital Resources - Uses of Liquidity - Dividend and Distribution Requirements", below, for more information on our dividend policy.
Sales of Unregistered Securities
The General Partner did not sell any of its securities during the year ended December 31, 2021 that were not registered under the Securities Act.
Issuer Purchases of Equity Securities
From time to time, we may repurchase our securities under a repurchase program that initially was approved by the General Partner's board of directors and publicly announced in October 2001 (the "Repurchase Program").
During 2021 we did not repurchase any equity securities under the Repurchase Program.
On January 26, 2022 the General Partner's board of directors adopted a resolution that amended and restated the Repurchase Program and delegated authority to management to repurchase a maximum of $300.0 million of the General Partner's common shares, $750.0 million of the Partnership's debt securities and $500.0 million of the General Partner's preferred shares, subject to the prior notification of the Chairperson of the finance committee of the board of directors of planned repurchases within these limits.

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ITEM 6. SELECTED FINANCIAL DATA
Item 6. Reserved

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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
The following discussion should be read in conjunction with the Consolidated Financial Statements included in Item 15. Exhibits and Financial Statement Schedules of this report and the matters described under Item 1A. Risk Factors.
A discussion regarding our financial condition and results of operations for 2021 compared to 2020 is under the Results of Operations section below. Our financial condition for 2019 and results of operations for 2020 compared to 2019 can be found under Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations, which is incorporated herein by this reference to our Annual Report on Form 10-K for the fiscal year ended December 31, 2020, filed with the SEC on February 19, 2021, and is available on the SEC’s website at www.sec.gov and the Investor Relations section of our website at www.dukerealty.com.
Business Overview
The General Partner and Partnership collectively specialize in the ownership, management and development of industrial real estate. The General Partner is a self-administered and self-managed REIT that began operations in 1986 and is the sole general partner of the Partnership. The Partnership is a limited partnership formed in 1993, at which time all of the properties and related assets and liabilities of the General Partner, as well as proceeds from a secondary offering of the General Partner's common shares, were contributed 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. We operate the General Partner and the Partnership as one enterprise, and therefore, our discussion and analysis refers to the General Partner and its consolidated subsidiaries, including the Partnership, collectively.
Our business operations primarily consist of two reportable operating segments: rental operations of industrial properties and service operations. Rental operations of industrial properties represent the ownership and development of industrial properties and is the primary component of our revenues and earnings. Service operations generate additional revenues from providing various real estate services primarily relating to development, construction management and property management services to customers, unconsolidated joint ventures and third-party owners.
Nationwide demand for industrial properties continues to be strong in the current economic environment as the COVID-19 pandemic has accelerated both consumer acceptance of e-commerce and the requirements of many retailers to increase inventory levels. Our operational focus is to maintain occupancy at high levels and to focus on rental rate growth. The occupancy of our consolidated industrial portfolio increased to 98.1% at December 31, 2021 as compared to 97.4% at December 31, 2020. Our annualized net effective rents for both renewals and new second generation leases, on a combined basis, executed in 2021 for consolidated properties grew by 34.8% over the previous leases. In the current environment of rising rental rates for industrial properties in most of the markets in which we operate, we believe there is potential for continued future rental rate growth to the extent we are able to renew or backfill expiring leases and maintain high levels of occupancy.
Year in Review
We finished 2021 in strong financial condition and recorded improved year-over-year operating results. Despite the challenges of the COVID-19 variants throughout the year, the United States economy recovered earlier than many economists predicted in 2021, highlighted by vaccine rollouts and business re-openings. As the year progressed, however, inflation in the United States reached the highest levels seen since 1982. The combination of supply chain disruptions induced by COVID-19, government spending and pent-up demand caused by shutdowns led to demand outpacing supply in a number of industries, including logistics real estate. Significant congestion in major ports, most notably the Ports of Los Angeles and Long Beach, and a generalized disruption throughout the nation's logistics network have also contributed to these recent levels of inflation.
These supply chain issues have also impacted our construction and development activities as lead times for materials lengthened significantly and construction prices on materials have increased significantly. In order to adapt to the disruptions in the global supply chain, many companies are attempting to increase inventory levels and accumulate safety stock. We continued to maintain high occupancy levels through 2021 and quickly lease a significant portion of our speculative development projects.
The COVID-19 pandemic's impact on the overall global economy is continuing and the ultimate impact cannot be predicted at this time. Please see Part I, Item 1A, "Risk Factors" for additional information about the potential impacts the pandemic may have on our business and results of operations.
Highlights of our 2021 strategic and operational activities are as follows:
•We generated $1.07 billion of total net cash proceeds from the disposition of 30 consolidated properties and 283 acres of wholly owned undeveloped land during the year ended December 31, 2021. As part of the dispositions, four industrial buildings and two trailer storage lots were contributed to a 20% owned unconsolidated joint venture.
•We acquired eight industrial properties for $447.6 million during the year ended December 31, 2021.
•We acquired 536 acres of land and one container storage lot under long term lease for $700.6 million during the year ended December 31, 2021.
•We started new development projects with expected total costs of $1.39 billion, which included $41.9 million of expected total costs for development projects started within two unconsolidated joint ventures, at our ownership share. The development projects started in 2021 were, in aggregate, 43.2% leased at December 31, 2021.
•We placed 18 newly completed consolidated development projects in service, which totaled 7.7 million square feet with total costs of $957.7 million at December 31, 2021. One fully leased, 517,000 square foot property was sold shortly after completion. The remaining new developments were 88.1% leased at December 31, 2021.
•The estimated cost of our properties under construction at December 31, 2021, including costs for unconsolidated properties shown at our ownership share, totaled $1.42 billion, with $709.1 million of such costs already incurred. The total estimated cost for two unconsolidated joint venture properties under construction at December 31, 2021 was $41.9 million, with $16.0 million of such costs already incurred. The consolidated properties under construction were 47.3% pre-leased, while the unconsolidated joint venture property under construction was 50.3% pre-leased.
•Income from continuing operations before income taxes was $880.2 million and $297.5 million for the twelve months ended December 31, 2021 and 2020, respectively.
•Same-property net operating income, on a cash basis, as defined hereafter under "Supplemental Performance Measures", increased by 5.3% for the twelve months ended December 31, 2021, as compared to the twelve months ended December 31, 2020.
•As the result of leasing up space in speculative developments throughout 2021, the percentage of total square feet leased for our in-service portfolio of consolidated properties increased from 97.4% at December 31, 2020 to 98.1% at December 31, 2021.
•Total leasing activity for our consolidated properties totaled 31.7 million square feet in 2021 compared to 25.5 million square feet in 2020.
•Total leasing activity for our consolidated and unconsolidated joint venture properties in 2021 included 12.6 million and 326,000, respectively, square feet of lease renewals (excludes early renewals and short term renewals), which represented 76.8% and 34.9%, respectively, retention rates on a square foot basis. New second generation and renewal leases, on a combined basis, executed for consolidated properties and unconsolidated joint venture properties during the year resulted in 34.8% and 46.7%, respectively, increases to net effective rents ("net effective rents" is defined hereafter in the "Key Performance Indicators" section) when compared to the previous leases of the same space.
We utilized the capital generated from dispositions during the year to reduce debt and to fund our acquisition and development activities. Highlights of our key financing activities are as follows:
•During 2021, the General Partner issued 8.2 million common shares under its at the market ("ATM") equity program, generating gross proceeds of $408.3 million and, after deducting commissions and other costs, net proceeds of $403.6 million.
•In January 2021, we issued $450.0 million of senior unsecured notes that bear interest at a stated interest rate of 1.75%, have an effective interest rate of 1.83% and mature on February 1, 2031, the proceeds for which were allocated to finance or refinance eligible green projects.
•In June 2021, we redeemed $83.7 million of senior unsecured notes bearing a stated interest rate of 3.88% and with a scheduled maturity in 2022. In connection with the early redemption of these notes, we recognized a loss of $3.9 million consisting of a prepayment premium and the write-off of unamortized deferred financing costs.
•In August 2021, we repaid $250.0 million of senior unsecured notes bearing a stated interest rate of 3.63% and with a scheduled maturity in 2023. In connection with the early redemption of these notes, we recognized a loss of $13.9 million consisting of a prepayment premium and the write-off of unamortized deferred financing costs.
•In November 2021, we issued $500.0 million of senior unsecured notes that bear interest at a stated interest rate of 2.25%, have an effective interest rate of 2.38% and mature on January 15, 2032, the proceeds for which will be allocated to finance or refinance eligible green projects.
Supplemental Performance Measures
The following table shows a reconciliation of net income attributable to common shareholders or common unitholders to the calculation of funds from operations ("FFO") attributable to common shareholders or common unitholders for the years ended December 31, 2021, 2020 and 2019, respectively (in thousands):
2021 2020 2019
Net income attributable to common shareholders of the General Partner $ 852,895 $ 299,915 $ 428,972
Add back: Net income attributable to noncontrolling interests - common limited partnership interests in the Partnership 8,354 2,663 3,678
Net income attributable to common unitholders of the Partnership 861,249 302,578 432,650
Adjustments:
Depreciation and amortization 362,148 353,013 327,223
Company share of unconsolidated joint venture depreciation and amortization 9,383 9,265 10,083
Partnership share of gains on property sales (585,685) (127,811) (235,098)
Gains on land sales (12,917) (10,458) (7,445)
Income tax expense (benefit) not allocable to FFO 18,549 (5,112) 8,686
Impairment charges - 5,626 -
Gains on sales of real estate assets - share of unconsolidated joint ventures (20,106) (822) (21,239)
FFO attributable to common unitholders of the Partnership (1) $ 632,621 $ 526,279 $ 514,860
Additional General Partner Adjustments:
Net income attributable to noncontrolling interests - common limited partnership interests in the Partnership (8,354) (2,663) (3,678)
Noncontrolling interest share of adjustments 2,222 (1,979) (702)
FFO attributable to common shareholders of the General Partner (1) $ 626,489 $ 521,637 $ 510,480
(1) FFO is a non-GAAP measure used in the real estate industry and is computed in accordance with standards established by the National Association of Real Estate Investment Trusts ("Nareit"). Nareit FFO is used by industry analysts and investors as a supplemental operating performance measure of a REIT. Nareit FFO is calculated as net income attributable to the common shareholders of the General Partner in accordance with GAAP excluding depreciation and amortization related to real estate, gains and losses on sales of real estate assets (including real estate assets incidental to our business), gains and losses from change in control, impairment charges related to real estate assets (including real estate assets incidental to our business) and similar adjustments for unconsolidated partnerships and joint ventures, all net of related taxes.
The most comparable GAAP measure to Nareit FFO is net income attributable to common shareholders or common unitholders. Management believes it is a useful indicator of consolidated operating performance, which improves the understanding of operating results of REITs among the investing public, makes comparisons of REIT operating results more meaningful and enables investors and analysts to readily identify the operating results of the long-term assets that form the core of a REIT's activity.
Net income attributable to the common shareholders of the General Partner for the year ended December 31, 2021, was $852.9 million, compared to net income of $299.9 million for the year ended December 31, 2020. Net income attributable to the common unitholders of the Partnership for the year ended December 31, 2021, was $861.2 million, compared to net income of $302.6 million for the year ended December 31, 2020. The increase in net income in 2021 for the General Partner and the Partnership, when compared to 2020, was primarily the result of higher gains on property sales, rental rate growth and increased occupancy.
Nareit FFO attributable to common shareholders of the General Partner totaled $626.5 million for the year ended December 31, 2021, compared to $521.6 million for 2020. Nareit FFO attributable to common unitholders of the Partnership totaled $632.6 million for the year ended December 31, 2021, compared to $526.3 million for 2020. The increase to Nareit FFO from 2020 for the General Partner and the Partnership was primarily driven by improved occupancy, rental rate growth, new developments being placed into service and leased up, and lower loss on debt extinguishment.
In addition to Nareit FFO we use (i) Property Level Net Operating Income - Cash Basis ("PNOI") and (ii) Same-Property Net Operating Income - Cash Basis ("SPNOI") as supplemental non-GAAP performance measures. Management believes that the use of PNOI and SPNOI combined with net income (which remains the primary measure of performance), improves the understanding of operating results of REITs among the investing public and
makes comparisons of REIT operating results more meaningful. The most comparable GAAP measure to PNOI and SPNOI is income from continuing operations before income taxes.
PNOI and SPNOI each exclude expenses that materially impact our overall results of operations and, therefore, should not be considered as a substitute for income from continuing operations before income taxes, or any other measures derived in accordance with GAAP. Furthermore, these metrics may not be comparable to other similarly titled measures of other companies.
Property Level Net Operating Income - Cash Basis
PNOI is comprised of rental revenues from continuing operations less rental expenses and real estate taxes from continuing operations, along with certain other adjusting items. As a performance metric that consists of only the cash-based revenues and expenses directly related to ongoing real estate rental operations, PNOI is narrower in scope than Nareit FFO.
PNOI, as we calculate it, may not be directly comparable to similarly titled, but differently calculated, measures for other REITs. We believe that PNOI is another useful supplemental performance measure, as it is an input in many REIT valuation models and it provides a means by which to evaluate the performance of the properties within our Rental Operations segments. The operations of our industrial properties, as well as our non-reportable Rental Operations (our residual non-industrial properties that have not yet been sold, referred to throughout as "non-reportable"), are collectively referred to as "Rental Operations."
The major factors influencing PNOI are occupancy levels, acquisitions and sales, development properties that achieve stabilized operations, rental rate increases or decreases, and the recoverability of operating expenses.
Note 9 to the consolidated financial statements included in Part IV, Item 15 of this Report shows a calculation of our PNOI for the years ended December 31, 2021, 2020 and 2019 and provides a reconciliation of PNOI for our Rental Operations segments to income from continuing operations before income taxes.
Same-Property Net Operating Income - Cash Basis
We also evaluate the performance of our properties, including our share of properties we jointly control, on a "same-property" basis, using a metric referred to as SPNOI. We view SPNOI as a useful supplemental performance measure because it improves comparability between periods by eliminating the effects of changes in the composition of our portfolio.
On an individual property basis, SPNOI is generally computed in a consistent manner as PNOI.
We define our "same-property" population once a year at the beginning of the current calendar year and include buildings that were stabilized (the term "stabilized" means properties that have reached 90% leased or that have been in-service for at least one year since development completion or acquisition) as of January 1 of the prior calendar year. The "same-property" pool is also adjusted to remove properties that were sold subsequent to the beginning of the current calendar year. As such, the "same-property" population for the period ended December 31, 2021 includes all properties that we owned or jointly controlled at January 1, 2021, which had both been owned or jointly controlled and had reached stabilization by January 1, 2020, and have not been sold.
A reconciliation of income from continuing operations before income taxes to SPNOI is presented as follows (in thousands, except percentage data):
Three Months Ended December 31, Percent Twelve Months Ended December 31, Percent
2021 2020 Change 2021 2020 Change
Income from continuing operations before income taxes $ 107,305 $ 166,418 $ 880,167 $ 297,537
Share of SPNOI from unconsolidated joint ventures 5,627 5,582 22,505 21,880
PNOI excluded from the "same-property" population (30,619) (13,508) (95,678) (31,005)
Earnings from Service Operations (2,327) (1,218) (12,142) (6,028)
Rental Operations revenues and expenses excluded from PNOI (11,192) (26,254) (66,902) (85,813)
Non-Segment Items 94,482 24,133 (88,940) 410,541
SPNOI $ 163,276 $ 155,153 5.2 % $ 639,010 $ 607,112 5.3 %
The composition of the line items titled "Rental Operations revenues and expenses excluded from PNOI" and "Non-Segment Items" from the table above are shown in greater detail in Note 9 to the consolidated financial statements included in Part IV, Item 15 of this Report.
We believe that the factors that impact SPNOI are generally the same as those that impact PNOI. The following table details the number of properties, square feet, average commencement occupancy and average cash rental rate for the properties included in SPNOI for the respective periods:
Three Months Ended December 31, Twelve Months Ended December 31,
2021 2020 2021 2020
Number of properties 457 457 457 457
Square feet (in thousands) (1) 125,862 125,862 125,862 125,862
Average commencement occupancy percentage (2) 98.5% 98.4% 98.0% 98.1%
Average rental rate - cash basis (3) $5.16 $4.99 $5.11 $4.93
(1) Includes the total square feet of the consolidated properties that are in the "same-property" population as well as 5.4 million square feet of space for unconsolidated joint ventures, which represents our ratable share of the 12.4 million total square feet of space for buildings owned by unconsolidated joint ventures that are in the "same-property" population.
(2) Commencement occupancy represents the percentage of total square feet where the leases have commenced.
(3) Represents the average annualized contractual rent per square foot for the three and twelve months ended December 31, 2021 and 2020 for tenants in occupancy in properties in the "same-property" population. Cash rent does not include the tenant's obligation to pay property operating expenses and real estate taxes. If a tenant was within a free rent period, its rent would equal zero for purposes of this metric.
Key Performance Indicators
Our operating results depend primarily upon rental income from our Rental Operations. The following discussion highlights the metrics that drive the performance of our Rental Operations, which management uses to operate the business, and that we consider to be critical drivers of future revenues.
Occupancy Analysis
Occupancy is an important metric for management and our investors for understanding our financial performance. Our ability to maintain high occupancy rates is among the principal drivers of maintaining and increasing rental revenue. The following table sets forth percent leased and average net effective rent information regarding our in-service portfolio of rental properties at December 31, 2021 and 2020, respectively:
Total Square Feet
(in thousands) Percent of
Total Square Feet Percent Leased* Average Annual Net Effective Rent**
Type 2021 2020 2021 2020 2021 2020 2021 2020
Industrial 139,816 140,511 99.8 % 99.9 % 98.1 % 97.4 % $5.77 $5.30
Non-reportable Rental Operations 211 211 0.2 % 0.1 % 93.8 % 96.8 % $22.55 $22.31
Total Consolidated 140,027 140,722 100.0 % 100.0 % 98.1 % 97.4 % $5.79 $5.32
Unconsolidated Joint Ventures 12,935 11,467 98.0 % 98.7 % $4.68 $4.32
Total Including Unconsolidated Joint Ventures 152,962 152,189 98.1 % 97.5 %
* Represents the percentage of total square feet leased based on executed leases and without regard to whether the leases have commenced.
** Average annual net effective rent represents average annual base rental payments per leased square foot, on a straight-line basis for the term of each lease, from space leased to tenants at the end of the most recent reporting period. This amount excludes additional amounts paid by tenants as reimbursement for operating expenses.
The increase in occupancy at December 31, 2021 within our industrial portfolio, when compared to December 31, 2020, primarily resulted from leasing up recently delivered speculative developments while renewing or backfilling existing leases to maintain the occupancy level within our existing base of properties.
Vacancy Activity
The following table sets forth vacancy activity, shown in square feet, from our in-service rental properties for the year ended December 31, 2021 (in thousands):
Consolidated Properties Unconsolidated Joint Venture Properties Total Including Unconsolidated Joint Venture Properties
Vacant square feet at December 31, 2020 3,716 150 3,866
Vacant space in completed developments 1,248 - 1,248
Expirations 6,041 667 6,708
Early lease terminations 197 87 284
Property structural changes/other (360) - (360)
Leasing of previously vacant space (8,216) (647) (8,863)
Vacant square feet at December 31, 2021 2,626 257 2,883
Total Leasing Activity
Our ability to maintain and improve occupancy and net effective rents primarily depends upon our continuing ability to lease vacant space. The volume and quality of our leasing activity is closely scrutinized by management in operation of the business and provides useful information regarding future performance. The initial leasing of development projects or vacant space in acquired properties is referred to as first generation lease activity. The leasing of such space that we have previously held under lease to a tenant is referred to as second generation lease activity. Second generation lease activity may be in the form of renewals of existing leases or new leases of previously leased space. The total leasing activity for our consolidated and unconsolidated industrial rental properties, expressed in square feet of leases signed, is as follows for the years ended December 31, 2021 and 2020 (in thousands):
2021 2020
New Leasing Activity - First Generation 7,058 7,917
New Leasing Activity - Second Generation 6,313 4,797
Renewal Leasing Activity 12,581 6,147
Early Renewal Leasing Activity * 2,841 2,671
Short-Term New Leasing Activity ** 582 1,889
Short-Term Renewal Leasing Activity ** 2,313 2,077
Non-Reportable Rental Operations Leasing Activity 1 36
Total Consolidated Leasing Activity 31,689 25,534
Unconsolidated Joint Venture Leasing Activity 1,823 3,154
Total Including Unconsolidated Joint Venture Leasing Activity 33,512 28,688
* Early renewals represent renewals executed more than two years in advance of a lease's originally scheduled end date.
** Short-term leases represent leases with a term of less than twelve months.
Second Generation Leases
The following table sets forth the estimated costs of tenant improvements and leasing costs, on a per square foot basis, that we are obligated to fulfill under the second generation industrial leases signed for our rental properties, during the years ended December 31, 2021 and 2020:
Square Feet of Leases
(in thousands) Percent of Expiring Leases Renewed Average Term in Years Estimated Tenant Improvement Cost per Square Foot Leasing Commissions per Square Foot Leasing Concessions per Square Foot
2021 2020 2021 2020 2021 2020 2021 2020 2021 2020 2021 2020
Consolidated - New Second Generation 6,313 4,797 5.9 5.4 $ 2.07 $ 1.79 $ 2.59 $ 2.87 $ 0.11 $ 0.05
Unconsolidated Joint Ventures - New Second Generation 577 527 7.1 3.3 $ 3.78 $ 1.56 $ 2.87 $ 1.12 $ 0.03 $ -
Total - New Second Generation 6,890 5,324 6.0 5.2 $ 2.21 $ 1.92 $ 2.61 $ 2.73 $ 0.10 $ 0.04
Consolidated - Renewal 12,581 6,147 76.8 % 65.6 % 5.8 4.6 $ 0.81 $ 0.99 $ 1.54 $ 1.50 $ 0.20 $ 0.03
Unconsolidated Joint Ventures - Renewal 326 1,142 34.9 % 86.8 % 7.4 4.7 $ 1.64 $ 0.93 $ 2.84 $ 1.53 $ - $ -
Total - Renewal 12,907 7,289 74.5 % 69.5 % 5.8 4.6 $ 0.84 $ 0.98 $ 1.58 $ 1.50 $ 0.20 $ 0.03
Growth in average annual net effective rents for new second generation and renewal leases, on a combined basis, for our consolidated and unconsolidated industrial rental properties, is as follows for the years ended December 31:
2021 2020
Ownership Type
Consolidated properties 34.8 % 28.2 %
Unconsolidated joint venture properties 46.7 % 33.8 %
Lease Expirations
The table below reflects our consolidated in-service portfolio lease expiration schedule at December 31, 2021 (in thousands, except percentage data and number of leases):
Total Consolidated Portfolio Industrial Non-Reportable
Year of
Expiration Square
Feet Annual Rental
Revenue* Number of Leases Square
Feet Annual Rental
Revenue* Square
Feet Annual Rental
Revenue*
2022 9,063 $ 40,799 99 9,046 $ 40,607 17 $ 192
2023 14,968 75,664 147 14,947 75,372 21 292
2024 14,536 78,307 154 14,529 78,225 7 82
2025 15,401 86,168 144 15,399 86,143 2 25
2026 17,193 90,196 142 17,181 90,047 12 149
2027 16,046 84,248 73 16,041 84,191 5 57
2028 11,068 74,015 53 10,949 70,528 119 3,487
2029 9,208 48,671 33 9,208 48,671 - -
2030 7,411 47,832 34 7,411 47,832 - -
2031 6,262 47,406 23 6,247 47,229 15 177
2032 and Thereafter 16,244 122,764 46 16,244 122,764 - -
Total Leased 137,400 $ 796,070 948 137,202 $ 791,609 198 $ 4,461
Total Portfolio Square Feet 140,027 139,816 211
Percent Leased 98.1 % 98.1 % 93.8 %
* Annualized rental revenue represents average annual base rental payments, on a straight-line basis for the term of each lease, from space leased to tenants at the end of the most recent reporting period. Annualized rental revenue excludes additional amounts paid by tenants as reimbursement for operating expenses.
Property Acquisitions
Our decision process in determining whether or not to acquire a property or portfolio of properties involves several factors, including expected rent growth, multiple yield metrics, property locations and expected demographic growth in each location, current occupancy of the properties, tenant profile and remaining terms of the in-place leases in the properties. It is difficult to predict which markets may present acquisition opportunities that align with our strategy. Because of the numerous factors considered in our acquisition decisions, we do not establish specific target yields for future acquisitions.
We acquired nine in-service buildings, including one property received through an asset distribution from an unconsolidated joint venture, and one container storage lot under long-term lease during the year ended December 31, 2021 and ten buildings during the year ended December 31, 2020. The following table summarizes the acquisition price, percent leased at time of acquisition and in-place yields of property acquisitions (in thousands, except percentage data):
2021 Acquisitions 2020 Acquisitions
Type Fair Value of Acquired Assets* In-Place Yield (Mark to Market)** Percent Leased at Acquisition Date*** Fair Value of Acquired Assets* In-Place Yield (Mark to Market)** Percent Leased at Acquisition Date***
Industrial $ 609,241 4.4 % 100.0 % $ 424,941 3.5 % 80.6 %
* Includes fair value of real estate assets and acquired in-place lease intangible assets.
** In-place yields of completed acquisitions are calculated as the current annualized net rental payments from space leased to tenants at the date of acquisition, including the amortization of above or below market leases, less current annualized operating expenses not recovered through tenant reimbursements, divided by the fair value of the acquired real estate assets.
*** Represents percentage of total square feet leased based on executed leases and without regard to whether the leases have commenced, at the date of acquisition, including lease-backs with sellers executed in connection with the acquisition(s).
Building Dispositions
We dispose of properties on a basis that is generally consistent with our strategic plans. Our ability to dispose of properties, from time to time, on favorable terms is a key performance indicator from the perspective of management, as a source of capital to fund future investment. We believe that evaluating our disposition activity is also useful to investors.
We sold 30 consolidated properties including two trailer storage lots during the year ended December 31, 2021 and seven consolidated properties during the year ended December 31, 2020. The following table summarizes the sales prices, in-place yields and percent leased of industrial properties dispositions (in thousands, except percentage data):
2021 Dispositions 2020 Dispositions
Type Sales Price In-Place Yield* Percent Leased** Sales Price In-Place Yield* Percent Leased**
Industrial $ 1,069,120 4.6 % 100.0 % $ 321,800 3.8 % 77.5 %
* In-place yields of completed dispositions are calculated as annualized net operating income from space leased to tenants at the date of sale on a lease-up basis, including full rent from all executed leases, even if currently in a free rent period, divided by the sales price. Annualized net operating income is comprised of base rental payments, excluding reimbursement of operating expenses, less current annualized operating expenses not recovered through tenant reimbursements.
** Represents percentage of total square feet leased based on executed leases and without regard to whether the leases have commenced, at the date of sale.
Development
We expect to generate future earnings from Rental Operations as development properties are placed in service and leased. Development activities, and our ability to lease those developments, are viewed by management as key indicators of future earnings growth and provide useful information to investors for the same reasons.
We had 9.7 million square feet of properties under development with total estimated costs upon completion of $1.42 billion at December 31, 2021 compared to 7.4 million square feet with total estimated costs upon completion of $1.07 billion at December 31, 2020. The square footage includes both consolidated properties and unconsolidated joint venture development activity at 100% while estimated costs include consolidated properties and unconsolidated joint venture development activity at our 50% ownership share.
The following table summarizes our properties under development at December 31, 2021 (in thousands, except percentage data and number of buildings):
Ownership Type Number of Buildings Square
Feet Percent
Leased Total
Estimated
Project
Costs Total
Incurred
to Date Amount
Remaining
to be Spent
Consolidated properties 29 8,538 47.3 % $ 1,378,289 $ 693,116 $ 685,173
Unconsolidated joint venture properties 2 1,157 50.3 % 41,911 15,967 25,944
Total 31 9,695 47.7 % $ 1,420,200 $ 709,083 $ 711,117
Results of Operations
A summary of our operating results and property statistics for each of the years in the three-year period ended December 31, 2021, is as follows (in thousands, except number of properties):
2021 2020 2019
Rental and related revenue from continuing operations $ 1,025,663 $ 929,194 $ 855,833
General contractor and service fee revenue 80,260 64,004 117,926
Operating income 975,238 417,846 524,761
General Partner
Net income attributable to common shareholders $ 852,895 $ 299,915 $ 428,972
Partnership
Net income attributable to common unitholders $ 861,249 $ 302,578 $ 432,650
Number of in-service consolidated properties at end of year 477 480 459
In-service consolidated square footage at end of year 140,027 140,722 135,451
Number of in-service unconsolidated joint venture properties at end of year 40 40 38
In-service unconsolidated joint venture square footage at end of year 12,935 11,467 10,976
Comparison of Year Ended December 31, 2021 to Year Ended December 31, 2020
Rental and Related Revenue
The following table sets forth rental and related revenue from continuing operations (in thousands):
2021 2020
Rental and related revenue:
Industrial $ 1,019,342 $ 921,612
Non-reportable Rental Operations and non-segment revenues 6,321 7,582
Total rental and related revenue from continuing operations $ 1,025,663 $ 929,194
The primary reasons for the increase in rental and related revenue from continuing operations were:
•We acquired 20 properties and placed 36 developments in service from January 1, 2020 to December 31, 2021, which provided incremental revenues from continuing operations of $94.2 million during the year ended December 31, 2021 as compared to the same period in 2020.
•Rental and related revenue from our "same-property" portfolio increased by $38.0 million during the twelve months ended December 31, 2021, as compared to the same period in 2020. These increased revenues were primarily driven by rental rate growth.
•The sale of 37 in-service properties since January 1, 2020, which did not meet the criteria to be classified within discontinued operations, resulted in a decrease of $36.1 million to rental and related revenue from continuing operations during the year ended December 31, 2021, as compared to the same period in 2020,
which partially offset the aforementioned increases to rental and related revenue from continuing operations.
Rental Expenses and Real Estate Taxes
The following table sets forth rental expenses and real estate taxes from continuing operations (in thousands):
2021 2020
Rental expenses:
Industrial $ 85,297 $ 75,345
Non-reportable Rental Operations and non-segment expenses 485 1,294
Total rental expenses from continuing operations $ 85,782 $ 76,639
Real estate taxes:
Industrial $ 159,171 $ 148,252
Non-reportable Rental Operations and non-segment expenses 409 1,043
Total real estate tax expense from continuing operations $ 159,580 $ 149,295
Overall, rental expenses from continuing operations increased by $9.1 million in 2021 compared to 2020. The increase to rental expenses was primarily due to higher snow removal costs compared to the same period in 2020.
Overall, real estate tax expense from continuing operations increased by $10.3 million in 2021 compared to 2020. The increase to real estate tax expenses was mainly due to higher real estate tax assessments in certain of our markets and the result of acquisitions and developments placed in service from January 1, 2020 to December 31, 2021, which have generally been concentrated in markets with higher tax rates and/or assessed values. These increases were partially offset by the impact of property sales that did not meet the criteria to be classified within discontinued operations.
Service Operations
The following table sets forth the components of net earnings from the Service Operations reportable segment for the years ended December 31, 2021 and 2020, respectively (in thousands):
2021 2020
Service Operations:
General contractor and service fee revenue $ 80,260 $ 64,004
General contractor and other services expenses (68,118) (57,976)
Net earnings from Service Operations $ 12,142 $ 6,028
Service Operations primarily consist of the development, construction management and general contractor services, leasing, property management and asset management for unconsolidated joint venture properties and properties owned by third parties. Service Operations are heavily influenced by the current state of the economy, as construction and development services rely on the expansion of business operations of third-party property owners and joint venture partners, while leasing and property management fees are dependent upon occupancy.
Net earnings from service operations increased as the result of higher fee-based third party construction activity during 2021 compared to 2020.
Depreciation and Amortization
Depreciation and amortization expense from continuing operations was $362.1 million and $353.0 million for the years ended December 31, 2021 and 2020, respectively. The increase in depreciation and amortization expense for the year ended December 31, 2021 was primarily the result of continued growth in our portfolio through development and acquisitions placed in service from January 1, 2020 to December 31, 2021, partially offset by the impact of property sales that did not meet the criteria to be classified within discontinued operations.
Equity in Earnings of Unconsolidated Joint Ventures
Equity in earnings of unconsolidated joint ventures represents our ownership share of net income from investments in unconsolidated joint ventures that generally own and operate rental properties. Equity in earnings of unconsolidated joint ventures was $32.8 million and $11.9 million for the years ended December 31, 2021 and 2020, respectively. In 2021, we recognized $10.6 million of equity in earnings of unconsolidated joint ventures related to gains on the distribution of joint venture assets to our partner in two unconsolidated joint ventures made in connection with a plan of dissolution (see Note 5 to the consolidated financial statements). We also recognized $10.0 million of equity in earnings related to our share of gains on the sale of properties to unrelated parties by unconsolidated joint ventures during 2021.
There were no property sales by unconsolidated joint ventures during 2020.
Gain on Sale of Properties - Continuing Operations
We sold 30 properties during 2021 that were classified in continuing operations, recognizing total gains on sale of $585.7 million. These properties did not meet the criteria for inclusion in discontinued operations.
We sold seven properties during 2020 that were classified in continuing operations, recognizing total gains on sale of $127.7 million. These properties did not meet the criteria for inclusion in discontinued operations.
Gain on Sale of Land
Gains on sale of land totaled $12.9 million and $10.5 million for the years ended December 31, 2021 and 2020, respectively. We sold 283 acres of undeveloped land in 2021 compared to 157 acres of undeveloped land in 2020.
Impairment Charges
We did not recognize any impairment charges in 2021.
We recognized $5.6 million of impairment charges during the first quarter of 2020, related to writing off pre-acquisition costs, primarily non-refundable purchase deposits, for certain planned purchases of undeveloped land that we elected not to pursue due to the uncertain economic outlook at the onset of the COVID-19 pandemic.
General and Administrative Expenses
General and administrative expenses consist of two components. The first component includes general corporate expenses, and the second component represents the indirect operating costs not allocated to, or absorbed by, either the development, leasing and operation of our consolidated properties or our Service Operations. Such indirect operating costs are primarily comprised of employee compensation, including related costs such as benefits and wage-related taxes, but also include other ancillary costs such as travel and information technology support. Total indirect operating costs, prior to any allocation or absorption, and general corporate expenses are collectively referred to as our overall pool of overhead costs.
Those indirect costs not allocated to or absorbed by these operations are charged to general and administrative expenses. We regularly review our total overhead cost structure relative to our leasing, development and construction volume and adjust the level of total overhead, generally through changes in our level of staffing in various functional departments, as necessary, in order to control overall general and administrative expenses.
General and administrative expenses were $69.6 million and $62.4 million for the years ended December 31, 2021 and 2020, respectively. The following table sets forth the factors that led to the increase in general and administrative expenses from 2020 to 2021 (in millions):
General and administrative expenses - 2020 $ 62.4
Increase to overall pool of overhead costs 12.4
Decrease in overhead restructuring charges (1) (1.0)
Impact of increased allocation of costs to leasing and development activities (2) (2.3)
Increased allocation of costs to Service Operations and Rental Operations (3) (1.9)
General and administrative expenses - 2021 $ 69.6
(1) We recognized approximately $3.5 million of overhead restructuring costs, primarily related to reorganizing our construction business during the year ended December 31, 2021, compared to $4.5 million of overhead restructuring charges during the year ended December 31, 2020.
(2) We capitalized $7.9 million and $28.6 million of our total overhead costs to leasing and development, respectively, for consolidated properties during 2021, compared to capitalizing $6.5 million and $28.8 million of such costs, respectively, for 2020. Non-capitalizable leasing costs were $13.3 million and $12.3 million for the years ended December 31, 2021 and 2020 (these costs are presented separately in the line item "Non-Incremental Costs Related to Successful Leases" on the Consolidated Statements of Operations). Combined overhead costs capitalized to leasing and development totaled 25.2% and 26.7% of our overall pool of overhead costs for 2021 and 2020, respectively.
(3) The increase in allocation of costs to Service Operations and Rental Operations resulted from a higher volume of third-party construction projects during 2021.
Interest Expense
Interest expense from continuing operations was $84.8 million and $93.4 million for the years ended December 31, 2021 and 2020, respectively. The decrease in interest expense from continuing operations for the year ended December 31, 2021 was primarily due to lower average interest rates resulting from refinancing unsecured notes and higher capitalization of interest expense, partially offset by increased overall borrowings.
We capitalized $35.0 million and $24.3 million of interest costs during 2021 and 2020, respectively.
Debt Extinguishment
In January 2021, the Partnership assumed and immediately repaid $40.2 million of unsecured debt related to the dissolution of two unconsolidated joint ventures (see Note 5 to the consolidated financial statements).
In June 2021, the Partnership redeemed $83.7 million of its remaining 3.88% unsecured notes due October 2022. A loss of $3.9 million was recognized in connection with the redemption of these notes including the prepayment premium and write-off of the unamortized deferred financing costs.
In August 2021, the Partnership redeemed $250.0 million of its unsecured notes due April 2023, which had a stated interest rate of 3.63%. A loss of $13.9 million was recognized in connection with the redemption of these notes including the prepayment premium and write-off of the unamortized deferred financing costs.
During 2020, the Partnership redeemed $300.0 million of unsecured notes with a stated interest rate of 4.38% and repurchased and canceled $216.3 million of unsecured notes with a stated interest rate of 3.88% pursuant to a tender offer completed by the Partnership. In connection with the redemption and repurchase of these unsecured notes, we recognized a total loss of $32.9 million including the redemption/repayment premium and write-off of the unamortized deferred financing costs.
Critical Accounting Estimates
The preparation of our consolidated financial statements in conformity with GAAP requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reported period. Certain estimates, judgments and assumptions are inherently subjective and based on the existing
business and market conditions, and are therefore continually evaluated based upon available information and experience. Based on the nature of our business, current economic conditions and the value of our real estate assets, we have concluded that our financial statements for all periods presented have not been materially impacted by individual accounts or classes of transaction that rely on estimates. Further, we have concluded that our financial statements for all periods presented are not materially impacted by estimates of fair value that rely upon non-observable inputs.
We have determined that judgments regarding the impairment of real estate assets represent a critical accounting estimate that has the potential to be material in future periods and has been material in certain periods prior to those presented in this Form 10-K. As the result of the strong demand, and generally appreciating values, for industrial real estate assets, we have not recognized any material impairment charges in any of the periods presented in our consolidated financial statements. As described below in our description of Critical Accounting Policies, determining whether a triggering event has taken place requires an evaluation of assumptions including occupancy levels, rental rates, capitalization rates and anticipated holding periods when evaluating real estate assets for potential impairment. We do not believe that the conclusions we reached regarding the assessment of our real estate assets for impairment, in the current economic and operating environment, would result in a materially different conclusion within any reasonable range of assumptions that could have been applied. Should economic conditions worsen, and the values of industrial assets decline in future periods, then the assumptions and estimates we may make in future impairment analyses, and potential future measurement of impairment charges, could be sensitive and could result in a material change in the range of potential outcomes.
Critical Accounting Policies
Note 2 to the Consolidated Financial Statements includes further discussion of our significant accounting policies. Our management has assessed the accounting policies used in the preparation of our financial statements and discussed them with our audit committee and independent auditors. The following accounting policies are considered critical based upon materiality to the financial statements, and to a lesser extent, the degree of judgment involved in estimating reported amounts and sensitivity to changes in industry and economic conditions:
Impairment of Real Estate Assets: We evaluate our real estate assets, with the exception of those that are classified as held-for-sale, for impairment whenever events or changes in circumstances indicate that their carrying amounts may not be recoverable. If such an evaluation is considered necessary, we compare the carrying amount of that real estate asset, or asset group, with the expected undiscounted cash flows that are directly associated with, and that are expected to arise as a direct result of, the use and eventual disposition of that asset, or asset group. Our estimate of the expected future cash flows used in testing for impairment is based on, among other things, our estimates regarding future market conditions, rental rates, occupancy levels, costs of tenant improvements, leasing commissions and other tenant concessions, assumptions regarding the residual value of our properties at the end of our anticipated holding period and the length of our anticipated holding period and is, therefore, subjective by nature. These assumptions could differ materially from actual results. If our strategy changes or if market conditions otherwise dictate a reduction in the holding period and an earlier sale date, an impairment loss could be recognized and such loss could be material. To the extent the carrying amount of a real estate asset, or asset group, exceeds the associated estimate of undiscounted cash flows, an impairment loss is recorded to reduce the carrying value of the asset to its fair value.
The determination of the fair value of real estate assets is also highly subjective, especially in markets where there is a lack of recent comparable transactions. We primarily utilize the income approach to estimate the fair value of our income producing real estate assets. To the extent that the assumptions used in testing long-lived assets for impairment differ from those of a marketplace participant, the assumptions are modified in order to estimate the fair value of a real estate asset when an impairment charge is measured. In addition to determining future cash flows, which make the estimation of a real estate asset's undiscounted cash flows highly subjective, the selection of the discount rate and exit capitalization rate used in applying the income approach is also highly subjective.
To the extent applicable marketplace data is available, we generally use the market approach in estimating the fair value of undeveloped land that is determined to be impaired.
Real estate assets that are classified as held-for-sale are reported at the lower of their carrying value or their fair value, less estimated costs to sell.
Acquisition of Real Estate Property and Related Assets: We generally account for real estate acquisitions as asset acquisitions as opposed to business combinations. We allocate the purchase price of acquired properties to tangible and identified intangible assets based on their relative fair values, using all pertinent information available at the date of acquisition. The allocation of the purchase price to tangible assets (buildings, tenant improvements and land) is based upon management's determination of the value of the property as if it were vacant. This “as-if vacant” value is estimated using an income, or discounted cash flow, approach that relies upon internally determined assumptions that we believe are consistent with current market conditions for similar properties. The most important assumptions in determining the allocation of the purchase price to tangible assets are the exit capitalization rate, estimated market rents and the fair value of the underlying land.
The purchase price of real estate assets is also allocated to intangible assets consisting of the above or below market component of in-place leases and the value of in-place leases. The value allocable to the above or below market component of an acquired in-place lease is determined based upon the present value (using a discount rate which reflects the risks associated with the acquired leases) of the difference between (i) the contractual amounts to be received pursuant to the lease over its remaining term and (ii) management's estimate of the amounts that would be received using fair market rates over the remaining term of the lease. The amounts allocated to above market leases are included in deferred leasing and other costs in the balance sheet and below market leases are included in other liabilities in the balance sheet; both are amortized to rental income over the remaining terms of the respective leases. Factors considered in determining the value allocable to in-place leases include estimates, during hypothetical lease up periods, related to space that is actually leased at the time of acquisition. These estimates include (i) lost rent at market rates, (ii) fixed operating costs that will be recovered from tenants and (iii) theoretical leasing commissions required to execute similar leases. These intangible assets are included in deferred leasing and other costs in the balance sheet and are amortized over the remaining term of the existing lease.
The audit committee has reviewed the critical accounting policies identified by management.
Liquidity and Capital Resources
Overview
We expect to meet our short-term liquidity requirements over the next 12 months, which include payments of dividends and distributions, completion of development projects that are currently under construction and capital expenditures needed to maintain our current real estate assets, through working capital, net cash provided by operating activities and short term borrowings on the Partnership's unsecured line of credit. We had no outstanding borrowings on the Partnership's $1.20 billion unsecured line of credit and had $69.8 million of cash on hand at December 31, 2021.
In addition to our existing sources of liquidity, we expect to meet long-term liquidity requirements, such as scheduled mortgage and unsecured debt maturities, financing of development activities, acquisitions and other capital improvements, through multiple sources of capital including operating cash flow, proceeds from property dispositions and accessing the public debt and equity markets.
Sources of Liquidity
Rental Operations
Cash flows from Rental Operations is our primary source of liquidity and provides a stable source of cash flow to fund operational expenses. We believe that this cash-based revenue stream is substantially aligned with revenue recognition (except for items such as periodic straight-line rental income accruals and amortization of above or below market rents) as cash receipts from the leasing of rental properties are generally received in advance of, or a short time following, the actual revenue recognition.
We are subject to a number of risks related to general economic conditions, including reduced occupancy, tenant defaults and bankruptcies and potential reduction in rental rates upon renewal or re-letting of properties, any of which would result in reduced cash flow from operations.
Debt and Equity Securities
Our unsecured line of credit at December 31, 2021 is described as follows (in thousands):
Description Borrowing
Capacity Maturity
Date Outstanding Balance at December 31, 2021
Unsecured Line of Credit - Partnership $ 1,200,000 March 31, 2025 $ -
In March 2021, the Partnership amended and restated its existing $1.20 billion unsecured line of credit, which was set to mature in January 2022 with two six-month extension options. The amended and restated unsecured line of credit bears interest at one-month LIBOR plus 0.775% with a reduction in borrowing costs if certain sustainability linked metrics are achieved each year. The amended and restated line of credit matures on March 31, 2025 with two six-month extension options to extend until March 31, 2026. Subject to certain conditions, the terms also include an option to increase the facility by up to an additional $800.0 million, for a total of up to $2.00 billion. This line of credit provides us with an option to obtain borrowings from financial institutions that participate in the line at rates that may be lower than the stated interest rate, subject to certain restrictions.
This line of credit contains financial covenants that require us to meet certain financial ratios and defined levels of performance, including those related to fixed charge coverage, unsecured interest expense coverage and debt-to-asset value (with asset value being defined in the Partnership's unsecured line of credit agreement). At December 31, 2021, we were in compliance with all covenants under this line of credit.
In 2017, the Alternative Reference Rates Committee proposed that the Secured Overnight Funding Rate replace LIBOR. In March 2021, the administrator of LIBOR announced that the publication of LIBOR will cease for one-week and two-month USD LIBOR settings immediately after December 31, 2021, and the remaining USD LIBOR settings immediately after June 30, 2023. As the Partnership's unsecured line of credit agreement has provisions that allow for automatic transition to a new rate, and the Partnership has no other material debt arrangements that are indexed to LIBOR, we believe that the transition will not have a material impact on our consolidated financial statements.
At December 31, 2021, we had on file with the SEC an automatic shelf registration statement on Form S-3 relating to the offer and sale, from time to time, of an indeterminate amount of debt and equity securities (including guarantees of the Partnership's debt securities by the General Partner). Equity securities are offered and sold by the General Partner, and the net proceeds of such offerings are contributed to the Partnership in exchange for additional General Partner Units or Preferred Units. From time to time, we expect to issue additional securities under this automatic shelf registration statement to fund the repayment of debt, development and future acquisitions and for other general corporate purposes.
In February 2021, the General Partner terminated its previous equity distribution agreement for its previous ATM equity program and entered into a new equity distribution agreement pursuant to which the General Partner may sell from time to time up to an aggregate offering price of $400.0 million of its common stock through sales agents or forward sellers. During the three months ended December 31, 2021, the General Partner issued 1.7 million common shares pursuant to its new ATM equity program, resulting in net proceeds of $94.6 million after paying total compensation of $955,000 to the applicable sales agents. During the year ended December 31, 2021, the General Partner issued 8.0 million common shares under its new ATM equity program, generating net proceeds of $396.0 million after paying total compensation of $4.0 million to the applicable sales agents. In addition, during the year ended December 31, 2021, the General Partner issued 210,000 common shares under its predecessor ATM equity program, resulting in net proceeds of $8.3 million after paying total compensation of $84,000 to the applicable sales agents. These issuances under both ATM programs resulted in net proceeds of $403.6 million during 2021, after deducting the commissions and other fees paid, totaling $626,000. As of December 31, 2021, substantially all of the ATM equity program has been utilized.
In January 2021, the Partnership issued $450.0 million of senior unsecured notes, which bear interest at a stated interest rate of 1.75%, have an effective interest rate of 1.83%, and mature on February 1, 2031, for cash proceeds of $446.6 million.
In November 2021, the Partnership issued $500.0 million of senior unsecured notes, which bear interest at a stated interest rate of 2.25%, have an effective interest rate of 2.38%, and mature on January 15, 2032, for cash proceeds of $494.1 million.
The Partnership has issued debt securities pursuant to certain indentures and related supplemental indentures, which also require us to comply with financial ratios and other covenants regarding our operations. We were in compliance with all such covenants at December 31, 2021.
Sale of Real Estate Assets
We dispose of certain properties in a manner consistent with our strategic plans. Our ability to dispose of such properties on favorable terms is dependent upon a number of factors including the availability of credit to potential buyers to purchase properties at prices that we consider acceptable. Although we believe that we have demonstrated our ability to generate significant liquidity through property dispositions, potential future adverse changes to market and economic conditions could negatively impact our further ability to dispose of properties that no longer meet our long-term objectives.
Sales of buildings and land provided $1.07 billion in net proceeds in 2021, compared to $336.3 million in 2020 and $432.7 million in 2019.
Transactions with Unconsolidated Joint Ventures
Transactions with unconsolidated joint ventures also provide a source of liquidity. From time to time we will sell properties to unconsolidated joint ventures, while retaining a continuing interest in that entity, and receive proceeds commensurate to those interests that we do not own. Additionally, unconsolidated joint ventures will from time to time obtain debt financing or sell properties and will then distribute to us, and our joint venture partners, all or a portion of the proceeds from such transactions. During 2021, our share of sale and capital distributions from unconsolidated joint ventures totaled $61.6 million. As part of closings of the contribution of properties to the recently formed 20% owned unconsolidated joint venture, we received $41.1 million for our ownership share of proceeds from third party mortgage loans originated by this joint venture during 2021.
Uses of Liquidity
Our principal uses of liquidity include the following:
•property investment;
•leasing/capital costs;
•dividends and distributions to shareholders and unitholders;
•debt service and maturities;
•opportunistic repurchases of outstanding debt; and
•other contractual obligations.
Property Investment
Our overall strategy is to continue to increase our investment in quality industrial properties, primarily through development, on both a speculative and build-to-suit basis, supplemented with acquisitions in Coastal Tier 1 markets. Pursuant to this strategy, we evaluate development and acquisition opportunities based upon our market outlook, including general economic conditions, supply and long-term growth potential. Our ability to make future property investments is dependent upon identifying suitable acquisition and development opportunities, and our continued access to our longer-term sources of liquidity, including issuances of debt or equity securities as well as generating cash flow by disposing of selected properties.
Leasing/Capital Costs
Tenant improvements and lease-related costs pertaining to our initial leasing of newly completed space, or vacant space in acquired properties, are referred to as first generation expenditures. Such first generation expenditures for tenant improvements are included within "development of real estate investments" in our Consolidated Statements of Cash Flows, while such expenditures for capitalizable lease-related costs are included within "other deferred leasing costs."
Cash expenditures related to the construction of a building's shell, as well as the associated site improvements, are also included within "development of real estate investments" in our Consolidated Statements of Cash Flows.
Tenant improvements and leasing costs to renew or re-let rental space that we previously leased to tenants for second generation leases are referred to as second generation expenditures. Building improvements that are not specific to any tenant, but serve to improve integral components of our real estate properties, are also second generation expenditures. One of the principal uses of our liquidity is to fund the second generation leasing/capital expenditures of our real estate investments.
The following table summarizes our second generation capital expenditures by type of expenditure, as well as capital expenditures for the development of real estate investments and for other deferred leasing costs (in thousands):
2021 2020 2019
Second generation tenant improvements $ 23,270 $ 17,126 $ 12,165
Second generation leasing costs 36,691 23,808 28,467
Building improvements 8,484 4,103 12,505
Total second generation capital expenditures $ 68,445 $ 45,037 $ 53,137
Development of real estate investments $ 661,416 $ 573,544 $ 446,801
Other deferred leasing costs $ 42,214 $ 41,607 $ 32,921
We had consolidated properties under development with an expected total cost of $1.38 billion at December 31, 2021, compared to projects with an expected cost of $1.04 billion and $1.05 billion at December 31, 2020 and 2019, respectively. We had $685.2 million of remaining costs to complete for consolidated properties under development at December 31, 2021.
The capital expenditures in the table above include the capitalization of internal overhead costs. We capitalized $7.9 million, $6.5 million and $6.8 million of overhead costs that are incremental to executing leases, including both first and second generation leases, during the years ended December 31, 2021, 2020 and 2019, respectively. We capitalized $28.6 million, $28.8 million and $24.2 million of overhead costs related to development activities, including both development and tenant improvement projects on first and second generation space, during the years ended December 31, 2021, 2020 and 2019, respectively. Combined overhead costs capitalized to leasing and development totaled 25.2%, 26.7% and 22.8% of our overall pool of overhead costs at December 31, 2021, 2020 and 2019, respectively.
Further discussion of the capitalization of overhead costs can be found herein, in the year-to-year comparison of general and administrative expenses of this Item 7.
In addition to the capitalization of overhead costs, the totals for development of real estate assets in the table above include the capitalization of $35.0 million, $24.3 million and $26.5 million of interest costs during the years ended December 31, 2021, 2020 and 2019, respectively.
Both our first and second generation expenditures vary significantly between leases on a per square foot basis, dependent upon several factors including the nature of a tenant's operations, the specific physical characteristics of each individual property and the market in which the property is located.
Dividend and Distribution Requirements
The General Partner is required to meet the distribution requirements of the Code in order to maintain its REIT status. We paid regular dividends or distributions of $1.045, $0.96 and $0.88 per common share or Common Unit for the years ended December 31, 2021, 2020 and 2019, respectively.
We expect to continue to distribute at least an amount equal to our taxable earnings, to meet the requirements to maintain the General Partner's REIT status, and additional amounts as determined by the General Partner's board of directors. Distributions are declared at the discretion of the General Partner's board of directors and are subject to actual cash available for distribution, our financial condition, capital requirements and such other factors as the General Partner's board of directors deems relevant.
Debt Service and Maturities
Debt outstanding at December 31, 2021 had a face value totaling $3.73 billion with a weighted average interest rate of 3.02% and maturities at various dates through 2050. Of this total amount, we had $3.68 billion of unsecured debt, $56.2 million of secured debt and no outstanding borrowings on our unsecured line of credit at December 31, 2021. Scheduled principal amortization, maturities and repayments of unsecured debt, outstanding line of credit balances and assumed joint venture debt totaled $673.4 million for the year ended December 31, 2021.
The following table is a summary of the scheduled future amortization and maturities of our indebtedness at December 31, 2021 (in thousands, except percentage data):
Future Repayments
Year Scheduled
Amortization Maturities Total Weighted Average
Interest Rate of
Future Repayments
2022 $ 4,646 $ - $ 4,646 5.19%
2023 4,893 - 4,893 5.22%
2024 5,155 300,000 305,155 3.92%
2025 5,102 - 5,102 5.09%
2026 3,238 375,000 378,238 3.38%
2027 1,615 475,000 476,615 3.18%
2028 1,307 500,000 501,307 4.45%
2029 1,359 400,000 401,359 2.88%
2030 1,413 350,000 351,413 1.86%
2031 1,469 450,000 451,469 1.84%
Thereafter 3,261 847,734 850,995 2.74%
$ 33,458 $ 3,697,734 $ 3,731,192 3.02%
We anticipate generating capital to fund our debt maturities by using undistributed cash generated from our Rental Operations and property dispositions and by raising additional capital from future debt or equity transactions.
On January 14, 2022, we provided notice of redemption to the holders of our $300.0 million of 3.75% unsecured notes, which are scheduled to mature in December 2024. This redemption will be funded with the proceeds of the contribution of third tranche of assets to a 20% owned joint venture which closed in January 2022.
Repayments of Outstanding Debt
To the extent that it supports our overall capital strategy, we may purchase or redeem some of our outstanding unsecured notes prior to their stated maturities.
In January 2021, the Partnership assumed, and immediately repaid $40.2 million of unsecured debt associated with the properties received as a result of the dissolution of two unconsolidated joint ventures.
In June 2021, we redeemed $83.7 million of unsecured notes that were scheduled to mature in October 2022.
In August 2021, we redeemed $250.0 million of unsecured notes that were scheduled to mature in April 2023.
Lease Commitments
As of December 31, 2021, we have total future payment obligations of $223.5 million on our ground leases and $25.5 million on our office leases and other lease arrangements, over their non-cancellable lease periods including applicable lease extension and renewal options when deemed reasonably certain of exercise. No payments on these leases are material in any individual year.
Guarantee Obligations
We are subject to various guarantee obligations in the normal course of business and, in most cases, do not anticipate these obligations to result in significant cash payments. At December 31, 2021, we guaranteed the repayment of a $4.8 million loan associated with one of our unconsolidated joint ventures.
Additionally, as of December 31, 2021, we guaranteed the repayment of $18.5 million of economic development bonds issued by various municipalities in connection with certain commercial developments.
Historical Cash Flows
Cash, cash equivalents and restricted cash were $103.2 million, $67.2 million and $121.4 million at December 31, 2021, 2020, and 2019, respectively. The following table highlights significant changes in net cash associated with our operating, investing and financing activities (in millions):
Years Ended December 31,
2021 2020 2019
Net cash provided by operating activities $ 642.4 $ 566.4 $ 505.9
Net cash used for investing activities $ (832.4) $ (856.2) $ (555.1)
Net cash provided by financing activities $ 225.9 $ 235.6 $ 145.1
Operating Activities
Cash flows from operating activities provide the cash necessary to meet our operational requirements and the receipt of rental income from Rental Operations continues to be our primary source of operating cash flows. The increase in net cash provided by operating activities, from 2019 to 2020 and from 2020 to 2021, was driven by increasing occupancy and rental rates within our existing portfolio and increasing our asset base through acquisitions and development, financed through equity or low cost debt issuances.
Investing Activities
Highlights of significant cash sources and uses are as follows (in millions):
Years Ended December 31,
2021 2020 2019
Development of real estate investments $ (661.4) $ (573.5) $ (446.8)
Acquisition of buildings, land and other real estate assets (1,148.2) (632.1) (598.4)
Proceeds from sale of land and properties, net 1,068.0 336.3 432.7
Second generation tenant improvements, leasing costs and building improvements (68.4) (45.0) (53.1)
Issuance of mortgage loan (31.7) - -
Purchase deposit for assets to be contributed to an unconsolidated joint venture 13.4 - -
Proceeds from the repayments of notes receivable from property sales - 110.0 162.6
Capital distributions from unconsolidated joint ventures 61.6 0.9 26.3
Capital contributions and advances to unconsolidated joint ventures (22.6) (6.2) (34.5)
Financing Activities
Highlights of cash inflows and outflows from equity transactions are as follows (in millions):
Years Ended December 31,
2021 2020 2019
Proceeds from issuances of common shares under ATM equity programs $ 403.6 $ 175.0 $ 263.3
Distributions to common shareholders (394.5) (355.3) (318.7)
Distributions to limited partners (3.9) (3.2) (2.8)
Highlights of cash inflows and outflows from debt transactions are as follows (in millions):
Years Ended December 31,
2021 2020 2019
Proceeds from the issuance of debt
Secured debt $ - $ 18.4 $ -
Senior unsecured debt 940.7 663.1 582.3
$ 940.7 $ 681.5 $ 582.3
Repurchase of and repayments on debt (including extinguishment costs)
Secured debt $ - $ (9.0) $ (41.7)
Senior unsecured debt (390.9) (547.0) (255.8)
$ (390.9) $ (556.0) $ (297.5)
(Repayments) borrowings on line of credit, net
Unsecured line of credit $ (295.0) $ 295.0 $ (30.0)
Impact of Changes in Credit Ratings on Our Liquidity
We are currently assigned investment grade corporate credit ratings on our senior unsecured notes from Moody's Investors Service and Standard & Poor's Ratings Group. Our senior unsecured notes have been assigned a rating of Baa1 by Moody's Investors Service. In addition, our senior unsecured notes have been assigned a rating of BBB+ by Standard & Poor's Ratings Group. A securities rating is not a recommendation to buy, sell, or hold securities and is subject to revision or withdrawal at any time by the rating organization.
The ratings of our senior unsecured notes could change based upon, among other things, the impact that prevailing economic conditions may have on our results of operations and financial condition. If our credit ratings are downgraded or other negative action is taken, we could be required, among other things, to pay additional interest and fees on outstanding borrowings under our revolving credit agreement. Credit rating reductions by one or more rating agencies could also adversely affect our access to funding sources, the cost and other terms of obtaining funding, as well as our overall financial condition, operating results and cash flow.
Financial Instruments
We are exposed to capital market risk, such as changes in interest rates. In order to reduce the volatility relating to interest rate risk, we may enter into interest rate hedging arrangements from time to time. We do not utilize derivative financial instruments for trading or speculative purposes.

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ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
We are exposed to market risks, including interest rates, in the ordinary course of business.
Interest Rate Risk
We are exposed to interest rate changes primarily as a result of our line of credit and long-term borrowings. Our interest rate risk management objective is to limit the impact of interest rate changes on earnings and cash flows and to lower overall borrowing costs. To achieve our objectives, we borrow primarily at fixed rates and may enter into derivative financial instruments such as interest rate swaps in order to mitigate our interest rate risk on a related financial instrument. We do not enter into derivative or interest rate transactions for speculative purposes.
Our interest rate risk is monitored using a variety of techniques. The table below presents the principal amounts (in thousands) of the expected annual maturities, weighted average interest rates for the average debt outstanding in the specified period and fair values (in thousands).
2022 2023 2024 2025 2026 Thereafter Total Fair Value
Long-Term Debt:
Fixed rate secured debt $ 4,346 $ 4,593 $ 4,855 $ 4,702 $ 3,238 $ 33,158 $ 54,892 $ 59,989
Weighted average interest rate 5.54 % 5.55 % 5.56 % 5.51 % 5.27 % 4.08 % 4.64 %
Variable rate secured debt $ 300 $ 300 $ 300 $ 400 $ - $ - $ 1,300 $ 1,300
Weighted average interest rate 0.12 % 0.12 % 0.12 % 0.12 % N/A N/A 0.12 %
Fixed rate unsecured debt $ - $ - $ 300,000 $ - $ 375,000 $ 3,000,000 $ 3,675,000 $ 3,779,465
Weighted average interest rate N/A N/A 3.90 % N/A 3.36 % 2.86 % 3.00 %
On January 14, 2022, we provided notice of redemption to the holders of our $300.0 million of 3.75% unsecured notes, which are scheduled to mature in December 2024.
As the above table incorporates only those exposures that existed at December 31, 2021, it does not consider those exposures or positions that could arise after that date. As a result, the ultimate impact of interest rate fluctuations will depend on future exposures that arise, our hedging strategies at that time, to the extent we are party to interest rate derivatives, and interest rates. Interest expense on our unsecured line of credit, to the extent there are outstanding borrowings, will be affected by fluctuations in the one-month LIBOR indices or applicable replacement rates, changes in our credit rating as well as certain sustainability linked metrics achieved each year. The interest rate at such point in the future as we may renew, extend or replace our unsecured line of credit will be heavily dependent upon the state of the credit environment.
At December 31, 2021, the face value of our unsecured debt was $3.68 billion and we estimated the fair value of that unsecured debt to be $3.78 billion. At December 31, 2020, the face value of our unsecured debt was $3.06 billion and we estimated the fair value of that unsecured debt to be $3.39 billion.

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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Item 8. Financial Statements and Supplementary Data
The financial statements and supplementary data are included under Item 15 of this Report and are incorporated herein by reference.

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ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
There was no change or disagreement with our accountants related to our accounting and financial disclosures.

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ITEM 9A. CONTROLS AND PROCEDURES
Item 9A. Controls and Procedures
Controls and Procedures (General Partner)
We conducted an evaluation of the effectiveness of the design and operation of our "disclosure controls and procedures" as of the end of the period covered by this Report. The controls evaluation was done under the supervision and with the participation of management, including the Chief Executive Officer and the Chief Financial Officer.
Attached as exhibits to this Report are certifications of our Chief Executive Officer and Chief Financial Officer, which are required in accordance with Rule 13a-14 of the Securities Exchange Act of 1934. This Controls and Procedures section includes the information concerning the controls evaluation referred to in the certifications and it should be read in conjunction with the certifications for a more complete understanding of the topics presented.
Disclosure controls and procedures (as defined in Rule 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 (the "Exchange Act")) are controls and other procedures that are designed to ensure that information required to be disclosed in our reports filed under the Exchange Act, such as this Report, is recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms. Disclosure controls and procedures are also designed to ensure that such information is accumulated and communicated to our management, including our principal executive and principal financial officers, as appropriate, to allow timely decisions regarding required disclosure.
Based on the disclosure controls and procedures evaluation referenced above, our Chief Executive Officer and Chief Financial Officer have concluded that as of the end of the period covered by this Report, our disclosure controls and procedures were effective.
Management's annual report on internal control over financial reporting and the audit report of our independent registered public accounting firm are included in Item 15 of Part IV under the headings "Management's Report on Internal Control" and "Report of Independent Registered Public Accounting Firm," respectively, and are incorporated herein by reference.
There were no changes in our internal control over financial reporting during the quarter ended December 31, 2021 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Controls and Procedures (Partnership)
We conducted an evaluation of the effectiveness of the design and operation of our "disclosure controls and procedures" as of the end of the period covered by this Report. The controls evaluation was done under the supervision and with the participation of management, including the General Partner's Chief Executive Officer and Chief Financial Officer.
Attached as exhibits to this Report are certifications of the General Partner's Chief Executive Officer and Chief Financial Officer, which are required in accordance with Rule 13a-14 of the Securities Exchange Act of 1934. This Controls and Procedures section includes the information concerning the controls evaluation referred to in the certifications and it should be read in conjunction with the certifications for a more complete understanding of the topics presented.
Disclosure controls and procedures (as defined in Rule 13a-15(e) and 15d-15(e) under the Exchange Act) are controls and other procedures that are designed to ensure that information required to be disclosed in our reports filed under the Exchange Act, such as this Report, is recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms. Disclosure controls and procedures are also designed to ensure that such information is accumulated and communicated to management, including the General Partner's principal executive and principal financial officers, as appropriate, to allow timely decisions regarding required disclosure.
Based on the disclosure controls and procedures evaluation referenced above, the General Partner's Chief Executive Officer and Chief Financial Officer have concluded that as of the end of the period covered by this Report, our disclosure controls and procedures were effective.
Management's annual report on internal control over financial reporting and the audit report of our independent registered public accounting firm are included in Item 15 of Part IV under the headings "Management's Report on Internal Control" and "Report of Independent Registered Public Accounting Firm," respectively, and are incorporated herein by reference.
There were no changes in our internal control over financial reporting during the quarter ended December 31, 2021 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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ITEM 9B. OTHER INFORMATION
Item 9B. Other Information
There was no information required to be disclosed in a report on Form 8-K during the fourth quarter of 2021 for which no Form 8-K was filed.
Our discussion of federal income tax considerations in Exhibit 99.1 attached hereto, which is incorporated herein by reference, supersedes and replaces, in its entirety, (i) the disclosure under the heading “Federal Income Tax Considerations” in the prospectus dated July 25, 2019, which is a part of our Registration Statement on Form S-3 (File No. 333-232816), as amended or supplemented, (ii) the disclosure under the heading “Federal Income Tax Considerations” in the prospectus dated April 30, 2021, which is a part of our Registration Statement on Form S-3 (File No. 333-255633), as amended or supplemented, and (iii) similarly titled sections in the prospectuses contained in our other Registration Statements on Form S-3 (File Nos. 333-128132, 333-108556, 333-70678, 333-59138, 333-51344, 333-39498, 333-35008, 333-85009, 333-82063, 333-66919, 333-50081, 333-26833, 333-24289, and 033-64659), as amended or supplemented. Our updated discussion addresses recent tax law changes.

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ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
Item 10. Directors, Executive Officers and Corporate Governance
The following is a summary of the executive officers of the General Partner:
James B. Connor, age 63. Mr. Connor was named the General Partner's Chairman and Chief Executive Officer, commencing April 26, 2017, and joined the General Partner's Board of Directors in 2015. Prior to being named Chairman and Chief Executive Officer, Mr. Connor held various senior management positions with the General Partner, including President and Chief Executive Officer from January 1, 2016 to April 25, 2017; Senior Executive Vice President and Chief Operating Officer from 2013 to 2015; Senior Regional Executive Vice President from 2011 to 2013; Executive Vice President of the Midwest Region from 2003 to 2011; and Senior Vice President between 1998 and 2003. Prior to joining the General Partner in 1998, Mr. Connor held numerous executive and brokerage positions with Cushman & Wakefield, most recently serving as Senior Managing Director for the Midwest area. In 2019, Mr. Connor joined the Board of Trustees of EPR Properties, a publicly traded REIT. Mr. Connor also serves on the Board of Trustees of Roosevelt University.
Mark A. Denien, age 54. Mr. Denien was appointed the General Partner's Executive Vice President and Chief Financial Officer on May 17, 2013. Prior to being named Executive Vice President and Chief Financial Officer, Mr. Denien was Senior Vice President and Chief Accounting Officer from 2009 to 2013 and, prior to that, served as Senior Vice President, Corporate Controller. Prior to joining the General Partner in 2005, Mr. Denien spent 16 years with KPMG LLP. Mr. Denien serves as a director of Goodwill Industries of Central Indiana, Inc.
Steven W. Schnur, age 48. Mr. Schnur has served as the General Partner's Executive Vice President and Chief Operating Officer since September 2019. Prior to being named Executive Vice President and Chief Operating Officer, Mr. Schnur served as Senior Regional Executive Vice President from May 2017 until September 2019; Executive Vice President, Central Region from January 2015 until May 2017; Senior Regional, Senior Vice President from August 2014 until January 2015; Senior Vice President, Midwest Region from December 2013 until August 2014; and Senior Vice President, Chicago from October 2004 until December 2013. Mr. Schnur began his career with the General Partner as a Vice President, Leasing in September 2003. Prior to that, Mr. Schnur was Director of Real Estate for Opus North Corporation.
Nicholas C. Anthony, age 56. Mr. Anthony was appointed the General Partner's Executive Vice President and Chief Investment Officer on June 17, 2013. His responsibilities include overseeing the General Partner's acquisition and disposition activity, as well as the overall management of its joint venture business. Prior to being named Executive Vice President and Chief Investment Officer, Mr. Anthony held various senior management positions with the General Partner, including Senior Vice President, Capital Transactions and Joint Ventures from 2010 until 2013. Mr. Anthony began his career with the General Partner in 1989 as a staff accountant.
Ann C. Dee, age 62. Ms. Dee was appointed the General Partner's Executive Vice President, General Counsel and Corporate Secretary on June 17, 2013. Prior to being named Executive Vice President, General Counsel and Corporate Secretary, Ms. Dee held the position of Senior Vice President, General Counsel and Corporate Secretary from January 1, 2013 until June 17, 2013 and the position of Deputy General Counsel and Senior Vice President from June 23, 2008 until January 1, 2013. Ms. Dee joined the General Partner in 1996 as a Corporate Attorney. Prior to joining the General Partner, Ms. Dee serves as a member of the Board of Directors of First Internet Bancorp, a bank holding company in Fishers, Indiana and the Center for Performing Arts in Carmel, Indiana.
All other information required by this item will be included in the General Partner's 2022 proxy statement (the "2022 Proxy Statement") for the General Partner's Annual Meeting of Shareholders to be held on April 14, 2022, and is incorporated herein by reference. In addition, the General Partner's Code of Business Ethics (which applies to each of our associates, officers and directors) and the General Partner's Corporate Governance Guidelines are available in the investor information/corporate governance section of our website at www.dukerealty.com. A copy of these documents may also be obtained without charge by writing to Duke Realty Corporation, 8711 River Crossing Boulevard, Indianapolis, Indiana 46240, Attention: Investor Relations.

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ITEM 11. EXECUTIVE COMPENSATION
Item 11. Executive Compensation
The information required by Item 11 of this Report will be included in our 2022 Proxy Statement, which information is incorporated herein by this reference.

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ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
The information required by Item 12 of this Report will be included in our 2022 Proxy Statement, which information is incorporated herein by this reference.

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ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Item 13. Certain Relationships and Related Transactions, and Director Independence
The information required to be furnished pursuant to Item 13 of this Report will be included in our 2022 Proxy Statement, which information is incorporated herein by this reference.

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ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
Item 14. Principal Accountant Fees and Services
KPMG LLP (Indianapolis, Indiana; PCAOB ID#185) is the independent registered public accounting firm for both the General Partner and the Partnership. The information required to be furnished pursuant to Item 14 of this Report will be included in our 2022 Proxy Statement, which information is incorporated herein by this reference.
PART IV

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ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
Item 15. Exhibits and Financial Statement Schedules
(a)The following documents are filed as part of this Annual Report:
1. Consolidated Financial Statements
The following Consolidated Financial Statements, together with the Management's Report on Internal Control and the Report of Independent Registered Public Accounting Firm are listed below:
Duke Realty Corporation:
Management's Report on Internal Control
Report of Independent Registered Public Accounting Firm
Duke Realty Limited Partnership:
Management's Report on Internal Control
Report of Independent Registered Public Accounting Firm
Duke Realty Corporation:
Consolidated Balance Sheets, December 31, 2021 and 2020
Consolidated Statements of Operations and Comprehensive Income, Years Ended December 31, 2021, 2020 and 2019
Consolidated Statements of Cash Flows, Years Ended December 31, 2021, 2020 and 2019
Consolidated Statements of Changes in Equity, Years Ended December 31, 2021, 2020 and 2019
Duke Realty Limited Partnership:
Consolidated Balance Sheets, December 31, 2021 and 2020
Consolidated Statements of Operations and Comprehensive Income, Years Ended December 31, 2021, 2020 and 2019
Consolidated Statements of Cash Flows, Years Ended December 31, 2021, 2020 and 2019
Consolidated Statements of Changes in Equity, Years Ended December 31, 2021, 2020 and 2019
Duke Realty Corporation and Duke Realty Limited Partnership:
Notes to Consolidated Financial Statements
2. Consolidated Financial Statement Schedules
Duke Realty Corporation and Duke Realty Limited Partnership:
Schedule III - Real Estate and Accumulated Depreciation
3. Exhibits
The exhibits required to be filed with this Report pursuant to Item 601 of Regulation S-K are listed on pages 115 to 119 of this Report and are incorporated herein by reference.
Management's Report on Internal Control
We, as management of Duke Realty Corporation and its subsidiaries (the "General Partner"), are responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rule 13a-15(f) under the Securities Exchange Act of 1934, as amended). Pursuant to the rules and regulations of the Securities and Exchange Commission, internal control over financial reporting is a process designed by, or under the supervision of, the company's principal executive and principal financial officers, or persons performing similar functions, and effected by the company's board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States of America and includes those policies and procedures that:
•Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of assets of the company;
•Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and
•Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the company's assets that could have a material effect on the financial statements.
Management has evaluated the effectiveness of its internal control over financial reporting as of December 31, 2021 based on the control criteria established in a report entitled Internal Control - Integrated Framework (2013), issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on such evaluation, we have concluded that, as of December 31, 2021, our internal control over financial reporting is effective based on these criteria.
The independent registered public accounting firm of KPMG LLP, as auditors of the General Partner's consolidated financial statements, has also issued an audit report on the General Partner's internal control over financial reporting.
/s/ James B. Connor
James B. Connor
Chairman and Chief Executive Officer
/s/ Mark A. Denien
Mark A. Denien
Executive Vice President and Chief Financial Officer
Report of Independent Registered Public Accounting Firm
To the Shareholders and Board of Directors
Duke Realty Corporation:
Opinions on the Consolidated Financial Statements and Internal Control Over Financial Reporting
We have audited the accompanying consolidated balance sheets of Duke Realty Corporation and subsidiaries (the Company) as of December 31, 2021 and 2020, the related consolidated statements of operations and comprehensive income, cash flows, and changes in equity for each of the years in the three-year period ended December 31, 2021, and the related notes and financial statement schedule III - real estate and accumulated depreciation (collectively, the consolidated financial statements). We also have audited the Company's internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2021 and 2020, and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, 2021, in conformity with U.S. generally accepted accounting principles. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.
Basis for Opinions
The Company’s management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management's Report on Internal Control. Our responsibility is to express an opinion on the Company’s consolidated financial statements and an opinion on the Company’s internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.
Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.
Definition and Limitations of Internal Control Over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of a critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
Assessment of certain values assigned to acquired assets and liabilities in certain asset acquisitions
As discussed in Notes 2 and 5 to the consolidated financial statements, the Company acquired approximately $571 million of real estate assets in 2021. For asset acquisitions, the Company records the purchase price to the tangible and identified intangible assets based on its “as-if vacant” fair value and other valuation techniques.
We identified the assessment of the fair value of land and the below market component of in-place leases in certain asset acquisitions as a critical audit matter. There is a high degree of subjective auditor judgment in determining the fair value of land and market rents used to determine the below market component of in-place leases.
The primary procedures we performed to address this critical audit matter included the following. We tested certain internal controls over the Company’s asset allocation process, including controls to identify and select publicly available comparable land sales and market rents used to estimate the fair value of land and the below market component of in-place leases, respectively. We involved valuation professionals with specialized skills and knowledge, who assisted in comparing:
•the Company’s estimated fair value of land to a range of independently developed estimates based on publicly available and comparable land sales: and
•the market rents used in the Company’s estimated fair value of the below market component of in-place leases to publicly available market data for similar properties.
/s/ KPMG LLP
We have served as the Company’s auditor since 1986.
Indianapolis, Indiana
February 18, 2022
Management's Report on Internal Control
We, as management of Duke Realty Limited Partnership and its subsidiaries (the "Partnership"), are responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rule 13a-15(f) under the Securities Exchange Act of 1934, as amended). Pursuant to the rules and regulations of the Securities and Exchange Commission, internal control over financial reporting is a process designed by, or under the supervision of the principal executive and principal financial officers, or persons performing similar functions, of Duke Realty Corporation (the "General Partner"), and effected by the General Partner's board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States of America and includes those policies and procedures that:
•Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of assets of the Partnership;
•Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the General Partner; and
•Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Partnership's assets that could have a material effect on the financial statements.
Management has evaluated the effectiveness of its internal control over financial reporting as of December 31, 2021 based on the control criteria established in a report entitled Internal Control - Integrated Framework (2013), issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on such evaluation, we have concluded that, as of December 31, 2021, our internal control over financial reporting is effective based on these criteria.
The independent registered public accounting firm of KPMG LLP, as auditors of the Partnership's consolidated financial statements, has also issued an audit report on the Partnership's internal control over financial reporting.
/s/ James B. Connor
James B. Connor
Chairman and Chief Executive Officer
of the General Partner
/s/ Mark A. Denien
Mark A. Denien
Executive Vice President and Chief Financial Officer
of the General Partner
Report of Independent Registered Public Accounting Firm
To the Unitholders of Duke Realty Limited Partnership and the Board of Directors of Duke Realty Corporation:
Opinions on the Consolidated Financial Statements and Internal Control Over Financial Reporting
We have audited the accompanying consolidated balance sheets of Duke Realty Limited Partnership and subsidiaries (the Partnership) as of December 31, 2021 and 2020, the related consolidated statements of operations and comprehensive income, cash flows, and changes in equity for each of the years in the three-year period ended December 31, 2021, and the related notes and financial statement schedule III - real estate and accumulated depreciation (collectively, the consolidated financial statements). We also have audited the Partnership's internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Partnership as of December 31, 2021 and 2020, and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, 2021, in conformity with U.S. generally accepted accounting principles. Also in our opinion, the Partnership maintained, in all material respects, effective internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.
Basis for Opinions
The Partnership’s management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management's Report on Internal Control. Our responsibility is to express an opinion on the Partnership’s consolidated financial statements and an opinion on the Partnership’s internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Partnership in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.
Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.
Definition and Limitations of Internal Control Over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of a critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
Assessment of certain values assigned to acquired assets and liabilities in certain asset acquisitions
As discussed in Notes 2 and 5 to the consolidated financial statements, the Partnership acquired approximately $571 million of real estate assets in 2021. For asset acquisitions, the Partnership records the purchase price to the tangible and identified intangible assets based on its “as-if vacant” fair value and other valuation techniques.
We identified the assessment of the fair value of land and the below market component of in-place leases in certain asset acquisitions as a critical audit matter. There is a high degree of subjective auditor judgment in determining the fair value of land and market rents used to determine the below market component of in-place leases.
The primary procedures we performed to address this critical audit matter included the following. We tested certain internal controls over the Partnership’s asset allocation process, including controls to identify and select publicly available comparable land sales and market rents used to estimate the fair value of land and the below market component of in-place leases, respectively. We involved valuation professionals with specialized skills and knowledge, who assisted in comparing:
•the Partnership’s estimated fair value of land to a range of independently developed estimates based on publicly available and comparable land sales: and
•the market rents used in the Partnership’s estimated fair value of the below market component of in-place leases to publicly available market data for similar properties.
/s/ KPMG LLP
We have served as the Partnership’s auditor since 1994.
Indianapolis, Indiana
February 18, 2022
DUKE REALTY CORPORATION AND SUBSIDIARIES
Consolidated Balance Sheets
As of December 31,
(in thousands, except per share amounts)
2021 2020
ASSETS
Real estate investments:
Real estate assets $ 9,616,076 $ 8,745,155
Construction in progress 744,871 695,219
Investments in and advances to unconsolidated joint ventures 168,336 131,898
Undeveloped land 473,317 291,614
11,002,600 9,863,886
Accumulated depreciation (1,684,413) (1,659,308)
Net real estate investments 9,318,187 8,204,578
Real estate investments and other assets held-for-sale 144,651 67,946
Cash and cash equivalents 69,752 6,309
Accounts receivable 13,449 15,204
Straight-line rent receivable 172,225 153,943
Receivables on construction contracts, including retentions 57,258 30,583
Deferred leasing and other costs, net of accumulated amortization of $209,975 and $204,122 337,936 329,765
Restricted cash held in escrow for like-kind exchange - 47,682
Other escrow deposits and other assets 332,197 255,384
$ 10,445,655 $ 9,111,394
LIABILITIES AND EQUITY
Indebtedness:
Secured debt, net of deferred financing costs of $304 and $343 $ 59,418 $ 64,074
Unsecured debt, net of deferred financing costs of $45,136 and $32,763 3,629,864 3,025,977
Unsecured line of credit - 295,000
3,689,282 3,385,051
Liabilities related to real estate investments held-for-sale 6,278 7,740
Construction payables and amounts due subcontractors, including retentions 107,009 62,332
Accrued real estate taxes 77,464 76,501
Accrued interest 20,815 18,363
Other liabilities 339,023 269,806
Tenant security deposits and prepaid rents 66,823 57,153
Total liabilities 4,306,694 3,876,946
Shareholders' equity:
Common shares ($0.01 par value); 600,000 shares authorized; 382,513 and 373,258 shares issued and outstanding, respectively 3,825 3,733
Additional paid-in capital 6,143,147 5,723,326
Accumulated other comprehensive loss (28,011) (31,568)
Distributions in excess of net income (75,210) (532,519)
Total shareholders' equity 6,043,751 5,162,972
Noncontrolling interests 95,210 71,476
Total equity 6,138,961 5,234,448
$ 10,445,655 $ 9,111,394
See accompanying Notes to Consolidated Financial Statements.
DUKE REALTY CORPORATION AND SUBSIDIARIES
Consolidated Statements of Operations and Comprehensive Income
For the Years Ended December 31,
(in thousands, except per share amounts)
2021 2020 2019
Revenues:
Rental and related revenue $ 1,025,663 $ 929,194 $ 855,833
General contractor and service fee revenue 80,260 64,004 117,926
1,105,923 993,198 973,759
Expenses:
Rental expenses 85,782 76,639 75,584
Real estate taxes 159,580 149,295 129,520
General contractor and other services expenses 68,118 57,976 111,566
Depreciation and amortization 362,148 353,013 327,223
675,628 636,923 643,893
Other operating activities:
Equity in earnings of unconsolidated joint ventures 32,804 11,944 31,406
Gain on sale of properties 585,685 127,700 234,653
Gain on land sales 12,917 10,458 7,445
Other operating expenses (3,607) (8,209) (5,318)
Impairment charges - (5,626) -
Non-incremental costs related to successful leases (13,302) (12,292) (12,402)
General and administrative expenses (69,554) (62,404) (60,889)
544,943 61,571 194,895
Operating income 975,238 417,846 524,761
Other income (expenses):
Interest and other income, net 4,451 1,721 9,941
Interest expense (84,843) (93,442) (89,756)
Loss on debt extinguishment (17,901) (32,900) (6,320)
Gain on involuntary conversion 3,222 4,312 2,259
Income from continuing operations before income taxes 880,167 297,537 440,885
Income tax (expense) benefit (18,549) 5,112 (8,686)
Income from continuing operations 861,618 302,649 432,199
Discontinued operations:
Gain on sale of properties - 111 445
Income from discontinued operations - 111 445
Net income 861,618 302,760 432,644
Net income attributable to noncontrolling interests (8,723) (2,845) (3,672)
Net income attributable to common shareholders $ 852,895 $ 299,915 $ 428,972
Basic net income per common share:
Continuing operations attributable to common shareholders $ 2.25 $ 0.81 $ 1.18
Total $ 2.25 $ 0.81 $ 1.18
Diluted net income per common share:
Continuing operations attributable to common shareholders $ 2.25 $ 0.80 $ 1.18
Total $ 2.25 $ 0.80 $ 1.18
Weighted average number of common shares outstanding 377,673 370,057 362,234
Weighted average number of common shares and potential dilutive securities 383,476 374,156 367,339
Comprehensive income:
Net income $ 861,618 $ 302,760 $ 432,644
Other comprehensive income (loss):
Unrealized losses on interest rate swap contracts - - (30,893)
Amortization of interest rate swap contracts 3,557 3,468 533
Total other comprehensive income (loss) 3,557 3,468 (30,360)
Comprehensive income $ 865,175 $ 306,228 $ 402,284
See accompanying Notes to Consolidated Financial Statements.
DUKE REALTY CORPORATION AND SUBSIDIARIES
Consolidated Statements of Cash Flows
For the Years Ended December 31,
(in thousands)
2021 2020 2019
Cash flows from operating activities:
Net income $ 861,618 $ 302,760 $ 432,644
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation of buildings and tenant improvements 304,935 297,158 272,422
Amortization of deferred leasing and other costs 57,213 55,855 54,801
Amortization of deferred financing costs 9,735 9,155 6,536
Straight-line rental income and expense, net (32,081) (25,865) (21,197)
Impairment charges - 5,626 -
Loss on debt extinguishment 17,901 32,900 6,320
Gain on involuntary conversion (3,222) (4,312) (2,259)
Gain on land and property sales (598,602) (138,269) (242,543)
Third-party construction contracts, net (6,269) (2,511) 9,254
Other accrued revenues and expenses, net 48,194 29,333 8,476
Equity in earnings (in excess of) less than operating distributions received from unconsolidated joint ventures (16,996) 4,606 (18,556)
Net cash provided by operating activities 642,426 566,436 505,898
Cash flows from investing activities:
Development of real estate investments (661,416) (573,544) (446,801)
Acquisition of buildings and related intangible assets (447,584) (383,672) (210,224)
Acquisition of land and other real estate assets (700,632) (248,413) (388,202)
Second generation tenant improvements, leasing costs and building improvements (68,445) (45,037) (53,137)
Other deferred leasing costs (42,214) (41,607) (32,921)
Other assets (19,067) (4,868) (10,777)
Proceeds from the repayments of notes receivable from property sales - 110,000 162,550
Proceeds from land and property sales, net 1,067,967 336,255 432,662
Capital distributions from unconsolidated joint ventures 61,616 876 26,272
Capital contributions and advances to unconsolidated joint ventures (22,640) (6,211) (34,496)
Net cash used for investing activities
(832,415) (856,221) (555,074)
Cash flows from financing activities:
Proceeds from issuance of common shares, net 406,576 187,856 272,761
Proceeds from unsecured debt 940,749 663,123 582,284
Payments on unsecured debt (390,900) (546,972) (255,812)
Proceeds from secured debt financings - 18,400 -
Payments on secured indebtedness including principal amortization (4,413) (13,457) (45,515)
(Repayments) borrowings on line of credit, net (295,000) 295,000 (30,000)
Distributions to common shareholders (394,487) (355,287) (318,702)
Distributions to noncontrolling interests, net (4,352) (3,347) (2,648)
Tax payments on stock-based compensation awards (5,132) (4,360) (6,825)
Change in book cash overdrafts (12,453) 1,941 138
Cash settlement of interest rate swaps - - (35,569)
Other financing activities (357) 163 (10,183)
Deferred financing costs (14,262) (7,483) (4,839)
Redemption of Limited Partner Units (39) - -
Net cash provided by financing activities 225,930 235,577 145,090
Net increase (decrease) in cash, cash equivalents and restricted cash 35,941 (54,208) 95,914
Cash, cash equivalents and restricted cash at beginning of year 67,223 121,431 25,517
Cash, cash equivalents and restricted cash at end of year $ 103,164 $ 67,223 $ 121,431
Non-cash activities:
Lease liabilities arising from right-of-use assets $ 19,822 $ 20,883 $ 40,467
Assumption of indebtedness and other liabilities in real estate acquisitions $ 128,639 $ 39,966 $ -
Non-cash distribution of assets from unconsolidated joint ventures, net $ 11,124 $ - $ -
Contribution of properties to unconsolidated joint venture $ 74,942 $ - $ -
Conversion of Limited Partner Units to common shares $ 5,099 $ - $ 1,624
Issuance of Limited Partner Units for acquisition $ 11,603 $ - $ -
See accompanying Notes to Consolidated Financial Statements.
DUKE REALTY CORPORATION AND SUBSIDIARIES
Consolidated Statements of Changes in Equity
(in thousands, except per share data)
Common Shareholders
Common
Stock Additional
Paid-in
Capital Accumulated
Other
Comprehensive
Income (Loss) Distributions
in Excess of
Net Income Non-
Controlling
Interests Total
Balance at December 31, 2018 $ 3,589 $ 5,244,375 $ (4,676) $ (585,087) $ 55,042 $ 4,713,243
Net income - - - 428,972 3,672 432,644
Other comprehensive loss - - (30,360) - - (30,360)
Issuance of common shares 83 272,678 - - - 272,761
Contributions from noncontrolling interests - - - - 312 312
Stock-based compensation plan activity 7 6,787 - (1,175) 7,703 13,322
Conversion of Limited Partner Units 1 1,623 - - (1,624) -
Distributions to common shareholders ($0.88 per share) - - - (318,702) - (318,702)
Distributions to noncontrolling interests - - - - (2,960) (2,960)
Balance at December 31, 2019 $ 3,680 $ 5,525,463 $ (35,036) $ (475,992) $ 62,145 $ 5,080,260
Net income - - - 299,915 2,845 302,760
Other comprehensive income - - 3,468 - - 3,468
Issuance of common shares 50 187,806 - - - 187,856
Contributions from noncontrolling interests - - - - 200 200
Stock-based compensation plan activity 3 10,057 - (1,155) 9,833 18,738
Distributions to common shareholders ($0.96 per share) - - - (355,287) - (355,287)
Distributions to noncontrolling interests - - - - (3,547) (3,547)
Balance at December 31, 2020 $ 3,733 $ 5,723,326 $ (31,568) $ (532,519) $ 71,476 $ 5,234,448
Net income - - - 852,895 8,723 861,618
Other comprehensive income - - 3,557 - - 3,557
Issuance of common shares 82 406,494 - - - 406,576
Stock-based compensation plan activity 6 8,274 - (1,099) 12,895 20,076
Issuance of Limited Partner Units - - - - 11,564 11,564
Conversion of Limited Partner Units 4 5,095 - - (5,099) -
Redemption of Limited Partner Units - (42) - - 3 (39)
Distributions to common shareholders ($1.045 per share) - - - (394,487) - (394,487)
Distributions to noncontrolling interests - - - - (4,352) (4,352)
Balance at December 31, 2021 $ 3,825 $ 6,143,147 $ (28,011) $ (75,210) $ 95,210 $ 6,138,961
See accompanying Notes to Consolidated Financial Statements.
DUKE REALTY LIMITED PARTNERSHIP AND SUBSIDIARIES
Consolidated Balance Sheets
As of December 31,
(in thousands)
2021 2020
ASSETS
Real estate investments:
Real estate assets $ 9,616,076 $ 8,745,155
Construction in progress 744,871 695,219
Investments in and advances to unconsolidated joint ventures 168,336 131,898
Undeveloped land 473,317 291,614
11,002,600 9,863,886
Accumulated depreciation (1,684,413) (1,659,308)
Net real estate investments 9,318,187 8,204,578
Real estate investments and other assets held-for-sale 144,651 67,946
Cash and cash equivalents 69,752 6,309
Accounts receivable 13,449 15,204
Straight-line rent receivable 172,225 153,943
Receivables on construction contracts, including retentions 57,258 30,583
Deferred leasing and other costs, net of accumulated amortization of $209,975 and $204,122 337,936 329,765
Restricted cash held in escrow for like-kind exchange - 47,682
Other escrow deposits and other assets 332,197 255,384
$ 10,445,655 $ 9,111,394
LIABILITIES AND EQUITY
Indebtedness:
Secured debt, net of deferred financing costs of $304 and $343 $ 59,418 $ 64,074
Unsecured debt, net of deferred financing costs of $45,136 and $32,763 3,629,864 3,025,977
Unsecured line of credit - 295,000
3,689,282 3,385,051
Liabilities related to real estate investments held-for-sale 6,278 7,740
Construction payables and amounts due subcontractors, including retentions 107,009 62,332
Accrued real estate taxes 77,464 76,501
Accrued interest 20,815 18,363
Other liabilities 339,023 269,806
Tenant security deposits and prepaid rents 66,823 57,153
Total liabilities 4,306,694 3,876,946
Partners’ equity:
Common equity (382,513 and 373,258 General Partner Units issued and outstanding, respectively) 6,071,762 5,194,540
Limited Partners' common equity (3,663 and 3,326 Limited Partner Units issued and outstanding, respectively) 90,679 66,874
Accumulated other comprehensive loss (28,011) (31,568)
Total partners' equity 6,134,430 5,229,846
Noncontrolling interests 4,531 4,602
Total equity 6,138,961 5,234,448
$ 10,445,655 $ 9,111,394
See accompanying Notes to Consolidated Financial Statements.
DUKE REALTY LIMITED PARTNERSHIP AND SUBSIDIARIES
Consolidated Statements of Operations and Comprehensive Income
For the Years Ended December 31,
(in thousands, except per unit amounts)
2021 2020 2019
Revenues:
Rental and related revenue $ 1,025,663 $ 929,194 $ 855,833
General contractor and service fee revenue 80,260 64,004 117,926
1,105,923 993,198 973,759
Expenses:
Rental expenses 85,782 76,639 75,584
Real estate taxes 159,580 149,295 129,520
General contractor and other services expenses 68,118 57,976 111,566
Depreciation and amortization 362,148 353,013 327,223
675,628 636,923 643,893
Other operating activities:
Equity in earnings of unconsolidated joint ventures 32,804 11,944 31,406
Gain on sale of properties 585,685 127,700 234,653
Gain on land sales 12,917 10,458 7,445
Other operating expenses (3,607) (8,209) (5,318)
Impairment charges - (5,626) -
Non-incremental costs related to successful leases (13,302) (12,292) (12,402)
General and administrative expenses (69,554) (62,404) (60,889)
544,943 61,571 194,895
Operating income 975,238 417,846 524,761
Other income (expenses):
Interest and other income, net 4,451 1,721 9,941
Interest expense (84,843) (93,442) (89,756)
Loss on debt extinguishment (17,901) (32,900) (6,320)
Gain on involuntary conversion 3,222 4,312 2,259
Income from continuing operations before income taxes 880,167 297,537 440,885
Income tax (expense) benefit (18,549) 5,112 (8,686)
Income from continuing operations 861,618 302,649 432,199
Discontinued operations:
Gain on sale of properties - 111 445
Income from discontinued operations - 111 445
Net income 861,618 302,760 432,644
Net (income) loss attributable to noncontrolling interests (369) (182) 6
Net income attributable to common unitholders $ 861,249 $ 302,578 $ 432,650
Basic net income per Common Unit:
Continuing operations attributable to common unitholders $ 2.25 $ 0.81 $ 1.18
Total $ 2.25 $ 0.81 $ 1.18
Diluted net income per Common Unit:
Continuing operations attributable to common unitholders $ 2.25 $ 0.80 $ 1.18
Total $ 2.25 $ 0.80 $ 1.18
Weighted average number of Common Units outstanding 381,381 373,360 365,352
Weighted average number of Common Units and potential dilutive securities 383,476 374,156 367,339
Comprehensive income:
Net income $ 861,618 $ 302,760 $ 432,644
Other comprehensive income (loss):
Unrealized losses on interest rate swap contracts - - (30,893)
Amortization of interest rate swap contracts 3,557 3,468 533
Total other comprehensive income (loss) 3,557 3,468 (30,360)
Comprehensive income $ 865,175 $ 306,228 $ 402,284
See accompanying Notes to Consolidated Financial Statements.
DUKE REALTY LIMITED PARTNERSHIP AND SUBSIDIARIES
Consolidated Statements of Cash Flows
For the Years Ended December 31,
(in thousands)
2021 2020 2019
Cash flows from operating activities:
Net income $ 861,618 $ 302,760 $ 432,644
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation of buildings and tenant improvements 304,935 297,158 272,422
Amortization of deferred leasing and other costs 57,213 55,855 54,801
Amortization of deferred financing costs 9,735 9,155 6,536
Straight-line rental income and expense, net (32,081) (25,865) (21,197)
Impairment charges - 5,626 -
Loss on debt extinguishment 17,901 32,900 6,320
Gain on involuntary conversion (3,222) (4,312) (2,259)
Gain on land and property sales (598,602) (138,269) (242,543)
Third-party construction contracts, net (6,269) (2,511) 9,254
Other accrued revenues and expenses, net 48,194 29,333 8,476
Equity in earnings (in excess of) less than operating distributions received from unconsolidated joint ventures (16,996) 4,606 (18,556)
Net cash provided by operating activities 642,426 566,436 505,898
Cash flows from investing activities:
Development of real estate investments (661,416) (573,544) (446,801)
Acquisition of buildings and related intangible assets (447,584) (383,672) (210,224)
Acquisition of land and other real estate assets (700,632) (248,413) (388,202)
Second generation tenant improvements, leasing costs and building improvements (68,445) (45,037) (53,137)
Other deferred leasing costs (42,214) (41,607) (32,921)
Other assets (19,067) (4,868) (10,777)
Proceeds from the repayments of notes receivable from property sales - 110,000 162,550
Proceeds from land and property sales, net 1,067,967 336,255 432,662
Capital distributions from unconsolidated joint ventures 61,616 876 26,272
Capital contributions and advances to unconsolidated joint ventures (22,640) (6,211) (34,496)
Net cash used for investing activities (832,415) (856,221) (555,074)
Cash flows from financing activities:
Contributions from the General Partner 406,576 187,856 272,761
Proceeds from unsecured debt 940,749 663,123 582,284
Payments on unsecured debt (390,900) (546,972) (255,812)
Proceeds from secured debt financings - 18,400 -
Payments on secured indebtedness including principal amortization (4,413) (13,457) (45,515)
(Repayments) borrowings on line of credit, net (295,000) 295,000 (30,000)
Distributions to common unitholders (398,399) (358,484) (321,469)
(Distributions to) contributions from noncontrolling interests, net (440) (150) 119
Tax payments on stock-based compensation awards (5,132) (4,360) (6,825)
Change in book cash overdrafts (12,453) 1,941 138
Cash settlement of interest rate swaps - - (35,569)
Other financing activities (357) 163 (10,183)
Deferred financing costs (14,262) (7,483) (4,839)
Redemption of Limited Partner Units (39) - -
Net cash provided by financing activities 225,930 235,577 145,090
Net increase (decrease) in cash, cash equivalents and restricted cash 35,941 (54,208) 95,914
Cash, cash equivalents and restricted cash at beginning of year 67,223 121,431 25,517
Cash, cash equivalents and restricted cash at end of year $ 103,164 $ 67,223 $ 121,431
Non-cash activities:
Lease liabilities arising from right-of-use assets $ 19,822 $ 20,883 $ 40,467
Assumption of indebtedness and other liabilities in real estate acquisitions $ 128,639 $ 39,966 $ -
Non-cash distribution of assets from unconsolidated joint ventures, net $ 11,124 $ - $ -
Contribution of properties to unconsolidated joint venture $ 74,942 $ - $ -
Conversion of Limited Partner Units to common shares of the General Partner $ 5,099 $ - $ 1,624
Issuance of Limited Partner Units for acquisition $ 11,603 $ - $ -
See accompanying Notes to Consolidated Financial Statements.
DUKE REALTY LIMITED PARTNERSHIP AND SUBSIDIARIES
Consolidated Statements of Changes in Equity
(in thousands, except per unit data)
Common Unitholders
General Limited Accumulated
Partner Partners' Other Total
Common Common Comprehensive Partners' Noncontrolling Total
Equity Equity Income (Loss) Equity Interests Equity
Balance at December 31, 2018 $ 4,662,877 $ 50,585 $ (4,676) $ 4,708,786 $ 4,457 $ 4,713,243
Net income 428,972 3,678 - 432,650 (6) 432,644
Other comprehensive loss - - (30,360) (30,360) - (30,360)
Capital contribution from the General Partner 272,761 - - 272,761 - 272,761
Stock-based compensation plan activity 5,619 7,703 - 13,322 - 13,322
Contributions from noncontrolling interests - - - - 312 312
Conversion of Limited Partner Units 1,624 (1,624) - - - -
Distributions to Partners ($0.88 per Common Unit) (318,702) (2,767) - (321,469) - (321,469)
Distributions to noncontrolling interests - - - - (193) (193)
Balance at December 31, 2019 $ 5,053,151 $ 57,575 $ (35,036) $ 5,075,690 $ 4,570 $ 5,080,260
Net income 299,915 2,663 - 302,578 182 302,760
Other comprehensive income - - 3,468 3,468 - 3,468
Capital contribution from the General Partner 187,856 - - 187,856 - 187,856
Stock-based compensation plan activity 8,905 9,833 - 18,738 - 18,738
Contributions from noncontrolling interests - - - - 200 200
Distributions to Partners ($0.96 per Common Unit) (355,287) (3,197) - (358,484) - (358,484)
Distributions to noncontrolling interests - - - - (350) (350)
Balance at December 31, 2020 $ 5,194,540 $ 66,874 $ (31,568) $ 5,229,846 $ 4,602 $ 5,234,448
Net income 852,895 8,354 - 861,249 369 861,618
Other comprehensive income - - 3,557 3,557 - 3,557
Capital contribution from the General Partner 406,576 - - 406,576 - 406,576
Stock-based compensation plan activity 7,181 12,895 - 20,076 - 20,076
Issuance of Limited Partner Units - 11,564 - 11,564 - 11,564
Conversion of Limited Partner Units 5,099 (5,099) - - - -
Redemption of Limited Partner Units (42) 3 - (39) - (39)
Distributions to Partners ($1.045 per Common Unit) (394,487) (3,912) - (398,399) - (398,399)
Distributions to noncontrolling interests - - - - (440) (440)
Balance at December 31, 2021 $ 6,071,762 $ 90,679 $ (28,011) $ 6,134,430 $ 4,531 $ 6,138,961
See accompanying Notes to Consolidated Financial Statements.
DUKE REALTY CORPORATION AND DUKE REALTY LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1)The Company
The General Partner was formed in 1985, and we believe that it qualifies as a REIT under the provisions of 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 99.1% of the Common Units at December 31, 2021. The remaining 0.9% 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 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.
As of December 31, 2021, we owned and operated a portfolio primarily consisting of industrial properties and provided real estate services to third-party owners, customers and joint ventures.
Substantially all of our Rental Operations (see Note 9) are conducted through the Partnership. We conduct our Service Operations (see Note 9) through Duke Realty Services, LLC, Duke Realty Services Limited Partnership and Duke Construction Limited Partnership ("DCLP"), which are consolidated entities that are 100% owned by a combination of the General Partner and the Partnership. DCLP is owned through a taxable REIT subsidiary.
(2)Summary of Significant Accounting Policies
Principles of Consolidation
The consolidated financial statements include our accounts and the accounts of our majority-owned or controlled subsidiaries. The equity interests in these controlled subsidiaries not owned by us are reflected as noncontrolling interests in the consolidated financial statements. All significant intercompany balances and transactions have been eliminated in the consolidated financial statements. Investments in entities that we do not control, and variable interest entities ("VIEs") in which we are not the primary beneficiary (to the extent applicable), are not consolidated and are reflected as investments in unconsolidated joint ventures under the equity method of reporting.
Due to the fact that the Limited Partners do not have kick out rights, or substantive participating rights, the Partnership is a VIE. Because the General Partner holds majority ownership and exercises control over every aspect of the Partnership's operations, the General Partner has been determined as the primary beneficiary of the Partnership and, therefore, consolidates the Partnership.
The assets and liabilities of the General Partner and the Partnership are substantially the same, as the General Partner does not have any significant assets other than its investment in the Partnership.
DUKE REALTY CORPORATION AND DUKE REALTY LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Reclassifications
Certain amounts in the accompanying consolidated financial statements have been reclassified to conform to the 2021 consolidated financial statement presentation.
Real Estate Investments
Rental real property, including land, land improvements, buildings and tenant improvements, are included in real estate investments and are generally stated at cost. Construction in process and undeveloped land are included in real estate investments and are stated at cost. Real estate investments also include our equity interests in unconsolidated joint ventures that own and operate rental properties and hold land for development.
Depreciation
Buildings and land improvements are depreciated on the straight-line method over their estimated lives not to exceed 40 and 15 years, respectively, for properties that we develop, and not to exceed 30 and 10 years, respectively, for acquired properties. Tenant improvement costs are depreciated using the straight-line method over the shorter of the useful life of the asset or term of the related lease.
Cost Capitalization
Direct and certain indirect costs, including interest, clearly associated with the development, construction or expansion of real estate investments are capitalized as a cost of the property. Direct costs include all leasing commissions paid to third parties for new leases or lease renewals. We capitalize a portion of our indirect costs associated with our construction and development efforts. Costs that are incremental to executing a lease are capitalized. In assessing the amount of direct and indirect costs to be capitalized, allocations are made based on estimates of the actual amount of time spent in each activity. We do not capitalize any costs attributable to downtime or to unsuccessful projects.
We capitalize interest and direct and indirect project costs during the period when we commence activities necessary to get the property ready for its intended use, including land entitlement and preconstruction activities, up to the time the property is substantially complete and ready for its intended use. In addition, we capitalize costs, including real estate taxes, insurance and utilities, that have been allocated to vacant space based on the square footage of the portion of the building not held available for immediate occupancy during the extended lease-up periods after construction of the building shell has been completed if costs are being incurred to ready the vacant space for its intended use. If costs and activities incurred to ready the vacant space cease, then cost capitalization is also discontinued until such activities are resumed. Once necessary work has been completed on a vacant space, project costs are no longer capitalized.
We cease capitalization of all project costs on extended lease-up periods when significant activities have ceased, which does not exceed the shorter of a one-year period after the completion of the building shell or when the property attains 90% occupancy.
Impairment
We evaluate our real estate assets, with the exception of those that are classified as held-for-sale, for impairment whenever events or changes in circumstances indicate that their carrying amounts may not be recoverable. If such an evaluation is considered necessary, we compare the carrying amount of that real estate asset, or asset group, with the expected undiscounted cash flows that are directly associated with, and that are expected to arise as a direct result of, the use and eventual disposition of that asset, or asset group. Our estimate of the expected future cash flows used in testing for impairment is based on, among other things, our estimates regarding future market conditions, rental rates, occupancy levels, costs of tenant improvements, leasing commissions and other tenant concessions, assumptions regarding the residual value of our properties at the end of our anticipated holding period and the length of our anticipated holding period and is, therefore, subjective by nature. These assumptions could differ materially from actual results. If our strategy changes or if market conditions otherwise dictate a reduction in the holding period and an earlier sale date, an impairment loss could be recognized and such loss could be material.
DUKE REALTY CORPORATION AND DUKE REALTY LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
To the extent the carrying amount of a real estate asset, or asset group, exceeds the associated estimate of undiscounted cash flows, an impairment loss is recorded to reduce the carrying value of the asset to its fair value.
The determination of the fair value of real estate assets is also highly subjective, especially in markets where there is a lack of recent comparable transactions. We primarily utilize the income approach to estimate the fair value of our income producing real estate assets. We utilize marketplace participant assumptions to estimate the fair value of a real estate asset when an impairment charge is required to be measured. The estimation of future cash flows, as well as the selection of the discount rate and exit capitalization rate used in applying the income approach, are highly subjective measures in estimating fair value.
Real estate assets classified as held-for-sale are reported at the lower of their carrying value or their fair value, less estimated costs to sell. Once a property is designated as held-for-sale, no further depreciation expense is recorded.
Asset Acquisitions
Our acquisitions of properties have been accounted for as asset acquisitions as they have not met the definition of a business. Transaction costs related to asset acquisitions are capitalized. To the extent that we gain control of real estate properties that are accounted for as asset acquisitions, as opposed to business combinations, we accumulate the costs of any pre-existing equity interests and consideration paid for additional interest acquired and we do not remeasure our pre-existing equity interest. Generally contingencies arising from an asset acquisition are only recognized when probable.
We allocate the purchase price of asset acquisitions to tangible and identified intangible assets based on their relative fair values, using all pertinent information available at the date of acquisition. Capitalized acquisition costs are also included in the total cost basis of acquired properties that are asset acquisitions. The allocation to tangible assets (buildings, tenant improvements and land) is based upon management's determination of the value of the property as if it were vacant. This “as-if vacant” value is estimated using an income, or discounted cash flow, approach that relies upon internally determined assumptions that we believe are consistent with current market conditions for similar properties. The most important assumptions in determining the allocation of the purchase price to tangible assets are the exit capitalization rate, estimated market rents and the fair value of the underlying land. The purchase price of real estate assets is also allocated to intangible assets consisting of the above or below market component of in-place leases and the value of in-place leases.
The value allocable to the above or below market component of an acquired in-place lease is determined based upon the present value (using a discount rate which reflects the risks associated with the acquired leases) of the difference between (i) the contractual amounts to be received pursuant to the lease over its remaining term and (ii) management's estimate of the amounts that would be received using fair market rates over the remaining term of the lease. The amounts allocated to above market leases are included in deferred leasing and other costs in the balance sheet and below market leases are included in other liabilities in the balance sheet; both are amortized to rental income over the remaining terms of the respective leases.
Factors considered in determining the value allocable to in-place leases include estimates, during hypothetical expected lease-up periods, of space that is actually leased at the time of acquisition, of lost rent at market rates, fixed operating costs that will be recovered from tenants and theoretical leasing commissions required to execute similar leases. These intangible assets are included in deferred leasing and other costs in the balance sheet and are amortized over the remaining term of the existing lease.
Joint Ventures
We have equity interests in unconsolidated joint ventures that are primarily engaged in the operation and development of industrial real estate properties.
We consolidate joint ventures that are considered to be VIEs where we are the primary beneficiary. We analyze our investments in joint ventures to determine if the joint venture is considered a VIE and would require consolidation. We (i) evaluate the sufficiency of the total equity investment at risk, (ii) review the voting rights and decision-making authority of the equity investment holders as a group and whether there are limited partners (or similar
DUKE REALTY CORPORATION AND DUKE REALTY LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
owning entities) that lack substantive participating or kick out rights, guaranteed returns, protection against losses, or capping of residual returns within the group and (iii) establish whether activities within the venture are on behalf of an investor with disproportionately few voting rights in making this VIE determination.
To the extent that we own interests in a VIE and we (i) have the power to direct the activities that most significantly impact the economic performance of the VIE and (ii) have the obligation or rights to absorb losses or receive benefits that could potentially be significant to the VIE, then we would be determined to be the primary beneficiary and would consolidate the VIE. To the extent that we own interests in a VIE, then at each reporting period, we re-assess our conclusions as to which, if any, party within the VIE is considered the primary beneficiary. Consolidated joint ventures that are VIE's were not significant in any period presented in these consolidated financial statements.
To the extent that our joint ventures do not qualify as VIEs, they are consolidated if we control them through majority ownership interests or if we are the managing entity (general partner or managing member) and our partner does not have substantive participating rights. Control is further demonstrated by our ability to unilaterally make significant operating decisions, refinance debt and sell the assets of the joint venture without the consent of the non-managing entity and the inability of the non-managing entity to remove us from our role as the managing entity. Consolidated joint ventures that are not VIEs are not significant in any period presented in these consolidated financial statements.
We use the equity method of accounting for those joint ventures where we exercise significant influence but do not have control. Under the equity method of accounting, our investment in each joint venture is included on our balance sheet; however, the assets and liabilities of the joint ventures for which we use the equity method are not included on our balance sheet.
When we sell or contribute properties to unconsolidated joint ventures and retain a non-controlling ownership interest in such assets, we recognize the difference between the consideration received and the carrying amount of the asset sold or contributed when its derecognition criteria are met. The equity method investment we retain in such partial sale transactions is noncash consideration and is measured at fair value. As a result, the accounting for a partial sale results in the recognition of a full gain or loss.
When circumstances indicate there may have been a reduction in the value of an equity investment, we evaluate whether the loss in value is other than temporary. If we conclude it is other than temporary, we recognize an impairment charge to reflect the equity investment at fair value.
In July 2021, we entered into a 20%-owned unconsolidated joint venture with CBRE Global Investors ("CBREGI") with plans to contribute three tranches of properties. We contributed two separate tranches of properties to the joint venture during 2021 (see Note 5) while the third tranche was closed in January 2022 (see Note 14). The joint venture financed the acquisition of these properties with a combination of third party first mortgage loans and equity contributions from our partner in this joint venture.
There were no unconsolidated joint ventures, in which we have any recognized assets or liabilities or have retained any economic exposure to loss at December 31, 2021 that met the criteria to be considered VIEs. At December 31, 2021, we guaranteed the repayment of a loan associated with one of our unconsolidated joint ventures. The maximum guarantee exposure for the loan was approximately $4.8 million.
Cash Equivalents
Investments with an original maturity of three months or less are classified as cash equivalents.
Valuation of Receivables
Our determination of the adequacy of our allowances for tenant receivables includes a binary assessment of whether or not the amounts due under a tenant’s lease agreement are probable of collection. For such amounts that are deemed probable of collection, revenue continues to be recorded on a straight-line basis over the lease term. For such amounts that are deemed not probable of collection, revenue is recorded as the lesser of (i) the amount which would be recognized on a straight-line basis or (ii) cash that has been received from the tenant, with any tenant and
DUKE REALTY CORPORATION AND DUKE REALTY LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
deferred rent receivable balances charged as a direct write-off against rental income in the period of the change in the collectability determination.
Deferred Costs
Deferred Financing Costs
Costs incurred in connection with obtaining financing are deferred and are amortized to interest expense over the term of the related loan. The costs for issuing debt, other than lines of credit, are presented on the consolidated balance sheets as a direct deduction from the debt's carrying value, while debt issuance costs related to the Partnership's unsecured line of credit are presented as assets on the consolidated balance sheets, as part of other escrow deposits and other assets.
Lease Related Costs and Acquired Lease-Related Intangible Assets
Costs that are directly incremental to executing a lease are capitalized.
Acquired lease-related intangible assets consist of above market lease assets and the value allocable to in-place leases. Above market lease assets are amortized as a reduction to rental income over the remaining terms of the respective leases. In-place lease intangible assets are amortized on a straight-line basis and included within depreciation and amortization in the consolidated statements of operations and comprehensive income.
Deferred leasing costs and acquired lease-related intangible assets at December 31, 2021 and 2020, excluding amounts classified as held-for-sale, were as follows (in thousands):
2021 2020
Deferred leasing costs $ 376,597 $ 359,646
Acquired lease-related intangible assets 171,314 174,241
$ 547,911 $ 533,887
Accumulated amortization - deferred leasing costs $ (122,789) $ (120,756)
Accumulated amortization - acquired lease-related intangible assets (87,186) (83,366)
Total $ 337,936 $ 329,765
Amounts recorded related to amortization expense for in-place leases for the years ended December 31, 2021, 2020 and 2019 totaled $20.4 million, $19.5 million and $22.0 million, respectively. Charges to rental income related to the amortization of above market lease assets for the years ended December 31, 2021, 2020 and 2019 totaled $367,000, $639,000 and $703,000, respectively.
DUKE REALTY CORPORATION AND DUKE REALTY LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The expected future amortization, or charge to rental income, of acquired lease-related intangible assets is summarized in the table below (in thousands):
Year Amortization Expense Charge to Rental Income
2022 $ 18,168 $ 352
2023 15,271 353
2024 11,986 59
2025 9,789 -
2026 7,574 -
Thereafter 20,576 -
$ 83,364 $ 764
Noncontrolling Interests
Noncontrolling interests relate to the minority ownership interests in the Partnership and interests in consolidated property partnerships that are not wholly owned by the General Partner or the Partnership. Noncontrolling interests are subsequently adjusted for additional contributions, distributions to noncontrolling holders and the noncontrolling holders' proportionate share of the net earnings or losses of each respective entity. We report noncontrolling interests as a component of total equity.
When a Common Unit of the Partnership is redeemed (Note 1), the change in ownership is treated as an equity transaction by the General Partner and there is no effect on its earnings or net assets.
Revenue Recognition
Rental and Related Revenue
Rental income from leases to customers is recognized on a straight-line basis. If a lease provides for tenant improvements, we determine whether we or the tenant is the owner of the tenant improvements. When we are the owner of the tenant improvements, any tenant improvements funded by the tenant are treated as lease payments which are deferred and amortized as revenue over the lease term. When the tenant is the owner of the tenant improvements, and we fund such improvements, we record such tenant improvement allowances as lease incentives and amortize as a reduction of revenue over the lease term.
We record lease termination fees when a tenant has executed a definitive termination agreement with us and the payment of the termination fee is not subject to any material conditions that must be met or waived before the fee is due to us.
General Contractor and Service Fee Revenue
General contractor and service fee revenues are comprised primarily of construction and development related revenues earned from third parties while acting in capacity of a developer, as a general contractor or a construction manager. We evaluate the goods and services provided in these construction arrangements to determine whether we are acting as principal or agent and, accordingly, recognize revenue on a gross or net basis based on that evaluation. There are other ancillary streams of revenue included in general contractor and service fee revenues (see Note 9), such as management fees earned from unconsolidated joint ventures in accordance with the terms specific to each arrangement, which are not significant.
Our construction arrangements are typically structured with only one performance obligation, which generally represents an obligation either to construct a new building or to construct fixtures in an existing building, and these single performance obligations are satisfied over time as construction progresses. We recognize revenue as we satisfy such performance obligations using the percentage of completion method, which is an input method. Using this method, profits are recorded based on our estimates of the percentage of completion of individual contracts, commencing when the work performed under the contracts reaches a point where the final costs can be estimated with reasonable accuracy. The percentage of completion estimates are based on a comparison of the contract expenditures incurred to the estimated final costs. We believe the percentage of completion method is a faithful
DUKE REALTY CORPORATION AND DUKE REALTY LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
depiction of the transfer of goods and services as changes in job performance and estimated profitability, which result in revisions to costs and income and are recognized in the period in which the revisions are determined, have not historically been significant. We typically receive regular progress payments on the majority of our construction arrangements and such arrangements generally have an original duration of less than one year. As the result of the relatively short duration of our construction arrangements, we apply the optional disclosure exemptions, related to our remaining performance obligations for our in-process construction projects, for which any future variable consideration is not material. Changes in job performance, job conditions and estimated profitability may result in revisions to costs and income and are recognized in the period in which the revisions are determined. To the extent that a fixed-price contract is estimated to result in a loss, the loss is recorded immediately.
Opening and closing balances of construction receivables are presented separately on the Consolidated Balance Sheets. Under billed and over billed receivables on construction contracts totaled $45.8 million and $1.9 million, respectively, at December 31, 2021 and $16.6 million and $105,000, respectively, at December 31, 2020. Over billed receivables are included in other liabilities in the Consolidated Balance Sheets. We generally do not have any contract assets associated with our construction arrangements.
Management fees are based on a percentage of rental receipts of properties managed and are recognized as the rental receipts are collected. Maintenance fees are based upon established hourly rates and are recognized as the services are performed.
Property Sales
Only disposals representing a strategic shift in operations (for example, a disposal of a major geographic area or a major line of business) should be presented as discontinued operations in accordance with ASC 205-20, without consideration of significant continuing involvement.
We recognize gains on sales of properties, including partial sales, of non-financial assets (and in-substance non-financial assets) when the recognition criteria are met. In the typical course of our business, sales of non-financial assets represent only one performance obligation and are recognized when an enforceable contract is in place, collectability is ensured and control is transferred to the buyer.
Leases
As a lessor, our primary business is the development, acquisition, and operation of industrial real estate properties that are held for investment and leased to tenants. We manage residual risk through investing in properties that we believe will appreciate in value over time. We also evaluate the collectability of the cash flows of our leases prior to their execution, and on an ongoing basis, to ensure collectability is probable prior to recognizing lease revenues on an accrual basis.
We only capitalize the incremental costs of signing a lease. Non-incremental costs attributable to successful leases, as presented in the Consolidated Statements of Operations, represent internal costs allocable to successful leasing activities and exclude estimated costs related to downtime and/or unsuccessful deals. These costs primarily consist of compensation and other benefits for internal leasing and legal personnel. These costs are not capitalizable "incremental costs" in the context of the applicable lease accounting rules, but we believe separate presentation on the Consolidated Statements of Operations provides useful information for purposes of comparability with economically similar success-based costs incurred by other organizations that outsource their leasing functions, which are generally capitalizable.
We exclude certain lessor costs, such as real estate taxes and insurance, that are paid directly by lessees to third parties, from rental revenue and the associated rental expense. Lessor costs that are paid by the lessor and reimbursed by the lessee continue to be recorded through rental revenue and the associated rental expense.
The applicable lease accounting rules allow a practical expedient for lessors to not separate rental recovery revenue related to lease-related services from the associated rental revenue related to the lease when certain criteria are met. The lease-related services provided to our tenants include property management, common area maintenance ("CAM") and utilities. We assessed the applicable criteria, concluding that the timing and straight-line pattern of
DUKE REALTY CORPORATION AND DUKE REALTY LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
transfer to the lessees for rental recovery revenue from our lease-related services and revenue from the underlying leases are the same and that lease classification does not change, and we have consistently applied this practical expedient in all periods presented.
As a lessee, we apply a dual approach, classifying leases as either finance or operating leases based on the principle of whether or not the lease is effectively a financed purchase of the leased asset. This classification determines whether the lease expense is recognized based on an effective interest method or on a straight-line basis over the term of the lease. In the capacity of a lessee, we record a right-of-use ("ROU") asset and a lease liability for all leases with a term of greater than 12 months regardless of classification.
See Note 3 for further disclosure on our leases as a lessor and lessee.
Net Income Per Common Share or Common Unit
Basic net income per common share or Common Unit is computed by dividing net income attributable to common shareholders or common unitholders, less dividends or distributions on share-based awards expected to vest (referred to as "participating securities" and primarily composed of unvested restricted stock units), by the weighted average number of common shares or Common Units outstanding for the period.
Diluted net income per common share is computed by dividing the sum of net income attributable to common shareholders and the noncontrolling interest in earnings allocable to Limited Partner Units (to the extent the Limited Partner Units are dilutive), less dividends or distributions on participating securities that are anti-dilutive, by the sum of the weighted average number of common shares outstanding and, to the extent they are dilutive, weighted average number of Limited Partner Units outstanding and any potential dilutive securities for the period. Diluted net income per Common Unit is computed by dividing the net income attributable to common unitholders, less dividends or distributions on participating securities that are anti-dilutive, by the sum of the weighted average number of Common Units outstanding and any potential dilutive securities for the period.
The following table reconciles the components of basic and diluted net income per common share or Common Unit (in thousands):
2021 2020 2019
General Partner
Net income attributable to common shareholders $ 852,895 $ 299,915 $ 428,972
Less: Dividends on participating securities (1,356) (1,447) (1,487)
Basic net income attributable to common shareholders 851,539 298,468 427,485
Add back dividends on dilutive participating securities 1,356 - 1,487
Noncontrolling interest in earnings of common unitholders 8,354 2,663 3,678
Diluted net income attributable to common shareholders $ 861,249 $ 301,131 $ 432,650
Weighted average number of common shares outstanding 377,673 370,057 362,234
Weighted average Limited Partner Units outstanding 3,708 3,303 3,118
Other potential dilutive shares 2,095 796 1,987
Weighted average number of common shares and potential dilutive securities 383,476 374,156 367,339
Partnership
Net income attributable to common unitholders $ 861,249 $ 302,578 $ 432,650
Less: Distributions on participating securities (1,356) (1,447) (1,487)
Basic net income attributable to common unitholders $ 859,893 $ 301,131 $ 431,163
Add back distributions on dilutive participating securities 1,356 - 1,487
Diluted net income attributable to common unitholders $ 861,249 $ 301,131 $ 432,650
Weighted average number of Common Units outstanding 381,381 373,360 365,352
Other potential dilutive units 2,095 796 1,987
Weighted average number of Common Units and potential dilutive securities 383,476 374,156 367,339
DUKE REALTY CORPORATION AND DUKE REALTY LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The following table summarizes the data that is excluded from the computation of net income per common share or Common Unit as a result of being anti-dilutive (in thousands):
2021 2020 2019
General Partner and Partnership
Other potential dilutive shares or units:
Anti-dilutive outstanding potential shares or units under fixed stock option and other stock-based compensation plans - - -
Anti-dilutive outstanding participating securities - 1,621 -
Federal Income Taxes
General Partner
The General Partner has elected to be taxed as a REIT under the Code, as amended. To qualify as a REIT, the General Partner must meet a number of organizational and operational requirements, including a requirement to distribute at least 90% of its REIT taxable income to its shareholders. Management intends to continue to adhere to these requirements and to maintain the General Partner's REIT status. As a REIT, the General Partner is entitled to a tax deduction for the dividends it pays to shareholders. Accordingly, the General Partner generally will not be subject to federal income taxes as long as it currently distributes to shareholders an amount equal to or in excess of its taxable income. The General Partner is, however, generally subject to federal income taxes on any taxable income that is not currently distributed to its shareholders. If the General Partner fails to qualify as a REIT in any taxable year, it will be subject to federal income taxes and may not be able to qualify as a REIT for four subsequent taxable years.
REIT qualification reduces, but does not eliminate, the amount of state and local taxes we pay. In addition, our financial statements include the operations of taxable corporate subsidiaries that are not entitled to a dividends paid deduction and are subject to federal, state and local income taxes. As a REIT, the General Partner may also be subject to certain federal excise taxes if it engages in certain types of transactions.
The following table reconciles the General Partner's net income to taxable income before the dividends paid deduction, and subject to the 90% distribution requirement, for the years ended December 31, 2021, 2020 and 2019 (in thousands):
2021 2020 2019
Net income $ 861,618 $ 302,760 $ 432,644
Book/tax differences (467,205) 63,838 (120,421)
Taxable income before the dividends paid deduction 394,413 366,598 312,223
Less: capital gains (33,652) (62,165) (62,513)
Adjusted taxable income subject to the 90% distribution requirement $ 360,761 $ 304,433 $ 249,710
The General Partner's dividends paid deduction is summarized below (in thousands):
2021 2020 2019
Cash dividends paid $ 394,487 $ 355,287 $ 318,702
Cash dividends declared and paid in subsequent year that apply to current year 26,886 22,960 6,521
Cash dividends declared and paid in current year that apply to previous year (22,960) (6,521) (9,286)
Dividends paid deduction 398,413 371,726 315,937
Less: Capital gain distributions (33,652) (62,165) (62,513)
Dividends paid deduction attributable to adjusted taxable income subject to the 90% distribution requirement $ 364,761 $ 309,561 $ 253,424
Our tax return for the year ended December 31, 2021 has not been filed. The taxability information presented for our dividends paid in 2021 is based upon management’s estimate. Consequently, the taxability of dividends is subject to change. A summary of the designated tax characterization of the dividends paid by the General Partner for the years ended December 31, 2021, 2020 and 2019 is as follows:
DUKE REALTY CORPORATION AND DUKE REALTY LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
2021 2020 2019
Common Shares
Ordinary income 91.5 % 74.6 % 80.7 %
Capital gains 8.5 % 25.4 % 19.3 %
100.0 % 100.0 % 100.0 %
Partnership
For the Partnership, the allocated share of income and loss other than the operations of its taxable REIT subsidiary is included in the income tax returns of its partners; accordingly the only federal income taxes included in the accompanying consolidated financial statements of the Partnership are in connection with its taxable REIT subsidiary.
Income taxes are not material to our operating results or financial position. Our taxable REIT subsidiary has no significant net deferred income tax positions or unrecognized tax benefit items.
Cash Paid for Income Taxes
We paid federal, state and local income taxes, net of income tax refunds, of $22.2 million and $7.8 million in 2021 and 2019, respectively. We received income tax refunds, net of federal, state and local income tax payments, of $308,000 in 2020.
Fair Value Measurements
We estimate fair value using available market information and valuation methodologies. Assets and liabilities recorded at fair value on the consolidated balance sheets are categorized based on the inputs to the valuation techniques as follows:
Level 1 inputs utilize quoted prices (unadjusted) in active markets for identical assets or liabilities to which we have access.
Level 2 inputs are inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly. Level 2 inputs may include quoted prices for similar assets and liabilities in active markets, as well as inputs that are observable for the asset or liability (other than quoted prices), such as interest rates and yield curves that are observable at commonly quoted intervals.
Level 3 inputs are unobservable inputs for the asset or liability, which are typically based on an entity's own assumptions, as there is little, if any, related market activity.
In instances where the determination of the fair value measurement is based on inputs from different levels of the fair value hierarchy, the level in the fair value hierarchy within which the entire fair value measurement falls is based on the lowest level input that is significant to the fair value measurement in its entirety. Our assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the asset or liability.
Derivative Financial Instruments
We periodically enter into certain interest rate protection agreements to effectively convert or cap floating rate debt to a fixed rate, and to hedge anticipated future financing transactions, both of which qualify for cash flow hedge accounting treatment. We do not utilize derivative financial instruments for trading or speculative purposes. The entire effect of any hedging instruments and hedged items are presented in the same income statement line item.
If a derivative qualifies as a cash flow hedge, the gain or loss on the derivative is recorded in accumulated other comprehensive income or loss and subsequently reclassified into interest expense in the same period during which the hedged forecasted transaction affects earnings. For all hedging relationships, we formally document the hedging relationship and its risk-management objective and strategy for undertaking the hedge, the hedging instrument, the hedged item, the nature of the risk being hedged and how the hedging instrument’s effectiveness in offsetting the hedged risk will be assessed prospectively and retrospectively.
DUKE REALTY CORPORATION AND DUKE REALTY LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Use of Estimates
The preparation of the financial statements requires management to make a number of estimates and assumptions that affect the reported amount of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the period. Actual results could differ from those estimates.
(3)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 CAM.
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):
Twelve Months Ended December 31,
2021 2020 2019
Rental revenue - fixed payments $ 764,574 $ 692,753 $ 645,759
Rental revenue - variable payments (1) 261,089 236,441 210,074
Rental and related revenue $ 1,025,663 $ 929,194 $ 855,833
(1) Primarily includes tenant recoveries for real estate taxes, insurance and CAM.
The future minimum rents due to us under non-cancelable operating leases are as follows (in thousands):
Year December 31, 2021
2022 $ 784,537
2023 769,715
2024 705,620
2025 630,618
2026 546,431
Thereafter 2,299,185
$ 5,736,106
Lessee Accounting
As of December 31, 2021, our lease arrangements, where we are the lessee, primarily consisted of office and ground leases. For these lease arrangements, we recognized ROU assets and the corresponding lease liabilities representing the discounted value of future lease payments required. In determining these amounts, we elected an available practical expedient that allows us, as a lessee, to not separate lease and non-lease components. Expenses recognized on these leases for the year ended December 31, 2021 were not material.
DUKE REALTY CORPORATION AND DUKE REALTY LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Our operating leases primarily include all of our office leases and two ground leases. As of December 31, 2021, a $36.8 million ROU asset associated with operating leases was included within Other Escrow Deposits and Other Assets and a corresponding lease liability of $41.4 million was included in Other Liabilities on our Consolidated Balance Sheets. As of December 31, 2020, total ROU assets and liabilities for operating leases were $38.9 million and $42.9 million, respectively. The following table summarizes the future lease payments (in thousands) to be made under non-cancellable operating lease arrangements:
Year December 31, 2021
2022 $ 4,617
2023 4,327
2024 3,433
2025 1,759
2026 1,644
Thereafter 81,487
Total undiscounted operating lease payments $ 97,267
Less: imputed interest 55,904
Present value of operating lease payments $ 41,363
The weighted average remaining lease term for our operating lease arrangements, on a combined basis as of December 31, 2021, was 34.3 years. The weighted average discount rate for our operating lease arrangements as of December 31, 2021 was 4.42%. As the discount rates implied in our operating lease arrangements were not readily determinable, we utilized our current credit ratings and credit yields observed from market traded securities with similar credit ratings to form a reasonable basis to establish secured borrowing rates when determining the present value of future operating lease payments.
Our finance leases include two long term ground leases. As of December 31, 2021, a $37.5 million ROU asset associated with finance leases was included within Other Escrow Deposits and Other Assets and a corresponding $39.2 million lease liability was included within Other Liabilities on our Consolidated Balance Sheets. As of December 31, 2020, total finance lease related ROU assets and liabilities were $19.2 million and $19.4 million, respectively. The future lease payments (in thousands) under our finance leases as of December 31, 2021 for five years and thereafter are as follows:
Year December 31, 2021
2022 $ 1,414
2023 1,714
2024 1,731
2025 1,762
2026 1,787
Thereafter 127,532
Total undiscounted finance lease payments $ 135,940
Less: imputed interest 96,746
Present value of finance lease payments $ 39,194
The ground lease payment obligation for one ground lease is subject to an annual consumer price index increase limited within a minimum 2% and a maximum 3% increase. The contractual obligations for both leases included above assume the minimum annual increase for the remainder of the lease term since we cannot predict future adjustments. The weighted average remaining lease term for our finance lease arrangements, on a combined basis as of December 31, 2021 was 54.2 years. The weighted average discount rate for our finance lease arrangements as of December 31, 2021 was 5.12%. The lessors' implicit rates in the leases were readily determinable when the leases were commenced.
DUKE REALTY CORPORATION AND DUKE REALTY LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(4)Restricted Cash
Restricted cash primarily consists of cash proceeds from dispositions but restricted only for qualifying like-kind exchange transactions and cash held in escrow related to acquisition and disposition holdbacks. The following table provides a reconciliation of cash, cash equivalents, and restricted cash reported within the Consolidated Balance Sheets that sum to the total of the same such amounts shown in the Consolidated Statements of Cash Flows (in thousands):
December 31, 2021 December 31, 2020
Cash and cash equivalents $ 69,752 $ 6,309
Restricted cash held in escrow for like-kind exchange - 47,682
Restricted cash included in other escrow deposits and other assets 33,412 13,232
Total cash, cash equivalents, and restricted cash shown in the Consolidated Statements of Cash Flows $ 103,164 $ 67,223
Restricted cash held in escrow for like-kind exchange on the Consolidated Balance Sheets consists of cash received from property dispositions intended to be used for qualifying like-kind exchange transactions.
(5)Acquisitions and Dispositions
Acquisitions and dispositions for the periods presented were completed in accordance with our strategy to reposition our investment concentration among the markets in which we operate and to increase our overall investment concentration in Coastal Tier 1 markets. Transaction costs related to asset acquisitions are capitalized.
Acquisitions
The following table summarizes our real estate acquisition activities for the years ended December 31 (dollars in thousands):
2021 2020 2019
Buildings:
Number of buildings 8 10 6
Cash paid at time of acquisition $ 447,584 $ 383,672 $ 210,224
Land and other real estate assets:
Acres of land 536 250 517
Cash paid at time of acquisition (1) $ 700,632 $ 248,413 $ 388,202
(1) Includes the cash acquisition cost of other real estate investments totaling $163.7 million, $13.1 million and $160.4 million for the years ended December 31, 2021, 2020 and 2019, respectively. See Note 7 for information on other real estate investments.
During 2021, we acquired a container storage lot in Northern New Jersey for a combination of $64.0 million of cash and Limited Partner Units with a fair value of $11.6 million. This income producing acquisition is included as part of land and other real estate assets above and also included in the table below.
The following table summarizes amounts recognized for each major class of assets and liabilities (in thousands) for acquisitions of income producing properties during the years ended December 31:
2021 2020 2019
Real estate assets $ 570,820 $ 410,481 $ 205,390
Lease related intangible assets 11,796 14,460 11,716
Total acquired assets $ 582,616 $ 424,941 $ 217,106
Secured debt - 25,455 -
Below market lease liabilities 57,441 14,124 -
DUKE REALTY CORPORATION AND DUKE REALTY LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The leases in the acquired properties had a weighted average remaining life at acquisition of approximately 11.0 years, 6.4 years and 6.5 years during 2021, 2020 and 2019, respectively.
Distribution of Joint Venture Properties
As part of a plan of dissolution, we received a non-cash distribution of real estate assets from two 50%-owned unconsolidated joint ventures. These joint ventures distributed their ownership in two in-service properties and certain parcels of undeveloped land to our partner, who shares control with us over both joint ventures, while distributing their ownership interest in an in-service property, a property under construction and a parcel of undeveloped land to us. These distributions were based on values negotiated between us and our partner on an arms-length basis and we determined that these negotiated values represented the fair value of the assets at their highest and best use, as determined from the perspective of a market participant. Concurrent with these asset distributions, both we and our partner assumed and repaid all of the joint ventures' unsecured debt, with each party paying off an amount necessary for the value of the assets distributed, net of debt repayments, to be equal.
As the result of this dissolution transaction, we recognized a gain of $10.6 million (included in equity in earnings in the Consolidated Statements of Operations), which was related to the properties distributed to our partner. We did not recognize a gain to remeasure our existing ownership interest in the assets we received in distribution and we recognized such assets at a combined basis of $52.2 million in the Consolidated Balance Sheets (not included in the 2021 Acquisitions table above). We assumed and immediately repaid unsecured debt of the joint ventures totaling $40.2 million.
Fair Value Measurements
We determine the fair value of the individual components of income producing real estate asset acquisitions primarily through calculating the "as-if vacant" value of a building, using an income approach, which relies significantly upon internally determined assumptions. We have determined that these estimates primarily rely on Level 3 inputs, which are unobservable inputs based on our own assumptions. The most significant assumptions used in calculating the "as-if vacant" value for acquisition activity during 2021 and 2020, respectively, are as follows:
2021 2020
Low High Low High
Exit capitalization rate 3.50% 5.00% 3.98% 5.46%
Annual net rental rate per square foot on acquired buildings $6.62 $17.16 $5.28 $18.11
Annual net rental rate per acre on acquired ground lease $182,136 $182,136 $- $-
The estimate of the portion of the "as-if vacant" value that is allocated to the land underlying the acquired real estate relies on Level 3 inputs and is primarily determined by reference to recent comparable transactions.
Capitalized acquisition costs were insignificant and the fair value of net assets acquired from unrelated parties during the year ended December 31, 2021 was substantially the same as the cost of acquisition.
Dispositions
Dispositions of buildings (see Note 7 for the number of buildings sold in each year) and undeveloped land generated net cash proceeds of $1.07 billion, $336.3 million and $432.7 million in 2021, 2020 and 2019, respectively.
On July 22, 2021, we closed on the sale of 14 wholly-owned buildings and 15 acres of undeveloped land, for net cash proceeds of $286.3 million, which completed our previously announced exit from the St. Louis market. This sale did not represent a strategic shift in operations.
In addition, in July 2021 we entered into a 20%-owned unconsolidated joint venture with plans to contribute three tranches of properties for a total of nine properties. Pursuant to the terms of the joint venture, on July 27, 2021, we contributed to the joint venture the first tranche of three properties, which consisted of two buildings and one trailer storage lot in Chicago and Atlanta, for net cash proceeds of $115.7 million. On September 21, 2021, we contributed
DUKE REALTY CORPORATION AND DUKE REALTY LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
the second tranche of three properties, which consisted of two buildings and one trailer storage lot in Baltimore, to the joint venture for net cash proceeds of $172.9 million. The joint venture financed the acquisition of these properties with a combination of third party first mortgage loans and equity contributions from our partner. we received $41.1 million for our ownership share of proceeds from such third party first mortgage loans, which was included in capital distributions from unconsolidated joint ventures in the Consolidated Statements of Cash Flows for the year ended December 31, 2021. We closed on the contribution of the third tranche in January 2022 (see Note 14).
During 2020, we collected the remaining $110.0 million of principal on our outstanding notes receivable, which was related to the sale of our medical office portfolio during 2017.
In September 2019, we completed the sale of 18 non-strategic industrial properties for $217.5 million in proceeds and recorded a gain on sale of $146.3 million. These properties totaled 4.1 million square feet and were located in primarily Midwest markets.
All other dispositions were not individually material.
(6)Investments in Unconsolidated Joint Ventures
Summarized Financial Information
As of December 31, 2021, we had equity interests in nine unconsolidated joint ventures that primarily own and operate rental properties.
Combined summarized financial information for the unconsolidated joint ventures at December 31, 2021 and 2020, and for the years ended December 31, 2021, 2020 and 2019, are as follows (in thousands):
2021 2020 2019
Rental revenue $ 67,142 $ 57,952 $ 59,905
Gains on land and property sales - continuing operations $ 64,480 $ 2,076 $ 24,099
Net income $ 85,323 $ 19,183 $ 40,134
Equity in earnings of unconsolidated joint ventures $ 32,804 $ 11,944 $ 31,406
Land, buildings and tenant improvements, net $ 625,206 $ 321,803
Construction in progress 31,745 23,507
Undeveloped land 3,326 23,653
Other assets 106,521 79,842
$ 766,798 $ 448,805
Indebtedness $ 286,430 $ 155,539
Other liabilities 45,580 31,946
332,010 187,485
Owners' equity 434,788 261,320
$ 766,798 $ 448,805
Investments in and advances to unconsolidated joint ventures (1) $ 168,336 $ 131,898
(1) Differences between the net investment in our unconsolidated joint ventures and our underlying equity in the net assets of the ventures are primarily a result of basis differences associated with the sales of properties to joint ventures in which we retained an ownership interest. These adjustments have resulted in an aggregate difference increasing our investments in unconsolidated joint ventures by $3.8 million and $2.7 million as of December 31, 2021 and 2020, respectively. Differences between historical cost basis and the basis reflected at the joint venture level (other than loans and impairments) are typically depreciated over the life of the related asset.
DUKE REALTY CORPORATION AND DUKE REALTY LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The scheduled principal payments of long term debt for the unconsolidated joint ventures, at our ratable ownership percentage, for each of the next five years and thereafter as of December 31, 2021 are as follows (in thousands):
Year Future Repayments
2022 $ 121
2023 126
2024 2,525
2025 30,885
2026 47,341
Thereafter -
$ 80,998
During 2021, a 20% owned joint venture partially financed acquisitions of properties from us with third party mortgage loans and our proportional share of such borrowings was $41.5 million with maturity dates in 2026 (see Note 5). In January 2022, this unconsolidated joint venture financed an additional acquisition of assets from us with $34.0 million, at our proportional share, of third party mortgage loans that mature in 2025 (see Note 14).
(7)Real Estate Assets, Discontinued Operations and Assets Held-for-Sale
Real Estate Assets
Real estate assets, excluding assets held-for-sale, consisted of the following (in thousands):
December 31, 2021 December 31, 2020
Buildings and tenant improvements $ 6,007,848 $ 5,812,004
Land and improvements 3,435,591 2,883,674
Other real estate investments (1) 172,637 49,477
Real estate assets $ 9,616,076 $ 8,745,155
(1) Includes underutilized in-fill sites, which may have had buildings/structures on site when we acquired them, that are either (i) under lease to a third party and, after the lease ends, are expected to be redeveloped or will require significant capital expenditures before re-leasing; or (ii) industrial/logistics properties that we intend to re-lease after significant retrofitting and/or environmental remediation is completed. The leases on these assets are usually short term in nature.
Allocation of Noncontrolling Interests - General Partner
The following table illustrates the General Partner's share of the income attributable to common shareholders from continuing operations and discontinued operations, reduced by the allocation of income between continuing and discontinued operations to noncontrolling interests, for the years ended December 31, 2021, 2020 and 2019, respectively (in thousands):
2021 2020 2019
Income from continuing operations attributable to common shareholders $ 852,895 $ 299,805 $ 428,531
Income from discontinued operations attributable to common shareholders - 110 441
Net income attributable to common shareholders $ 852,895 $ 299,915 $ 428,972
Allocation of Noncontrolling Interests - Partnership
Substantially all of the income from discontinued operations for all periods presented in the Partnership's Consolidated Statements of Operations and Comprehensive Income is attributable to the common unitholders.
DUKE REALTY CORPORATION AND DUKE REALTY LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Assets Sold or Held-for-Sale
The following table illustrates the number of sold or held-for-sale properties:
Held-for-Sale at December 31, 2021 Sold in 2021 Sold in 2020 Sold in 2019 Total
Properties sold or classified as held-for-sale 3 30 7 28 68
These held-for-sale properties were wholly-owned and leased by our largest tenant, which was the third tranche of assets to be contributed to a 20% owned unconsolidated joint venture (see Note 5). The contribution was closed in January 2022 (see Note 14).
At December 31, 2021, three in-service properties were classified as held-for-sale, but did not meet the criteria to be classified within discontinued operations. The following table illustrates aggregate balance sheet information for properties held-for-sale (in thousands):
Held-for-Sale Properties Included in Continuing Operations
December 31, 2021 December 31, 2020
Land and improvements $ 67,818 $ 27,954
Buildings and tenant improvements 102,867 44,800
Accumulated depreciation (36,785) (5,976)
Deferred leasing and other costs, net 5,392 936
Other assets 5,359 232
Total assets held-for-sale $ 144,651 $ 67,946
Accrued expenses $ 43 $ 660
Other liabilities 6,235 7,080
Total liabilities held-for-sale $ 6,278 $ 7,740
(8)Indebtedness
All debt is issued directly or indirectly by the Partnership. The General Partner does not have any indebtedness, but does guarantee some of the unsecured debt of the Partnership.
Indebtedness at December 31, 2021 and 2020 consists of the following (in thousands):
Maturity Date Weighted Average Interest Rate Weighted Average Interest Rate
2021 2020 2021 2020
Fixed rate secured debt 2025 to 2035 4.51 % 4.56 % $ 58,422 $ 62,817
Variable rate secured debt 2025 0.12 % 0.08 % 1,300 1,600
Unsecured debt 2024 to 2050 3.00 % 3.35 % 3,675,000 3,058,740
Unsecured line of credit 2026 - % 1.03 % - 295,000
$ 3,734,722 $ 3,418,157
Less: Deferred financing costs 45,440 33,106
Total indebtedness as reported on consolidated balance sheets $ 3,689,282 $ 3,385,051
Secured Debt
At December 31, 2021, our secured debt was collateralized by rental properties with a carrying value of $158.9 million and by a letter of credit in the amount of $1.3 million.
The fair value of our fixed rate secured debt at December 31, 2021 was $60.0 million. Because our fixed rate secured debt is not actively traded in any marketplace, we utilized a discounted cash flow methodology to determine
DUKE REALTY CORPORATION AND DUKE REALTY LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
its fair value. Accordingly, we calculated fair value by applying an estimate of the current market rate to discount the debt's remaining contractual cash flows. Our estimate of a current market rate, which is the most significant input in the discounted cash flow calculation, is intended to replicate debt of similar maturity and loan-to-value relationship. The estimated market rates for all of our current fixed rate secured debt are between 2.40% and 2.90%, depending on the attributes of the specific loans. The current market rates we utilized were internally estimated; therefore, we have concluded that our determination of fair value for our fixed rate secured debt was primarily based upon Level 3 inputs.
In February 2020, a consolidated joint venture obtained an $18.4 million secured loan from a third party financial institution, with a fixed annual interest rate of 3.41% and a maturity date of March 1, 2035.
In September 2020, we assumed two secured loans in conjunction with a two-building asset acquisition. These assumed loans had a total face value of $21.5 million and fair value of $25.5 million. These assumed loans had a weighted average remaining term at acquisition of 11.8 years and carried a weighted average stated interest rate of 4.54%. The difference between the fair value and the face value of loans assumed in connection with the acquisition is recorded as a premium and amortized to interest expense over the life of the loans assumed. We used an estimated market interest rate of 2.50% in determining the fair values of these loans.
During 2020, we repaid one fixed rate secured loan, totaling $9.0 million, which had a stated interest rate of 5.61%.
Unsecured Debt
At December 31, 2021, all of our unsecured debt bore interest at fixed rates and primarily consisted of unsecured notes that are publicly traded. We utilized broker estimates in estimating the fair value of our fixed rate unsecured debt. The broker estimates took into account any recent trades within the same series of our fixed rate unsecured debt, comparisons to recent trades of other series of our fixed rate unsecured debt, trades of fixed rate unsecured debt from companies with profiles similar to ours, as well as overall economic conditions. We reviewed these broker estimates for reasonableness and accuracy, considering whether the estimates were based upon market participant assumptions within the principal and most advantageous market and whether any other observable inputs would be more accurate indicators of fair value than the broker estimates. We concluded that the broker estimates were representative of fair value. We have determined that our estimation of the fair value of our fixed rate unsecured debt was primarily based upon Level 3 inputs. The estimated trading values of our fixed rate unsecured debt, depending on the maturity and coupon rates, ranged from 95.00% to 125.00% of face value.
The indentures (and related supplemental indentures) governing our outstanding series of unsecured notes also require us to comply with financial ratios and other covenants regarding our operations. We were in compliance with all such financial covenants at December 31, 2021.
We took the following actions during 2021 and 2020 as they pertain to our unsecured indebtedness:
•In November 2021, the Partnership issued $500.0 million of senior unsecured notes that bear a stated interest rate of 2.25%, have an effective interest rate of 2.38% and mature on January 15, 2032. Proceeds from this unsecured notes offering will be allocated to finance or refinance eligible green projects.
•In August 2021, we redeemed $250.0 million of 3.63% senior unsecured notes due April 2023. We recognized a loss of $13.9 million in connection with the redemption of these notes including the prepayment premium and write-off of unamortized deferred financing costs.
•In June 2021, we redeemed $83.7 million of 3.88% senior unsecured notes due October 2022. In connection with the early repayment of these notes, we recognized a loss of $3.9 million, including the prepayment premium and the write-off of unamortized deferred financing costs.
•In January 2021, the Partnership issued $450.0 million of senior unsecured notes that bear a stated interest rate of 1.75%, have an effective interest rate of 1.83%, and mature on February 1, 2031. Proceeds from the unsecured notes offering were allocated to finance or refinance eligible green projects. In addition, in January 2021, the Partnership assumed and immediately repaid $40.2 million of unsecured debt related to the assets received as part of the dissolution of unconsolidated joint ventures (see Note 5).
•In June 2020, we issued $350.0 million of senior unsecured notes, which bear interest at a stated interest rate of 1.75%, have an effective interest rate of 1.85% and mature on July 1, 2030. Proceeds from the unsecured notes offering were primarily used to repurchase and cancel $216.3 million of 3.88% senior
DUKE REALTY CORPORATION AND DUKE REALTY LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
unsecured notes due 2022 pursuant to a tender offer completed by the Partnership in June 2020. In connection with the early cancellation of these notes, we recognized a loss of $15.1 million consisting of a repayment premium and the write-off of unamortized deferred financing costs.
•In February 2020, we issued $325.0 million of senior unsecured notes that bear interest at a stated interest rate of 3.05%, have an effective interest rate of 3.19%, and mature on March 1, 2050. Proceeds from the unsecured notes offering were primarily used to repay the $300.0 million of senior unsecured notes bearing a stated interest rate of 4.38% due 2022. In connection with the early redemption of these notes, we recognized a loss of $17.8 million consisting of a prepayment premium and the write-off of unamortized deferred financing costs.
Unsecured Line of Credit
Our unsecured line of credit at December 31, 2021 is described as follows (in thousands):
Outstanding Balance at
Description Borrowing Capacity Maturity Date December 31, 2021
Unsecured Line of Credit - Partnership $ 1,200,000 March 31, 2025 $ -
In March 2021, the Partnership amended and restated its existing $1.20 billion unsecured line of credit, which was set to mature in January 2022 with with options to extend until January 30, 2023. The amended and restated line of credit bears interest at one-month LIBOR plus 0.775% with a reduction in borrowing costs if certain sustainability linked metrics are achieved each year. In addition, the amended and restated line of credit matures on March 31, 2025 with options to extend until March 31, 2026. Subject to certain conditions, the terms also include an option to increase the facility by up to an additional $800.0 million, for a total of up to $2.00 billion. This line of credit provides us with an option to obtain borrowings from financial institutions that participate in the line at rates that may be lower than the stated interest rate, subject to certain restrictions. The line of credit also allows automatic transition to an alternative rate of interest in the event that the one-month LIBOR ceases to publish and needs to be replaced. As a result of amending and restating the unsecured line of credit, we incurred $6.2 million of deferred financing costs through December 31, 2021.
This line of credit contains financial covenants that require us to meet certain financial ratios and defined levels of performance, including those related to fixed charge coverage, unsecured interest expense coverage and debt-to-asset value (with asset value being defined in the Partnership's unsecured line of credit agreement). At December 31, 2021, we were in compliance with all financial covenants under this line of credit.
We utilized a discounted cash flow methodology in order to estimate the fair value of outstanding borrowings on our unsecured line of credit. To the extent that credit spreads have changed since the origination of the line of credit, the net present value of the difference between future contractual interest payments and future interest payments based on our estimate of a current market rate would represent the difference between the book value and the fair value. This estimate of a current market rate is based upon the rate, considering current market conditions and our specific credit profile, at which we estimate we could obtain similar borrowings. As our credit spreads have not changed appreciably, we believe that the contractual interest rate and the current market rate on any outstanding borrowings on the line of credit are the same. The current market rate is internally estimated and therefore is primarily based upon a Level 3 input.
DUKE REALTY CORPORATION AND DUKE REALTY LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Changes in Fair Value
As all of our fair value debt disclosures relied primarily on Level 3 inputs, the following table summarizes the book value and changes in the fair value of our debt for the year ended December 31, 2021 (in thousands):
Book Value at 12/31/2020 Book Value at 12/31/2021 Fair Value at 12/31/2020 Issuances and
Assumptions Payments/Payoffs Adjustments
to Fair Value Fair Value at 12/31/2021
Fixed rate secured debt $ 62,817 $ 58,422 $ 65,848 $ - $ (4,113) $ (1,746) $ 59,989
Variable rate secured debt 1,600 1,300 1,600 - (300) - 1,300
Unsecured debt 3,058,740 3,675,000 3,387,913 990,226 (373,966) (224,708) 3,779,465
Unsecured line of credit 295,000 - 295,000 - (295,000) - -
Total $ 3,418,157 $ 3,734,722 $ 3,750,361 $ 990,226 $ (673,379) $ (226,454) $ 3,840,754
Less: Deferred financing costs 33,106 45,440
Total indebtedness as reported on the consolidated balance sheets $ 3,385,051 $ 3,689,282
Scheduled Maturities and Interest Paid
At December 31, 2021, the scheduled amortization and maturities of all indebtedness, excluding fair value adjustment, for the next five years and thereafter were as follows (in thousands):
Year Amount
2022 $ 4,646
2023 4,893
2024 305,155
2025 5,102
2026 378,238
Thereafter 3,033,158
$ 3,731,192
The amount of interest paid in 2021, 2020 and 2019 was $107.9 million, $104.6 million and $111.8 million, respectively. The amount of interest capitalized in 2021, 2020 and 2019 was $35.0 million, $24.3 million and $26.5 million, respectively.
(9)Segment Reporting
Reportable Segments
As of December 31, 2021, we had two reportable operating segments, the first consisting of the ownership and rental of industrial real estate investments. We continue to increase our investments in quality industrial properties largely based on anticipated geographic trends in supply and demand for industrial buildings, as well as the real estate needs of our major tenants that operate on a national level. We treat our industrial properties as a single operating and reportable segment based on our method of internal reporting. Properties not included in this reportable segment, because they are not industrial properties and do not by themselves meet the quantitative thresholds for separate presentation as a reportable segment, are generally referred to as non-reportable Rental Operations. Our non-reportable Rental Operations primarily include our remaining office properties and medical office property at December 31, 2021. The operations of our industrial properties, as well as our non-reportable Rental Operations, are collectively referred to as "Rental Operations."
Our second reportable segment consists of various real estate services such as development, general contracting, construction management, property management, asset management, maintenance and leasing to third-party property customers, owners and joint ventures, and is collectively referred to as "Service Operations." The Service Operations segment is identified as one single operating segment because the lowest level of financial results reviewed by our chief operating decision maker are the results for the Service Operations segment in total. Further,
DUKE REALTY CORPORATION AND DUKE REALTY LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
our reportable segments are managed separately because each segment requires different operating strategies and management expertise.
Revenues by Reportable Segment
The following table shows the revenues for each of the reportable segments, as well as a reconciliation to consolidated revenues, for the years ended December 31, 2021, 2020 and 2019 (in thousands):
2021 2020 2019
Revenues
Rental Operations:
Industrial $ 1,019,342 $ 921,612 $ 848,806
Non-reportable Rental Operations 5,506 5,995 5,794
Service Operations 80,260 64,004 117,926
Total segment revenues 1,105,108 991,611 972,526
Other revenue 815 1,587 1,233
Consolidated revenue $ 1,105,923 $ 993,198 $ 973,759
Major Customer
The table below shows the revenues from a major customer from each of our reportable segments (in thousands):
Twelve Months Ended December 31,
2021 2020 2019
Revenues
Rental Operations - Industrial $ 91,495 $ 92,986 $ 63,805
Service Operations 30,315 32,771 45,177
We generated more than 10% of our total revenues from this customer for the year ended December 31, 2021. Revenues from Rental Operations related to leasing properties to this customer. Revenues from Service Operations for this customer pertained primarily to general contractor and fee based construction management services.
Supplemental Performance Measure
PNOI is the non-GAAP supplemental performance measure that we use to evaluate the performance of, and to allocate resources among, the real estate investments in the reportable and operating segments that comprise our Rental Operations. PNOI for our Rental Operations segments is comprised of rental revenues from continuing operations less rental expenses and real estate taxes from continuing operations, along with certain other adjusting items (collectively referred to as "Rental Operations revenues and expenses excluded from PNOI," as shown in the following table). Additionally, we do not allocate interest expense, depreciation expense and certain other non-property specific revenues and expenses (collectively referred to as "Non-Segment Items," as shown in the following table) to our individual operating segments.
DUKE REALTY CORPORATION AND DUKE REALTY LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
We evaluate the performance of our Service Operations reportable segment using net income or loss, as allocated to that segment ("Earnings from Service Operations").The following table shows a reconciliation of our segment-level measures of profitability to consolidated income from continuing operations before income taxes, for the years ended December 31, 2021, 2020 and 2019 (in thousands and excluding discontinued operations):
2021 2020 2019
PNOI
Industrial $ 706,956 $ 611,217 $ 550,399
Non-reportable Rental Operations 5,227 5,020 3,811
PNOI, excluding all sold properties 712,183 616,237 554,210
PNOI from sold properties included in continuing operations 24,834 49,574 63,911
PNOI, continuing operations 737,017 665,811 618,121
Earnings from Service Operations 12,142 6,028 6,360
Rental Operations revenues and expenses excluded from PNOI:
Straight-line rental income and expense, net 32,081 25,865 21,197
Revenues related to lease buyouts 323 2,863 1,611
Amortization of lease concessions and above and below market rents 12,368 8,984 7,802
Intercompany rents and other adjusting items (2,704) (1,473) 1,012
Non-Segment Items:
Equity in earnings of unconsolidated joint ventures 32,804 11,944 31,406
Interest expense (84,843) (93,442) (89,756)
Depreciation and amortization expense (362,148) (353,013) (327,223)
Gain on sale of properties 585,685 127,700 234,653
Impairment charges - (5,626) -
Interest and other income, net 4,451 1,721 9,941
General and administrative expenses (69,554) (62,404) (60,889)
Gain on land sales 12,917 10,458 7,445
Other operating expenses (3,607) (8,209) (5,318)
Loss on extinguishment of debt (17,901) (32,900) (6,320)
Gain on involuntary conversion 3,222 4,312 2,259
Non-incremental costs related to successful leases (13,302) (12,292) (12,402)
Other non-segment revenues and expenses, net 1,216 1,210 986
Income from continuing operations before income taxes $ 880,167 $ 297,537 $ 440,885
The most comparable GAAP measure to PNOI is income from continuing operations before income taxes. PNOI excludes expenses that materially impact our overall results of operations and, therefore, should not be considered as a substitute for income from continuing operations before income taxes or any other measures derived in accordance with GAAP. Furthermore, PNOI may not be comparable to other similarly titled measures of other companies.
Assets by Reportable Segment
The assets for each of the reportable segments at December 31, 2021 and 2020 were as follows (in thousands):
December 31, 2021 December 31, 2020
Assets
Rental Operations:
Industrial $ 9,887,635 $ 8,709,960
Non-reportable Rental Operations 33,702 35,292
Service Operations 182,979 160,194
Total segment assets 10,104,316 8,905,446
Non-segment assets 341,339 205,948
Consolidated assets $ 10,445,655 $ 9,111,394
DUKE REALTY CORPORATION AND DUKE REALTY LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In addition to revenues and PNOI, we also review our second generation capital expenditures in measuring the performance of our individual Rental Operations segments. We review these expenditures to determine the costs associated with re-leasing vacant space and maintaining the condition of our properties. Our second generation capital expenditures are included within "second generation tenant improvements, leasing costs and building improvements" in our consolidated statements of Cash Flows and are primarily attributable to the industrial segment for the years ended December 31, 2021, 2020 and 2019.
(10)Employee Benefit Plans
We maintain a 401(k) plan for our eligible employees. We make matching contributions of 50% of the employee salary deferral contributions up to 6% of eligible compensation and may also make annual discretionary contributions. A discretionary contribution was declared at the end of 2021, 2020 and 2019. The total expense recognized for this plan was $2.6 million, $2.2 million and $2.1 million for the years ended December 31, 2021, 2020 and 2019, respectively.
Effective January 1, 2022, we have increased the matching contribution of 50% of employee salary deferral contributions to up to 10% of employees' eligible compensation.
(11)Shareholders' Equity of the General Partner and Partners' Capital of the Partnership
General Partner
The General Partner has an at the market ("ATM") equity program that allows it to issue and sell its common shares through sales agents from time to time. Actual sales under the ATM equity program depend on a variety of factors to be determined by the General Partner, including, among others, market conditions, the trading price of the General Partner’s common stock, determinations by the General Partner of the appropriate sources of funding and potential uses of funding available.
In February 2021, the General Partner terminated its previous equity distribution agreement for the ATM equity program and entered into a new equity distribution agreement pursuant to which the General Partner may sell from time to time up to an aggregate offering price of $400.0 million of its common stock through sales agents or forward sellers. No forward sales were executed in 2021 and substantially all of the capacity of this ATM program was utilized as of December 31, 2021.
During 2021, the General Partner issued 8.2 million common shares pursuant to its ATM equity programs, generating gross proceeds of $408.3 million and, after deducting commissions and other costs, net proceeds of $403.6 million. The proceeds from these offerings were contributed to the Partnership and used to fund development activities.
During 2020, the General Partner issued 4.6 million common shares pursuant to its ATM equity programs, generating gross proceeds of $177.1 million and, after deducting commissions and other costs, net proceeds of $175.0 million. The proceeds from these offerings were contributed to the Partnership and used to fund development activities.
During 2019, the General Partner issued 8.0 million common shares pursuant to its ATM equity program, generating gross proceeds of approximately $266.3 million and, after deducting commissions and other costs, net proceeds of approximately $263.3 million. The proceeds from these offerings were contributed to the Partnership and used to fund development activities.
Partnership
For each common share or preferred share that the General Partner issues, the Partnership issues a corresponding General Partner Unit or Preferred Unit, as applicable, to the General Partner in exchange for the contribution of the proceeds from the stock issuance. Similarly, when the General Partner redeems or repurchases common shares or preferred shares, the Partnership redeems the corresponding General Partner Units or Preferred Units held by the General Partner at the same price.
DUKE REALTY CORPORATION AND DUKE REALTY LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(12)Stock Based Compensation
We are authorized to issue up to 9.7 million shares of the General Partner's common stock under our stock-based employee and non-employee compensation plans. Executive officers may elect to receive Long-Term Incentive Plan Units ("LTIP Units"), which represent an interest in the Partnership, in lieu of stock based compensation awards denominated in the General Partner's common stock.
Restricted Stock Units ("RSUs")
Under our 2015 Long-Term Incentive Plan, which was approved by the General Partner's shareholders in April 2015, and our 2015 Non-Employee Directors Compensation Plan (collectively, the "Compensation Plans"), RSUs may be granted to non-employee directors, executive officers and selected employees. An RSU is economically equivalent to a share of the General Partner's common stock, and RSUs are valued based on the market price of the General Partner's common stock on the date of the award. Amounts disclosed below include both RSUs and any elected LTIP Units, which have the same vesting schedule as RSUs.
RSUs granted to employees from 2015 to 2021 vest ratably in most cases over a three-year period and are payable in shares of our common stock with a new share of such common stock issued upon each RSU's vesting. RSUs granted to existing non-employee directors vest 100% over one year and have contractual lives of one year.
To the extent that a recipient of an RSU grant is not determined to be retirement eligible, as defined by the Compensation Plans, we recognize expense on a straight-line basis over the vesting period. Expense is recognized immediately at the date of grant to the extent a recipient is retirement eligible and expense is accelerated to the extent that a participant will become retirement eligible prior to the end of the contractual life of granted RSUs.
The following table summarizes transactions for our unvested RSUs, excluding dividend equivalents, for 2021:
Restricted Stock Units Number of
RSUs Weighted
Average
Grant-Date
Fair Value
December 31, 2020 678,803 $32.98
Granted in 2021 322,227 $42.15
Vested in 2021 (368,428) $31.66
Forfeited in 2021 (41,760) $37.47
December 31, 2021 590,842 $38.49
Compensation cost recognized for RSUs totaled $12.5 million, $12.1 million and $11.0 million for the years ended December 31, 2021, 2020 and 2019, respectively.
As of December 31, 2021, there was $6.3 million of total unrecognized compensation expense related to nonvested RSUs granted under the Plan, which is expected to be recognized over a weighted average period of 1.7 years.
The total intrinsic value (which is equal to the value of a share of the General Partner's common stock on the date of vesting) of RSUs vested during the years ended December 31, 2021, 2020 and 2019 was $11.7 million, $15.4 million and $17.7 million, respectively.
The weighted average grant-date fair value of RSUs granted during 2020 and 2019 was $37.28 and $29.98, respectively.
The weighted average grant-date fair value of nonvested RSUs as of December 31, 2019 was $27.73.
DUKE REALTY CORPORATION AND DUKE REALTY LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Performance-Based Awards
A portion of the annual stock-based compensation awards granted to our executive officers annually include performance conditions, measured over a three-year performance period, based on pre-established goals for growth in a defined adjusted funds from operations (“AFFO”) metric. These performance-based awards disclosed below include awards denominated in both common shares of the General Partner or LTIP Units. The total number of instruments issued at the end of each performance period may be earned in a range from 0% to 200% of the target value of the award depending on our AFFO performance relative to the pre-established goals.
To the extent that a recipient of these performance-based awards is not determined to be retirement eligible, as defined by the Compensation Plans, we recognize expense on a straight-line basis over the performance period based on the most likely payout percentage at each reporting period for each grant to the extent that a payout is determined to be probable. Expense is recognized immediately at the date of grant, based on the most likely payout percentage to the extent that a payout is determined to be probable, when a recipient is retirement eligible, and expense is accelerated to the extent that a participant will become retirement eligible prior to the end of the performance period of an award.
Details on the unvested amounts of these annual grants by performance period are as follows:
Performance-Based Awards Unvested Awards Outstanding Unvested Weighted Average Grant Date Fair Value
Unvested awards at December 31, 2020 207,712 $33.58
Above target performance adjustment 105,416 $29.98
Vested in 2021 (210,832) $29.98
Granted in 2021 97,527 $42.07
Unvested awards at December 31, 2021 199,823 $39.62
A summary of vested performance-based awards that are denominated in LTIP units is as follows:
Vested LTIP Awards Outstanding
Vested Awards at December 31, 2020 322,569
Vested in 2021 148,518
Completed holding period in 2021 (142,324)
Vested Awards at December 31, 2021 328,763
Compensation cost recognized for these performance-based awards totaled $8.5 million, $7.8 million and $6.2 million for the years ended December 31, 2021, 2020 and 2019, respectively.
As of December 31, 2021, there was $760,000 of total unrecognized compensation expense related to nonvested performance-based awards, which is expected to be recognized over a weighted average period of 1.5 years.
The weighted average grant-date fair value, per instrument, for these performance-based awards granted during 2020 and 2019 was $37.29 and $29.98.
The weighted average grant-date fair value of these nonvested performance-based awards as of December 31, 2019 was $27.50.
DUKE REALTY CORPORATION AND DUKE REALTY LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(13)Commitments and Contingencies
Legal
We are subject to various legal proceedings and claims that arise in the ordinary course of business. In the opinion of management, the amount of any ultimate liability with respect to these actions is not expected to materially affect our consolidated financial statements or results of operations.
Environmental
We generally perform environmental site assessments at properties we are considering acquiring. The properties, particularly land parcels, we acquire may have been subject to adverse environmental conditions as a result of previous owners’ operations, which require remediation prior to development of land by the applicable environmental laws or regulations.
At the time of acquisition, we establish a liability for the costs associated with environmental remediation when such obligation has been incurred and can be reasonably estimated. Subsequently we adjust the liability as appropriate when additional information becomes available. We record such environmental liabilities in other liabilities on the Consolidated Balance Sheets. We purchase various environmental insurance policies to mitigate our exposure to environmental liabilities. As of December 31, 2021, we are not aware of any environmental liabilities that would have a material adverse effect on our consolidated financial condition, results of operations or cash flows.
Off-Balance Sheet Liabilities
The Partnership has guaranteed the repayment of $18.5 million of economic development bonds issued by various municipalities in connection with certain commercial developments. We may be required to make payments under our guarantees to the extent that incremental taxes from specified developments are not sufficient to pay the bond debt service. Management does not believe that it is probable that we will be required to make any significant payments in satisfaction of these guarantees.
The Partnership also has guaranteed the repayment of a loan associated with one of our unconsolidated joint ventures. At December 31, 2021, the maximum guarantee exposure for the loan was approximately $4.8 million.
(14)Subsequent Events
Declaration of Dividends/Distributions
The General Partner's board of directors declared the following dividends/distributions at its regularly scheduled board meeting held on January 26, 2022:
Class of stock/units Quarterly
Amount per Share or Unit Record Date Payment Date
Common $ 0.28 February 16, 2022 February 28, 2022
Property Dispositions
In January 2022, we contributed three buildings to an unconsolidated joint venture. The joint venture financed the acquisition of these properties with a combination of third party first mortgage loans and equity contributions from our partner and we received approximately $289.7 million of net cash proceeds, including our share of the proceeds from the joint venture's first mortgage loans.
Debt Extinguishment
On January 14, 2022, we provided notice of redemption to the holders of our $300.0 million of 3.75% unsecured notes, which are scheduled to mature in December 2024. This redemption occurred on February 13, 2022 and resulted in a loss on debt extinguishment of approximately $22.0 million, which is comprised of the prepayment premium and the write-off of unamortized deferred financing costs.
DUKE REALTY CORPORATION AND DUKE REALTY LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Duke Realty Corporation and Duke Realty Limited Partnership
Real Estate and Accumulated Depreciation
December 31, 2021
(in thousands of U.S. dollars, as applicable) Schedule III
Initial Cost Cost Capitalized
Subsequent to
Development or Acquisition Gross Book Value at 12/31/2021
Name Asset Type Encumbrances Land Buildings Land/Land Imp Bldgs/TI Total (1) Accum. Depr. (2) Year Constructed/Renovated Year Acquired
Atlanta, Georgia
Airport Distribution 3781 Industrial - 4,064 11,383 320 4,064 11,703 15,767 3,683 2002 2014
Aurora, Illinois
Meridian Business 880 Industrial - 963 4,625 1,467 963 6,092 7,055 3,376 2000 2000
4220 Meridian Parkway Industrial - 970 3,512 102 970 3,614 4,584 1,544 2004 2004
Butterfield 2805 Industrial - 9,185 10,795 5,847 9,272 16,555 25,827 11,623 2008 2008
Butterfield 4000 Industrial - 3,132 12,639 70 3,132 12,709 15,841 3,870 2016 2016
Butterfield 2850 Industrial - 11,317 18,305 130 11,317 18,435 29,752 6,561 2016 2016
Butterfield 4200 Industrial - 5,777 13,108 68 5,967 12,986 18,953 3,493 2016 2016
Austell, Georgia
Hartman Business 7545 Industrial - 2,640 21,471 20 2,640 21,491 24,131 8,725 2008 2012
240 The Bluffs Industrial - 6,138 15,447 3,086 6,138 18,533 24,671 2,314 2018 2018
Avenel, New Jersey
Paddock 1 Industrial - 20,861 15,408 91 20,861 15,499 36,360 1,644 2020 2020
Baltimore, Maryland
Chesapeake Commerce 5901 Industrial - 3,345 1,355 3,855 3,365 5,190 8,555 3,834 2008 2008
Chesapeake Commerce 5003 Industrial - 6,488 7,087 5,767 6,546 12,796 19,342 6,739 2008 2008
Chesapeake Commerce 1500 Industrial - 8,289 10,109 108 8,333 10,173 18,506 4,326 2016 2016
Chesapeake Commerce 5900 Industrial - 5,567 6,100 876 5,567 6,976 12,543 2,373 2017 2017
Chesapeake Commerce 6000 Industrial - 2,418 10,369 362 2,418 10,731 13,149 835 2020 2020
Batavia, Ohio
S Afton Industrial Park 3001 Industrial - 5,729 20,717 - 5,729 20,717 26,446 2,881 2019 2019
Bloomingdale, Georgia
Morgan Business Center 400 Industrial - 18,385 44,455 539 18,385 44,994 63,379 9,004 2017 2017
Bolingbrook, Illinois
250 East Old Chicago Road Industrial - 1,229 4,038 253 1,229 4,291 5,520 1,723 2005 2005
Crossroads 2 Industrial - 1,134 5,434 1,407 1,134 6,841 7,975 2,375 1998 2010
Crossroads 375 Industrial - 1,064 4,371 497 1,064 4,868 5,932 1,848 2000 2010
Crossroads Parkway 370 Industrial - 2,409 4,236 912 2,409 5,148 7,557 2,383 1989 2011
Crossroads Parkway 605 Industrial - 3,656 7,587 3,550 3,656 11,137 14,793 3,970 1998 2011
Crossroads Parkway 335 Industrial - 2,574 8,342 1,032 2,574 9,374 11,948 3,533 1997 2012
DUKE REALTY CORPORATION AND DUKE REALTY LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Duke Realty Corporation and Duke Realty Limited Partnership
Real Estate and Accumulated Depreciation
December 31, 2021
(in thousands of U.S. dollars, as applicable) Schedule III
Initial Cost Cost Capitalized
Subsequent to
Development or Acquisition Gross Book Value at 12/31/2021
Name Asset Type Encumbrances Land Buildings Land/Land Imp Bldgs/TI Total (1) Accum. Depr. (2) Year Constructed/Renovated Year Acquired
Boynton Beach, Florida
Gateway Center 1103 Industrial - 3,701 5,300 1,712 3,702 7,011 10,713 2,920 2002 2010
Gateway Center 3602 Industrial - 1,738 4,584 265 1,739 4,848 6,587 1,789 2002 2010
Gateway Center 3402 Industrial - 2,063 3,218 471 2,064 3,688 5,752 1,485 2002 2010
Gateway Center 2055 Industrial - 1,560 2,583 175 1,560 2,758 4,318 1,036 2000 2010
Gateway Center 2045 Industrial - 1,073 1,541 835 1,073 2,376 3,449 922 2000 2010
Gateway Center 2035 Industrial - 1,073 1,304 699 1,073 2,003 3,076 772 2000 2010
Gateway Center 2025 Industrial - 1,560 2,658 145 1,560 2,803 4,363 1,048 2000 2010
Gateway Center 1926 Industrial - 4,143 9,900 1,458 4,144 11,357 15,501 4,653 2004 2010
Braselton, Georgia
Braselton Business 920 Industrial - 1,365 7,713 4,921 1,529 12,470 13,999 7,001 2001 2001
625 Braselton Pkwy Industrial - 4,355 21,010 5,726 5,417 25,674 31,091 11,360 2006 2005
1350 Braselton Parkway Industrial - 8,227 8,856 2,158 8,227 11,014 19,241 8,839 2008 2008
Brentwood, Tennessee
Brentwood South Business 7104 Industrial - 1,065 4,410 2,084 1,065 6,494 7,559 3,469 1987 1999
Brentwood South Business 7106 Industrial - 1,065 1,844 1,974 1,065 3,818 4,883 2,100 1987 1999
Brentwood South Business 7108 Industrial - 848 3,233 1,392 848 4,625 5,473 2,650 1989 1999
Brooklyn Park, Minnesota
7300 Northland Drive Industrial - 700 5,289 862 703 6,148 6,851 3,398 1999 1998
Crosstown North 9201 Industrial - 835 4,433 1,501 1,121 5,648 6,769 3,168 1998 1999
Crosstown North 8400 Industrial - 2,079 4,926 3,044 2,233 7,816 10,049 4,003 1999 1999
Crosstown North 9100 Industrial - 1,079 3,743 999 1,166 4,655 5,821 2,591 2000 2000
Crosstown North 9200 Industrial - 1,222 2,674 2,690 1,256 5,330 6,586 2,262 2005 2005
Crosstown North 7601 Industrial - 2,998 7,472 885 2,998 8,357 11,355 3,366 2005 2005
Buena Park, California
6280 Artesia Boulevard Industrial - 28,582 5,010 871 28,582 5,881 34,463 1,253 2005 2017
Carol Stream, Illinois
Carol Stream 815 Industrial - 3,037 11,210 1,849 3,037 13,059 16,096 6,008 2004 2003
Carol Stream 640 Industrial - 876 3,200 495 876 3,695 4,571 1,534 1999 2010
Carol Stream 370 Industrial - 1,319 5,960 1,053 1,332 7,000 8,332 2,561 2002 2010
250 Kehoe Boulevard Industrial - 1,715 7,552 136 1,715 7,688 9,403 2,843 2008 2011
Carol Stream 720 Industrial - 3,362 17,759 1,020 4,083 18,058 22,141 6,592 1999 2011
DUKE REALTY CORPORATION AND DUKE REALTY LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Duke Realty Corporation and Duke Realty Limited Partnership
Real Estate and Accumulated Depreciation
December 31, 2021
(in thousands of U.S. dollars, as applicable) Schedule III
Initial Cost Cost Capitalized
Subsequent to
Development or Acquisition Gross Book Value at 12/31/2021
Name Asset Type Encumbrances Land Buildings Land/Land Imp Bldgs/TI Total (1) Accum. Depr. (2) Year Constructed/Renovated Year Acquired
Carson, California
20915 S Wilmington Ave Industrial - 24,350 7,934 545 24,350 8,479 32,829 346 1996 2020
Carteret, New Jersey
900 Federal Blvd. Industrial - 2,088 24,712 36 2,088 24,748 26,836 4,503 2017 2017
Chino, California
13799 Monte Vista Industrial - 14,046 8,236 2,252 14,046 10,488 24,534 6,983 2013 2013
Cincinnati, Ohio
Kenwood Commons 8230 Office 663 638 35 2,460 638 2,495 3,133 769 1986 1993
Kenwood Commons 8280 Office 637 638 275 2,059 638 2,334 2,972 1,241 1986 1993
World Park 5389 Industrial - 963 5,550 1,464 963 7,014 7,977 2,616 1994 2010
World Park 5232 Industrial - 1,078 5,074 818 1,077 5,893 6,970 2,139 1997 2010
World Park 5399 Industrial - 739 5,251 896 740 6,146 6,886 2,605 1998 2010
World Park 5265 Industrial - 2,118 11,569 4,480 2,118 16,049 18,167 5,889 2015 2010
City of Industry, California
825 Ajax Ave Industrial - 38,930 27,627 8,133 38,930 35,760 74,690 6,546 2017 2017
14508 Nelson Ave Industrial - 26,162 25,210 950 26,162 26,160 52,322 1,147 2010 2020
College Park, Georgia
2929 Roosevelt Highway Industrial - 9,419 17,205 65 9,419 17,270 26,689 1,696 2020 2020
College Station, Texas
Baylor College Station MOB Medical Office - 5,551 33,770 5,293 5,551 39,063 44,614 17,731 2013 2013
Columbus, Ohio
RGLP Intermodal North 9224 Industrial - 1,550 19,873 985 1,550 20,858 22,408 4,100 2016 2016
RGLP Intermodal S 9799 Industrial - 13,065 44,159 239 13,065 44,398 57,463 6,695 2018 2018
Coppell, Texas
Freeport X Industrial - 2,145 12,784 3,624 2,145 16,408 18,553 7,325 2004 2004
Point West 400 Industrial - 10,181 12,803 9,041 10,475 21,550 32,025 14,092 2008 2008
Point West 240 Industrial - 6,785 11,700 6,299 7,519 17,265 24,784 10,965 2008 2008
Point West 120 Industrial - 3,267 8,695 147 3,267 8,842 12,109 4,058 2015 2015
Corona, California
1283 Sherborn Street Industrial - 7,231 13,575 428 7,231 14,003 21,234 4,690 2005 2011
Cranbury, New Jersey
311 Half Acre Road Industrial - 6,600 14,106 317 6,600 14,423 21,023 4,886 2004 2013
315 Half Acre Road Industrial - 14,100 29,188 6,998 14,100 36,186 50,286 10,481 2004 2013
DUKE REALTY CORPORATION AND DUKE REALTY LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Duke Realty Corporation and Duke Realty Limited Partnership
Real Estate and Accumulated Depreciation
December 31, 2021
(in thousands of U.S. dollars, as applicable) Schedule III
Initial Cost Cost Capitalized
Subsequent to
Development or Acquisition Gross Book Value at 12/31/2021
Name Asset Type Encumbrances Land Buildings Land/Land Imp Bldgs/TI Total (1) Accum. Depr. (2) Year Constructed/Renovated Year Acquired
Cypress, California
6450 Katella Ave Industrial - 85,984 2,517 - 85,984 2,517 88,501 204 2021 2021
Davenport, Florida
Park 27 Distribution 210 Industrial - 1,143 5,052 600 1,198 5,597 6,795 2,698 2003 2003
Park 27 Distribution 220 Industrial - 4,374 5,066 5,850 4,502 10,788 15,290 6,664 2007 2007
Davie, Florida
Westport Business Park 2555 Industrial - 1,040 951 69 1,040 1,020 2,060 366 1991 2011
Westport Business Park 2501 Industrial - 943 629 239 943 868 1,811 401 1991 2011
Westport Business Park 2525 Industrial - 2,048 5,774 1,472 2,048 7,246 9,294 2,725 1991 2011
Deer Park, Texas
801 Seaco Court Industrial - 2,331 4,673 627 2,331 5,300 7,631 2,240 2006 2012
Des Moines, Washington
21202 24th Ave South Industrial - 18,720 36,496 43 18,720 36,539 55,259 4,946 2018 2018
21402 24th Ave South Industrial - 18,970 31,048 1,176 18,970 32,224 51,194 4,140 2018 2018
Duluth, Georgia
Sugarloaf 2775 Industrial - 560 4,298 1,185 560 5,483 6,043 2,989 1997 1999
Sugarloaf 3079 Industrial - 776 4,536 3,482 776 8,018 8,794 4,260 1998 1999
Sugarloaf 2855 Industrial - 765 2,618 1,906 765 4,524 5,289 2,301 1999 1999
Sugarloaf 6655 Industrial - 1,651 6,804 879 1,651 7,683 9,334 3,591 1998 2001
2625 Pinemeadow Court Industrial - 732 3,096 889 732 3,985 4,717 1,389 1994 2010
2660 Pinemeadow Court Industrial - 459 1,670 118 459 1,788 2,247 699 1996 2010
2450 Satellite Boulevard Industrial - 473 1,730 414 473 2,144 2,617 886 1994 2010
DuPont, Washington
2700 Center Drive Industrial - 34,413 37,943 520 34,582 38,294 72,876 16,473 2013 2013
2800 Center Drive Industrial - 21,025 48,060 1,794 21,025 49,854 70,879 2,420 2020 2020
2900 Center Drive Industrial - 34,692 71,066 34 34,692 71,100 105,792 3,872 2020 2020
2980 Center Drive Industrial - 15,956 17,527 (63) 15,956 17,464 33,420 861 1996 2020
Center Drive trailer lot Grounds - 3,252 - 1 3,253 - 3,253 80 n/a 2020
Durham, North Carolina
Centerpoint Raleigh 1805 Industrial - 3,574 10,339 5,260 3,574 15,599 19,173 6,791 2000 2011
Centerpoint Raleigh 1757 Industrial - 2,607 8,722 125 2,607 8,847 11,454 2,990 2007 2011
Eagan, Minnesota
Apollo 920 Industrial - 866 3,234 2,036 895 5,241 6,136 3,178 1997 1997
Apollo 940 Industrial - 474 2,092 784 474 2,876 3,350 1,624 2000 2000
Apollo 950 Industrial - 1,432 5,988 127 1,432 6,115 7,547 3,333 2000 2000
2015 Silver Bell Road Industrial - 1,740 4,180 2,997 1,740 7,177 8,917 4,135 1999 1999
DUKE REALTY CORPORATION AND DUKE REALTY LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Duke Realty Corporation and Duke Realty Limited Partnership
Real Estate and Accumulated Depreciation
December 31, 2021
(in thousands of U.S. dollars, as applicable) Schedule III
Initial Cost Cost Capitalized
Subsequent to
Development or Acquisition Gross Book Value at 12/31/2021
Name Asset Type Encumbrances Land Buildings Land/Land Imp Bldgs/TI Total (1) Accum. Depr. (2) Year Constructed/Renovated Year Acquired
Trapp 1279 Industrial - 671 3,441 1,054 691 4,475 5,166 2,494 1996 1998
Trapp 1245 Industrial - 1,250 5,424 1,784 1,250 7,208 8,458 4,048 1998 1998
East Point, Georgia
Camp Creek 2400 Industrial - 296 627 2,267 300 2,890 3,190 1,517 1988 2001
Camp Creek 2600 Industrial - 364 824 1,702 368 2,522 2,890 1,416 1990 2001
Camp Creek 3201 Industrial - 1,937 7,426 2,901 1,937 10,327 12,264 4,610 2004 2004
Camp Creek 3900 Industrial - 287 2,919 2,191 286 5,111 5,397 2,487 2005 2005
Camp Creek 3909 Industrial - 2,403 1,309 18,177 3,583 18,306 21,889 6,660 2014 2006
Camp Creek 3000 Industrial - 1,163 1,020 1,450 1,258 2,375 3,633 1,942 2007 2007
Camp Creek 4800 Industrial - 2,476 3,906 2,380 2,740 6,022 8,762 3,944 2008 2008
Camp Creek 4100 Industrial - 3,130 9,115 553 3,327 9,471 12,798 4,292 2013 2013
Camp Creek 3700 Industrial - 1,878 3,016 100 1,883 3,111 4,994 1,526 2014 2014
Camp Creek 4909 Industrial - 7,807 14,321 3,826 7,851 18,103 25,954 6,534 2016 2016
Camp Creek 3707 Industrial - 7,282 20,538 3 7,282 20,541 27,823 7,128 2017 2017
Camp Creek 4505 Industrial - 4,505 9,697 3,708 4,505 13,405 17,910 2,991 2017 2017
Camp Creek 4900 Industrial - 3,244 7,758 778 3,244 8,536 11,780 1,359 2019 2019
Camp Creek 4850 Industrial - 5,428 7,169 197 5,428 7,366 12,794 911 2020 2020
1000 Logistics Way Industrial - 10,599 41,030 - 10,599 41,030 51,629 1,709 2021 2021
Camp Creek 6200 Industrial - 5,609 15,301 - 5,609 15,301 20,910 177 2021 2021
2000 Centre Court Industrial - 3,938 10,297 - 3,938 10,297 14,235 43 2021 2021
East Rutherford, New Jersey
66-96 East Union Avenue - 18,043 3,954 - 18,043 3,954 21,997 186 1969 2021
Easton, Pennsylvania
33 Logistics Park 1610 Industrial - 24,752 55,500 1,982 24,896 57,338 82,234 19,386 2016 2016
33 Logistics Park 1611 Industrial - 17,979 20,882 1,970 17,979 22,852 40,831 8,385 2017 2017
33 Logistics Park 1620 Industrial - 29,786 33,023 1,352 29,791 34,370 64,161 7,449 2018 2018
Elk Grove Village, Illinois
1717 Busse Road Industrial - 3,602 18,065 494 3,602 18,559 22,161 6,631 2004 2011
901 Chase Avenue Industrial - 10,405 8,961 39 10,405 9,000 19,405 1,101 2020 2020
Ellenwood, Georgia
2529 Old Anvil Block Industrial - 4,664 9,265 446 4,664 9,711 14,375 4,133 2014 2014
Fairfield, Ohio
Union Centre Industrial 6019 Industrial - 5,635 6,576 2,534 5,635 9,110 14,745 6,111 2008 2008
Union Centre Industrial 5855 Industrial - 3,009 15,387 2,063 3,009 17,450 20,459 4,745 2016 2016
Fairfield Logistics Ctr 7940 Industrial - 4,679 8,237 2,180 4,689 10,407 15,096 1,889 2018 2018
DUKE REALTY CORPORATION AND DUKE REALTY LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Duke Realty Corporation and Duke Realty Limited Partnership
Real Estate and Accumulated Depreciation
December 31, 2021
(in thousands of U.S. dollars, as applicable) Schedule III
Initial Cost Cost Capitalized
Subsequent to
Development or Acquisition Gross Book Value at 12/31/2021
Name Asset Type Encumbrances Land Buildings Land/Land Imp Bldgs/TI Total (1) Accum. Depr. (2) Year Constructed/Renovated Year Acquired
Flower Mound, Texas
Lakeside Ranch 550 Industrial - 4,619 19,299 488 4,619 19,787 24,406 6,730 2007 2011
Lakeside Ranch 1001 Industrial - 5,662 23,061 2,317 5,662 25,378 31,040 3,724 2019 2019
Lakeside Ranch 350 Industrial - 3,665 10,105 4,312 3,665 14,417 18,082 1,452 2019 2019
Fontana, California
14970 Jurupa Ave Grounds - 17,306 - - 17,306 - 17,306 1,158 n/a 2016
7953 Cherry Ave Industrial - 6,704 12,521 824 6,704 13,345 20,049 3,305 2017 2017
9988 Redwood Ave Industrial - 7,755 16,326 695 7,755 17,021 24,776 4,692 2016 2017
11250 Poplar Ave Industrial - 18,138 33,586 - 18,138 33,586 51,724 8,206 2016 2017
16171 Santa Ana Ave Industrial - 13,681 13,331 112 13,681 13,443 27,124 2,377 2018 2018
Fort Lauderdale, Florida
Interstate 95 2200 Industrial - 9,332 13,401 2,123 9,332 15,524 24,856 3,319 2017 2017
Interstate 95 2100 Industrial - 10,948 18,681 - 10,948 18,681 29,629 3,513 2017 2017
Fort Worth, Texas
Riverpark 3300 Industrial - 1,673 10,633 856 1,674 11,488 13,162 5,016 2007 2011
Franklin, Tennessee
Aspen Grove Business 277 Industrial - 936 2,919 3,954 936 6,873 7,809 3,852 1996 1999
Aspen Grove Business 320 Industrial - 1,151 5,824 1,628 1,151 7,452 8,603 4,065 1996 1999
Aspen Grove Business 305 Industrial - 970 4,677 1,300 970 5,977 6,947 3,245 1998 1999
Aspen Grove Business 400 Industrial - 492 1,677 1,218 492 2,895 3,387 1,298 2002 2002
Brentwood South Business 119 Industrial - 569 1,063 1,625 569 2,688 3,257 1,485 1990 1999
Brentwood South Business 121 Industrial - 445 1,563 614 445 2,177 2,622 1,124 1990 1999
Brentwood South Business 123 Industrial - 489 962 1,347 489 2,309 2,798 1,391 1990 1999
Franklin Park, Illinois
11501 West Irving Park Road Industrial - 3,900 2,702 1,835 3,900 4,537 8,437 2,321 2007 2007
Fremont, California
48401 Fremont Blvd - 33,621 19,407 - 33,621 19,407 53,028 708 2021 2021
Fullerton, California
500 Burning Tree Rd Industrial - 7,336 4,435 42 7,336 4,477 11,813 1,269 1991 2018
700 Burning Tree Rd Industrial - 5,001 4,915 - 5,001 4,915 9,916 869 1991 2018
Garner, North Carolina
Greenfield North 600 Industrial - 519 2,448 536 520 2,983 3,503 1,224 2006 2011
DUKE REALTY CORPORATION AND DUKE REALTY LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Duke Realty Corporation and Duke Realty Limited Partnership
Real Estate and Accumulated Depreciation
December 31, 2021
(in thousands of U.S. dollars, as applicable) Schedule III
Initial Cost Cost Capitalized
Subsequent to
Development or Acquisition Gross Book Value at 12/31/2021
Name Asset Type Encumbrances Land Buildings Land/Land Imp Bldgs/TI Total (1) Accum. Depr. (2) Year Constructed/Renovated Year Acquired
Greenfield North 700 Industrial - 407 2,054 295 408 2,348 2,756 919 2007 2011
Greenfield North 800 Industrial - 381 5,772 858 383 6,628 7,011 2,232 2004 2011
Greenfield North 900 Industrial - 367 5,792 1,764 370 7,553 7,923 2,746 2007 2011
Greenfield North 1000 Industrial - 1,897 6,026 96 1,979 6,040 8,019 2,323 2016 2016
Greenfield North 1001 Industrial - 2,517 5,494 2,523 2,610 7,924 10,534 2,462 2017 2017
N. Greenfield Pkwy Grounds - 189 222 10 189 232 421 259 n/a 2015
Greenfield North 1100 Industrial - 1,870 5,623 (1) 1,870 5,622 7,492 514 2020 2020
Greenfield North 1201 Industrial - 3,462 6,867 3,292 3,462 10,159 13,621 967 2020 2020
Greenfield North 1300 Industrial - 6,112 - - 6,112 - 6,112 217 2021 2021
Geneva, Illinois
1800 Averill Road Industrial - 3,189 11,582 7,640 4,778 17,633 22,411 6,317 2013 2011
Gibsonton, Florida
Tampa Regional Ind Park 13111 Industrial - 10,547 8,662 2,011 10,547 10,673 21,220 3,515 2017 2017
Tampa Regional Ind Park 13040 Industrial - 13,184 13,475 2,987 13,184 16,462 29,646 3,468 2018 2018
Glendale Heights, Illinois
990 North Avenue Industrial - 12,144 5,933 3,854 12,324 9,607 21,931 1,850 2018 2018
Grand Prairie, Texas
Grand Lakes 4003 Industrial - 3,206 9,124 14,038 4,361 22,007 26,368 6,487 2017 2006
Grand Lakes 3953 Industrial - 11,853 11,851 13,674 11,853 25,525 37,378 16,448 2008 2008
1803 W. Pioneer Parkway Industrial - 3,158 15,389 97 3,158 15,486 18,644 5,203 2008 2011
Grand Lakes 4053 Industrial - 2,468 6,599 1,242 2,468 7,841 10,309 1,656 2018 2018
Groveport, Ohio
Groveport Commerce Center 6200 Industrial - 1,049 5,123 2,816 1,049 7,939 8,988 4,685 1999 1999
Groveport Commerce Center 6300 Industrial - 510 2,395 2,321 510 4,716 5,226 2,507 2000 2000
Groveport Commerce Center 6295 Industrial - 435 5,435 2,160 435 7,595 8,030 3,983 2000 2000
Groveport Commerce Center 6405 Industrial - 1,207 10,322 992 1,207 11,314 12,521 4,780 2005 2005
RGLP North 2842 Industrial - 5,680 22,366 843 5,680 23,209 28,889 6,905 2008 2010
Hebron, Kentucky
Hebron 2305 Industrial - 3,789 10,797 18,591 3,789 29,388 33,177 20,695 2006 2006
Hebron 2285 Industrial - 6,790 6,730 5,138 6,813 11,845 18,658 8,333 2007 2007
Skyport 2350 Industrial - 898 5,777 1,423 1,428 6,670 8,098 2,415 1997 2010
Skyport 2250 Industrial - 1,190 8,680 1,714 1,393 10,191 11,584 3,562 1999 2010
Skyport 2245 Industrial - 1,714 8,305 1,167 1,714 9,472 11,186 3,637 2000 2010
Skyport 2265 Industrial - 1,153 6,038 846 1,153 6,884 8,037 2,783 2006 2010
Southpark 1990 Industrial - 366 7,701 2 366 7,703 8,069 1,373 2016 2016
Hialeah, Florida
Countyline Corporate Park 3740 Industrial - 18,934 11,560 45 18,934 11,605 30,539 3,331 2018 2018
DUKE REALTY CORPORATION AND DUKE REALTY LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Duke Realty Corporation and Duke Realty Limited Partnership
Real Estate and Accumulated Depreciation
December 31, 2021
(in thousands of U.S. dollars, as applicable) Schedule III
Initial Cost Cost Capitalized
Subsequent to
Development or Acquisition Gross Book Value at 12/31/2021
Name Asset Type Encumbrances Land Buildings Land/Land Imp Bldgs/TI Total (1) Accum. Depr. (2) Year Constructed/Renovated Year Acquired
Countyline Corporate Park 3780 Industrial - 21,445 22,144 166 21,445 22,310 43,755 4,379 2018 2018
Countyline Corporate Park 3760 Industrial - 32,802 52,633 153 32,802 52,786 85,588 8,949 2018 2018
Countyline Corporate Park 3840 Industrial - 15,906 14,953 266 15,906 15,219 31,125 3,202 2018 2018
Countyline Corporate Park 3850 Industrial - 18,270 17,567 179 18,270 17,746 36,016 2,549 2019 2019
Countyline Corporate Park 3870 Industrial - 17,605 17,068 91 17,605 17,159 34,764 2,408 2019 2019
Hialeah Gardens, Florida
Miami Ind Logistics Ctr 15002 Industrial - 10,671 14,071 1,828 10,671 15,899 26,570 4,130 2017 2017
Miami Ind Logistics Ctr 14802 Industrial - 10,800 14,236 3,635 10,800 17,871 28,671 4,574 2017 2017
Miami Ind Logistics Ctr 10701 Industrial - 13,048 17,204 2,366 13,048 19,570 32,618 5,432 2017 2017
Hopkins, Minnesota
Cornerstone 401 Industrial - 1,454 7,623 2,462 1,454 10,085 11,539 6,062 1996 1997
Houston, Texas
Point North 8210 Industrial - 3,125 2,178 2,293 3,125 4,471 7,596 3,373 2008 2008
Point North 8120 Industrial - 4,210 2,108 4,616 4,581 6,353 10,934 3,266 2013 2013
Point North 8111 Industrial - 3,957 15,093 642 3,957 15,735 19,692 5,631 2014 2014
Point North 8411 Industrial - 5,333 6,946 1,271 5,333 8,217 13,550 3,246 2015 2015
Westland 8323 Industrial - 4,183 2,574 3,675 4,417 6,015 10,432 4,591 2008 2008
Westland 13788 Industrial - 3,246 8,338 989 3,246 9,327 12,573 5,314 2011 2011
Gateway Northwest 20710 Industrial - 7,204 8,028 4,167 7,204 12,195 19,399 5,217 2014 2014
Gateway Northwest 20702 Industrial - 2,981 3,122 1,173 2,981 4,295 7,276 1,896 2014 2014
Gateway Northwest 20502 Industrial - 2,987 5,342 21 2,987 5,363 8,350 2,206 2016 2016
22008 N Berwick Drive Industrial - 2,981 4,949 905 2,981 5,854 8,835 1,611 2002 2015
Gateway Northwest 20510 Industrial - 6,787 11,501 792 6,787 12,293 19,080 3,098 2018 2018
Point North 8221 Industrial - 6,503 10,357 1,441 6,503 11,798 18,301 2,117 2019 2019
Huntley, Illinois
14100 Weber Drive Industrial - 7,539 34,069 78 7,539 34,147 41,686 8,068 2015 2015
Hutchins, Texas
801 Wintergreen Road Industrial - 2,288 9,115 1,482 2,288 10,597 12,885 3,926 2006 2006
Prime Pointe 1005 Industrial - 5,865 19,420 59 5,865 19,479 25,344 5,340 2016 2016
Prime Pointe 1015 Industrial - 8,356 16,319 2,257 8,170 18,762 26,932 3,704 2018 2018
Indianapolis, Indiana
Park 100 5550 Industrial - 1,171 12,611 678 1,424 13,036 14,460 8,704 1997 1995
Park 100 Bldg 121 Land Lease Grounds - 3 - - 3 - 3 - n/a 2003
West 79th St. Parking Lot LL Grounds - 164 - - 164 - 164 - n/a 2006
North Airport Park 7750 Industrial - 1,620 4,279 810 1,620 5,089 6,709 2,168 1997 2010
Park 100 5010 Industrial - 621 1,687 568 621 2,255 2,876 1,144 1984 2010
Park 100 5134 Industrial - 578 1,904 299 578 2,203 2,781 867 1984 2010
DUKE REALTY CORPORATION AND DUKE REALTY LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Duke Realty Corporation and Duke Realty Limited Partnership
Real Estate and Accumulated Depreciation
December 31, 2021
(in thousands of U.S. dollars, as applicable) Schedule III
Initial Cost Cost Capitalized
Subsequent to
Development or Acquisition Gross Book Value at 12/31/2021
Name Asset Type Encumbrances Land Buildings Land/Land Imp Bldgs/TI Total (1) Accum. Depr. (2) Year Constructed/Renovated Year Acquired
Park 100 5302 Industrial - 384 998 325 384 1,323 1,707 604 1989 2010
Park 100 5303 Industrial - 384 1,515 348 384 1,863 2,247 772 1989 2010
Park 100 7225 Industrial - 1,037 13,332 998 1,037 14,330 15,367 5,667 1996 2010
Park 100 4925 Industrial - 1,152 8,569 2,319 1,152 10,888 12,040 4,471 2000 2010
8711 North River Crossing Blvd HQ/Core Portfolio 17,387 1,211 24,259 70 1,211 24,329 25,540 2,108 2020 2020
Katy, Texas
3900 Peek Road Industrial - 8,584 14,385 4,645 8,584 19,030 27,614 1,351 2020 2020
Kent, Washington
21214 66th Ave South Industrial - 3,813 9,767 - 3,813 9,767 13,580 662 2016 2020
Kutztown, Pennsylvania
West Hills 9645 Industrial - 15,340 47,981 623 15,340 48,604 63,944 16,192 2014 2014
West Hills 9677 Industrial - 5,218 13,029 68 5,218 13,097 18,315 4,482 2015 2015
La Mirada, California
16501 Trojan Way Industrial - 23,503 30,945 225 23,503 31,170 54,673 11,572 2002 2012
16301 Trojan Way Industrial - 39,645 22,164 45 39,645 22,209 61,854 3,615 2018 2018
Lancaster, Texas
Lancaster 2820 Industrial - 9,786 22,270 8 9,786 22,278 32,064 4,953 2018 2018
LaPorte, Texas
Bayport Container Lot Grounds - 3,334 - 1,041 4,375 - 4,375 - n/a 2010
Lathrop, California
16825 Murphy Parkway Industrial - 10,121 20,959 - 10,121 20,959 31,080 - 2021 2021
Lawrenceville, Georgia
175 Alcovy Industrial Road Industrial - 1,480 2,935 45 1,487 2,973 4,460 1,268 2004 2004
Lebanon, Indiana
Lebanon Park 185 Industrial - 177 8,664 1,554 177 10,218 10,395 6,116 2000 1997
Lebanon Park 322 Industrial - 340 6,230 1,479 340 7,709 8,049 4,360 1999 1999
Lebanon Park 500 Industrial - 816 10,741 2,471 815 13,213 14,028 5,821 2005 2005
Lebanon Park 210 Industrial - 156 3,427 109 156 3,536 3,692 1,379 1996 2010
Lebanon Park 311 Industrial - 349 7,604 767 350 8,370 8,720 3,380 1998 2010
Lebanon, Tennessee
Park 840 West 14840 Industrial - 2,367 8,449 4,907 2,367 13,356 15,723 4,897 2006 2006
Park 840 East 1009 Industrial - 7,731 12,462 1,782 7,852 14,123 21,975 7,216 2013 2013
Linden, New Jersey
Legacy Commerce Center 801 Industrial - 22,134 23,645 2,198 22,134 25,843 47,977 6,905 2014 2014
DUKE REALTY CORPORATION AND DUKE REALTY LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Duke Realty Corporation and Duke Realty Limited Partnership
Real Estate and Accumulated Depreciation
December 31, 2021
(in thousands of U.S. dollars, as applicable) Schedule III
Initial Cost Cost Capitalized
Subsequent to
Development or Acquisition Gross Book Value at 12/31/2021
Name Asset Type Encumbrances Land Buildings Land/Land Imp Bldgs/TI Total (1) Accum. Depr. (2) Year Constructed/Renovated Year Acquired
Legacy Commerce Center 301 Industrial - 6,933 8,575 335 6,933 8,910 15,843 2,845 2015 2015
Legacy Commerce Center 901 Industrial - 25,935 19,806 2,311 25,937 22,115 48,052 6,802 2016 2016
Lithia Springs, Georgia
2601 Skyview Drive Industrial - 4,282 9,534 58 4,282 9,592 13,874 2,816 2016 2017
Lockport, Illinois
Lockport 16328 Industrial - 3,339 17,446 460 3,339 17,906 21,245 3,659 2016 2017
Lockport 16410 Industrial - 2,677 16,117 285 2,677 16,402 19,079 3,249 2016 2017
Lockport 16508 Industrial - 4,520 17,472 2,616 4,520 20,088 24,608 4,362 2017 2017
Lockbourne, Ohio
Creekside 2120 Industrial - 2,868 15,406 1,031 2,868 16,437 19,305 6,312 2008 2012
Creekside 4555 Industrial - 1,947 11,453 294 1,947 11,747 13,694 4,339 2005 2012
Lodi, New Jersey
65 Industrial Road Industrial - 20,063 899 40 20,063 939 21,002 106 1965 2020
Logan Township, New Jersey
1130 Commerce Boulevard Industrial - 3,770 18,699 1,158 3,770 19,857 23,627 6,240 2002 2013
Long Beach, California
3700 Cover Street Industrial - 7,280 6,954 - 7,280 6,954 14,234 3,464 2012 2013
189 W Victoria St Industrial - 16,905 2,373 - 16,905 2,373 19,278 - 1979 2021
Los Angeles, California
13344 S Main Street Industrial - 39,678 23,978 - 39,678 23,978 63,656 403 2021 2021
Lynwood, California
2700 East Imperial Highway Industrial - 15,230 17,865 56 15,230 17,921 33,151 6,338 1999 2011
11600 Alameda Street Industrial - 10,705 10,979 1,949 10,958 12,675 23,633 2,503 2017 2017
Manteca, California
600 Spreckels Avenue Industrial - 4,851 18,985 416 4,851 19,401 24,252 7,117 1999 2012
Maple Grove, Minnesota
Arbor Lakes 10500 Industrial - 4,803 9,891 4,090 4,912 13,872 18,784 1,975 2018 2018
Arbor Lakes 10501 Industrial - 5,363 17,713 85 5,363 17,798 23,161 2,727 2019 2019
Park 81 10750 Industrial - 3,971 9,262 1 3,971 9,263 13,234 1,143 2019 2019
McDonough, Georgia
Liberty Distribution 120 Industrial - 615 8,117 733 615 8,850 9,465 4,925 1997 1999
Liberty Distribution 250 Industrial - 2,273 10,910 7,946 3,416 17,713 21,129 8,521 2001 2001
DUKE REALTY CORPORATION AND DUKE REALTY LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Duke Realty Corporation and Duke Realty Limited Partnership
Real Estate and Accumulated Depreciation
December 31, 2021
(in thousands of U.S. dollars, as applicable) Schedule III
Initial Cost Cost Capitalized
Subsequent to
Development or Acquisition Gross Book Value at 12/31/2021
Name Asset Type Encumbrances Land Buildings Land/Land Imp Bldgs/TI Total (1) Accum. Depr. (2) Year Constructed/Renovated Year Acquired
Mechanicsburg, Pennsylvania
500 Independence Avenue Industrial - 4,494 15,007 883 4,499 15,885 20,384 5,099 2008 2013
Medley, Florida
Miami 27 Business Park 10300 Industrial - 34,758 16,913 - 34,758 16,913 51,671 298 2021 2021
Miami 27 Business Park 10310 Industrial - 15,275 11,412 - 15,275 11,412 26,687 255 2021 2021
Melrose Park, Illinois
1600 North 25th Avenue Industrial - 5,907 17,516 299 5,907 17,815 23,722 7,744 2000 2010
Miami, Florida
9601 NW 112 Avenue Industrial - 11,626 14,651 8 11,626 14,659 26,285 5,599 2003 2013
Minooka, Illinois
Midpoint Distribution 801 Industrial - 6,282 30,802 627 6,282 31,429 37,711 9,838 2008 2013
Modesto, California
1000 Oates Court Industrial - 10,115 16,944 428 10,115 17,372 27,487 8,440 2002 2012
Monroe Twp., New Jersey
773 Cranbury South River Road Industrial - 3,001 36,527 199 3,001 36,726 39,727 7,609 2016 2017
Moreno Valley, California
17791 Perris Boulevard Industrial - 67,806 74,531 38 67,806 74,569 142,375 14,331 2018 2017
15810 Heacock Street Industrial - 9,727 18,882 2,770 9,727 21,652 31,379 3,389 2017 2017
24975 Nandina Ave Industrial - 13,322 17,214 214 13,322 17,428 30,750 2,172 2019 2019
24960 San Michele Industrial - 8,336 13,699 - 8,336 13,699 22,035 2,430 2019 2019
Morgans Point, Texas
Barbours Cut 1200 Industrial - 889 7,140 90 889 7,230 8,119 2,661 2004 2010
Barbours Cut 1000 Industrial - 868 7,311 168 868 7,479 8,347 2,756 2005 2010
Morrisville, North Carolina
Perimeter Park 3000 Industrial - 482 1,982 1,688 491 3,661 4,152 2,018 1989 1999
Perimeter Park 2900 Industrial - 235 1,314 1,644 241 2,952 3,193 1,662 1990 1999
Perimeter Park 2800 Industrial - 777 4,151 1,511 791 5,648 6,439 3,039 1992 1999
Perimeter Park 2700 Industrial - 662 1,081 2,270 662 3,351 4,013 1,761 2001 2001
Woodlake 100 Industrial - 633 3,183 2,080 1,132 4,764 5,896 2,824 1994 1999
Woodlake 101 Industrial - 615 3,868 530 615 4,398 5,013 2,411 1997 1999
Woodlake 200 Industrial - 357 3,688 932 357 4,620 4,977 2,539 1999 1999
Woodlake 501 Industrial - 640 5,477 1,032 640 6,509 7,149 3,283 1999 1999
Woodlake 400 Industrial - 390 1,055 443 390 1,498 1,888 685 2004 2004
DUKE REALTY CORPORATION AND DUKE REALTY LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Duke Realty Corporation and Duke Realty Limited Partnership
Real Estate and Accumulated Depreciation
December 31, 2021
(in thousands of U.S. dollars, as applicable) Schedule III
Initial Cost Cost Capitalized
Subsequent to
Development or Acquisition Gross Book Value at 12/31/2021
Name Asset Type Encumbrances Land Buildings Land/Land Imp Bldgs/TI Total (1) Accum. Depr. (2) Year Constructed/Renovated Year Acquired
Myerstown, Pennsylvania
Central Logistics Park 100 Industrial - 16,936 29,564 83 16,936 29,647 46,583 2,742 2020 2020
Central Logistics Park 60 Industrial - 16,058 26,546 - 16,058 26,546 42,604 807 2021 2021
Naperville, Illinois
1835 W. Jefferson Industrial - 2,209 7,921 1,651 2,213 9,568 11,781 4,182 2005 2003
175 Ambassador Drive Industrial - 3,822 11,252 11 3,822 11,263 15,085 4,540 2006 2010
1860 West Jefferson Industrial - 7,016 35,581 1,113 7,016 36,694 43,710 16,272 2000 2012
Nashville, Tennessee
Airpark East 800 Industrial - 1,564 2,129 1,985 1,564 4,114 5,678 1,814 2002 2002
Nashville Business 3300 Industrial - 936 4,773 1,914 936 6,687 7,623 3,822 1997 1999
Nashville Business 3438 Industrial - 3,048 8,165 2,221 3,048 10,386 13,434 4,758 2005 2005
Four-Forty Business 700 Industrial - 938 6,354 706 938 7,060 7,998 4,036 1997 1999
Four-Forty Business 684 Industrial - 1,812 6,561 2,207 1,812 8,768 10,580 4,923 1998 1999
Four-Forty Business 782 Industrial - 1,522 4,820 1,796 1,522 6,616 8,138 3,705 1997 1999
Four-Forty Business 784 Industrial - 471 2,153 1,698 471 3,851 4,322 2,404 1999 1999
Four-Forty Business 701 Industrial - 997 4,763 107 997 4,870 5,867 1,838 1996 2010
Newark, New Jersey
429 Delancy Street Industrial - 60,393 85,359 959 60,486 86,225 146,711 8,090 2019 2019
740-768 Doremus Avenue Grounds - 106,552 - - 106,552 - 106,552 - n/a 2021
Northlake, Illinois
Northlake Distribution 635 Industrial - 5,721 9,008 1,574 5,721 10,582 16,303 4,991 2002 2002
Northlake Distribution 599 Industrial - 2,823 5,685 3,400 2,823 9,085 11,908 2,988 2014 2006
200 Champion Way Industrial - 3,554 11,528 832 3,554 12,360 15,914 4,576 1997 2011
Oakland, California
1905 Dennison Street Industrial 15,063 12,118 20,518 2 12,118 20,520 32,638 1,131 1956 2020
955 Kennedy Street Industrial 9,519 13,053 9,764 - 13,053 9,764 22,817 736 1966 2020
Ontario, California
1656 Bon View Industrial - 9,551 250 - 9,551 250 9,801 23 1991 2021
2151 S Vintage Ave Industrial - 105,589 82,630 - 105,589 82,630 188,219 1,828 1991 2021
Orange, California
210 W Baywood Ave Industrial - 5,066 4,515 1,816 5,066 6,331 11,397 1,049 1989 2018
Orlando, Florida
2502 Lake Orange Industrial - 2,331 3,235 319 2,331 3,554 5,885 1,698 2003 2003
DUKE REALTY CORPORATION AND DUKE REALTY LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Duke Realty Corporation and Duke Realty Limited Partnership
Real Estate and Accumulated Depreciation
December 31, 2021
(in thousands of U.S. dollars, as applicable) Schedule III
Initial Cost Cost Capitalized
Subsequent to
Development or Acquisition Gross Book Value at 12/31/2021
Name Asset Type Encumbrances Land Buildings Land/Land Imp Bldgs/TI Total (1) Accum. Depr. (2) Year Constructed/Renovated Year Acquired
Parksouth Distribution 2500 Industrial - 565 4,360 1,714 570 6,069 6,639 3,287 1996 1999
Parksouth Distribution 2490 Industrial - 493 4,170 654 498 4,819 5,317 2,764 1997 1999
Parksouth Distribution 2491 Industrial - 593 3,150 1,963 597 5,109 5,706 2,719 1998 1999
Parksouth Distribution 9600 Industrial - 649 4,111 1,128 653 5,235 5,888 3,091 1997 1999
Parksouth Distribution 9550 Industrial - 1,030 4,207 3,521 1,035 7,723 8,758 3,813 1999 1999
Parksouth Distribution 2481 Industrial - 725 2,245 1,567 730 3,807 4,537 2,142 2000 2000
Parksouth Distribution 9592 Industrial - 623 1,646 99 623 1,745 2,368 845 2003 2003
Crossroads Business Park 301 Industrial - 1,653 2,804 4,070 1,653 6,874 8,527 2,891 2006 2006
Crossroads Business Park 601 Industrial - 2,701 3,571 2,059 2,701 5,630 8,331 3,244 2007 2007
7133 Municipal Drive Industrial - 5,817 6,820 29 5,817 6,849 12,666 1,296 2018 2018
Otsego, Minnesota
Gateway North 6301 Industrial - 1,543 6,515 6,009 2,783 11,284 14,067 2,828 2017 2015
Gateway North 6651 Industrial - 3,667 16,249 129 3,748 16,297 20,045 4,548 2015 2015
Gateway North 6701 Industrial - 3,266 10,996 237 3,374 11,125 14,499 3,219 2014 2014
Gateway North 6651 Grounds - 1,521 - - 1,521 - 1,521 536 n/a 2016
Pasadena, Texas
Interport 13001 Industrial - 5,715 30,961 781 5,655 31,802 37,457 10,451 2007 2013
Bayport 4035 Industrial - 3,772 10,255 188 3,772 10,443 14,215 2,264 2008 2017
Bayport 4331 Industrial - 7,638 30,213 125 7,638 30,338 37,976 6,970 2008 2017
Perris, California
3500 Indian Avenue Industrial - 16,210 27,759 8,884 18,716 34,137 52,853 12,137 2015 2015
3300 Indian Avenue Industrial - 39,012 43,280 1,870 38,989 45,173 84,162 16,181 2017 2017
4323 Indian Ave Industrial - 20,525 30,125 470 20,525 30,595 51,120 4,644 2019 2019
4375 N Perris Blvd Industrial - 26,830 69,527 57 26,830 69,584 96,414 6,415 2020 2020
4501 Patterson Avenue Industrial - 28,211 49,869 2,621 28,211 52,490 80,701 5,042 2020 2020
728 W. Rider Street Industrial - 69,056 62,459 - 69,056 62,459 131,515 616 2021 2021
Piscataway, New Jersey
141 Circle Drive North Grounds - 5,237 - 29 5,266 - 5,266 - n/a 2020
150 Old New Brunswick Road Industrial - 52,134 45,883 - 52,134 45,883 98,017 1,090 2021 2021
600 Ridge Road Industrial - 102,080 63,847 - 102,080 63,847 165,927 114 2019 2021
Plymouth, Minnesota
Waterford Innovation Center Industrial - 2,689 9,897 113 2,689 10,010 12,699 2,221 2017 2017
Pomona, California
1589 E 9th St. Industrial - 7,386 14,745 652 7,386 15,397 22,783 3,552 2016 2017
DUKE REALTY CORPORATION AND DUKE REALTY LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Duke Realty Corporation and Duke Realty Limited Partnership
Real Estate and Accumulated Depreciation
December 31, 2021
(in thousands of U.S. dollars, as applicable) Schedule III
Initial Cost Cost Capitalized
Subsequent to
Development or Acquisition Gross Book Value at 12/31/2021
Name Asset Type Encumbrances Land Buildings Land/Land Imp Bldgs/TI Total (1) Accum. Depr. (2) Year Constructed/Renovated Year Acquired
468 S Humane Way Industrial - 11,959 13,044 - 11,959 13,044 25,003 125 2017 2021
1941 Mission Blvd Industrial - 7,405 8,249 - 7,405 8,249 15,654 - 2017 2021
1943 Mission Blvd Industrial - 8,364 10,203 - 8,364 10,203 18,567 - 2017 2021
Perth Amboy, New Jersey
ePort 960 Industrial - 14,425 23,463 2,014 14,425 25,477 39,902 4,674 2017 2017
ePort 980 Industrial - 43,778 87,019 273 43,778 87,292 131,070 15,950 2017 2017
ePort 1000 Industrial - 19,726 41,229 1,040 19,726 42,269 61,995 7,244 2017 2017
Steel Run Logistics Ctr Bldg 1 Industrial - 31,987 23,948 388 32,318 24,005 56,323 2,277 2020 2020
Steel Run Logistics Ctr Bldg 2 Industrial - 73,056 68,473 4,145 73,974 71,700 145,674 4,412 2020 2020
Plainfield, Indiana
Plainfield 1551 Industrial - 1,097 7,772 10,831 1,097 18,603 19,700 8,380 2015 2000
Plainfield 1581 Industrial - 1,094 7,279 2,506 1,094 9,785 10,879 5,013 2000 2000
Plainfield 2209 Industrial - 2,016 8,717 2,639 2,016 11,356 13,372 5,334 2002 2002
Plainfield 1390 Industrial - 998 5,817 986 998 6,803 7,801 2,887 2004 2004
Plainfield 2425 Industrial - 1,917 10,908 1,979 1,918 12,886 14,804 5,052 2006 2006
Home Depot trailer parking lot Grounds - 310 - - 310 - 310 - 2018 2018
AllPoints Midwest Bldg. 1 Industrial - 6,692 51,152 2,056 6,692 53,208 59,900 12,143 2008 2016
AllPoints Midwest Bldg. 4 Industrial - 4,111 9,943 22 4,053 10,023 14,076 6,293 2012 2013
AllPoints Midwest Bldg. 10 Industrial - 2,867 22,335 - 2,867 22,335 25,202 1,017 2018 2021
Pompano Beach, Florida
Atlantic Business 1700 Industrial - 2,743 8,821 1,849 2,743 10,670 13,413 4,259 2000 2010
Atlantic Business 1800 Industrial - 2,308 8,381 564 2,308 8,945 11,253 3,439 2001 2010
Atlantic Business 1855 Industrial - 2,395 8,162 234 2,395 8,396 10,791 3,107 2001 2010
Atlantic Business 2022 Industrial - 1,563 5,885 41 1,563 5,926 7,489 2,190 2002 2010
Atlantic Business 1914 Industrial - 1,589 5,332 31 1,589 5,363 6,952 1,982 2002 2010
Atlantic Business 2003 Industrial - 1,716 5,918 831 1,716 6,749 8,465 2,876 2002 2010
Atlantic Business 1901 Industrial - 1,729 6,199 381 1,729 6,580 8,309 2,397 2004 2010
Atlantic Business 2200 Industrial - 1,732 6,012 843 1,732 6,855 8,587 2,802 2004 2010
Atlantic Business 2100 Industrial - 1,723 6,130 141 1,723 6,271 7,994 2,306 2002 2010
Atlantic Business 2201 Industrial - 1,901 4,050 121 1,901 4,171 6,072 1,534 2005 2010
Atlantic Business 2101 Industrial - 1,790 6,682 122 1,791 6,803 8,594 2,479 2004 2010
Atlantic Business 2103 Industrial - 1,400 3,628 118 1,401 3,745 5,146 1,412 2005 2010
Copans Business Park 1571 Industrial - 1,482 3,646 367 1,482 4,013 5,495 1,480 1989 2010
Copans Business Park 1521 Industrial - 1,543 3,101 309 1,544 3,409 4,953 1,305 1989 2010
Park Central 3250 Industrial - 1,463 1,997 10 1,463 2,007 3,470 799 1999 2010
DUKE REALTY CORPORATION AND DUKE REALTY LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Duke Realty Corporation and Duke Realty Limited Partnership
Real Estate and Accumulated Depreciation
December 31, 2021
(in thousands of U.S. dollars, as applicable) Schedule III
Initial Cost Cost Capitalized
Subsequent to
Development or Acquisition Gross Book Value at 12/31/2021
Name Asset Type Encumbrances Land Buildings Land/Land Imp Bldgs/TI Total (1) Accum. Depr. (2) Year Constructed/Renovated Year Acquired
Park Central 3760 Industrial - 2,685 2,491 1,682 2,685 4,173 6,858 1,647 1995 2010
Pompano Commerce Center 2901 Industrial - 2,177 3,896 789 2,178 4,684 6,862 1,758 2010 2010
Pompano Commerce Center 3101 Industrial - 2,905 4,095 571 2,916 4,655 7,571 1,805 2015 2015
Pompano Commerce Center 2951 Industrial - 2,177 4,465 37 2,178 4,501 6,679 1,720 2010 2010
Pompano Commerce Center 3151 Industrial - 2,897 3,939 121 2,908 4,049 6,957 1,369 2015 2015
Sample 95 Business Park 3101 Industrial - 2,860 6,115 565 2,860 6,680 9,540 2,464 1999 2010
Sample 95 Business Park 3001 Industrial - 2,568 6,135 121 2,568 6,256 8,824 2,264 1999 2011
Sample 95 Business Park 3035 Industrial - 3,218 4,288 411 3,218 4,699 7,917 1,759 1999 2011
Sample 95 Business Park 3135 Industrial - 1,463 4,890 858 1,463 5,748 7,211 2,441 1999 2010
Copans Business Park 1551 Industrial - 1,608 3,146 667 1,609 3,812 5,421 1,636 1989 2011
Copans Business Park 1501 Industrial - 1,723 3,367 365 1,723 3,732 5,455 1,339 1989 2011
Park Central 1700 Industrial - 3,584 6,361 863 3,585 7,223 10,808 2,760 1998 2011
Park Central 2101 Industrial - 2,336 5,756 1,135 2,337 6,890 9,227 2,736 1998 2011
Park Central 3300 Industrial - 1,417 2,846 434 1,417 3,280 4,697 1,309 1996 2011
Park Central 100 Industrial - 1,300 1,992 660 1,300 2,652 3,952 1,083 1998 2011
Park Central 1300 Industrial - 2,113 3,021 2,178 2,113 5,199 7,312 2,484 1997 2011
Copans 95 1731 Industrial - 3,511 5,889 1,749 3,518 7,631 11,149 864 2019 2019
Port Wentworth, Georgia
100 Logistics Way Industrial 4,019 1,975 11,043 2,283 2,005 13,296 15,301 5,561 2006 2006
500 Expansion Boulevard Industrial 1,903 649 5,842 144 649 5,986 6,635 2,202 2006 2008
400 Expansion Boulevard Industrial - 1,636 13,186 2,798 1,636 15,984 17,620 5,223 2007 2008
605 Expansion Boulevard Industrial - 1,615 6,852 5,273 1,615 12,125 13,740 2,833 2020 2008
405 Expansion Boulevard Industrial - 535 3,192 50 535 3,242 3,777 1,088 2008 2009
600 Expansion Boulevard Industrial - 1,248 9,392 33 1,248 9,425 10,673 3,139 2008 2009
602 Expansion Boulevard Industrial - 1,840 10,981 88 1,859 11,050 12,909 3,617 2009 2009
Raleigh, North Carolina
Walnut Creek 540 Industrial - 419 1,651 1,054 419 2,705 3,124 1,287 2001 2001
Walnut Creek 4000 Industrial - 456 2,078 492 456 2,570 3,026 1,287 2001 2001
Walnut Creek 3080 Industrial - 679 2,766 1,534 679 4,300 4,979 2,055 2001 2001
Walnut Creek 3070 Industrial - 913 1,187 1,500 913 2,687 3,600 1,198 2004 2004
Walnut Creek 3071 Industrial - 1,718 2,746 618 1,718 3,364 5,082 2,321 2008 2008
Rancho Cucamonga, California
9189 Utica Ave Industrial - 5,794 12,646 265 5,794 12,911 18,705 3,278 2016 2017
10415 8th Street Industrial - 8,641 9,790 - 8,641 9,790 18,431 144 2021 2021
DUKE REALTY CORPORATION AND DUKE REALTY LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Duke Realty Corporation and Duke Realty Limited Partnership
Real Estate and Accumulated Depreciation
December 31, 2021
(in thousands of U.S. dollars, as applicable) Schedule III
Initial Cost Cost Capitalized
Subsequent to
Development or Acquisition Gross Book Value at 12/31/2021
Name Asset Type Encumbrances Land Buildings Land/Land Imp Bldgs/TI Total (1) Accum. Depr. (2) Year Constructed/Renovated Year Acquired
Rancho Dominguez, California
18700 Laurel Park Rd Industrial - 8,080 2,987 456 8,438 3,085 11,523 913 1971 2017
Redlands, California
2300 W. San Bernadino Ave Industrial - 20,031 17,968 1,911 20,031 19,879 39,910 8,710 2001 2013
9180 Alabama St. Industrial - 52,999 52,226 - 52,999 52,226 105,225 1,958 2021 2021
Richmond, California
2041 Factory Street Industrial - 8,132 22,266 - 8,132 22,266 30,398 2,723 2000 2019
Romeoville, Illinois
875 W. Crossroads Parkway Industrial - 4,113 7,274 1,685 4,113 8,959 13,072 3,665 2005 2005
Crossroads 1255 Industrial - 2,350 9,217 3,090 2,350 12,307 14,657 5,250 1999 2010
Crossroads 801 Industrial - 2,622 6,184 305 2,622 6,489 9,111 4,522 2009 2010
1341-1343 Enterprise Drive Industrial - 3,076 12,150 394 3,076 12,544 15,620 2,930 2015 2015
50-56 N. Paragon Industrial - 3,985 5,433 1,212 3,985 6,645 10,630 2,174 2017 2017
Airport Logistics Center I Industrial - 9,133 17,187 5,843 11,282 20,881 32,163 2,998 2019 2019
Roseville, Minnesota
2215 Highway 36 West Industrial - 1,132 5,931 1,283 1,132 7,214 8,346 2,852 1998 2011
2420 Long Lake Road Industrial - 939 4,135 1,078 939 5,213 6,152 1,983 2000 2011
San Leandro, California
1919 Williams Street Grounds - 27,739 2,038 493 27,739 2,531 30,270 574 n/a 2019
Santa Fe Springs, California
13215 Cambridge Street Industrial - 3,558 10,167 - 3,558 10,167 13,725 122 2021 2021
Savannah, Georgia
198 Gulfstream Industrial - 475 3,650 956 476 4,605 5,081 1,706 1997 2006
194 Gulfstream Industrial - 358 2,359 285 358 2,644 3,002 1,058 1998 2006
190 Gulfstream Industrial - 599 4,134 372 599 4,506 5,105 1,849 1999 2006
250 Grange Road Industrial - 771 7,776 51 771 7,827 8,598 3,130 2002 2006
248 Grange Road Industrial - 529 3,180 8 529 3,188 3,717 1,278 2002 2006
318 Grange Road Industrial - 759 4,131 892 759 5,023 5,782 1,900 2001 2006
246 Grange Road Industrial 2,096 972 7,486 744 972 8,230 9,202 3,123 2006 2006
163 Portside Court Industrial - 5,260 7,746 260 5,260 8,006 13,266 3,212 2004 2006
151 Portside Court Industrial - 840 7,117 1,398 790 8,565 9,355 3,298 2003 2006
175 Portside Court Industrial 4,206 3,740 13,344 1,619 4,229 14,474 18,703 5,831 2005 2006
DUKE REALTY CORPORATION AND DUKE REALTY LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Duke Realty Corporation and Duke Realty Limited Partnership
Real Estate and Accumulated Depreciation
December 31, 2021
(in thousands of U.S. dollars, as applicable) Schedule III
Initial Cost Cost Capitalized
Subsequent to
Development or Acquisition Gross Book Value at 12/31/2021
Name Asset Type Encumbrances Land Buildings Land/Land Imp Bldgs/TI Total (1) Accum. Depr. (2) Year Constructed/Renovated Year Acquired
235 Jimmy Deloach Parkway Industrial - 934 7,201 1,277 893 8,519 9,412 3,529 2001 2006
239 Jimmy Deloach Parkway Industrial - 934 6,424 732 934 7,156 8,090 2,961 2001 2006
246 Jimmy Deloach Parkway Industrial 1,274 863 4,878 33 806 4,968 5,774 1,999 2006 2006
200 Logistics Way Industrial 2,955 878 9,274 1,337 883 10,606 11,489 3,513 2006 2008
2509 Dean Forest Road Industrial - 2,080 5,987 2,477 2,602 7,942 10,544 3,236 2008 2011
276 Jimmy Deloach Parkway Industrial - 6,772 6,405 327 6,772 6,732 13,504 1,211 2019 2019
Sea Brook, Texas
Bayport Logistics 5300 Industrial - 1,578 11,361 195 1,577 11,557 13,134 4,304 2009 2010
Bayport Logistics 5801 Industrial - 5,116 7,663 251 5,116 7,914 13,030 3,021 2015 2015
Shakopee, Minnesota
3880 4th Avenue East Industrial - 1,023 6,102 36 1,049 6,112 7,161 2,083 2000 2011
Gateway South 2301 Industrial - 2,648 11,898 91 2,647 11,990 14,637 2,881 2016 2016
Gateway South 2101 Industrial - 4,273 16,252 90 4,273 16,342 20,615 3,406 2017 2017
Sharonville, Ohio
Mosteller 11400 Industrial - 408 2,705 3,773 408 6,478 6,886 3,190 1997 1997
South Brunswick, New Jersey
10 Broadway Road Industrial - 15,168 13,916 1,226 15,168 15,142 30,310 4,445 2017 2017
Stafford, Texas
10225 Mula Road Industrial - 3,502 2,656 3,845 3,502 6,501 10,003 3,987 2008 2008
Sterling, Virginia
TransDulles Centre 22601 Industrial - 1,700 5,001 602 1,700 5,603 7,303 3,022 2004 2016
TransDulles Centre 22620 Industrial - 773 1,957 16 773 1,973 2,746 1,063 1999 2016
TransDulles Centre 22626 Industrial - 1,544 3,874 321 1,544 4,195 5,739 2,198 1999 2016
TransDulles Centre 22633 Industrial - 702 1,586 34 702 1,620 2,322 861 2004 2016
TransDulles Centre 22635 Industrial - 1,753 4,182 17 1,753 4,199 5,952 2,270 1999 2016
TransDulles Centre 22645 Industrial - 1,228 3,411 379 1,228 3,790 5,018 1,985 2005 2016
TransDulles Centre 22714 Industrial - 3,973 3,535 1,251 3,973 4,786 8,759 3,045 2007 2007
TransDulles Centre 22750 Industrial - 2,068 4,970 357 2,068 5,327 7,395 2,802 2003 2016
TransDulles Centre 22815 Industrial - 7,685 5,713 414 7,685 6,127 13,812 3,634 2000 2016
TransDulles Centre 22825 Industrial - 1,758 4,951 305 1,758 5,256 7,014 2,761 1997 2016
TransDulles Centre 22879 Industrial - 2,828 8,425 399 2,828 8,824 11,652 4,648 1989 2016
TransDulles Centre 22880 Industrial - 2,311 4,922 10 2,311 4,932 7,243 2,785 1998 2016
TransDulles Centre 46213 Industrial - 5,912 3,965 462 5,912 4,427 10,339 2,105 2015 2015
Sumner, Washington
13501 38th Street East Industrial - 16,032 4,954 332 16,032 5,286 21,318 5,277 2005 2007
4800 E Valley Highway Industrial - 12,567 21,838 - 12,567 21,838 34,405 3,707 2004 2019
DUKE REALTY CORPORATION AND DUKE REALTY LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Duke Realty Corporation and Duke Realty Limited Partnership
Real Estate and Accumulated Depreciation
December 31, 2021
(in thousands of U.S. dollars, as applicable) Schedule III
Initial Cost Cost Capitalized
Subsequent to
Development or Acquisition Gross Book Value at 12/31/2021
Name Asset Type Encumbrances Land Buildings Land/Land Imp Bldgs/TI Total (1) Accum. Depr. (2) Year Constructed/Renovated Year Acquired
1510 Puyallup Street Industrial - 12,040 13,225 - 12,040 13,225 25,265 175 2021 2021
Suwanee, Georgia
Horizon Business 90 Industrial - 153 1,143 221 153 1,364 1,517 497 2002 2010
Horizon Business 225 Industrial - 388 2,048 703 389 2,750 3,139 1,289 1990 2010
Horizon Business 250 Industrial - 1,381 5,660 1,172 1,381 6,832 8,213 2,848 1997 2010
Horizon Business 70 Industrial - 813 3,397 1,015 812 4,413 5,225 1,779 1998 2010
Horizon Business 2780 Industrial - 972 5,576 2,128 972 7,704 8,676 2,718 1997 2010
Horizon Business 25 Industrial - 615 2,390 2,007 614 4,398 5,012 2,008 1999 2010
Horizon Business 2790 Industrial - 780 4,952 - 780 4,952 5,732 1,899 2006 2010
1000 Northbrook Parkway Industrial - 643 2,974 729 643 3,703 4,346 1,618 1986 2010
Tampa, Florida
Fairfield Distribution 8640 Industrial - 483 2,359 1,080 487 3,435 3,922 1,733 1998 1999
Fairfield Distribution 4720 Industrial - 530 4,624 590 534 5,210 5,744 2,854 1998 1999
Fairfield Distribution 4758 Industrial - 334 2,658 756 338 3,410 3,748 1,792 1999 1999
Fairfield Distribution 8600 Industrial - 600 1,185 2,084 604 3,265 3,869 1,921 1999 1999
Fairfield Distribution 4901 Industrial - 488 2,425 1,136 488 3,561 4,049 1,875 2000 2000
Fairfield Distribution 4727 Industrial - 555 3,348 1,785 555 5,133 5,688 2,299 2001 2001
Fairfield Distribution 4701 Industrial - 394 1,350 2,244 394 3,594 3,988 1,509 2001 2001
Fairfield Distribution 4661 Industrial - 444 1,640 879 444 2,519 2,963 1,191 2004 2004
Eagle Creek Business 8701 Industrial - 1,286 2,331 2,702 1,287 5,032 6,319 2,407 2006 2006
Eagle Creek Business 8651 Industrial - 2,354 1,661 1,660 2,354 3,321 5,675 2,975 2007 2007
Eagle Creek Business 8601 Industrial - 2,332 2,229 892 2,332 3,121 5,453 2,596 2007 2007
Pinebrooke Bus Center 10350 Industrial - 2,457 6,211 393 2,457 6,604 9,061 517 2020 2020
Teterboro, New Jersey
1 Catherine Street Industrial - 14,376 18,788 11 14,376 18,799 33,175 4,652 2016 2017
Tracy, California
1400 Pescadero Avenue Industrial - 9,633 39,644 - 9,633 39,644 49,277 15,142 2008 2013
1124 E Pescadero Ave Grounds - 24,944 - - 24,944 - 24,944 768 2021 2021
West Chester, Ohio
World Park Union Centre 9287 Industrial - 582 827 7,518 582 8,345 8,927 3,364 2006 2006
World Park Union Centre 9271 Industrial - 557 5,923 528 557 6,451 7,008 2,804 2004 2004
World Park Union Centre 9266 Industrial - 956 5,951 440 956 6,391 7,347 2,535 1999 2010
World Park Union Centre 9451 Industrial - 1,036 6,053 873 1,036 6,926 7,962 2,685 1999 2010
World Park Union Centre 5443 Industrial - 935 4,753 429 935 5,182 6,117 2,019 2005 2010
World Park Union Centre 9107 Industrial - 986 5,962 1,578 986 7,540 8,526 3,305 1999 2010
World Park Union Centre 9245 Industrial - 1,011 5,535 782 1,010 6,318 7,328 2,515 2001 2010
DUKE REALTY CORPORATION AND DUKE REALTY LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Duke Realty Corporation and Duke Realty Limited Partnership
Real Estate and Accumulated Depreciation
December 31, 2021
(in thousands of U.S. dollars, as applicable) Schedule III
Initial Cost Cost Capitalized
Subsequent to
Development or Acquisition Gross Book Value at 12/31/2021
Name Asset Type Encumbrances Land Buildings Land/Land Imp Bldgs/TI Total (1) Accum. Depr. (2) Year Constructed/Renovated Year Acquired
West Palm Beach, Florida
Park of Commerce 5655 Industrial - 1,417 1,728 310 1,417 2,038 3,455 757 2010 2010
Park of Commerce 5720 Industrial - 1,872 3,633 844 2,032 4,317 6,349 1,636 2010 2010
Airport Center 1701 Industrial - 2,112 5,844 689 2,112 6,533 8,645 2,628 2002 2010
Airport Center 1805 Industrial - 1,478 4,445 251 1,479 4,695 6,174 1,785 2002 2010
Airport Center 1865 Industrial - 1,300 4,168 773 1,300 4,941 6,241 1,843 2002 2010
Park of Commerce #4 Grounds - 5,882 - - 5,882 - 5,882 - n/a 2011
Park of Commerce #5 Grounds - 6,258 - - 6,258 - 6,258 - n/a 2011
Turnpike Crossing 1315 Industrial - 7,390 5,391 353 7,390 5,744 13,134 2,393 2016 2016
Turnpike Crossing 1333 Industrial - 6,255 4,560 975 6,255 5,535 11,790 2,439 2016 2016
Turnpike Crossing 6747 Industrial - 10,607 7,112 2,786 10,607 9,898 20,505 3,301 2017 2017
Turnpike Crossing 6729 Industrial - 8,576 7,506 723 8,576 8,229 16,805 1,902 2018 2018
Turnpike Crossing 6711 Industrial - 8,328 7,210 38 8,340 7,236 15,576 927 2019 2019
Turnpike Crossing 6717 Industrial - 7,849 9,542 1,378 7,850 10,919 18,769 947 2020 2020
Wilmer, TX
110 Sunridge Blvd Industrial - 5,692 18,751 - 5,692 18,751 24,443 407 2021 2021
Wind Gap, Pennsylvania
1380 Jacobsburg Road Industrial - 15,500 25,247 753 15,500 26,000 41,500 4,555 2017 2019
Wood-Ridge, New Jersey
5 Ethel Boulevard Industrial - 18,776 24,752 32 18,776 24,784 43,560 3,009 2019 2019
Accum. Depr. on Improvements of Undeveloped Land 561
Eliminations (20) (16) (4) (20) 9
Properties held-for-sale (67,818) (102,867) (170,685) (36,785)
59,722 3,480,500 5,473,564 660,060 3,435,591 6,007,848 9,443,439 1,684,413
(1)The tax basis (in thousands) of our real estate assets at December 31, 2021 was approximately $8,734,029 (unaudited) for federal income tax purposes.
(2)Depreciation of real estate is computed using the straight-line method not to exceed 40 years for buildings and 15 years for land improvements for properties that we develop, and not to exceed 30 years for buildings and 10 years for land improvements for properties that we acquire. Tenant improvements are depreciated over shorter periods based on lease terms (generally 3 to 10 years).
DUKE REALTY CORPORATION AND DUKE REALTY LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Real Estate Assets Accumulated Depreciation
2021 2020 2019 2021 2020 2019
Balance at beginning of year $ 8,768,432 $ 7,851,278 $ 7,248,346 $ 1,665,284 $ 1,487,593 $ 1,345,060
Acquisitions 595,719 410,003 205,390
Construction costs and tenant improvements 979,367 796,312 635,173
Depreciation expense 304,935 297,158 272,422
Cost of real estate sold or contributed (598,445) (203,502) (176,603) (118,072) (33,808) (68,861)
Write-off of fully depreciated assets (130,949) (85,659) (61,028) (130,949) (85,659) (61,028)
Balance at end of year including held-for-sale $ 9,614,124 $ 8,768,432 $ 7,851,278 $ 1,721,198 $ 1,665,284 $ 1,487,593
Properties held-for-sale (170,685) (72,754) (23,401) (36,785) (5,976) (7,132)
Balance at end of year excluding held-for-sale $ 9,443,439 $ 8,695,678 $ 7,827,877 $ 1,684,413 $ 1,659,308 $ 1,480,461
Other real estate investments 172,637 49,477 165,500
Real estate assets $ 9,616,076 $ 8,745,155 $ 7,993,377
See Accompanying Notes to Independent Auditors' Report
DUKE REALTY CORPORATION AND DUKE REALTY LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS