Duke Realty Corporation (
), a leading real estate investment trust (REIT), has recently got shareholder approvals to amend its Third Restated Articles of Incorporation in order to increase the number of authorized common shares from 250 million to 400 million.?
With the shareholder’s authorization, the company has ensured the availability of adequate stock for issuance in the event of equity-based financings, acquisitions and other corporate projects. We believe that the move is aimed to lift the sagging fortunes of the company amid deteriorating market fundamentals.?
Duke Realty primarily has a suburban office and industrial portfolio, which does not have the near or long-term growth prospects of some of its better positioned peers. As the economy continues to weaken and corporate layoffs accelerate, suburban office and industrial properties are the first to face problems.?
Furthermore, national office and industrial vacancies are increasing in most markets across the country. The company’s Dallas and Atlanta markets have historically been among the weakest domestic industrial and office markets in the US, where there is still too much space and rent growth is difficult. In addition, Duke Realty is exposed to some slower growth Midwestern markets, namely Cincinnati and Indianapolis, where market vacancies continue to increase.?
However, the core markets of the company performed relatively well during the first quarter of 2009. Duke Realty is also repositioning its portfolio and has exited certain markets in an attempt to concentrate in areas where it already has a strong presence. The company has temporarily closed its operations in some of its newest markets including Austin, San Antonio, Seattle, and Newport Beach.?
Duke Realty has also curtailed its development and reduced the dividend to increase its liquidity. In addition, the company has raised capital through issue of new shares and asset sales. At the current valuation, shares of Duke Realty represent value for investors with a long time horizon. We reiterate our Hold rating of the company.
