Duke Realty Corporation (NYSE:DRE) Q4 2014 Earnings Conference Call - Final Transcript

Jan 29, 2015 • 03:00 pm ET


Duke Realty Corporation (NYSE:DRE) Q4 2014 Earnings Conference Call - Final Transcript


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Ladies and gentlemen, thank you for standing by and welcome to the Duke Realty Fourth Quarter and Year End 2014 Earnings Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session, instructions will be given at that time. [Operator Instructions] As a reminder, today's conference is being recorded.

Now, I would like to turn the conference over to Mr. Ron Hubbard, VP of Investor Relations. Please go ahead.

Ron Hubbard

Thank you. Good afternoon, everyone and welcome to our Fourth Quarter Earnings Call. Joining me today are Denny Oklak, Chairman and CEO; Jim Connor, Chief Operating Officer; and Mark Denien, Chief Financial Officer and Nick Anthony, our Chief Investment Officer.

Before we make our prepared remarks, let me remind you that statements we make today are subject to certain risks and uncertainties that could cause actual results to differ materially from expectations. For more information about those risk factors, we would refer you to our December 31, 2013, 10-K that we have on file with the SEC.

Now for our prepared statement, I'll turn it over to Denny Oklak.

Denny Oklak

Thank you, Ron. Good afternoon, everyone. Let me start by saying that 2014 was another excellent year for Duke Realty. We met or exceeded all of our beginning of the year goals and capped off the year with an excellent fourth quarter. In light of the suburban office disposition we announced yesterday, today's prepared remarks will focus on the sale along with our 2015 guidance and we'll provide limited highlights to the fourth quarter and 2014.

So now on to the sale. We just agreed to sell a portfolio of suburban office properties totaling 6.9 million square feet and 57 acres of undeveloped land. An affiliate of Starwood Capital Group in a joint venture with affiliates of Vanderbilt Partners and Trinity Capital Advisors agreed to purchase the portfolio for $1.12 billion. The 62 building portfolio includes all the Company's wholly owned suburban office assets in Nashville, Raleigh, South Florida and St. Louis. One of the buildings in Raleigh is currently under construction.

The in-service portfolio is 91.6% leased and the buildings have an average age of 15.5 years. The portfolio is encumbered by only $40 million of secured debt that will be paid off at closing. Buyer will assume all the leasing and property management responsibilities upon closing. As part of the transaction, the Company will provide seller financing of $200 million in the form of a first mortgage on a portion of the underlying properties, which will bear interest at LIBOR plus 1.5% and have a maturity date of December 31, 2016. The note will be pre-payable without penalty beginning in January of 2016 and will be collateralized by properties with an approximate 75% loan to value.

Closing of the transaction is subject to certain customary conditions and is expected to occur on or about April 1st of 2015, except for the one property currently under construction which is expected to close upon completion late