8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 8-K

CURRENT REPORT

PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

Date of Report (Date of earliest event reported): January 27, 2010

DUKE REALTY LIMITED PARTNERSHIP

(Exact name of registrant as specified in its charter)

Indiana	0-20625	35-1898425
(State or Other Jurisdiction of Incorporation)	(Commission File Number)	(IRS Employer Identification No.)

600 East 96th Street, Suite 100, Indianapolis, Indiana	46240
(Address of Principal Executive Offices)	(Zip Code)

Registrant’s telephone number, including area code: (317) 808-6000

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 2.02. Results of Operations and Financial Condition.

On January 27, 2010, Duke Realty Corporation (the “General Partner”), the sole general partner of Duke Realty Limited Partnership, issued a press release (the “Press Release”) announcing its results of operations and financial condition for the fourth quarter ended December 31, 2009. A copy of the press release is being furnished as Exhibit 99.1 to this Form 8-K.

On January 28, 2010, the General Partner also held a conference call to discuss the General Partner’s financial results for the fourth quarter ended December 31, 2009. Pursuant to General Instruction F to Form 8-K, a copy of the transcript from the conference call (the “Transcript”) is attached hereto as Exhibit 99.2 and is incorporated into this Item 2.02 by this reference. The Transcript has been selectively edited to facilitate the understanding of the information communicated during the conference call.

The information contained in this Item 2.02, including the related information set forth in the Press Release and the Transcript attached hereto and incorporated by reference herein, is being “furnished” and shall not be deemed “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934 or otherwise. The information in this Item 2.02 shall not be incorporated by reference into any registration statement or other document pursuant to the Securities Act of 1933, as amended, or into any filing or other document pursuant to the Securities Exchange Act of 1934, as amended, except as otherwise expressly stated in any such filing.

Item 9.01. Financial Statements and Exhibits.

(d) Exhibits

99.1	Duke Realty Corporation press release dated January 27, 2010, with respect to its financial results for the fourth quarter ended December 31, 2009.*
99.2	Duke Realty Corporation transcript from the conference call held on January 28, 2010, with respect to its financial results for the fourth quarter ended December 31, 2009.*

* The Press Release and the Transcript attached hereto as Exhibits 99.1 and 99.2, respectively, are “furnished” and not “filed,” as described in Item 2.02 of this Current Report on Form 8-K.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

		DUKE REALTY LIMITED PARTNERSHIP
		By:	Duke Realty Corporation, its sole general partner
			By:	/s/ Howard L. Feinsand
				Howard L. Feinsand
				Executive Vice President, General Counsel and Corporate Secretary
Dated:	02/01/10

EX-99.1

Exhibit 99.1

	News Release
FOR IMMEDIATE RELEASE

DUKE REALTY CORPORATION REPORTS

FOURTH QUARTER AND FULL YEAR 2009 RESULTS

Liquidity Position Enhanced

2009 FFO Delivered within Guidance

2010 FFO Guidance Issued

(INDIANAPOLIS, January 27, 2010) – Duke Realty Corporation (NYSE: DRE), a leading industrial and office property REIT, today reported results for the fourth quarter and full year 2009.

Operating Highlights

• Recurring funds from operations per diluted share which excludes certain non-recurring items (“Recurring FFO”) was $0.31 for the quarter and $1.45 for the year; in line with guidance. FFO including non-recurring items was $0.33 for the quarter and $0.06 for the year.

• Liquidity position further enhanced during the quarter:

• Unsecured revolving line of credit completed; $850 million facility renewed through February 2013 with $200 million accordion feature; no balance outstanding on the line at year end;

• Properties and land sold; $150 million in proceeds generated in the fourth quarter;

• Available cash at year end to pay all 2010 unsecured debt maturities;

• Over $1.6 billion of capital raised during the year.

• Positive momentum in operating performance:

• Overall portfolio occupancy increased to 87.8 percent;

• Tenant retention rate at nearly 80 percent;

• Positive net absorption for the quarter and over 22 million square feet of leases completed during the year;

Duke Realty Corporation Reports Fourth Quarter and Full Year Results

January 27, 2010

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• Total overhead expenses reduced over 10 percent year over year according to plan.

• 2010 Recurring FFO guidance issued: $0.95 - $1.15 per share.

“During 2009 we made significant progress on the capital side of our business, raising over $1.6 billion. In addition, during the fourth quarter we renewed our line of credit through 2013 and had no balance outstanding on the line at year end,” said Dennis D. Oklak, chairman and chief executive officer. “We also ended the year with positive leasing momentum, increasing our occupancy by 80 basis points during the fourth quarter.”

Oklak continued, “As we look forward to 2010, we expect economic conditions to remain challenging; however, we will continue to execute on our operating, capital and asset strategies.”

Financial Performance

• The following table reconciles FFO, as defined by NAREIT, to Recurring FFO as measured by the company, for both the fourth quarter and years ended 2009 and 2008.

	Three Months Ended December 31,						Twelve Months Ended December 31,
	2009			2008			2009			2008
FFO	$	0.33		$	0.70		$	0.06		$	2.51
Adjustments
Impairment charges and loss on business combinations		—			0.07			1.45			0.07
Gains on debt transactions		—			(0.01	)		(0.10	)		(0.01	)
Gains on preferred stock repurchases		—			(0.09	)		—			(0.09	)
Valuation adjustments on deferred tax assets		(0.02	)		—			0.04			—
Recurring FFO	$	0.31		$	0.67		$	1.45		$	2.48

• Recurring FFO for the fourth quarter was $0.31 compared with $0.67 for the fourth quarter of 2008. The variance is primarily attributable to an increase in our weighted average share count due to the common equity offering in April 2009, gains on the sale of land and build-for-sale properties in the fourth quarter of 2008 and gains on the repurchase of preferred stock and debt in the fourth quarter of 2008. Recurring FFO for the year was $1.45 compared with $2.48 for 2008, and this variance was also primarily attributable to the same items mentioned above causing the quarterly variance. Recurring FFO includes $2.9 million ($0.01 per share) and $9.6 million ($0.05 per share) of severance costs for the fourth quarter and year 2009, respectively.

Duke Realty Corporation Reports Fourth Quarter and Full Year Results

January 27, 2010

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• Net income per diluted share (EPS) for fourth quarter 2009 was a loss of $0.02, as compared to earnings of $0.13 for the same quarter in 2008. The variance is primarily attributable to a gain on the repurchase of preferred stock and debt recognized in the fourth quarter of 2008. EPS for the year was a loss of $1.67 compared to earnings of $0.33 for 2008. The loss was primarily driven by $302.6 million of non-cash impairment charges recognized in 2009 and the dilution from the follow on equity offering as noted above.

Financing Transactions and Liquidity

• The company successfully renewed its unsecured revolving credit facility in November 2009. Under terms of the renewal, the facility has a borrowing capacity of $850 million with an interest rate on borrowings of 275 basis points plus LIBOR, and matures in February 2013. The terms also include a $200 million accordion feature to increase the facility to $1.05 billion. There is currently no balance outstanding under the facility.

• Total capital raised in 2009 exceeded $1.6 billion from equity and unsecured debt offerings, asset sales, and secured financing transactions. As of year-end 2009, the company had approximately $1 billion of liquidity available from its available unsecured line of credit and cash on hand.

Portfolio Performance

“Despite the challenging leasing markets, 2009 ended with positive momentum in operations including filling a significant portion of our speculative industrial space with long-term leases and quality tenants,” said Mr. Oklak. “Our tenant retention for 2009 was nearly 80 percent and we extended near term expirations when appropriate. The decisions we made throughout 2009 will contribute positively for the future as we come out of the recession.”

Specific operational highlights include:

• Overall portfolio occupancy, including projects under development, was 87.8 percent as of December 31, 2009, compared to 87.0 percent at September 30, 2009.

• Tenant retention for the fourth quarter and year were 79.6 percent and 79.4 percent, respectively.

• The company executed major leases for properties during the fourth quarter, including filling speculative industrial buildings in Columbus, Chicago and Atlanta totaling 2 million square feet.

Duke Realty Corporation Reports Fourth Quarter and Full Year Results

January 27, 2010

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• Same property net operating income decreased by 5.9 percent for the fourth quarter of 2009, compared with the three-month period ended December 31, 2008. Same property net operating income decreased by approximately 2.7 percent for the 12-month period ended December 31, 2009, compared with the same period ended December 31, 2008, and was within expectations given the economic environment.

Real Estate Investment Activity

Development

Wholly Owned Properties

• The company’s wholly owned development pipeline at December 31, 2009 consists of four significantly pre-leased projects and reflects reduced development volume as well as the company’s focus on pre-leased projects. The total estimated costs of these projects upon stabilization are $122.2 million, with $30.4 million in costs remaining to be funded. The pipeline is 662,000 square feet and 97 percent pre-leased in the aggregate.

• During the fourth quarter 2009, the company placed into service five buildings and completed one expansion on an existing industrial asset. In aggregate, these assets and expansion totaled 702,000 square feet and were 83.6% pre-leased. Included in these assets were four medical office properties totaling approximately 280,000 square feet, which were 58.9% pre-leased in the aggregate, a 306,977 square foot expansion to a 100% pre-leased industrial building, and an 116,000 square foot, 100% pre-leased suburban office building.

Joint Venture Properties

• The company’s joint venture development pipeline at December 31, 2009, consists of two projects which total 497,000 square feet and are 13 percent pre-leased. The total estimated costs of these projects upon stabilization are $157.8 million, with $61.9 million in remaining costs to be funded. Each joint venture has obtained third-party debt to finance construction of these properties. (All joint venture costs and square footage are reported at 100 percent ownership.)

• The company began construction of one medical office property (62,000 square feet) that is 100% pre-leased.

Duke Realty Corporation Reports Fourth Quarter and Full Year Results

January 27, 2010

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Dispositions

Proceeds from fourth quarter non-strategic building dispositions were $144.4 million at a stabilized capitalization rate of 8.3 percent and primarily comprised of mid-west office properties. For the year ended 2009, the company received gross proceeds of $299.7 million from the sale of non-strategic properties and land parcels.

Dividends Declared

The company’s board of directors declared a quarterly cash dividend on the company’s common stock of $0.17 per share, or $0.68 per share on an annualized basis. The fourth quarter dividend will be payable February 26, 2010, to shareholders of record as of February 12, 2010.

The board also declared the following dividends on the company’s outstanding preferred stock:

Class	NYSE Symbol	Quarterly Amount/Share	Record Date	Payment Date
Series J	DREPRJ	$0.414063	February 12, 2010	February 26, 2010
Series K	DREPRK	$0.406250	February 12, 2010	February 26, 2010
Series L	DREPRL	$0.412500	February 12, 2010	February 26, 2010
Series M	DREPRM	$0.434375	March 17, 2010	March 31, 2010
Series N	DREPRN	$0.453125	March 17, 2010	March 31, 2010
Series O	DREPRO	$0.523438	March 17, 2010	March 31, 2010

Earnings Guidance and 2010 Outlook

“As we look forward to the remainder of 2010, we expect another challenging year given the state of the economy,” Oklak said. “While economic forecasts call for tepid GDP growth during 2010, unemployment remains high and is expected to worsen with nominal economic growth forecasted by the end of the year. Our earnings guidance reflects the economic environment we face as we continue to focus on improving our portfolio performance and further positioning our business for growth as the economy recovers.”

The company expects Recurring FFO for 2010 to be in the range of $0.95 to $1.15 per share. The assumptions underlying Recurring FFO guidance are as follows:

• No gains from the sale of build-for-sale properties;

Duke Realty Corporation Reports Fourth Quarter and Full Year Results

January 27, 2010

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• Relatively flat occupancy performance;

• Slightly declining same property NOI growth;

• Dilutive effect of non-strategic property dispositions;

• Flat new development volume; and

• No acquisitions

More specific assumptions and components of 2010 Recurring FFO will be available after 6:00pm EST today through the Investor Relations section of company’s web-site.

Information Regarding FFO

We compute FFO in accordance with standards established by the National Association of Real Estate Investment Trusts (“NAREIT”). NAREIT defines FFO as net income (loss) before non-controlling interest and excluding gains (losses) on sales of depreciable property and extraordinary items (computed in accordance with generally accepted accounting principles (“GAAP”)); plus real estate related depreciation and amortization, and after similar adjustments for unconsolidated joint ventures. We believe FFO to be most directly comparable to net income as defined by GAAP. We believe that FFO should be examined in conjunction with net income (as defined by GAAP) as presented in the financial statements accompanying this release. FFO does not represent a measure of liquidity, nor is it indicative of funds available for our cash needs, including our ability to make cash distributions to shareholders. A reconciliation of net income per share, as defined by GAAP, to FFO per share, as defined by NAREIT, is included in the financial information accompanying this release.

For information purposes, we also provide FFO adjusted for certain non-recurring items such as impairment charges, gains (losses) on debt transactions and gains (losses) on the repurchases of preferred stock to reflect what management defines as Recurring FFO. Although our calculation of Recurring FFO differs from NAREIT’s definition of FFO and may not be comparable to that of other REITs and real estate companies, we believe it provides a meaningful supplemental measure of our operating performance. A reconciliation of FFO as defined by NAREIT to Recurring FFO is included in the Financial Performance section of this release.

About Duke Realty Corporation

Duke Realty Corporation owns and operates more than 135 million rentable square feet of industrial and office, including medical office, space in 20 U.S. cities. Duke Realty Corporation is publicly traded on the NYSE under the symbol DRE and is listed on the S&P MidCap 400 Index. More information about Duke is available at www.dukerealty.com.

Duke Realty Corporation Reports Fourth Quarter and Full Year Results

January 27, 2010

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Fourth Quarter Earnings Call and Supplemental Information

Duke is hosting a conference call tomorrow, January 28, 2010, at 3:00 p.m. EST to discuss its fourth quarter operating results. All investors and other interested parties are invited to listen to the call. Access is available through the Investor Relations section of the company’s Web site.

A copy of the company’s supplemental information fact book will be available after 6:00 p.m. EST today through the Investor Relations section of the company’s Web site

Cautionary Notice Regarding Forward-Looking Statements

This news release may contain forward-looking statements within the meaning of the federal securities laws. All statements, other than statements of historical facts, including, among others, statements regarding the company’s future financial position, projected financing sources, future transactions with joint venture partners, future dividends, and future performance, are forward-looking statements. Those statements include statements regarding the intent, belief or current expectations of the company, members of its management team, as well as the assumptions on which such statements are based, and generally are identified by the use of words such as “may,” “will,” “seeks,” “anticipates,” “believes,” “estimates,” “expects,” “plans,” “intends,” “should,” or similar expressions. Forward-looking statements are not guarantees of future performance and involve risks and uncertainties that actual results may differ materially from those contemplated by such forward-looking statements. Many of these factors are beyond the company’s abilities to control or predict. Such factors include, but are not limited to, (i) general adverse economic and local real estate conditions, including the current economic recession; (ii) the inability of major tenants to continue paying their rent obligations due to bankruptcy, insolvency or a general downturn in their business; (iii) financing risks, such as the inability to obtain equity, debt or other sources of financing or refinancing on favorable terms, if at all; (iv) the company’s ability to raise capital by selling its assets; (v) changes in governmental laws and regulations; (vi) the level and volatility of interest rates and foreign currency exchange rates; (vii) valuation of joint venture investments, (viii) valuation of marketable securities and other investments; (ix) increases in operating costs; (x) changes in the dividend policy for the company’s common stock; (xi) the reduction in the company’s income in the event of multiple lease terminations by tenants; and (xii) impairment charges. Additional information concerning factors that could cause actual results to differ materially from those forward-looking statements is contained from time to time in the company’s filings with the Securities and Exchange Commission. The company refers you to the section entitled “Risk Factors” contained in the company’s Annual Report on Form 10-K for the year ended December 31, 2008. Copies of each filing may be obtained from the company or the Securities and Exchange Commission.

The risks included here are not exhaustive and undue reliance should not be placed on any forward-looking statements, which are based on current expectations. All written and oral forward-looking statements attributable to the company, its management, or persons acting on their behalf are qualified in their entirety by these cautionary statements. Further, forward-looking statements speak only as of the date they are made, and the company undertakes no obligation to update or revise forward-looking statements to reflect changed assumptions, the occurrence of unanticipated events or changes to future operating results over time unless otherwise required by law.

Duke Realty Corporation Reports Fourth Quarter and Full Year Results

January 27, 2010

Page 8 of 8

Contact Information:

Media:

Jim Bremner

317.808.6920

jim.bremner@dukerealty.com

Investors:

Randy Henry

317.808.6060

randy.henry@dukerealty.com

Duke Realty Corporation Statement of Operations December 31, 2009 (In thousands, except per share amounts)
	Quarter Ended December 31,						Twelve Months Ended December 31,
	2009			2008			2009			2008
Revenues:
Rental and related revenue	$	226,098		$	219,824		$	894,580		$	857,559
General contractor and service fee revenue		114,097			162,777			449,509			434,624
		340,195			382,601			1,344,089			1,292,183
Expenses:
Rental expenses		50,759			48,309			203,537			191,264
Real estate taxes		30,143			26,866			119,113			103,819
General contractor and service operations expenses		108,314			151,865			427,666			418,743
Depreciation and amortization		85,117			82,991			338,975			308,139
		274,333			310,031			1,089,291			1,021,965
Other Operating Activities
Equity in earnings of unconsolidated companies		2,543			6,633			9,896			23,817
Gain on sale of properties		12,337			12,400			12,337			39,057
Earnings from sales of land		—			4,160			357			12,651
Undeveloped land carrying costs		(2,757	)		(2,458	)		(10,403	)		(8,204	)
Impairment charges		—			(10,716	)		(301,794	)		(10,165	)
Other operating expenses		(174	)		(2,474	)		(1,017	)		(8,298	)
General and administrative expense		(13,224	)		(10,008	)		(47,937	)		(39,508	)
		(1,275	)		(2,463	)		(338,561	)		9,350
Operating income (loss)		64,587			70,107			(83,763	)		279,568
Other Income (Expense)
Interest and other income (expense), net		305			228			1,229			1,451
Interest expense		(59,160	)		(52,823	)		(220,239	)		(198,449	)
Gain (loss) on debt transactions		(180	)		1,953			20,700			1,953
Loss on business combinations		(63	)		—			(1,062	)		—
Income (loss) from continuing operations before income taxes		5,489			19,465			(283,135	)		84,523
Income tax benefit (expense)		3,128			2,090			13,348			7,005
Valuation allowance on deferred tax asset		4,995			—			(7,278	)		—
Income (loss) from continuing operations		13,612			21,555			(277,065	)		91,528
Discontinued Operations:
Income (loss) before impairment and gain on sales		(58	)		203			(439	)		3,185
Impairment charges		—			(1,266	)		(772	)		(1,266	)
Gain on sale of depreciable properties		1,618			5,021			6,786			16,961
Income (loss) from discontinued operations		1,560			3,958			5,575			18,880
Net income (loss)		15,172			25,513			(271,490	)		110,408
Dividends on preferred shares		(18,362	)		(18,388	)		(73,451	)		(71,426	)
Gain on repurchase of preferred shares, net		—			14,046			—			14,046
Net (income) loss attributable to noncontrolling interests		157			(1,043	)		11,340			(2,620	)
Net income (loss) attributable to common shareholders	($	3,033	)	$	20,128		($	333,601	)	$	50,408
Basic net income (loss) per Common Share:
Continuing operations attributable to common shareholders	($	0.02	)	$	0.10		($	1.70	)	$	0.20
Discontinued operations attributable to common shareholders	$	0.00		$	0.03		$	0.03		$	0.13
Total	($	0.02	)	$	0.13		($	1.67	)	$	0.33
Diluted net income (loss) per Common Share:
Continuing operations attributable to common shareholders	($	0.02	)	$	0.10		($	1.70	)	$	0.20
Discontinued operations attributable to common shareholders	$	0.00		$	0.03		$	0.03		$	0.13
Total	($	0.02	)	$	0.13		($	1.67	)	$	0.33

Duke Realty Corporation

Statement of Funds From Operations

December 31, 2009

(In thousands, except per share amounts)

	Three Months Ended December 31, (Unaudited)
	2009							2008
	Amount			Wtd. Avg. Shares	Per Share			Amount			Wtd. Avg. Shares	Per Share
Net Income (Loss) Attributable to Common Shares	($	3,033	)					$	20,128
Less: Dividends on share based awards expected to vest		(391	)						(415	)
Net Income (Loss) Per Common Share - Basic		(3,424	)	224,012	($	0.02	)		19,713		147,615	$	0.13
Add back:
Noncontrolling interest in earnings of unitholders		—							1,025		7,299
Potentially dilutive securities
Net Income (Loss) Per Common Share - Diluted	($	3,424	)	224,012	($	0.02	)	$	20,738		154,914	$	0.13
Reconciliation to Funds From Operations (“FFO”)
Net Income (Loss) Attributable to Common Shares	($	3,033	)	224,012				$	20,128		147,615
Adjustments:
Depreciation and amortization		85,453							83,996
Company share of joint venture depreciation and amortization		8,953							9,552
Earnings from depreciable property sales-wholly owned		(13,955	)						(5,021	)
Earnings from depreciable property sales-JV		—							—
Noncontrolling interest share of adjustments		(2,308	)						(4,176	)
Funds From Operations - Basic		75,110		224,012	$	0.34			104,479		147,615	$	0.71
Noncontrolling interest in earnings (loss) of unitholders		(89	)	6,617					1,025		7,299
Joint venture partner convertible ownership option		—							1,708		4,284
Noncontrolling interest share of adjustments		2,308							4,176
Potentially dilutive securities				1,352							433
Funds From Operations - Diluted		77,329		231,981	$	0.33			111,388		159,631	$	0.70
(Gains) losses on debt transactions		180							(1,953	)
Gains on preferred stock repurchases		—							(14,046	)
Impairment charges and loss on business combination		63							11,431
Change in valuation allowance on deferred tax assets		(4,995	)						—
Recurring Funds From Operations - Diluted	$	72,577		231,981	$	0.31			106,820		159,631	$	0.67
	Twelve Months Ended December 31, (Unaudited)
	2009							2008
	Amount			Wtd. Avg. Shares	Per Share			Amount			Wtd. Avg. Shares	Per Share
Net Income (Loss) Attributable to Common Shares	($	333,601	)					$	50,408
Less income allocated to participating securities		(1,759	)						(1,631	)
Net Income (Loss) Per Common Share - Basic		(335,360	)	201,206	($	1.67	)		48,777		146,915	$	0.33
Add back:
Noncontrolling interest in earnings of unitholders		—							2,640		7,619
Potentially dilutive securities											19
Net Income (Loss) Per Common Share - Diluted	($	335,360	)	201,206	($	1.67	)	$	51,417		154,553	$	0.33
Reconciliation to Funds From Operations (“FFO”)
Net Income (Loss) Attributable to Common Shares	($	333,601	)	201,206				$	50,408		146,915
Adjustments:
Depreciation and amortization		340,126							314,952
Company share of joint venture depreciation and amortization		36,966							38,321
Earnings (loss) from depreciable property sales-wholly owned		(19,123	)						(16,961	)
Earnings (loss) from depreciable property sales-JV		—							(495	)
Noncontrolling interest share of adjustments		(11,514	)						(16,527	)
Funds From Operations - Basic		12,854		201,206	$	0.06			369,698		146,915	$	2.52
Noncontrolling interest in earnings (loss) of unitholders		(11,099	)	6,687					2,640		7,619
Noncontrolling interest share of adjustments		11,514							16,527
Potentially dilutive securities				1,104							507
Funds From Operations - Diluted		13,269		208,997	$	0.06			388,865		155,041	$	2.51
(Gains) losses on debt transactions		(20,700	)						(1,953	)
Gains on preferred stock repurchases		—							(14,046	)
Impairment charges and loss on business combination		303,271							11,431
Change in valuation allowance on deferred tax assets		7,278							—
Recurring Funds From Operations - Diluted	$	303,118		208,997	$	1.45			384,297		155,041	$	2.48

Duke Realty Corporation

Balance Sheet

December 31, 2009

(In thousands, except per share amounts)

	December 31, 2009			December 31, 2008
ASSETS:
Rental Property	$	6,390,119		$	6,297,923
Less: Accumulated Depreciation		(1,311,733	)		(1,167,113	)
Construction in Progress		103,298			159,330
Land Held for Development		660,723			806,379
Net Real Estate Investments		5,842,407			6,096,519
Cash		147,322			22,532
Accounts Receivable		20,604			28,026
Straight-line Rents Receivable		131,934			123,863
Receivables on Construction Contracts		18,755			75,100
Investments in and Advances to Unconsolidated Companies		501,121			693,503
Deferred Financing Costs, Net		54,489			47,907
Deferred Leasing and Other Costs, Net		371,286			369,224
Escrow Deposits and Other Assets		216,361			234,209
Total Assets	$	7,304,279		$	7,690,883
LIABILITIES AND SHAREHOLDERS’ EQUITY:
Secured Debt	$	785,797		$	507,351
Unsecured Notes		3,052,465			3,285,980
Unsecured Line of Credit		15,770			483,659
Construction Payables and Amounts due Subcontractors		43,147			105,227
Accrued Real Estate Taxes		84,347			78,483
Accrued Interest		62,971			56,376
Accrued Expenses		48,758			45,059
Other Liabilities		198,906			187,425
Tenant Security Deposits and Prepaid Rents		44,258			41,348
Total Liabilities		4,336,419			4,790,908
Preferred Stock		1,016,625			1,016,625
Common Stock and Additional Paid-in Capital		3,269,436			2,703,997
Accumulated Other Comprehensive Income		(5,630	)		(8,652	)
Distributions in Excess of Net Income		(1,355,086	)		(867,951	)
Total Shareholders’ Equity		2,925,345			2,844,019
Non-controlling Interest		42,515			55,956
Total Liabilities and Equity	$	7,304,279		$	7,690,883

EX-99.2

Exhibit 99.2

  ^© 2010 Thomson Reuters. All rights reserved. Republication or redistribution of Thomson Reuters content, including by framing or similar means, is prohibited without the prior written consent of Thomson Reuters. ‘Thomson Reuters’ and the Thomson Reuters logo are registered trademarks of Thomson Reuters and its affiliated companies.

CORPORATE PARTICIPANTS

Randy Henry

Duke Realty Corporation — Assistant VP, IR

Dennis Oklak

Duke Realty Corporation — Chairman, CEO

Christie Kelly

Duke Realty Corporation — EVP, CFO

CONFERENCE CALL PARTICIPANTS

Ki Bin Kim

Macquarie Research Equities — Analyst

Sloan Bohlen

Goldman Sachs — Analyst

Unidentified Participant

Analyst

Michael Bilerman

Citi — Analyst

Jamie Feldman

Bank of America/ Merrill Lynch — Analyst

Brendan Maiorana

Well Fargo Securities — Analyst

Michael Mott

Green Street Advisors — Analyst

Shane Buckner

Wells Capital Management — Analyst

PRESENTATION

Operator

Ladies and gentleman, thank you for standing by and welcome to the Duke Realty quarterly earnings conference call. (Operator Instructions). As a reminder, today’s conference call is being recorded. I would now like to turn the conference over to Mr. Randy Henry. Please go ahead, sir.

Randy Henry - Duke Realty Corporation — Assistant VP, IR

Thank you, and good afternoon everyone, and welcome to our quarterly conference call. Joining me today are Dennis Oklak, Chairman and Chief Executive Officer; Christie Kelly, Executive Vice President and Chief Financial Officer; and Mark Denien, Chief Accounting Officer. Before we make our prepared remarks, let me first remind you that the statements we make today are subject to certain risks and uncertainties that could cause actual results to differ materially from expectations.

Some of those risk factors include our continued qualification as a REIT, general business. and economic conditions, competition, increases in real estate construction costs, interest rates, accessibility of the debt and equity capital markets, and also other risks inherent in the real estate business. For more information about those risk factors, we would refer you to our 10-K, that we have on file with the SEC, dated February 25th, 2009. Now for our prepared remarks, I will turn it over to Denny Oklak.

Dennis Oklak - Duke Realty Corporation — Chairman, CEO

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Thank you, Randy. Good afternoon, everyone, and welcome to Duke Realty’s fourth quarter earnings call. On today’s call, I will update our view on key factors affecting our business, as well as touch on our portfolio performance for the quarter. Christie Kelly will provide an update on our 2009 financing activities and financial performance. And then, finally, I’ll discuss our 2010 FFO guidance.

What a difference a year makes, as I think back to our call last year. A year ago, we were facing a worsening US economy, the worst we have experienced in our lifetime, and no access to capital throughout the marketplace. Although the economy and business fundamentals deteriorated even further than expected, in terms of unemployment, consumer confidence, nonresidential fixed investment and GDP, we were able to execute significant transactions throughout 2009, both in the capital markets and on the leasing front.

2009 was a year of significant challenges met by successes. We raised over $1.6 billion of additional capital and renewed our line of credit in a difficult environment. We added clarity to strategic plans and we completed over 22 million square feet of leases and closed the year with positive operating momentum. However, it is still one of the most difficult and challenging operating environments we have experienced.

Although there has been some positive signs recently that the low point may have been reached in the cycle, we are not optimistic that a rebound is around the coroner 2010. While unemployment figures continue to show a national average of around 10%, in December there are some positive indicators that we may be near the bottom of this cycle. Orders in shipments for capital goods rose in December, pointing to a pick-up in business investment. Current data suggests that as inventory levels have continued to be drawn down in the fourth quarter of 2009, inventory-to-sales ratios have come down to more normal levels. Freight and shipping volumes have increased in the second half of 2009, with truck tonnage and container shipping data showing slower rates of decline, with the expectations that the trend will continue into 2010. Consumer confidence is up modestly, this month again but still gloomy and far from indicating stability or growth in our economy. This data all points to outlook that the first part of 2010 will continue to be slow, but that the second half could start seeing some pickup in activity, which would benefit our industrial product initially, with office recovery expected to lag into 2011.

Turning to operations, we ended the — 2009 with continued success. As we mentioned in our earnings release. We executed over 22 million square feet of leases in 2009, including over 6.8 million in the fourth quarter, which was our highest quarter since the fourth quarter of 2007. We also experienced overall positive net absorption of 2.6 million square feet in 2009. Occupancy in our stabilized bulk distribution portfolio was 88.9% at December 31, up about 75 basis points from the third quarter.

We had some significant deals during the quarter, including the following. In Columbus, we signed a 10-year lease with Kraft Foods to fully lease a 936,000 square foot speculative bulk industrial building. In Atlanta, we leased a previously vacant 550,000 square foot bulk building to two tenants. Both signed leases over 10 years. Safelite Glass Corporation took about 65% of the space. In Chicago, we signed a 503,000 square foot lease to fully occupy a speculative industrial building in our Dugan joint venture, which was just placed in the service in the second quarter of 2009. The lease was with RTC Industries, which manufactures and distributes sales displays internationally, and the lease is for 12 years.

On the renewal side, we executed a 437,000 square foot renewal with Philips Electronics North America at our Groveport industrial center in Columbus, Ohio. This lease extends their current lease, which expired in July of this year, out to 2013. So very good activity on the bulk industrial side.

On the office side, things continue to be slow, but we are holding our own there. The occupancy for stabilized suburban office portfolio was 85.6% at year end, down from 86.3% at September 30th. A couple key deals for the quarter included, in St. Louis, we executed an 11-year, 77,000 square foot lease with Panera Bread for their corporate headquarters. A key item to note about this deal is that we moved — they moved into a building that was fully leased by another tenant, who wished to vacate, and we received the buyout from that tenant on that portion of the space and immediately backfilled with Panera. In Raleigh, we worked with our tenant, Lenovo, to renew existing leases, totaling nearly 400,000 square feet. If you recall, we built a three-building campus for them in 2006 and 2007. The lease terms were extended by over three years, moving expirations out until 2020. And early lease terminations rights that they had were removed, in exchange for Lenovo giving back around [69,000] square feet of space. In addition, we received a buyout on the terminated space. But this transaction really shows the flexibility that we offer the tenants to assist them in their needs and still protect our interests in the long-term.

Our overall occupancy in our portfolio was 87.8% at year end, up from 87% at September 30th. At the end of 2009, our wholly owned development pipeline consisted of only four properties, comprising 660,000 square feet, which were 97% preleased with an anticipated yield of 8%. These projects require approximately $30.4 million of additional capital to deplete. Same property NOI for the year was a negative 2.7%. It was in line with our original expectations. Approximately 1.7% of this decline was driven by our blend-and-extend strategy transactions. Likewise, of the negative 5.9% for the quarter, 2.4% was attributable to the blend-and-extend transactions. And just to note, on the bulk industrial for the fourth quarter, 1.74% related to blend-extend deals. Without those we would have been at a negative 6.99%.

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Our lease renewal percentage for 2009 was an outstanding 79.6% with the small growth in net effective rents. We are very pleased with our operation team’s ability to secure renewals on tenants. The 8% decline on the bulk industrial renewals on the net effective rents in the quarter is primarily attributable to some renewals on short-term leases we did on the quarter. And we spent virtually no capital on those leases.

Moving forward, we remain focused on deleveraging our balance sheet, leasing our recently placed in-service development projects, and executing on operating asset and capital strategies, in order to drive core operating income and continue offering our customers and investors quality service in returns. I’ll now turn the call over to Christie.

Christie Kelly - Duke Realty Corporation — EVP, CFO

Thanks, Denny and good afternoon, everyone. As Denny mentioned, I would like to give an overview of our capital markets and financing activities and then provide an update on our financial performance. On the capital side of our business, 2009 was a productive year. As Denny mentioned, we’ve raised over $1.6 billion in capital and improved our liquidity position significantly. The proceeds were used to fully repay amounts outstanding on our line of credit, retire $850 million of unsecured debt that was scheduled to mature at various periods through 2011, and fund our new development. We were also successful in renewing our line of credit during November, as planned. Under the terms of the renewal, the facility had the borrowing capacity of $850 million, with an interest rate on borrowings of 275 basis points plus LIBOR, and matures in February 2013. I’m also pleased to report that there is currently no balance outstanding under the facility. We have over $1 billion of liquidity available from our line of credit and cash on hand.

For fourth quarter and year-end 2009, recurring FFO was $0.31 and $1.45 respectively, which excludes the effects of certain nonrecurring adjustments and in line with our guidance. We are pleased with the results in light of the difficult operating environment we faced in 2009. The decrease in recurring FFO from 2008 to 2009 is primarily the result of the common equity offering we did in April, the exit from the merchant building business in accordance with operating strategy, and our nonstrategic disposition strategy.

A few comments about the fourth quarter and 2009 results. First we recognized $8 million of lease termination fees during the fourth quarter, most of which were associated with the transactions in Raleigh and St. Louis that Denny mentioned earlier. The key message here, is that we have been able to negotiate termination fees with some benefits to us in the longer term. Second, proceeds from the fourth quarter nonstrategic building dispositions were $144.4 million, at a stabilized capitalization rate of 8.3%, and primarily comprised of Midwest office properties as communicated in our strategic plan. For the year ended 2009, the Company received gross proceeds of nearly $300 million from the sale of nonstrategic properties and land portals. We also had a strong pipeline of dispositions that we’re working on going into this 2010.

G&A expenses for the quarter and year included $2.9 million and $9.6 million respectively of severance costs. These costs are included in our recurring FFO results. The completion of all of our capital-raising transactions has allowed us to improve on our key leverage metrics from 2008 and deliver — delever, excuse me, our balance sheet. Effective leverage was 56.5% at year end, compared to 59.8% at the end of 2008. We made great progress on this ratio, with the success of the common equity offering in early 2009, and the debt buy backs we executed throughout the year. I want to point out that we include both debt and preferred stock in our calculation.

Our fixed charge coverage ratio at year end was 1.8 compared to 1.9 for 2008. We anticipated this ratio to trend down slightly in 2009 as a result of asset dispositions and our decision to hold cash on our balance sheet towards the latter part of 2009. Net debt, debt less cash to recurring EBITDA, was 6.7 compared to 7.2 for 2009 and 2008 respectively. Again, we made significant progress to move this metric closer to our goal of 6 over the next few years.

Overall, 2009 was a very successful year due to the strength of our business and the results of our capital raising initiatives. With that, I’d like to turn it back over to Denny.

Dennis Oklak - Duke Realty Corporation — Chairman, CEO

Thanks, Christie. We have announced a range for 2010 recurring FFO, of $0.95 to $1.15 per share. I’d like to provide a little color and background to our 2010 outlook. Before I talk through some of the details, I want to make a few overall comments on our guidance. Our belief is that fundamentals in 2010 will be challenging in both industrial and office as a result of weaker occupancy and pressure on rental rates.

I’ll now talk through some of the key performance metrics outlined on the 2010 range of estimates page we provided on our website. Our portfolio occupancy range for 2010 is 84% to 87.5%. Our portfolio occupancy at year end 2009 was at 87.8%. We anticipate in our guidance, to lose about 100 basis points of occupancy in the first quarter of 2010 for normal expirations that we do not expect to renew. This would put our

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occupancy around 86.5% at the end of the first quarter. From then, through the rest of the year, we are assuming occupancy holds fairly steady. The bottom end of the range would result from unanticipated terminations or bankruptcies, like we experienced in early 2009.

Same property NOI growth is projected at a range of negative 1% to negative 5%. In the last two quarters of 2009, our same property declined by over 5%. This trend will begin to reverse itself, and we will see some improvement in the later part of 2010. However, on average for the year, we will still be in that negative 1% to negative 5% range.

On the capital recycling front, we project proceeds from building dispositions in the range of $150 million to $350 million, and proceeds from land dispositions of $20 million to $50 million. As Christie mentioned earlier, we have a good backlog of nonstrategic assets that are poised to sell in 2010. This is consistent with our strategy to reposition our portfolio over the next few years.

Development starts are projected in the range of $100 million to $200 million. We expect medical office starts of between $100 million and $150 million, as this product type continues to experience growth opportunities as hospital and construction projects, including medical office, are expected to increase in 2010 and 2011. This results from a number of delayed projects because of the economic environment and debate over healthcare reform. The rest of the development starts will come from build-to-suit projects.

Construction volume in the range of $600 million to $750 million. If you look at the components of the projected volume, third-party construction is a significant piece this year, due primarily to the BRAC project in Washington, DC and the Baylor Cancer Center project down in Dallas, both of which are 2011 deliveries. We have assumed no gain on the sale of development properties or land in our guidance. Also note that there were no such gains in our 2009 reported recurring FFO either. We look at the disposition of any nonstrategic asset as a capital recycling function, and believe that any gains [inaudible] our recurring operational FFO. We have assumed no income tax benefits or expense in 2010 compared to $13.3 million of tax benefits included in 2009 recurring FFO. This is a result of our decision to exit the merchant building business.

G&A expenses in the range of $39 million to $45 million is our projection for this year. I would like to again mention that the 2009 G&A of $47.9 million that we reported includes approximately $9.6 million of severance costs. We reduced our total overhead expenses by over 10% in 2009. We are pleased with all that we have accomplished in 2009. We are especially pleased that we ended the year with solid leasing momentum. We know that 2010 will be another challenging year, but we are well-positioned to meet those challenges and look for opportunities. I thank you, and just before I open it up for questions, I’d like to say go Colts. Thank you.

QUESTION AND ANSWER

Operator

(Operator Instructions). Our first question is from the line of Ki Bin Kim from Macquarie. Please go ahead.

Ki Bin Kim - Macquarie Research Equities — Analyst

All right, thank you. So if you guys could break out your same-store NOI and occupancy guidance between — can you guys break it out between industrial and office for us?

Dennis Oklak - Duke Realty Corporation — Chairman, CEO

Ki Bin, we don’t have that information available here today. We’ll look at that, and Randy and Mark will see if we have that data, and then we’ll try to give you some ranges out on the website.

Ki Bin Kim - Macquarie Research Equities — Analyst

And the second part, if I look at the low end of your guidance, especially the occupancy number of 84%, it seems like you only have 8% of your leases expiring in 2010. And in order for you to hit that mark, it seems like you have to retain 50% of leases and do zero new leasing, which seems like a unlikely scenario. And I know you made some comments about your first quarter tenant losses, but are there other big leases coming up that you are just not certain of, or what am I missing here?

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Dennis Oklak - Duke Realty Corporation — Chairman, CEO

You really have to compare that with our guidance range. Obviously, if we were to get down to the 84%, it would not be just on normal lease expirations, Ki Bin. It would be, as I mentioned in the remarks, through bankruptcies or other tenant terminations. So, we experienced a lot of those in 2009, so we are just being very cautious going in to 2010. So, in the case that those happen, I think we will be — we could end up closer to the bottom end of that range. As I mentioned, we do know of about 100 basis points of worth is going to expire in the first quarter. The midpoint of our guidance assumes we stay flat for the rest of the year. And then, the top end of our guidance would say that we start making some leasing improvements because things improved during the year. We are sitting here today not in a position to really know for sure what the leasing environment is going to be like this year. As we said, we are pleased with the nice deals we did in the fourth quarter, but we are still very, very cautious.

Ki Bin Kim - Macquarie Research Equities — Analyst

And occupants — on your basis points, is that coming from industrial or office?

Dennis Oklak - Duke Realty Corporation — Chairman, CEO

It would be coming from industrial, the pick-up side, for two reasons. The bigger spaces, so when you do lease those, it has a bigger effect on occupancy. And quite honestly, I think we do feel moderately optimistic that we will see some kind of industrial activity that year, based on what we saw in the fourth quarter. But, we are not very optimistic on the office side. I think this office recovery, because of the unemployment and where we are in the cycle, is just going to be a little bit longer. And we just can’t really see that turning around for much any time in 2010. We certainly feel pretty good about being able to reasonably hold our own on the office side this year, but don’t see a lot of pick up.

Ki Bin Kim - Macquarie Research Equities — Analyst

One very quick question, does your guidance include you guys buying back debt in 2010?

Christie Kelly - Duke Realty Corporation — EVP, CFO

Hi, Ki Bin. No, it does not.

Ki Bin Kim - Macquarie Research Equities — Analyst

Okay. Thank you.

Operator

Next, we go to the line of Sloan Bohlen with Goldman Sachs. Please go ahead.

Sloan Bohlen - Goldman Sachs — Analyst

Hello. Good afternoon, guys. Denny, maybe we could start a little bit with your comments on office and your outlook for that. And then maybe reconcile that with what you expect for potentially selling assets as you guys reposition the portfolio a little bit. I know in the release you commented a little bit about potential dilution from sales. I wonder if you can maybe offer some more detail there.

Dennis Oklak - Duke Realty Corporation — Chairman, CEO

Sure. I just think that the office business is going to be tough this year. We are now down in about the 85% range on office. Last cycle, if you look back to the last cycle, we ended up the bottom-end occupancy on the office side, around 84%, when we finally hit bottom. And my guess is,

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it could get close to that again on the office side here. And so, we are just watching that very closely. There is a few deals out there, but there is not a big backlog of deals on the office side. I think a lot of our customers are just being very caution right now.

Sloan Bohlen - Goldman Sachs — Analyst

My question was maybe a little bit more towards potentially selling assets and what the potential buyers of those assets would be looking for.

Dennis Oklak - Duke Realty Corporation — Chairman, CEO

Yes. So, on the sales side then, a lot of what we have teed up is still from our build-to-suit portfolio for projects that we started in 2008 that are being completed. For example, the GE Aviation buildings down in Cincinnati are in the build-to-suit portfolio. We do anticipate being able to close on those when they are completed this year. And that was always our intention with those buildings. We have got a few other projects that we are looking at that we have got some contracts on. We have a VA medical office building that we are planning on completing and selling this year. So, those are most — more of the type of projects we are talking about selling. And again, that’s — those type of projects made up a lot of what we sold in 2009 also. So there is not a lot of multi-tenant type of office properties that we are anticipating selling. There are still just the build-to-suit and a lot of single-tenant product.

Sloan Bohlen - Goldman Sachs — Analyst

Okay. And a question for Christie. Just given what spreads have done, and how much they’ve tightened, it seems like you guys are primarily sticking with asset sales as the source of delevering. But is there any thought about potentially going into the market for additional mortgage debt or potentially even unsecured?

Christie Kelly - Duke Realty Corporation — EVP, CFO

We have looked at that a little bit, and we are really paying a lot of attention and monitoring on a daily basis, as you can imagine. Both spreads as well as perspective on treasury rates, and we have got a view towards what our break-even rate is, to the extent that we were to take down some debt, and then go back out into the market and issue unsecured. Again it would all be in alignment with our capital strategy. The fact of the matter is, right now, the NPV on such a trade would be so negative that it’s really not worth going into the market at this point in time. But we are paying close attention to it.

Sloan Bohlen - Goldman Sachs — Analyst

Okay. One last question if I could. Denny, just on a couple of the projects in the pipeline, if we could get an update. One on the Buckhead asset, or development. And secondly, it looks like in the unstabilized portion, at least on 18, just the medical office buildings. It seems like they are about half-leased. I just wonder what the lease-up progress is there.

Dennis Oklak - Duke Realty Corporation — Chairman, CEO

First of all, on the Buckhead project, we now have executed our first lease down there. Basically, the shell is complete on the project. We are now really very focused on the leasing activity, as we have been for a while. There is a number of lease opportunities in the market today. So, there is a lot of things we are working on. Obviously, what I would say is there is two things. The concessions are obviously a little bit higher than we pro forma-ed, and the tenant improvements that we are seeing in the market are higher than we originally pro formaed on that building. We are working with our construction lender to just make sure that we can execute on the leases that make sense long-term for that building. So we are just moving ahead and working on now filling the space.

Sloan Bohlen - Goldman Sachs — Analyst

Then on the medical office building?

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Dennis Oklak - Duke Realty Corporation — Chairman, CEO

And on the medical office buildings, there is — we have got, basically just four buildings are that unstabilized in that portfolio. We are working our way through those. There is a good leasing activity. A lot of the lease up — most of the buildings start out somewhat preleased. The specs space then, can take a little bit longer to fill up because it’s smaller tenants with doctors offices. The hospitals are the larger tenants. The doctors’ offices, many times, are some smaller tenants, so it just takes a little longer. But, we have seen reasonably good activity. I will tell you that I think now it’s starting to pick up. Because I just think in the whole healthcare industry, this healthcare reform that was going on in DC was just hanging over the industry like a little bit of a cloud. Now, I think people are starting to loosen up because they certainly now do not believe that a major — that major healthcare bill that was getting close to passing is going to pass now.

Sloan Bohlen - Goldman Sachs — Analyst

Okay. Thank you, guys very much.

Operator

Next we go to the line of Michael Bilerman with Citi. Please go ahead.

Unidentified Participant Analyst

Hi it’s Josh [Atty] with Michael. Could you tell us what’s the size of the asset sale pipeline, and how close are you to closing some of those deals?

Dennis Oklak - Duke Realty Corporation — Chairman, CEO

Well again, our estimates for this year are $150 million to $350 million. I would tell you that in our pipeline today, we are towards the upper end of that range right now. And there is probably, again in today’s world, you just never know until the money is wired and you have got the fed reference number, then it’s closed. I would say that there is a reasonably good chance with the projects we have got teed up today, that we could get close to that higher end in the first six months of the year.

Unidentified Participant Analyst

Can you talk a little bit about your thoughts on using the revolver? If the pace of asset sales were slower than you expect, would you be inclined to use the revolver as — to temporarily fund some of your longer-term commitments until those sales came through?

Dennis Oklak - Duke Realty Corporation — Chairman, CEO

We really don’t have any longer-term commitments.

Unidentified Participant Analyst

The debt maturities and the development pipeline funding.

Christie Kelly - Duke Realty Corporation — EVP, CFO

We actually — we have got cash on hand today. And as it relates to the debt maturities, we have paid all remaining unsecured debt maturities through 2010, and are working on providing for 2011.

Dennis Oklak - Duke Realty Corporation — Chairman, CEO

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The cash that we have on hand will really cover all of our development expenditures. At this point in time, when we look at the plan as we presented to you all, we don’t really show tapping into that line at all this year.

Michael Bilerman - Citi — Analyst

Okay. Thank you. Then I had a question, it is Michael Bilerman speaking. As you think about the occupancy for a second, at the high end of the range, at the optimistic case, you’re effectively, just assuming that you’re doing about 11 million square feet of leasing during the year? Effectively, I guess this is average occupancy for the year, not ending occupancy, is that right?

Dennis Oklak - Duke Realty Corporation — Chairman, CEO

Yes, I think that’s about right, Michael.

Michael Bilerman - Citi — Analyst

What would be, I guess — in these ranges, what would be the ending occupancies for the year that would go around these ranges?

Dennis Oklak - Duke Realty Corporation — Chairman, CEO

Again, as we have said, it would probably be in the 86% to 87% range.

Michael Bilerman - Citi — Analyst

By the end of the year.

Dennis Oklak - Duke Realty Corporation — Chairman, CEO

Yes.

Michael Bilerman - Citi - Analyst

Even though you are coming down and then —

Dennis Oklak - Duke Realty Corporation — Chairman, CEO

Yes. What we said, Michael, is we think we are going to lose about 100 basis points in the first quarter. Then our assumptions really are that we hold flat for the rest of the year.

Michael Bilerman - Citi — Analyst

So that occupancy is being lost late in the first quarter then? If you are starting the year at 87.8%?

Dennis Oklak - Duke Realty Corporation — Chairman, CEO

Yes. It is throughout the first quarter.

Michael Bilerman - Citi — Analyst

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Right. But to get an average of 87.5& for the year, you have got to be going up above 86.5% for the back, right?

Dennis Oklak - Duke Realty Corporation — Chairman, CEO

Yes, yes. I just don’t have those numbers exactly in from of me, Michael. We do though. I know that we do drop down, and then come back up a little towards the end of the year, in what our folks are looking at on the leasing side.

Michael Bilerman - Citi — Analyst

If we put the 11 million square feet — if that’s the high end of guidance, right, putting 11 square feet of leasing in, effectively. You did 15 million in 2009; you did 13 million in 2008, two extraordinarily difficult years. So, I guess what elements would actually take you down to the low end. Assuming that you are able to do that leasing volume, even if rent spreads are getting hit. I have got to imagine even if you lose a little bit to bankruptcy, or buyouts, which I know was $1.8 million in 2009 and just under $1 million in 2008 that we should not be even seeing close to 84% occupancy. And if things actually don’t come, if you don’t have much default, and you are able to get your leasing up to 13 million to 15 million square feet, in optimistic scenario, could be a lot higher than what you are putting in.

Dennis Oklak - Duke Realty Corporation — Chairman, CEO

It could be. It could be a little higher, yes. I would tell you that, again — let me try to just explain how we are looking at that. Obviously, when we say pessimistic, we mean that that isn’t very likely. There is not a very high probability of getting all the way down there. But you are exactly right. And as I said, that would be because we have some unexpected terminations, defaults, bankruptcies, and then —

Michael Bilerman - Citi — Analyst

On top of your leasing volumes being much, much lower than they have historically been.

Dennis Oklak - Duke Realty Corporation — Chairman, CEO

Yes, we are anticipating leasing volume may be down a little bit this year, but that we can hold relatively consistently with those last couple years and maybe down a little bit. The real key is the unanticipated termination. So you’re right, Michael, that if we hold steady, we will probably be right around that, and look back and don’t have unanticipated terminations, do that same type of leasing volume. We will probably come out right around, or close to, the top end of that guidance.

Michael Bilerman - Citi — Analyst

So, I don’t want to put words in your mouth, Denny. But, I would say your pessimistic scenario is very pessimistic, and your optimistic is probably more of a realist.

Dennis Oklak - Duke Realty Corporation — Chairman, CEO

Well, I’m not going to let you put words in my mouth, Michael because I just don’t know what to expect. We saw a lot of surprising things in 2009, and what I’m just trying to lay out for you all is the range of things that could happen. If the economy holds steady here, it looks like we saw some pretty good GEP growth in the fourth quarter. If that occurs in the first and second quarters, then I think we will have the opportunity to do some leases. We will probably lose less tenants, and I think we will get there. But again, we just don’t really know what’s going to happen, and in this environment on the bottom end, I want to provide you guys with the bottom end, that even if things turn fairly bad again, we think we will be able to make it.

Michael Bilerman - Citi — Analyst

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I just want to clarify, even if you don’t do the sales, the $150 million to $300 million of asset sales, you feel comfortable that you will just leverage your line and use your existing cash, rather than come to the market with common equity?

Dennis Oklak - Duke Realty Corporation — Chairman, CEO

Let me put it this way. We wouldn’t need to come to the market for anything, really. Because we have got plenty of capacity. Again, we believe with cash and through the dispositions, as Christy said, all of our 2010 maturities are basically paid. So we don’t have any real maturities until May of 2011. So, there is no reason for us to go to the market unless — for any kind of capital, unless there is some kind of transaction we want to do or some tender offer for our debt, if it ever made sense. There is really no reason for us to come to the market.

Michael Bilerman - Citi — Analyst

Denny, when you look at the 2010 sources of funds, are you including your share of the JV maturities?

Dennis Oklak - Duke Realty Corporation — Chairman, CEO

Yes.

Christie Kelly - Duke Realty Corporation — EVP, CFO

Yes, we are.

Michael Bilerman - Citi — Analyst

So even including that, you feel like you have enough cash, if you didn’t sell any assets, you think you would have enough cash in revolver capacity to get through it?

Dennis Oklak - Duke Realty Corporation — Chairman, CEO

Yes.

Christie Kelly - Duke Realty Corporation — EVP, CFO

Yes.

Dennis Oklak - Duke Realty Corporation — Chairman, CEO

Plenty. If we didn’t sell assets, we might have to draw on the line just a little bit, but probably not even much there.

Michael Bilerman - Citi — Analyst

So most of the joint venture debt can be 100% rolled over?

Dennis Oklak - Duke Realty Corporation — Chairman, CEO

Yes. There is really only one joint venture piece that is of any significance this year. That’s our joint venture with JPMorgan. We have — we are a 50% partner in that. We have a $200 million CNBS loan coming due in October. And we haven’t concluded — we could easily refinance that., that loan was done back in 2000, at about 50% loan to value. And that’s an industrial property joint venture. So we could easily refinance that.

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Our partner hasn’t communicated to us yet exactly what they want to do with that. But even if we do need to repay our 50% of that loan this year, we still have cash to do it without even really drawing on the line . That’s it. There is no other

Michael Bilerman - Citi — Analyst

Okay, thank you.

Operator

Next we go to the line of Jamie Feldman with Bank of America.

Jamie Feldman - Bank of America/ Merrill Lynch — Analyst

Thank you. When you look at your guidance, and you have this 90% to 105% AFFO payout ratio. Can you talk a little bit about the safety of the dividend, even if you end up with the 90% range? And maybe, I don’t know if you’ve been able to model out taxable net income. Could you cut the dividend, and how should we think about that?

Dennis Oklak - Duke Realty Corporation — Chairman, CEO

Let me start, and then Christie can jump in. But, we took hard look at this. And we really feel that that dividend is very safe. We are looking at — they really additional NOI as we do lease up that portfolio going out into 2011 and 2012, which are going to easily cover that dividend. So we just felt very comfortable leaving it at the level that it is at today. And while it could be a little tight this year, going forward as the economy eventually does improve, which it will, will easily cover it.

Jamie Feldman - Bank of America/ Merrill Lynch — Analyst

What level makes you comfortable in terms of AFFO payout?

Dennis Oklak - Duke Realty Corporation — Chairman, CEO

Well, I would rather be down somewhere in the 80% to 90% level. Again, we cut the dividend a year ago, and then adjusted it when we did the offering in April, for the effect of the offering. And our intent when we did the cut last year was to take it as far as we ever thought we would need to take it. So when we are looking at this year, again we feel like we are in, not exactly where we want to be, but we are pretty close. And going forward, we don’t think it’s an issue.

Jamie Feldman - Bank of America/ Merrill Lynch — Analyst

Okay.

Christie Kelly - Duke Realty Corporation — EVP, CFO

Jamie, that covers it really. As Denny said, we have taken a very hard look at this for this year, as well as projected 2011 and 2012, and feel comfortable with supporting the current dividend level.

Jamie Feldman - Bank of America/ Merrill Lynch — Analyst

Okay. Then, can you talk a little bit more about the watch list? You said some of the downside risk is additional bankruptcies or tenant move outs. How are things in the portfolio today, in both office and warehouse?

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Dennis Oklak - Duke Realty Corporation — Chairman, CEO

Well, they did pick up. The first quarter of last year, we saw a lot of issues. The second and third quarters were a little better. We saw a few more issues in the fourth quarter this year. All of our folks out in the field really know, and we do have a list of tenants that are on the watch list. There is — I’m relatively certain we are going to get hit by one or two folks that just drop out this year because we know that there is two or three larger tenants on the industrial side, mainly, that we don’t think are going to make it through. So we could see more industrial vacancy from those tenants, and again, probably in the first three months of this year.

Jamie Feldman - Bank of America/ Merrill Lynch — Analyst

I assume that is the 100 basis points you are talking about. But beyond those, can you say comfortably that the worst is over — I know the worst is over. But you really don’t think unknown bankruptcies will be an issue in 2010?

Dennis Oklak - Duke Realty Corporation — Chairman, CEO

No. I can’t really say that, Jamie. Because we just experienced so many in 2009 that we are coming at us from different places, that I wouldn’t feel comfortable today saying we won’t have any more unknown bankruptcies. Maybe by the middle of the year as we see things, I will be comfortable saying that. But I can’t say I’m sitting here today saying that.

Jamie Feldman - Bank of America/ Merrill Lynch — Analyst

Then in terms of the strategic plan you announced last quarter, can you give us an update in terms of — have there been any changes to it operationally? It seemed like you were moving a lot of the market operations to the local markets. Like is everything going as planned, or have you had to tweak it at all?

Dennis Oklak - Duke Realty Corporation — Chairman, CEO

No everything is going just as planned. The key pieces are we completed our internal personnel restructuring, and that’s going just as anticipated. We are moving forward on the disposition strategy that we have laid out to change the mixture of our assets. And again, as we pointed out last quarter and at the meetings we had, a lot of that those dispositions are still coming from what was our held-for-sale portfolio, so those are moving. And then when you look at the focus of our development this year, as I mentioned, we think primarily that will consist of the medical office development this year. Which as you know, in the plan that we laid out, it is our goal to increase our investment in the medical office piece of the business, and we are moving ahead?

Jamie Feldman - Bank of America/ Merrill Lynch — Analyst

Okay. And then finally, can you just remind us what your fee stream is for the BRAC project and the Baylor project? And then, also what your yields are in the medical office projects you plan to start?

Dennis Oklak - Duke Realty Corporation — Chairman, CEO

Let me start with the latter. The medical office project, we are looking at in the stabilized yield of in the 9.5 range, something like that that we think is achievable in today’s market. On the BRAC and Baylor Cancer Center projects, we got, let’s see, $400 million of fees from those two, or excuse me, of construction volume of those two in 2010. And our average fee rate on that is probably right around 5%, something like that. We were right around 5% on the BRAC project, and that’s the bulk of that development — or construction volume.

Jamie Feldman - Bank of America/ Merrill Lynch — Analyst

Then does that that fall off in 2011?

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Dennis Oklak - Duke Realty Corporation — Chairman, CEO

It will fall off, but it will be pretty consistent all the way through September of 2011, at least. Because that’s when the BRAC project finishes and it’s — we — it’s going to be right up to the end.

Jamie Feldman - Bank of America/ Merrill Lynch — Analyst

Thank you.

Operator

Next, we go to the line of Brendan Maiorana with Wells Fargo. Please go ahead.

Brendan Maiorana - Well Fargo Securities — Analyst

Thanks. Good afternoon. Denny, as I look at your guidance for the year, there is obviously a decline in FFO from the same-store pool, which we hope will reverse in 2011. But there is also a significant drag on earnings from net disposition. And if I think about your deleveraging goals and getting to 45% leverage from 56% today, it would seem that you have got $1 billion or more of net dispositions that would have to occur over a several year time frame. I know a portion of that is land, which I think we talked about was around $250 million, and a portion of that will be development projects, which aren’t contributing to earnings today. But it seems like there has got to be a significant portion of the net dispositions that would be income-producing properties. Are you worried that you are going to have this continued pressure on earnings for a few years from net disposition?

Dennis Oklak - Duke Realty Corporation — Chairman, CEO

Well, I’m not overly concerned about that Brendan, because we’ve got a plan here to really reposition the portfolio. And it is going take some time on the dispositions. But I think during that time period, when we are doing the dispositions, eventually we will have some opportunities to get back and invest more of that capital in development. And then ,we haven’t really talked about acquisitions, but we certainly aren’t ruling out acquisitions to advance our strategic goals and get the right assets in the right geographic locations for a long-term plan. So I think we will be able to time the dispositions and the redeployment of the capital to minimize the dilution.

Brendan Maiorana - Well Fargo Securities — Analyst

It would seem that if you are not retaining any capital, or not much, because you’re — at least for this year, you are paying out roughly — your AFFO is roughly equivalent to your dividend. You still have got a lot of net disposition activity that has to occur — net of whatever acquisitions or development that may occur, if you want to reach your leverage goal.

Dennis Oklak - Duke Realty Corporation — Chairman, CEO

Yes. True. I think it’s pretty easy to do the math, and eventually there may be some time where we need equity or have we do acquisitions with equity or something like that. But it’s a long-term thing now because we don’t need it today. So it’s a long-term goal. We have said that this is going to take some time for us to get there. And our goal is really out in 2013 to have this there. Certainly we would love to get there more quickly, and if things go well we will get there more quickly. But I think it is a long-term thing. But, yes, if you look at the numbers, eventually we are going want to have some more equity in the business.

Christie Kelly - Duke Realty Corporation — EVP, CFO

Brendan, the only other thing I would like to add is that we can’t lose sight of the embedded NOI that is retained in our portfolio, which offers significant upside that has not been factored into, necessarily, the guidance for 2010. As we look toward to 2011 and beyond, we view that as the

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economy turns around, we will unleash that embedded NOI. As we have been able to prove time and time again, from an operating perspective which will balance out that dilutive effect. Don’t forget about that.

Brendan Maiorana - Well Fargo Securities — Analyst

That’s helpful. Christie, maybe if I could follow up on that point. If I look at your supplemental on page 19, and the projects — this is just the wholly owned stuff, but the projects, if I look at the NOI rate that you are getting on projects that have been in service greater than a year, but are less than 90% leased, you have got there about 54% leased. Is the rate of NOI that you are getting on those projects today comparable to the expected return that you would get if they were 90% or 95% leased? Meaning you are not expecting increased growth in terms of rents. If I look at your schedule on page 34, at those target returns.

Christie Kelly - Duke Realty Corporation — EVP, CFO

We do not expect and, or in the imbedded NOI that — in the numbers we quoted, Brendan, do not expect any growth in those numbers specifically. It is really at the current rental rates that we are experiencing in the portfolio. So, we haven’t been aggressive in that regard.

Brendan Maiorana - Well Fargo Securities — Analyst

Okay. And then lastly, your capitalized interest for the quarter was about $5.8 million. That seems high to me, relative to the amount of [CIP] that you have. Is there anything else that you’re capitalizing interest on?

Christie Kelly - Duke Realty Corporation — EVP, CFO

No, there isn’t, Brendan.

Brendan Maiorana - Well Fargo Securities — Analyst

If all those projects lease up and come on line, plus the projects that have been on line for less than a year, the portion that’s not leased, then we would expect to see that whole $5.8 million quarterly interest be expensed through the income statement?

Christie Kelly - Duke Realty Corporation — EVP, CFO

Yes a lot of it.

Brendan Maiorana - Well Fargo Securities — Analyst

Okay. Great, thank you.

Operator

Next we go to the line of Michael Knot with Green Street Advisors. Please go ahead.

Dennis Oklak - Duke Realty Corporation — Chairman, CEO

Michael?

Operator

Mr. Knot, your line is open. Do you have your phone on mute?

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Unidentified Participant Analyst

Can you guys hear me?

Randy Henry - Duke Realty Corporation — Assistant VP, IR

Now we can.

Unidentified Participant Analyst

Sorry about that, the speaker is not working. This is Lucas [Harwichen] by the way for Michael Knot. Denny, I was curious if you could comment on the mindset of your office tenants versus your industrial tenants.

Dennis Oklak - Duke Realty Corporation — Chairman, CEO

I think that’s a interesting question. Trying to figure out how to answer that. But I think I can give you insight. Let me start with industrial. I think what we are seeing right now is some of the larger companies that need distribution space are getting out there being pretty aggressive at taking space today. I think we experienced some of that in the fourth quarter because they are beginning to think we are at the bottom on where rates are going to go and what space is going to be.

Some of the folks were out there really trying to get their space needs taken care of, locking into long-term leases right now, on the industrial side. Which I think is very good idea on their part. I think it’s ultimately good for us because we are leasing up some of that space. What we found, as we mentioned in the prepared remarks, a lot of that space, and our occupancy pick up was in the new buildings. So we are seeing folks consolidate, and do some things, and want to take space in the new buildings at what they feel are very favorable rental rates and terms to date. So that is what we are seeing on the industrial side.

On the office side, what we are seeing is a little bit of the same. Folks are relocating from “b” and “c” space to “a” space, and getting the same kind of rents. What we are also seeing on the office side though, is looking for quality landlords. Tenants are finding now that they are in the middle of this downturn, and they want to renew their lease, or they want to do something to their space. They have got landlords out there that don’t have the money to do it and can’t really do the things they want to do. So the office tenants are really taking this opportunity to improve, not only the quality of their buildings, but the quality of their landlords, long-term because they realize there has been a number of issues out there on the landlord side during this downturn. So those — hopefully, that’s a little bit of what you are referring to. And those are probably the two highlights, I would say, on those product types of what we are seeing right now.

Unidentified Participant Analyst

That’s helpful. And Christie, I know you commented that Duke is not looking to raise unsecured debt right now. But I was just curious, if Duke were to go out and raise some unsecured bonds, what kinds of terms do you think you would get?

Christie Kelly - Duke Realty Corporation — EVP, CFO

Well we have got some very attractive terms that we have been looking at, to the point where, if we were to go out to issue today, it would be trading through our secondaries. So, we think that — versus historical averages, we would be very close to where we have executed historically. But again, it’s not attractive overall, just given where we are with our capital strategy, and also looking at the break-even NPV going forward. But it’s really a matter of where rates go.

Unidentified Participant Analyst

That’s it for me, thank you.

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Dennis Oklak - Duke Realty Corporation — Chairman, CEO

Thank you.

Operator

Our final question is from the line of Shane Buckner with Wells Capital Management. Please go ahead.

Shane Buckner - Wells Capital Management — Analyst

You mentioned earlier, possibly looking at some acquisitions. And just curious, are you seeing anything in the market now that is tempting at all?

Dennis Oklak - Duke Realty Corporation — Chairman, CEO

We haven’t seen a lot, I would say. There is a few one-off buildings that we are looking at that we think we can get for some reasonable pricing, mostly from private developers or private owners that might have some issues. Haven’t seen a lot of the big portfolios breakout yet. So we are monitoring it and looking, but we just haven’t seen a lot yet.

Shane Buckner - Wells Capital Management — Analyst

Would you primarily be looking in the industrial and healthcare areas?

Dennis Oklak - Duke Realty Corporation — Chairman, CEO

That’s correct. That’s in line with really our asset strategy.

Shane Buckner - Wells Capital Management — Analyst

Okay. Thank you.

Dennis Oklak - Duke Realty Corporation — Chairman, CEO

Thank you.

Operator

Mister Henry, I will turn the call back to you. Any further closing comments, sir?

Randy Henry - Duke Realty Corporation — Assistant VP, IR

Yes, thanks everyone for participating. Our next call will be our first quarter 2010 quarterly call, scheduled for sometime in April. That’s it. Thank you.

Operator

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