UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)
ý	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

	For the quarterly period ended March 31, 2003

OR

o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

	For the transition period from to .

Commission File Number: 1-9044

DUKE REALTY CORPORATION

State of Incorporation:		IRS Employer Identification Number:
Indiana		35-1740409

600 East 96^th Street, Suite 100
Indianapolis, Indiana 46240

Telephone: (317) 808-6000
(Address, including zip code and telephone number, including area code, of principal executive offices)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes ý No o

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Securities Exchange Act).

Yes ý No o

The number of Common Shares outstanding as of May 7, 2003 was 135,338,390 ($.01 par value).

DUKE REALTY CORPORATION

INDEX

Part I - Financial Information

Item 1. Financial Statements

	Condensed Consolidated Balance Sheets as of March 31, 2003 (Unaudited) and December 31, 2002

	Condensed Consolidated Statements of Operations (Unaudited) for the three months ended March 31, 2003 and 2002

	Condensed Consolidated Statements of Cash Flows (Unaudited) for the three months ended March 31, 2003 and 2002

	Condensed Consolidated Statement of Shareholders’ Equity (Unaudited) for the three months ended March 31, 2003

	Notes to Condensed Consolidated Financial Statements (Unaudited)

	Independent Accountants’ Review Report

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Item 4. Controls and Procedures

Part II - Other Information

	Item 1.	Legal Proceedings
	Item 2.	Changes in Securities
	Item 3.	Defaults Upon Senior Securities
	Item 4.	Submission of Matters to a Vote of Security Holders
	Item 5.	Other Information
	Item 6.	Exhibits and Reports on Form 8-K

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

DUKE REALTY CORPORATION AND SUBSIDIARIES

Condensed Consolidated Balance Sheets

(in thousands, except per share amounts)

	March 31, 2003			December 31, 2002
	(Unaudited)
ASSETS

Real estate investments:
Land and improvements	$	614,461		$	608,995
Buildings and tenant improvements	4,291,679			4,237,360
Construction in progress	87,345			85,756
Investments in unconsolidated companies	299,829			315,589
Land held for development	321,958			326,535
	5,615,272			5,574,235
Accumulated depreciation	(588,629		)	(555,858		)

Net real estate investments	5,026,643			5,018,377

Cash and cash equivalents	12,509			17,414
Accounts receivable, net of allowance of $2,108 and $2,008	14,501			15,415
Straight-line rent receivable, net of allowance of $2,491	55,881			52,062
Receivables on construction contracts	26,438			23,181
Deferred financing costs, net of accumulated amortization of $15,601 and $15,390	13,105			11,493
Deferred leasing and other costs, net of accumulated amortization of $53,291 and $50,543	121,986			112,772
Escrow deposits and other assets	109,960			98,109
	$	5,381,023		$	5,348,823
LIABILITIES AND SHAREHOLDERS’ EQUITY

Indebtedness:
Secured debt	$	275,558		$	299,147
Unsecured notes	1,701,077			1,526,138
Unsecured lines of credit	205,000			281,000
	2,181,635			2,106,285

Construction payables and amounts due subcontractors	37,050			43,232
Accounts payable	1,241			548
Accrued expenses:
Real estate taxes	56,888			51,474
Interest	23,204			27,374
Other	37,779			54,568
Other liabilities	102,979			106,811
Tenant security deposits and prepaid rents	39,985			33,710
Total liabilities	2,480,761			2,424,002

Minority interest	303,395			308,641

Shareholders’ equity:
Preferred shares ($.01 par value); 5,000 shares authorized	440,869			440,889
Common shares ($.01 par value); 250,000 shares authorized; 135,270 and 135,007 shares issued and outstanding	1,353			1,350
Additional paid-in capital	2,341,167			2,335,278
Accumulated other comprehensive income (loss)	(3,271		)	(2,111		)
Distributions in excess of net income	(183,251		)	(159,226		)
Total shareholders’ equity	2,596,867			2,616,180

	$	5,381,023		$	5,348,823

See accompanying Notes to Condensed Consolidated Financial Statements

DUKE REALTY CORPORATION AND SUBSIDIARIES

Condensed Consolidated Statements of Operations

For the three months ended March 31,

(in thousands, except per share amounts)

(Unaudited)

	2003			2002
RENTAL OPERATIONS
Revenues:
Rental income	$	180,742		$	168,185
Equity in earnings of unconsolidated companies	4,269			6,296
	185,011			174,481
Operating expenses:
Rental expenses	40,473			31,164
Real estate taxes	20,572			19,117
Interest expense	32,713			27,192
Depreciation and amortization	47,654			42,337
	141,412			119,810
Earnings from rental operations	43,599			54,671

SERVICE OPERATIONS
Revenues:
General contractor gross revenue	50,142			45,933
General contractor costs	(44,880		)	(40,219		)
Net general contractor revenue	5,262			5,714

Property management, maintenance and leasing fees	4,094			3,199
Construction and development activity income	(193		)	20,393
Other income	259			215
Total revenue	9,422			29,521

Operating expenses	7,369			14,006
Total earnings from service operations	2,053			15,515

General and administrative expense	(6,272		)	(7,238		)
Operating income	39,380			62,948

OTHER INCOME (EXPENSE)
Interest income	991			421
Earnings from land and depreciable property dispositions, net of impairment adjustment	9,402			1,111
Other revenue (expense)	(550		)	212
Other minority interest in earnings of subsidiaries	(23		)	(385		)
Minority interest in earnings of common unitholders	(3,873		)	(5,643		)
Minority interest in earnings of preferred unitholders	(1,402		)	(2,102		)
Income from continuing operations	43,925			56,562

Discontinued operations:
Net income from discontinued operations, net of minority interest	182			824
Gain on sale of discontinued operations, net of minority interest	2,122			—
Income from discontinued operations	2,304			824
Net income	46,229			57,386
Dividends on preferred shares	(8,752		)	(12,108		)
Net income available for common shareholders	$	37,477		$	45,278
Basic net income per common share:
Continuing operations	$	0.26		$	0.33
Discontinued operations	0.02			0.01
Total	$	0.28		$	0.34
Diluted net income per common share:
Continuing operations	$	0.26		$	0.33
Discontinued operations	0.02			0.01
Total	$	0.28		$	0.34
Weighted average number of common shares outstanding	135,170			131,932
Weighted average number of common and dilutive potential common shares	150,627			150,270

See accompanying Notes to Consolidated Financial Statements.

DUKE REALTY CORPORATION AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows

For the three months ended March 31

(in thousands)

(Unaudited)

	2003			2002
Cash flows from operating activities:
Net income	$	46,229		$	57,386
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation of buildings and tenant improvements	41,771			37,186
Amortization of deferred leasing and other costs	5,901			5,633
Amortization of deferred financing costs	999			965
Minority interest in earnings	5,550			8,234
Straight-line rent adjustment	(4,574		)	(1,386		)
Earnings from land and depreciated property sales	(11,756		)	(1,111		)
Build-to-suit operations, net	(15,257		)	101,178
Construction contracts, net	(8,491		)	(10,598		)
Other accrued revenues and expenses, net	(7,898		)	5,627
Operating distributions received in excess of equity and earnings from unconsolidated companies	6,408			5,288

Net cash provided by operating activities	58,882			208,402

Cash flows from investing activities:
Development of real estate investments	(28,995		)	(36,733		)
Acquisition of real estate investments	(34,602		)	(8,375		)
Acquisition of land held for development and infrastructure costs	(7,120		)	(4,681		)
Recurring tenant improvements	(8,258		)	(5,952		)
Recurring leasing costs	(4,901		)	(4,274		)
Recurring building improvements	(2,625		)	(2,399		)
Other deferred leasing costs	(6,078		)	(3,586		)
Other deferred costs and other assets	1,447			4,044
Exercise purchase option on ground lease	(12,042		)	—
Tax deferred exchange escrow, net	(8,207		)	—
Proceeds from land and depreciated property sales, net	51,368			25,395
Advances to unconsolidated companies	(1,313		)	(8,794		)

Net cash used by investing activities	(61,326		)	(45,355		)

Cash flows from financing activities:
Proceeds from issuance of common shares, net	2,830			7,023
Payments for redemption of preferred stock	(20		)	—
Proceeds from indebtedness	175,000			—
Proceeds from debt refinancing	38,340			—
Payments on indebtedness including principal amortization	(61,706		)	(5,193		)
Repayments on lines of credit, net	(75,095		)	(79,392		)
Distributions to common shareholders	(61,502		)	(59,298		)
Distributions to preferred shareholders	(8,752		)	(12,108		)
Distributions to preferred unitholders	(1,402		)	(2,102		)
Distributions to minority interest	(7,453		)	(7,796		)
Deferred financing costs	(2,701		)	(154		)
Net cash used for financing activities	(2,461		)	(159,020		)
Net increase (decrease) in cash and cash equivalents	(4,905		)	4,027

Cash and cash equivalents at beginning of period	17,414			9,483
Cash and cash equivalents at end of period	$	12,509		$	13,510

Other non-cash items:
Assumption of debt for real estate acquisitions	$	—		$	7,791
Conversion of Limited Partner Units to shares	$	2,927		$	32,772
Issuance of Limited Partner Units for real estate acquisitions	$	—		$	4,687
Impairment adjustment on undeveloped land	$	420		$	—

See accompanying Notes to Condensed Consolidated Financial Statements

DUKE REALTY CORPORATION AND SUBSIDIARIES

Condensed Consolidated Statement of Shareholders’ Equity

For the three months ended March 31, 2003

(in thousands, except per share data)

(Unaudited)

	Preferred Stock			Common Stock		Additional Paid-in Capital		Accumulated Other Comprehensive Income (Loss)			Distributions in Excess of Net Income			Total

Balance at December 31, 2002	$	440,889		$	1,350	$	2,335,278	$	(2,111	)	$	(159,226	)	$	2,616,180

Comprehensive Income:

Net income	—			—		—		—			46,229			46,229

Distributions to preferred shareholders	—			—		—		—			(8,752		)	(8,752		)

Gains (losses) on derivative instruments	—			—		—		(1,160		)	—			(1,160		)

Comprehensive income available for common shareholders														36,317

Issuance of common shares	—			2		2,859		—			—			2,861

Acquisition of minority interest	—			1		2,926		—			—			2,927

Repurchase of Series D Preferred Shares	(20		)	—		—		—			—			(20		)

Tax benefits from employee stock plans	—			—		94		—			—			94

FASB 123 Compensation expense	—			—		10		—			—			10

Distributions to common shareholders ($.455 per share)	—			—		—		—			(61,502		)	(61,502		)

Balance at March 31, 2003	$	440,869		$	1,353	$	2,341,167	$	(3,271	)	$	(183,251	)	$	2,596,867

See accompanying Notes to Condensed Consolidated Financial Statements

DUKE REALTY CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1. Financial Statements

The interim condensed consolidated financial statements included herein have been prepared by Duke Realty Corporation (the “Company”) without audit (except for the Balance Sheet as of December 31, 2002). The financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and in accordance with Rule 10-01 of Regulation S-X of the Securities Exchange Act of 1934. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation have been included. These financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2002.

The Company

The Company’s rental operations are conducted through Duke Realty Limited Partnership (“DRLP”), an entity in which the Company owns 90.1% at March 31, 2003. The remaining interests in DRLP are redeemable for shares of the Company’s common stock. The Company conducts Service Operations through Duke Realty Services Limited Partnership (“DRSLP”), in which the Company is the sole general partner. The Company also conducts Service Operations through Duke Construction Limited Partnership (“DCLP”), which is effectively 100% owned by DRLP. The consolidated financial statements include the accounts of the Company and its majority-owned or controlled subsidiaries.

2. Lines of Credit

The Company has the following lines of credit available (in thousands):

Description	Borrowing Capacity (in 000’s)		Maturity Date	Interest Rate		Outstanding at March 31, 2003 (in 000’s)
Unsecured Line of Credit	$	500,000	February 2004	LIBOR + .65	%	$	205,000
Secured Line of Credit	50,000		January 2006	LIBOR + .60	%	24,800

The lines of credit are used to fund development activities, to acquire additional rental properties and to provide working capital.

The $500 million line of credit provides the Company with an option to obtain borrowings from the financial institutions that participate in the line of credit at rates lower than the stated interest rate, subject to certain restrictions. Amounts outstanding on the unsecured line of credit at March 31, 2003, are at LIBOR + .65% (1.95% at March 31, 2003).

3. Related Party Transactions

The Company provides management, maintenance, leasing, construction, and other tenant-related services to properties in which certain of its executive officers have ownership interests. The Company has an option to acquire these executive officers’ interest in these properties (the “Option Properties”). The Company received fees totaling approximately $364,000 and $316,000 for services provided to the Option Properties for the three months ended March 31, 2003 and 2002, respectively. The Company believes that the fees charged by the Company for such services are equivalent to those charged to third-party owners for similar services.

The Company has other related party transactions that are insignificant and that include terms that are considered by the Company to be at arm’s-length and equal to those negotiated with unaffiliated parties.

4. Net Income Per Common Share

Basic net income per common share is computed by dividing net income available for common shares by the weighted average number of common shares outstanding for the period. Diluted net income per common share is computed by dividing the sum of net income available for common shareholders and minority interest in earnings of unitholders, by the sum of the weighted average number of common shares and units outstanding and dilutive potential common shares for the period.

The following table reconciles the components of basic and diluted net income per common share for the three months ended March 31 (in thousands):

	2003		2002
Basic net income available for common shareholders	$	37,477	$	45,278
Minority interest in earnings of common unitholders	4,125		5,748
Diluted net income available for common shareholders	$	41,602	$	51,026

Weighted average number of common shares outstanding	135,170		131,932
Weighted average partnership units outstanding	14,802		16,738
Dilutive shares for stock based compensation plans	655		1,600
Weighted average number of common shares and dilutive potential common shares	150,627		150,270

The Series D Convertible Preferred stock was anti-dilutive for the three months ended March 31, 2003 and 2002; therefore, no conversion to common shares is included in weighted dilutive potential common shares.

5. Segment Reporting

The Company is engaged in four operating segments; the ownership and rental of office, industrial and retail real estate investments (collectively, “Rental Operations”), and the providing of various real estate services such as property management, maintenance, leasing, development and construction management to third-party property owners (“Service Operations”). The Company’s reportable segments offer different products or services and are managed separately because each requires different operating strategies and management expertise. There are no material intersegment sales or transfers.

Non-segment revenue consists mainly of equity in earnings of unconsolidated companies. Non-segment assets consist of corporate assets including cash, deferred financing costs and investments in unconsolidated companies.

The Company assesses and measures segment operating results based upon an industry performance measure referred to as Funds From Operations (“FFO”), which management believes is a useful indicator of the Company’s operating performance. The National Association of Real Estate Investment Trusts defines

FFO as net income or loss, excluding gains or losses from sales of depreciated operating property, plus operating property depreciation and amortization and adjustments for minority interest and unconsolidated companies on the same basis. Interest expense and other non-property specific revenues and expenses are not allocated to individual segments in determining the Company’s performance measure.

The revenues and FFO for each of the reportable segments for the three months ended March 31, 2003 and 2002, and the assets for each of the reportable segments as of March 31, 2003 and December 31, 2002, are summarized as follows (in thousands):

	2003			2002
Revenues
Rental Operations:
Office	$	107,105		$	96,654
Industrial	70,531			69,369
Retail	2,096			1,588
Service Operations	9,422			29,521
Total Segment Revenues	189,154			197,132
Non-Segment Revenue	5,279			6,870
Consolidated Revenue from continuing operations	194,433			204,002
Discontinued Operations	504			2,237
Consolidated Revenue	$	194,937		$	206,239

Funds From Operations
Rental Operations:
Office	$	68,654		$	64,194
Industrial	50,065			52,839
Retail	1,608			1,372
Services Operations	2,053			15,515
Total Segment FFO	122,380			133,920

Non-Segment FFO:
Interest expense	(32,713		)	(27,192		)
Interest income	991			421
General and administrative expense	(6,272		)	(7,238		)
Gain on land sales	3,143			1,208
Other expenses	(1,279		)	(355		)
Minority interest in earnings of common unitholders	(3,873		)	(5,643		)
Minority interest in earnings of preferred unitholders	(1,402		)	(2,102		)
Minority interest in earnings of subsidiaries	(23		)	(385		)
Minority interest share of FFO adjustments	(4,349		)	(5,329		)
Joint venture FFO	9,371			10,776
Dividends on preferred shares	(8,752		)	(12,108		)
Discontinued operations, net of minority interest	(32		)	1,306
Consolidated FFO	77,190			87,279

Depreciation and amortization on continuing operations	(47,654		)	(42,377		)
Depreciation and amortization on discontinued operations	(18		)	(482		)
Share of joint venture adjustments	(5,003		)	(4,415		)
Earnings from depreciated property sales on continuing operations	6,259			(96		)
Earnings from depreciated property sales on discontinued operations	2,354			—
Minority interest share of FFO adjustments	4,349			5,329

Net Income Available for Common Shareholders	$	37,477		$	45,278

	March 31, 2003		December 31, 2002
Assets
Rental Operations:
Office	$	2,705,254	$	2,677,427
Industrial	2,155,966		2,144,686
Retail	71,488		71,072
Service Operations	91,852		91,399
Total Segment Assets	5,024,560		4,984,584
Non-Segment Assets	356,463		364,239
Consolidated Assets	$	5,381,023	$	5,348,823

6. Real Estate Investments

The Company adopted Statement of Financial Accounting Standards No. 144, “Accounting for the Impairment or Disposal of Long Lived Assets” (“SFAS 144”), on January 1, 2002. SFAS 144 requires the Company to report in discontinued operations the results of operations of a property which has either been disposed or is classified as held for sale, unless certain conditions are met.

The Company has classified operations of ten buildings as discontinued operations in accordance with SFAS 144. As a result, the Company classified net income, net of minority interest, of $182,000 and $824,000 as net income from discontinued operations for the three months ended March 31, 2003 and 2002. In addition, five of the properties classified in discontinued operations were sold during the first quarter of 2003; therefore, the gains on disposal for these properties, net of minority interest, of $2.1 million are also reported in discontinued operations.

At March 31, 2003, the Company had 2 industrial, 5 office and 6 retail properties comprising approximately 1.1 million square feet held for sale. Of these properties, 4 build-to-suit office and 3 build-to-suit retail properties were under development. Net operating income (defined as total property revenues, less property expenses, which include real estate taxes, repairs and maintenance, property management, utilities, insurance and other expenses) of the properties held for sale for the three months ended March 31, 2003 and 2002 is approximately $882,000 and $382,000, respectively. Net book value of the properties held for sale at March 31, 2003, is approximately $53.7 million. There can be no assurance that such properties held for sale will be sold.

In association with a contract for a sale of one parcel of land entered into by the Company in the first quarter of 2003, the Company recognized an impairment adjustment of $420,000 to reflect the anticipated loss on the sale of this land.

7. Shareholders’ Equity

The Company periodically accesses the public equity markets to fund the development and acquisition of additional rental properties. The proceeds of these offerings are contributed to DRLP in exchange for additional interests in DRLP. The following series of preferred stock are outstanding as of March 31, 2003 (in thousands, except percentages):

Description	Shares Outstanding	Dividend Rate		Initial Optional Redemption Date	Liquidation Preference		Convertible
Series B Preferred	265	7.990	%	March 31, 2007	$	132,250	No
Series D Preferred	535	7.375	%	December 31, 2003	$	133,619	Yes
Series E Preferred	400	8.250	%	January 20, 2004	$	100,000	No
Series I Preferred	300	8.450	%	February 6, 2006	$	75,000	No

All series of preferred shares require cumulative distributions and have no stated maturity date (although the Company may redeem them on or following their initial optional redemption dates).

The Series D Preferred shares are convertible at a conversion rate of 9.3677 common shares for each preferred share outstanding.

The dividend rate on the Series B Preferred shares increases to 9.99% after September 12, 2012.

8. Other Matters

Reclassifications

Certain 2002 balances have been reclassified to conform to 2003 presentation.

9. Derivative Instruments

The Company is exposed to capital market risk, such as changes in interest rates. In order to manage the volatility relating to interest rate risk, the Company may enter into interest rate hedging arrangements from time to time. The Company does not utilize derivative financial instruments for trading or speculative purposes. The Company accounts for derivative instruments under Statement of Financial Accounting Standard No. 133, “Accounting for Derivative Instruments and Hedging Activities” as amended (“SFAS 133”).

In December 2002, the Company simultaneously entered into two $50 million forward-starting interest rate swaps. The Company designated the aggregate $100 million swaps as a hedge to effectively fix the rate on financing expected in 2003. The Company expects and intends that the financing will be a ten-year fixed-rate semi-annual financing, pricing between May 1, 2003 and November 1, 2003. The fair value of the swaps was a liability of ($3.3) million as of March 31, 2003, and is recorded in other liabilities in the accompanying balance sheet. The swaps qualify for hedge accounting under SFAS 133; therefore, changes in fair value are recorded in other comprehensive income.

In February 2003, the Company simultaneously entered into two $25 million forward-starting interest rate swaps. The Company designated the aggregate $50 million swaps as a hedge to effectively fix the rate on financing expected in 2003. The Company expects and intends that the financing will be a ten-year fixed-rate semi-annual financing, pricing between May 1, 2003 and November 1, 2003. The fair value of the swaps was an asset of $75,000 as of March 31, 2003, and is netted in other liabilities in the accompanying balance sheet. The swaps qualify for hedge accounting under SFAS 133; therefore, changes in fair value are recorded in other comprehensive income.

10. Stock Based Compensation

For all issuances prior to 2002, the Company applies the recognition and measurement provisions of APB Opinion No. 25, Accounting for Stock Issued to Employees, and related Interpretations in accounting for these plans.

Effective January 1, 2002, the Company prospectively adopted the fair value recognition provisions of FASB Statement No. 123, Accounting for Stock-Based Compensation, to all awards granted after January 1, 2002.

The following table illustrates the effect on net income and earnings per share if the fair value method had been applied to all outstanding and unvested awards in each period.

	2003			2002
Net income, as reported	$	37,477		$	45,278
Add: Stock-based employee compensation expense included in net income determined under fair value method	178			101
Deduct: Total stock based compensation expense determined under fair value method for all awards	(353		)	(333		)
Proforma Net Income	$	37,302		$	45,046

		2003		2002

Basic net income per share	As reported	$	.28	$	.34
	Pro forma	$	.28	$	.34

Diluted net income per share	As reported	$	.28	$	.34
	Pro forma	$	.28	$	.34

11. Subsequent Events

The Company’s Board of Directors declared the following dividends at its April 30, 2003 regularly scheduled Board meeting:

Class	Quarterly Amount/Share		Record Date	Payment Date
Common	$	0.455	May 14, 2003	May 30, 2003
Preferred (per depositary share):
Series B	$	0.99875	June 16, 2003	June 30, 2003
Series D	$	0.46094	June 16, 2003	June 30, 2003
Series E	$	0.51563	June 16, 2003	June 30, 2003
Series I	$	0.52813	June 16, 2003	June 30, 2003

The Board of Directors

Duke Realty Corporation:

We have reviewed the condensed consolidated balance sheet of Duke Realty Corporation and subsidiaries as of March 31, 2003, the related condensed consolidated statements of operations for the three months ended March 31, 2003 and 2002, the related condensed consolidated statements of cash flows for the three months ended March 31, 2003 and 2002, and the related condensed consolidated statement of shareholders’ equity for the three months ended March 31, 2003. These condensed consolidated financial statements are the responsibility of the Company’s management.

We conducted our review in accordance with standards established by the American Institute of Certified Public Accountants. A review of interim financial information consists principally of applying analytical procedures to financial data and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with auditing standards generally accepted in the United States of America, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.

Based on our review, we are not aware of any material modifications that should be made to the condensed consolidated financial statements referred to above for them to be in conformity with accounting principles generally accepted in the United States of America.

We have previously audited, in accordance with auditing standards generally accepted in the United States of America, the consolidated balance sheet of Duke Realty Corporation and subsidiaries as of December 31, 2002, and the related consolidated statements of operations, shareholders’ equity and cash flows for the year then ended (not presented herein); and in our report dated January 29, 2003, we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying condensed consolidated balance sheet as of December 31, 2002 is fairly presented, in all material respects, in relation to the consolidated balance sheet from which it has been derived.

KPMG LLP

Indianapolis, Indiana

April 30, 2003

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Cautionary Statement Regarding Forward Looking Statements

Certain statements in this quarterly report, including those related to the Company’s future operations, constitute “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These forward-looking statements involve known and unknown risks, uncertainties and other important factors that could cause the actual results, performance or achievements of the Company, or industry results, to differ materially from any predictions of future results, performance or achievements that we express or imply in this report. Some of the risks, uncertainties and other important factors that may affect future results include, among others:

• General economic and business conditions;

• The Company’s continued qualification as a real estate investment trust;

• Competition for tenants and decrease in property occupancy;

• Potential increases in real estate construction costs;

• Potential changes in interest rates;

• Continuing ability to favorably raise debt and equity in the capital markets; and

• Other risks inherent in the real estate business including tenant defaults, potential liability relating to environmental matters and liquidity of real estate investments.

This list of risks and uncertainties, however, is not intended to be exhaustive. The Company has on file with the Securities and Exchange Commission (“SEC”) a Report on Form 8K dated December 6, 2001, with additional risk factor information.

The words “believe,” “estimate,” “expect” and similar expressions or statements regarding future periods are intended to identify forward-looking statements. Although we believe that the plans, expectations and results expressed in or suggested by our forward-looking statements are reasonable, all forward-looking statements are inherently uncertain as they involve substantial risks and uncertainties beyond the Company’s control. New factors emerge from time to time, and it is not possible for us to predict the nature or assess the potential impact of each new factor on the Company’s business. Given these uncertainties, we caution you not to place undue reliance on these forward-looking statements. The Company undertakes no obligation to update or revise any of its forward-looking statements for events or circumstances that arise after the statement is made.

Business Overview

The Company is a self-administered and self managed real estate investment trust that began operations through a related entity in 1972. As of March 31, 2003, the Company:

• Owned or controlled 924 industrial, office and retail properties (including properties under development), consisting of nearly 109 million square feet located in 12 states; and

• Owned or controlled more than 4,000 acres of land with an estimated future development potential of more than 62 million square feet of industrial, office and retail properties.

The Company provides the following services for its properties and for certain properties owned by third parties:

• leasing;

• management;

• construction;

• development; and

• other tenant-related services.

The Company’s operating results depend primarily upon income from the Rental Operations of its properties. This rental income is substantially influenced by the supply and demand for the Company’s rental space. The Company’s continued growth is dependent upon its ability to maintain occupancy rates and increase rental rates of its in-service portfolio. The Company’s strategy for growth also includes developing and acquiring additional rental properties.

The following highlights the areas of Rental Operations that the Company considers critical for future revenue growth (all square footage totals and occupancy percentages reflect 100% of both wholly-owned properties and properties in joint ventures):

Same Property Performance: The Company tracks same property performance, which measures the performance of properties that were in-service for all reported portions of a two-year period by comparing the results of the second year with the results of the first year. For the three months ended March 31, 2003, net operating income from the same property portfolio decreased 3.1% from the same period in 2002. The decrease resulted from lower occupancies in the properties that rolled into the same property population in 2003, coupled with the fact that a majority of the properties sold over the past two and a half years were from the same property population and were over 90% leased.

Occupancy Analysis: As discussed above, the ability to maintain occupancy rates is a principal driver of the Company’s results of operations. The following table sets forth information regarding the Company’s in-service portfolio of rental properties as of March 31, 2003 and 2002 (square feet in thousands):

	Total Square Feet		Percent of Total Square Feet				Percent Occupied
Type	2003	2002	2003		2002		2003		2002
Industrial
Service Centers	13,758	13,868	13.1	%	13.6	%	86.4	%	88.0	%
Bulk	66,077	63,450	62.7	%	62.1	%	88.5	%	88.8	%
Office	24,709	24,056	23.4	%	23.6	%	85.1	%	85.3	%
Retail	840	745	.8	%	.7	%	99.3	%	97.5	%

Total	105,384	102,119	100.0	%	100.0	%	87.5	%	87.9	%

The Company’s lower occupancy percentage in the three months ended March 31, 2003 as compared to the three months ended March 31, 2002 was primarily caused by slower lease-up of new developments placed in-service during 2002 and reduced demand for existing space.

Lease Expiration: The following table reflects the Company’s in-service portfolio lease expiration schedule as of March 31, 2003, by property type indicating square footage and annualized net effective rents under expiring leases (in thousands, except per square foot amounts):

	Total Portfolio						Industrial				Office				Retail
Year of Expiration	Square Feet		Ann. Rent Revenue		Percent of Revenue		Square Feet		Ann. Rent Revenue		Square Feet		Ann. Rent Revenue		Square Feet		Ann. Rent Revenue
2003	8,170		$	48,434	8	%	7,029		$	33,802	1,141		$	14,632	—		$	—
2004	11,059		77,193		12	%	8,398		39,732		2,641		37,080		20		381
2005	13,556		94,784		14	%	10,716		53,982		2,808		40,372		32		430
2006	11,101		76,845		12	%	8,820		45,963		2,279		30,849		2		33
2007	10,554		74,838		12	%	7,945		39,764		2,557		34,412		52		662
2008	9,560		59,615		9	%	7,614		33,958		1,919		25,201		27		456
2009	7,142		44,361		7	%	5,754		25,107		1,367		18,853		21		401
2010	6,484		50,421		8	%	4,657		22,295		1,811		27,862		16		264
2011	3,603		31,284		5	%	2,335		11,252		1,247		19,682		21		350
2012	4,373		27,450		4	%	3,347		13,114		1,004		13,745		22		591
2013 and Thereafter	6,631		56,525		9	%	3,749		16,986		2,261		34,600		621		4,939
Total Leased	92,233		$	641,750	100	%	70,364		$	335,955	21,035		$	297,288	834		$	8,507

Total Portfolio Square Feet	105,384						79,835				24,709				840

Percent Occupied	87.52	%					88.14	%			85,13	%			99.33	%

Future Development: The Company expects to realize growth in earnings from Rental Operations through the development and acquisition of additional rental properties in its primary markets. Specifically, the Company has 3.5 million square feet of properties under development at March 31, 2003. These properties should provide future earnings through Service Operations income upon sale or from Rental Operations growth as they are placed in service as follows (in thousands, except percent leased and stabilized returns):

Anticipated In-Service Date	Square Feet	Percent Leased			Project Costs		Estimated Stabilized Return

Held For Rental:

2nd Quarter 2003	349		77	%	$	38,988	10.8	%
3rd Quarter 2003	38		69	%	3,373		11.9	%
4th Quarter 2003	973		87	%	37,522		10.8	%
Thereafter	1,581		79	%	65,492		9.9	%
	2,941		81	%	$	145,375	10.4	%
Build-to-Suit for Sale:

2nd Quarter 2003	61		77	%	$	6,942	11.1	%
3rd Quarter 2003	159		70	%	15,204		12.1	%
4th Quarter 2003	274		100	%	30,857		8.9	%
Thereafter	110		100	%	12,377		10.5	%
	604		90	%	$	65,380	10.2	%
Total	3,545		82	%	$	210,755	10.3	%

Lease Renewals: The Company renewed 61.6% of leases up for renewal in the three months ended March 31, 2003, totaling 1.1 million square feet. This compares to renewals of 70.0% for the three months ended March 31, 2002, totaling 2.0 million square feet.

Results of Operations

A summary of the Company’s operating results and property statistics for the three months ended March 31, 2003 and 2002, is as follows (in thousands, except number of properties and per share amounts):

	2003		2002

Rental Operations revenue	$	185,011	$	174,481
Service Operations revenue	9,422		29,521
Earnings from Rental Operations	43,599		54,671
Earnings from Service Operations	2,053		15,515
Operating income	39,380		62,948
Net income available for common shareholders	$	37,477	$	45,278
Weighted average common shares outstanding	135,170		131,932
Weighted average common and dilutive potential common shares	150,627		150,270
Basic income per common share:
Continuing operations	$	.26	$	.33
Discontinued operations	$	.02	$	.01
Diluted income per common share:
Continuing operations	$	.26	$	.33
Discontinued operations	$	.02	$	.01

Number of in-service properties at end of period	908		894
In-service square footage at end of period	105,384		102,119
Under development square footage at end of period	3,545		3,718

Comparison of Three Months Ended March 31, 2003 to Three Months Ended March 31, 2002

Rental Operations

Rental Operations are comprised of net income from rental properties (“Rental Net Income”) and equity in earnings from unconsolidated companies (“Equity in Earnings”). Rental Net Income is defined as rental income less rental expenses and real estate taxes. Overall, Rental Net Income increased from $117.9 million in 2002 to $119.7 million in 2003. The increase is primarily attributable to the Company recognizing $9.3 million of lease termination fees during the three months ended March 31, 2003, compared to $5.3 million for the same period in 2002. This increase was offset somewhat by an increase in rental expenses as a result of snow removal and other weather related expenses increasing significantly in the first quarter of 2003 as several of the Company’s markets experienced prolonged effects of winter weather. The Company has experienced a slight decrease in occupancy of its in-service portfolio from 87.9% at March 31, 2002 to 87.5% at March 31, 2003; however, occupancy has increased slightly since the fourth quarter of 2002.

The Company analyzes the results of Rental Operations by office, industrial and retail portfolios. The following highlights the financial results for each of the Company’s Rental Operations portfolios.

Office

Rental Net Income for Office properties increased from $64.2 million for the three months ended March 31, 2002, to $68.7 million for the three months ended March 31, 2003 as a result of the following:

• The Company experienced a slight decrease in its in-service Office portfolio occupancy from 85.3% at March 31, 2002, to 85.1% at March 31, 2003.

• The Company’s in-service Office portfolio has increased from 233 properties at March 31, 2002, to 239 properties at March 31, 2003.

• The Company recognized $8.2 million in termination fees associated with this segment for the three months ended March 31, 2003, compared to $4.8 million for the same period in 2002.

Industrial

Rental Net Income for Industrial properties decreased from $52.8 million for the three months ended March 31, 2002, to $50.1 million for the three months ended March 31, 2003 as a result of the following:

• The Company experienced a decrease in its in-service Industrial portfolio occupancy from 88.6% at March 31, 2002, to 88.1% at March 31, 2003.

• The Company’s in-service Industrial portfolio increased from 651 properties at March 31, 2002 to 659 properties at March 31, 2003.

Retail

Rental Net Income for Retail properties increased to $1.6 million for the three months ended March 31, 2003, from $1.4 million for the same period in 2002.

Equity in earnings decreased from $6.3 million for the first quarter of 2002 to $4.3 million for the same period in 2003. The decrease is primarily the result of increased rental expenses for snow removal from prolonged winter weather in many of the markets in which the Company is a joint venture partner. There were no significant effects on equity in earnings from lease terminations during the three months ended March 31, 2003 or 2002. Combined occupancy of all the Company’s investments in unconsolidated companies was 92.2% at March 31, 2003 compared to 89.5% at March 31, 2002. During the first quarter of 2003, the Company sold its 50% interest in an office joint venture in South Florida, recognizing a gain of $6.3 million, which is reflected in earnings from land and depreciable property dispositions as the venture owned and operated real estate property and held land for future development.

Depreciation and amortization expense increased from $42.3 million for the first three months of 2002 to $47.7 million for the same period in 2003 as a result of the following trends:

• The Company increased its building basis in its held for investment property portfolio by approximately $100 million from March 31, 2002 to March 31, 2003, primarily through developments placed in-service throughout 2002 and a $50 million building acquisition in December of 2002;

• Tenant improvements increased from $318.0 million at March 31, 2002 to $374.4 million at March 31, 2003 as the Company continues to incur capital expenditures to lease-up vacant space.

The $5.5 million increase in interest expense is attributable to the following:

• Interest capitalized on development projects decreased from $4.6 million in 2002 to $1.9 million in 2003 as a result of decreased development activity by the Company over the past twelve months in response to soft demand in most of the Company’s markets.

• Interest expense on corporate unsecured debt increased from $24.5 million in 2002 to $28.4 million in 2003. The Company issued $175 million of seven-year unsecured debt in January 2003 at an effective interest rate of 5.365%. Interest expense on this new issuance for the first quarter totaled $1.9 million. In addition, interest expense on two debt issuances from the third quarter of 2002 totaled $2.9 million for the first quarter of 2003.

As a result of the above-mentioned items, earnings from Rental Operations decreased $11.1 million from $54.7 million for the three months ended March 31, 2002, to $43.6 million for the three months ended March 31, 2003.

Service Operations

Service Operations primarily consist of leasing, management, construction and development services for joint venture properties and properties owned by third parties. Service Operations revenues decreased from $29.5 million for the three months ended March 31, 2002, to $9.4 million for the three months ended March 31, 2003. The decrease is primarily attributable to a decline in activity from the Company’s held for sale program whereby the Company develops a property for sale upon completion. During the first quarter of 2002, the Company recognized gains totaling $19.9 million on sales of properties developed for immediate sale compared to no such sales in the first quarter of 2003.

Service Operations expenses decreased from $14.0 million in 2002 to $7.4 million in 2003 as a result of income tax expense of $6.6 million being recognized in 2002 on the sale of properties sold from the Company’s held for sale program as noted above.

As a result of the above, earnings from Service Operations decreased from $15.5 million for the three months ended March 31, 2002, to $2.1 million for the same period in 2003.

General and Administrative Expense

General and Administrative Expense decreased from $7.2 million for the three months ended March 31, 2002 to $6.3 million for the same period in 2003. The decrease is attributable to a combination of the following:

• A decrease in state and local tax expense based upon estimated revenues for 2003 being lower than 2002;

• An increase in levels of construction and leasing activity during the end of 2002 and into 2003 which allowed for more overhead costs to be applied to projects versus expensed in general and administrative expenses.

Other Income and Expenses

Gain on sale of land and depreciable property dispositions, net of impairment adjustment, is comprised of the following amounts for the three months ended March 31, 2003 and 2002:

	2003			2002

Gain(loss) on sales of depreciable properties	$	—		$	(96	)
Gain on land sales	3,563			1,207
Gain on sale of joint venture interest	6,259			0
Impairment adjustment	(420		)	0

Total	$	9,402		$	1,111

Gain on sales of depreciable properties represent sales of previously identified held for sale rental properties prior to adoption of FASB 144. All future sales of held for investment properties in 2003 and beyond will be classified as discontinued operations.

Gain on land sales represents sales of undeveloped land owned by the Company. The Company pursues opportunities to dispose of land in markets with a high concentration of undeveloped land and those markets where the land no longer meets strategic development plans of the Company.

In January 2003, the Company sold its 50% interest in a joint venture for $16.1 million in proceeds. The joint venture develops and operates real estate assets; thus the gain was not included in operating income.

The Company recorded a $420,000 adjustment in 2003 associated with a contract to sell one parcel of land.

Discontinued Operations

The Company adopted Statement of Financial Accounting Standards No. 144, “Accounting for the Impairment or Disposal of Long Lived Assets” (“SFAS 144”), on January 1, 2002. SFAS 144 requires the Company to report in discontinued operations the results of operations of a property that has either been sold or is classified as held for sale, unless certain conditions are met.

The Company has classified operations of ten buildings as discontinued operations in accordance with SFAS 144. As a result, the Company classified net income, net of minority interest, of $182,000 and $824,000 as net income from discontinued operations for the three months ended March 31, 2003 and 2002. In addition, five of the properties classified in discontinued operations were sold during the first quarter of 2003; therefore, the gains on disposal for these properties $2.1million, net of minority interest, are also reported in discontinued operations.

Net Income Available for Common Shares

Net income available for common shares for the three months ended March 31, 2003 was $37.5 million compared to $45.3 million for the same period ended March 31, 2002. This decrease results primarily from the operating result fluctuations in Rental Operations, Service Operations, General and Administrative Expenses and earnings from sales of depreciable property as discussed above.

Liquidity and Capital Resources

Sources of Liquidity

The Company expects to meet liquidity requirements over the next twelve months, including payments of dividends and distributions as well as recurring capital expenditures relating to maintaining the Company’s current real estate assets, primarily through the following:

• working capital; and

• net cash provided by operating activities.

The Company expects to meet long-term liquidity requirements, such as scheduled mortgage debt maturities, the retirement of unsecured notes and amounts outstanding under the unsecured credit facility, property acquisitions, financing of development activities and other non-recurring capital improvements, through the following:

• issuance of additional unsecured notes;

• undistributed cash available for distribution, if any; and

• proceeds received from real estate dispositions.

Credit Facilities

The Company has the following lines of credit available (in thousands):

Description	Borrowing Capacity		Maturity Date	Interest Rate		Amount Outstanding at March 31, 2003
Unsecured Line of Credit	$	500,000	February 2004	LIBOR + .65	%	$	205,000
Secured Line of Credit	$	50,000	January 2006	LIBOR + .60	%	$	24,800

The lines of credit are used to fund development and acquisition of additional rental properties and to provide working capital.

Associated with the $500 million line of credit are financial covenants that require the Company to meet defined levels of performance. As of March 31, 2003, the Company is in compliance with all covenants pertaining to the $500 million line of credit.

Debt and Equity Securities

The Company currently has on file with the SEC an effective shelf registration statement that permits the Company to sell up to an additional $420 million of unsecured debt securities. In addition, the Company has on file with the SEC an effective shelf registration statement that permits the Company to sell up to an additional $250.7 million of common and preferred stock. From time-to-time, the Company expects to issue additional securities under these registration statements to fund development and acquisition of additional rental properties and to fund the repayment of the credit facilities and other long-term debt upon maturity.

The indenture governing the Company’s unsecured notes also requires the Company to comply with financial ratios and other covenants regarding the operations of the Company. The Company is currently in compliance with all such covenants and expects to remain in compliance in the foreseeable future.

In January 2003, the Company completed an issuance of unsecured debt totaling $175.0 million bearing an effective interest rate of 5.365%, due 2010.

Uses of Liquidity

The Company’s principal uses of liquidity include the following:

• Property investments and recurring leasing/capital costs;

• Dividends and distributions to shareholders and unitholders;

• Long-term debt maturities; and

• The Company’s common stock repurchase program.

Property Investments and Other Capital Expenditures

One of the Company’s principal uses of its liquidity is for the development, acquisition and recurring leasing/capital expenditures of its real estate investments.

A summary of the Company’s recurring capital expenditures is as follows (in thousands):

	March 31, 2003		March 31, 2002

Tenant improvements	$	8,258	$	5,952

Leasing costs	4,901		4,274
Building improvements	2,625		2,399
Totals	$	15,784	$	12,625

Debt Maturities

Debt outstanding at March 31, 2003, totals $2.2 billion with a weighted average interest rate of 6.29% maturing at various dates through 2028. The Company had $1.9 billion of unsecured debt and $275.6 million of secured debt outstanding at March 31, 2003. Scheduled principal amortization of such debt totaled $2.4 million for the quarter ended March 31, 2003.

Following is a summary of the scheduled future amortization and maturities of the Company’s indebtedness at March 31, 2003 (in thousands):

	Future Repayments						Weighted Average
Year	Scheduled Amortization		Maturities		Total		Interest Rate of Future Repayments

2003	$	6,845	$	249,436	$	256,281	7.62	%
2004	7,793		372,386		380,179		4.34	%
2005	7,825		205,980		213,805		7.16	%
2006	7,409		164,986		172,395		6.33	%
2007	5,933		114,616		120,549		7.07	%
2008	5,021		134,028		139,049		6.31	%
2009	4,802		275,000		279,802		7.31	%
2010	4,193		175,000		179,193		5.27	%
2011	3,463		175,000		178,463		6.93	%
2012	1,977		200,000		201,977		5.76	%
Thereafter	9,942		50,000		59,942		6.53	%
	$	65,203	$	2,116,432	$	2,181,635	6.29	%

Historical Cash Flows

Cash and cash equivalents were $12.5 million and $13.5 million at March 31, 2003 and 2002, respectively. The decrease is the result of the following increases/(decreases) in cash flows (amounts in thousands):

	Three Months Ended March 31,
	2003			2002
Net cash Provided by Operating Activities	$	58.9		$	208.4

Net Cash Used by Investing Activities	$	(61.3	)	$	(45.4	)

Net Cash Used for Financing Activities	$	(2.5	)	$	(159.0	)

Operating Activities

The decrease in net cash provided by operating activities resulted primarily from the following:

• The Company received net proceeds of $101.2 million from its Build-to-Suit operations during the three months ended March 31, 2002, compared to incurring net development costs of $15.3 million for the same period in 2003. During the first quarter of 2002, the Company sold five properties from its Build-to-Suit portfolio.

Investing Activities

The increase in net cash used by investing activities from the first quarter of 2002 to 2003 was attributable to the following:

• Dispositions of land and depreciated property provided $51.4 million in net proceeds during the first quarter of 2003, compared to $25.4 million in 2002. The Company pursues opportunistic dispositions when conditions and terms are favorable.

• Real estate development costs decreased from $36.7 million in 2002 to $29.0 million in 2003, due to a reduction in new development starts in 2002 in response to weakened demand in many of the Company’s markets.

• The Company acquired $34.6 million of real estate assets during the first quarter of 2003 compared to $8.4 million during the same period in 2002. The acquisitions in 2003 consisted of two office buildings that are each 100% leased.

• The Company paid $12.0 million when it exercised a purchase option on a ground lease during the first quarter of 2003.

Financing Activities

The decrease in net cash used for financing activities resulted from the following:

• In 2003, the Company issued $175.0 million of unsecured debt.

• The Company paid off $21.0 million of secured debt, net of a $38.3 million secured debt refinancing during the first quarter of 2003 compared to $2.7 million in 2002.

Derivative Financial Instruments

Investments in Unconsolidated Companies

The Company has equity interests ranging from 10 – 64% in unconsolidated partnerships and joint ventures that own and operate rental properties and hold land for development. The equity method of accounting is used for these investments in which the Company has the ability to exercise significant influence, but not control, over operating and financial policies. As a result, the assets and liabilities of these joint ventures are not included on the Company’s balance sheet.

The Company’s investment in unconsolidated companies represents less than 6% of the Company’s total assets as of March 31, 2003. This investment provides several benefits to the Company including increased market share and an additional source of capital to fund real estate projects.

Funds From Operations

Funds From Operations (“FFO”), which is defined by the National Association of Real Estate Investment Trusts as GAAP net income or loss, excluding gains or losses from sales of depreciated operating property, plus operating property depreciation and amortization and adjustments for minority interest and unconsolidated companies on the same basis, is the industry standard for comparing and reporting the operating performance of real estate companies. Management believes that FFO is a useful indicator of the Company’s operating performance.

The following table provides a reconciliation of GAAP net income to FFO for the three months ended March 31 as follows (in thousands):

	2003			2002

Net income available for common shareholders	$	37,477		$	45,278
Add back (deduct):
Depreciation and amortization	47,672			42,819
Share of joint venture adjustments	5,003			4,415
(Earnings) loss from depreciable property dispositions	(8,613		)	96
Minority interest share of add-backs	(4,349		)	(5,329		)
Funds From Operations	$	77,190		$	87,279

Recent Accounting Pronouncements

In January 2003, FASB issued Interpretation 46, Consolidation of Variable Interest Entities (“Interpretation 46”), which addresses consolidation of certain variable interest entities. Interpretation 46 applies immediately to variable interest entities created after January 31, 2003, and to variable interest entities in which an enterprise obtains an interest after that date. The interpretation applies in the first fiscal year or interim period beginning after June 15, 2003, to variable interest entities in which an enterprise holds a variable interest that it acquired before February 1, 2003. The Company will review its investments in unconsolidated companies based on this new accounting pronouncement, but does not anticipate that the adoption of Interpretation 46 will have a material impact on its financial statements.

Item 3. Quantitative and Qualitative Disclosure About Market Risks

The Company is exposed to interest rate changes primarily as a result of its line of credit and long-term debt used to maintain liquidity and fund capital expenditures and expansion of the Company’s real estate investment portfolio and operations. The Company’s interest rate risk management objective is to limit the impact of interest rate changes on earnings and cash flows and to lower its overall borrowing costs. To achieve its objectives the Company borrows primarily at fixed rates and may enter into derivative financial instruments such as interest rate swaps, caps and treasury locks in order to mitigate its interest rate risk on a related financial instrument. The Company does not enter into derivative or interest rate transactions for speculative purposes.

Item 4. Controls and Procedures

The Company maintains disclosure controls and procedures that are designed to ensure that information required to be disclosed in our annual and periodic reports filed with the SEC is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. These disclosure controls and procedures are further designed to ensure that such information is accumulated and communicated to our management, including our chief executive officer, chief financial officer and chief operating officer, to allow timely decisions regarding required disclosure.

Based on the most recent evaluation, which was completed within 90 days of the filing of this report, our chief executive officer and chief financial officer believe that our disclosure controls and procedures are effective. There have been no significant changes in our internal controls or in other factors that could significantly affect the internal controls subsequent to the date we completed our evaluation.

Part II - Other Information

Item 1. Legal Proceedings

None

Item 2. Changes in Securities

None

Item 3. Defaults upon Senior Securities

None

Item 4. Submission of Matters to a Vote of Security Holders

On April 30, 2003, the Company held its Annual Meeting of Shareholders. At the meeting, shareholders approved proposals that effected amendments to both the Articles of Incorporation and the Amended and Restated by-Laws of the Company. These amendments are included in this Form 10-Q as Exhibits 3.1 and 3.2, respectively. The voting results on all proposals at the Annual Meeting will be included in the June 30, 2003 Form 10-Q under Item 4.

Item 5. Other Information

None

Item 6. Exhibits and Reports on Form 8-K

(a) Exhibits

Exhibit 3.1	Third Restated Articles of Incorporation of Duke Realty Corporation

Exhibit 3.2	Third Amended and Restated By-Laws of Duke Realty Corporation

Exhibit 15.	Letter regarding unaudited interim financial information

Exhibit 99.1	Certification Pursuant to 18 U.S. C. Section 13.50, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

Exhibit 99.2	Certification Pursuant to 18 U.S. C. Section 13.50, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

Exhibit 99.3	Certification Pursuant to 18 U.S. C. Section 13.50, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

(b) Reports on Form 8-K

The Company filed a Current Report on Form 8-K, dated January 29, 2003, to furnish a press release issued on January 29, 2003 to announce the Company’s 2002 earnings.

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 CORPORATION



Date: May 13, 2003		/s/ Thomas L. Hefner
		Thomas L. Hefner
		Chairman of the Board and Chief Executive Officer


		/s/ Darell E. Zink, Jr.
		Darell E. Zink, Jr.
		Vice Chairman, Executive Vice President and Chief Financial Officer


		/s/ Dennis D. Oklak
		Dennis D. Oklak
		President and Chief Operating Officer


		/s/ Matthew A. Cohoat
		Matthew A. Cohoat
		Senior Vice President and Corporate Controller

CERTIFICATION PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2003

I, Thomas L. Hefner, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Duke Realty Corporation;

2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;

3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the Company as of, and for, the periods presented in this quarterly report;

4. The Company’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the Company and we have:

(a) designed such disclosure controls and procedures to ensure that material information relating to the Company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;

(b) evaluated the effectiveness of the Company’s disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the “Evaluation Date”); and

(c) presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;

5. The Company’s other certifying officers and I have disclosed, based on our most recent evaluation, to the Company’s auditors and the audit committee of the Company’s board of directors (or persons performing the equivalent function):

(a) all significant deficiencies in the design or operation of internal controls which could adversely affect the Company’s ability to record, process, summarize and report financial data and have identified for the Company’s auditors any material weaknesses in internal controls; and

(b) any fraud, whether or not material, that involves management or other employees who have a significant role in the Company’s internal controls; and

6. The Company’s other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

Date: May 13, 2003


/s/ Thomas L. Hefner
Thomas L. Hefner
Chairman of the Board and Chief Executive Officer

CERTIFICATION PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2003

I, Darell E. Zink, Jr., certify that:

1. I have reviewed this quarterly report on Form 10-Q of Duke Realty Corporation;

(b) evaluated the effectiveness of the Company’s disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the “Evaluation Date”); and

(c) presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;

(b) any fraud, whether or not material, that involves management or other employees who have a significant role in the Company’s internal controls; and

Date: May 13, 2003


/s/ Darell E. Zink, Jr.
Darell E. Zink, Jr.
Vice Chairman, Executive Vice President and Chief Financial Officer

CERTIFICATION PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2003

I, Dennis D. Oklak, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Duke Realty Corporation;

(b) evaluated the effectiveness of the Company’s disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the “Evaluation Date”); and

(c) presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;

(b) any fraud, whether or not material, that involves management or other employees who have a significant role in the Company’s internal controls; and

Date: May 13, 2003


/s/ Dennis D, Oklak
Dennis D. Oklak
President and Chief Operating Officer