June 7 - Standard & Poor's Ratings Services today assigned its 'BBB-' rating
to the $300 million 4.375% senior unsecured notes due June 15, 2022, issued by
Duke Realty L.P., a subsidiary of Duke Realty Corp. (together Duke; see list).
Duke will use the proceeds from the note sale to repay revolver borrowings and
for general corporate purposes, which may include prefunding $200 million of
aggregate senior notes that mature in August ($150 million) and October ($50
Our ratings on Duke Realty Corp. (Duke) reflect a "satisfactory" business risk
profile supported by a large, diversified, and competitively positioned
portfolio of high-quality industrial and medical office properties, and office
properties with weaker, but stabilizing performance. We believe the company's
advancing portfolio repositioning initiatives will enhance the portfolio over
the long run. We view the REIT's financial risk profile as "significant" due
to high, but moderating leverage (including preferred stock), and low, but
stable debt coverage measures.
The stable outlook reflects our expectations for continued low but relatively
firm FCC measures, given the company's minimal exposure to variable interest
rates, relatively manageable lease expirations, and reduced development
pipeline. We could lower the ratings if the company's cash flow deteriorates,
perhaps due to very dilutive asset recycling. We would also consider a
downgrade if core operations deteriorate due to weaker than expected economic
growth, such that coverage measures fall from current levels. Although
unlikely in the near term, we could consider an upgrade if Duke gradually
reduces overall leverage levels, occupancy growth continues, and coverage
metrics steadily improve (FCC of more than 2.0x).
For our most recent credit analysis on Duke Realty Corp., see "Summary: Duke
Realty Corp.," published March 21, 2012, on RatingsDirect on the Global Credit
Portal at www.globalcreditportal.com.
RELATED CRITERIA AND RESEARCH
-- Industry Report Card: Improvements In Operating Fundamentals Bode Well
For North American REITs, published May 4, 2012.
-- Issuer Ranking: North American REITs And Real Estate Operating
Companies, Strongest To Weakest, published April 30, 2012.
-- Credit FAQ: How Standard & Poor's Applies Its Liquidity Descriptors
For Global Corporate Issuers To North American Real Estate Companies,
published Oct. 12, 2011.
-- Methodology And Assumptions: Liquidity Descriptors For Global
Corporate Issuers, published Sept. 28, 2011.
-- Key Credit Factors: Global Criteria For Rating Real Estate Companies,
published June 21, 2011.
Duke Realty Corp./Duke Realty L.P.
Corporate credit BBB-/Stable/--
Senior unsecured BBB-
Duke Realty L.P.
$300 million 4.375% senior
Unsecd notes due 2022 BBB-