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Executives

Randy Henry - AVP, IR

Denny Oklak - Chairman and CEO

Christie Kelly - EVP and CFO

Analysts

Sloan Bohlen - Goldman Sachs

Steven Frankel - Green Street Advisors

Josh Attie - Citi

Brendan Maiorana - Wells Fargo Securities

Jamie Feldman - Bank of America Merrill Lynch

Duke Realty Corporation (DRE) Q1 2011 Earnings Call April 28, 2011 3:00 PM ET

Operator

Ladies and gentlemen, thank you for standing by and welcome to the Duke Realty quarterly earnings conference call. At this time, all participants are in a listen-only mode and later, we will conduct a question-and-answer session with instructions being given at that time.

(Operator instructions) As a reminder, this conference is being recorded. I would now like to turn the conference over to your host Mr. Randy Henry; Assistant Vice President Investor Relations. Please go ahead sir.

Randy Henry

Thank you, Keely. Good afternoon, everyone and welcome to our first quarter earnings call. Joining me today are Denny 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 again 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. For more information about those risk factors, we would refer you to our December 31, 2010 10-K that we have on file with the SEC and now for our prepared statement, I’ll turn it over to Denny Oklak.

Denny Oklak

Thank you Randy, good afternoon everyone and welcome to Duke Reality's first quarter earnings call. Today, I will address our view on the state of business and some of the drivers affecting real estate demand, I will also highlight some of our key accomplishments during the quarter in both our assets and operations strategies. Christie will address our first quarter financial performance and progress on our capital strategy.

The first quarter was solid from an operation prospective and in the execution on our asset repositioning strategy. The end of 2010 provided significant moment for us with the announcement of both the acquisition of the premier portfolio in South Florida and the transaction with CBRE Realty Trust. I am pleased to announce that both transactions are now fully complete.

The first quarter of 2011 started somewhat slow with continued concerns over the pace of the economic recovery and whether any near-term meaningful traction to be sustained. A combination of the political events taking place in the Middle Eastern country and concerns over weak growth estimates for the US and other key countries also affected leasing activity.

Another key factor during the first two months of the quarter was the severe winter weather conditions we experienced in many of our markets. At various times during the quarter our Dallas, Atlanta, St Louis, Indianapolis and Columbus offices were closed because of inclement weather. We know now that the combination of all these factors led to a slowdown in growth in GDP to 1.8% in the first quarter. We certainly can feel the slowdown.

The good news is that now we are beginning to see somewhat of a pickup in activity as companies review their business forecasts and their plans for potential space needs. We said in January that our outlook remained somewhat conservative on the industrial sector. We are seeing more visits to view available space, the timing of these users, making a commitment to lease additional space is still unclear but at least it is encouraging to see people back in the market.

As I also noted on our fourth quarter call, that we were aware of a few potential significant terminations in our industrial portfolio or during the first part of 2011. I am pleased to report that we were able to execute a renewal for 800,000 square feet expirations we mentioned in Savannah. That was one of the key vacancies that we needed to address in 2011. We still have some challenges ahead but we're off to a good start nonetheless.

The office leasing environment remains slow but there are pockets of solid activity. We signed 125,000 square feet lease with Alcatel-Lucent over in Columbus Ohio. We also are pleased to report that our 3630 Peachtree project in Buckhead is now 44% leased with solid momentum and a backlog of prospects to push that occupancy even higher. On the medical office front leasing activity and development opportunities are picking up. In March we placed into service the Baylor Cancer Center in Dallas.

Our building is spectacular and is 95% leased to Baylor and US Oncology. The overall occupancy in our portfolio was 88.9% at March 31, down slightly from 89.1% at year-end 2010. This is a little better than we expected because of some key renewals and some continued short-term leases. We signed over 5.3 million sq ft of leases during the quarter which is a very solid number.

Our industrial portfolio maintained occupancy at 90.2% at the end of the quarter in addition to the two-year renewal we signed in Savannah, other key industrial transactions included a 646,000 square feet lease extension in our Hebron Building 1 in Cincinnati and three renewal extension deals totaling nearly 370,000 square feet in our Freeport buildings in Dallas.

Our office portfolio maintained occupancy at 85.6% as of the end of the first quarter which was basically flat with year-end. And as I mentioned there are pockets of activity but the leasing environment is still slow. One positive note is that we're beginning to see some of our customers looking to hire again which we believe is a good sign. Consistent with our expectations, same-property NOI for the three and 12 months ended March 31 was flat at a positive 0.9% respectively.

I would like to point out that our guidance for 2011 is a negative 3% to a positive 1% range in same property NOI growth. Our results through the first quarter are in line with our expectations given the known terminations and continued anticipated rent roll downs. During the quarter, we renewed 70% of our leases in line with our historical average. We did experience a negative 4.9% rolled down in net affective rents in these renewals, this is in line with where we ended up in 2010 in all our renewals.

The negative 6.88% on industrials renewals was driven by a couple of larger transactions that we completed where we gained more leased term but had to give some ground on rents for quality tenants. Our lease expirations for the rest of 2011 are very manageable given our historic renewal percentage and executioned our teams in each market. We do expect net spreads to be in this general range for the rest of this year.

Our current development pipeline reflects our commitment to pre-leased medical office in industrial assets. As of March 31, our wholly owned development pipeline consisted of six medical office assets totaling 347,000 square feet and two industrial buildings totaling 1.6 million square feet. The aggregate occupancy of the pipeline is 88%, our joint-venture development pipeline is comprised of a previously announced 406,000 square feet 100% lease industrial building expansion in Indianapolis.

We are having more discussions with customers about build-to-suit projects on both the industrial and office side. Still too early to tell if any of these projects will get started this year but we are more optimistic about potential development starts. The only acquisition activity we completed in the first quarter was the closing on the additional assets in the premium portfolio and as of today as I mentioned, we have closed on all the properties.

We have personnel in place to manage and operate a portfolio and are seeing good leasing activities. We continue to review and pursue other acquisition opportunities to advance our asset repositioning strategy. We are focused on industrial and medical office deals that complement our current portfolio. Pricing in some of the deals that we have pursued has been very aggressive as cap rates for high-quality assets in major markets continue to compress.

We will continue to be patient on making acquisition decisions that make sense for our portfolio. We had a very strong quarter on the disposition front. We generated over $456 million of proceeds from asset sales, nearly all were Midwest office assets. As I mentioned earlier, we closed on the sale of the remaining 13 suburban office buildings to our joint-venture with CBRE Realty Trust which generated proceeds of $274 million to us.

In conjunction with the sale, the joint-venture closed at $275 million bridge loan. The venture is currently working to refinance the bridge loan with long-term secured loans on assets in this portfolio.

We had a lot of interest from lenders in the secured financing at very favorable terms. We also disclosed that our portfolio consisting of two CBD buildings in Cincinnati Ohio and three suburban office assets located in Nashville. The portfolio was over 98800 square feet and was 86% leased. We are pleased to see bank financing for this portfolio, this was the first time we saw true bank financing for this kind of a transaction in over three years.

And finally we sold two other office buildings in Cincinnati totaling nearly 410,000 sq. ft. The assets were 100% leased to a single tenant and were originally developed in our health for sale portfolio.

I am also pleased to report that investor concentration is that 45% industrial, 46% office, 6% medical and 3% retail as of the end of the first quarter. So with that I will turn it over to Christie.

Christie Kelly

Thanks Denny. Good afternoon everyone, as Denny mentioned I would like to provide an update o our first quarter financial performance and progress on our capital strategy. I am pleased to report that our first quarter of 2011, core FFO with $0.28 per share. The results were in line with our expectations and the consensus estimates for the quarter.

Our core earnings from rental operations remain stable, even as we continue to re position our asset mix. Our service operations continue to have strong results from the progress on the Brass project in Washington, DC, which is moving to completion later this year. We also had a strong backlog of projects for the service operation business.

On the capital transaction side, the timing of the closing of the CBRE Realty Trust transaction combined with the other asset disposition resulted in a cash balance of $167 million as of March 31, 2011. And I am pleased to say a zero balance on our unsecured line of credit.

As Denny mentioned, we are looking at acquisition and development opportunities that make sense in order to re-invest the cash balance. We made good progress during the quarter on some of our key capital strategy metrics. Specifically, our fixed charge coverage ratio improved to 1.8 one time from 1.7 nine time at year-end 2010.

Net debt to EBITDA improved to 6.66 times from 7.31 times at the year-end and debt to gross asset remained at 46%. We retired $42.5 million of unsecured bonds in March with available cash. Our maturities for the remainder of 2011 totaled just over $355 million. Our capital strategy call for the retirement free use of cash proceeds from asset sales of refinancing unsecured bonds when the timing and pricing makes sense.

We are pleased with our progress today in our capital strategy and our focused on achieving our goal. We will continue to address our capital plans in accordance with our assets and operating strategy. With that I will turn it back over to Denny.

Denny Oklak

Thanks Christie. We are pleased with the start to 2011 and we are optimistic about the remainder of the year. We are executing our operation strategy through leasing in our portfolio and pursuit of development opportunities primarily in medical office and industrial build-to-suit projects. Our current development pipe line is well leased comprise of high quality projects that step in to our long term asset plans.

The acquisition disposition activity in the first quarter of 2011 continued our progress on the ultimate repositioning of our portfolio to 60% bulk industrial, 25% suburban office and 15% medical office. Our balance sheet is strong and our long term focus is to continue to improve, key coverage of metrics to reset of our vacant space. This process will take some time, but we are well positioned heading into the rest of 2011.

Finally with the solid start to the year, we have reaffirmed our core FFO guidance of $1.06 to $1.18 per share for 2011. Thank you again for joining us today and now we will open it up for questions.

Question-and-Answer Session

Operator

Thank you. (Operator Instructions) Our first question will come from the line of Sloan Bohlen at Goldman Sachs, please go ahead.

Sloan Bohlen – Goldman Sachs

Hi. Good afternoon, guys. First, Denny, just a question - you touch on it a little bit but just pricing for suburban office , as you guys are looking to sell more. And then within that question, maybe just your thoughts on the pace at which you can sell. A competitor of yours had talked about the opportunity to sell more into this market, given the pricing looks pretty good for that.

Denny Oklak

Yes, sure Sloan the pricing is, as you can imagine a little bit all over the board on suburban office depending on the age, the location, the market, but we are in sort of the 8.8% cap rates, what we call the stabilized cap rate range for what we reported for this quarter and I would point out that there was some - a little bit higher cap rate and some of those assets the once in particular that were part of that Nashville portfolio that were located in not the best office sub market in Nashville and - or probably 25 years old. But I think for the good quality assets again we’re seeing cap rates and probably the seven and three quarters to eight the quarter range today.

And I think we are pleased with what we proceed, the state of the market is for being able to do dispositions As I mentioned on the remarks, we are very pleased that we did see a major bank come in and provide just a loan for our real estate acquisition project. We just really had seen that from the banking industry for quite a long time. And again, the terms on that were 50% to 55% loan to value which is still a little bit on the lower side but at least the money is becoming available.

So we're going to continue on the repositioning strategy and actively market - continue to actively market a number of our office properties.

Sloan Bohlen - Goldman Sachs

Okay, and just with regard on the pace, is it as much and how much can you get done, as fast as you can get done, or do you think about where you put those proceeds in terms of acquisition opportunities in the dividend as part of that consideration too.

Denny Oklak

Well we do think about that. But I would say that, we are finding a fair number of acquisition opportunities, so we're not really slowing down or trying to limit the dispositions at this point in time.

Sloan Bohlen - Goldman Sachs

And then just one last question, if I may? On your same-store guidance for the year, it looks like things are trending to the higher end. You talked about lease expirations being fairly manageable for the rest of the year. Can you may be just talk about what would be the types of things if anything, that would kind of move you toward the lower end of that range?

Denny Oklak

Well, again I think it is really good, the pace of the overall economy is going to drive it about as much as anything else. To get an improvement in that number, so be, towards a more optimistic range. Our occupancy has to be a little bit more towards the higher and of our range for the year that we gave you.

I think even then if the volume of activity picks up, it is going to be good for occupancy but I don't think it's going to have a big impact on rent. I still think, this year even of activity is towards the higher end, the rent - there is still going to be some pressure on rent and like we said. It is probably a negative 5% give or take range on the rent spreads today and will be for the rest of the year.

Sloan Bohlen - Goldman Sachs

Okay, thank you guys.

Denny Oklak

Thanks Sloan.

Operator

Thank you. And next we’ll go to the line of Stephen Frankel with Green Street Advisors, please go ahead.

Steven Frankel - Green Street Advisors

Thank you, just a couple of questions. Denny, as you mentioned earlier, the CBRT JV is starting to look at secure debt packages. You mentioned that you started to see better packages than before but can you be more specific about what that means? How have spreads moved over the last six months or so and what kind of LTV are you targeting for that venture

Christie Kelly

Steven, I'll jump in there. In terms of the LTV, we're looking at 50% to 60% off LTV venture and specifically as it relates to the permanent debt proposals and/or LOI's that have in hand, very attractive, very aggressive pricing in terms of rates. We are talking about four, to mid five.

Steven Frankel - Green Street Advisors

Is that with like a five year term or a 10 year term?

Christie Kelly

We are looking at ten-year term.

Steven Frankel - Green Street Advisors

And is that from a life companies, banks, mixture of that?

Christie Kelly

Primarily life companies.

Steven Frankel - Green Street Advisors

Okay. And then, when you guys are looking at allocating capital between acquisitions and development, what kind of an unlevered IRR hurdle are you viewing both of those activities through?

Denny Oklak

Well, it sort of depends today because, as part of this repositioning. We are selling assets that what we believe is good, long-term pricing and then we're just focused on buying assets at good long-term pricing too and just improving. We are moving towards our desired asset mix, and just improving the overall quality of the portfolios, so we're focused, I will tell you more on that than we are on exclusively on cap rates today.

Particularly again on the acquisition side, but you can see where, things are shaking out on some of the acquisitions that we have done and depending on where we are, we are probably really in the 7% to 8% range.

On new development, we are always looking at higher yields than on acquisitions and that difference again as it usually is in most parts of the cycle is today probably about 150 basis points higher yield on the development that we can find on similar kinds of acquisitions today. So in the development, we are really looking at for the most part 8.5 to 9.5 yields with some growth built into that for some longer-term leases.

Steven Frankel - Green Street Advisors

Okay, and then finally, perception of how your suburban office recovery is faring mid-cycle versus the early 2000s. Are we - is it taking longer because it's the job (inaudible) or are things starting to catch up more now?

Denny Oklak

No, I think it is definitely taken longer Steve. It is, this one is pretty slow and pretty stubborn and it is, I really do believe being driven by that unemployment rate. If you look at where we are today in the last 18 months, we really have not made a lot of progress on this unemployment rate.

It appears now that it is finally starting to tick down and - but I do not really see the office business picking up until we start seeing 50 basis point improvements in that over a couple of months period. Then I think we can start seeing some office activity, but this has been one of the lowest, slowest recoveries we have seen in a long time.

Steven Frankel - Green Street Advisors

Great, thank you.

Denny Oklak

Thanks, Stephen.

Operator

Thank you, and we will go next to the line of Michael Bilerman with Citi please go ahead.

Josh Attie - Citi

Hey, thanks. It's Josh Attie with Michael. Can you talk more about the acquisition and the disposition pipelines and specifically the timing? Last December, you were able to nicely time a sale and a buy and, as you look forward and you think about what you want to sell and what you want to require, how important is it to you, for you to be able to time those deals in a way that's capital efficient?

Denny Oklak

Well Josh, we are very focused on that timing and trying to match those up, but again that is not the key driver of our strategy because we were very fortunate and through a lot of luck and hard work, we were able to match up several larger transactions last year. We know that is not always going to be the case. But, if an acquisition comes along, that we think makes long-term sense and the disposition pipeline is not there.

We will still make that acquisition and funded accordingly, vice versa if we see an opportunity to do the right kind of disposition that makes long-term sense but don't have immediate use of the proceeds, we will certainly consider that and likely do that. But just - then just looking at the pipeline, it is just so hard to tell because I would tell you basically those three major transactions that we did last year.

They are sitting there a year ago in April, the only one we really had any discussions going on was the Dugan transaction which closed right at the beginning of the third quarter, so they come up and they move pretty quickly when you see it. So, I think overall I would say there is a pretty good pipeline of deals being up deals out there, deals being marketed and so I am pretty optimistic about the progress we can make this year, but it is just so hard to say and until you find one of the big ones then looks things can close in 90 to 120 days.

Josh Attie - Citi

Year-to-date, do you feel like there's been more activity in your pipeline on the buy side or on the sell side?

Denny Oklak

I would say on the buy side so far this year, but I think that could turn too.

Josh Attie - Citi

And when you think about growing the medical office part of the portfolio, do you think that that will come from development or acquisitions or a mixture?

Denny Oklak

Well, I think it could be a mixture, but today it’s really primarily come from the new development. We’ve only done, I mean basically one medical office acquisition that was the deal we closed late last year in Charlotte which was an excellent asset and it basically gave us the relationship with the Carolina’s healthcare system and almost everything else that we have in that portfolio today is new development.

We continue to look at some acquisition opportunities there I think that they may come up, most of those are going to come I still think through our relationships with the hospital systems so when they want to sell some of their buildings to raise capital for other uses within their business they are going to come to one of their trusted advisors and owners and that will be us, so that’s where I think most of those will come from. But, we were monitoring the market pretty closely so we kind of know what is going on there.

Josh Attie – Citi

And then just last question, you mention in your prepared remarks you were getting interest in development on the suburban office side. I guess how serious are those conversations and what are, what are the economics that would justify developing suburban office?

Denny Oklak

Well, again these are build-to-suit opportunities. So, that is really what is driving it and the build-to-suit on the suburban office side is usually a need by a customer for a specific building and I am not talking about anything extraordinary, but a building to meet their specific needs or building in a specific location that they want to be in. So, many times it is on our land parcels where we can develop another building in a park.

Lot of times, some of the people we’re talking to are our existing tenants that need a new building for expansion purposes. This isn’t real wide spread Josh, but we haven’t had a discussion on an office built-to-suit for I am not sure I can remember where it has been a while other than something that was funded by the federal government. But for private companies, we really haven’t seen any for quite a while and there are a couple of discussions going on around our system today.

Josh Attie - Citigroup

Okay, thanks a lot.

Denny Oklak

Thanks Josh.

Operator

Thank you. The next question is from Brendan Maiorana at Wells Fargo. Please go ahead.

Brendan Maiorana - Wells Fargo Securities

Thanks. Good afternoon. Denny, you mentioned that you – you're seeing a lot of acquisition opportunities and you mentioned if you don't have the sales proceeds kind of match up that you would fund those accordingly, which I guess I'm just interested in maybe what that means and, given that you've had a nice performance in your stock, would you consider looking at an equity issuance to grow the portfolio a little bit more constructively now versus I think the beginning part of the year, where it seemed like you were pretty reluctant to do that?

Denny Oklak

Well, I think our philosophy hasn't changed here, Brendan. What we’ve been saying really for the last probably 18 months at least, I can’t think back further than that right now so for the last 18 months we have been very consistent on that in saying that we would - we're not, we don’t really need the equity. We’re in good shape with everything, on our balance sheet and we would consider issuing equity in connection with a major transaction if it came up and I think that is still our philosophy today.

Fortunately, I mean if you look back over the last 12 months we did do some equity when we did the Dugan transaction because we didn’t have all the dispositions lined up at that time. Then as this was pointed out, we are very fortunate and if the timing worked out great between the CBRE Realty Trust deal and the premier deals, so we did not need to do equity and didn’t consider doing equity for the premier transaction. We’re really in excellent shape today. As Christy mentioned, we got $167 million in cash as of the end of the quarter to fund additional acquisitions, no balance on the line. So, we’re just going to continue to go down that path.

Brendan Maiorana - Wells Fargo Securities

Given that you've got kind of all of that near-term liquidity or call it bridge liquidity or whatever, would you feel comfortable if you didn't have the dispositions lined up, taking a big acquisition on the balance sheet for the time being with some of that bridge financing and then just paying it off later when you get a couple of deals disposition fund?

Denny Oklak

I think this is certainly something we’d look at, but we have to be pretty comfortable that there were some disposition proceeds coming not too far behind us.

Christie Kelly

And Brendon, I am just jumping there again we’ve got almost 179 cash in bank and to that point we’ve been running our line really just with what I’ll call just for timing purposes, we’ve gone up on our line a bit. Denny and I have been very specific about not using that line as a permanent source “financing” and to that point have no intention of doing that in the future. So, even as we closed the quarter we had a little bit up on our line effectively with the disposition, brought that down and now have a lot of cash in bank.

Brendan Maiorana - Wells Fargo Securities

Sure. Thanks. And then just switching a little bit to the development outlook, you've had some of your peers on the industrial side that I think are looking a little bit more opportunistically at perhaps starting some projects back in some of the better markets. I think you guys have been kind of reluctant to do that thus far in the cycle. But - and I know that when we talked about this back at your investor day a couple of months ago, I don't think that was where your minds were at. But has any of that changed in the past couple of months and could you envision doing back projects this year?

Denny Oklak

Up to here today not really, Brendon, I think when I look at virtually all of our markets, there is still fair amount of supply, it is a lot less than it was 18, 15 months ago, 12 months ago, but there’s still a fair amount of supply out there. The only place we started a partially pre-leased building in Houston last year that was about 45% lease we started and it is now 75% lease then construction is going to finish up in the next 30 days or so.

So, we’re pleased and there’s good activity, but when you look around the markets I just don’t really see a need for projects out there today. So, I just don’t see it for the remainder of this year.

Brendan Maiorana - Wells Fargo Securities

Sure, okay. That's helpful. And then just last for me, Christie, it looked like the straight line rent jumped up fairly significantly just from fourth quarter to first quarter. Is there anything that was particularly driving that number up and what might we expect for kind of the balance of the year?

Christie Kelly

There was really nothing of note, Brendon, whatsoever. I mean to the extent that there was maybe some timing on some larger deals that we did with a little free rent, that’s about it. But, there is nothing out of the ordinary projected for the year and nothing that I can make note of for the quarter.

Brendan Maiorana - Wells Fargo Securities

Great, okay. Thank you.

Christie Kelly

You bet.

Operator

Thank you and next we’ll go to the line of Jamie Feldman of Bank of America Merrill Lynch, please go ahead.

Jamie Feldman – Bank of America Merrill Lynch

Thank you, and good afternoon. Conversations with some of the brokers I've been having lately suggest that they're not seeing a big backlog of leasing activity, particularly in the bulk portfolio. Some of it I think (inaudible) with what you were saying about earlier in the quarter. I guess I'm just trying to figure out, what are you guys seeing in terms of kind of the backlog of potential leases and are things kind of slowing down or picking up?

Denny Oklak

Well I think as I said Jamie we got off to a slow start I think for a lot of reasons this year, but the weather certainly was a big one. And we - after that, I think we had some pretty good activity sort of early March, it picked and now I would say it is kind of steady. There are some deals out there, but I wouldn’t say we have like a huge backlog. If you look at just our industrial occupancy it’s really held pretty steady over the last year.

We had a pretty big movement from late 2009 to early 2010 and I am talking late third quarter to say mid to late first quarter, a year ago and we felt pretty steady at just over 90% since that time.

There is nothing out there that I am seeing that is telling me that all of a sudden we are going to bump that backup to 92 or 93% in the next couple of quarters. I think where the market is today, people are – there is deals out there, but there’s also deals with tenants expiring. There is still some downsizing going on in a few cases. So, I would anticipate that occupancy that has to hold fairly steady at least for the next 6 months.

I think getting in to late third quarter and maybe early fourth quarter. We’ll have to see where the economy is and what again particularly the retailers are thinking about the holidays and we might see some movement there, but between now and then I just don’t see a lot.

Jamie Feldman – Bank of America Merrill Lynch

Okay, thank you. And then what are you seeing in terms of within your - what you call bulk distribution between like more flex type office, kind of smaller tenant users, versus big-box?

Denny Oklak

Well, you got to remember we really don’t have any flex. I mean if you look at we’ve got over a 100 million square feet of industrial and we’ve only got about 3 million square feet of flex and that is going away. We got some of that, we have a lot less than that. We got some of that in the Dugan acquisition and that will probably start going away even lower. So, I don’t really have any comment on the flex business because we’re just on it. But, just on the bulk business what I would say is, generally speaking we’re still seeing the bigger deals and I am talking what I would define as a bigger deal today is above 200,000 square feet. I think we’re seeing more of those kind of deals than we are at the 30,000 to 50,000 square foot bulk deals.

Jamie Feldman – Bank of America Merrill Lynch

Okay. And then finally, I got on late. I apologize. Did you - did anyone ask, the Richmond (inaudible) portfolio, is that something that you guys would be interested in terms of the land, the location and size?

Denny Oklak

Well, Jamie we don’t comment on speculative acquisitions and you know what we are focused on and we’re focused primarily on in bulk industrial acquisitions, but as I mentioned here just a couple of minutes ago where we not opposed to do with some medical office acquisitions. So, I guess I don’t know their portfolio very well to be honest with you, but I suppose if their medical office assets in the right markets with - and good quality products it might be some we are interested in.

Jamie Feldman – Bank of America Merrill Lynch

I guess my question was just more - would you want to own that much more medical office?

Denny Oklak

Well, you know our target is 15% of our overall portfolio. So, we probably need another 500 to 700 million to get to that when you look at where the overall size of our company is today. So, we’ve got plenty of room to do some acquisitions in there because today we’re doing about 100 to 150 million of development there. So, we’ve got plenty of room within our strategy to acquire some and we’ll just see if that happens.

Jamie Feldman – Bank of America Merrill Lynch

Okay. Thank you.

Christie Kelly

Thanks Jamie.

Operator

(Operator Instructions) Thank you. Allowing few moments for people to queue up, Mr. Henry there are no further questions. I’ll turn it back to you for closing remarks.

Randy Henry

Okay. Thank you again everyone for joining us today. As a reminder, our first quarter earnings call is tentatively scheduled for July 28, that concludes our call. Thanks again.

Operator

Thank you and ladies and gentlemen this conference will be available for replay after 5.30pm eastern time today through Thursday, May 2 [ph] at midnight. You may access the AT&T teleconference replay system at any time by dialing 302-365-3844 with the access code of 197143, those numbers again 302-365-3844 with the access code of 197143. That does conclude your conference for today. Thank you for your participations and for using AT&T executive teleconference. You may now disconnect.

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Source: Duke Realty CEO Discusses Q1 2011 Results - Earnings Call Transcript
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