DUKE REALTY INVESTMENTS INC, 424B5, 1997-09-10

DUKE REALTY INVESTMENTS INC
424B5, 1997-09-10
REAL ESTATE INVESTMENT TRUSTS

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<PAGE>
PROSPECTUS SUPPLEMENT
(TO PROSPECTUS DATED MAY 27, 1997)
9,500,000 SHARES

[LOGO]
DUKE REALTY INVESTMENTS, INC.
COMMON STOCK
------------------

Duke Realty Investments, Inc. (the "Company") is a self-administered and
self-managed real estate investment trust that began operations through a
related entity in 1972. As of June 30, 1997, the Company owned a diversified
portfolio of 262 in-service industrial, office and retail properties,
encompassing approximately 31.4 million square feet located in seven states, and
26 buildings and one building expansion encompassing approximately 4.1 million
square feet under development. The Company also owned approximately 1,300 acres
of land for future development. The Company has the largest commercial real
estate operations in Indianapolis and Cincinnati and is one of the largest real
estate companies in the Midwest. The Company expects to continue to pay regular
quarterly dividends to its shareholders.

All of the shares of Common Stock offered hereby are being sold by the
Company. Of the 9,500,000 shares of Common Stock offered hereby, 7,600,000
shares of Common Stock are being offered initially in the United States and
Canada and the remaining 1,900,000 shares of Common Stock are being offered
initially outside of the United States and Canada (collectively, the
"Offerings"). See "Underwriting." The Common Stock is listed on the New York
Stock Exchange under the symbol DRE. The last reported sale price for the Common
Stock on September 9, 1997 was $21 7/16 per share.
--------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS
TO WHICH IT RELATES. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.

<TABLE>
<CAPTION>
PRICE TO UNDERWRITING PROCEEDS TO
PUBLIC DISCOUNT(1) COMPANY(2)
<S> <C> <C> <C>
Per Share.............................................. $21.4375 $1.10 $20.3375
Total (3).............................................. $203,656,250 $10,450,000 $193,206,250
</TABLE>

(1) The Company has agreed to indemnify the several Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, as
amended. See "Underwriting."

(2) Before deducting expenses payable by the Company estimated at $400,000.

(3) The Company has granted to the several U.S. Underwriters an option to
purchase up to an additional 1,140,000 shares of Common Stock to cover
over-allotments, if any, and has granted the several International Managers
an option to purchase up to an additional 285,000 shares of Common Stock to
cover over-allotments, if any. If both options are exercised in full, the
total Price to Public, Underwriting Discount and Proceeds to Company will be
$234,204,688, $12,017,500 and $222,187,188, respectively. See
"Underwriting."
--------------------------

The shares of Common Stock are offered by the several Underwriters, subject
to prior sale, when, as and if delivered to and accepted by them, subject to
approval of certain legal matters by counsel for the Underwriters. The
Underwriters reserve the right to withdraw, cancel or modify such offer and to
reject orders in whole or in part. It is expected that delivery of the shares of
Common Stock will be made in New York, New York on or about September 15, 1997.
--------------------------
MERRILL LYNCH & CO.

BT ALEX. BROWN

A.G. EDWARDS & SONS, INC.

LEGG MASON WOOD WALKER
INCORPORATED

MCDONALD & COMPANY
SECURITIES, INC.

MORGAN STANLEY DEAN WITTER

--------------------------
The date of this Prospectus Supplement is September 9, 1997.
<PAGE>
[MAP entitled "Duke Realty Investments Principal Markets" and consisting of (1)
a map of the continental United States on which the states of Missouri,
Wisconsin, Illinois, Indiana, Kentucky, Tennessee and Ohio are shaded and (2) a
larger map of such states on which the city of Indianapolis, Indiana is shown as
the Corporate Headquarters; the cities of Chicago, Illinois, St. Louis,
Missouri, Columbus, Ohio, Cincinnati, Ohio and Nashville, Tennessee are shown as
Regional Office locations; and the city of Milwaukee, Wisconsin is shown as
Other Markets.]

CERTAIN PERSONS PARTICIPATING IN THE OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK,
INCLUDING EXERCISING THE OVER-ALLOTMENT OPTION, ENTERING STABILIZING BIDS,
EFFECTING SYNDICATE COVERING TRANSACTIONS AND IMPOSING PENALTY BIDS. FOR A
DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITING."

S-2
<PAGE>
PROSPECTUS SUPPLEMENT SUMMARY

THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY, AND SHOULD BE READ IN
CONJUNCTION WITH, THE MORE DETAILED INFORMATION APPEARING ELSEWHERE IN THIS
PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS OR DOCUMENTS INCORPORATED
HEREIN AND THEREIN BY REFERENCE. UNLESS INDICATED OTHERWISE, THE INFORMATION
CONTAINED IN THIS PROSPECTUS SUPPLEMENT IS PRESENTED AS OF JUNE 30, 1997. SHARE
AND PER SHARE AMOUNTS IN THIS PROSPECTUS SUPPLEMENT REFLECT THE COMPANY'S
TWO-FOR-ONE STOCK SPLIT WHICH OCCURRED ON AUGUST 25, 1997. SEE "--RECENT
DEVELOPMENTS." ALL REFERENCES TO THE "COMPANY" IN THIS PROSPECTUS SUPPLEMENT AND
THE ACCOMPANYING PROSPECTUS INCLUDE THE COMPANY AND THOSE ENTITIES OWNED OR
CONTROLLED BY THE COMPANY, UNLESS THE CONTEXT INDICATES OTHERWISE.

WHEN USED IN THIS PROSPECTUS SUPPLEMENT, THE WORDS "BELIEVES," "EXPECTS" AND
SIMILAR EXPRESSIONS ARE INTENDED TO IDENTIFY FORWARD-LOOKING STATEMENTS. SUCH
STATEMENTS ARE SUBJECT TO CERTAIN RISKS AND UNCERTAINTIES WHICH COULD CAUSE
ACTUAL RESULTS TO DIFFER MATERIALLY. READERS ARE CAUTIONED NOT TO PLACE UNDUE
RELIANCE ON THESE FORWARD-LOOKING STATEMENTS, WHICH SPEAK ONLY AS OF THE DATE
HEREOF. THE COMPANY UNDERTAKES NO OBLIGATION TO PUBLICLY RELEASE THE RESULTS OF
ANY REVISIONS TO THESE FORWARD-LOOKING STATEMENTS WHICH MAY BE MADE TO REFLECT
EVENTS OR CIRCUMSTANCES AFTER THE DATE HEREOF OR TO REFLECT THE OCCURRENCE OF
UNANTICIPATED EVENTS.

THE COMPANY

The Company is a self-administered and self-managed real estate investment
trust (a "REIT") that began operations through a related entity in 1972. At June
30, 1997, the Company owned a diversified portfolio of 262 in-service
industrial, office and retail properties (the "Properties"), encompassing
approximately 31.4 million square feet located in seven states, and 26 buildings
and one building expansion encompassing approximately 4.1 million square feet
under development. The Company also owned approximately 1,300 acres of
unencumbered land (the "Land") for future development, of which approximately
75% is zoned for industrial use and which is typically located adjacent to the
Properties. The Company provides leasing, management, construction, development
and other tenant-related services for the Properties and certain properties
owned by third parties. The Company has the largest commercial real estate
operations in Indianapolis and Cincinnati and is one of the largest real estate
companies in the Midwest. The Company believes that the Midwest offers a
relatively strong and stable economy compared to other regions of the United
States and provides significant growth potential due to its central location,
established manufacturing base, skilled work force and moderate labor costs.

The Company has developed over 50 million square feet of commercial property
since its founding including an average of approximately 4.1 million square feet
per year during the last five years. In addition, the Company acquired
approximately 8.9 million square feet during the three years ended December 31,
1996. During the six months ended June 30, 1997, the Company placed in service
2.6 million square feet of new development and acquired 1.8 million square feet
of property.

The Company manages over 43 million square feet of property, including over
8.1 million square feet owned by third parties. The Company manages
approximately 35% and 29% of all competitive suburban office, warehousing and
light manufacturing space in Indianapolis and Cincinnati, respectively. In
addition to providing services to approximately 1,800 tenants in the Properties,
the Company provides such services to over 900 tenants in 92 properties owned by
third parties. Based on market data maintained by the Company, the Company
believes that it was responsible in the first six months of 1997 for
approximately 67% and 34% of the net absorption (gross space leased minus lease
terminations and expirations) of competitive suburban office, warehousing and
light manufacturing space in Indianapolis and Cincinnati, respectively. The
Company believes that its dominant position in the primary markets in which it
operates gives it a competitive advantage in its real estate activities.

S-3
<PAGE>
may be exchanged by the holders thereof, other than the Company, for Common
Stock of the Company on a one-for-one basis. Upon an exchange of Units for
Common Stock, the Company's percentage interest in the Operating Partnership
will increase. The Company controls the Operating Partnership as the sole
general partner and owner, as of June 30, 1997, of approximately 90% of the
Units. In addition, the senior management team of the Company owns approximately
12.5% of the Company through Common Stock and Unit ownership.

The following tables provide an overview of the Properties.

SUMMARY OF PROPERTIES
(IN THOUSANDS, EXCEPT PERCENTAGES)

<TABLE>
<CAPTION>
PERCENT
ANNUAL OF TOTAL
PERCENT NET NET EFFECTIVE OCCUPANCY
SQUARE OF TOTAL EFFECTIVE ANNUAL AT
TYPE OF PROPERTY FEET SQUARE FEET RENT(1) RENT(1) JUNE 30, 1997
- -------------------------------------- --------- ------------- ------------ ------------- -------------
<S> <C> <C> <C> <C> <C>
Industrial............................ 21,753 69% $ 77,384 42% 95.5%
Office................................ 7,943 25 91,739 50 96.3%
Retail................................ 1,710 6 15,471 8 95.2%
--------- ----- ------------ -----
Total................................. 31,406 100% $ 184,594 100% 95.7%
--------- ----- ------------ -----
--------- ----- ------------ -----
</TABLE>

- ------------------------

(1) Represents annual net effective rent due from tenants in occupancy as of
June 30, 1997. Net effective rent ("Net Effective Rent") equals the average
annual rental property revenue over the terms of the respective leases,
excluding additional rent due as operating expense reimbursements, landlord
allowances for operating expenses and percentage rents.

SQUARE FOOTAGE AND ANNUAL NET EFFECTIVE RENT OF PROPERTIES
(IN THOUSANDS, EXCEPT PERCENTAGES)

<TABLE>
<CAPTION>
SQUARE FEET ANNUAL PERCENT OF
----------------------------------------------------------- NET ANNUAL
PERCENT OF EFFECTIVE NET EFFECTIVE
PRIMARY MARKET INDUSTRIAL OFFICE RETAIL TOTAL TOTAL RENT(1) RENT
- ----------------------- ----------- ----------- --------- --------- ----------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Indianapolis........... 13,621 1,417 194 15,232 49% $ 61,635 33%
Cincinnati............. 4,003 2,961 799 7,763 25 55,113 31
Columbus............... 1,749 1,481 219 3,449 11 25,759 14
St. Louis.............. 924 680 -- 1,604 5 12,626 7
Cleveland.............. 332 1,059 -- 1,391 4 13,669 7
Nashville.............. 562 -- -- 562 2 3,896 2
Chicago................ -- 345 -- 345 1 5,961 3
Other (2).............. 562 -- 498 1,060 3 5,935 3
----------- ----- --------- --------- ----- ------------ -----
Total.................. 21,753 7,943 1,710 31,406 100% $ 184,594 100%
----------- ----- --------- --------- ----- ------------ -----
----------- ----- --------- --------- ----- ------------ -----
Percent of Total
Square feet.......... 69% 25% 6% 100%
----------- ----- --------- ---------
----------- ----- --------- ---------
</TABLE>

- ------------------------

(1) Represents annual Net Effective Rent due from tenants in occupancy as of
June 30, 1997, excluding additional rent due as a result of operating
expense reimbursements, landlord allowances for operating expenses and
percentage rents.

(2) Represents properties not located in the Company's primary markets. These
properties are located in other similar Midwestern markets.

S-4
<PAGE>
RECENT DEVELOPMENTS

OPERATING PERFORMANCE, DIVIDEND INCREASE AND STOCK SPLIT

For the six months ended June 30, 1997, the Company reported the following
information as compared to the same period in 1996.

<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30
-----------------------
1997 1996
----------- ----------
(IN THOUSANDS)
<S> <C> <C>
Net income available for common shareholders...... $ 29,682 $ 21,947
Revenues.......................................... 111,572 83,744
Funds From Operations............................. 48,123 34,911
Cash flow provided by (used by):
Operating activities.......................... 71,462 39,116
Investing activities.......................... (175,407) (93,598)
Financing activities.......................... 101,718 49,041
</TABLE>

On July 24, 1997, the Company's Board of Directors raised its regular
quarterly common dividend from $.51 per share to $.59 per share, payable on
August 29, 1997 to common shareholders of record on August 15, 1997. The new
dividend is an increase of $.32 per year which is a 15.7% increase over the
previous amount. This dividend equals $2.36 on an annualized basis. The Board of
Directors also declared a two-for-one split of the Company's common stock (the
"Stock Split") to be effected as a 100% share dividend, payable on August 25,
1997 to common shareholders of record on August 18, 1997. The Company also
announced that its Board of Directors anticipates the Company's regular
quarterly dividend amount to be $.30 per common share on a post-Stock Split
basis. This would equate to a dividend increase of 1.7% and follows the
Company's 15.7% dividend increase announced July 24, 1997. The official
declaration for this new dividend is expected to be on October 23, 1997, the
date of the Company's next regularly scheduled Board of Directors' meeting.
Share and per share amounts in this Prospectus Supplement have been restated to
reflect the effect of the Stock Split.

FINANCING

In July 1997, the Company issued 3.0 million Depositary Shares, each
representing 1/10 of a Series B Cumulative Step-Up Redeemable Preferred Share,
raising net proceeds of $146.1 million. These securities are not redeemable
prior to September 30, 2007 and offer a cumulative distribution of 7.99% through
September 2012, and 9.99% thereafter. The proceeds of this financing were fully
used to reduce the outstanding balance on the Company's unsecured line of credit
and to fund the development and acquisition of additional rental properties.

In August 1997, the Company issued $100 million of unsecured Pass-through
Asset Trust Securities ("PATS"). The PATS bear interest at a coupon rate of
6.95% and mature on August 15, 2004. The effective rate of the PATS is 7.347%,
which includes the effect of the settlement of a forward Treasury lock agreement
which the Company entered into in April 1997. The Company and an affiliate of
the placement agent for the PATS can effectively agree to reset the interest
rate and remarket the underlying notes with a maturity of August 15, 2011.

The Company reduced the interest rate on its $150.0 million unsecured line
of credit from the 30-day London Interbank Offered Rate ("LIBOR") plus 1.25% to
LIBOR plus 1.00% effective March 27, 1997. Effective August 28, 1997, the
unsecured line of credit was increased to $200.0 million and the interest rate
was reduced to LIBOR plus .80%. This line of credit also includes a "competitive
bid option" and matures in April 2001.

S-5
<PAGE>
Concurrently with the Offering, the Company is considering offering
approximately $20 million of Common Stock to an institutional buyer at the
prevailing market price of the stock. There can be no assurance that this
transaction will be consummated.

DEVELOPMENT AND ACQUISITIONS

During the first seven months of 1997, the Company completed development of
and placed in service 10 properties and one property expansion comprising 2.6
million square feet at a total cost of $79.5 million. The Company has 27
properties and one property expansion under development at July 31, 1997
comprising 4.2 million square feet which will have a total cost of $204.1
million upon completion. Also during the first seven months of 1997, the Company
acquired 9 properties with 1.9 million square feet at a total cost of $120.5
million.

These property additions (the "New Properties"), totaling 8.7 million square
feet, consist of 73% industrial, 23% office, and 4% retail projects. The total
cost of the New Properties is expected to be $404.1 million. At July 31, 1997,
the New Properties which have been placed in service are 88% leased, and the New
Properties under construction are 58% pre-leased for a combined total of 73%
leased. The New Properties are expected to provide a weighted average
unleveraged stabilized return on cost (computed as property annual contractual
net operating income ("NOI") divided by total project costs) of 11.3% with
anticipated leasing activity. The annual contractual NOI to be generated from
the New Properties, once placed in service, will be $45.7 million with
anticipated additional leasing. The cost of the New Properties to be placed in
service in the third quarter of 1997 is $47.1 million, in the fourth quarter of
1997 is $78.9 million, and in 1998 is $78.1 million.

The Company's expectations of total cost and weighted average unleveraged
stabilized return on cost constitute forward-looking information that is subject
to risks inherent in the completion of construction of the properties under
development and the leasing of any unleased portion of the properties. Such
risks could cause actual results to differ materially from the Company's
expectations.

CHICAGO, ILLINOIS. In May 1997, the Company entered the Chicago, Illinois
market. Through a joint venture with an institutional investor, the Company
purchased the six-story, 345,200 square foot Central Park of Lisle 96% occupied
office property in Lisle, Illinois, a western suburb of Chicago. The acquisition
also included a 17-acre site, located adjacent to the existing property, for
future office development. The Company is establishing a regional office in
Chicago. The Company believes that the Chicago market will offer additional
profitable development and acquisition opportunities in select sub-markets.
While the Company does not anticipate dominating the Chicago market because of
its magnitude, it believes that entry into the Chicago market is in accordance
with its strategy of entering attractive Midwestern markets.

S-6
<PAGE>
The following table sets forth information regarding each of the New
Properties as of July 31, 1997.
<TABLE>
<CAPTION>
IN-SERVICE OR
ANTICIPATED PROPERTY
IN-SERVICE DATE PROJECT/TENANT LOCATION TYPE
- ------------------------------ ------------------------------ ---------------- ----------
<S> <C> <C> <C>
DEVELOPMENT COMPLETED IN 1997:
1st Qtr. 1997 Park Fletcher Building 33 Indianapolis, IN Industrial
1st Qtr. 1997 Dukeport 2 St. Louis, MO Industrial
2nd Qtr. 1997 Silver Burdett Ginn Expansion Indianapolis, IN Industrial
2nd Qtr. 1997 Vanstar Indianapolis, IN Industrial
2nd Qtr. 1997 North Airport Park Bldg. 2 Indianapolis, IN Industrial
2nd Qtr. 1997 Pamida Lebanon, IN Industrial
2nd Qtr. 1997 Skyport Building 1 Cincinnati, OH Industrial
2nd Qtr. 1997 Parkwood Place Columbus, OH Office
2nd Qtr. 1997 Sofa Express - Florence Florence, KY Retail
2nd Qtr. 1997 Purity Wholesale Lebanon, IN Industrial
3rd Qtr. 1997 Freedom Square III Cleveland, OH Office
UNDER DEVELOPMENT:
3rd Qtr. 1997 Mr. Coffee Cleveland, OH Industrial
3rd Qtr. 1997 Southpointe C Columbus, OH Industrial
3rd Qtr. 1997 Three Parkwood Indianapolis, IN Office
3rd Qtr. 1997 Anthem Cincinnati, OH Office
3rd Qtr. 1997 Haywood Oaks Building 8 Nashville, TN Industrial
3rd Qtr. 1997 Fountain Place Cincinnati, OH Retail
4th Qtr. 1997 Beiersdorf Cincinnati, OH Industrial
4th Qtr. 1997 Park Fletcher Building 35 Indianapolis, IN Industrial
4th Qtr. 1997 Southpointe Building D Columbus, OH Industrial
4th Qtr. 1997 Southpointe Building E Columbus, OH Industrial
4th Qtr. 1997 Hamilton Crossing Building 2 Indianapolis, IN Office
4th Qtr. 1997 Park 100 Building 133 Indianapolis, IN Industrial
4th Qtr. 1997 Landerbrook Corporate Ctr. Cleveland, OH Office
4th Qtr. 1997 4660 Governor's Pointe Cincinnati, OH Office
4th Qtr. 1997 Mosteller II Cincinnati, OH Industrial
4th Qtr. 1997 Park Fletcher Building 34 Indianapolis, IN Industrial
4th Qtr. 1997 Compmanagement Columbus, OH Office
4th Qtr. 1997 Park 100 Building 132 Indianapolis, IN Office
4th Qtr. 1997 Lowes Cincinnati, OH Retail
4th Qtr. 1997 Dukeport 3 St. Louis, MO Industrial
4th Qtr. 1997 Biggs B-Shoppes Cincinnati, OH Retail
1st Qtr. 1998 Prentice Hall Lebanon, IN Industrial
1st Qtr. 1998 Software Artistry Indianapolis, IN Office
1st Qtr. 1998 Park 100 Building 135 Indianapolis, IN Office
2nd Qtr. 1998 Rings Road Office Building Columbus, OH Office
2nd Qtr. 1998 Sterling 4 Columbus, OH Office
2nd Qtr. 1998 MCI St. Louis, MO Office
3rd Qtr. 1998 Creekside Crossing One Nashville, TN Office
1997 ACQUISITIONS:
2nd Qtr. 1997 NGIC/Pointe 70 St. Louis, MO Office
2nd Qtr. 1997 Dyment/Johnson Controls Cleveland, OH Industrial
2nd Qtr. 1997 Central Park of Lisle Chicago, IL Office
2nd Qtr. 1997 8555 Keystone Crossing Indianapolis, IN Office
2nd Qtr. 1997 Sun TV Columbus, OH Industrial
3rd Qtr. 1997 7910 and 7920 Kentucky Drive Cincinnati, OH Industrial

<CAPTION>
IN-SERVICE OR PERCENT
ANTICIPATED PERCENTAGE SQUARE LEASED OR INITIAL LEASE
IN-SERVICE DATE OWNERSHIP FEET PRE-LEASED(1) TERM(2)
- ------------------------------ --------- --------- ------------- -------------
<S> <C> <C> <C> <C>
DEVELOPMENT COMPLETED IN 1997:
1st Qtr. 1997 50% 112,710 100% 5 years
1st Qtr. 1997 100% 244,800 65% 5 years
2nd Qtr. 1997 100% 183,950 100% 7 years
2nd Qtr. 1997 100% 415,680 100% 10 years
2nd Qtr. 1997 100% 377,280 100% 5 years
2nd Qtr. 1997 100% 200,000 100% 10 years
2nd Qtr. 1997 100% 316,800 9% Varies
2nd Qtr. 1997 100% 156,000 100% 15 years
2nd Qtr. 1997 100% 20,250 100% 10 years
2nd Qtr. 1997 100% 556,248 100% 10 years
3rd Qtr. 1997 100% 71,025 74% Varies
---------
2,654,743 85%
---------
UNDER DEVELOPMENT:
3rd Qtr. 1997 100% 458,000 100% 15 years
3rd Qtr. 1997 100% 322,000 0%(3) N/A
3rd Qtr. 1997 100% 121,246 73% Varies
3rd Qtr. 1997 100% 78,240 100% 10 years
3rd Qtr. 1997 100% 71,500 0% N/A
3rd Qtr. 1997 25% 207,170 95% 20 years
4th Qtr. 1997 100% 252,000 100% 10 years
4th Qtr. 1997 50% 96,000 0% N/A
4th Qtr. 1997 100% 116,520 35% 15 years
4th Qtr. 1997 100% 82,520 0% N/A
4th Qtr. 1997 100% 32,800 77% 10 years
4th Qtr. 1997 100% 20,530 100% 15 years
4th Qtr. 1997 100% 110,148 51% Varies
4th Qtr. 1997 100% 76,465 71% Varies
4th Qtr. 1997 100% 261,440 0% N/A
4th Qtr. 1997 50% 230,400 33% 5 years
4th Qtr. 1997 100% 67,841 59% 15 years
4th Qtr. 1997 100% 27,600 44% 10 years
4th Qtr. 1997 100% 128,747 100% 20 years
4th Qtr. 1997 100% 214,400 0% N/A
4th Qtr. 1997 100% 13,000 58% 5 years
1st Qtr. 1998 100% 577,340 100% 10 years
1st Qtr. 1998 100% 108,273 75% 15 years
1st Qtr. 1998 100% 77,125 67% 10 years
2nd Qtr. 1998 100% 145,000 0% N/A
2nd Qtr. 1998 100% 94,219 100% 15 years
2nd Qtr. 1998 100% 97,356 100% 10 years
3rd Qtr. 1998 100% 112,800 0% N/A
---------
4,200,680 58%
---------
1997 ACQUISITIONS:
2nd Qtr. 1997 100% 215,549 99% Varies
2nd Qtr. 1997 100% 331,550 100% 10 years
2nd Qtr. 1997 50% 345,200 96% Varies
2nd Qtr. 1997 100% 75,545 94% Varies
2nd Qtr. 1997 100% 789,175 81% 5 years
3rd Qtr. 1997 100% 132,274 100% Varies
---------
1,889,293 91%
---------
8,744,716 73%
---------
---------
</TABLE>

- ----------------------------------------

(1) Represents completed leasing activity through July 31, 1997.

(2) Represents lease term of the building's primary tenant or tenants.

(3) In August 1997, the Company signed a lease totaling 168,000 square feet with
a lease term of eight years bringing this property to 52% occupancy.

S-7
<PAGE>
PENDING ACQUISITIONS

The Company has entered into contracts or letters of intent to purchase
certain properties in St. Louis and in the Chicago suburbs (the "Pending
Acquisitions") for an aggregate purchase price of approximately $247.3 million.
The Company currently expects to complete the Pending Acquisitions by October 1,
1997. However, the purchase of each of the Pending Acquisitions is subject to
various closing conditions. Accordingly, no assurances can be made that the
Company will close any or all of the Pending Acquisitions.

In addition to the Pending Acquisitions, as part of its ongoing business,
the Company continually engages in discussions with other real estate owners
regarding possible portfolio or single asset acquisitions in its current and
other attractive Midwestern markets. No assurances can be made that the Company
will acquire any of the properties or portfolios currently being evaluated.

The following describes each of the Pending Acquisitions.

BAUR PROPERTIES. In August 1997, the Company entered into a letter of
intent to acquire Baur Properties' existing rental properties and operations in
St. Louis, Missouri. Baur Properties has been in operation in St. Louis for over
43 years and is one of the leading suburban office developers and operators in
the Midwest. The Baur rental property portfolio consists of eight suburban
office buildings totaling 904,000 square feet and three industrial buildings
totaling 78,000 square feet. Seven of the suburban office projects are located
in Maryville Centre, one of the premier suburban office parks in St. Louis. The
acquisition will also include undeveloped land to accommodate approximately one
million square feet of additional suburban office development and the property
management and development operations of Baur Properties. Accordingly, Edward T.
Baur, the Chairman of Baur Properties, will become Vice President and General
Manager of the Company's St. Louis operations. The purchase price of this
acquisition is expected to be paid through the assumption of $57.5 million in
existing mortgage debt with a weighted average interest rate of 8.13%, the
payment of approximately $25.0 million in cash and the remainder in Units. Along
with its existing operations in St. Louis, the Company believes this acquisition
will make it the dominant real estate developer in this market. The Company
believes this acquisition is in accordance with its strategy of dominating its
Midwestern markets.

The following table sets forth information regarding the Baur Properties as
of July 31, 1997.

<TABLE>
<CAPTION>
RENTABLE YEAR PERCENT
PROPERTY TYPE SQUARE FEET BUILT LEASED
- ------------------------------------------------------------ ------------------ ----------- --------- -----------
<S> <C> <C> <C> <C>
500 Maryville............................................... Suburban Office 165,544 1984 100.00%
530 Maryville............................................... Suburban Office 107,957 1990 100.00%
540 Maryville............................................... Suburban Office 107,973 1990 100.00%
550 Maryville............................................... Suburban Office 97,109 1988 95.68%
625 Maryville(1)............................................ Suburban Office 101,576 1994 100.00%
635-645 Maryville........................................... Suburban Office 148,307 1987 99.86%
655 Maryville............................................... Suburban Office 90,499 1994 100.00%
Twin Oaks................................................... Suburban Office 85,066 1980 100.00%
Southport I................................................. Service Center 20,810 1977 100.00%
Southport II................................................ Service Center 22,400 1978 100.00%
Southport Commerce Center................................... Service Center 34,873 1978 100.00%
-----------
TOTAL..................................................... 982,114 99.55%
-----------
-----------
</TABLE>

- ------------------------

(1) The Company currently intends to acquire a 49% interest in this property.

S-8
<PAGE>
EXECUTIVE TOWERS. On August 28, 1997, the Company purchased Executive
Towers West, a three-building, 650,000 square foot, suburban office complex in
Downers Grove, Illinois, a western suburb of Chicago. This property is near the
Company's previously announced Central Park of Lisle acquisition. The purchase
price of this acquisition was paid entirely in cash. The Company believes this
acquisition is in accordance with its strategy, as discussed above, of expanding
into select sub-markets in Chicago.

The following table sets forth information regarding Executive Towers as of
July 31, 1997.

THE OFFERINGS

<TABLE>
<S> <C>
Common Stock Offered.............. 9,500,000 shares (1)

Common Stock to be Outstanding
After the Offerings............. 72,819,230 shares (2)

Use of Proceeds................... To retire the outstanding balance on the Lines of Credit
(as defined herein) and to fund development and
acquisition of additional rental properties, including
the Pending Acquisitions.

New York Stock Exchange Symbol.... DRE
</TABLE>

- ------------------------

(1) Assumes the Underwriters' over-allotment options to purchase up to an
aggregate of 1,425,000 shares of Common Stock are not exercised. See
"Underwriting."

(2) Excludes 6,759,846 Units issued by the Operating Partnership which are
exchangeable by the holders for shares of Common Stock, 2,400 shares of
Common Stock issued subsequent to June 30, 1997 as directors' compensation,
2,161,036 shares of Common Stock issuable upon exercise of outstanding
employee stock options and 171,830 shares of Common Stock issued subsequent
to June 30, 1997 in connection with the Company's direct stock purchase
plan, all as adjusted for the Stock Split.

S-9
<PAGE>
SUMMARY CONSOLIDATED FINANCIAL DATA

The following table sets forth selected consolidated financial and operating
information for the Company. The information was derived from the Company's
consolidated financial statements, which are incorporated by reference in the
accompanying Prospectus.

The following selected financial information should be read in conjunction
with "Management's Discussion and Analysis of Financial Condition and Results of
Operations" for the Company and the consolidated financial statements
incorporated by reference in the accompanying Prospectus.

<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, YEAR ENDED DECEMBER 31,
-------------------- -------------------------------
1997 1996 1996 1995 1994
--------- --------- --------- --------- ---------
(IN THOUSANDS, EXCEPT PROPERTIES AND PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
RESULTS OF OPERATIONS:
Revenues:
Rental Operations................................. $ 102,504 $ 74,261 $ 162,160 $ 113,641 $ 89,299
Service Operations................................ 9,068 9,483 19,929 17,777 18,473
--------- --------- --------- --------- ---------
TOTAL REVENUES........................................ $ 111,572 $ 83,744 $ 182,089 $ 131,418 $ 107,772
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
NET INCOME AVAILABLE FOR COMMON SHARES................ $ 29,682 $ 21,947 $ 50,872 $ 35,019 $ 26,216
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
SHARE DATA (1):
Net Income per Common Share....................... $ .48 $ .41 $ .91 $ .77 $ .76
Dividends Declared per Common Share............... .55 .50 1.01 .97 .93
Weighted Average Common Shares Outstanding........ 62,400 53,428 56,134 45,358 34,278
BALANCE SHEET DATA:
Total Assets...................................... $1,550,879 $1,177,792 $1,361,142 $1,045,588 $ 774,901
Total Debt........................................ $ 614,857 $ 431,856 $ 525,815 $ 454,820 $ 298,640
Total Shareholders' Equity........................ $ 835,221 $ 677,846 $ 754,932 $ 534,789 $ 445,384
Total Common Shares Outstanding (1)(2)............ 63,320 58,640 58,972 48,304 40,782
OTHER DATA:
Funds From Operations (3)......................... $ 48,123 $ 34,911 $ 76,079 $ 54,746 $ 38,198
Cash Flow Provided by (Used by):
Operating activities.......................... $ 71,462 $ 39,116 $ 95,135 $ 78,620 $ 51,873
Investing activities.......................... $(175,407) $ (93,598) $(276,748) $(289,569) $(116,238)
Financing activities.......................... $ 101,718 $ 49,041 $ 181,220 $ 176,243 $ 94,733
NUMBER OF IN-SERVICE PROPERTIES AT END OF PERIOD...... 262 219 249 202 128
IN-SERVICE SQUARE FEET AVAILABLE AT END OF PERIOD..... 31,406 23,219 27,402 20,073 12,896
</TABLE>

- ------------------------------

(1) All share data has been restated to reflect the effect of the Stock Split.

(2) Excludes Units held by persons other than the Company which are exchangeable
for Common Stock.

(3) Funds from Operations ("FFO") is defined by the National Association of Real
Estate Investment Trusts ("NAREIT") as net income or loss excluding gains or
losses from debt restructuring and sales of property plus depreciation and
amortization, and after adjustments for minority interest, unconsolidated
partnerships and joint ventures (adjustments for minority interests,
unconsolidated partnerships and joint ventures are calculated to reflect FFO
on the same basis). FFO does not represent cash flow from operations as
defined by generally accepted accounting principles, should not be
considered as an alternative to net income as an indicator of the Company's
operating performance and is not indicative of cash available to fund all
cash flow needs.

S-10
<PAGE>
THE COMPANY

The Company is a self-administered and self-managed REIT that began
operations through a related entity in 1972. At June 30, 1997, the Company owned
a diversified portfolio of 262 in-service industrial, office and retail
Properties, encompassing approximately 31.4 million square feet located in seven
states, and 26 buildings and one building expansion encompassing approximately
4.1 million square feet under development. The Company also owned approximately
1,300 acres of unencumbered Land for future development, of which approximately
75% is zoned for industrial use and which is typically located adjacent to the
Properties. The Company provides leasing, management, construction, development
and other tenant-related services for the Properties and certain properties
owned by third parties. The Company has the largest commercial real estate
operations in Indianapolis and Cincinnati and is one of the largest real estate
companies in the Midwest. The Company believes that the Midwest offers a
relatively strong and stable economy compared to other regions of the United
States and provides significant growth potential due to its central location,
established manufacturing base, skilled work force and moderate labor costs.

The Company has developed over 50 million square feet of commercial property
since its founding including an average of approximately 4.1 million square feet
per year during the last five years. In addition, the Company acquired
approximately 8.9 million square feet during the three years ended December 31,
1996. Through the six months ended June 30, 1997, the Company placed in service
2.6 million square feet of new development and acquired 1.8 million square feet
of property.

The Company manages over 43 million square feet of property, including over
8.1 million square feet owned by third parties. The Company manages
approximately 35% and 29% of all competitive suburban office, warehousing and
light manufacturing space in Indianapolis and Cincinnati, respectively. In
addition to providing services to approximately 1,800 tenants in the Properties,
the Company provides such services to over 900 tenants in 92 properties owned by
third parties. Based on market data maintained by the Company, the Company
believes that it was responsible in the first six months of 1997 for
approximately 67% and 34% of the net absorption (gross space leased minus lease
terminations and expirations) of competitive suburban office, warehousing and
light manufacturing space in Indianapolis and Cincinnati, respectively. The
Company believes that its dominant position in its primary markets gives it a
competitive advantage in its real estate activities.

All of the Company's interests in the Properties and Land are held directly
or indirectly by, and substantially all of its operations relating to the
Properties are conducted through, the Operating Partnership. Units in the
Operating Partnership may be exchanged by the holders thereof, other than the
Company, for Common Stock of the Company on a one-for-one basis. Upon an
exchange of Units for Common Stock, the Company's percentage interest in the
Operating Partnership will increase. The Company controls the Operating
Partnership as the sole general partner and owner, as of June 30, 1997, of
approximately 90% of the Units.

BUSINESS STRATEGY

The Company's business objective is to increase its Funds From Operations by
(i) maintaining and increasing property occupancy and rental rates through the
aggressive management of its portfolio of existing properties; (ii) expanding
existing properties; (iii) developing and acquiring new properties; and (iv)
providing a full line of real estate services to the Company's tenants and to
third parties.

The Company believes that the analysis of real estate opportunities and
risks can be done most effectively at regional or local levels. As a result, the
Company intends to continue its emphasis on increasing its market share and
effective rents in its existing markets primarily within the Midwest. The
Company also expects to utilize its approximately 1,300 acres of unencumbered
Land and its many business relationships with more than 2,700 commercial tenants
to expand its build-to-suit business (development projects substantially
pre-leased to a single tenant) and to pursue other development and

S-11
<PAGE>
acquisition opportunities in its existing markets and elsewhere, primarily in
the Midwest. The Company believes that this regional focus will allow it to
assess market supply and demand for real estate more effectively as well as to
capitalize on its strong relationships with its tenant base.

The Company's policy is to seek to develop and acquire substantially
pre-leased Class A commercial properties located in markets with attractive
investment potential for Fortune 500 companies and other quality regional and
local firms. The Company's industrial and suburban office development focuses on
business parks and mixed use developments suitable for development of multiple
projects on a single site and where the Company can create and control the
business environment. These business parks and mixed use developments generally
include restaurants and other amenities which the Company believes create an
atmosphere that is particularly efficient and desirable. The Company's retail
development focuses on community, power and neighborhood centers in its existing
markets. As a fully integrated real estate company, the Company is able to
arrange for or provide to its industrial, office and retail tenants not only
well located and well maintained facilities, but also additional services such
as build-to-suit construction, tenant finish construction, expansion flexibility
and advertising and marketing services.

FINANCING STRATEGY

The Company seeks to maintain a well-balanced, conservative and flexible
capital structure by: (i) currently targeting a ratio of long-term debt to total
market capitalization in the range of 25% to 40%; (ii) extending and sequencing
the maturity dates of its debt; (iii) borrowing primarily at fixed rates; (iv)
generally pursuing current and future long-term debt financings and refinancings
on an unsecured basis; (v) maintaining conservative debt service and fixed
charge coverage ratios; and (vi) maintaining a conservative dividend payout
ratio. Management believes that these strategies have enabled and should
continue to enable the Company to access the debt and equity capital markets for
their long-term requirements such as debt refinancings and financing for
development and acquisitions of additional rental properties. The Company has
demonstrated its ability to access the equity and debt markets to finance the
activities of the Company through recent public offerings of Common Stock,
Preferred Stock and unsecured notes since October 1993 which generated aggregate
net proceeds of $1.24 billion.

MIDWESTERN FOCUS

The Company believes that the Midwest offers a relatively strong and stable
economy compared to other regions of the United States and provides attractive
new opportunities due to its central location, established manufacturing base,
skilled work force and moderate labor costs. In addition, the interstate highway
systems serving Indianapolis, Cincinnati and Columbus, markets in which
approximately 78% and 85% of the Properties, in terms of both dollar value of
Net Effective Rent and square footage, respectively, are located, help make
those cities prime industrial and office property locations.

Employment statistics are generally a useful measure of the viability of a
commercial real estate market because the demand for industrial and office space
in a geographic area is usually linked to the levels of business activity and
disposable income. According to the United States Department of Labor's Bureau
of Labor Statistics, the unemployment rate for June 1997 was 2.6%, 3.6% and 2.8%
in the Indianapolis, Cincinnati and Columbus metropolitan areas, respectively,
compared to 5.0% for the United States. Additionally, total non-farm employment
has increased 15.5%, 11.4% and 16.5% from December 1989 to December 1996 for the
Indianapolis, Cincinnati and Columbus metropolitan areas, respectively, as
compared to 11.0% for the United States.

Management believes that the Company's assets are located in strong real
estate markets with good investment potential. The Spring 1997 issue of
MarketScore, a National Real Estate Index and Ernst & Young Kenneth Leventhal
Real Estate Group publication ("MarketScore"), rated 64 metropolitan areas in
the United States in terms of their real estate investment potential for the
succeeding two years. The study

S-12
<PAGE>
segmented each metropolitan area by property type and considered real estate,
economic and demographic variables such as vacancy rates, construction, rental
trends, job growth, population and household growth, and household income.
Approximately 34.4 million square feet of the Company's in-service and
under-development Properties are in markets considered by MarketScore to have
good or excellent investment potential.

INDIANAPOLIS, INDIANA. With more than 1.5 million residents, Indianapolis
is Indiana's largest metropolitan area. With a central location at the
intersection of four interstate highways, Indianapolis continues to attract new
growth by offering a skilled work force and stable economic base. Indianapolis'
economic base includes distribution, government, manufacturing, retail trade,
service and tourism related industries. According to CB Commercial Real Estate
Group, Inc. ("CB Commercial"), the industrial vacancy rate was 9.5% as of
December 31, 1996. The Indianapolis suburban office market strengthened over the
24-month period ending March 31, 1997. According to CB Commercial, at March 31,
1997, Indianapolis had an 8.5% suburban office vacancy rate compared to a
national average of 10.6%.

CINCINNATI, OHIO. Cincinnati is the second largest metropolitan area in
Ohio with a population of 1.6 million. With an unemployment rate which is below
the national average, Cincinnati's economic base is healthy and diverse.
Balanced between major Fortune 500 employers and entrepreneurial enterprises,
Cincinnati's economic base includes banking, distribution, manufacturing, retail
trade and service related industries. Relatively low taxes, an expanding airport
(a major North American hub for Delta Airlines) and aggressive state and local
incentive packages designed to attract new business have contributed to major
corporate relocations in Cincinnati. Indicative of the economic strength in
Cincinnati, the industrial vacancy rate as reported by CB Commercial declined by
0.7% over the 24 months ended December 31, 1996 to 3.0%, less than half the
national average of 7.3%. As reported by CB Commercial, the Cincinnati suburban
office market vacancy rate declined by 6.1% over the twenty-four month period
ended March 31, 1997 to 8.4%, compared to the national average of 10.6%, and the
Cincinnati downtown office vacancy rate declined 1.2% over the same period to
13.7%.

COLUMBUS, OHIO. The Columbus metropolitan area has a population of
approximately 1.4 million and is the third largest metropolitan area in Ohio.
The city's central location, well-trained work force and high quality of life
have established Columbus as a major transportation and distribution center.
Columbus' economic base includes distribution, government, manufacturing, retail
trade and service-related industries. As reported by CB Commercial, as of
December 31, 1996, the industrial vacancy rate in Columbus was 6.1% compared to
the national average of 7.3%. As of March 31, 1997, the suburban office vacancy
rate in Columbus was 10.6%, equal to the national average.

CLEVELAND, OHIO. Cleveland is the largest metropolitan area in Ohio with a
population of 2.2 million. The city is a major center for industry, technology,
and service industries, including banking, health, research and development and
the legal and accounting professions. Twenty-eight Fortune 500 companies have
located their headquarters in Cleveland. As reported by CB Commercial, as of
December 31, 1996 the industrial vacancy rate in Cleveland was 7.3%, equal to
the national average and, as of March 31, 1997, the suburban office vacancy rate
was 8.4% compared to the national average of 10.6%.

ST. LOUIS, MISSOURI. St. Louis is Missouri's largest metropolitan area with
a population of 2.5 million. With its central location, St. Louis is within 500
miles of one-third of the U.S. population and businesses and it has the lowest
total mileage from the 24 largest metro areas in the mid-U.S. to the same 24
metro areas. Twenty-three Fortune 500 companies have located their headquarters
in St. Louis. As reported by CB Commercial, as of December 31, 1996 the
industrial vacancy rate in St. Louis was 2.5% compared to the national average
of 7.3% and, as of March 31, 1997, the suburban office vacancy rate was 6.2%
compared to the national average of 10.6%.

S-13
<PAGE>
The following table summarizes important economic and performance statistics
for the Company's principal markets and for the United States.

<TABLE>
<CAPTION>
MARCH 1997
JUNE 1997 DECEMBER 1996 SUBURBAN
UNEMPLOYMENT JOB GROWTH INDUSTRIAL PROPERTY OFFICE
RATE (1) SINCE 1989 (1) VACANCY RATE (2) VACANCY RATE (2)
------------------- ----------------- ----------------------- -------------------
<S> <C> <C> <C> <C>
Cincinnati, Ohio............................. 3.6% 11.4% 3.0% 8.4%
Cleveland, Ohio.............................. 4.2% 5.7% 7.3% 8.4%
Columbus, Ohio............................... 2.8% 16.5% 6.1% 10.6%
Indianapolis, Indiana........................ 2.6% 15.5% 9.5% 8.5%
St. Louis, Missouri.......................... 4.0% 7.2% 2.5% 6.2%
United States................................ 5.0% 11.0% 7.3% 10.6%
</TABLE>

- --------------------------

(1) Source: United States Department of Labor's Bureau of Labor Statistics.

(2) Source: CB Commercial.

QUALITY TENANT BASE

The Company's Properties have a diverse and stable base of approximately
1,800 tenants. Many of the tenants are Fortune 500 companies and engage in a
wide variety of businesses, including manufacturing, retailing, wholesale trade,
distribution, and professional services. Approximately 50% of the square footage
of the Properties is occupied by tenants with a net worth based on book value of
$100 million or greater. Approximately 75% of the gross leasable area of the
Properties is occupied by tenants who have been in business for more than 10
years. The Company renewed 84% of the square feet of tenants up for renewal in
the first six months of 1997 on approximately 1.3 million square feet up for
renewal. No single tenant accounts for more than 2.5% of the Company's total
gross effective rent (computed using the average annual rental property revenue
over the terms of the respective leases including landlord operating expense
allowances but excluding additional rent due as operating expense
reimbursements).

The following table sets forth information regarding the 10 largest tenants
of the Properties based upon annualized gross effective rents as of June 30,
1997.

<TABLE>
<CAPTION>
ANNUALIZED PERCENTAGE OF
YEAR OF PERCENTAGE OF GROSS ANNUALIZED
LEASE SQUARE TOTAL SQUARE EFFECTIVE GROSS EFFECTIVE
TENANT PRIMARY LOCATION EXPIRATION(1) FOOTAGE FEET RENT(2) RENT
- ---------------------- ---------------- ------------ --------- --------------- -------------- -----------------
<S> <C> <C> <C> <C> <C> <C>
LCI Communications,
Inc................. Columbus 2001 - 2012 370,320 1.23% $ 5,054,129 2.47%
Budget Rent-A-Car
Corporation......... Chicago 2006 160,488 0.53 3,780,095 1.85
Sterling Commerce..... Columbus 2000 - 2012 228,460 0.76 3,595,084 1.76
Nationwide Mutual Ins.
Co.................. Columbus 1997 - 2006 317,799 1.06 3,446,602 1.69
National General
Insurance........... St. Louis 2005 112,000 0.37 2,935,249 1.44
General Electric...... Cincinnati 1997 - 2001 223,872 0.74 2,859,326 1.40
Anheuser-Busch........ St. Louis 1997 - 2002 155,568 0.52 2,687,656 1.31
Lenscrafter........... Cincinnati 1998 - 2005 284,761 0.95 2,535,349 1.24
SDRC.................. Cincinnati 1997 - 2011 221,215 0.74 2,426,142 1.19
Associated Group...... Indianapolis 1997 - 1999 264,897 0.88 2,351,341 1.15
--------- --- -------------- -----
2,339,380 7.78% $ 31,670,973 15.50%
--------- --- -------------- -----
--------- --- -------------- -----
</TABLE>

- --------------------------

(1) Where multiple years are listed, the tenant represents more than one lease
with maturities during the indicated range of years.

(2) Represents annual gross effective rents due from tenants in service as of
June 30, 1997. Annual gross effective rents equals the average annual rental
property revenue over the terms of the respective leases including landlord
operating expense allowance and excluding additional rent due as operating
expense reimbursements.

S-14
<PAGE>
USE OF PROCEEDS

The net proceeds to the Company from the sale of the Common Stock offered
hereby are expected to be approximately $192.8 million (approximately $221.8
million if the Underwriters' over-allotment options are exercised in full). The
Company presently intends to use the net proceeds as well as the net proceeds of
its PATS offering of approximately $100.0 million to retire the outstanding
balance on its lines of credit (the "Lines of Credit") and to fund development
and acquisition of additional rental properties, including the cash portion of
the Pending Acquisitions, expected to total in excess of $120 million. The
remaining costs to be funded on the 4.2 million square feet of property under
development at July 31, 1997 total $108.8 million with $73.7 million expected to
be spent by December 31, 1997. See "Prospectus Supplement Summary--Recent
Developments." The Lines of Credit are expected to have an outstanding balance
of approximately $65.0 million on September 15, 1997, bearing interest at LIBOR
plus .75% to .80%.

PRICE RANGE OF COMMON STOCK AND DIVIDEND HISTORY

The Common Stock is listed on the New York Stock Exchange under the symbol
DRE. The following table sets forth the high and low sale prices of the Common
Stock for the periods indicated and the dividend paid per share during each such
period. All share price and dividend information has been adjusted to reflect
the effect of the Stock Split.

<TABLE>
<CAPTION>
CLOSING PRICES
PER SHARE
-------------------- DIVIDENDS
QUARTERLY PERIOD HIGH LOW PER SHARE
- ----------------------------------------------------------------------------------- --------- --------- -----------
<S> <C> <C> <C>
1995
First Quarter.................................................................... $ 13.94 $ 12.57 $ 0.235
Second Quarter................................................................... 14.63 13.13 0.235
Third Quarter.................................................................... 15.82 13.82 0.245
Fourth Quarter................................................................... 15.88 13.82 0.245
1996
First Quarter.................................................................... 16.25 14.57 0.245
Second Quarter................................................................... 15.25 14.19 0.245
Third Quarter.................................................................... 16.63 14.50 0.255
Fourth Quarter................................................................... 19.25 16.38 0.255
1997
First Quarter.................................................................... 21.44 19.13 0.255
Second Quarter................................................................... 20.81 17.44 0.255
Third Quarter (through September 9, 1997)........................................ 22.75 19.88 0.295
</TABLE>

The last reported sale price of the Common Stock on the New York Stock
Exchange on September 9, 1997 was $21 7/16 per share. As of September 9, 1997,
there were 4,102 registered holders of Common Stock.

On July 24, 1997, the Company's Board of Directors raised its regular
quarterly common dividend from $.255 per share to $.295 per share, payable on
August 29, 1997 to common shareholders of record on August 15, 1997. The new
dividend is an increase of $.16 per year which is a 15.7% increase over the
previous amount. This dividend equals $1.18 on an annualized basis.

The Company has announced that its Board of Directors anticipates the
Company's regular quarterly dividend amount to be $.30 per common share on a
post Stock-Split basis. This would equate to a dividend increase of 1.7% and
follows the Company's 15.7% dividend increase announced July 24, 1997. The
official declaration for this new dividend is expected to be on October 23,
1997, the date of the Company's next regularly scheduled Board of Directors'
meeting.

S-15
<PAGE>
Since its organization in 1986, the Company has paid regular and
uninterrupted dividends. The Company intends to continue to declare quarterly
dividends on its Common Stock. However, no assurances can be given as to the
amounts of future dividends as such dividends are subject to the Company's cash
flow from operations, earnings, financial condition, capital requirements and
such other factors as the Board of Directors deems relevant. The Company has
determined that approximately 1% of the per share distribution for 1996
represented return of capital to the shareholders for income tax purposes. No
assurance can be given that such percentage will not change in future years.

DIVIDEND REINVESTMENT PLAN

The Company has an Automatic Dividend Reinvestment Plan (the "Plan") which
allows shareholders to acquire additional shares of Common Stock by
automatically reinvesting cash dividends. Common Stock is acquired pursuant to
the Plan at a price equal to the prevailing market price of such Common Stock
less a 4% discount, without payment of any brokerage commission or service
charge. The Plan also allows persons to purchase Common Stock at a price equal
to the prevailing market price of such Common Stock (without any discount but
without payment of any brokerage commission or service charge) in the same
manner as cash dividends are invested in amounts of not less than $100 ($25 for
automated funds transfers) and not more than $5,000 per month for participating
shareholders and in amounts of not less than $250 and more than $5,000 per month
for initial investments by persons who are not shareholders. Shareholders who do
not participate in the Plan continue to receive cash dividends, as declared.

S-16
<PAGE>
CAPITALIZATION

The following table sets forth the capitalization of the Company and its
subsidiaries as of June 30, 1997 and as adjusted to give effect to the Offerings
and the application of the net proceeds thereof as described under "Use of
Proceeds." The table should be read in conjunction with the Company's
consolidated financial statements incorporated herein by reference.

<TABLE>
<CAPTION>
JUNE 30, 1997
--------------------------
HISTORICAL AS ADJUSTED
------------ ------------
(IN THOUSANDS)
<S> <C> <C>
Debt:
Secured Debt (1).................................................................... $ 271,857 $ 261,857
Unsecured Debt (2).................................................................. 240,000 340,000
Unsecured Line of Credit (3)........................................................ 103,000 --
------------ ------------
Total Debt.......................................................................... $ 614,857 $ 601,857
------------ ------------
Minority Interest..................................................................... 18,867 18,867
------------ ------------

Shareholders' Equity:
Preferred Stock ($.01 par value), 5,000 shares authorized:
9.10% Series A Cumulative Redeemable Preferred Shares, liquidation preference $250
per share, 300 shares issued and outstanding.................................... 72,288 72,288
7.99% Series B Cumulative Step-Up Premium Rate-SM- Preferred Shares, liquidation
preference $500 per share, 300 shares issued and
outstanding..................................................................... -- 146,050
Common Stock and Paid-in Capital ($.01 par value), 150,000 shares authorized; 63,319
outstanding; 72,819 outstanding as adjusted (4)................................... 813,625 1,006,431
Distributions in excess of net income............................................... (50,692) (50,692)
------------ ------------
Total Shareholders' Equity.......................................................... $ 835,221 $ 1,174,077
------------ ------------
Total Capitalization.................................................................. $ 1,468,945 $ 1,794,801
------------ ------------
------------ ------------
</TABLE>

- ------------------------

(1) The Company had the full amount outstanding on its $10 million secured line
of credit at June 30, 1997.

(2) In August 1997, the Company issued $100 million of unsecured Pass-Through
Asset Trust Securities ("PATS"). These PATS bear interest at a coupon rate
of 6.95% and mature on August 15, 2004. The effective rate of the PATS is
7.347%, which includes the effect of the settlement of a forward Treasury
lock agreement which the Company entered into in April 1997. The Company and
an affiliate of the placement agent for the PATS can effectively agree to
reset the interest rate and remarket the underlying notes with a maturity of
August 15, 2011.

(3) The Company paid down the $103 million outstanding on its unsecured line of
credit at June 30, 1997 with a portion of the proceeds of the $146.1 million
Series B Cumulative Step-Up Premium Rate Preferred Shares which were issued
in July 1997.

(4) Does not include 6,760 shares reserved for issuance upon exchange of issued
and outstanding Units. Shares issued and outstanding have been adjusted to
reflect the effect of the Stock Split.

S-17
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA

The following table sets forth selected financial and operating information
for the Company on a historical basis. The information was derived from the
Company's financial statements, which are incorporated by reference in the
accompanying Prospectus.

The following selected financial information should be read in conjunction
with "Management's Discussion and Analysis of Financial Condition and Results of
Operations" for the Company and the financial statements incorporated by
reference in the accompanying Prospectus.

<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, YEAR ENDED DECEMBER 31,
---------------------- ----------------------------------
1997 1996 1996 1995 1994
---------- ---------- ---------- ---------- ----------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
OPERATING DATA:
RENTAL OPERATIONS:
Revenues:
Rental Income..................................... $ 98,860 $ 71,714 $ 156,392 $ 112,931 $ 88,243
Equity in earnings of unconsolidated companies.... 3,644 2,547 5,768 710 1,056
---------- ---------- ---------- ---------- ----------
102,504 74,261 162,160 113,641 89,299
---------- ---------- ---------- ---------- ----------
Operating expenses:
Rental expenses................................... 18,022 13,814 29,669 20,922 17,074
Real estate taxes................................. 9,115 6,507 14,244 9,683 8,256
Interest expense.................................. 17,951 14,617 31,344 21,424 18,920
Depreciation and amortization..................... 20,241 16,157 32,571 24,337 18,036
---------- ---------- ---------- ---------- ----------
65,329 51,095 107,828 76,366 62,286
---------- ---------- ---------- ---------- ----------
Earnings from rental operations................... 37,175 23,166 54,332 37,275 27,013
---------- ---------- ---------- ---------- ----------
SERVICE OPERATIONS:
Revenues:
Property management, maintenance and leasing
fees............................................ 5,855 5,662 11,496 11,138 11,084
Construction management and development fees...... 2,711 3,153 6,895 5,582 6,107
Other income...................................... 502 668 1,538 1,057 1,282
---------- ---------- ---------- ---------- ----------
9,068 9,483 19,929 17,777 18,473
---------- ---------- ---------- ---------- ----------
Operating expenses:
Payroll........................................... 4,885 4,617 9,176 7,606 8,141
Maintenance....................................... 916 717 1,526 1,344 1,069
Office and other.................................. 1,093 1,339 2,791 2,258 2,188
---------- ---------- ---------- ---------- ----------
6,894 6,673 13,493 11,208 11,398
---------- ---------- ---------- ---------- ----------
Earnings from service operations.................. 2,174 2,810 6,436 6,569 7,075
---------- ---------- ---------- ---------- ----------
General and administrative expense................ (2,890) (2,263) (4,719) (3,536) (3,261)
---------- ---------- ---------- ---------- ----------
Operating income.................................. 36,459 23,713 56,049 40,308 30,827
OTHER INCOME (EXPENSE):
Interest income..................................... 427 613 1,194 1,900 1,115
Earnings from property sales........................ 382 1,604 4,532 283 2,198
Other expense....................................... (419) (67) (174) (31) (84)
Other minority interest in earnings of
subsidiaries...................................... (425) (430) (986) (911) (1,088)
Minority interest in earnings of unitholders........ (3,330) (3,486) (7,184) (6,530) (6,752)
---------- ---------- ---------- ---------- ----------
Net income............................................ 33,094 21,947 53,431 35,019 26,216
Dividends on preferred shares......................... (3,412) -- (2,559) -- --
---------- ---------- ---------- ---------- ----------
Net income available for common shares................ $ 29,682 $ 21,947 $ 50,872 $ 35,019 $ 26,216
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------
</TABLE>

S-18
<PAGE>

<TABLE>
<CAPTION>
AS OF JUNE 30, AS OF DECEMBER 31,
---------------------------- -----------------------------------------
1997 1996 1996 1995 1994
------------- ------------- ------------- ------------- -----------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Real estate investments................. $ 1,459,765 $ 1,110,108 $ 1,290,676 $ 963,499 $ 723,713
Accumulated depreciation................ (96,491) (69,250) (82,207) (56,335) (38,058)
------------- ------------- ------------- ------------- -----------
Net real estate investments........... 1,363,274 1,040,858 1,208,469 907,164 685,655
Cash.................................... 3,107 286 5,334 5,727 40,433
Investments in unconsolidated
companies............................. 112,837 73,164 79,362 67,771 8,418
Other assets............................ 71,661 63,484 67,977 64,926 40,395
------------- ------------- ------------- ------------- -----------
Total assets.......................... 1,550,879 1,177,792 1,361,142 $ 1,045,588 $ 774,901
------------- ------------- ------------- ------------- -----------
------------- ------------- ------------- ------------- -----------

Secured debt............................ 271,857 281,856 $ 261,815 $ 259,820 $ 298,640
Unsecured debt.......................... 240,000 150,000 240,000 150,000 --
Unsecured line of credit................ 103,000 -- 24,000 45,000 --
------------- ------------- ------------- ------------- -----------
Total debt............................ 614,857 431,856 525,815 454,820 298,640
Other liabilities....................... 81,934 55,310 67,312 51,243 29,543
------------- ------------- ------------- ------------- -----------
Total liabilities..................... 696,791 487,166 593,127 506,063 328,183
------------- ------------- ------------- ------------- -----------
Minority interest....................... 18,867 12,780 13,083 4,736 1,334
------------- ------------- ------------- ------------- -----------
Shareholders' equity.................... 835,221 677,846 754,932 534,789 445,384
------------- ------------- ------------- ------------- -----------
Total liabilities and shareholders'
equity.............................. $ 1,550,879 $ 1,177,792 $ 1,361,142 $ 1,045,588 $ 774,901
------------- ------------- ------------- ------------- -----------
------------- ------------- ------------- ------------- -----------
</TABLE>

<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, YEAR ENDED DECEMBER 31,
------------------------ -------------------------------------
1997 1996 1996 1995 1994
----------- ----------- ----------- ----------- -----------
(IN THOUSANDS, EXCEPT PROPERTIES DATA)
<S> <C> <C> <C> <C> <C>
OTHER DATA:
Funds from Operations
Available to Common Shareholders (1)............ $ 48,123 $ 34,911 $ 76,079 $ 54,746 $ 38,198
Cash flow provided by (used in):
Operating activities.......................... 71,462 39,116 95,135 78,620 51,873
Investing activities.......................... (175,407) (93,598) (276,748) (289,569) (116,238)
Financing activities.......................... 101,718 49,041 181,220 176,243 94,733
Weighted average common shares outstanding
(2)........................................... 62,400 53,428 56,134 45,358 34,278
Number of in-service Properties at end of
period........................................ 262 219 249 202 128
In-service square feet available at end of
period........................................ 31,406 23,219 27,402 20,073 12,896
</TABLE>

- ------------------------

(1) FFO is defined by NAREIT as net income or loss excluding gains or losses
from debt restructuring and sales of property plus depreciation and
amortization, and after adjustments for minority interest, unconsolidated
partnerships and joint ventures (adjustments for minority interests,
unconsolidated partnerships and joint ventures are calculated to reflect FFO
on the same basis). FFO does not represent cash flow from operations as
defined by generally accepted accounting principles, should not be
considered as an alternative to net income as an indicator of the Company's
operating performance and is not indicative of cash available to fund all
cash flow needs.

(2) Adjusted to reflect the effect of the Stock Split.

S-19
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

OVERVIEW

The Company's operating results depend primarily upon income from the rental
operations of its industrial, office and retail properties located in its
primary markets. This income from rental operations is substantially influenced
by the supply and demand for the Company's rental space in its primary markets.
In addition, the Company's continued growth is dependent upon its ability to
maintain occupancy rates and increase rental rates of its in-service portfolio
and to continue development and acquisition of additional rental properties.

The Company's primary markets in the Midwest have continued to offer strong
and stable local economies and have provided attractive new development
opportunities because of their central location, established manufacturing base,
skilled work force and moderate labor costs. Consequently, the Company's
occupancy rate of its in-service portfolio has exceeded 92% the last two years
and was at 95.7% at June 30, 1997. The Company expects to continue to maintain
its overall occupancy levels at comparable levels and also expects to be able to
increase rental rates as leases are renewed or new leases are executed. This
stable occupancy as well as increasing rental rates should improve the Company's
results of operations from its in-service properties. The Company's strategy for
continued growth also includes developing and acquiring additional rental
properties in its primary markets and expanding into other attractive Midwestern
markets.

The following table sets forth information regarding the Company's
in-service portfolio of rental properties as of June 30, 1997 and 1996 (in
thousands, except percentages):

<TABLE>
<CAPTION>
TOTAL PERCENT OF PERCENT OCCUPIED
SQUARE FEET TOTAL SQUARE FEET
-------------------- -------------------- --------------------
TYPE 1997 1996 1997 1996 1997 1996
- --------------------------------------------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
INDUSTRIAL
Service Centers............................ 3,051 2,971 9.7% 12.8% 94.9% 93.6%
Bulk....................................... 18,702 12,926 59.5 55.7 95.6% 90.5%
OFFICE
Suburban................................... 6,875 4,684 21.9 20.2 96.9% 97.1%
CBD........................................ 699 699 2.2 3.0 91.1% 81.3%
Medical.................................... 369 333 1.2 1.4 95.8% 90.3%
RETAIL....................................... 1,710 1,606 5.5 6.9 95.2% 93.0%
--------- --------- --------- ---------
Total...................................... 31,406 23,219 100.0% 100.0% 95.7% 92.1%
--------- --------- --------- ---------
--------- --------- --------- ---------
</TABLE>

Management expects occupancy of the in-service property portfolio to remain
stable because (i) only 5.5% and 10.8% of the Company's occupied square footage
is subject to leases expiring in the remainder of 1997 and in 1998,
respectively, and (ii) the Company's renewal percentage averaged 80%, 65% and
73% in 1996, 1995 and 1994, respectively. For the first six months of 1997, the
renewal percentage was 84%.

S-20
<PAGE>
The following table reflects the Company's in-service portfolio lease
expiration schedule as of June 30, 1997 by product type indicating square
footage and annualized net effective rents under expiring leases (in thousands,
except per square foot amounts):

<TABLE>
<CAPTION>
INDUSTRIAL OFFICE RETAIL TOTAL PORTFOLIO
---------------------- ------------------------ ------------------------ ----------------------
YEAR OF SQUARE CONTRACTUAL CONTRACTUAL CONTRACTUAL SQUARE CONTRACTUAL
EXPIRATION FEET RENT SQUARE FEET RENT SQUARE FEET RENT FEET RENT
- ----------------------- --------- ----------- ----------- ----------- ----------- ----------- --------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1997................... 1,334 $ 5,285 299 $ 3,111 25 $ 277 1,658 $ 8,673
1998................... 2,357 9,029 769 8,348 111 1,182 3,237 18,559
1999................... 2,217 9,568 1,036 11,164 117 1,191 3,370 21,923
2000................... 2,112 8,862 788 9,513 107 1,290 3,007 19,665
2001................... 2,644 10,248 874 9,688 88 1,061 3,606 20,997
2002................... 2,604 9,161 1,002 10,787 157 1,669 3,763 21,617
2003................... 301 1,816 249 2,849 40 342 590 5,007
2004................... 934 3,810 213 2,609 13 125 1,160 6,544
2005................... 1,440 4,586 698 9,736 177 1,507 2,315 15,829
2006................... 2,284 7,141 509 8,078 5 67 2,798 15,286
2007 and Thereafter.... 2,555 7,878 1,213 15,856 787 6,760 4,555 30,494
--------- ----------- ----- ----------- ----- ----------- --------- -----------
Total Leased........... 20,782 $ 77,384 7,650 $ 91,739 1,627 $ 15,471 30,059 $ 184,594
--------- ----------- ----- ----------- ----- ----------- --------- -----------
--------- ----------- ----- ----------- ----- ----------- --------- -----------

Total Portfolio
Square Feet............ 21,753 7,943 1,710 31,406
--------- ----- ----- ---------
--------- ----- ----- ---------

Annualized net
effective rent per
square foot.......... $ 3.72 $ 11.99 $ 9.51 $ 6.14
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
</TABLE>

This stable occupancy, along with stable rental rates in each of the
Company's markets, will allow the in-service portfolio to continue to provide a
comparable or increasing level of earnings from rental operations. The Company
also expects to realize growth in earnings from rental operations through (i)
the development and acquisition of additional rental properties in its primary
markets; (ii) the expansion into other attractive Midwestern markets; and (iii)
the completion of the 4.1 million square feet of properties under development at
June 30, 1997 over the next five quarters. The 4.1 million square feet of
properties under development should provide future earnings from rental
operations growth for the Company as they are placed in service as follows (in
thousands, except percent leased and stabilized returns):

<TABLE>
<CAPTION>
ANTICIPATED
PERCENT PROJECT STABILIZED
ANTICIPATED IN-SERVICE DATE SQUARE FEET LEASED COSTS RETURN
- ----------------------------------------------------------------------- ----------- ------------- ---------- -------------
<S> <C> <C> <C> <C>
3rd Quarter 1997....................................................... 1,329 65% $ 54,840 11.3%
4th Quarter 1997....................................................... 1,717 37% 77,353 11.5%
1st Quarter 1998....................................................... 699 95% 25,086 11.3%
Thereafter............................................................. 352 27% 38,151 11.9%
----- ----------
4,097 55% $ 195,430 11.5%
----- ----------
----- ----------
</TABLE>

S-21
<PAGE>
RESULTS OF OPERATIONS

Following is a summary of the Company's operating results and property
statistics for the six months ended June 30, 1997 and 1996 (in thousands, except
number of properties and per share amounts):

<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE
30,
-----------------------
1997 1996
----------- ----------
<S> <C> <C>
Rental Operations revenue................................................................ $ 102,504 $ 74,261
Service Operations revenue............................................................... 9,068 9,483
Earnings from Rental Operations.......................................................... 37,175 23,166
Earnings from Service Operations......................................................... 2,174 2,810
Operating income......................................................................... 36,459 23,713
Net income available for common shares................................................... $ 29,682 $ 21,947
Weighted average common shares outstanding (1)........................................... 62,400 53,428
Net income per common share (1).......................................................... $ .48 $ .41

Number of in-service properties at end of period......................................... 262 219
In-service square footage at end of period............................................... 31,406 23,219
Under development square footage at end of period........................................ 4,097 3,400
</TABLE>

- ------------------------

(1) All share and per share data has been restated to reflect the effect of the
Stock Split.

COMPARISON OF SIX MONTHS ENDED JUNE 30, 1997 TO SIX MONTHS ENDED JUNE 30, 1996

RENTAL OPERATIONS. The Company increased its in-service portfolio of rental
properties from 219 properties comprising 23.2 million square feet at June 30,
1996 to 262 properties comprising 31.4 million square feet at June 30, 1997
through the acquisition of 28 properties totaling 3.6 million square feet and
the completion of 19 properties and four building expansions totaling 5.1
million square feet developed by the Company. The Company also disposed of four
properties totaling 495,000 square feet. These 43 net additional rental
properties primarily account for the $28.2 million increase in revenues from
Rental Operations from 1996 to 1997. The Company also received a $1.2 million
net lease termination payment made by a tenant in one of the Company's office
properties which is included in rental income for the six months ended June 30,
1997. The increase from 1996 to 1997 in rental expenses, real estate taxes and
depreciation and amortization expense is also a result of the additional 43
in-service rental properties.

Interest expense increased by approximately $3.3 million from $14.6 million
for the six months ended June 30, 1996 to $17.9 million for the six months ended
June 30, 1997 due to additional unsecured debt issued in its medium-term note
program in the last two quarters of 1996 to fund the development and acquisition
of additional rental properties.

As a result of the above-mentioned items, earnings from rental operations
increased $14.0 million from $23.2 million for the six months ended June 30,
1996 to $37.2 million for the six months ended June 30, 1997.

SERVICE OPERATIONS. Service Operation revenues decreased to $9.1 million
for the six months ended June 30, 1997 as compared to $9.5 million for the six
months ended June 30, 1996. This decrease was primarily the result of a decrease
in construction management fees caused by certain higher profit third-party
construction projects that were in process during the six months ended June 30,
1996 which resulted in higher revenue margins. Service Operation operating
expenses increased from $6.7 million to $6.9 million for the six months ended
June 30, 1997 as compared to the six months ended June 30, 1996 primarily as a
result of an increase in operating expenses resulting from the overall growth of
the Company.

S-22
<PAGE>
As a result of the above-mentioned items, earnings from Service Operations
decreased from $2.8 million for the six months ended June 30, 1996 to $2.2
million for the six months ended June 30, 1997.

GENERAL AND ADMINISTRATIVE EXPENSE. General and administrative expense
increased from $2.3 million for the six months ended June 30, 1996 to $2.9
million for the six months ended June 30, 1997 primarily as a result of
increased state and local taxes due to the growth in revenues and net income of
the Company.

OTHER INCOME (EXPENSE). Interest income decreased from $613,000 for the six
months ended June 30, 1996 to $427,000 for the six months ended June 30, 1997
primarily as a result of interest income which was earned on certain escrows
during the six months ended June 30, 1996 which were refunded later in 1996.
Other expense consists of the write-off of costs incurred during the pursuit of
various build-to-suit development projects or the acquisition of real estate
assets. During the six months ended June 30, 1997, approximately $312,000 of
costs were written-off in connection with the decision to terminate the pursuit
of the acquisition of a large real estate portfolio.

NET INCOME AVAILABLE FOR COMMON SHARES. Net income available for common
shares for the six months ended June 30, 1997 was $29.7 million compared to net
income available for common shares of $21.9 million for the six months ended
June 30, 1996. This increase results primarily from the operating result
fluctuations in rental and service operations explained above.

LIQUIDITY AND CAPITAL RESOURCES

Net cash provided by operating activities totaling $71.5 million and $39.1
million for the six months ended June 30, 1997 and 1996, respectively,
represents the primary source of liquidity to fund distributions to
shareholders, unitholders and the other minority interests and to fund recurring
costs associated with the renovation and re-letting of the Company's properties.
This increase is primarily a result of, as discussed above under "Results of
Operations," the increase in net income resulting from the expansion of the
in-service portfolio through development and acquisitions of additional rental
properties.

Net cash used by investing activities totaling $175.4 million and $93.6
million for the six months ended June 30, 1997 and 1996, respectively,
represents the investment of funds by the Company to expand its portfolio of
rental properties through the development and acquisition of additional rental
properties net of proceeds received from property sales. In 1997, $153.3 million
was invested in the development and acquisition of additional rental properties
and the acquisition of land held for development. In 1996, the investment in the
development and acquisition of additional rental properties and land held for
development was $132.7 million. During the six months ended June 30, 1997, the
Company invested over $30 million in a newly formed joint venture with an
institutional investor which allowed the joint venture to purchase a 345,000
square foot office property in Chicago, Illinois which was over 95% occupied.

Net cash provided by financing activities totaling $101.2 million and $49.0
million for the six months ended June 30, 1997 and 1996, respectively,
represents the source of funds from equity and debt offerings and borrowings on
the lines of credit to fund the Company's investing activities. Also included in
financing activities are the distribution of funds to shareholders and minority
interests. In 1996, the Company received $126.1 million of net proceeds from a
common equity offering which was used to pay down amounts outstanding on the
unsecured line of credit and to fund current development and acquisition
activity. In January 1997, the Company received $56.7 million of net proceeds
from a common equity offering which was used to pay down amounts outstanding on
the unsecured line of credit and to fund current development activity. During
the six months ended June 30, 1997, the Company also received $7.0 million of
net proceeds from the issuance of common stock under its Direct Stock Purchase
and Dividend Reinvestment Plan and the exercise of employee stock options.

The Company has a $200 million unsecured line of credit which matures in
April 2001. In January 1996, the borrowing rate was LIBOR plus 1.625%. In
September 1996, the borrowing rate was reduced to LIBOR plus 1.25%. On March 27,
1997, the borrowing rate was further reduced to LIBOR plus 1.00%.

S-23
<PAGE>
On August 28, 1997, the borrowing rate was reduced to LIBOR plus .80%. The line
of credit also includes a "competitive bid option" and matures in April 2001.
The Company also has a demand $10 million secured revolving credit facility
which is available to provide working capital. This facility bears interest
payable at the 30-day LIBOR rate plus .75%.

The Company currently has on file Form S-3 Registration Statements with the
Securities and Exchange Commission ("Shelf Registrations") which, after
completion of the Offerings, will have remaining availability of approximately
$556 million to issue common stock, preferred stock or unsecured debt
securities. The Company intends to issue additional equity or debt under these
Shelf Registrations as capital needs arise to fund the development and
acquisition of additional rental properties.

The Company intends to maintain a conservative capital structure. The
Company's debt to total market capitalization ratio at June 30, 1997 was 29.1%.
Following the Offerings, the Company's debt to total market capitalization ratio
will be 23.7% based on a market price of the Company's Common Stock of $21 7/16
per share.

The total debt outstanding at June 30, 1997 consists of notes totaling
$614.9 million with a weighted average interest rate of 7.44% maturing at
various dates through 2017. The Company has $343.0 million of unsecured debt and
$271.9 million of secured debt outstanding at June 30, 1997. Scheduled principal
amortization of such debt totaled $1.5 million for the six months ended June 30,
1997.

Following is a summary of the scheduled future amortization and maturities
of the Company's indebtedness at June 30, 1997 (in thousands):

<TABLE>
<CAPTION>
WEIGHTED AVERAGE
SCHEDULED INTEREST RATE OF
YEAR AMORTIZATION MATURITIES TOTAL FUTURE REPAYMENTS
- ------------------------------------------------------- ------------ ----------- ----------- -------------------
<S> <C> <C> <C> <C>
1997................................................... $ 2,033 $ 10,000 $ 12,033 6.61%
1998................................................... 4,574 149,590 154,164 6.84%
1999................................................... 5,323 28,470 33,793 6.17%
2000................................................... 3,418 44,853 48,271 7.39%
2001................................................... 3,137 59,954 63,091 8.71%
2002................................................... 3,412 50,000 53,412 7.37%
2003................................................... 1,144 68,216 69,360 8.48%
2004................................................... 1,239 50,000 51,239 7.15%
2005................................................... 1,346 100,000 101,346 7.48%
2006................................................... 1,465 - 1,465 7.58%
Thereafter............................................. 17,391 9,292 26,683 7.71%
------------ ----------- -----------
Total $ 44,482 $ 570,375 $ 614,857 7.44%
------------ ----------- -----------
------------ ----------- -----------
</TABLE>

The 1997 maturities consist of the outstanding balance on the Company's $10
million demand secured line of credit. The 1998 maturities consist mainly of the
outstanding balance on the Company's $150 million unsecured line of credit. This
outstanding balance was repaid with a portion of the proceeds of the $146.1
million Series B Cumulative Step-Up Premium Rate Preferred Shares which were
issued in July 1997.

The Company intends to pay regular quarterly dividends from net cash
provided by operating activities. A quarterly dividend of $.59 per Common Share
was declared on July 24, 1997 payable on August 29, 1997 to shareholders of
record on August 15, 1997, which represents an annualized dividend of $2.36 per
share. A quarterly dividend of $.56875 per depositary share of Series A
Preferred Shares was declared on July 24, 1997 which is payable on August 29,
1997 to preferred shareholders of record on July 24, 1997. On July 24, 1997, the
Board of Directors declared a dividend of $.88778 per depositary share

S-24
<PAGE>
on the Series B Cumulative Step-up Redeemable Preferred Shares. The dividend is
payable on September 30, 1997 to preferred shareholders of record on September
16, 1997 and is applicable to the period beginning July 11, 1997 and ending
September 30, 1997.

FUNDS FROM OPERATIONS

Management believes that FFO, which is defined by NAREIT as net income or
loss excluding gains or losses from debt restructuring and sales of property
plus depreciation and amortization, and after adjustments for minority interest,
unconsolidated partnerships and joint ventures (adjustments for minority
interest, unconsolidated partnerships and joint ventures are calculated to
reflect FFO on the same basis), is the industry standard for reporting the
operations of real estate investment trusts.

The following table reflects the calculation of the Company's FFO for the
six months ended June 30 as follows (in thousands):

<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE
30,
----------------------
1997 1996
---------- ----------
<S> <C> <C>
Net income available for common shares.................................................... $ 29,682 $ 21,947
Add back:
Depreciation and amortization........................................................... 19,551 15,554
Share of joint venture depreciation and amortization.................................... 1,314 883
Earnings from property sales............................................................ (382) (1,604)
Minority interest share of add-backs.................................................... (2,042) (1,869)
---------- ----------
Funds From Operations..................................................................... $ 48,123 $ 34,911
---------- ----------
---------- ----------
Cash flow provided by (used by):
Operating activities.................................................................... $ 71,462 $ 39,116
Investing activities.................................................................... (175,407) (93,598)
Financing activities.................................................................... 101,718 49,041
</TABLE>

The increase in FFO for the six months ended June 30, 1997 compared to the
six months ended June 30, 1996 results primarily from the increased in-service
rental property portfolio as discussed above under "Results of Operations."

While management believes that FFO is the most relevant and widely used
measure of the Company's operating performance, such amount does not represent
cash flow from operations as defined by generally accepted accounting
principles, should not be considered as an alternative to net income as an
indicator of the Company's operating performance, and is not indicative of cash
available to fund all cash flow needs.

S-25
<PAGE>
PROPERTIES

GENERAL

The Company owns a diversified portfolio of properties which includes (i)
the in-service Properties, consisting of 262 industrial, office and retail
properties located in Indiana, Ohio, Illinois, Tennessee, Kentucky, Wisconsin
and Missouri; (ii) 26 buildings and one building expansion currently under
development; and (iii) the Land, consisting of approximately 1,300 acres of
unencumbered land for future development in Indiana, Ohio, Missouri, Illinois,
Kentucky, and Tennessee. The Company owns the entire equity interest in 219 of
the Properties, including property under development, and a partial interest in
the remainder of the Properties. The Properties are comprised of a broad range
of product types which include bulk and medium bulk warehouse and distribution
facilities, light manufacturing facilities, multi-tenant flex space buildings,
suburban office buildings, downtown office buildings, and neighborhood, power
and community shopping centers. The Company believes that its Properties are of
the highest quality available to tenants in its markets. The total square
footage of the in-service Properties is approximately 31.4 million, consisting
of approximately 21.8 million square feet of industrial space, approximately 7.9
million square feet of office space and approximately 1.7 million square feet of
retail space. The total square footage of the 26 buildings and one building
expansion currently under development is approximately 4.1 million square feet,
consisting of approximately 2.7 million square feet of industrial space,
approximately 1.0 million square feet of office space and approximately 350,000
square feet of retail space. The current development projects are 55% leased as
of June 30, 1997. The total annual Net Effective Rental income of the Properties
based upon tenants in occupancy as of June 30, 1997 is approximately $184.6
million, with $77.4 million relating to the industrial Properties, $91.7 million
relating to the office Properties and $15.5 million relating to the retail
Properties. At June 30, 1997, the Properties were approximately 95.7% leased.

The following table provides an overview of the Properties.

SUMMARY OF PROPERTIES
(IN THOUSANDS, EXCEPT PERCENTAGES)

<TABLE>
<CAPTION>
PERCENT OF
PERCENT OF ANNUAL NET TOTAL NET
SQUARE TOTAL SQUARE EFFECTIVE EFFECTIVE OCCUPANCY AT
TYPE OF PROPERTY FEET FEET RENT(1) ANNUAL RENT JUNE 30, 1997
- ------------------------------------------------ --------- --------------- ------------ --------------- ---------------
<S> <C> <C> <C> <C> <C>
Industrial...................................... 21,753 69% $ 77,384 42% 95.5%
Office.......................................... 7,943 25 91,739 50 96.3%
Retail.......................................... 1,710 6 15,471 8 95.2%
--------- --- ------------ ---
Total........................................... 31,406 100% $ 184,594 100% 95.7%
--------- --- ------------ ---
--------- --- ------------ ---
</TABLE>

- ------------------------

(1) Represents annual Net Effective Rent due from tenants in occupancy as of
June 30, 1997. Net Effective Rent equals the average annual rental property
revenue over the terms of the respective leases, excluding additional rent
due as operating expense reimbursements, landlord allowances for operating
expenses and percentage rents.

S-26
<PAGE>
The following table sets forth the aggregate average percent leased for all
of the Properties during the indicated periods.

<TABLE>
<CAPTION>
AVERAGE OCCUPANCY
(ALL PROPERTIES)
SQUARE FEET AVERAGE
YEAR AVAILABLE OCCUPANCY
- ---------------------------------------------------------------------------------------- ------------ -------------
<S> <C> <C>
June 30, 1997........................................................................... 31,406,042 95.4%
1996.................................................................................... 27,402,150 95.2%
1995.................................................................................... 20,072,666 95.1%
1994.................................................................................... 12,894,603 93.8%
</TABLE>

The following table shows lease expirations for leases in place as of June
30, 1997 for each of the ten years beginning with 1997 for the Properties,
assuming none of the tenants exercises early termination or renewal options.

LEASE EXPIRATIONS
(ALL PROPERTIES)

<TABLE>
<CAPTION>
ANNUAL NET PERCENT OF PERCENT OF
EFFECTIVE ANNUAL NET TOTAL
RENT PER EFFECTIVE LEASED
NET RENTABLE ANNUAL NET SQ. FT. RENT SQ. FT.
NUMBER OF AREA (IN SQ. EFFECTIVE RENT UNDER REPRESENTED REPRESENTED
LEASES FT.) SUBJECT TO UNDER EXPIRING EXPIRING BY EXPIRING BY EXPIRING
YEAR OF LEASE EXPIRATION EXPIRING EXPIRING LEASES LEASES (1) LEASES (1) LEASES LEASES
- -------------------------------- ----------- --------------- -------------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
(IN THOUSANDS) (IN THOUSANDS)
1997............................ 199 1,658 $ 8,673 $ 5.23 4.70% 5.52%
1998............................ 330 3,237 18,559 $ 5.73 10.05 10.77
1999............................ 336 3,370 21,923 $ 6.51 11.88 11.21
2000............................ 290 3,007 19,665 $ 6.54 10.65 10.00
2001............................ 294 3,606 20,997 $ 5.82 11.37 12.00
2002............................ 196 3,763 21,617 $ 5.74 11.71 12.52
2003............................ 35 590 5,007 $ 8.49 2.71 1.96
2004............................ 28 1,160 6,544 $ 5.64 3.55 3.86
2005............................ 47 2,315 15,829 $ 6.84 8.58 7.70
2006............................ 42 2,798 15,286 $ 5.46 8.28 9.31
2007 and
thereafter...................... 59 4,555 30,494 $ 6.69 16.52 15.15
----- ------ -------------- ----------- -----------
Total........................... 1,856 30,059 $ 184,594 $ 6.14 100.00% 100.00%
----- ------ -------------- ----------- -----------
----- ------ -------------- ----------- -----------
</TABLE>

- ------------------------

(1) Represents annual Net Effective Rent due from tenants in occupancy as of
June 30, 1997.

INDUSTRIAL PROPERTIES

The 157 industrial Properties are primarily located in industrial or
business parks that have been developed by the Company and consist of 109 bulk
distribution facilities and 48 service center facilities. Approximately 86% of
the square footage of the industrial Properties is contained in bulk
distribution facilities. The bulk distribution facilities accommodate the needs
of large warehouse and distribution users with ceiling clear heights of 20 feet
or more while providing leased space to many large tenants including users of
more than 500,000 square feet. The service center facilities are also known as
flex buildings or light industrial properties which generally have 12 to 18 foot
ceiling heights and a combination of drive-up and dock loading access. These
service center facilities accommodate users of 1,200 square feet and up. The

S-27
<PAGE>
diversity of the industrial buildings allows the Company to cater to many
segments of the industrial market and renders the Company less dependent upon
any specific market segment. Over 89% of the industrial Properties are in the
Company's markets of Indianapolis, Cincinnati and Columbus.

OFFICE PROPERTIES

The Company owns a portfolio of 81 office Properties, including 72 suburban
office buildings which range from single-story to mid-rise and are located in
developed business parks and mixed use developments with excellent interstate
access and visibility. Six of the suburban office buildings are medical
buildings, including a single tenant facility with a 20 year lease and two
multi-tenant properties attached to a hospital. In addition, the Company owns
three downtown office buildings consisting of two new high-rise buildings and
one rehabilitated building. The Company believes that these primarily Class A
office Properties are among the highest quality available to tenants in its
markets. This diverse mix of office buildings is occupied by tenants spanning
all segments of the office market.

RETAIL PROPERTIES

The retail Properties, which cater to a variety of retail markets, include
one regional shopping center, 12 neighborhood shopping centers, three shopping
centers designed primarily to serve the business parks in which they are located
and eight free-standing single-tenant buildings. The regional and neighborhood
shopping centers either have well known anchor tenants such as Wal-Mart and Pet
Food Supermarket, or are located adjacent to major retailers such as Kroger or
in areas where other large commercial facilities draw consumers. The retail
Properties are generally located in upscale suburban and high growth areas.

LAND

Substantially all of the approximately 1,300 acres of unencumbered Land is
located adjacent to the Properties in industrial or business parks that have
been developed by the Company. Approximately 75% of the Land is zoned for
industrial use, with the remainder zoned for either office or retail use. All of
the Land is unencumbered, has available to it appropriate utilities and is ready
for immediate development. The Company believes that approximately 17 million
square feet of commercial development can be constructed on the Land. The
Company believes that the Land gives it a competitive advantage over other real
estate companies operating in its markets.

S-28
<PAGE>
MANAGEMENT

The directors and senior officers of the Company are as follows:

<TABLE>
<CAPTION>
NAME AGE PRINCIPAL OCCUPATIONS AND POSITIONS
- --------------------------- --- -------------------------------------------------------------------------------
<S> <C> <C>
John W. Wynne 64 Director and Chairman of the Board.

Thomas L. Hefner 50 Director and President and Chief Executive Officer.

Darell E. Zink, Jr. 50 Director and Executive Vice President and Chief Financial Officer.

Geoffrey Button 48 Director; Independent real estate and financing consultant.

Ngaire E. Cuneo 46 Director; Executive Vice President, Corporate Development, Conseco, Inc.

Howard L. Feinsand 49 Director; Principal, Choir Capital Ltd.

L. Ben Lytle 50 Director; President and Chief Executive Officer of Anthem, Inc.

John D. Peterson 64 Director; Chairman of City Securities Corporation.

James E. Rogers 49 Director; Vice Chairman, President and Chief Operating Officer of CINergy.

Daniel C. Staton 44 Director; Principal, Walnut Capital Partners.

Jay J. Strauss 61 Director; Chairman and Chief Executive Officer of Regent Realty Group, Inc.

Gary A. Burk 45 President of Construction Services and Executive Vice President of Duke
Services, Inc.

Richard W. Horn 39 Executive Vice President, Office.

William E. Linville, III 42 Executive Vice President, Industrial.

David R. Mennel 43 General Manager of Services Operations and President of Duke Services, Inc.

Dennis D. Oklak 43 Vice President and Treasurer.

John R. Gaskin 36 Vice President, General Counsel and Secretary.

John M. Nemecek 42 President of Asset/Property Management.
</TABLE>

S-29
<PAGE>
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS

For a discussion of material federal income tax consequences applicable to
distributions to shareholders and the Company's election to be taxed as a REIT,
see "Federal Income Tax Considerations" in the accompanying Prospectus.

Prospective purchasers should be aware that the recently enacted Taxpayer
Relief Act of 1997 (the "1997 Act") made numerous changes to the Code, including
reducing the maximum tax imposed on net capital gains from the sale of assets
held for more than 18 months by individuals, trusts and estates. The 1997 Act
also makes certain changes to the requirements to qualify as a REIT and to the
taxation of REITs and their shareholders.

The 1997 Act contains significant changes to the taxation of capital gains
of individuals, trusts and estates and certain changes to the REIT Requirements
and the taxation of REITs. For gains realized after July 28, 1997, and subject
to certain exceptions, the maximum rate of tax on net capital gains of
individuals, trusts and estates from the sale or exchange of assets held for
more than 18 months has been reduced to 20%, and the maximum rate is reduced to
18% for assets acquired after December 31, 2000 and held for more than five
years. For taxpayers who would be subject to a maximum tax rate of 15%, the rate
on net capital gains is reduced to 10%, and effective for taxable years
commencing after December 31, 2000, the rate is reduced to 8% for assets held
for more than five years. The maximum rate for net capital gains attributable to
the sale of depreciable real property held for more than 18 months is 25% to the
extent of the deductions for depreciation with respect to such property.
Long-term capital gain allocated to a shareholder by the Company will be subject
to the 25% rate to the extent that the gain does not exceed depreciation on real
property sold by the Company. The maximum rate of capital gains tax for capital
assets held more than one year but not more than 18 months remains at 28%. The
taxation of capital gains of corporations was not changed by the 1997 Act.

The 1997 Act also includes several provisions that are intended to simplify
the taxation of REITs. These provisions are effective for taxable years
beginning after the date of enactment of the 1997 Act which, as to the Company,
is its taxable year commencing January 1, 1998. First, in determining whether a
REIT satisfies the income tests, a REIT's rental income from a property will not
cease to qualify as "rents from real property" merely because the REIT performs
services for a tenant other than permitted customary services if the amount that
the REIT is deemed to have received as a result of performing impermissible
services does not exceed one percent of all amounts received directly or
indirectly by the REIT with respect to such property. The amount that a REIT
will be deemed to have received for performing impermissible services is at
least 150% of the direct cost to the REIT of providing those services. Second,
certain non-cash income, including income from cancellation of indebtedness and
original issue discount will be excluded from income in determining the amount
of dividends that a REIT is required to distribute. Third, a REIT may elect to
retain and pay income tax on any net long-term capital gains and require its
shareholders to include such undistributed net capital gains in their income. If
a REIT makes such an election, the REIT's shareholders would receive a tax
credit attributable to their share of capital gains tax paid by a REIT on the
undistributed net capital gains that was included in the shareholders' income,
and such shareholders will receive an increase in the basis of their shares in
the amount of undistributed net capital gain included in their income reduced by
the amount of the credit. Fourth, the 1997 Act repeals the requirement that a
REIT receive less than 30% of its gross income from the sale or disposition of
stock or securities held for less than one year, gain from prohibited
transactions, and gain from certain sales of real property held less than four
years. Finally, the 1997 Act contains a number of technical provisions that
reduce the risk that a REIT will inadvertently cease to qualify as a REIT.

S-30
<PAGE>
UNDERWRITING

Subject to the terms and conditions contained in the terms agreement and
related underwriting agreement (collectively, the "U.S. Underwriting
Agreement"), the Company has agreed to sell to each of the Underwriters named
below (the "U.S. Underwriters"), and each of the U.S. Underwriters for whom
Merrill Lynch, Pierce, Fenner & Smith Incorporated, BT Alex. Brown Incorporated,
A.G. Edwards & Sons, Inc., Legg Mason Wood Walker, Incorporated, McDonald &
Company Securities, Inc. and Morgan Stanley & Co. Incorporated are acting as
representatives (the "U.S. Representatives") has severally agreed to purchase
from the Company, the respective number of shares of Common Stock set forth
after its name below.

<TABLE>
<CAPTION>
NUMBER OF SHARES
UNDERWRITER OF COMMON STOCK
- ---------------------------------------------------------------------------- ----------------
<S> <C>
Merrill Lynch, Pierce, Fenner & Smith
Incorporated...................................................... 1,060,000
BT Alex. Brown Incorporated................................................. 1,060,000
A.G. Edwards & Sons, Inc.................................................... 1,060,000
Legg Mason Wood Walker, Incorporated........................................ 1,060,000
McDonald & Company Securities, Inc.......................................... 1,060,000
Morgan Stanley & Co. Incorporated........................................... 1,060,000
Donaldson, Lufkin & Jenrette Securities Corporation......................... 80,000
EVEREN Securities, Inc...................................................... 80,000
PaineWebber Incorporated.................................................... 80,000
Prudential Securities Incorporated.......................................... 80,000
Salomon Brothers Inc........................................................ 80,000
Smith Barney Inc............................................................ 80,000
UBS Securities LLC.......................................................... 80,000
City Securities Corporation................................................. 40,000
Dain Bosworth Incorporated.................................................. 40,000
Friedman, Billings, Ramsey & Co., Inc....................................... 40,000
Gruntal & Co., L.L.C........................................................ 40,000
Edward D. Jones & Co., L.P.................................................. 40,000
NatCity Investments, Inc.................................................... 40,000
David A. Noyes & Company.................................................... 40,000
The Ohio Company............................................................ 40,000
Ormes Capital Markets, Inc.................................................. 40,000
Rauscher Pierce Refsnes, Inc................................................ 40,000
Raymond James & Associates, Inc............................................. 40,000
Roney & Co., LLC............................................................ 40,000
Stifel, Nicolaus & Company, Incorporated.................................... 40,000
Sutro & Co. Incorporated.................................................... 40,000
Traub and Company, Inc...................................................... 40,000
Utendahl Capital Partners, L.P.............................................. 40,000
Wheat, First Securities, Inc................................................ 40,000
----------------
Total............................................................. 7,600,000
----------------
----------------
</TABLE>

The Company also has entered into a terms agreement and related underwriting
agreement (collectively, the "International Underwriting Agreement" and,
together with the U.S. Underwriting Agreement, the "Underwriting Agreements")
with certain underwriters outside the United States and Canada (the
"International Managers" and, together with the U.S. Underwriters, the
"Underwriters") for whom Merrill Lynch International, BT Alex. Brown
International Division of Bankers Trust International PLC,

S-31
<PAGE>
A.G. Edwards & Sons, Inc., Legg Mason Wood Walker, Incorporated, McDonald &
Company Securities, Inc. and Morgan Stanley & Co. International Limited are
acting as lead managers. Subject to the terms and conditions set forth in the
International Underwriting Agreement, and concurrently with the sale of
7,600,000 shares of Common Stock to the U.S. Underwriters pursuant to the U.S.
Underwriting Agreement, the Company has agreed to sell to the International
Managers, and the International Managers have severally agreed to purchase from
the Company, an aggregate of 1,900,000 shares of Common Stock. The public
offering price per share and the underwriting discount per share are identical
under the International Underwriting Agreement and the U.S. Underwriting
Agreement.

In each Underwriting Agreement, the U.S. Underwriters and the International
Managers have agreed, subject to the terms and conditions set forth therein, to
purchase all of the shares being sold pursuant to each such Underwriting
Agreement if any of such shares of Common Stock are purchased. Under certain
circumstances, the commitments of nondefaulting U.S. Underwriters or
International Managers may be increased. The closings with respect to the sale
of the shares to be purchased by the International Managers and the U.S.
Underwriters are conditioned one upon the other.

The U.S. Representatives have advised the Company that the U.S. Underwriters
propose initially to offer the Common Stock to the public at the public offering
price set forth on the cover page of this Prospectus Supplement, and to certain
dealers at such price less a concession not in excess of $.63 per share. The
U.S. Underwriters may allow, and such dealers may reallow, a discount not in
excess of $.10 to certain other dealers. After the Offerings, the public
offering price, concession and discounts may be changed.

The Company has been informed that the U.S. Underwriters and the
International Managers have entered into an intersyndicate agreement (the
"Intersyndicate Agreement") that provides for the coordination of their
activities. Under the terms of the Intersyndicate Agreement, the U.S.
Underwriters and the International Managers are permitted to sell Common Stock
to each other for purposes of resale at the price per share to the public on the
cover page of this Prospectus Supplement, less an amount not greater than the
selling concession. Under the terms of the Intersyndicate Agreement, the
International Managers and any dealer to whom they sell Common Stock will not
offer to sell or sell Common Stock to persons who are United States persons or
Canadian persons or to persons they believe intend to resell to persons who are
United States persons or Canadian persons, and the U.S. Underwriters and any
dealer to whom they sell Common Stock will not offer to sell or sell Common
Stock to persons who are non-United States and non-Canadian persons or to
persons they believe intend to resell to persons who are non-United States and
non-Canadian persons, except in each case for transactions pursuant to the
Intersyndicate Agreement.

The Company has granted an option to the U.S. Underwriters, exercisable
during the 30-day period after the date of this Prospectus Supplement, to
purchase up to 1,140,000 additional shares of Common Stock at the price to the
public set forth on the cover page of this Prospectus Supplement, less the
underwriting discount. The U.S. Underwriters may exercise this option only to
cover over-allotments, if any. If the U.S. Underwriters exercise this option,
each of the U.S. Underwriters will have a firm commitment, subject to certain
conditions, to purchase approximately the same percentage thereof which the
number of shares of Common Stock to be purchased by it shown in the foregoing
table bears to the 7,600,000 shares of Common Stock offered hereby. The Company
has granted an option to the International Managers, exercisable during the
30-day period after the date of this Prospectus Supplement, to purchase up to
285,000 additional shares of Common Stock solely to cover over-allotments, if
any, on terms similar to those granted to the U.S. Underwriters.

The Company has agreed to indemnify the several Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, as amended,
or to contribute to payments the Underwriters may be required to make in respect
thereof.

The Company and the executive officers of the Company and the Directors have
agreed that for a period of 90 days from the date of this Prospectus Supplement
they will not, without prior and written

S-32
<PAGE>
consent of the U.S. Representatives, offer, sell or otherwise dispose of any
shares of Common Stock or any other security convertible into or exercisable for
shares of Common Stock (except pursuant to the Company's stock option or
dividend reinvestment plans and certain other agreements).

In connection with the Offerings, the rules of the Securities and Exchange
Commission permit the U.S. Representatives and the International Managers to
engage in certain transactions that stabilize the price of the Common Stock.
Such transactions may consist of bids or purchases for the purpose of pegging,
fixing or maintaining the price of the Common Stock.

If the U.S. Underwriters or International Managers create a short position
in the Common Stock in connection with the Offerings (I.E., if they sell more
shares of Common Stock than are set forth on the cover page of this Prospectus
Supplement), the U.S. Representatives and the International Managers,
respectively, may reduce that short position by purchasing Common Stock in the
open market. The U.S. Representatives and the International Managers,
respectively, also may elect to reduce any short position by exercising all or
part of the over-allotment options described herein.

The U.S. Representatives and the International Managers also may impose a
penalty bid on certain Underwriters and selling group members. This means that
if the U.S. Representatives and the International Managers purchase shares of
Common Stock in the open market to reduce the U.S. Underwriters' or
International Managers' short position, respectively, or to stabilize the price
of the Common Stock, they may reclaim the amount of the selling concession from
the Underwriters and selling group members who sold those shares as part of the
Offerings.

In general, purchases of a security for the purpose of stabilization or to
reduce a syndicate short position could cause the price of the security to be
higher than it might otherwise be in the absence of such purchases. The
imposition of a penalty bid might have an effect on the price of a security to
the extent that it were to discourage resales of the security by purchasers in
the Offerings.

Neither the Company nor any of the Underwriters makes any representation or
prediction as to the direction or magnitude of any effect that the transactions
described above may have on the price of the Common Stock. In addition, neither
the Company nor any of the Underwriters makes any representation that the U.S.
Representatives or the International Managers will engage in such transactions
or that such transactions, once commenced, will not be discontinued without
notice.

Merrill Lynch, Pierce, Fenner & Smith Incorporated ("Merrill Lynch") from
time to time provides investment banking and financial advisory services to the
Company. Merrill Lynch also acted as representative of various underwriters in
connection with public offerings of the Company's Common Stock, Depositary
Shares and debt securities in 1993 through 1997.

LEGAL MATTERS

In addition to the legal opinions referred to under "Legal Opinions" in the
accompanying Prospectus, the description of Federal income tax matters contained
in this Prospectus Supplement entitled "Certain Federal Income Tax
Considerations" is based upon the opinion of Bose McKinney & Evans.

S-33
<PAGE>
- ------------------------------------------------
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- ------------------------------------------------
------------------------------------------------

NO DEALER, SALESMAN OR OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED OR
INCORPORATED BY REFERENCE IN THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS IN
CONNECTION WITH THE OFFERING MADE BY THIS PROSPECTUS SUPPLEMENT AND THE
PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT
BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR THE UNDERWRITERS.
NEITHER THE DELIVERY OF THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS NOR ANY
SALE MADE HEREUNDER AND THEREUNDER SHALL, UNDER ANY CIRCUMSTANCE, CREATE AN
IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE FACTS SET FORTH IN THIS
PROSPECTUS SUPPLEMENT OR IN THE PROSPECTUS OR IN THE AFFAIRS OF THE COMPANY
SINCE THE DATE HEREOF. THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS DO NOT
CONSTITUTE AN OFFER OR SOLICITATION BY ANYONE IN ANY STATE IN WHICH SUCH OFFER
OR SOLICITATION IS NOT AUTHORIZED OR IN WHICH THE PERSON MAKING SUCH OFFER OR
SOLICITATION IS NOT QUALIFIED TO DO SO OR TO ANYONE TO WHOM IT IS UNLAWFUL TO
MAKE SUCH OFFER OR SOLICITATION.

----------------

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
PROSPECTUS SUPPLEMENT
Prospectus Supplement Summary.................. S-3
The Company.................................... S-11
Use of Proceeds................................ S-15
Price Range of Common Stock and Dividend
History....................................... S-15
Capitalization................................. S-17
Selected Consolidated Financial Data........... S-18
Management's Discussion and Analysis of
Financial Condition and Results of
Operations.................................... S-20
Properties..................................... S-26
Management..................................... S-29
Certain Federal Income Tax Considerations...... S-30
Underwriting................................... S-31
Legal Matters.................................. S-33

PROSPECTUS
Available Information.......................... 2
Incorporation of Certain Documents by
Reference..................................... 2
The Company and the Operating Partnership...... 3
Use of Proceeds................................ 3
Ratios of Earnings to Fixed Charges............ 4
Description of Debt Securities................. 4
Description of Preferred Stock................. 15
Description of Depositary Shares............... 21
Description of Common Stock.................... 24
Federal Income Tax Considerations.............. 26
Plan of Distribution........................... 33
Legal Opinions................................. 34
Experts........................................ 34
</TABLE>

9,500,000 SHARES

[LOGO]

COMMON STOCK

-------------------

PROSPECTUS SUPPLEMENT

-------------------

MERRILL LYNCH & CO.
BT ALEX. BROWN

A.G. EDWARDS & SONS, INC.
LEGG MASON WOOD WALKER
INCORPORATED
MCDONALD & COMPANY
SECURITIES, INC.
MORGAN STANLEY DEAN WITTER

SEPTEMBER 9, 1997

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