PROSPECTUS SUPPLEMENT
(TO PROSPECTUS DATED MAY 27, 1997)
1,525,000 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 December 31, 1997, the Company owned a
diversified portfolio of355 in-service industrial, office and retail properties,
encompassing approximately 40.7 million square feet located in eight states,
and 25 buildings and three building expansions encompassing approximately 5.2
million square feet under development. The Company also owned approximately
1,700 acres of land for future development. 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. The Common Stock is listed on the New York Stock Exchange (the
"NYSE") under the symbol DRE. The last reported sale price for the Common
Stock on April 23, 1998 was $24.00 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.
---------------------
The Underwriter has agreed to purchase the Common Stock from the Company
at a price of $22.74 per share, resulting in aggregate proceeds to the
Company of $34,678,500 before payment of expenses by the Company estimated
to be $25,000, subject to the terms and conditions of a terms agreement and
related underwriting agreement (collectively, the "Underwriting Agreement").
The Underwriter intends to deposit the shares of Common Stock, valued at the
last repored sales price, with the trustee of the Equity Investor Fund Cohen &
Steers Realty Majors Portfolio (A Unit Investment trust) (the "Trust") in
exchange for units in the Trust. The units of the Trust will be sold to
investors at a price based upon the net asset value of the securities in
the Trust. For purposes of this calculation, the value of the Common Stock as
of the evaluation time for units of the Trust on April 23, 1998 was $24.00
per share of Common Stock.
--------------------
The shares of Common Stock are offered by the Underwriter, subject to prior
sale, when, as and if delivered to and accepted by the Underwriter and
subject to approval of certain legal matters by counsel for the Underwriter.
<PAGE>
The Underwriter reserves 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 offered hereby will be made in New York, New York on
or about April 29, 1998.
------------------
MERRILL LYNCH & CO.
------------------
The date of this Prospectus Supplement is April 23, 1998.
<PAGE>
CERTAIN PERSONS PARTICIPATING IN THE OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK,
INCLUDING ENTERING STABILIZING BIDS. FOR A DESCRIPTION OF THESE ACTIVITIES,
SEE "UNDERWRITING."
<PAGE>
The following information is qualified in its entirety by, and should be
read in conjunction with, the more detailed information appearing in 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 December 31, 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
within the meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended. 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
December 31, 1997, the Company owned a diversified portfolio of 355 in-service
industrial, office and retail properties (the "Properties"), encompassing
approximately 40.7 million square feet located in eight states, and 25 buildings
and three building expansions encompassing approximately 5.2 million square feet
under development. The Company also owned approximately 1,700 acres of
unencumbered land (the "Land") for future development, of which approximately
70% is zoned for industrial use and which is typically located adjacent to the
Properties. The Company provides leasing, management, construction, development
and other tenantrelated services for the Properties and certain properties
owned by third parties. 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 approximately 54 million square feet of
commercial property since its founding including an average of approximately
4.8 million square feet per year during the last five years. In addition, the
Company acquired approximately 14.1 million square feet during the three years
ended December 31, 1997. During 1997, the Company placed in service 5.3
million square feet of new development and acquired 8.4 million square feet
of property.
The Company manages approximately 54 million square feet of property,
including over 8.3 million square feet owned by third parties. The Company
manages approximately 37% and 27% of all competitive suburban office,
warehousing and light manufacturing space in Indianapolis and Cincinnati,
respectively. In addition to providing services to more than 2,300 tenants in
the Properties, the Company provides such services to nearly 1,000 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 72% and 39% 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.
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 Duke Realty Limited Partnership (the "Operating
Partnership"). Partnership interests ("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 December 31, 1997 of approximately 87% of
the Units. In addition, the senior management team of the Company owns
approximately 10.75% of the Company through Common Stock and Unit ownership.
The following tables provide an overview of the Properties.
<TABLE>
<CAPTION>
SUMMARY OF PROPERTIES
(IN THOUSANDS, EXCEPT PERCENTAGES)
PERCENT
PERCENT ANNUAL OF TOTAL OCCUPANCY
SQUARE OF TOTAL NET EFFECTIVE NET EFFECTIVE AT
TYPE OF PROPERTY FEET SQ. FT. RENT (1) ANNUAL DECEMBER
RENT 31, 1997
- ---------------- ------- ---------- ------------- ------------- ----------
<S> <C> <C> <C> <C> <C>
Industrial 27,880 69% $101,074 41% 93.3%
Office 10,747 26% 128,879 52% 95.8%
Retail 2,041 5% 18,028 7% 95.8%
Total 40,668 100% $247,981 100% 94.1%
</TABLE>
- ----------
(1) Represents annual net effective rent due from tenants in occupancy as of
December 31, 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.
<TABLE>
<CAPTION>
SQUARE FOOTAGE AND ANNUAL NET EFFECTIVE RENT OF PROPERTIES
(IN THOUSANDS, EXCEPT PERCENTAGES)
SQUARE FEET PERCENT OF
----------------------------------------------------- ANNUAL
PERCENT NET EFFECTIVE NET EFFECT.
PRIMARY MARKET INDUST. OFFICE RETAIL TOTAL OF TOTAL RENT RENT
- -------------- -------- ------ ------ ----- --------- ------------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Indianapolis 13,875 1,519 194 15,588 38% $ 65,776 27%
Cincinnati 4,649 3,403 1,130 9,182 22% 62,581 25%
St. Louis 1,266 1,902 - 3,168 8% 31,017 13%
Columbus 2,275 1,549 219 4,043 10% 28,104 11%
Cleveland 1,464 1,311 - 2,775 7% 20,507 8%
Chicago - 995 - 995 2% 15,606 6%
Minneapolis 3,156 68 - 3,224 8% 12,960 5%
Nashville 633 - - 633 2% 4,651 2%
Other (2) 562 - 498 1,060 3% 6,779 3%
------ ------ ----- ------ ---- ------- ----
Total 27,880 10,747 2,041 40,668 100% $247,981 100%
</TABLE>
- -----------
(1) Represents annual Net Effective Rent due from tenants in occupancy
as of December 31, 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.
<PAGE>
RECENT DEVELOPMENTS
OPERATING PERFORMANCE, DIVIDEND AND STOCK SPLIT
For the year ended December 31, 1997, the Company reported the following
information as compared to 1996.
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
-------------------------
1997 1996
-------- --------
(IN THOUSANDS)
<S> <C> <C>
Net income available for common shareholders $ 65,999 $ 50,872
Revenues 252,080 182,089
Funds From Operations 107,256 76,079
Cash flow provided by (used by):
Operating activities 159,195 95,135
Investing activities (597,324) (276,748)
Financing activities 443,148 181,220
</TABLE>
On January 29, 1998, the Company's Board of Directors declared a regular
quarterly common dividend of $.30 per share, payable on February 27, 1998 to
common shareholders of record on February 13, 1998. The Company effected a
two-for-one split of its common stock (the "Stock Split") which was paid on
August 25, 1997 to common shareholders of record on August 18, 1997. Share
and per share amounts in this Prospectus Supplement have been restated to
reflect the effect of the Stock Split.
FINANCING
In February 1998, March 1998 and April 1998, the Company issued 661,157,
839,895 and 826,873 shares of its Common Stock, respectively, to unit trusts,
raising combined net proceeds of approximately $52.3 million.
The Company issued $100 million of unsecured Puttable Reset Securities
("PURS") in March 1998. The PURS bear interest at a coupon rate of 7.05% and
mature on March 1, 2016. On March 1, 2006, the interest rate may be reset as a
fixed rate determined on the basis of certain bids to be requested from
reference dealers, and the PURS are subject to a call option held by one of
the underwriters involved in the sale of the PURS and, if the call is not
exercised, to the right of the holders to put the PURS to the Company, in
each case on the terms and conditions described therein. The effective
interest rate of the PURS is 6.72%, which includes the effect of the settlement
of a forward Treasury lock agreement which the Company entered into in
December 1997.
DEVELOPMENT AND ACQUISITIONS
During the first quarter of 1998, the Company completed development of and
placed in service 10 properties comprising 2.0 million square feet at a total
cost of $78.1 million. The Company had 23 properties and four property
expansions under development at March 31, 1998 comprising 4.3 million square
feet which is expected to have a total cost of $330.9 million upon
completion. Also during the first quarter of 1998, the Company acquired 15
properties with 1.1 million square feet at a total cost of $40.9 million.
These property additions (the "New Properties"), totaling 7.4 million square
feet, consist of 65% industrial, 32% office and 3% retail projects. The total
cost of the New Properties is expected to be $449.9 million. At March 31, 1998,
the New Properties which have been placed in service are 83% leased, and the
New Properties under construction are 59% pre-leased for a combined total of
69% 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 11.0% with
anticipated leasing activity. The annual contractual NOI to be generated from
the New Properties, once placed in service, will be $49.5 million with
anticipated additional leasing.
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.
The following table sets forth information regarding each of the New
Properties as of March 31, 1998.
<TABLE>
<CAPTION>
IN-SERVICE OR % % LEASED
ANTICIPATED PROJECT/ PROPERTY OWNER- SQUARE OR PRE-
IN-SERVICE DATE TENANT LOCATION TYPE SHIP FEET LEASED
- ---------------- -------- --------- --------- ------- ------ --------
<S> <C> <C> <C> <C> <C> <C>
DEVELOPMENT COMPLETED IN FIRST QUARTER 1998:
1st Qtr. 1998 Prentice Hall Indianapolis, IN Indust. 100% 577,340 100%
1st Qtr. 1998 World Park
Bldg. 29 Cincinnati, OH Indust. 100% 452,000 100%
1st Qtr. 1998 Software
Artistry,Inc. Indianapolis, IN Office 100% 108,273 75%
1st Qtr. 1998 Dukeport 3 St. Louis, MO Indust. 100% 214,400 58%
1st Qtr. 1998 World Park
Bldg. 28 Cincinnati, OH Indust. 100% 220,160 100%
1st Qtr. 1998 Rings Road
Off.Bldg. Columbus, OH Office 100% 145,000 85%
1st Qtr. 1998 Park Fletcher
Bldg.35 Indianapolis, IN Indust. 50% 96,000 100%
1st Qtr. 1998 Woodland Corp.
Ctr. One Indianapolis, IN Office 100% 77,186 100%
1st Qtr. 1998 Fountain Pkwy.
Bldg. I Cleveland, OH Indust. 100% 108,704 100%
1st Qtr. 1998 Park Fletcher
Bldg. 36 Indianapolis, IN Indust. 50% 52,800 9%
--------
2,051,863 91%
UNDER DEVELOPMENT:
2nd Qtr. 1998 Dukeport 4 St. Louis, MO Indust. 100% 153,600 0%
2nd Qtr. 1998 Sterling 4 Columbus, OH Office 100% 94,219 100%
2nd Qtr. 1998 MCI St. Louis, MO Office 100% 97,356 100%
2nd Qtr. 1998 General Cable Lebanon, IN Indust. 100% 395,472 50%
2nd Qtr. 1998 Westport Ctr.I St. Louis, MO Indust. 100% 177,600 0%
2nd Qtr. 1998 Park 100
Bldg. 134 Indianapolis, IN Indust. 100% 110,400 49%
2nd Qtr. 1998 Strongville
Pk 82, Bldg.1 Cleveland, OH Indust. 100% 67,540 0%
2nd Qtr. 1998 Thomson Exp. Indianapolis, IN Indust. 50% 740,155 100%
2nd Qtr. 1998 Sun TV Exp. Columbus, OH Indust. 100% 231,936 100%
2nd Qtr. 1998 Franklin Road
Exp. Indianapolis, IN Indust. 100% 150,000 72%
3rd Qtr. 1998 Creekside
Crossing One Nashville, TN Office 100% 116,390 18%
3rd Qtr. 1998 Governors Pte.
4680 Bldg. Cincinnati, OH Office 100% 126,102 0%
3rd Qtr. 1998 WestPort
Ctr. II St. Louis, MO Indust. 100% 51,480 73%
3rd Qtr. 1998 Western Hills
Mktpl. Cincinnati, OH Retail 100% 148,140 82%
4th Qtr. 1998 Four Parkwood Indianapolis, IN Office 100% 132,836 0%
4th Qtr. 1998 Tri-County
Mktpl. Cincinnati, OH Retail 100% 74,174 100%
4th Qtr. 1998 Executive Plaza
III Cincinnati, OH Office 100% 90,073 0%
4th Qtr. 1998 Landerbrook
Phase II Cleveland, OH Office 100% 103,300 0%
4th Qtr. 1998 Pfeiffer Woods Cincinnati, OH Office 50% 112,000 40%
4th Qtr. 1998 Emerald II Columbus, OH Office 100% 45,214 0%
4th Qtr. 1998 520 Maryville
Ctr. St. Louis, MO Office 100% 113,659 0%
4th Qtr. 1998 Park Center
Bldg. I Cleveland, OH Office 100% 133,550 0%
4th Qtr. 1998 Gov. Pte.
Retail N. Cincinnati, OH Retail 100% 6,400 63%
1st Qtr. 1999 Express Med Columbus, OH Office 50% 103,606 100%
1st Qtr. 1999 One Easton
Oval Columbus, OH Office 100% 127,080 0%
1st Qtr. 1999 Solutia Ctr. St. Louis, MO Office 100% 264,952 100%
1st Qtr. 1999 Novus Services Columbus, OH Office 100% 326,481 100%
---------
4,293,715 59%
FIRST QUARTER ACQUISITIONS:
1st Qtr. 1998 Happe Indust./
Portfolio Minneapolis, MN Off. 100% 269,658 93%
1st Qtr. 1998 Anderson
Portfolio Chicago, IL Indust. 100% 513,074 96%
1st Qtr. 1998 Crossroads
Bldg. Chicago, IL Indust. 100% 289,920 0%
---------
1,072,652 69%
TOTAL 7,418,230 69%
</TABLE>
- ----------------
(1) Represents completed leasing activity through March 31, 1998.
<PAGE>
USE OF PROCEEDS
The net proceeds to the Company from the sale of the Common Stock offered
hereby, after deducting the estimated offering expenses, are expected to be
approximately $34.7 million. The Company presently intends to use the net
proceeds to fund development and acquisition of additional rental properties.
See "Recent Developments."
PRICE RANGE OF COMMON STOCK AND DIVIDEND HISTORY
The Common Stock is listed on the NYSE 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>
1996
First Quarter $16.25 $14.56 $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 19.00 0.255
Second Quarter 20.88 17.13 0.255
Third Quarter 23.63 19.81 0.295
Fourth Quarter 25.00 21.38 0.300
1998
First Quarter 24.63 22.63 0.300
Second Quarter (through
April 23, 1998) 24.94 24.19
</TABLE>
The last reported sale price of the Common Stock on the NYSE on April 23,
1998 was $24.00 per share. As of April 23, 1998, there were 8,627
registered holders of Common Stock.
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 none of the per share
distribution for 1997 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.
<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 aREIT, 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 or exchange of
assets held for more than 18 months by individuals,
trusts and estates to 20%. This reduced tax rate is effective
for sales and exchanges occurring after July 28, 1997. 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. 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 (other than certain depreciation recapture
taxable as ordinary income). Accordingly, long-term capital
gain (other than certain depreciation recapture taxable as
ordinary income) 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 such 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 the REIT on the undistributed net capital gain 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.
<PAGE>
PROPOSED TAX LEGISLATION
On February 2, 1998, President Clinton released his budget
proposal for fiscal year 1999 (the "Proposal"). Two provisions
contained in the Proposal could affect the Company if enacted
in final form. First, the Proposal would prohibit a REIT from owning,
directly or indirectly, more than 10% of the voting power or value
of all classes of a C corporation's stock (other than the stock of a
qualified REIT subsidiary). Currently, a REIT may own no more than 10%
of the voting stock of a C corporation, but its ownership of the
nonvoting stock of a C corporation is not limited (other than
by the rule that the value of a REIT's combined equity and debt
interests in a C corporation may not exceed 5% of the value of
a REIT's total assets). That provision is proposed to be
effective with respect to stock in a C corporation acquired by
a REIT on or after the date of "first committee action" (i.e.,
first action by the House Ways and Means Committee with respect
to the provision). If enacted as presently written, that
provision would severely limit the use by a REIT of taxable
subsidiaries to conduct businesses the income from which would
be nonqualifying income if received directly by the REIT.
Second, the Proposal would require recognition of any built-
in gain associated with the assets of a "large" C corporation
(i.e., a C corporation whose stock has a fair market value of
more than $5 million) upon its conversion to REIT status or
merger into a REIT. That provision is proposed to be effective
for conversions to REIT status effective for taxable years
beginning after January 1, 1999 and mergers of C corporations
into REITs that occur after December 31, 1998. This provision
would require immediate recognition of gain if, at any time
after December 31, 1998, a "large" C corporation merges into
the Company.
<PAGE>
UNDERWRITING
Subject to the terms and conditions contained in the
Underwriting Agreement, the Company has agreed to sell to
Merrill Lynch, Pierce, Fenner & Smith Incorporated (the
"Underwriter"), and the Underwriter has agreed to
purchase from the Company, 1,525,000 shares of Common Stock.
The Underwriting Agreement provides that the obligations of the
Underwriter are subject to certain conditions precedent, and
that the Underwriter will be obligated to purchase all of such
shares if any are purchased.
The Underwriter intends to deposit the shares of Common Stock offered
hereby with the Trust, a registered unit investment trust under
the Investment Company Act of 1940, as amended, for which the
Underwriter acts as sponsor and depositor, in exchange for
units of the Trust. The Underwriter is an affiliate of the
Trust.
In the Underwriting Agreement, the Company has agreed to
indemnify the Underwriter against certain liabilities,
including liabilities under the Securities Act of 1933, as
amended, or to contribute to payments the Underwriter may be
required to make in respect thereof.
In connection with the Offering, the rules of the Securities and Exchange
Commission permit the Underwriter 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 Underwriter creates a short position in the
Common Stock in connection with the Offering (i.e., if it sells
more shares of Common Stock than are set forth on the cover
page of this Prospectus Supplement), the Underwriter may reduce
that short position by purchasing Common Stock in the open
market.
In general, purchases of a security for the purpose of stabilization or
to reduce a short position could cause the price of the
security to be higher than it might otherwise be in the absence
of such purchases.
Neither the Company nor the Underwriter 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 the Underwriter makes any representation that the
Underwriter will engage in such transactions or that such
transactions, once commenced, will not be discontinued without
notice.
In the ordinary course of its business, the Underwriter
provides investment banking, advisory and other financial
services to the Company and the Operating Partnership for which
it receives customary fees. The Underwriter also acted as
representative of various underwriters in connection with
public offerings of the Company's Common Stock and Depositary
Shares and the Operating Partnership's debt securities in 1993
through 1997.
The Common Stock is listed on the NYSE under the symbol
"DRE." The Company has applied for listing of the shares of
Common Stock offered hereby on the NYSE.
LEGAL MATTERS
In addition to the legal opinions for the Company 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. The legality of the shares of Common Stock offered
hereby will be passed upon for the Underwriters by Rogers &
Wells LLP, New York, New York.
<PAGE>
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
UNDERWRITER. 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.
- -----------------
1,525,000 SHARES
[LOGO]
COMMON
STOCK
<PAGE>
TABLE OF CONTENTS PAGE
----
PROSPECTUS SUPPLEMENT
The Company S-3
Recent Developments S-5
Use of Proceeds S-7
Price Range of Common Stock and Dividend
History S-7
Certain Federal Income Tax Considerations S-8
Underwriting S-10
Legal Matters S-10
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
____________________
PROSPECTUS SUPPLEMENT
____________________
MERRILL LYNCH & CO.
APRIL 23, 1998
