PROSPECTUS SUPPLEMENT
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(To Prospectus dated May 27, 1997)
322,581 SHARES
(LOGO)
DUKE REALTY INVESTMENTS, INC.
COMMON STOCK
We are a self-administered and self-managed real estate
investment trust. We are offering and selling 322,581 shares of
common stock with this prospectus supplement to AEW Capital
Management, L.P. We are selling these shares at a price of $23.25
per share, for total proceeds of $7,500,008.25. We will receive
the proceeds from the sale of the common stock. Our common stock
is listed on the New York Stock Exchange under the symbol DRE.
The last reported sale price for the common stock on November 11,
1998 was $23-1/16 per share.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE
SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED OF THESE
SECURITIES OR DETERMINED IF THIS PROSPECTUS SUPPLEMENT OR THE
ATTACHED PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
The date of this Prospectus Supplement is November 12, 1998.
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TABLE OF CONTENTS
PAGE
PROSPECTUS SUPPLEMENT
The Company S-3
Recent Developments S-3
Use of Proceeds S-4
Certain Federal Income Tax Considerations S-5
Plan of Distribution S-6
Legal Matters S-6
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
FORWARD-LOOKING STATEMENTS
This prospectus supplement and the accompanying prospectus
includes and incorporates by reference forward-looking
statements. We have based these forward-looking statements on our
current expectations and projections about future events. These
forward-looking statements are subject to risks, uncertainties
and assumptions about us, including, among other things:
- Our anticipated future acquisition and development strategies;
- Tax risks, including our continued qualification
as a real estate investment trust;
- The limited geographic diversification of our real
estate portfolio; and
- General real estate investment risks, including
local market conditions and rental rates, competition for
tenants, tenant defaults, possible environmental
liabilities and financing risks.
We undertake no obligation to publicly update or revise any
forward-looking statements, whether as a result of new
information, future events or otherwise. In light of these risks,
uncertainties and assumptions, the forward-looking events
discussed in this prospectus supplement and discussed in or
incorporated by reference in the accompanying prospectus may not
occur.
You should rely only on the information contained in this
prospectus supplement and the accompanying prospectus. We have
not, and the underwriter has not, authorized any other person to
provide you with different information. If anyone provides you
with different or inconsistent information, you should not rely
on it. We are not, and the underwriters are not, making an offer
to sell these securities in any jurisdiction where the offer or
sale is not permitted.
S - 2
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THE FOLLOWING INFORMATION MAY NOT CONTAIN ALL THE INFORMATION
THAT MAY BE IMPORTANT TO YOU. YOU SHOULD READ THE ENTIRE
PROSPECTUS SUPPLEMENT AND ACCOMPANYING PROSPECTUS, AS WELL AS THE
DOCUMENTS INCORPORATED BY REFERENCE IN THE PROSPECTUS BEFORE
MAKING AN INVESTMENT DECISION. UNLESS INDICATED OTHERWISE, THE
INFORMATION CONTAINED IN THIS PROSPECTUS SUPPLEMENT IS PRESENTED
AS OF SEPTEMBER 30, 1998. ALL REFERENCES TO "WE" OR THE "COMPANY"
IN THIS PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS
MEAN DUKE REALTY INVESTMENTS, INC. AND ALL ENTITIES OWNED OR
CONTROLLED BY DUKE REALTY INVESTMENTS, INC., EXCEPT WHERE IT IS
MADE CLEAR THAT THE TERM MEANS ONLY THE PARENT COMPANY.
THE COMPANY
We are a self-administered and self-managed real estate
investment trust (a "REIT") that began operations through a
related entity in 1972. At September 30, 1998, we owned a
diversified portfolio of:
- 428 in-service industrial, office and retail properties (the
"Properties"), encompassing approximately 49.5 million square
feet located in eight states;
- 34 buildings and four building expansions
encompassing approximately 5.1 million square feet under
development; and
- 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.
We provide the following services for the Properties and for
certain properties owned by third parties:
- leasing
- management
- construction
- development
- other tenant-related services
We directly or indirectly hold all of our interests in the
Properties and Land and we conduct all of our operations through
Duke Realty Limited Partnership (the "Operating Partnership").
Holders of units in the Operating Partnership (other than us) may
exchange them for our common stock on a one for one basis. When
units are exchanged for common stock, our percentage interest in
the Operating Partnership increases. We control the Operating
Partnership as its sole general partner and own, as of
September 30, 1998, approximately 88% of the Operating
Partnership's units. In addition, as of September 30, 1998, our
senior management team owned approximately 14% of the Company
through ownership of common stock and units in the Operating
Partnership.
RECENT DEVELOPMENTS
OPERATING PERFORMANCE AND DIVIDEND
For the nine months ended September 30, 1998, we reported the
following information as compared to the same period in 1997.
S-3
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<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
-----------------
1998 1997
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<S> <C> <C> (IN THOUSANDS)
Net income available for common shareholders $ 67,569 $ 46,593
Revenues 272,309 158,722
Funds From Operations 118,084 74,130
Cash flow provided by (used by):
Operating activities 149,109 110,138
Investing activities (470,801) (380,536)
Financing activities 333,372 439,196
</TABLE>
On October 22, 1998, our Board of Directors declared a regular
quarterly common dividend of $.34 per share, payable on November
30, 1998 to common shareholders of record on November 12, 1998.
This dividend equals $1.36 on an annualized basis.
FINANCING
Effective in August 1998, our unsecured line of credit was
increased from $250.0 million to $450.0 million. This line of
credit bears interest at a rate equal to the London Interbank
Offered Rate (LIBOR) plus .80%. This line of credit matures in
April 2001.
DEVELOPMENT AND ACQUISITIONS
During the first nine months of 1998, we placed in service 4.6
million square feet of newly developed properties which are 93%
leased. The total cost of these properties was $186.2 million and
the combined weighted average unleveraged stabilized return on
cost for these properties is expected to be 11.9%. Also during
the first nine months of 1998, we acquired 4.2 million square
feet of properties which are 83% leased. The total cost of these
properties was $249.4 million. We expect the combined weighted
average unleveraged stabilized return on cost for these
properties to be 10.1%. We currently have 5.1 million square feet
of properties under development which are 43% pre-leased. These
properties consist of 52% industrial, 44% office and 4% retail
properties (based on square footage) and are expected to have a
total cost upon completion of $351.5 million. We expect the
combined weighted average unleveraged stabilized return on cost
for these properties to be 11.5%.
Subsequent to September 30, 1998, we placed in service another
283,000 square feet of properties which are 62% leased with a
total cost of $27.2 million . In addition, we have acquired
459,000 square feet of properties which are 95% leased at a total
cost of $55.2 million. We expect the combined weighted average
unleveraged stabilized return on cost for these properties to be
10.8%.
Our expectations of total cost and weighted average unleveraged
stabilized return on cost are forward-looking information. This
information is, therefore, subject to normal risks in the
completion of construction of the properties under development
and the leasing of any unleased portion of the properties. These
risks could cause actual results to be materially different from
our expectations.
USE OF PROCEEDS
We expect to receive net proceeds from the sale of the common
stock of approximately $7.5 million. We presently intend to use
the net proceeds to reduce the outstanding balance on our
unsecured line of credit which will be used to fund development
and acquisition of additional rental properties. Our unsecured
line of credit had an aggregate of $182 million outstanding as of
November 5, 1998, bearing interest at LIBOR plus .55% - .80%.
S-4
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CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
For a discussion of material federal income tax consequences
applicable to distributions to shareholders and our election to
be taxed as a REIT, see "Federal Income Tax Considerations" in
the accompanying prospectus.
You should be aware that the Taxpayer Relief Act of 1997 (the
"1997 Act") and the recently-enacted IRS Restructuring 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 12 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.
In general, a domestic shareholder will realize capital gain or
loss on the disposition of common stock equal to the difference
between (i) the amount of cash and the fair market value of any
property received on such disposition and (ii) the shareholder's
adjusted basis of such common stock. Under the 1997 Act, as
revised by the IRS Restructuring Act, for gains realized after
December 31, 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 12 months has been reduced to 20%;
- the maximum rate of tax on net capital gains of
individuals, trusts and estates from the sale or exchange of
assets 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%;
- for taxpayers who would be subject to a maximum tax rate
of 15%, 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 12
months is 25% to the extent of the deductions for
depreciation with respect to such property; and
- long-term capital gain we allocate to a shareholder will
be subject to the 25% rate to the extent that the gain does
not exceed depreciation on real property we sell.--
The 1997 Act provides the Internal Revenue Service with authority
to issue regulations that could, among other things, apply these
rates to sales of capital assets by "pass through entities"
(including REITs) and to sales of interests in "pass through
entities." The taxation of capital gains of corporations was not
changed by the 1997 Act or the IRS Restructuring 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 us, is our taxable year which began January
1, 1998. These provisions are as follows:
- 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.
- 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.
S-5
<PAGE>
- 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.
- 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.
- The 1997 Act contains a number of technical provisions
that reduce the risk that a REIT will inadvertently cease to
qualify as a REIT.
PLAN OF DISTRIBUTION
We have agreed to sell to AEW Capital Management, L.P., and it
has agreed to purchase from us, 322,581 shares of our common
stock.
We expect to incur expenses of approximately $6,500 in
connection with this offering. These expenses are estimated to
include legal fees of $3,500, New York Stock Exchange listing
fees of $1,800 and miscellaneous expenses of $1,200.
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-6
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322,581 SHARES
(LOGO)
COMMON STOCK
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PROSPECTUS SUPPLEMENT
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NOVEMBER 12, 1998
