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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2020
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from              to             
Commission File Number: 1-9044 (Duke Realty Corporation) 0-20625 (Duke Realty Limited Partnership)
DRE-20200930_G1.JPG
DUKE REALTY CORPORATION
DUKE REALTY LIMITED PARTNERSHIP
(Exact Name of Registrant as Specified in Its Charter)
Indiana (Duke Realty Corporation)   35-1740409  (Duke Realty Corporation)
Indiana (Duke Realty Limited Partnership) 35-1898425  (Duke Realty Limited Partnership)
(State or Other Jurisdiction
of Incorporation or Organization)
  (I.R.S. Employer
Identification Number)
8711 River Crossing Boulevard  
Indianapolis, Indiana 46240
        (Address of Principal Executive Offices)   (Zip Code)
Registrant's Telephone Number, Including Area Code:
(317) 808-6000
Securities registered pursuant to Section 12(b) of the Act:
Title of Class Trading Symbol(s) Name of Exchange on Which Registered
Duke Realty Corporation Common Stock, $0.01 par value DRE New York Stock Exchange
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Duke Realty Corporation
Yes
 No  
Duke Realty Limited Partnership
Yes 
 No  
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Duke Realty Corporation Yes
 No  
Duke Realty Limited Partnership
Yes 
 No  
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Duke Realty Corporation:
Large accelerated filer
Accelerated filer  
Non-accelerated filer  
Smaller reporting company  
Emerging growth company
Duke Realty Limited Partnership:
Large accelerated filer
Accelerated filer  
Non-accelerated filer  
Smaller reporting company  
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act):
Duke Realty Corporation Yes
No  
Duke Realty Limited Partnership
Yes  
No  
The number of shares of Duke Realty Corporation's common stock outstanding at October 27, 2020 was 371,951,171.



EXPLANATORY NOTE
This report (the "Report") combines the quarterly reports on Form 10-Q for the period ended September 30, 2020 of both Duke Realty Corporation and Duke Realty Limited Partnership. Unless stated otherwise or the context otherwise requires, references to "Duke Realty Corporation" or the "General Partner" mean Duke Realty Corporation and its consolidated subsidiaries, and references to the "Partnership" mean Duke Realty Limited Partnership and its consolidated subsidiaries. The terms the "Company," "we," "us" and "our" refer to the General Partner and the Partnership, collectively, and those entities owned or controlled by the General Partner and/or the Partnership.
Duke Realty Corporation is a self-administered and self-managed real estate investment trust ("REIT") and is the sole general partner of the Partnership, owning approximately 99.1% of the common partnership interests of the Partnership ("General Partner Units") as of September 30, 2020. The remaining 0.9% of the common partnership interests ("Limited Partner Units" and, together with the General Partner Units, the "Common Units") are owned by limited partners. As the sole general partner of the Partnership, the General Partner has full, exclusive and complete responsibility and discretion in the day-to-day management and control of the Partnership.
The General Partner and the Partnership are operated as one enterprise. The management of the General Partner consists of the same members as the management of the Partnership. As the sole general partner with control of the Partnership, the General Partner consolidates the Partnership for financial reporting purposes, and the General Partner does not have any significant assets other than its investment in the Partnership. Therefore, the assets and liabilities of the General Partner and the Partnership are substantially the same.
We believe combining the quarterly reports on Form 10-Q of the General Partner and the Partnership into this single report results in the following benefits:
enhances investors' understanding of the General Partner and the Partnership by enabling investors to view the business as a whole in the same manner as management views and operates the business;
eliminates duplicative disclosure and provides a more streamlined and readable presentation of information since a substantial portion of the Company's disclosure applies to both the General Partner and the Partnership; and
creates time and cost efficiencies through the preparation of one combined report instead of two separate reports.
 
We believe it is important to understand the few differences between the General Partner and the Partnership in the context of how we operate as an interrelated consolidated company. The General Partner's only material asset is its ownership of partnership interests in the Partnership. As a result, the General Partner does not conduct business itself, other than acting as the sole general partner of the Partnership and issuing public equity from time to time. The General Partner does not issue any indebtedness, but does guarantee some of the unsecured debt of the Partnership. The Partnership holds substantially all the assets of the business, directly or indirectly, and holds the ownership interests related to certain of the Company's investments. The Partnership conducts the operations of the business and has no publicly traded equity. Except for net proceeds from equity issuances by the General Partner, which are contributed to the Partnership in exchange for General Partner Units or Preferred Units, the Partnership generates the capital required by the business through its operations, its incurrence of indebtedness and the issuance of Limited Partner Units to third parties.
Noncontrolling interests, shareholders' equity and partners' capital are the main areas of difference between the consolidated financial statements of the General Partner and those of the Partnership. The noncontrolling interests in the Partnership's financial statements include the interests in consolidated investees not wholly owned by the Partnership. The noncontrolling interests in the General Partner's financial statements include the same noncontrolling interests at the Partnership level, as well as the common limited partnership interests in the Partnership, which are accounted for as partners' capital by the Partnership.
In order to highlight the differences between the General Partner and the Partnership, there are separate sections in this report, as applicable, that separately discuss the General Partner and the Partnership, including separate financial statements and separate Exhibit 31 and 32 certifications. In the sections that combine disclosure of the General Partner and the Partnership, this report refers to actions or holdings as being actions or holdings of the collective Company.




DUKE REALTY CORPORATION/DUKE REALTY LIMITED PARTNERSHIP
INDEX
    Page
Duke Realty Corporation:
3
4
5
6
Duke Realty Limited Partnership:
7
8
9
Duke Realty Corporation and Duke Realty Limited Partnership:
2


PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
DUKE REALTY CORPORATION AND SUBSIDIARIES
Consolidated Balance Sheets
(in thousands, except per share amounts)
September 30,
2020
December 31,
2019
  (Unaudited)  
ASSETS
Real estate investments:
Real estate assets $ 8,569,340  $ 7,993,377 
Construction in progress 604,819  550,926 
Investments in and advances to unconsolidated joint ventures 132,127  133,074 
Undeveloped land 267,254  254,537 
9,573,540  8,931,914 
Accumulated depreciation (1,637,190) (1,480,461)
Net real estate investments 7,936,350  7,451,453 
Real estate investments and other assets held-for-sale   18,463 
Cash and cash equivalents 6,748  110,891 
Accounts receivable 15,072  20,349 
Straight-line rent receivable 145,130  129,344 
Receivables on construction contracts, including retentions 44,824  25,607 
Deferred leasing and other costs, net of accumulated amortization of $219,089 and $203,857 325,846  320,444 
Restricted cash held in escrow for like-kind exchange   1,673 
Notes receivable from property sales   110,000 
Other escrow deposits and other assets 269,055  232,338 
$ 8,743,025  $ 8,420,562 
LIABILITIES AND EQUITY
Indebtedness:
Secured debt, net of deferred financing costs of $353 and $164 $ 74,339  $ 34,023 
Unsecured debt, net of deferred financing costs of $33,651 and $19,258 3,025,089  2,880,742 
Unsecured line of credit 47,000  — 
3,146,428  2,914,765 
Liabilities related to real estate investments held-for-sale   887 
Construction payables and amounts due subcontractors, including retentions 83,047  68,840 
Accrued real estate taxes 101,846  69,042 
Accrued interest 26,499  14,181 
Other liabilities 249,266  223,680 
Tenant security deposits and prepaid rents 47,292  48,907 
Total liabilities 3,654,378  3,340,302 
Shareholders' equity:
Common shares ($0.01 par value); 600,000 shares authorized; 371,510 and 367,950 shares issued and outstanding, respectively 3,715  3,680 
Additional paid-in capital 5,653,143  5,525,463 
Accumulated other comprehensive loss (32,457) (35,036)
Distributions in excess of net income (606,182) (475,992)
Total shareholders' equity 5,018,219  5,018,115 
Noncontrolling interests 70,428  62,145 
Total equity 5,088,647  5,080,260 
$ 8,743,025  $ 8,420,562 
See accompanying Notes to Consolidated Financial Statements
3


DUKE REALTY CORPORATION AND SUBSIDIARIES
Consolidated Statements of Operations and Comprehensive Income
For the three and nine months ended September 30,
(in thousands, except per share amounts)
(Unaudited)
Three Months Ended Nine Months Ended
  2020 2019 2020 2019
Revenues:
Rental and related revenue $ 235,391  $ 215,374  $ 680,520  $ 638,446 
General contractor and service fee revenue 26,637  25,955  46,388  104,838 
262,028  241,329  726,908  743,284 
Expenses:
Rental expenses 20,231  19,158  56,631  57,423 
Real estate taxes 37,027  31,739  110,517  96,556 
General contractor and other services expenses 24,604  23,640  41,578  99,415 
Depreciation and amortization 88,596  83,924  260,659  242,920 
170,458  158,461  469,385  496,314 
Other operating activities:
Equity in earnings of unconsolidated joint ventures 4,023  3,736  8,958  12,594 
Gain on sale of properties 10,968  173,646  19,905  204,075 
Gain on land sales 2,346  3,869  8,551  6,569 
Other operating expenses (1,772) (874) (4,430) (4,515)
Impairment charges   —  (5,626) — 
Non-incremental costs related to successful leases (4,058) (1,123) (10,617) (6,726)
General and administrative expenses (11,439) (13,720) (46,808) (49,123)
68  165,534  (30,067) 162,874 
Operating income 91,638  248,402  227,456  409,844 
Other income (expenses):
Interest and other income, net 32  2,085  1,643  7,377 
Interest expense (23,059) (22,604) (69,394) (68,246)
Loss on debt extinguishment (120) —  (32,898) (13)
Gain on involuntary conversion 3,029  —  4,312  2,259 
Income from continuing operations before income taxes 71,520  227,883  131,119  351,221 
Income tax benefit (expense) 956  536  1,166  (6,465)
Income from continuing operations 72,476  228,419  132,285  344,756 
Discontinued operations:
Gain on sale of properties 40  112  111  366 
Income from discontinued operations 40  112  111  366 
Net income 72,516  228,531  132,396  345,122 
Net income attributable to noncontrolling interests (693) (1,965) (1,297) (2,952)
Net income attributable to common shareholders $ 71,823  $ 226,566  $ 131,099  $ 342,170 
Basic net income per common share:
Continuing operations attributable to common shareholders $ 0.19  $ 0.62  $ 0.35  $ 0.95 
Diluted net income per common share:
Continuing operations attributable to common shareholders $ 0.19  $ 0.62  $ 0.35  $ 0.94 
Weighted average number of common shares outstanding 371,082  362,416  369,375  360,424 
Weighted average number of common shares and potential dilutive securities 374,834  367,271  373,091  365,343 
Comprehensive income:
Net income $ 72,516  $ 228,531  $ 132,396  $ 345,122 
Other comprehensive income (loss):
Unrealized losses on interest rate swap contracts   (13,387)   (37,428)
Amortization of interest rate swap contracts 889  —  2,579  — 
Comprehensive income $ 73,405  $ 215,144  $ 134,975  $ 307,694 
See accompanying Notes to Consolidated Financial Statements
4


DUKE REALTY CORPORATION AND SUBSIDIARIES
Consolidated Statements of Cash Flows
For the nine months ended September 30,
(in thousands)
(Unaudited)
Nine Months Ended
2020 2019
Cash flows from operating activities:
Net income $ 132,396  $ 345,122 
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation of buildings and tenant improvements 219,694  202,261 
Amortization of deferred leasing and other costs 40,965  40,659 
Amortization of deferred financing costs 6,814  4,606 
Straight-line rental income and expense, net (15,660) (15,627)
Impairment charges 5,626  — 
Loss on debt extinguishment 32,898  13 
Gain on involuntary conversion (4,312) (2,259)
Gain on land and property sales (28,567) (211,010)
Third-party construction contracts, net 2,017  14,218 
Other accrued revenues and expenses, net 42,415  26,870 
Operating distributions received in excess of (less than) equity in earnings from unconsolidated joint ventures 4,656  (766)
Net cash provided by operating activities 438,942  404,087 
Cash flows from investing activities:
Development of real estate investments (469,001) (325,825)
Acquisition of buildings and related intangible assets (85,465) (146,632)
Acquisition of land and other real estate assets (96,376) (223,547)
Second generation tenant improvements, leasing costs and building improvements (27,733) (31,644)
Other deferred leasing costs (29,867) (28,551)
Other assets (9,519) (9,104)
Proceeds from the repayments of notes receivable from property sales 110,000  145,000 
Proceeds from land and property sales, net 55,740  379,774 
Capital distributions from unconsolidated joint ventures 876  2,664 
Capital contributions and advances to unconsolidated joint ventures (6,161) (5,963)
Net cash used for investing activities (557,506) (243,828)
Cash flows from financing activities:
Proceeds from issuance of common shares, net 119,765  222,672 
Proceeds from unsecured debt 663,123  182,284 
Payments on unsecured debt (546,972) — 
Proceeds from secured debt financings 18,400  — 
Payments on secured indebtedness including principal amortization (3,284) (44,652)
Borrowings (repayments) on line of credit, net 47,000  (30,000)
Distributions to common shareholders (260,431) (232,323)
Distributions to noncontrolling interests, net (2,149) (1,864)
Tax payments on stock-based compensation awards (4,263) (5,695)
Change in book cash overdrafts (13,588) (14,306)
Other financing activities 284  (9,920)
Deferred financing costs (7,354) (1,440)
Net cash provided by financing activities 10,531  64,756 
Net (decrease) increase in cash, cash equivalents and restricted cash (108,033) 225,015 
Cash, cash equivalents and restricted cash at beginning of period 121,431  25,517 
Cash, cash equivalents and restricted cash at end of period $ 13,398  $ 250,532 
Non-cash activities:
Lease liabilities arising from right-of-use assets $ 35,956  $ 38,826 
Assumption of indebtedness and other liabilities in real estate acquisitions $ 33,905  $ — 
See accompanying Notes to Consolidated Financial Statements

5


DUKE REALTY CORPORATION AND SUBSIDIARIES
Consolidated Statements of Changes in Equity
For the three and nine months ended September 30, 2020 and 2019
(in thousands, except per share data)
(Unaudited)
 
  Common Shareholders    
  Common
Stock
Additional
Paid-in
Capital
Accumulated
Other
Comprehensive
Loss
Distributions
in Excess of
Net Income
Noncontrolling
Interests
Total
Balance at June 30, 2020 $ 3,704  $ 5,607,897  $ (33,346) $ (590,435) $ 69,596  $ 5,057,416 
Net income —  —  —  71,823  693  72,516 
Other comprehensive income —  —  889  —  —  889 
Issuance of common shares 11  43,076  —  —  —  43,087 
Stock-based compensation plan activity —  2,170  —  (270) 722  2,622 
Contributions from noncontrolling interests —  —  —  —  200  200 
Distributions to common shareholders ($0.235 per share) —  —  —  (87,300) —  (87,300)
Distributions to noncontrolling interests —  —  —  —  (783) (783)
Balance at September 30, 2020 $ 3,715  $ 5,653,143  $ (32,457) $ (606,182) $ 70,428  $ 5,088,647 
Balance at December 31, 2019 $ 3,680  $ 5,525,463  $ (35,036) $ (475,992) $ 62,145  $ 5,080,260 
Net income —  —  —  131,099  1,297  132,396 
Other comprehensive income —  —  2,579  —  —  2,579 
Issuance of common shares 32  119,733  —  —  —  119,765 
Stock-based compensation plan activity 7,947  —  (858) 9,135  16,227 
Contributions from noncontrolling interests —  —  —  —  200  200 
Distributions to common shareholders ($0.705 per share) —  —  —  (260,431) —  (260,431)
Distributions to noncontrolling interests —  —  —  —  (2,349) (2,349)
Balance at September 30, 2020 $ 3,715  $ 5,653,143  $ (32,457) $ (606,182) $ 70,428  $ 5,088,647 
  Common Shareholders    
  Common
Stock
Additional
Paid-in
Capital
Accumulated
Other
Comprehensive
Loss
Distributions
in Excess of
Net Income
Noncontrolling
Interests
Total
Balance at June 30, 2019 $ 3,606  $ 5,290,382  $ (28,717) $ (624,674) $ 61,524  $ 4,702,121 
Net income —  —  —  226,566  1,965  228,531 
Other comprehensive loss —  —  (13,387) —  —  (13,387)
Issuance of common shares 55  180,489  —  —  —  180,544 
Stock-based compensation plan activity 1,639  —  (255) 534  1,920 
Distributions to common shareholders ($0.215 per share) —  —  —  (77,773) —  (77,773)
Distributions to noncontrolling interests —  —  —  —  (684) (684)
Balance at September 30, 2019 $ 3,663  $ 5,472,510  $ (42,104) $ (476,136) $ 63,339  $ 5,021,272 
Balance at December 31, 2018 $ 3,589  $ 5,244,375  $ (4,676) $ (585,087) $ 55,042  $ 4,713,243 
Net income —  —  —  342,170  2,952  345,122 
Other comprehensive loss —  —  (37,428) —  —  (37,428)
Issuance of common shares 68  222,604  —  —  —  222,672 
Stock-based compensation plan activity 5,531  —  (896) 7,209  11,850 
Contributions from noncontrolling interests —  —  —  —  312  312 
Distributions to common shareholders ($0.645 per share) —  —  —  (232,323) —  (232,323)
Distributions to noncontrolling interests —  —  —  —  (2,176) (2,176)
Balance at September 30, 2019 $ 3,663  $ 5,472,510  $ (42,104) $ (476,136) $ 63,339  $ 5,021,272 

See accompanying Notes to Consolidated Financial Statements
6


DUKE REALTY LIMITED PARTNERSHIP AND SUBSIDIARIES
Consolidated Balance Sheets
(in thousands)
September 30,
2020
December 31,
2019
(Unaudited)
ASSETS
Real estate investments:
Real estate assets $ 8,569,340  $ 7,993,377 
     Construction in progress 604,819  550,926 
     Investments in and advances to unconsolidated joint ventures 132,127  133,074 
     Undeveloped land 267,254  254,537 
9,573,540  8,931,914 
Accumulated depreciation (1,637,190) (1,480,461)
              Net real estate investments 7,936,350  7,451,453 
Real estate investments and other assets held-for-sale   18,463 
Cash and cash equivalents 6,748  110,891 
Accounts receivable 15,072  20,349 
Straight-line rent receivable 145,130  129,344 
Receivables on construction contracts, including retentions 44,824  25,607 
Deferred leasing and other costs, net of accumulated amortization of $219,089 and $203,857 325,846  320,444 
Restricted cash held in escrow for like-kind exchange   1,673 
Notes receivable from property sales   110,000 
Other escrow deposits and other assets 269,055  232,338 
$ 8,743,025  $ 8,420,562 
LIABILITIES AND EQUITY
Indebtedness:
Secured debt, net of deferred financing costs of $353 and $164 $ 74,339  $ 34,023 
Unsecured debt, net of deferred financing costs of $33,651 and $19,258 3,025,089  2,880,742 
Unsecured line of credit 47,000  — 
3,146,428  2,914,765 
Liabilities related to real estate investments held-for-sale   887 
Construction payables and amounts due subcontractors, including retentions 83,047  68,840 
Accrued real estate taxes 101,846  69,042 
Accrued interest 26,499  14,181 
Other liabilities 249,266  223,680 
Tenant security deposits and prepaid rents 47,292  48,907 
     Total liabilities 3,654,378  3,340,302 
Partners' equity:
Common equity (371,510 and 367,950 General Partner Units issued and outstanding, respectively) 5,050,676  5,053,151 
Limited Partners' common equity (3,330 and 3,029 Limited Partner Units issued and outstanding, respectively) 65,525  57,575 
Accumulated other comprehensive loss (32,457) (35,036)
            Total partners' equity 5,083,744  5,075,690 
Noncontrolling interests 4,903  4,570 
     Total equity 5,088,647  5,080,260 
$ 8,743,025  $ 8,420,562 
See accompanying Notes to Consolidated Financial Statements
7


DUKE REALTY LIMITED PARTNERSHIP AND SUBSIDIARIES
Consolidated Statements of Operations and Comprehensive Income
For the three and nine months ended September 30,
(in thousands, except per unit amounts)
(Unaudited)
Three Months Ended Nine Months Ended
  2020 2019 2020 2019
Revenues:
Rental and related revenue $ 235,391  $ 215,374  $ 680,520  $ 638,446 
General contractor and service fee revenue 26,637  25,955  46,388  104,838 
262,028  241,329  726,908  743,284 
Expenses:
Rental expenses 20,231  19,158  56,631  57,423 
Real estate taxes 37,027  31,739  110,517  96,556 
General contractor and other services expenses 24,604  23,640  41,578  99,415 
Depreciation and amortization 88,596  83,924  260,659  242,920 
170,458  158,461  469,385  496,314 
Other operating activities:
Equity in earnings of unconsolidated joint ventures 4,023  3,736  8,958  12,594 
Gain on sale of properties 10,968  173,646  19,905  204,075 
Gain on land sales 2,346  3,869  8,551  6,569 
Other operating expenses (1,772) (874) (4,430) (4,515)
Impairment charges   —  (5,626) — 
Non-incremental costs related to successful leases (4,058) (1,123) (10,617) (6,726)
General and administrative expenses (11,439) (13,720) (46,808) (49,123)
68  165,534  (30,067) 162,874 
Operating income 91,638  248,402  227,456  409,844 
Other income (expenses):
Interest and other income, net 32  2,085  1,643  7,377 
Interest expense (23,059) (22,604) (69,394) (68,246)
Loss on debt extinguishment (120) —  (32,898) (13)
Gain on involuntary conversion 3,029  —  4,312  2,259 
Income from continuing operations before income taxes 71,520  227,883  131,119  351,221 
Income tax benefit (expense) 956  536  1,166  (6,465)
Income from continuing operations 72,476  228,419  132,285  344,756 
Discontinued operations:
Gain on sale of properties 40  112  111  366 
           Income from discontinued operations 40  112  111  366 
Net income 72,516  228,531  132,396  345,122 
Net (income) loss attributable to noncontrolling interests (55) (133) 19 
Net income attributable to common unitholders $ 72,461  $ 228,534  $ 132,263  $ 345,141 
Basic net income per Common Unit:
Continuing operations attributable to common unitholders $ 0.19  $ 0.62  $ 0.35  $ 0.95 
Diluted net income per Common Unit:
Continuing operations attributable to common unitholders $ 0.19  $ 0.62  $ 0.35  $ 0.94 
Weighted average number of Common Units outstanding 374,412  365,558  372,671  363,542 
Weighted average number of Common Units and potential dilutive securities 374,834  367,271  373,091  365,343 
Comprehensive income:
Net income $ 72,516  $ 228,531  $ 132,396  $ 345,122 
Other comprehensive income (loss):
Unrealized losses on interest rate swap contracts   (13,387)   (37,428)
Amortization of interest rate swap contracts 889  —  2,579  — 
Comprehensive income $ 73,405  $ 215,144  $ 134,975  $ 307,694 

See accompanying Notes to Consolidated Financial Statements
8


DUKE REALTY LIMITED PARTNERSHIP AND SUBSIDIARIES
Consolidated Statements of Cash Flows
For the nine months ended September 30,
(in thousands)
(Unaudited)
Nine Months Ended
2020 2019
Cash flows from operating activities:
Net income $ 132,396  $ 345,122 
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation of buildings and tenant improvements 219,694  202,261 
Amortization of deferred leasing and other costs 40,965  40,659 
Amortization of deferred financing costs 6,814  4,606 
Straight-line rental income and expense, net (15,660) (15,627)
Impairment charges 5,626  — 
Loss on debt extinguishment 32,898  13 
Gain on involuntary conversion (4,312) (2,259)
Gain on land and property sales (28,567) (211,010)
Third-party construction contracts, net 2,017  14,218 
Other accrued revenues and expenses, net 42,415  26,870 
Operating distributions received in excess of (less than) equity in earnings from unconsolidated joint ventures 4,656  (766)
Net cash provided by operating activities 438,942  404,087 
Cash flows from investing activities:
Development of real estate investments (469,001) (325,825)
Acquisition of buildings and related intangible assets (85,465) (146,632)
Acquisition of land and other real estate assets (96,376) (223,547)
Second generation tenant improvements, leasing costs and building improvements (27,733) (31,644)
Other deferred leasing costs (29,867) (28,551)
Other assets (9,519) (9,104)
Proceeds from the repayments of notes receivable from property sales 110,000  145,000 
Proceeds from land and property sales, net 55,740  379,774 
Capital distributions from unconsolidated joint ventures 876  2,664 
Capital contributions and advances to unconsolidated joint ventures (6,161) (5,963)
Net cash used for investing activities (557,506) (243,828)
Cash flows from financing activities:
Proceeds from the General Partner 119,765  222,672 
Proceeds from unsecured debt 663,123  182,284 
Payments on unsecured debt (546,972) — 
Proceeds from secured debt financings 18,400  — 
Payments on secured indebtedness including principal amortization (3,284) (44,652)
Borrowings (repayments) on line of credit, net 47,000  (30,000)
Distributions to common unitholders (262,780) (234,352)
Contributions from noncontrolling interests, net 200  165 
Tax payments on stock-based compensation awards (4,263) (5,695)
Change in book cash overdrafts (13,588) (14,306)
Other financing activities 284  (9,920)
Deferred financing costs (7,354) (1,440)
Net cash provided by financing activities 10,531  64,756 
Net (decrease) increase in cash, cash equivalents and restricted cash (108,033) 225,015 
Cash, cash equivalents and restricted cash at beginning of period 121,431  25,517 
Cash, cash equivalents and restricted cash at end of period $ 13,398  $ 250,532 
Non-cash activities:
Lease liabilities arising from right-of-use assets $ 35,956  $ 38,826 
Assumption of indebtedness and other liabilities in real estate acquisitions $ 33,905  $ — 
See accompanying Notes to Consolidated Financial Statements
9


DUKE REALTY LIMITED PARTNERSHIP AND SUBSIDIARIES
Consolidated Statements of Changes in Equity
For the three and nine months ended September 30, 2020 and 2019
(in thousands, except per unit data)
(Unaudited)
Common Unitholders
General Limited Accumulated
   Partner's Partners' Other Total    
  Common Equity Common Equity Comprehensive
Loss
Partners' Equity Noncontrolling
Interests
Total Equity
Balance at June 30, 2020 $ 5,021,166  $ 64,948  $ (33,346) $ 5,052,768  $ 4,648  5,057,416 
Net income 71,823  638  —  72,461  55  72,516 
Other comprehensive income —  —  889  889  —  889 
Capital contribution from the General Partner 43,087  —  —  43,087  —  43,087 
Stock-based compensation plan activity 1,900  722  —  2,622  —  2,622 
Contributions from noncontrolling interests —  —  —  —  200  200 
Distributions to common unitholders ($0.235 per Common Unit) (87,300) (783) —  (88,083) —  (88,083)
Balance at September 30, 2020 $ 5,050,676  $ 65,525  $ (32,457) $ 5,083,744  $ 4,903  $ 5,088,647 
Balance at December 31, 2019 $ 5,053,151  $ 57,575  $ (35,036) $ 5,075,690  $ 4,570  5,080,260 
Net income 131,099  1,164  —  132,263  133  132,396 
Other comprehensive income —  —  2,579  2,579  —  2,579 
Capital contribution from the General Partner 119,765  —  —  119,765  —  119,765 
Stock-based compensation plan activity 7,092  9,135  —  16,227  —  16,227 
Contributions from noncontrolling interests —  —  —  —  200  200 
Distributions to common unitholders ($0.705 per Common Unit) (260,431) (2,349) —  (262,780) —  (262,780)
Balance at September 30, 2020 $ 5,050,676  $ 65,525  $ (32,457) $ 5,083,744  $ 4,903  $ 5,088,647 
Common Unitholders
General Limited Accumulated
   Partner's Partners' Other Total    
  Common Equity Common Equity Comprehensive
Loss
Partners' Equity Noncontrolling
Interests
Total Equity
Balance at June 30, 2019 $ 4,669,314  $ 56,910  $ (28,717) $ 4,697,507  $ 4,614  $ 4,702,121 
Net income 226,566  1,968  —  228,534  (3) 228,531 
Other comprehensive loss —  —  (13,387) (13,387) —  (13,387)
Capital contribution from the General Partner 180,544  —  —  180,544  —  180,544 
Stock-based compensation plan activity 1,386  534  —  1,920  —  1,920 
Distributions to common unitholders ($0.215 per Common Unit) (77,773) (676) —  (78,449) —  (78,449)
Distributions to noncontrolling interests —  —  —  —  (8) (8)
Balance at September 30, 2019 $ 5,000,037  $ 58,736  $ (42,104) $ 5,016,669  $ 4,603  $ 5,021,272 
Balance at December 31, 2018 $ 4,662,877  $ 50,585  $ (4,676) $ 4,708,786  $ 4,457  $ 4,713,243 
Net income 342,170  2,971  —  345,141  (19) 345,122 
Other comprehensive loss —  —  (37,428) (37,428) —  (37,428)
Capital contribution from the General Partner 222,672  —  —  222,672  —  222,672 
Stock-based compensation plan activity 4,641  7,209  —  11,850  —  11,850 
Contributions from noncontrolling interests —  —  —  —  312  312 
Distributions to common unitholders ($0.645 per Common Unit) (232,323) (2,029) —  (234,352) —  (234,352)
Distributions to noncontrolling interests —  —  —  —  (147) (147)
Balance at September 30, 2019 $ 5,000,037  $ 58,736  $ (42,104) $ 5,016,669  $ 4,603  $ 5,021,272 




See accompanying Notes to Consolidated Financial Statements
10


DUKE REALTY CORPORATION AND DUKE REALTY LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
 
1.    General Basis of Presentation
The interim consolidated financial statements included herein have been prepared by the General Partner and the Partnership. The 2019 year-end consolidated balance sheet data included in this Report was derived from the audited financial statements in the combined Annual Report on Form 10-K of the General Partner and the Partnership for the year ended December 31, 2019 (the "2019 Annual Report"), but does not include all disclosures required by accounting principles generally accepted in the United States of America ("GAAP"). The financial statements have been prepared in accordance with GAAP for interim financial information and in accordance with Rule 10-01 of Regulation S-X of the Securities Exchange Act of 1934, as amended. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation have been included. GAAP requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and revenue and expenses during the reporting period. Our actual results could differ from those estimates and assumptions. These financial statements should be read in conjunction with Management's Discussion and Analysis of Financial Condition and Results of Operations included herein and the consolidated financial statements and notes thereto included in the 2019 Annual Report.
The General Partner was formed in 1985, and we believe that it qualifies as a REIT under the provisions of the Internal Revenue Code of 1986, as amended (the "Code"). The Partnership was formed on October 4, 1993, when the General Partner contributed all of its properties and related assets and liabilities, together with the net proceeds from an offering of additional shares of its common stock, to the Partnership. Simultaneously, the Partnership completed the acquisition of Duke Associates, a full-service commercial real estate firm operating in the Midwest whose operations began in 1972.
The General Partner is the sole general partner of the Partnership, owning approximately 99.1% of the Common Units at September 30, 2020. The remaining 0.9% of the Common Units are owned by limited partners. As the sole general partner of the Partnership, the General Partner has full, exclusive and complete responsibility and discretion in the day-to-day management and control of the Partnership. The General Partner and the Partnership are operated as one enterprise. The management of the General Partner consists of the same members as the management of the Partnership. As the sole general partner with control of the Partnership, the General Partner consolidates the Partnership for financial reporting purposes, and the General Partner does not have any significant assets other than its investment in the Partnership. Therefore, the assets and liabilities of the General Partner and the Partnership are substantially the same.
Limited partners have the right to redeem their Limited Partner Units, subject to certain restrictions. Pursuant to the Fifth Amended and Restated Agreement of Limited Partnership, as amended (the "Partnership Agreement"), the General Partner is obligated to redeem the Limited Partner Units in shares of its common stock, unless it determines in its reasonable discretion that the issuance of shares of its common stock could cause it to fail to qualify as a REIT. Each Limited Partner Unit shall be redeemed for one share of the General Partner's common stock, or, in the event that the issuance of shares could cause the General Partner to fail to qualify as a REIT, cash equal to the fair market value of one share of the General Partner's common stock at the time of redemption, in each case, subject to certain adjustments described in the Partnership Agreement. The Limited Partner Units are not required, per the terms of the Partnership Agreement, to be redeemed in registered shares of the General Partner.
As of September 30, 2020, we owned and operated a portfolio primarily consisting of industrial properties and provided real estate services to third-party owners and customers. Substantially all of our Rental Operations (see Note 11) are conducted through the Partnership. We conduct our Service Operations (see Note 11) through Duke Realty Services, LLC, Duke Realty Services Limited Partnership and Duke Construction Limited Partnership ("DCLP"), which are consolidated entities that are 100% owned by a combination of the General Partner and the Partnership. DCLP is owned through a taxable REIT subsidiary. The consolidated financial statements include our accounts and the accounts of our majority-owned or controlled subsidiaries.  
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2.    Leases
Lease Income
Our leases generally include scheduled rent increases, but do not include variable payments based on indexes. Our rental revenue is primarily based on fixed, non-cancelable leases. Our variable rental revenue primarily consists of amounts recovered from lessees for property tax, insurance and common area maintenance ("CAM").
If we conclude that collection of lease payments are not probable, any difference between the revenue that would have been recognized under the straight-line method and the lease payments that have been collected is recognized as a current period adjustment to rental revenues. Any other changes in collectability reserves for leases not subject to the collectability constraint are also recorded as a current period adjustment to rental revenues.

All revenues related to lease and lease-related services are included in, and comprise substantially all of, the caption "Rental and Related Revenue" on the Consolidated Statements of Operations and Comprehensive Income. The components of Rental and Related Revenue are as follows (in thousands):
Three Months Ended September 30, Nine Months Ended September 30,
2020 2019 2020 2019
Rental revenue - fixed payments $ 176,085  $ 163,516  $ 507,309  $ 481,674 
Rental revenue - variable payments (1) 59,306  51,858  173,211  156,772 
Rental and related revenue $ 235,391  $ 215,374  $ 680,520  $ 638,446 
(1) Primarily includes tenant recoveries for real estate taxes, insurance and CAM.
Accounting for Lease Concessions Granted in Connection with the COVID-19 Outbreak
On April 8, 2020, the Financial Accounting Standard Board ("FASB") held a public meeting and shortly afterwards issued a question-and-answer ("Q&A") document which was intended to provide accounting relief for lease concessions related to the COVID-19 pandemic. The accounting relief permits an entity to choose to forgo the evaluation of the enforceable rights and obligations of a lease contract, which is a requirement of Accounting Standards Codification Topic 842, Leases ("ASC 842"), as long as the total rent payments after the lease concessions are substantially the same, or less than, the total payments previously required by the lease. An entity may account for COVID-19 related lease concessions either (i) as if they were part of the enforceable rights and obligations of the parties under the existing lease contract; or (ii) as a lease modification. To the extent that a rent concession is granted as a deferral of payments, but the total lease payments are substantially the same, lessors are allowed to account for the concession as if no change had been made to the original lease contract.
Based on the Q&A, an entity is not required to account for all lease concessions related to the effects of the COVID-19 pandemic under one elected option; however, the entity is required to apply the elected option consistently to leases with similar characteristics and in similar circumstances. As of September 30, 2020, we have executed agreements with certain tenants allowing for the deferral of rental payments totaling $8.1 million. The substantial majority of these agreements required repayment of deferred amounts within twelve months of their execution. The tenants with whom we have executed agreements allowing for deferral of rental payments have paid all amounts due under their revised billing schedules through September 30, 2020.

The rental deferral agreements that we have executed, where the revised payment terms require repayment of deferred amounts within twelve months of their execution, are eligible for the alternate accounting treatment allowed through the Q&A. We have elected to account for these deferred rental agreements as if the deferral of rental payments was an enforceable right in the original lease agreements. This accounting election resulted in us not modifying the pattern of revenue recognition for these leases, to the extent they are collectable, and all deferred amounts related to leases to which we are applying this accounting treatment are classified within Accounts Receivable on the September 30, 2020 Consolidated Balance Sheets.

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For deferred rental agreements where the revised terms do not require repayment of the full amount of deferred amounts within twelve months of their execution, even if such revised payment terms fall within the scope of the relief offered by the Q&A, we have continued to apply lease modification accounting as stipulated by ASC 842.

Lessee Accounting

As of September 30, 2020, our lease arrangements, where we are the lessee, primarily consisted of office and ground leases. All of our office leases are classified as operating leases under ASC 842. Ground leases that were classified as operating leases prior to adoption of ASC 842 continue to be accounted for as operating leases by electing the practical expedient under ASC 842. In July 2020, we entered into a new ground lease which met the criteria to be classified as a finance lease. As of September 30, 2020, right-of-use ("ROU") assets related to our operating leases and finance lease were $40.2 million and $34.4 million, respectively, which are included within Other Escrow Deposits and Other Assets on our Consolidated Balance Sheets as of September 30, 2020. The corresponding lease liabilities related to these operating leases and finance lease of $43.5 million and $34.3 million, respectively, are included in Other Liabilities on our Consolidated Balance Sheets as of September 30, 2020, and represent the discounted value of the future lease payments required under our lease agreements. As of December 31, 2019, total ROU assets and liabilities for operating leases were $40.5 million and $46.9 million, respectively. In determining these amounts, we elected an available practical expedient that allows us, as a lessee, to not separate lease and non-lease components.

3.    Reclassifications
There have been no amounts in the accompanying consolidated financial statements for 2019 reclassified to conform to the 2020 consolidated financial statement presentation.

4.    Restricted Cash
Restricted cash primarily consists of cash proceeds from dispositions but restricted only for qualifying like-kind exchange transactions and cash held in escrow related to acquisition and disposition holdbacks. The following table provides a reconciliation of cash, cash equivalents, and restricted cash reported within the Consolidated Balance Sheets that sum to the total of the same such amounts shown in the Consolidated Statements of Cash Flows (in thousands):
September 30, 2020 December 31, 2019
Cash and cash equivalents $ 6,748  $ 110,891 
Restricted cash held in escrow for like-kind exchange   1,673 
Restricted cash included in other escrow deposits and other assets 6,650  8,867 
Total cash, cash equivalents, and restricted cash shown in the Consolidated Statements of Cash Flows $ 13,398  $ 121,431 

5.    Variable Interest Entities
Partnership
Due to the fact that the Limited Partners do not have kick out rights, or substantive participating rights, the Partnership is a variable interest entity ("VIE"). Because the General Partner holds majority ownership and exercises control over every aspect of the Partnership's operations, the General Partner has been determined as the primary beneficiary and, therefore, consolidates the Partnership.

The assets and liabilities of the General Partner and the Partnership are substantially the same, as the General Partner does not have any significant assets other than its investment in the Partnership. All of the Company's debt is an obligation of the Partnership.

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Joint Ventures

We have equity interests in unconsolidated joint ventures that primarily own and operate rental properties or hold land for development. We consolidate those joint ventures that are considered to be VIEs where we are the primary beneficiary. We analyze our investments in joint ventures to determine if the joint venture is considered a VIE and would require consolidation. We (i) evaluate the sufficiency of the total equity investment at risk, (ii) review the voting rights and decision-making authority of the equity investment holders as a group and whether there are limited partners (or similar owning entities) that lack substantive participating or kick out rights and (iii) establish whether or not activities within the venture are on behalf of an investor with disproportionately few voting rights in making this VIE determination.

To the extent that we own interests in a VIE and we (i) are the sole entity that has the power to direct the activities of the VIE and (ii) have the obligation or rights to absorb the VIE's losses or receive its benefits, then we would be determined to be the primary beneficiary and would consolidate the VIE. To the extent we own interests in a VIE, then at each reporting period, we re-assess our conclusions as to which, if any, party within the VIE is considered the primary beneficiary. Consolidated joint ventures that are VIEs are not significant in any period presented in these consolidated financial statements.

To the extent that our joint ventures do not qualify as VIEs, they are consolidated if we control them through majority ownership interests or if we are the managing entity (general partner or managing member) and the other partner does not have substantive participating rights. Control is further demonstrated by our ability to unilaterally make significant operating decisions, refinance debt and sell the assets of the joint venture without the consent of the non-managing entity and the inability of the non-managing entity to remove us from our role as the managing entity. Consolidated joint ventures that are not VIEs are not significant in any period presented in these consolidated financial statements.

There were no unconsolidated joint ventures, in which we have any recognized assets or liabilities or have retained any economic exposure to loss at September 30, 2020, that met the criteria to be considered VIEs. Our maximum loss exposure for guarantees of unconsolidated joint venture indebtedness, none of which relate to VIEs, totaled $66.5 million at September 30, 2020.

6.    Acquisitions and Dispositions

Acquisitions and dispositions for the periods presented were completed in accordance with our strategy to reposition our investment concentration among the markets in which we operate and to increase our overall investments in quality industrial projects. Transaction costs related to asset acquisitions are capitalized and transaction costs related to business combinations and dispositions are expensed.

Acquisitions
We paid cash of $85.5 million and $146.6 million for building acquisitions during the nine months ended September 30, 2020 and September 30, 2019, respectively.

We acquired five properties during the nine months ended September 30, 2020. We determined that these properties did not meet the definition of a business and, accordingly, we accounted for them as asset acquisitions as opposed to business combinations.

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The following table summarizes amounts recognized for each major class of assets and liabilities (in thousands) for these acquisitions during the nine months ended September 30, 2020:

Real estate assets $ 115,257 
Lease related intangible assets 4,890 
Total acquired assets 120,147 
Secured debt 25,455 
Below market lease liability 8,079 
Other liabilities 371 
Total assumed liabilities 33,905 
Fair value of acquired net assets $ 86,242 

The leases in the acquired properties had a weighted average remaining life at acquisition of approximately 6.9 years.

Fair Value Measurements
We determine the fair value of the individual components of real estate asset acquisitions primarily through calculating the "as-if vacant" value of a building, using an income approach, which relies significantly upon internally determined assumptions. We have determined that these estimates primarily rely upon level 3 inputs, which are unobservable inputs based on our own assumptions. The most significant assumptions used in calculating the "as-if vacant" value for acquisition activity during the nine months ended September 30, 2020 are as follows:

Low High
Exit capitalization rate 4.7% 5.5%
Net rental rate per square foot $7.50 $11.04

Capitalized acquisition costs were insignificant and the fair value of the five properties acquired during the nine months ended September 30, 2020 was substantially the same as the cost of acquisition.

Dispositions
Dispositions of buildings and undeveloped land generated net cash proceeds of $55.7 million and $379.8 million during the nine months ended September 30, 2020 and 2019, respectively. The number of buildings sold, as well as their classification between continuing and discontinued operations, is disclosed in Note 12.

During the nine months ended September 30, 2020, we collected the remaining $110.0 million of principal on our outstanding notes receivable, which was related to the sale of our medical office portfolio during 2017.

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7.    Indebtedness

All debt is issued directly or indirectly by the Partnership. The General Partner does not have any indebtedness, but does guarantee some of the unsecured debt of the Partnership. The following table summarizes the book value and changes in the fair value of our debt (in thousands):
Book Value at 12/31/2019 Book Value at 9/30/2020 Fair Value at 12/31/2019 Issuances and
Assumptions
Payments/Payoffs Adjustments
to Fair Value
Fair Value at 9/30/2020
Fixed rate secured debt $ 32,287  $ 73,092  $ 34,547  $ 43,855  $ (2,984) $ 1,776  $ 77,195 
Variable rate secured debt 1,900  1,600  1,900  —  (300) —  1,600 
Unsecured debt 2,900,000  3,058,740  3,045,485  675,000  (516,260) 158,947  3,363,172 
Unsecured line of credit —  47,000  —  47,000  —  —  47,000 
Total $ 2,934,187  $ 3,180,432  $ 3,081,932  $ 765,855  $ (519,544) $ 160,723  $ 3,488,967 
Less: Deferred financing costs 19,422  34,004 
Total indebtedness as reported on the consolidated balance sheets $ 2,914,765  $ 3,146,428 

Secured Debt

Because our fixed rate secured debt is not actively traded in any marketplace, we utilized a discounted cash flow methodology to determine its fair value. Accordingly, we calculated fair value by applying an estimate of the current market rate to discount the debt's remaining contractual cash flows. Our estimate of a current market rate, which is the most significant input in the discounted cash flow calculation, is intended to replicate debt of similar maturity and loan-to-value relationship. The estimated market rates for all of our current fixed rate secured debt are between 1.60% and 2.50%, depending on the attributes of the specific loans. The current market rates we utilized were internally estimated; therefore, we have concluded that our determination of fair value for our fixed rate secured debt was primarily based upon level 3 inputs.

In February 2020, a consolidated joint venture obtained an $18.4 million secured loan from a third party financial institution, with a fixed annual interest rate of 3.41% and a maturity date of March 1, 2035.
In September 2020, we assumed two secured loans in conjunction with a two-building asset acquisition. These assumed loans had a total face value of $21.5 million and fair value of $25.5 million. These assumed loans had a weighted average remaining term at acquisition of 11.8 years and carried a weighted average stated interest rate of 4.54%. The difference between the fair value and the face value of loans assumed in connection with the acquisition is recorded as a premium and amortized to interest expense over the life of the loans assumed. We used an estimated market interest rate of 2.50% in determining the fair values of these loans.
Unsecured Debt

At September 30, 2020, all of our unsecured debt bore interest at fixed rates and primarily consisted of unsecured notes that are publicly traded. We utilized broker estimates in estimating the fair value of our fixed rate unsecured debt. Our unsecured notes are thinly traded and, in certain cases, the broker estimates were not based upon comparable transactions. The broker estimates took into account any recent trades within the same series of our fixed rate unsecured debt, comparisons to recent trades of other series of our fixed rate unsecured debt, trades of fixed rate unsecured debt from companies with profiles similar to ours, as well as overall economic conditions. We reviewed these broker estimates for reasonableness and accuracy, considering whether the estimates were based upon market participant assumptions within the principal and most advantageous market and whether any other observable inputs would be more accurate indicators of fair value than the broker estimates. We concluded that the broker estimates were representative of fair value. We have determined that our estimation of the fair value of our fixed rate unsecured debt was primarily based upon level 3 inputs. The estimated trading values of our fixed rate unsecured debt, depending on the maturity and coupon rates, ranged from 100.00% to 137.00% of face value.
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In February 2020, we issued $325.0 million of senior unsecured notes bearing interest at a stated interest rate of 3.05% and maturing on March 1, 2050, at 97.35% of par value, resulting in an effective interest rate of 3.19%. Proceeds from the unsecured notes offering were primarily used to repay the $300.0 million of 4.38% senior unsecured notes due 2022. In connection with the early redemption of these notes, we recognized a loss of $17.8 million consisting of a repayment premium and write-off of deferred financing costs.
In June 2020, we issued $350.0 million of senior unsecured notes bearing interest at a stated interest rate of 1.75% and maturing on July 1, 2030, at 99.07% of par value, resulting in an effective interest rate of 1.85%. Proceeds from the unsecured notes offering were primarily used to repurchase and cancel $216.3 million of 3.88% senior unsecured notes due 2022 pursuant to a tender offer completed by the Partnership in June 2020. In connection with the early cancellation of these notes, we recognized a loss of $15.1 million consisting of a repayment premium and write-off of deferred financing costs.
The indentures (and related supplemental indentures) governing our outstanding series of unsecured notes also require us to comply with financial ratios and other covenants regarding our operations. We were in compliance with all such financial covenants at September 30, 2020.
Unsecured Line of Credit
Our unsecured line of credit at September 30, 2020 is described as follows (in thousands):
Description Borrowing
Capacity
Maturity Date Outstanding Balance at September 30, 2020
Unsecured Line of Credit - Partnership $ 1,200,000  January 30, 2022 $ 47,000 

The Partnership's unsecured line of credit has an interest rate on borrowings of LIBOR plus 0.875% (equal to 1.04% for our outstanding borrowings at September 30, 2020) and has a maturity date of January 30, 2022, with options to extend until January 30, 2023. Subject to certain conditions, the terms also include an option to increase the facility by up to an additional $800.0 million, for a total of up to $2.00 billion. This line of credit provides us with an option to obtain borrowings from financial institutions that participate in the line at rates that may be lower than the stated interest rate, subject to certain restrictions.
This line of credit contains financial covenants that require us to meet certain financial ratios and defined levels of performance, including those related to fixed charge coverage, unsecured interest expense coverage and debt-to-asset value (with asset value being defined in the Partnership's unsecured line of credit agreement). At September 30, 2020, we were in compliance with all financial covenants under this line of credit.
We utilize a discounted cash flow methodology in order to estimate the fair value of outstanding borrowings on our unsecured line of credit. To the extent that credit spreads have changed since the origination of the line of credit, the net present value of the difference between future contractual interest payments and future interest payments based on our estimate of a current market rate would represent the difference between the book value and the fair value. This estimate of a current market rate is based upon the rate, considering current market conditions and our specific credit profile, at which we estimate we could obtain similar borrowings. As our credit spreads have not changed appreciably, we believe that the contractual interest rate and the current market rate on any outstanding borrowings on the line of credit are the same. The current market rate is internally estimated and therefore is primarily based upon a level 3 input.









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8.    Shareholders' Equity of the General Partner and Partners' Capital of the Partnership
General Partner
The General Partner has an at the market ("ATM") equity program that allows it to issue and sell its common shares through sales agents from time to time. The current ATM equity program provides for the sale of up to $400.0 million of shares of the General Partner's common stock. Actual sales under the ATM equity program depend on a variety of factors to be determined by the General Partner, including, among others, market conditions, the trading price of the General Partner’s common stock, determinations by the General Partner of the appropriate sources of funding and potential uses of funding available.
During the nine months ended September 30, 2020, the General Partner issued 3.0 million common shares pursuant to its ATM equity program, generating gross proceeds of $110.6 million and, after deducting commissions and other costs, net proceeds of $109.1 million. The proceeds from these sales were contributed to the Partnership and used to fund development activities.
Partnership
For each common share or preferred share that the General Partner issues, the Partnership issues a corresponding General Partner Unit or Preferred Unit, as applicable, to the General Partner in exchange for the contribution of the proceeds from the stock issuance. Similarly, when the General Partner redeems or repurchases common shares or preferred shares, the Partnership redeems the corresponding General Partner Units or Preferred Units held by the General Partner at the same price.

9.    Related Party Transactions
We provide property management, asset management, leasing, construction and other tenant-related services to unconsolidated joint ventures in which we have equity interests. We recorded the corresponding fees based on contractual terms that approximate market rates for these types of services and have eliminated our ownership percentage of these fees in the consolidated financial statements. The following table summarizes the fees earned from these joint ventures, prior to the elimination of our ownership percentage (in thousands): 
  Three Months Ended September 30, Nine Months Ended September 30,
  2020 2019 2020 2019
Management fees $ 398  $ 452  $ 1,143  $ 1,318 
Leasing fees $ 60  $ 759  $ 511  $ 1,315 
Construction and development fees $ 874  $ 582  $ 2,095  $ 4,520 

10.    Net Income per Common Share or Common Unit
Basic net income per common share or Common Unit is computed by dividing net income attributable to common shareholders or common unitholders, less dividends or distributions on share-based awards expected to vest (referred to as "participating securities" and primarily composed of unvested restricted stock units), by the weighted average number of common shares or Common Units outstanding for the period.
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Diluted net income per common share is computed by dividing the sum of net income attributable to common shareholders and the noncontrolling interest in earnings allocable to Limited Partner Units (to the extent the Limited Partner Units are dilutive), less dividends or distributions on participating securities that are anti-dilutive, by the sum of the weighted average number of common shares outstanding and, to the extent they are dilutive, weighted average number of Limited Partner Units outstanding and any potential dilutive securities for the period. Diluted net income per Common Unit is computed by dividing the net income attributable to common unitholders, less dividends or distributions on participating securities that are anti-dilutive, by the sum of the weighted average number of Common Units outstanding and any potential dilutive securities for the period. The following table reconciles the components of basic and diluted net income per common share or Common Unit (in thousands): 
  Three Months Ended September 30, Nine Months Ended September 30,
  2020 2019 2020 2019
General Partner
Net income attributable to common shareholders $ 71,823  $ 226,566  $ 131,099  $ 342,170 
Less: dividends on participating securities (352) (350) (1,064) (1,125)
Basic net income attributable to common shareholders $ 71,471  $ 226,216  $ 130,035  $ 341,045 
Add back dividends on dilutive participating securities   350    1,125 
Noncontrolling interest in earnings of common unitholders 638  1,968  1,164  2,971 
Diluted net income attributable to common shareholders $ 72,109  $ 228,534  $ 131,199  $ 345,141 
Weighted average number of common shares outstanding 371,082  362,416  369,375  360,424 
Weighted average Limited Partner Units outstanding 3,330  3,142  3,296  3,118 
Other potential dilutive shares 422  1,713  420  1,801 
Weighted average number of common shares and potential dilutive securities 374,834  367,271  373,091  365,343 
Partnership
Net income attributable to common unitholders $ 72,461  $ 228,534  $ 132,263  $ 345,141 
Less: distributions on participating securities (352) (350) (1,064) (1,125)
Basic net income attributable to common unitholders $ 72,109  $ 228,184  $ 131,199  $ 344,016 
Add back distributions on dilutive participating securities   350    1,125 
Diluted net income attributable to common unitholders $ 72,109  $ 228,534  $ 131,199  $ 345,141 
Weighted average number of Common Units outstanding 374,412  365,558  372,671  363,542 
Other potential dilutive units 422  1,713  420  1,801 
Weighted average number of Common Units and potential dilutive securities 374,834  367,271  373,091  365,343 
The following table summarizes the data that is excluded from the computation of net income per common share or Common Unit as a result of being anti-dilutive (in thousands): 
  Three Months Ended September 30, Nine Months Ended September 30,
  2020 2019 2020 2019
General Partner and Partnership
Other potential dilutive shares or units:
Anti-dilutive outstanding potential shares or units under fixed stock option and other stock-based compensation plans   —    — 
Anti-dilutive outstanding participating securities 1,642  —  1,642  — 
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11.    Segment Reporting
Reportable Segments
As of September 30, 2020, we had two reportable operating segments, the first consisting of the ownership and rental of industrial real estate investments. We continue to increase our investments in quality industrial properties largely based on anticipated geographic trends in supply and demand for industrial buildings, as well as the real estate needs of our major tenants that operate on a national level. We treat our industrial properties as a single operating and reportable segment based on our method of internal reporting. Properties not included in our reportable segments, because they are not industrial properties and do not by themselves meet the quantitative thresholds for separate presentation as a reportable segment, are generally referred to as non-reportable Rental Operations. Our non-reportable Rental Operations primarily include our remaining office properties and medical office property at September 30, 2020. The operations of our industrial properties, as well as our non-reportable Rental Operations, are collectively referred to as "Rental Operations."

Our second reportable segment consists of various real estate services such as development, general contracting, construction management, property management, asset management, maintenance and leasing to third-party property customers, owners and joint ventures, and is collectively referred to as "Service Operations." The Service Operations segment is identified as one single operating segment because the lowest level of financial results reviewed by our chief operating decision maker are the results for the Service Operations segment in total.  Further, our reportable segments are managed separately because each segment requires different operating strategies and management expertise.

Revenues by Reportable Segment

The following table shows the revenues for each of the reportable segments, as well as a reconciliation to consolidated revenues (in thousands): 
  Three Months Ended September 30, Nine Months Ended September 30,
  2020 2019 2020 2019
Revenues
Rental Operations:
Industrial $ 233,572  $ 213,819  $ 674,996  $ 633,226 
Non-reportable Rental Operations 1,499  1,471  4,410  4,401 
Service Operations 26,637  25,955  46,388  104,838 
Total segment revenues 261,708  241,245  725,794  742,465 
Other revenue 320  84  1,114  819 
Consolidated revenue $ 262,028  $ 241,329  $ 726,908  $ 743,284 

Supplemental Performance Measure

Property-level net operating income on a cash basis ("PNOI") is the non-GAAP supplemental performance measure that we use to evaluate the performance of, and to allocate resources among, the real estate investments in the reportable and operating segments that comprise our Rental Operations. PNOI for our Rental Operations segments is comprised of rental revenues from continuing operations less rental expenses and real estate taxes from continuing operations, along with certain other adjusting items (collectively referred to as "Rental Operations revenues and expenses excluded from PNOI," as shown in the following table). Additionally, we do not allocate interest expense, depreciation expense and certain other non-property specific revenues and expenses (collectively referred to as "Non-Segment Items," as shown in the following table) to our individual operating segments.

We evaluate the performance of our Service Operations reportable segment using net income or loss, as allocated to that segment ("Earnings from Service Operations").

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The most comparable GAAP measure to PNOI is income from continuing operations before income taxes. PNOI excludes expenses that materially impact our overall results of operations and, therefore, should not be considered as a substitute for income from continuing operations before income taxes or any other measures derived in accordance with GAAP. Furthermore, PNOI may not be comparable to other similarly titled measures of other companies.
The following table shows a reconciliation of our segment-level measures of profitability to consolidated income from continuing operations before income taxes (in thousands and excluding discontinued operations):