Duke Sells 1.7 Million Square Foot Retail Portfolio and Landscape Business; Sale of Non-Core Assets Provides $172 Million of Proceeds.

Business Editors

INDIANAPOLIS--(BUSINESS WIRE)--Aug. 9, 2001

Duke Realty Corporation (NYSE:DRE) announced today that it has sold approximately 70 percent of its retail property portfolio, and the Company's landscape operations, in two unrelated transactions.

The dispositions produced more than $172 million of proceeds. The in-place net operating income of the retail properties sold equates to a cap rate of 10.3 percent.

Commenting on these transactions, Thomas L. Hefner, Duke's Chairman and Chief Executive Officer, said,

"Over the past 12-18 months, as we embraced both our EVA and

capital recycling programs, we spent a great deal of time

analyzing certain properties and operations that are not

integral to our business or customers. As part of this

process, we determined that creating value through the

opportunistic development and acquisition of retail properties

is an important adjunct to our core office and industrial

operations. However, we also determined that being a long-term

owner of retail properties in locations that have little

synergy with our primary business parks is not the most

efficient use of our capital or delivery system. Similarly, we

concluded that certain interior functions, such as our HVAC 

maintenance group, are critical to our operation because they

create and maintain long-term value for our properties and

contribute to our clients' complete satisfaction. We also

concluded that some of our exterior maintenance functions,

including landscaping and snow removal, are not core

competencies. Consequently, as evidenced by today's

announcements, we decided to sell most of our retail portfolio

and all of our landscape business. The purpose of these

transactions is to position our resources and intellectual

capital where they can be most profitably employed for the

benefit of our shareholders."

Added Gene Zink, Chief Financial Officer of Duke,

"While the sale of the retail portfolio will have a

medium-term negative impact on property funds from operations 

(FFO), a portion of the gain on the sale of the landscape

operations will be included in FFO during the third quarter.

Because of the offsetting effects of these two transactions,

the Company does not anticipate any abnormal effect on FFO per

share for the quarter. As discussed on the Company's last

quarterly conference call, however, the additional liquidity

the Company has created over the last 18 months, while

positioning the Company extremely well in this recessionary

environment, will put downward pressure on FFO growth until

the liquidity can be strategically reemployed."

Duke's retail portfolio was sold to SSC Properties, LLC, an affiliate of the Don M. Casto Organization of Columbus, Ohio. It included more than 1.7 million square feet of properties located in Bloomington and Champaign, Illinois; Columbus and Cincinnati, Ohio; and Fort Wayne and Indianapolis, Indiana. Taken together, these 19 retail buildings, two ground leases and one vacant outlot averaged 94.8 percent leased. On a pro forma basis as of June 30, 2001, Duke's remaining retail portfolio represents just over one percent of net effective rents, compared to 45 percent and 54 percent, respectively, for the Company's office and industrial properties.

Commenting on the Company's retail disposition, Larry Myrvold, Senior Vice President of Duke's retail business unit, said,

"By selling this portfolio we are implementing a new strategy

for the retail group that is based more on creating value and

generating profits via new development versus managing a large

portfolio of properties for the long-term. After completing

this sale, we will own approximately $50 million of retail

investments totaling more than 700,000 square feet that

generally represent complementary holdings that service or are

positioned strategically to other key non-retail Duke assets.

Currently, we also have approximately 160 acres of excellent

retail land, representing five separate projects that we plan

to develop for sale on a merchant building basis over the next

three to five years. These projects amount to approximately

1,000,000 square feet of new retail opportunities.

Implementing this new strategy will accentuate the core

strengths of our group and complement the rest of the Company

and its shareholders."

Duke sold its landscaping business to The Brickman Group, Ltd. of Langhorne, Pennsylvania, one of the largest and most respected landscape service organizations in the country. As part of the sale, Duke signed a multi-year service agreement with Brickman for landscape and snow removal services covering most of the Company's wholly owned properties. Importantly, substantially all of Duke's more than 300 employees in its landscape operations are expected to be retained by Brickman.

Commenting on this transaction, Gary Burk, Executive Vice President and head of Duke's construction and property management operations, said,

"During 2000, as part of our overall strategy to improve

business efficiencies and reduce overhead costs, we began a

closer analysis of our landscape operations. During this

process, we determined that while our landscaping business was

marginally profitable, it was not a core function for our real

estate business and could be performed more efficiently by a

company specializing in such operations. After reaching this

conclusion, we decided to pursue selling our landscape

business and we are very pleased to complete this transaction

with a quality firm like The Brickman Group."

Duke Realty Corporation is the largest mixed office and industrial real estate company in the United States. Offering a complete range of real estate products and services, Duke produces more than $800 million in annual revenue from approximately 5,000 tenants and focuses on building dominant market positions in each of its 13 geographic platforms across the Midwest and the Sunbelt. Duke owns interests in more than 107 million square feet of properties, has approximately 1,100 employees and owns or controls approximately 4,400 acres of undeveloped land that can support more than 65 million square feet of future development. Visit Duke on the web at www.dukerealty.com.