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Duke Realty Limited PARTNERSHIP (DRE)

Filed: 29 Oct 20, 4:06pm

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,Indiana46240
        (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 ClassTrading Symbol(s)Name of Exchange on Which Registered
Duke Realty CorporationCommon Stock, $0.01 par valueDRENew 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 CorporationYes
 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 CorporationYes
 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 CorporationYes
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:
Duke Realty Limited Partnership:
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 progress604,819 550,926 
Investments in and advances to unconsolidated joint ventures132,127 133,074 
Undeveloped land267,254 254,537 
9,573,540 8,931,914 
Accumulated depreciation(1,637,190)(1,480,461)
Net real estate investments7,936,350 7,451,453 
Real estate investments and other assets held-for-sale0 18,463 
Cash and cash equivalents6,748 110,891 
Accounts receivable15,072 20,349 
Straight-line rent receivable145,130 129,344 
Receivables on construction contracts, including retentions44,824 25,607 
Deferred leasing and other costs, net of accumulated amortization of $219,089 and $203,857325,846 320,444 
Restricted cash held in escrow for like-kind exchange0 1,673 
Notes receivable from property sales0 110,000 
Other escrow deposits and other assets269,055 232,338 
$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 $19,2583,025,089 2,880,742 
Unsecured line of credit47,000 
3,146,428 2,914,765 
Liabilities related to real estate investments held-for-sale0 887 
Construction payables and amounts due subcontractors, including retentions83,047 68,840 
Accrued real estate taxes101,846 69,042 
Accrued interest26,499 14,181 
Other liabilities249,266 223,680 
Tenant security deposits and prepaid rents47,292 48,907 
Total liabilities3,654,378 3,340,302 
Shareholders' equity:
Common shares ($0.01 par value); 600,000 shares authorized; 371,510 and 367,950 shares issued and outstanding, respectively3,715 3,680 
Additional paid-in capital5,653,143 5,525,463 
Accumulated other comprehensive loss(32,457)(35,036)
Distributions in excess of net income(606,182)(475,992)
Total shareholders' equity5,018,219 5,018,115 
Noncontrolling interests70,428 62,145 
Total equity5,088,647 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 EndedNine Months Ended
 2020201920202019
Revenues:
Rental and related revenue$235,391 $215,374 $680,520 $638,446 
General contractor and service fee revenue26,637 25,955 46,388 104,838 
262,028 241,329 726,908 743,284 
Expenses:
Rental expenses20,231 19,158 56,631 57,423 
Real estate taxes37,027 31,739 110,517 96,556 
General contractor and other services expenses24,604 23,640 41,578 99,415 
Depreciation and amortization88,596 83,924 260,659 242,920 
170,458 158,461 469,385 496,314 
Other operating activities:
Equity in earnings of unconsolidated joint ventures4,023 3,736 8,958 12,594 
Gain on sale of properties10,968 173,646 19,905 204,075 
Gain on land sales2,346 3,869 8,551 6,569 
Other operating expenses(1,772)(874)(4,430)(4,515)
Impairment charges0 (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 income91,638 248,402 227,456 409,844 
Other income (expenses):
Interest and other income, net32 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 conversion3,029 4,312 2,259 
Income from continuing operations before income taxes71,520 227,883 131,119 351,221 
Income tax benefit (expense)956 536 1,166 (6,465)
Income from continuing operations72,476 228,419 132,285 344,756 
Discontinued operations:
Gain on sale of properties40 112 111 366 
Income from discontinued operations40 112 111 366 
Net income72,516 228,531 132,396 345,122 
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 outstanding371,082 362,416 369,375 360,424 
Weighted average number of common shares and potential dilutive securities374,834 367,271 373,091 365,343 
Comprehensive income:
Net income$72,516 $228,531 $132,396 $345,122 
Other comprehensive income (loss):
Unrealized losses on interest rate swap contracts0 (13,387)0 (37,428)
Amortization of interest rate swap contracts889 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
20202019
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 improvements219,694 202,261 
Amortization of deferred leasing and other costs40,965 40,659 
Amortization of deferred financing costs6,814 4,606 
Straight-line rental income and expense, net(15,660)(15,627)
Impairment charges5,626 
Loss on debt extinguishment32,898 13 
Gain on involuntary conversion(4,312)(2,259)
Gain on land and property sales(28,567)(211,010)
Third-party construction contracts, net2,017 14,218 
Other accrued revenues and expenses, net42,415 26,870 
Operating distributions received in excess of (less than) equity in earnings from unconsolidated joint ventures4,656 (766)
Net cash provided by operating activities438,942 404,087 
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 sales110,000 145,000 
Proceeds from land and property sales, net55,740 379,774 
Capital distributions from unconsolidated joint ventures876 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, net119,765 222,672 
Proceeds from unsecured debt663,123 182,284 
Payments on unsecured debt(546,972)
Proceeds from secured debt financings18,400 
Payments on secured indebtedness including principal amortization(3,284)(44,652)
Borrowings (repayments) on line of credit, net47,000 (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 activities284 (9,920)
Deferred financing costs(7,354)(1,440)
Net cash provided by financing activities10,531 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 period121,431 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 shares11 43,076 — — — 43,087 
Stock-based compensation plan activity2,170 — (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 shares32 119,733 — — — 119,765 
Stock-based compensation plan activity7,947 — (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 shares55 180,489 — — — 180,544 
Stock-based compensation plan activity1,639 — (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 shares68 222,604 — — — 222,672 
Stock-based compensation plan activity5,531 — (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 progress604,819 550,926 
     Investments in and advances to unconsolidated joint ventures132,127 133,074 
     Undeveloped land267,254 254,537 
9,573,540 8,931,914 
Accumulated depreciation(1,637,190)(1,480,461)
              Net real estate investments7,936,350 7,451,453 
Real estate investments and other assets held-for-sale0 18,463 
Cash and cash equivalents6,748 110,891 
Accounts receivable15,072 20,349 
Straight-line rent receivable145,130 129,344 
Receivables on construction contracts, including retentions44,824 25,607 
Deferred leasing and other costs, net of accumulated amortization of $219,089 and $203,857325,846 320,444 
Restricted cash held in escrow for like-kind exchange0 1,673 
Notes receivable from property sales0 110,000 
Other escrow deposits and other assets269,055 232,338 
$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 $19,2583,025,089 2,880,742 
Unsecured line of credit47,000 
3,146,428 2,914,765 
Liabilities related to real estate investments held-for-sale0 887 
Construction payables and amounts due subcontractors, including retentions83,047 68,840 
Accrued real estate taxes101,846 69,042 
Accrued interest26,499 14,181 
Other liabilities249,266 223,680 
Tenant security deposits and prepaid rents47,292 48,907 
     Total liabilities3,654,378 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' equity5,083,744 5,075,690 
Noncontrolling interests4,903 4,570 
     Total equity5,088,647 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 EndedNine Months Ended
 2020201920202019
Revenues:
Rental and related revenue$235,391 $215,374 $680,520 $638,446 
General contractor and service fee revenue26,637 25,955 46,388 104,838 
262,028 241,329 726,908 743,284 
Expenses:
Rental expenses20,231 19,158 56,631 57,423 
Real estate taxes37,027 31,739 110,517 96,556 
General contractor and other services expenses24,604 23,640 41,578 99,415 
Depreciation and amortization88,596 83,924 260,659 242,920 
170,458 158,461 469,385 496,314 
Other operating activities:
Equity in earnings of unconsolidated joint ventures4,023 3,736 8,958 12,594 
Gain on sale of properties10,968 173,646 19,905 204,075 
Gain on land sales2,346 3,869 8,551 6,569 
Other operating expenses(1,772)(874)(4,430)(4,515)
Impairment charges0 (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 income91,638 248,402 227,456 409,844 
Other income (expenses):
Interest and other income, net32 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 conversion3,029 4,312 2,259 
Income from continuing operations before income taxes71,520 227,883 131,119 351,221 
Income tax benefit (expense)956 536 1,166 (6,465)
Income from continuing operations72,476 228,419 132,285 344,756 
Discontinued operations:
Gain on sale of properties40 112 111 366 
           Income from discontinued operations40 112 111 366 
Net income72,516 228,531 132,396 345,122 
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 outstanding374,412 365,558 372,671 363,542 
Weighted average number of Common Units and potential dilutive securities374,834 367,271 373,091 365,343 
Comprehensive income:
Net income$72,516 $228,531 $132,396 $345,122 
Other comprehensive income (loss):
Unrealized losses on interest rate swap contracts0 (13,387)0 (37,428)
Amortization of interest rate swap contracts889 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
20202019
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 improvements219,694 202,261 
Amortization of deferred leasing and other costs40,965 40,659 
Amortization of deferred financing costs6,814 4,606 
Straight-line rental income and expense, net(15,660)(15,627)
Impairment charges5,626 
Loss on debt extinguishment32,898 13 
Gain on involuntary conversion(4,312)(2,259)
Gain on land and property sales(28,567)(211,010)
Third-party construction contracts, net2,017 14,218 
Other accrued revenues and expenses, net42,415 26,870 
Operating distributions received in excess of (less than) equity in earnings from unconsolidated joint ventures4,656 (766)
Net cash provided by operating activities438,942 404,087 
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 sales110,000 145,000 
Proceeds from land and property sales, net55,740 379,774 
Capital distributions from unconsolidated joint ventures876 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 Partner119,765 222,672 
Proceeds from unsecured debt663,123 182,284 
Payments on unsecured debt(546,972)
Proceeds from secured debt financings18,400 
Payments on secured indebtedness including principal amortization(3,284)(44,652)
Borrowings (repayments) on line of credit, net47,000 (30,000)
Distributions to common unitholders(262,780)(234,352)
Contributions from noncontrolling interests, net200 165 
Tax payments on stock-based compensation awards(4,263)(5,695)
Change in book cash overdrafts(13,588)(14,306)
Other financing activities284 (9,920)
Deferred financing costs(7,354)(1,440)
Net cash provided by financing activities10,531 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 period121,431 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
GeneralLimitedAccumulated
  Partner'sPartners'OtherTotal  
 Common EquityCommon EquityComprehensive
Loss
Partners' EquityNoncontrolling
Interests
Total Equity
Balance at June 30, 2020$5,021,166 $64,948 $(33,346)$5,052,768 $4,648 5,057,416 
Net income71,823 638 — 72,461 55 72,516 
Other comprehensive income— — 889 889 — 889 
Capital contribution from the General Partner43,087 — — 43,087 — 43,087 
Stock-based compensation plan activity1,900 722 — 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 income131,099 1,164 — 132,263 133 132,396 
Other comprehensive income— — 2,579 2,579 — 2,579 
Capital contribution from the General Partner119,765 — — 119,765 — 119,765 
Stock-based compensation plan activity7,092 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
GeneralLimitedAccumulated
  Partner'sPartners'OtherTotal  
 Common EquityCommon EquityComprehensive
Loss
Partners' EquityNoncontrolling
Interests
Total Equity
Balance at June 30, 2019$4,669,314 $56,910 $(28,717)$4,697,507 $4,614 $4,702,121 
Net income226,566 1,968 — 228,534 (3)228,531 
Other comprehensive loss— — (13,387)(13,387)— (13,387)
Capital contribution from the General Partner180,544 — — 180,544 — 180,544 
Stock-based compensation plan activity1,386 534 — 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 income342,170 2,971 — 345,141 (19)345,122 
Other comprehensive loss— — (37,428)(37,428)— (37,428)
Capital contribution from the General Partner222,672 — — 222,672 — 222,672 
Stock-based compensation plan activity4,641 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
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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,
2020201920202019
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, 2020December 31, 2019
Cash and cash equivalents$6,748 $110,891 
Restricted cash held in escrow for like-kind exchange0 1,673 
Restricted cash included in other escrow deposits and other assets6,650 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 5 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 assets4,890 
Total acquired assets120,147 
Secured debt25,455 
Below market lease liability8,079 
Other liabilities371 
Total assumed liabilities33,905 
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:

LowHigh
Exit capitalization rate4.7%5.5%
Net rental rate per square foot$7.50$11.04

Capitalized acquisition costs were insignificant and the fair value of the 5 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 12/31/2019Book Value at 9/30/2020Fair Value at 12/31/2019Issuances and
Assumptions
Payments/PayoffsAdjustments
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 debt1,900 1,600 1,900 (300)1,600 
Unsecured debt2,900,000 3,058,740 3,045,485 675,000 (516,260)158,947 3,363,172 
Unsecured line of credit47,000 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 costs19,422 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 2 secured loans in conjunction with a 2-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):
DescriptionBorrowing
Capacity
Maturity DateOutstanding 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,
 2020201920202019
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,
 2020201920202019
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 securities0 350 0 1,125 
Noncontrolling interest in earnings of common unitholders638 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 outstanding371,082 362,416 369,375 360,424 
Weighted average Limited Partner Units outstanding3,330 3,142 3,296 3,118 
Other potential dilutive shares422 1,713 420 1,801 
Weighted average number of common shares and potential dilutive securities374,834 367,271 373,091 365,343 
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 securities0 350 0 1,125 
Diluted net income attributable to common unitholders$72,109 $228,534 $131,199 $345,141 
Weighted average number of Common Units outstanding374,412 365,558 372,671 363,542 
Other potential dilutive units422 1,713 420 1,801 
Weighted average number of Common Units and potential dilutive securities374,834 367,271 373,091 365,343 
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,
 2020201920202019
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 plans0 0 
Anti-dilutive outstanding participating securities1,642 1,642 
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11.    Segment Reporting
Reportable Segments
As of September 30, 2020, we had 2 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,
 2020201920202019
Revenues
Rental Operations:
Industrial$233,572 $213,819 $674,996 $633,226 
Non-reportable Rental Operations1,499 1,471 4,410 4,401 
Service Operations26,637 25,955 46,388 104,838 
Total segment revenues261,708 241,245 725,794 742,465 
Other revenue320 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): 
 Three Months Ended September 30,Nine Months Ended September 30,
 2020201920202019
PNOI
Industrial$168,123 $150,672 $484,973 $442,475 
Non-reportable Rental Operations1,092 883 3,964 2,623 
PNOI, excluding all sold properties169,215 151,555 488,937 445,098 
PNOI from sold properties included in continuing operations105 4,353 671 16,745 
PNOI, continuing operations$169,320 $155,908 $489,608 $461,843 
Earnings from Service Operations2,033 2,315 4,810 5,423 
Rental Operations revenues and expenses excluded from PNOI:
Straight-line rental income and expense, net7,184 5,161 15,660 15,627 
Revenues related to lease buyouts179 1,465 2,605 1,484 
Amortization of lease concessions and above and below market rents1,746 1,741 5,843 4,545 
Intercompany rents and other adjusting items(624)77 (999)180 
Non-Segment Items:
Equity in earnings of unconsolidated joint ventures4,023 3,736 8,958 12,594 
Interest expense(23,059)(22,604)(69,394)(68,246)
Depreciation and amortization expense(88,596)(83,924)(260,659)(242,920)
Gain on sale of properties10,968 173,646 19,905 204,075 
Impairment charges0 (5,626)
Interest and other income, net32 2,085 1,643 7,377 
General and administrative expenses(11,439)(13,720)(46,808)(49,123)
Gain on land sales2,346 3,869 8,551 6,569 
Other operating expenses(1,772)(874)(4,430)(4,515)
Loss on extinguishment of debt(120)(32,898)(13)
Gain on involuntary conversion3,029 4,312 2,259 
Non-incremental costs related to successful leases(4,058)(1,123)(10,617)(6,726)
Other non-segment revenues and expenses, net328 125 655 788 
Income from continuing operations before income taxes$71,520 $227,883 $131,119 $351,221 









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12.    Real Estate Assets, Discontinued Operations and Assets Held-for-Sale

Real Estate Assets
Real estate assets, excluding assets held-for-sale, consisted of the following (in thousands):
September 30, 2020December 31, 2019
Buildings and tenant improvements$5,691,561 $5,295,336 
Land and improvements2,753,809 2,532,541 
Other real estate investments (1)123,970 165,500 
Real estate assets$8,569,340 $7,993,377 
(1) Consists of underutilized in-fill sites, which may have had buildings/structures on site when we acquired them, that are either (i) under lease to a third party and, after the lease ends, are expected to be redeveloped or will require significant capital expenditures before re-leasing; or (ii) industrial/logistics properties that we intend to re-lease after significant retrofitting and/or environmental remediation is completed.

Discontinued Operations
The following table illustrates the number of sold or held-for-sale properties in this report, all of which were excluded from discontinued operations:
Held-for-Sale at September 30, 2020Sold Year-to-Date in 2020Sold in 2019Total
 Properties sold or classified as held-for-sale022830

Allocation of Noncontrolling Interests - General Partner
The following table illustrates the General Partner's share of the income attributable to common shareholders from continuing operations and discontinued operations, reduced by the allocation of income between continuing and discontinued operations to the noncontrolling interests (in thousands):
Three Months Ended September 30,Nine Months Ended September 30,
 2020201920202019
Income from continuing operations attributable to common shareholders$71,783 $226,455 $130,989 $341,807 
Income from discontinued operations attributable to common shareholders40 111 110 363 
Net income attributable to common shareholders$71,823 $226,566 $131,099 $342,170 
Allocation of Noncontrolling Interests - Partnership
Substantially all of the income from discontinued operations for all periods presented in the Partnership's Consolidated Statements of Operations and Comprehensive Income is attributable to the common unitholders.
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Assets Held-for-Sale
The following table illustrates aggregate balance sheet information for assets held-for-sale (in thousands):
Held-for-Sale Properties Included in Continuing Operations
September 30, 2020December 31, 2019
Land and improvements$0 $4,561 
Buildings and tenant improvements0 18,840 
Undeveloped land0 
Accumulated depreciation0 (7,132)
Deferred leasing and other costs, net0 2,100 
Other assets0 94 
Total assets held-for-sale$0 $18,463 
Total liabilities related to assets held-for-sale$0 $887 

13.    Subsequent Event
Declaration of Dividends/Distributions
The General Partner's board of directors declared the following dividends/distributions at its regularly scheduled board meeting held on October 22, 2020:
Class of stock/unitsQuarterly Amount per Share or UnitRecord DatePayment Date
Common - Quarterly$0.255November 16, 2020November 30, 2020
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Item 2.    Management's Discussion and Analysis of Financial Condition and Results of Operations
The following Management's Discussion and Analysis of Financial Condition and Results of Operations is intended to help the reader understand our operations and our present business environment. Management's Discussion and Analysis is provided as a supplement to, and should be read in conjunction with, our consolidated financial statements and the notes thereto contained in Part I, Item 1 of this Report, and the consolidated financial statements and notes thereto contained in Part IV, Item 15 of our 2019 Annual Report.
Cautionary Notice Regarding Forward-Looking Statements
Certain statements contained in or incorporated by reference into this Report, including, without limitation, those related to our future operations and those related to our expectations concerning the effects of the COVID-19 pandemic on our future operations and balance sheet, constitute "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. The words "believe," "estimate," "expect," "anticipate," "intend," "plan," "strategy," "continue," "seek," "may," "could" and similar expressions or statements regarding future periods are intended to identify forward-looking statements, although not all forward-looking statements may contain such words.
These forward-looking statements involve known and unknown risks, uncertainties and other important factors that could cause our actual results, performance or achievements, or industry results, to differ materially from any predictions of future results, performance or achievements that we express or imply in this Report or in the information incorporated by reference into this Report. Some of the risks, uncertainties and other important factors that may affect future results include, among others:
The impact of the COVID-19 pandemic on our business, our tenants and the economy in general, including the measures taken by governmental authorities to address it;
Changes in general economic and business conditions, including the financial condition of our tenants and the value of our real estate assets;
The General Partner's continued qualification as a REIT for U.S. federal income tax purposes;
Heightened competition for tenants and potential decreases in property occupancy;
Potential changes in the financial markets and interest rates;
Volatility in the General Partner's stock price and trading volume;
Our continuing ability to raise funds on favorable terms, or at all;
Our ability to successfully identify, acquire, develop and/or manage properties on terms that are favorable to us;
Potential increases in real estate construction costs including construction cost increases as the result of trade disputes and tariffs on goods imported in the United States;
Our real estate asset concentration in the industrial sector and potential volatility in this sector;
Our ability to successfully dispose of properties on terms that are favorable to us;
Our ability to successfully integrate our acquired properties;
Our ability to retain our current credit ratings;
Inherent risks related to disruption of information technology networks and related systems and cyber security attacks;
Inherent risks in the real estate business, including, but not limited to, tenant defaults, potential liability relating to environmental matters and liquidity of real estate investments; and
Other risks and uncertainties described herein, as well as those risks and uncertainties discussed from time to time in our other reports and other public filings with the Securities and Exchange Commission (the "SEC").
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Although we presently believe that the plans, expectations and anticipated results expressed in or suggested by the forward-looking statements contained in or incorporated by reference into this Report are reasonable, all forward-looking statements are inherently subjective, uncertain and subject to change, as they involve substantial risks and uncertainties, including those beyond our control. New factors emerge from time to time, and it is not possible for us to predict the nature, or assess the potential impact, of each new factor on our business. Given these uncertainties, we caution you not to place undue reliance on these forward-looking statements. We undertake no obligation to update or revise any of our forward-looking statements for events or circumstances that arise after the statement is made, except as otherwise may be required by law.

The above list of risks and uncertainties is only a summary of some of the most important factors and is not intended to be exhaustive. Additional information regarding risk factors that may affect us is included in our 2019 Annual Report and in Part II, Item 1A, "Risk Factors" in this Report. The risk factors contained in our 2019 Annual Report are updated by us from time to time in Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and other filings that we make with the SEC. 
Business Overview
The General Partner and Partnership collectively specialize in the ownership, management and development of industrial real estate.
The General Partner is a self-administered and self-managed REIT that began operations in 1986 and is the sole general partner of the Partnership. The Partnership is a limited partnership formed in 1993, at which time all of the properties and related assets and liabilities of the General Partner, as well as proceeds from a secondary offering of the General Partner's common shares, were contributed 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. We operate the General Partner and the Partnership as one enterprise, and therefore, our discussion and analysis refers to the General Partner and its consolidated subsidiaries, including the Partnership, collectively. A more complete description of our business, and of management's philosophy and priorities, is included in our 2019 Annual Report.
At September 30, 2020, we:
Owned or jointly controlled 529 primarily industrial properties, of which 517 properties with 151.8 million square feet were in service and 12 properties with 7.0 million square feet were under development. The 517 in-service properties were comprised of 478 consolidated properties with 140.6 million square feet and 39 unconsolidated joint venture properties with 11.1 million square feet. The 12 properties under development consisted of 11 consolidated properties with 6.6 million square feet and one unconsolidated joint venture property with 358,000 square feet.
Owned directly, or through ownership interests in unconsolidated joint ventures (with acreage not adjusted for our percentage ownership interest), approximately 1,120 acres of land and controlled approximately 900 acres through purchase options.
Our overall strategy is to continue to increase our investment in quality industrial properties primarily through development, on both a speculative and build-to-suit basis, supplemented with acquisitions in higher barrier markets with the highest growth potential.

COVID-19

As the result of the COVID-19 pandemic, we have made various changes to our operations in order to support the health and safety of our associates and the communities in which we operate. The pandemic has had a far-reaching impact on the global economy but the demand for industrial real estate continues to be healthy, especially as the demand for industrial space to support e-commerce has accelerated.
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As of September 30, 2020, we have executed deferral agreements with certain tenants that will eventually allow for $8.1 million of total scheduled rental payments to be deferred and repaid in future periods. The substantial majority of these agreements require repayment of the 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.

During the third quarter of 2020, we resumed speculative development activity in certain targeted markets based on our leasing activity to date, the resilience of the industrial real estate sector during the COVID-19 pandemic and our belief that we will be able to continue to lease our speculative space.

The pandemic's impact on the overall global economy is continuing and the ultimate impact is unknown at this time. Please see Part II, Item 1A, "Risk Factors" below for additional information about the potential impacts the pandemic may have on our business and results of operations.

Key Performance Indicators
Our operating results depend primarily upon rental income from our Rental Operations. The following discussion highlights the metrics that drive the performance of our Rental Operations, which management uses to operate the business, and that we consider to be critical drivers of future revenues.
Occupancy Analysis
Occupancy is an important metric for management and our investors for understanding our financial performance. Our ability to maintain high occupancy rates is among the principal drivers of maintaining and increasing rental revenue. The following table sets forth percent leased and average net effective rent information regarding our in-service portfolio of rental properties at September 30, 2020 and 2019, respectively:
 Total Square Feet
(in thousands)
Percent of
Total Square Feet
Percent Leased*Average Annual Net Effective Rent**
Type20202019202020192020201920202019
Industrial140,437 135,096 99.8 %99.8 %97.0 %96.1 %$5.18$4.90
Non-reportable Rental Operations211 211 0.2 %0.2 %80.5 %77.3 %$24.27$24.76
Total Consolidated140,648 135,307 100.0 %100.0 %97.0 %96.0 %$5.21$4.93
Unconsolidated Joint Ventures11,109 12,656 97.5 %97.6 %$4.26$4.10
Total Including Unconsolidated Joint Ventures151,757 147,963 97.0 %96.2 %
 * Represents the percentage of total square feet leased based on executed leases and without regard to whether the leases have commenced.
**Average annual net effective rent represents average annual base rental payments per leased square foot, on a straight-line basis for the term of each lease, from space leased to tenants at the end of the most recent reporting period. This amount excludes additional amounts paid by tenants as reimbursement for operating expenses.
The higher leased percentage in our industrial portfolio at September 30, 2020, compared to September 30, 2019, was due to leasing up speculative developments.
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Vacancy Activity
The following table sets forth vacancy activity, shown in square feet, from our in-service rental properties for the nine months ended September 30, 2020 (in thousands):
Consolidated PropertiesUnconsolidated Joint Venture PropertiesTotal Including Unconsolidated Joint Venture Properties
Vacant square feet at December 31, 20194,540 406 4,946 
  Vacant space in completed developments1,138 — 1,138 
  Expirations2,697 299 2,996 
  Early lease terminations1,448 — 1,448 
  Property structural changes/other14 — 14 
  Leasing of previously vacant space(5,607)(430)(6,037)
Vacant square feet at September 30, 20204,230 275 4,505 

Total Leasing Activity
Our ability to maintain and improve occupancy and net effective rents primarily depends upon our continuing ability to lease vacant space. The volume and quality of our leasing activity is closely scrutinized by management in operation of the business and provides useful information regarding future performance. The initial leasing of development projects or vacant space in acquired properties is referred to as first generation lease activity. The leasing of such space that we have previously held under lease to a tenant is referred to as second generation lease activity. Second generation lease activity may be in the form of renewals of existing leases or new second generation leases of previously leased space. The total leasing activity for our consolidated and unconsolidated industrial rental properties, expressed in square feet of leases signed, is as follows (in thousands):
Three Months Ended September 30,Nine Months Ended September 30,
2020201920202019
New Leasing Activity - First Generation2,4062,1115,4406,775
New Leasing Activity - Second Generation1,4059842,9781,841
Renewal Leasing Activity8993,1313,4947,717
Early Renewal Leasing Activity *
1,2651482,5762,063
Short-Term New Leasing Activity **
1252161,194924
Short-Term Renewal Leasing Activity **
6771,615619
Non-Reportable Rental Operations Leasing Activity314
Total Consolidated Leasing Activity6,7776,59317,29819,943
Unconsolidated Joint Venture Leasing Activity5611,8321,6892,042
Total Including Unconsolidated Joint Venture Leasing Activity7,3388,42518,98721,985
* Early renewals represent renewals executed more than two years in advance of a lease's originally scheduled end date.
** Short-term leases represent leases with a term of less than twelve months.
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Second Generation Leases
The following table sets forth the estimated costs of tenant improvements and leasing commissions, on a per square foot basis, that we are obligated to fulfill under the second generation industrial leases signed for our rental properties during the three and nine months ended September 30, 2020 and 2019:
 Square Feet of Leases
(in thousands)
Percent of Expiring Leases RenewedAverage Term in YearsEstimated Tenant Improvement Cost per Square FootLeasing Costs per Square Foot
2020201920202019202020192020201920202019
Three Months
Consolidated - New Second Generation1,405 984 6.45.5$1.78$2.21$3.76$2.10
Unconsolidated Joint Ventures - New Second Generation257 49 1.010.2$3.49$0.38$4.57
Total - New Second Generation1,662 1,033 5.65.7$1.51$2.27$3.23$2.22
Consolidated - Renewal899 3,131 42.3 %82.2 %3.54.3$0.72$0.46$0.92$1.14
Unconsolidated Joint Ventures - Renewal131 459 100.0 %90.3 %1.05.9$0.95$0.29$2.29
Total - Renewal1,030 3,590 45.7 %83.1 %3.24.5$0.63$0.52$0.84$1.29
Nine Months
Consolidated - New Second Generation2,978 1,841 5.25.7$2.02$2.75$2.79$2.22
Unconsolidated Joint Ventures - New Second Generation257 165 1.07.2$1.82$0.38$2.75
Total - New Second Generation3,235 2,006 4.85.8$1.87$2.67$2.60$2.26
Consolidated - Renewal3,494 7,717 59.9 %82.3 %4.64.4$1.01$0.71$1.45$1.30
Unconsolidated Joint Ventures - Renewal628 554 90.2 %85.6 %3.76.0$0.38$0.92$1.42$2.32
Total - Renewal4,122 8,271 63.2 %82.5 %4.54.5$0.91$0.72$1.45$1.37
Growth in average annual net effective rents for new second generation and renewal leases, on a combined basis, for our consolidated and unconsolidated industrial rental properties, is as follows:
Three Months Ended September 30,Nine Months Ended September 30,
Ownership Type2020201920202019
Consolidated properties32.3 %22.5 %28.9 %25.0 %
Unconsolidated joint venture properties29.5 %44.9 %39.0 %38.2 %
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Lease Expirations
The table below reflects our consolidated in-service portfolio lease expiration schedule at September 30, 2020 (in thousands, except percentage data and number of leases):
 Total Consolidated PortfolioIndustrialNon-Reportable
Year of
Expiration
Square
Feet
Annual Rental
Revenue*
Number of LeasesSquare
Feet
Annual Rental
Revenue*
Square
Feet
Annual Rental
Revenue*
Remainder of 20201,556$7,964 271,555$7,958 1$
202112,53459,366 13712,53459,366 — 
202217,46275,111 14817,44574,919 17192 
202314,24071,856 14914,21971,564 21292 
202414,40373,163 13714,39873,101 562 
202515,56483,852 13915,56283,827 225 
202610,79051,989 6010,79051,989 — 
20278,61542,282 368,61042,225 557 
20288,28354,363 328,16450,876 1193,487 
20298,42845,436 268,42845,436 — 
2030 and Thereafter24,544145,056 7324,544145,056 — 
Total Leased136,419$710,438 964136,249$706,317 170$4,121 
Total Portfolio Square Feet140,648140,437211
Percent Leased97.0 %97.0 %80.5 %
* Annualized rental revenue represents average annual base rental payments, on a straight-line basis for the term of each lease, from space leased to tenants at the end of the most recent reporting period. Annualized rental revenue excludes additional amounts paid by tenants as reimbursement for operating expenses.

Building Acquisitions
Our decision process in determining whether or not to acquire a property or portfolio of properties involves several factors, including expected rent growth, multiple yield metrics, property locations and expected demographic growth in each location, current occupancy of the properties, tenant profile and remaining terms of the in-place leases in the properties. It is difficult to predict which markets may present acquisition opportunities that align with our strategy. Because of the numerous factors considered in our acquisition decisions, we do not establish specific target yields for future acquisitions.
Five buildings were acquired during the nine months ended September 30, 2020, and six buildings were acquired during the year ended December 31, 2019. The following table summarizes the acquisition price, percent leased at time of acquisition and in-place yields of industrial building acquisitions (in thousands, except percentage data):
Year-to-Date 2020 AcquisitionsFull Year 2019 Acquisitions
TypeAcquisition Price*In-Place Yield**Percent Leased at Acquisition Date***Acquisition Price*In-Place Yield**Percent Leased at Acquisition Date***
Industrial$112,068 4.6 %100.0 %$217,106 4.1 %88.4 %
* Includes fair value of real estate assets and net acquired lease-related intangible assets, including above or below market leases, but excludes assumed debt if applicable and other acquired working capital assets and liabilities.
** In-place yields of completed acquisitions are calculated as the current annualized net rental payments from space leased to tenants at the date of acquisition, divided by the acquisition price of the acquired real estate.  Annualized net rental payments are comprised of base rental payments, excluding additional amounts payable by tenants as reimbursement for operating expenses, less current annualized operating expenses not recovered through tenant reimbursements.
*** Represents percentage of total square feet leased based on executed leases and without regard to whether the leases have commenced, at the date of acquisition, including lease-backs with sellers executed in connection with the acquisition(s).

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Building Dispositions
We regularly work to identify, consider and pursue opportunities to dispose of properties on an opportunistic basis and on a basis that is generally consistent with our strategic plans. Our ability to dispose of properties, from time to time, on favorable terms is a key performance indicator from the perspective of management, as a source of capital to fund future investment, and we believe that evaluating our disposition activity is also useful to investors.
We sold two consolidated buildings during the nine months ended September 30, 2020 and 28 consolidated buildings during the year ended December 31, 2019. The following table summarizes the sales prices, in-place yields and percent leased of industrial building dispositions (in thousands, except percentage data):
Year-to-Date 2020 DispositionsFull Year 2019 Dispositions
Type          Sales PriceIn-Place Yield*Percent Leased**             Sales PriceIn-Place Yield*Percent Leased**
Industrial$45,900 5.8 %100.0 %$425,767 5.6 %91.4 %
*   In-place yields of completed dispositions are calculated as annualized net operating income from space leased to tenants at the date of sale on a lease-up basis, including full rent from all executed leases, even if currently in a free rent period, divided by the sales price. Annualized net operating income is comprised of base rental payments, excluding reimbursement of operating expenses, less current annualized operating expenses not recovered through tenant reimbursements.
** Represents percentage of total square feet leased based on executed leases and without regard to whether the leases have commenced, at the date of sale.

Development

We expect to generate future earnings from Rental Operations as development properties are placed in service and leased. Development activities, and our ability to lease those developments, are viewed by management as key indicators of future earnings growth and provide useful information to investors for the same reasons. At September 30, 2020, we had 7.0 million square feet of property under development with total estimated costs upon completion of $907.7 million compared to 7.2 million square feet with total estimated costs upon completion of $933.8 million at September 30, 2019. The square footage and estimated costs include both consolidated properties and unconsolidated joint venture development activity at 100%.
The following table summarizes our properties under development at September 30, 2020 (in thousands, except percentage data): 
Ownership TypeSquare
Feet
Percent
Leased
Total
Estimated
Project Costs
Total
Incurred
to Date
Amount
Remaining
to be Spent
Consolidated properties6,62161 %$886,621 $575,579 $311,042 
Unconsolidated joint venture properties358100 %21,037 18,937 2,100 
Total6,97963 %$907,658 $594,516 $313,142 

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Results of Operations
A summary of our operating results and property statistics is as follows (in thousands, except number of properties and per share or Common Unit data):
 Three Months Ended September 30,Nine Months Ended September 30,
 2020201920202019
Rental and related revenue from continuing operations$235,391 $215,374 $680,520 $638,446 
General contractor and service fee revenue26,637 25,955 46,388 104,838 
Operating income91,638 248,402 227,456 409,844 
General Partner
Net income attributable to common shareholders$71,823 $226,566 $131,099 $342,170 
Weighted average common shares outstanding371,082 362,416 369,375 360,424 
Weighted average common shares and potential dilutive securities374,834 367,271 373,091 365,343 
Partnership
Net income attributable to common unitholders$72,461 $228,534 $132,263 $345,141 
Weighted average Common Units outstanding374,412 365,558 372,671 363,542 
Weighted average Common Units and potential dilutive securities374,834 367,271 373,091 365,343 
General Partner and Partnership
Basic income per common share or Common Unit:
Continuing operations$0.19 $0.62 $0.35 $0.95 
Diluted income per common share or Common Unit:
Continuing operations$0.19 $0.62 $0.35 $0.94 
Number of in-service consolidated properties at end of period478457478457
In-service consolidated square footage at end of period140,648135,307140,648135,307
Number of in-service unconsolidated joint venture properties at end of period39403940
In-service unconsolidated joint venture square footage at end of period11,10912,65611,10912,656

Supplemental Performance Measures
In addition to net income computed in accordance with GAAP, we assess and measure the overall operating results of the General Partner and the Partnership using certain non-GAAP supplemental performance measures, which include (i) Funds From Operations ("FFO"), (ii) PNOI and (iii) Same-Property Net Operating Income - Cash Basis ("SPNOI").
These non-GAAP metrics are commonly used by industry analysts and investors as supplemental operating performance measures of REITs and are viewed by management to be useful indicators of operating performance. Historical cost accounting for real estate assets in accordance with GAAP implicitly assumes that the value of real estate assets diminishes predictably over time. Since real estate values instead have historically risen or fallen with market conditions, many industry analysts and investors have considered presentation of operating results for real estate companies that use historical cost accounting to be insufficient by themselves. Management believes that the use of FFO, PNOI and SPNOI, combined with net income (which remains the primary GAAP measure of performance), improves the understanding of operating results of REITs among the investing public and makes comparisons of REIT operating results more meaningful.
The most comparable GAAP measure to FFO is net income (loss) attributable to common shareholders or common unitholders, while the most comparable GAAP measure to PNOI and SPNOI is income (loss) from continuing operations before income taxes.
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FFO, PNOI and SPNOI each exclude expenses that materially impact our overall results of operations and, therefore, should not be considered as a substitute for net income (loss) attributable to common shareholders or common unitholders, income (loss) from continuing operations before income taxes, or any other measures derived in accordance with GAAP. Furthermore, these metrics may not be comparable to other similarly titled measures of other companies.
Funds From Operations
The National Association of Real Estate Investment Trusts ("NAREIT") created FFO as a non-GAAP supplemental measure of REIT operating performance. FFO, as defined by NAREIT, represents GAAP net income (loss), excluding gains or losses from sales of real estate assets (including real estate assets incidental to our business) and related taxes, gains and losses from change in control, impairment charges related to real estate assets (including real estate assets incidental to our business) plus certain non-cash items such as real estate asset depreciation and amortization, and after similar adjustments for unconsolidated partnerships and joint ventures. We calculate FFO in accordance with the definition that was adopted by the Board of Governors of NAREIT.
Management believes that the use of FFO as a performance measure enables investors and analysts to readily identify the operating results of the long-term assets that form the core of a REIT's activity and assists them in comparing these operating results between periods or between different companies that use the NAREIT definition of FFO.
The following table shows a reconciliation of net income attributable to common shareholders or common unitholders to the calculation of FFO attributable to common shareholders or common unitholders (in thousands):
 Three Months Ended September 30,Nine Months Ended September 30,
 2020201920202019
Net income attributable to common shareholders of the General Partner$71,823 $226,566 $131,099 $342,170 
Add back: Net income attributable to noncontrolling interests - common limited partnership interests in the Partnership638 1,968 1,164 2,971 
Net income attributable to common unitholders of the Partnership72,461 228,534 132,263 345,141 
Adjustments:
Depreciation and amortization88,596 83,924 260,659 242,920 
Company share of unconsolidated joint venture depreciation, amortization and other adjustments2,259 2,858 6,759 7,628 
Gains on sale of properties(11,008)(173,758)(20,016)(204,441)
Gain on land sales(2,346)(3,869)(8,551)(6,569)
Impairment charges — 5,626 — 
Income tax (benefit) expense triggered by sales of real estate assets(956)(536)(1,166)6,465 
Gains on sales of real estate assets - share of unconsolidated joint ventures(1,095)(332)(787)(4,859)
FFO attributable to common unitholders of the Partnership$147,911 $136,821 $374,787 $386,285 
Additional General Partner Adjustments:
Net income attributable to noncontrolling interests - common limited partnership interests in the Partnership(638)(1,968)(1,164)(2,971)
        Noncontrolling interest share of adjustments(671)788 (2,144)(353)
FFO attributable to common shareholders of the General Partner$146,602 $135,641 $371,479 $382,961 

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Property-Level Net Operating Income - Cash Basis
PNOI is comprised of rental revenues from continuing operations less rental expenses and real estate taxes from continuing operations, along with certain other adjusting items. As a performance metric that consists of only the cash-based revenues and expenses directly related to ongoing real estate rental operations, PNOI is narrower in scope than NAREIT FFO.
PNOI, as we calculate it, may not be directly comparable to similarly titled, but differently calculated, measures for other REITs. We believe that PNOI is another useful supplemental performance measure, as it is an input in many REIT valuation models and it provides a means by which to evaluate the performance of the properties within our Rental Operations segments. The operations of our industrial properties, as well as our non-reportable Rental Operations (our residual non-industrial properties that have not yet been sold, referred to throughout as "non-reportable"), are collectively referred to as "Rental Operations."
The major factors influencing PNOI are occupancy levels, acquisitions and sales, development properties that achieve stabilized operations, rental rate increases or decreases, and the recoverability of operating expenses.
Note 11 to the consolidated financial statements included in Part I, Item 1 of this Report shows a calculation of our PNOI for the three and nine months ended September 30, 2020 and 2019 and provides a reconciliation of PNOI for our Rental Operations segments to income from continuing operations before income taxes.
Same-Property Net Operating Income - Cash Basis
We also evaluate the performance of our properties, including our share of properties we jointly control, on a "same-property" basis, using a metric referred to as SPNOI. We view SPNOI as a useful supplemental performance measure because it improves comparability between periods by eliminating the effects of changes in the composition of our portfolio.
On an individual property basis, SPNOI is generally computed in a consistent manner as PNOI.
We define our "same-property" population once a year at the beginning of the current calendar year and include buildings that were stabilized (the term "stabilized" means properties that have reached 90% leased or that have been in-service for at least one year since development completion or acquisition) as of January 1 of the prior calendar year. The "same-property" pool is also adjusted to remove properties that were sold subsequent to the beginning of the current calendar year. As such, the "same-property" population for the period ended September 30, 2020 includes all properties that we owned or jointly controlled at January 1, 2020, which had both been owned or jointly controlled and had reached stabilization by January 1, 2019, and have not been sold.
A reconciliation of income from continuing operations before income taxes to SPNOI is presented as follows (in thousands, except percentage data):
Three Months Ended September 30,PercentNine Months Ended September 30,Percent
20202019Change20202019Change
Income from continuing operations before income taxes$71,520 $227,883 $131,119 $351,221 
  Share of SPNOI from unconsolidated joint ventures4,917 4,564 14,236 13,550 
  PNOI excluded from the "same-property" population(19,444)(8,767)(43,132)(22,703)
  Earnings from Service Operations(2,033)(2,315)(4,810)(5,423)
  Rental Operations revenues and expenses excluded from PNOI(8,590)(12,797)(23,780)(38,581)
  Non-Segment Items108,318 (61,216)386,408 137,881 
SPNOI$154,688 $147,352 5.0 %$460,041 $435,945 5.5 %
The composition of the line items titled "Rental Operations revenues and expenses excluded from PNOI" and "Non-Segment Items" from the table above are shown in greater detail in Note 11 to the consolidated financial statements included in Part I, Item 1 of this Report.
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We believe that the factors that impact SPNOI are generally the same as those that impact PNOI. The following table details the number of properties, square feet, average commencement occupancy and average cash rental rate for the properties included in SPNOI for the respective periods:
Three Months Ended September 30,Nine Months Ended September 30,
2020201920202019
Number of properties454454454454
Square feet (in thousands) (1)127,478127,478127,478127,478
Average commencement occupancy percentage (2)98.8%98.2%98.6%98.0%
Average rental rate - cash basis (3)$4.83$4.69$7.20$6.99
(1) Includes the total square feet of the consolidated properties that are in the "same-property" population as well as 4.9 million square feet of space for unconsolidated joint ventures, which represents our ratable share of the 9.8 million total square feet of space for buildings owned by unconsolidated joint ventures that are in the "same-property" population.
(2) Commencement occupancy represents the percentage of total square feet where the leases have commenced.
(3) Represents the average annualized contractual rent per square foot for tenants in occupancy in properties in the "same-property" population. Cash rent does not include the tenant's obligation to pay property operating expenses and real estate taxes. If a tenant was within a free rent period, its rent would equal zero for purposes of this metric.

Comparison of Three Months Ended September 30, 2020 to Three Months Ended September 30, 2019
Rental and Related Revenue
The following table sets forth rental and related revenue from continuing operations (in thousands): 
 Three Months Ended September 30,
 20202019
Rental and related revenue:
Industrial$233,572 $213,819 
Non-reportable Rental Operations and non-segment revenues1,819 1,555 
Total rental and related revenue from continuing operations$235,391 $215,374 
The primary reasons for the increase in rental and related revenue from continuing operations were:
We acquired 11 properties and placed 34 developments in service from January 1, 2019 to September 30, 2020, which provided incremental revenues from continuing operations of $16.2 million during the three months ended September 30, 2020, as compared to the same period in 2019.
The increase in rental revenue included $5.6 million of higher expense recoveries primarily related to increased recoverable real estate taxes compared to the same period in 2019.
Increases in rental rates and occupancy within our "same-property" portfolio, as well as the lease up of properties that were placed in service prior to January 1, 2019 but were not in the "same-property" portfolio, also contributed to the increase to rental and related revenue from continuing operations.
The sale of 30 in-service properties since January 1, 2019, which did not meet the criteria to be classified within discontinued operations, resulted in a decrease of $6.3 million to rental and related revenue from continuing operations in the three months ended September 30, 2020, as compared to the same period in 2019, which partially offset the aforementioned increases to rental and related revenue from continuing operations.
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Rental Expenses and Real Estate Taxes
The following table sets forth rental expenses and real estate taxes from continuing operations (in thousands):
 Three Months Ended September 30,
 20202019
Rental expenses:
Industrial$19,795 $18,928 
Non-reportable Rental Operations and non-segment expenses436 230 
Total rental expenses from continuing operations$20,231 $19,158 
Real estate taxes:
Industrial$37,010 $31,503 
Non-reportable Rental Operations and non-segment expenses17 236 
Total real estate tax expense from continuing operations$37,027 $31,739 

Overall, rental expenses from continuing operations increased by $1.1 million during the three months ended September 30, 2020, compared to the same period in 2019. The increase to rental expenses was primarily the result of acquisitions and developments placed in service from January 1, 2019 to September 30, 2020, partially offset by the impact of property sales that did not meet the criteria to be classified within discontinued operations.

Overall, real estate tax expense from continuing operations increased by $5.3 million during the three months ended September 30, 2020, compared to the same period in 2019. The increase to real estate tax expense was mainly due to higher real estate tax assessments in certain of our markets and the result of acquisitions and developments placed in service from January 1, 2019 to September 30, 2020. These increases were partially offset by the impact of property sales that did not meet the criteria to be classified within discontinued operations.
Depreciation and Amortization
Depreciation and amortization expense from continuing operations was $88.6 million and $83.9 million for the three months ended September 30, 2020 and 2019, respectively. The increase in depreciation and amortization expense for the three months ended September 30, 2020 was mainly the result of continued growth in our portfolio through development.
Gain on Sale of Properties - Continuing Operations
The $11.0 million recognized as gain on sale of properties in continuing operations for the three months ended September 30, 2020 was primarily the result of the sale of one property that did not meet the criteria for inclusion in discontinued operations.
The $173.6 million recognized as gain on sale of properties in continuing operations for the three months ended September 30, 2019 was primarily the result of the sale of 26 properties that did not meet the criteria for inclusion in discontinued operations.
General and Administrative Expenses
General and administrative expenses consist of two components. The first component includes general corporate expenses, and the second component represents the indirect operating costs not allocated to, or absorbed by, either the development, leasing and operation of our consolidated properties or our Service Operations. Such indirect operating costs are primarily comprised of employee compensation, including related costs such as benefits and wage-related taxes, but also include other ancillary costs such as travel and information technology support. Total indirect operating costs, prior to any allocation or absorption, and general corporate expenses are collectively referred to as our overall pool of overhead costs.
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Those indirect costs not allocated to or absorbed by these operations are charged to general and administrative expenses. We regularly review our total overhead cost structure relative to our leasing, development and construction volume and adjust the level of total overhead, generally through changes in our level of staffing in various functional departments, as necessary, in order to control overall general and administrative expense.
General and administrative expenses were $11.4 million and $13.7 million for the three months ended September 30, 2020 and 2019, respectively. The following table sets forth the factors that led to the decreased general and administrative expenses (in millions):
General and administrative expenses - three months ended September 30, 2019$13.7 
   Decrease to overall pool of overhead costs(0.4)
   Impact of increased leasing and development activities (1)(3.5)
   Decreased allocation of costs to Service Operations and Rental Operations1.6 
General and administrative expenses - three months ended September 30, 2020$11.4 
(1) Due to a higher volume of successful leases, non-capitalizable leasing costs increased to $4.1 million during the three months ended September 30, 2020 from $1.1 million during the three months ended September 30, 2019 (these costs are presented separately in the line item "Non-Incremental Costs Related to Successful Leases" on the Consolidated Statements of Operations). Additionally, we capitalized $1.7 million and $5.6 million of our total overhead costs to leasing and development, respectively, for consolidated properties during the three months ended September 30, 2020, compared to capitalizing approximately $900,000 and $5.8 million of such costs, respectively, for the three months ended September 30, 2019. Combined overhead costs capitalized to leasing and development totaled 24.8% and 22.5% of our overall pool of overhead costs for the three months ended September 30, 2020 and 2019, respectively, with the higher percentage being attributable to the increased volume of successful leases during the three months ended September 30, 2020.

Interest Expense
Interest expense from continuing operations was $23.1 million and $22.6 million for the three months ended September 30, 2020 and 2019, respectively. The increase in interest expense from continuing operations for the three months ended September 30, 2020 was primarily due to increased overall borrowings and decreased capitalized interest, partially offset by lower average interest rates.
We capitalized $5.7 million and $6.2 million of interest costs for the three months ended September 30, 2020 and 2019, respectively.

Comparison of Nine Months Ended September 30, 2020 to Nine Months Ended September 30, 2019
Rental and Related Revenue
The following table sets forth rental and related revenue from continuing operations (in thousands): 
 Nine Months Ended September 30,
 20202019
Rental and related revenue:
Industrial$674,996 $633,226 
Non-reportable Rental Operations and non-segment revenues5,524 5,220 
Total rental and related revenue from continuing operations$680,520 $638,446 
The following factors contributed to the increase in rental and related revenue from continuing operations:

We acquired 11 properties and placed 34 developments in service from January 1, 2019 to September 30, 2020, which provided incremental revenues from continuing operations of $41.9 million in the nine months ended September 30, 2020, as compared to the same period in 2019.
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Increased occupancy and rental rates within our "same-property" portfolio, as well as the lease up of properties that were placed in service prior to January 1, 2019 but were not in the "same-property" portfolio, also contributed to the increase to rental and related revenue from continuing operations.
The increase in rental revenue included $13.0 million of higher expense recoveries primarily related to increased recoverable real estate taxes compared to the same period in 2019.
The sale of 30 in-service properties, since January 1, 2019, which did not meet the criteria for inclusion within discontinued operations, resulted in a decrease of $22.2 million to rental and related revenue from continuing operations in the nine months ended September 30, 2020, as compared to the same period in 2019, which partially offset the aforementioned increases to rental and related revenue from continuing operations.
The increase in rental revenue was also partially offset by a $4.0 million increase in collectability reserves for contractual and straight-line receivables, primarily as a result of current economic conditions caused by the COVID-19 pandemic during the nine months ended September 30, 2020.

Rental Expenses and Real Estate Taxes
The following table sets forth rental expenses and real estate taxes from continuing operations (in thousands):
 Nine Months Ended September 30,
 20202019
Rental expenses:
Industrial$55,333 $56,339 
Non-reportable Rental Operations and non-segment expenses1,298 1,084 
Total rental expenses from continuing operations$56,631 $57,423 
Real estate taxes:
Industrial$109,877 $96,031 
Non-reportable Rental Operations and non-segment expenses640 525 
Total real estate tax expense from continuing operations$110,517 $96,556 
Overall, real estate tax expense from continuing operations increased by $14.0 million in the nine months ended September 30, 2020, compared to the same period in 2019. The increase to real estate tax expense was mainly the result of acquisitions and developments placed in service from January 1, 2019 to September 30, 2020 and increased tax assessments in certain of our markets. These increases were partially offset by the impact of property sales that did not meet the criteria to be classified within discontinued operations.
Service Operations
The following table sets forth the components of the Service Operations reportable segment for the nine months ended September 30, 2020 and 2019, respectively (in thousands):

Nine Months Ended September 30,
20202019
Service Operations:
General contractor and service fee revenue$46,388 $104,838 
General contractor and other services expenses41,578 99,415 
Net earnings from Service Operations$4,810 $5,423 
General contractor and service fee revenues, and general contractor and other services expenses, decreased during the nine months ended September 30, 2020 as the result of lower third-party construction activity as we continue to focus our resources on wholly-owned development projects.
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Depreciation and Amortization
Depreciation and amortization expense was $260.7 million and $242.9 million for the nine months ended September 30, 2020 and 2019, respectively. The increase in depreciation and amortization expense for the nine months ended September 30, 2020 was mainly the result of continued growth in our portfolio through development.
Gain on Sale of Properties - Continuing Operations
The $19.9 million recognized as gain on sale of properties in continuing operations for the nine months ended September 30, 2020 was primarily the result of the sale of two consolidated properties that did not meet the criteria for inclusion in discontinued operations.
The $204.1 million recognized as gain on sale of properties in continuing operations for the nine months ended September 30, 2019 was primarily comprised of the gains from the sale of 27 properties that did not meet the criteria for inclusion in discontinued operations.

Impairment Charges
We recognized $5.6 million of impairment charges during the first quarter of 2020, related to writing off pre-acquisition costs, primarily non-refundable purchase deposits, for certain planned purchases of undeveloped land that we elected not to pursue due to the uncertain economic outlook at the onset of the COVID-19 pandemic.

We did not recognize any impairment charges during the nine months ended September 30, 2019.
General and Administrative Expense
General and administrative expenses were $46.8 million and $49.1 million for the nine months ended September 30, 2020 and 2019, respectively. The following table sets forth the factors that led to the decreased general and administrative expenses (in millions):
General and administrative expenses - nine months ended September 30, 2019$49.1 
Decrease to overall pool of overhead costs(0.5)
Overhead restructuring charges (1)2.1 
Impact of increased leasing and development activities (2)(10.7)
Decreased allocation of costs to Service Operations and Rental Operations (3)6.8 
General and administrative expenses - nine months ended September 30, 2020$46.8 
(1) We recognized approximately $2.1 million of overhead restructuring charges, primarily related to benefits provided to certain associates that terminated employment as part of a voluntary retirement package offered to certain eligible employees during the nine months ended September 30, 2020.
(2) Due to the timing of incurring costs attributable to successful leases, non-capitalizable leasing costs increased to $10.6 million during the nine months ended September 30, 2020 from $6.7 million during the nine months ended September 30, 2019 (these costs are presented separately in the line item "Non-Incremental Costs Related to Successful Leases" on the Consolidated Statements of Operations). Additionally, we capitalized $3.9 million and $23.8 million of our total overhead costs to leasing and development, respectively, for consolidated properties during the nine months ended September 30, 2020, compared to capitalizing $4.1 million and $16.8 million of such costs, respectively, for the nine months ended September 30, 2019. Combined overhead costs capitalized to leasing and development totaled 27.4% and 20.6% of our overall pool of overhead costs for the nine months ended September 30, 2020 and 2019, respectively, with the higher percentage being attributable to increased development volume for the nine months ended September 30, 2020.
(3) The decrease in allocation of costs to Service Operations and Rental Operations resulted from a lower volume of third-party construction projects during the nine months ended September 30, 2020.
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Interest Expense
Interest expense allocable to continuing operations was $69.4 million and $68.2 million for the nine months ended September 30, 2020 and 2019, respectively. The increase in interest expense from continuing operations for the nine months ended September 30, 2020 was primarily due to increased overall borrowings, partially offset by lower average interest rates.
We capitalized $19.4 million and $19.1 million of interest costs during the nine months ended September 30, 2020 and 2019, respectively.
Debt Extinguishment
During the nine months ended September 30, 2020, we redeemed $300.0 million of unsecured notes with a stated interest rate of 4.38% and repurchased and canceled $216.3 million of unsecured notes with a stated interest rate of 3.88% pursuant to a tender offer completed by the Partnership. In connection with redemption and repurchase of these unsecured notes, we recognized a total loss of $32.9 million including the redemption/repayment premium and write-off of the deferred financing costs.
We did not redeem or repurchase any unsecured notes during the nine months ended September 30, 2019.

Liquidity and Capital Resources

Sources of Liquidity
We expect to meet our short-term liquidity requirements over the next 12 months, which include payments of dividends and distributions, completion of development projects that are currently under construction and capital expenditures needed to maintain our current real estate assets, through working capital, net cash provided by operating activities and short term borrowings on the Partnership's unsecured line of credit. We had $6.7 million of cash on hand and $47.0 million outstanding borrowings on the Partnership's $1.20 billion unsecured line of credit at September 30, 2020.

In addition to our existing sources of liquidity, we expect to meet long-term liquidity requirements, such as scheduled mortgage and unsecured debt maturities, financing of development activities, acquisitions and other capital improvements, through multiple sources of capital including operating cash flow, proceeds from property dispositions and accessing the public debt and equity markets.

Rental Operations

Cash flows from Rental Operations is our primary source of liquidity and provides a stable source of cash flow to fund operational expenses. We believe that this cash-based revenue stream is substantially aligned with revenue recognition (except for items such as periodic straight-line rental income accruals and amortization of above or below market rents) as cash receipts from the leasing of rental properties are generally received in advance of, or a short time following, the actual revenue recognition.

We are subject to a number of risks, which have intensified as the result of the COVID-19 outbreak, related to general economic conditions, including reduced occupancy, tenant defaults and bankruptcies and potential reduction in rental rates upon renewal or re-letting of properties, any of which would result in reduced cash flow from operations.

Debt and Equity Securities

We use the Partnership's unsecured line of credit (which is guaranteed by the General Partner) as a temporary source of capital to fund development activities, acquire additional rental properties and provide working capital.

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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.

Also in February 2020, we issued $325.0 million of senior unsecured notes, which bear interest at a stated interest rate of 3.05%, have an effective interest rate of 3.19%, and mature on March 1, 2050, for cash proceeds of $316.4 million.

In June 2020, we issued $350.0 million of senior unsecured notes, which bear interest at a stated interest rate of 1.75%, have an effective interest rate of 1.85%, and mature on July 1, 2030, for cash proceeds of $346.8 million.

The Partnership has issued debt securities pursuant to certain indentures and related supplemental indentures, which also require us to comply with financial ratios and other covenants regarding our operations. We were in compliance with all such covenants, as well as applicable covenants under our unsecured line of credit, at September 30, 2020.

The Partnership's unsecured line of credit has an interest rate that is indexed to LIBOR. In 2017, the Alternative Reference Rates Committee ("ARRC") proposed that the Secured Overnight Funding Rate ("SOFR") replace LIBOR. ARRC also proposed that the transition to SOFR from LIBOR take place by the end of 2021. As the Partnership's unsecured line of credit agreement has provisions that allow for automatic transition to a new rate, the Partnership has no other material debt arrangements that are indexed to LIBOR, and has settled all of our outstanding interest rate swaps in November 2019, we believe that the transition will not have a material impact on our consolidated financial statements.

At September 30, 2020, we had on file with the SEC an automatic shelf registration statement on Form S-3 relating to the offer and sale, from time to time, of an indeterminate amount of debt and equity securities (including guarantees of the Partnership's debt securities by the General Partner). Equity securities are offered and sold by the General Partner, and the net proceeds of such offerings are contributed to the Partnership in exchange for additional General Partner Units or Preferred Units. From time to time, we expect to issue additional securities under this automatic shelf registration statement to fund the repayment of long-term debt upon maturity and for other general corporate purposes.

The General Partner has an ATM equity program that allows it to issue new common shares at $0.01 par value per share, from time to time, with an aggregate offering price of up to $400.0 million. During the three months ended September 30, 2020, the General Partner issued 1.0 million common shares under its ATM equity program, resulting in net proceeds of $38.5 million after paying total compensation of $390,000 to the applicable sales agents. The General Partner issued a total of 3.0 million common shares under its ATM equity program for the nine months ended September 30, 2020, resulting in net proceeds of $109.4 million after paying total compensation of $1.1 million to the applicable sales agents. Other fees related to these issuances, totaling $334,000, were also paid during the nine months ended September 30, 2020. As of September 30, 2020, the ATM equity program still had $80.0 million worth of new common shares available to issue.

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Sale of Real Estate Assets
We regularly work to identify, consider and pursue opportunities to dispose of non-strategic properties on an opportunistic basis and on a basis that is generally consistent with our strategic plans. Our ability to dispose of such properties on favorable terms, or at all, is dependent upon a number of factors including the availability of credit to potential buyers to purchase properties at prices that we consider acceptable. Although we believe that we have demonstrated our ability to generate significant liquidity through the disposition of non-strategic properties, potential future adverse changes to general market and economic conditions, including the uncertain economic outlook caused by the COVID-19 pandemic, could negatively impact our further ability to dispose of such properties.
Sales of land and properties provided $55.7 million and $379.8 million in net proceeds during the nine months ended September 30, 2020 and 2019, respectively.
Transactions with Unconsolidated Joint Ventures
Transactions with unconsolidated joint ventures also provide a source of liquidity. From time to time we will sell properties to unconsolidated joint ventures, while retaining a continuing interest in that entity, and receive proceeds commensurate to those interests that we do not own. Additionally, unconsolidated joint ventures will from time to time obtain debt financing or sell properties and will then distribute to us, and our joint venture partners, all or a portion of the proceeds from such transactions.

Uses of Liquidity
Our principal uses of liquidity include the following:
property investment;
leasing/capital costs;
dividends and distributions to shareholders and unitholders;
long-term debt maturities;
opportunistic repurchases of outstanding debt; and
other contractual obligations.
Property Investment
Our overall strategy is to continue to increase our investment in quality industrial properties, primarily through development, on both a speculative and build-to-suit basis, supplemented with acquisitions in higher barrier markets with the highest growth potential. Pursuant to this strategy, we evaluate development and acquisition opportunities based upon our market outlook, including general economic conditions, supply and long-term growth potential. Our ability to make future property investments is dependent upon identifying suitable acquisition and development opportunities, and our continued access to our longer-term sources of liquidity, including issuances of debt or equity securities as well as generating cash flow by disposing of selected properties.

Leasing/Capital Costs
Tenant improvements and lease-related costs pertaining to our initial leasing of newly completed space, or vacant space in acquired properties, are referred to as first generation expenditures. Such first generation expenditures for tenant improvements are included within "development of real estate investments" in our Consolidated Statements of Cash Flows, while such expenditures for capitalizable lease-related costs are included within "other deferred leasing costs."
Cash expenditures related to the construction of a building's shell, as well as the associated site improvements, are also included within "development of real estate investments" in our Consolidated Statements of Cash Flows.
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Tenant improvements and leasing costs to renew or re-let rental space that we previously leased to tenants for second generation leases are referred to as second generation expenditures. Building improvements that are not specific to any tenant but serve to improve integral components of our real estate properties are also second generation expenditures. One of the principal uses of our liquidity is to fund the second generation leasing/capital expenditures of our real estate investments.
The following table summarizes our second generation capital expenditures by type of expenditure, as well as capital expenditures for the development of real estate investments and for other deferred leasing costs (in thousands):
Nine Months Ended September 30,
 20202019
Second generation tenant improvements$11,635 $9,837 
Second generation leasing costs14,334 15,478 
Building improvements1,764 6,329 
Total second generation capital expenditures$27,733 $31,644 
Development of real estate investments$469,001 $325,825 
Other deferred leasing costs$29,867 $28,551 
The capital expenditures in the table above include the capitalization of internal overhead costs. We capitalized $3.9 million and $4.1 million of overhead costs that are incremental to executing leases, including both first and second generation leases, during the nine months ended September 30, 2020 and 2019, respectively. We capitalized $23.8 million and $16.8 million of overhead costs related to development activities, including both development and tenant improvement projects on first and second generation space, during the nine months ended September 30, 2020 and 2019, respectively. Combined overhead costs capitalized to leasing and development totaled 27.4% and 20.6% of our overall pool of overhead costs for the nine months ended September 30, 2020 and 2019, respectively.

Further discussion of the capitalization of overhead costs can be found herein, in the quarter-to-quarter and year-to-year comparisons of general and administrative expenses of this Item 2 as well as in the Critical Accounting Policies section of Management's Discussion and Analysis of Financial Condition and Results of Operations in our 2019 Annual Report.

In addition to the capitalization of overhead costs, the totals for development of real estate assets in the table above include the capitalization of $19.4 million and $19.1 million of interest costs during the nine months ended September 30, 2020 and 2019, respectively.
Both our first and second generation expenditures vary significantly between leases on a per square foot basis, dependent upon several factors including the product type, the nature of a tenant's operations, the specific physical characteristics of each individual property and the market in which the property is located.

Dividend and Distribution Requirements
The General Partner is required to meet the distribution requirements of the Code in order to maintain its REIT status. We paid regular dividends or distributions of $0.235 per common share or Common Unit in the first, second and third quarters of 2020, and the General Partner's board of directors declared dividends or distributions of $0.255 per common share or Common Unit to be paid in the fourth quarter of 2020.
We expect to continue to distribute at least an amount equal to our taxable earnings, to meet the requirements to maintain the General Partner's REIT status, and additional amounts as determined by the General Partner's board of directors. Distributions are declared at the discretion of the General Partner's board of directors and are subject to actual cash available for distribution, our financial condition, capital requirements and such other factors as the General Partner's board of directors deems relevant.
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Debt Maturities
Debt outstanding at September 30, 2020 had a face value totaling $3.18 billion with a weighted average interest rate of 3.35% and maturities at various dates through 2050. Of this total amount, we had $3.06 billion of unsecured debt, $70.8 million of secured debt and $47.0 million of outstanding borrowings on our unsecured line of credit at September 30, 2020. Scheduled principal amortization, maturities and early repayments of such debt totaled $519.5 million for the nine months ended September 30, 2020.
The following table is a summary of the scheduled future amortization and maturities of our indebtedness at September 30, 2020 (in thousands, except percentage data):
 
 Future Repayments
YearScheduled
Amortization
MaturitiesTotalWeighted Average Interest Rate of
Future Repayments
Remainder of 2020$1,126 $— $1,126 5.56 %
20214,413 9,047 13,460 5.46 %
20224,646 83,740 88,386 3.99 %
20234,894 297,000 301,894 3.33 %
20245,155 300,000 305,155 3.92 %
20255,102 — 5,102 5.09 %
20263,238 375,000 378,238 3.38 %
20271,615 475,000 476,615 3.18 %
20281,307 500,000 501,307 4.45 %
20291,359 400,000 401,359 2.88 %
20301,413 350,000 351,413 1.86 %
Thereafter4,729 347,734 352,463 3.26 %
$38,997 $3,137,521 $3,176,518 3.35 %

The Partnership’s unsecured line of credit is reflected in the table above as maturing in January 2023, based on the ability to exercise the two six-month extension options from its stated maturity date of January 2022 (see Note 7). We anticipate generating capital to fund our debt maturities by using undistributed cash generated from our Rental Operations and property dispositions and by raising additional capital from future debt or equity transactions.

Repayments of Outstanding Debt

To the extent that it supports our overall capital strategy, we may purchase or redeem some of our outstanding unsecured notes prior to their stated maturities.

In March 2020, we redeemed $300.0 million of unsecured notes that were scheduled to mature in June 2022.

In June 2020, we repurchased and canceled $216.3 million of unsecured notes that were scheduled to mature in October 2022 pursuant to a tender offer completed by the Partnership.

Contractual Obligations

Aside from repayments of long-term debt and the issuances of senior unsecured notes described above, we have entered into a new ground lease agreement (see Note 2). There have been no other material changes in our outstanding commitments since December 31, 2019, as previously discussed in our 2019 Annual Report.

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Historical Cash Flows
Cash, cash equivalents and restricted cash were $13.4 million and $250.5 million at September 30, 2020 and 2019, respectively. The following table highlights significant changes in net cash associated with our operating, investing and financing activities (in millions): 
 Nine Months Ended September 30,
 20202019
General Partner
Net cash provided by operating activities$438.9 $404.1 
Net cash used for investing activities$(557.5)$(243.8)
Net cash provided by financing activities$10.5 $64.8 
Partnership
Net cash provided by operating activities$438.9 $404.1 
Net cash used for investing activities$(557.5)$(243.8)
Net cash provided by financing activities$10.5 $64.8 

Operating Activities

Cash flows from operating activities provide the cash necessary to meet our operational requirements and the receipt of rental income from Rental Operations continues to be our primary source of operating cash flows. The increase in net cash provided by operating activities was driven by increasing our asset base through development, financed through equity or low cost debt issuances, and increasing occupancy and rental rates within our existing portfolio.

Investing Activities

Highlights of significant cash sources and uses are as follows:
During the nine months ended September 30, 2020, we paid cash of $85.5 million and $96.4 million, respectively, for real estate and undeveloped land acquisitions, compared to $146.6 million and $223.5 million, respectively, for real estate and undeveloped land acquisitions in the same period in 2019.
Real estate development costs were $469.0 million during the nine months ended September 30, 2020, compared to $325.8 million during the same period in 2019.
Sales of land and properties provided $55.7 million in net proceeds during the nine months ended September 30, 2020, compared to $379.8 million during the same period in 2019.
During the nine months ended September 30, 2020, we received repayments of $110.0 million on our notes receivable related to the disposition of our medical office portfolio in 2017, compared to $145.0 million of repayments of notes receivable from property sales during the same period in 2019.
Second generation tenant improvements, leasing costs and building improvements totaled $27.7 million during the nine months ended September 30, 2020 compared to $31.6 million during the same period in 2019.
For the nine months ended September 30, 2020, we made capital contributions of $6.2 million to unconsolidated joint ventures, compared to $6.0 million during the same period in 2019.
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Financing Activities
The following items highlight significant capital transactions:
During the nine months ended September 30, 2020, the General Partner issued 3.0 million common shares pursuant to its ATM equity program for net proceeds of $109.1 million, compared to 6.6 million common shares for net proceeds of $215.6 million during the same period in 2019.
During the nine months ended September 30, 2020, the Partnership issued $325.0 million of senior unsecured notes, which bear interest at a stated interest rate of 3.05%, have an effective interest rate of 3.19% and mature on March 1, 2050, for cash proceeds of $316.4 million. The Partnership also issued $350.0 million of senior unsecured notes, which bear interest at a stated interest rate of 1.75%, have an effective interest rate of 1.85% and mature on July 1, 2030, for cash proceeds of $346.8 million. We issued $175.0 million of senior unsecured notes during the nine months ended September 30, 2019.
During the nine months ended September 30, 2020, the Partnership paid total cash of $547.0 million for the early redemption of $300.0 million of senior unsecured notes that were scheduled to mature in June 2022 and the early repurchase and cancellation of $216.3 million of senior unsecured notes due in October 2022. We did not repurchase or redeem any senior unsecured notes during the nine months ended September 30, 2019.
During the nine months ended September 30, 2020, a consolidated joint venture of the Partnership obtained a secured loan from a third party financial institution for gross proceeds of $18.4 million. We did not obtain any secured loans during the same period in 2019.
During the nine months ended September 30, 2019, the Partnership repaid three secured loans for $41.7 million. We did not repay any secured loans during the nine months ended September 30, 2020.
For nine months ended September 30, 2020, we increased net borrowings on the Partnership's unsecured line of credit by $47.0 million, compared to a $30.0 million decrease in net borrowings for the same period in 2019.
We paid regular cash dividends totaling $260.4 million and $232.3 million during the nine months ended September 30, 2020 and 2019, respectively.
Changes in book cash overdrafts are classified as financing activities within our Consolidated Statements of Cash Flows. Book cash overdrafts were $856,000 at September 30, 2020. There were no book overdrafts at September 30, 2019.
We paid off a special assessment bond for $9.9 million which was reflected within Other Financing Activities on our Consolidated Statements of Cash Flows during nine months ended September 30, 2019. We did not make similar significant repayments during the nine months ended September 30, 2020.

Off Balance Sheet Arrangements - Investments in Unconsolidated Joint Ventures
We analyze our investments in unconsolidated joint ventures to determine if they meet the criteria for classification as a VIE and would require consolidation. We (i) evaluate the sufficiency of the total equity 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 (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 of the VIE and would consolidate it. At the end of each reporting period, we re-assess our conclusions as to which, if any, party within the VIE is considered the primary beneficiary. To the extent that our joint ventures do not qualify as VIEs, we further assess each joint venture partner's substantive participating rights to determine if the venture should be consolidated. There were no unconsolidated joint ventures that met the criteria to be a VIE at September 30, 2020.
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We have equity interests in unconsolidated partnerships and limited liability companies that primarily own and operate rental properties and hold land for development. These unconsolidated joint ventures are primarily engaged in the operation and development of industrial real estate properties. These investments provide us with increased market share and tenant and property diversification. The equity method of accounting is used for these investments in which we have the ability to exercise significant influence, but not control, over operating and financial policies. As a result, the assets and liabilities of these entities are not included on our balance sheet. Our investments in and advances to unconsolidated joint ventures represented approximately 2% of our total assets at September 30, 2020 and December 31, 2019. Total assets of our unconsolidated joint ventures were $431.7 million and $419.1 million at September 30, 2020 and December 31, 2019, respectively. The combined revenues of our unconsolidated joint ventures totaled $42.9 million and $45.8 million for the nine months ended September 30, 2020 and 2019, respectively.
We have guaranteed the repayment of certain secured and unsecured loans of our unconsolidated joint ventures. The outstanding balances on the guaranteed portion of these loans totaled $66.5 million and $160.1 million at September 30, 2020 and 2019, respectively.
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Item 3.    Quantitative and Qualitative Disclosures About Market Risk
We are exposed to interest rate changes primarily as a result of our line of credit and our long-term borrowings. Our interest rate risk management objective is to limit the impact of interest rate changes on earnings and cash flows and to lower overall borrowing costs. To achieve our objectives, we borrow primarily at fixed rates and may enter into derivative financial instruments such as interest rate swaps, from time to time, in order to mitigate our interest rate risk on a related financial instrument. We do not enter into derivative or interest rate transactions for speculative purposes.
Our interest rate risk is monitored using a variety of techniques. The table below presents the principal amounts (in thousands) of the expected annual maturities, weighted average interest rates for the average debt outstanding in the specified period and fair values (in thousands).
Remainder of 20202021202220232024ThereafterFace ValueFair Value
Long-Term Debt:
Fixed rate
secured debt
$1,126 $13,160 $4,346 $4,594 $4,855 $41,097 $69,178 $77,195 
Weighted average
interest rate
5.56 %5.58 %5.54 %5.55 %5.56 %4.33 %4.83 %
Variable rate
secured debt
$— $300 $300 $300 $300 $400 $1,600 $1,600 
Weighted average
interest rate
N/A0.12 %0.12 %0.12 %0.12 %0.12 %0.12 %
Fixed rate
unsecured debt
$— $— $83,740 $250,000 $300,000 $2,425,000 $3,058,740 $3,363,172 
Weighted average
interest rate
N/AN/A3.93 %3.72 %3.90 %3.23 %3.35 %
Variable rate unsecured line of credit$— $— $— $47,000 $— $— $47,000 $47,000 
Rate at September 30, 2020N/AN/AN/A1.04%N/AN/A1.04 %
The Partnership’s unsecured line of credit is reflected in the table above as maturing in January 2023, based on the ability to exercise the two six-month extension options from its stated maturity date of January 2022 (see Note 7). As the above table incorporates only those exposures that existed at September 30, 2020, it does not consider those exposures or positions that could arise after that date. As a result, the ultimate impact of interest rate fluctuations will depend on future exposures that arise, our hedging strategies at that time, to the extent we are party to interest rate derivatives, and interest rates. Interest expense on our unsecured line of credit will be affected by fluctuations in the LIBOR indices or applicable replacement rates as well as changes in our credit rating. The interest rate at such point in the future as we may renew, extend or replace our unsecured line of credit will be heavily dependent upon the state of the credit environment.

Item 4.    Controls and Procedures
Controls and Procedures (General Partner)
(a) Evaluation of Disclosure Controls and Procedures
We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms. These disclosure controls and procedures are further designed to ensure that such information is accumulated and communicated to management, including the Chief Executive Officer and the Chief Financial Officer, to allow timely decisions regarding required disclosure.
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We carried out an evaluation, under the supervision and with the participation of management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures pursuant to Exchange Act Rules 13a-15 and 15d-15. Based upon the foregoing, the Chief Executive Officer and the Chief Financial Officer concluded that, as of the end of the period covered by this Report, our disclosure controls and procedures were effective.
(b) Changes in Internal Control over Financial Reporting
There have been no changes in our internal control over financial reporting during the period covered by this Report that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Controls and Procedures (Partnership)

(a) Evaluation of Disclosure Controls and Procedures
We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms. These disclosure controls and procedures are further designed to ensure that such information is accumulated and communicated to management, including the General Partner's Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure.
We carried out an evaluation, under the supervision and with the participation of management, including the General Partner's Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures pursuant to Exchange Act Rules 13a-15 and 15d-15. Based upon the foregoing, the General Partner's Chief Executive Officer and Chief Financial Officer concluded that, as of the end of the period covered by this Report, our disclosure controls and procedures were effective.
(b) Changes in Internal Control over Financial Reporting
There have been no changes in our internal control over financial reporting during the period covered by this Report that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
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Part II - Other Information
 
Item 1. Legal Proceedings
From time to time, we are parties to a variety of legal proceedings and claims arising in the ordinary course of our businesses. While these matters generally are covered by insurance, there is no assurance that our insurance will cover any particular proceeding or claim. We are not subject to any material pending legal proceedings other than routine litigation arising in the ordinary course of business. We presently believe that all of the proceedings to which we were subject as of September 30, 2020, taken as a whole, will not have a material adverse effect on our liquidity, business, financial condition or results of operations.
Item 1A. Risk Factors
In addition to the information set forth in this Report, you also should carefully review and consider the information contained in our other reports and periodic filings that we make with the SEC, including, without limitation, the information contained under the caption "Item 1A. Risk Factors" in our 2019 Annual Report. The risks and uncertainties described in our 2019 Annual Report are not the only risks that we face. Additional risks and uncertainties not currently known to us, or that we presently deem to be immaterial, also may materially adversely affect our business, financial condition and results of operations. Significant additional risk factors that we face since our 2019 Annual Report are described below:
The full effects of the COVID-19 pandemic are highly uncertain and cannot be predicted.
An outbreak of COVID-19, a respiratory disease caused by a novel corona virus, has spread internationally, including in the United States where we operate. In March 2020, the World Health Organization declared the outbreak to be a pandemic, and the President of the United States declared it a national emergency. Globally, population movement and trade have been restricted to varying degrees. Within the United States, various state and local governmental authorities issued stay-at-home orders, proclamations and/or directives aimed at minimizing the spread of COVID-19 near the time of its onset. Since then, many of these measures have been scaled back using various phased re-opening plans but, due to surges in infections in several major geographic areas, some of these re-opening plans have been halted or have not proceeded according to their original schedules. As the country continues to re-open, different segments of the economy have recovered to varying degrees and it is still not possible to estimate the duration of the pandemic or all of its future effects. The general economy, and the economic conditions for our industry, could stall or reverse previous recoveries until a vaccine or cure is discovered or until other public health measures reduce the prevalence of COVID-19 in the United States.
The economic consequences of the COVID-19 pandemic have affected substantially all of our tenant base in various ways and with varying magnitudes. We have executed rent deferral agreements with certain of our tenants to assist them in maintaining viable operations through the pandemic. The total amount of rental payments deferred pursuant to these arrangements is slightly less than 1.0% of annualized gross rental revenues. The substantial majority of these deferral agreements have repayment terms of one year or less, which results in many of the deferred amounts having revised payment dates in late 2020 and into 2021. Some of the tenants with whom we have entered into deferral arrangements may have received government assistance. We cannot predict the continued viability of the tenants with whom we've executed these agreements. There is a risk that they will default and the amounts deferred, along with future amounts due under the leases, will not ultimately be collectible.
As the result of current uncertain economic conditions, even tenants that are now in sound financial condition may be adversely affected over the longer term if the economic recession caused by the pandemic extends for a long period of time. These possible events could in turn disrupt, or further disrupt, our tenants' businesses and their ability to satisfy rental payments. Such a prolonged recession could also adversely impact our ability to lease vacant space.
As the result of leasing up a portion of our speculative properties under construction, we resumed speculative development activity and started two new speculative projects during the third quarter of 2020. However, our ability to lease up these properties and to pursue more development opportunities will depend on future events,
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including the duration and severity of the pandemic, the potential for additional travel restrictions or shelter in place orders, additional governmental actions that may be taken and numerous other uncertainties which we cannot predict at this time.
A prolonged COVID-19 outbreak could negatively impact our operations and financial condition.
Should the major public health issues caused by the COVID-19 outbreak persist for an extended period of time, we could be adversely affected by actions limiting trade and population movement, the movement of goods through the supply chain, and other impacts to business and consumer demand that may diminish the demand and rents for our properties. To date, only an insignificant portion of our tenant base has declared bankruptcy as the result of the COVID-19 pandemic. In the event of the default or insolvency of a significant number of our tenants, we may experience a substantial loss of rental revenue and/or delays in collecting rent and incur substantial costs in enforcing our rights as landlord. If a tenant files for bankruptcy protection, a court could allow the tenant to reject and terminate its lease with us.
As a result, our financial condition, results of operations and distributable cash flow would be adversely affected if a significant number of our tenants became unable to meet their obligations to us, became insolvent or declared bankruptcy, and if we are unable to promptly renew the leases or relet the space, or if the rental rates upon such renewal or reletting are significantly lower than current rates.
Our stock price could be negatively impacted by COVID-19.
The COVID-19 outbreak has resulted in significant market volatility, including large swings in global stock prices that have adversely affected trade and global and local economies. These conditions may worsen in future periods and negatively impact our share price.
COVID-19 could adversely affect our ability to finance our operations.
The outbreak has also adversely impacted financial institutions which could, in future periods, negatively impact their willingness to extend credit or result in adverse changes to the terms at which credit is extended. The United States Federal Government has taken certain measures to support continued liquidity and availability of capital, but there is no guarantee that these measures will continue to be successful. These potential risks could negatively impact our future ability to access capital, which would negatively impact our liquidity and our ability to execute our strategic plans.
The ability of our employees to work may be adversely impacted by COVID-19.
Our workforce, including key employees, could be adversely impacted by the outbreak in future periods. Currently, some of our employees are working remotely and some are working on-site. The impacts of the outbreak could, among other things, negatively affect (i) the operation of our properties, (ii) the timeliness of our strategic decision making, (iii) the operation of an effective cyber security function, (iv) the operation of our key information systems, (v) our ability to make timely filings with the SEC and (vi) our ability to maintain an effective control environment.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

(a) Unregistered Sales of Equity Securities
None
(b) Use of Proceeds
None
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(c) Issuer Purchases of Equity Securities
From time to time, we repurchase our securities under a repurchase program that initially was approved by the General Partner's board of directors and publicly announced in October 2001 (the "Repurchase Program").
On January 29, 2020, the General Partner's board of directors adopted a resolution that amended and restated the Repurchase Program and delegated authority to management to repurchase a maximum of $300.0 million of the General Partner's common shares, $750.0 million of the Partnership's debt securities and $500.0 million of the General Partner's preferred shares, subject to the prior notification of the Chairman of the finance committee of the board of directors of planned repurchases within these limits. We did not repurchase any equity securities through the Repurchase Program during the three months ended September 30, 2020.

Item 3. Defaults upon Senior Securities

During the period covered by this Report, we did not default under the terms of any of our material indebtedness.

Item 4. Mine Safety Disclosures

Not applicable. 

Item 5. Other Information

During the period covered by this Report, there was no information required to be disclosed by us in a Current Report on Form 8-K that was not so reported, nor were there any material changes to the procedures by which our security holders may recommend nominees to the General Partner's board of directors.

Item 6. Exhibits
(a) Exhibits
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3.1 
3.2 
3.3 
3.4 (i)
3.4 (ii)
3.4 (iii)
3.4 (iv)
3.4 (v)
3.4 (vi)
31.1 
31.2 
31.3 
31.4 
32.1 
32.2 
32.3 
32.4 
101.DefDefinition Linkbase Document
101.PrePresentation Linkbase Document
101.LabLabels Linkbase Document
101.CalCalculation Linkbase Document
101.SchSchema Document
101.InsInstance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document
104Cover Page Interactive Data File (embedded within the Inline XBRL document and contained in Exhibit 101)
*Filed herewith.
**The certifications attached as Exhibits 32.1, 32.2, 32.3 and 32.4 accompany this Quarterly Report on Form 10-Q and are "furnished" to the Securities and Exchange Commission pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and shall not be deemed "filed" by the General Partner or the Partnership, respectively, for purposes of Section 18 of the Securities Exchange Act of 1934, as amended.

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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
 
 DUKE REALTY CORPORATION
/s/ James B. Connor
 James B. Connor
 Chairman and Chief Executive Officer
 /s/ Mark A. Denien
 Mark A. Denien
 Executive Vice President and Chief Financial Officer
 DUKE REALTY LIMITED PARTNERSHIP
By: DUKE REALTY CORPORATION, its general partner
/s/ James B. Connor
 James B. Connor
 Chairman and Chief Executive Officer of the General Partner
 /s/ Mark A. Denien
 Mark A. Denien
 Executive Vice President and Chief Financial Officer of the General Partner
Date:October 29, 2020

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