pld-ex991_1119.htm

The following Consolidated Financial Statements, together with the Management's Report on Internal Control and the Report of Independent Registered Public Accounting Firm are listed below:

We, as management of Duke Realty Corporation and its subsidiaries (the "General Partner"), are responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rule 13a-15(f) under the Securities Exchange Act of 1934, as amended). Pursuant to the rules and regulations of the Securities and Exchange Commission, internal control over financial reporting is a process designed by, or under the supervision of, the company's principal executive and principal financial officers, or persons performing similar functions, and effected by the company's board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States of America and includes those policies and procedures that:

Management has evaluated the effectiveness of its internal control over financial reporting as of December 31, 2021 based on the control criteria established in a report entitled Internal Control – Integrated Framework (2013), issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on such evaluation, we have concluded that, as of December 31, 2021, our internal control over financial reporting is effective based on these criteria.

The independent registered public accounting firm of KPMG LLP, as auditors of the General Partner's consolidated financial statements, has also issued an audit report on the General Partner's internal control over financial reporting.

Opinions on the Consolidated Financial Statements and Internal Control Over Financial Reporting

We have audited the accompanying consolidated balance sheets of Duke Realty Corporation and subsidiaries (the Company) as of December 31, 2021 and 2020, the related consolidated statements of operations and comprehensive income, cash flows, and changes in equity for each of the years in the three-year period ended December 31, 2021, and the related notes and financial statement schedule III - real estate and accumulated depreciation (collectively, the consolidated financial statements). We also have audited the Company's internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2021 and 2020, and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, 2021, in conformity with U.S. generally accepted accounting principles. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.

The Company’s management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management's Report on Internal Control. Our responsibility is to express an opinion on the Company’s consolidated financial statements and an opinion on the Company’s internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.

Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of a critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Assessment of certain values assigned to acquired assets and liabilities in certain asset acquisitions

As discussed in Notes 2 and 5 to the consolidated financial statements, the Company acquired approximately $571 million of real estate assets in 2021. For asset acquisitions, the Company records the purchase price to the tangible and identified intangible assets based on its “as-if vacant” fair value and other valuation techniques.

We identified the assessment of the fair value of land and the below market component of in-place leases in certain asset acquisitions as a critical audit matter. There is a high degree of subjective auditor judgment in determining the fair value of land and market rents used to determine the below market component of in-place leases.

The primary procedures we performed to address this critical audit matter included the following. We tested certain internal controls over the Company’s asset allocation process, including controls to identify and select publicly available comparable land sales and market rents used to estimate the fair value of land and the below market component of in-place leases, respectively. We involved valuation professionals with specialized skills and knowledge, who assisted in comparing:

We, as management of Duke Realty Limited Partnership and its subsidiaries (the "Partnership"), are responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rule 13a-15(f) under the Securities Exchange Act of 1934, as amended). Pursuant to the rules and regulations of the Securities and Exchange Commission, internal control over financial reporting is a process designed by, or under the supervision of the principal executive and principal financial officers, or persons performing similar functions, of Duke Realty Corporation (the "General Partner"), and effected by the General Partner's board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States of America and includes those policies and procedures that:

The independent registered public accounting firm of KPMG LLP, as auditors of the Partnership's consolidated financial statements, has also issued an audit report on the Partnership's internal control over financial reporting.

To the Unitholders of Duke Realty Limited Partnership and the Board of Directors of Duke Realty Corporation:

Opinions on the Consolidated Financial Statements and Internal Control Over Financial Reporting

We have audited the accompanying consolidated balance sheets of Duke Realty Limited Partnership and subsidiaries (the Partnership) as of December 31, 2021 and 2020, the related consolidated statements of operations and comprehensive income, cash flows, and changes in equity for each of the years in the three-year period ended December 31, 2021, and the related notes and financial statement schedule III - real estate and accumulated depreciation (collectively, the consolidated financial statements). We also have audited the Partnership's internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Partnership as of December 31, 2021 and 2020, and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, 2021, in conformity with U.S. generally accepted accounting principles. Also in our opinion, the Partnership maintained, in all material respects, effective internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.

The Partnership’s management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management's Report on Internal Control. Our responsibility is to express an opinion on the Partnership’s consolidated financial statements and an opinion on the Partnership’s internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Partnership in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

Assessment of certain values assigned to acquired assets and liabilities in certain asset acquisitions

As discussed in Notes 2 and 5 to the consolidated financial statements, the Partnership acquired approximately $571 million of real estate assets in 2021. For asset acquisitions, the Partnership records the purchase price to the tangible and identified intangible assets based on its “as-if vacant” fair value and other valuation techniques.

The primary procedures we performed to address this critical audit matter included the following. We tested certain internal controls over the Partnership’s asset allocation process, including controls to identify and select publicly available comparable land sales and market rents used to estimate the fair value of land and the below market component of in-place leases, respectively. We involved valuation professionals with specialized skills and knowledge, who assisted in comparing:


	2021	2020
ASSETS
Real estate investments:
Real estate assets	$9,616,076	$8,745,155
Construction in progress	744,871	695,219
Investments in and advances to unconsolidated joint ventures	168,336	131,898
Undeveloped land	473,317	291,614
	11,002,600	9,863,886
Accumulated depreciation	(1,684,413)	(1,659,308)
Net real estate investments	9,318,187	8,204,578

Real estate investments and other assets held-for-sale	144,651	67,946

Cash and cash equivalents	69,752	6,309
Accounts receivable	13,449	15,204
Straight-line rent receivable	172,225	153,943
Receivables on construction contracts, including retentions	57,258	30,583
Deferred leasing and other costs, net of accumulated amortization of $209,975 and $204,122	337,936	329,765
Restricted cash held in escrow for like-kind exchange	—	47,682
Other escrow deposits and other assets	332,197	255,384
	$10,445,655	$9,111,394
LIABILITIES AND EQUITY
Indebtedness:
Secured debt, net of deferred financing costs of $304 and $343	$59,418	$64,074
Unsecured debt, net of deferred financing costs of $45,136 and $32,763	3,629,864	3,025,977
Unsecured line of credit	—	295,000
	3,689,282	3,385,051

Liabilities related to real estate investments held-for-sale	6,278	7,740

Construction payables and amounts due subcontractors, including retentions	107,009	62,332
Accrued real estate taxes	77,464	76,501
Accrued interest	20,815	18,363
Other liabilities	339,023	269,806
Tenant security deposits and prepaid rents	66,823	57,153
Total liabilities	4,306,694	3,876,946
Shareholders' equity:
Common shares ($0.01 par value); 600,000 shares authorized; 382,513 and 373,258 shares issued and outstanding, respectively	3,825	3,733
Additional paid-in capital	6,143,147	5,723,326
Accumulated other comprehensive loss	(28,011)	(31,568)
Distributions in excess of net income	(75,210)	(532,519)
Total shareholders' equity	6,043,751	5,162,972
Noncontrolling interests	95,210	71,476
Total equity	6,138,961	5,234,448
	$10,445,655	$9,111,394


	2021	2020	2019
Revenues:
Rental and related revenue	$1,025,663	$929,194	$855,833
General contractor and service fee revenue	80,260	64,004	117,926
	1,105,923	993,198	973,759
Expenses:
Rental expenses	85,782	76,639	75,584
Real estate taxes	159,580	149,295	129,520
General contractor and other services expenses	68,118	57,976	111,566
Depreciation and amortization	362,148	353,013	327,223
	675,628	636,923	643,893
Other operating activities:
Equity in earnings of unconsolidated joint ventures	32,804	11,944	31,406
Gain on sale of properties	585,685	127,700	234,653
Gain on land sales	12,917	10,458	7,445
Other operating expenses	(3,607)	(8,209)	(5,318)
Impairment charges	—	(5,626)	—
Non-incremental costs related to successful leases	(13,302)	(12,292)	(12,402)
General and administrative expenses	(69,554)	(62,404)	(60,889)
	544,943	61,571	194,895
Operating income	975,238	417,846	524,761
Other income (expenses):
Interest and other income, net	4,451	1,721	9,941
Interest expense	(84,843)	(93,442)	(89,756)
Loss on debt extinguishment	(17,901)	(32,900)	(6,320)
Gain on involuntary conversion	3,222	4,312	2,259
Income from continuing operations before income taxes	880,167	297,537	440,885
Income tax (expense) benefit	(18,549)	5,112	(8,686)
Income from continuing operations	861,618	302,649	432,199
Discontinued operations:
Gain on sale of properties	—	111	445
Income from discontinued operations	—	111	445
Net income	861,618	302,760	432,644
Net income attributable to noncontrolling interests	(8,723)	(2,845)	(3,672)
Net income attributable to common shareholders	$852,895	$299,915	$428,972
Basic net income per common share:
Continuing operations attributable to common shareholders	$2.25	$0.81	$1.18
Total	$2.25	$0.81	$1.18
Diluted net income per common share:
Continuing operations attributable to common shareholders	$2.25	$0.80	$1.18
Total	$2.25	$0.80	$1.18
Weighted average number of common shares outstanding	377,673	370,057	362,234
Weighted average number of common shares and potential dilutive securities	383,476	374,156	367,339
Comprehensive income:
Net income	$861,618	$302,760	$432,644
Other comprehensive income (loss):
Unrealized losses on interest rate swap contracts	—	—	(30,893)
Amortization of interest rate swap contracts	3,557	3,468	533
Total other comprehensive income (loss)	3,557	3,468	(30,360)
Comprehensive income	$865,175	$306,228	$402,284


	2021	2020	2019
Cash flows from operating activities:
Net income	$861,618	$302,760	$432,644
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation of buildings and tenant improvements	304,935	297,158	272,422
Amortization of deferred leasing and other costs	57,213	55,855	54,801
Amortization of deferred financing costs	9,735	9,155	6,536
Straight-line rental income and expense, net	(32,081)	(25,865)	(21,197)
Impairment charges	—	5,626	—
Loss on debt extinguishment	17,901	32,900	6,320
Gain on involuntary conversion	(3,222)	(4,312)	(2,259)
Gain on land and property sales	(598,602)	(138,269)	(242,543)
Third-party construction contracts, net	(6,269)	(2,511)	9,254
Other accrued revenues and expenses, net	48,194	29,333	8,476
Equity in earnings (in excess of) less than operating distributions received from unconsolidated joint ventures	(16,996)	4,606	(18,556)
Net cash provided by operating activities	642,426	566,436	505,898
Cash flows from investing activities:
Development of real estate investments	(661,416)	(573,544)	(446,801)
Acquisition of buildings and related intangible assets	(447,584)	(383,672)	(210,224)
Acquisition of land and other real estate assets	(700,632)	(248,413)	(388,202)
Second generation tenant improvements, leasing costs and building improvements	(68,445)	(45,037)	(53,137)
Other deferred leasing costs	(42,214)	(41,607)	(32,921)
Other assets	(19,067)	(4,868)	(10,777)
Proceeds from the repayments of notes receivable from property sales	—	110,000	162,550
Proceeds from land and property sales, net	1,067,967	336,255	432,662
Capital distributions from unconsolidated joint ventures	61,616	876	26,272
Capital contributions and advances to unconsolidated joint ventures	(22,640)	(6,211)	(34,496)
Net cash used for investing activities	(832,415)	(856,221)	(555,074)
Cash flows from financing activities:
Proceeds from issuance of common shares, net	406,576	187,856	272,761
Proceeds from unsecured debt	940,749	663,123	582,284
Payments on unsecured debt	(390,900)	(546,972)	(255,812)
Proceeds from secured debt financings	—	18,400	—
Payments on secured indebtedness including principal amortization	(4,413)	(13,457)	(45,515)
(Repayments) borrowings on line of credit, net	(295,000)	295,000	(30,000)
Distributions to common shareholders	(394,487)	(355,287)	(318,702)
Distributions to noncontrolling interests, net	(4,352)	(3,347)	(2,648)
Tax payments on stock-based compensation awards	(5,132)	(4,360)	(6,825)
Change in book cash overdrafts	(12,453)	1,941	138
Cash settlement of interest rate swaps	—	—	(35,569)
Other financing activities	(357)	163	(10,183)
Deferred financing costs	(14,262)	(7,483)	(4,839)
Redemption of Limited Partner Units	(39)	—	—
Net cash provided by financing activities	225,930	235,577	145,090
Net increase (decrease) in cash, cash equivalents and restricted cash	35,941	(54,208)	95,914
Cash, cash equivalents and restricted cash at beginning of year	67,223	121,431	25,517
Cash, cash equivalents and restricted cash at end of year	$103,164	$67,223	$121,431
Non-cash activities:
Lease liabilities arising from right-of-use assets	$19,822	$20,883	$40,467
Assumption of indebtedness and other liabilities in real estate acquisitions	$128,639	$39,966	$—
Non-cash distribution of assets from unconsolidated joint ventures, net	$11,124	$—	$—
Contribution of properties to unconsolidated joint venture	$74,942	$—	$—
Conversion of Limited Partner Units to common shares	$5,099	$—	$1,624
Issuance of Limited Partner Units for acquisition	$11,603	$—	$—


	Common Shareholders
	Common Stock	Additional Paid-in Capital	Accumulated Other Comprehensive Income (Loss)	Distributions in Excess of Net Income	Non- Controlling Interests	Total
Balance at December 31, 2018	$3,589	$5,244,375	$(4,676)	$(585,087)	$55,042	$4,713,243
Net income	—	—	—	428,972	3,672	432,644
Other comprehensive loss	—	—	(30,360)	—	—	(30,360)
Issuance of common shares	83	272,678	—	—	—	272,761
Contributions from noncontrolling interests	—	—	—	—	312	312
Stock-based compensation plan activity	7	6,787	—	(1,175)	7,703	13,322
Conversion of Limited Partner Units	1	1,623	—	—	(1,624)	—
Distributions to common shareholders ($0.88 per share)	—	—	—	(318,702)	—	(318,702)
Distributions to noncontrolling interests	—	—	—	—	(2,960)	(2,960)
Balance at December 31, 2019	$3,680	$5,525,463	$(35,036)	$(475,992)	$62,145	$5,080,260
Net income	—	—	—	299,915	2,845	302,760
Other comprehensive income	—	—	3,468	—	—	3,468
Issuance of common shares	50	187,806	—	—	—	187,856
Contributions from noncontrolling interests	—	—	—	—	200	200
Stock-based compensation plan activity	3	10,057	—	(1,155)	9,833	18,738
Distributions to common shareholders ($0.96 per share)	—	—	—	(355,287)	—	(355,287)
Distributions to noncontrolling interests	—	—	—	—	(3,547)	(3,547)
Balance at December 31, 2020	$3,733	$5,723,326	$(31,568)	$(532,519)	$71,476	$5,234,448
Net income	—	—	—	852,895	8,723	861,618
Other comprehensive income	—	—	3,557	—	—	3,557
Issuance of common shares	82	406,494	—	—	—	406,576
Stock-based compensation plan activity	6	8,274	—	(1,099)	12,895	20,076
Issuance of Limited Partner Units	—	—	—	—	11,564	11,564
Conversion of Limited Partner Units	4	5,095	—	—	(5,099)	—
Redemption of Limited Partner Units	—	(42)	—	—	3	(39)
Distributions to common shareholders ($1.045 per share)	—	—	—	(394,487)	—	(394,487)
Distributions to noncontrolling interests	—	—	—	—	(4,352)	(4,352)
Balance at December 31, 2021	$3,825	$6,143,147	$(28,011)	$(75,210)	$95,210	$6,138,961


	2021	2020
ASSETS
Real estate investments:
Real estate assets	$9,616,076	$8,745,155
Construction in progress	744,871	695,219
Investments in and advances to unconsolidated joint ventures	168,336	131,898
Undeveloped land	473,317	291,614
	11,002,600	9,863,886
Accumulated depreciation	(1,684,413)	(1,659,308)
Net real estate investments	9,318,187	8,204,578

Real estate investments and other assets held-for-sale	144,651	67,946

Cash and cash equivalents	69,752	6,309
Accounts receivable	13,449	15,204
Straight-line rent receivable	172,225	153,943
Receivables on construction contracts, including retentions	57,258	30,583
Deferred leasing and other costs, net of accumulated amortization of $209,975 and $204,122	337,936	329,765
Restricted cash held in escrow for like-kind exchange	—	47,682
Other escrow deposits and other assets	332,197	255,384
	$10,445,655	$9,111,394
LIABILITIES AND EQUITY
Indebtedness:
Secured debt, net of deferred financing costs of $304 and $343	$59,418	$64,074
Unsecured debt, net of deferred financing costs of $45,136 and $32,763	3,629,864	3,025,977
Unsecured line of credit	—	295,000
	3,689,282	3,385,051

Liabilities related to real estate investments held-for-sale	6,278	7,740

Construction payables and amounts due subcontractors, including retentions	107,009	62,332
Accrued real estate taxes	77,464	76,501
Accrued interest	20,815	18,363
Other liabilities	339,023	269,806
Tenant security deposits and prepaid rents	66,823	57,153
Total liabilities	4,306,694	3,876,946
Partners’ equity:
Common equity (382,513 and 373,258 General Partner Units issued and outstanding, respectively)	6,071,762	5,194,540
Limited Partners' common equity (3,663 and 3,326 Limited Partner Units issued and outstanding, respectively)	90,679	66,874
Accumulated other comprehensive loss	(28,011)	(31,568)
Total partners' equity	6,134,430	5,229,846
Noncontrolling interests	4,531	4,602
Total equity	6,138,961	5,234,448
	$10,445,655	$9,111,394


	2021	2020	2019
Revenues:
Rental and related revenue	$1,025,663	$929,194	$855,833
General contractor and service fee revenue	80,260	64,004	117,926
	1,105,923	993,198	973,759
Expenses:
Rental expenses	85,782	76,639	75,584
Real estate taxes	159,580	149,295	129,520
General contractor and other services expenses	68,118	57,976	111,566
Depreciation and amortization	362,148	353,013	327,223
	675,628	636,923	643,893
Other operating activities:
Equity in earnings of unconsolidated joint ventures	32,804	11,944	31,406
Gain on sale of properties	585,685	127,700	234,653
Gain on land sales	12,917	10,458	7,445
Other operating expenses	(3,607)	(8,209)	(5,318)
Impairment charges	—	(5,626)	—
Non-incremental costs related to successful leases	(13,302)	(12,292)	(12,402)
General and administrative expenses	(69,554)	(62,404)	(60,889)
	544,943	61,571	194,895
Operating income	975,238	417,846	524,761
Other income (expenses):
Interest and other income, net	4,451	1,721	9,941
Interest expense	(84,843)	(93,442)	(89,756)
Loss on debt extinguishment	(17,901)	(32,900)	(6,320)
Gain on involuntary conversion	3,222	4,312	2,259
Income from continuing operations before income taxes	880,167	297,537	440,885
Income tax (expense) benefit	(18,549)	5,112	(8,686)
Income from continuing operations	861,618	302,649	432,199
Discontinued operations:
Gain on sale of properties	—	111	445
Income from discontinued operations	—	111	445
Net income	861,618	302,760	432,644
Net (income) loss attributable to noncontrolling interests	(369)	(182)	6
Net income attributable to common unitholders	$861,249	$302,578	$432,650
Basic net income per Common Unit:
Continuing operations attributable to common unitholders	$2.25	$0.81	$1.18
Total	$2.25	$0.81	$1.18
Diluted net income per Common Unit:
Continuing operations attributable to common unitholders	$2.25	$0.80	$1.18
Total	$2.25	$0.80	$1.18
Weighted average number of Common Units outstanding	381,381	373,360	365,352
Weighted average number of Common Units and potential dilutive securities	383,476	374,156	367,339
Comprehensive income:
Net income	$861,618	$302,760	$432,644
Other comprehensive income (loss):
Unrealized losses on interest rate swap contracts	—	—	(30,893)
Amortization of interest rate swap contracts	3,557	3,468	533
Total other comprehensive income (loss)	3,557	3,468	(30,360)
Comprehensive income	$865,175	$306,228	$402,284


	2021	2020	2019
Cash flows from operating activities:
Net income	$861,618	$302,760	$432,644
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation of buildings and tenant improvements	304,935	297,158	272,422
Amortization of deferred leasing and other costs	57,213	55,855	54,801
Amortization of deferred financing costs	9,735	9,155	6,536
Straight-line rental income and expense, net	(32,081)	(25,865)	(21,197)
Impairment charges	—	5,626	—
Loss on debt extinguishment	17,901	32,900	6,320
Gain on involuntary conversion	(3,222)	(4,312)	(2,259)
Gain on land and property sales	(598,602)	(138,269)	(242,543)
Third-party construction contracts, net	(6,269)	(2,511)	9,254
Other accrued revenues and expenses, net	48,194	29,333	8,476
Equity in earnings (in excess of) less than operating distributions received from unconsolidated joint ventures	(16,996)	4,606	(18,556)
Net cash provided by operating activities	642,426	566,436	505,898
Cash flows from investing activities:
Development of real estate investments	(661,416)	(573,544)	(446,801)
Acquisition of buildings and related intangible assets	(447,584)	(383,672)	(210,224)
Acquisition of land and other real estate assets	(700,632)	(248,413)	(388,202)
Second generation tenant improvements, leasing costs and building improvements	(68,445)	(45,037)	(53,137)
Other deferred leasing costs	(42,214)	(41,607)	(32,921)
Other assets	(19,067)	(4,868)	(10,777)
Proceeds from the repayments of notes receivable from property sales	—	110,000	162,550
Proceeds from land and property sales, net	1,067,967	336,255	432,662
Capital distributions from unconsolidated joint ventures	61,616	876	26,272
Capital contributions and advances to unconsolidated joint ventures	(22,640)	(6,211)	(34,496)
Net cash used for investing activities	(832,415)	(856,221)	(555,074)
Cash flows from financing activities:
Contributions from the General Partner	406,576	187,856	272,761
Proceeds from unsecured debt	940,749	663,123	582,284
Payments on unsecured debt	(390,900)	(546,972)	(255,812)
Proceeds from secured debt financings	—	18,400	—
Payments on secured indebtedness including principal amortization	(4,413)	(13,457)	(45,515)
(Repayments) borrowings on line of credit, net	(295,000)	295,000	(30,000)
Distributions to common unitholders	(398,399)	(358,484)	(321,469)
(Distributions to) contributions from noncontrolling interests, net	(440)	(150)	119
Tax payments on stock-based compensation awards	(5,132)	(4,360)	(6,825)
Change in book cash overdrafts	(12,453)	1,941	138
Cash settlement of interest rate swaps	—	—	(35,569)
Other financing activities	(357)	163	(10,183)
Deferred financing costs	(14,262)	(7,483)	(4,839)
Redemption of Limited Partner Units	(39)	—	—
Net cash provided by financing activities	225,930	235,577	145,090
Net increase (decrease) in cash, cash equivalents and restricted cash	35,941	(54,208)	95,914
Cash, cash equivalents and restricted cash at beginning of year	67,223	121,431	25,517
Cash, cash equivalents and restricted cash at end of year	$103,164	$67,223	$121,431
Non-cash activities:
Lease liabilities arising from right-of-use assets	$19,822	$20,883	$40,467
Assumption of indebtedness and other liabilities in real estate acquisitions	$128,639	$39,966	$—
Non-cash distribution of assets from unconsolidated joint ventures, net	$11,124	$—	$—
Contribution of properties to unconsolidated joint venture	$74,942	$—	$—
Conversion of Limited Partner Units to common shares of the General Partner	$5,099	$—	$1,624
Issuance of Limited Partner Units for acquisition	$11,603	$—	$—


	Common Unitholders
	General	Limited	Accumulated
	Partner	Partners'	Other	Total
	Common	Common	Comprehensive	Partners'	Noncontrolling	Total
	Equity	Equity	Income (Loss)	Equity	Interests	Equity
Balance at December 31, 2018	$4,662,877	$50,585	$(4,676)	$4,708,786	$4,457	$4,713,243
Net income	428,972	3,678	—	432,650	(6)	432,644
Other comprehensive loss	—	—	(30,360)	(30,360)	—	(30,360)
Capital contribution from the General Partner	272,761	—	—	272,761	—	272,761
Stock-based compensation plan activity	5,619	7,703	—	13,322	—	13,322
Contributions from noncontrolling interests	—	—	—	—	312	312
Conversion of Limited Partner Units	1,624	(1,624)	—	—	—	—
Distributions to Partners ($0.88 per Common Unit)	(318,702)	(2,767)	—	(321,469)	—	(321,469)
Distributions to noncontrolling interests	—	—	—	—	(193)	(193)
Balance at December 31, 2019	$5,053,151	$57,575	$(35,036)	$5,075,690	$4,570	$5,080,260
Net income	299,915	2,663	—	302,578	182	302,760
Other comprehensive income	—	—	3,468	3,468	—	3,468
Capital contribution from the General Partner	187,856	—	—	187,856	—	187,856
Stock-based compensation plan activity	8,905	9,833	—	18,738	—	18,738
Contributions from noncontrolling interests	—	—	—	—	200	200
Distributions to Partners ($0.96 per Common Unit)	(355,287)	(3,197)	—	(358,484)	—	(358,484)
Distributions to noncontrolling interests	—	—	—	—	(350)	(350)
Balance at December 31, 2020	$5,194,540	$66,874	$(31,568)	$5,229,846	$4,602	$5,234,448
Net income	852,895	8,354	—	861,249	369	861,618
Other comprehensive income	—	—	3,557	3,557	—	3,557
Capital contribution from the General Partner	406,576	—	—	406,576	—	406,576
Stock-based compensation plan activity	7,181	12,895	—	20,076	—	20,076
Issuance of Limited Partner Units	—	11,564	—	11,564	—	11,564
Conversion of Limited Partner Units	5,099	(5,099)	—	—	—	—
Redemption of Limited Partner Units	(42)	3	—	(39)	—	(39)
Distributions to Partners ($1.045 per Common Unit)	(394,487)	(3,912)	—	(398,399)	—	(398,399)
Distributions to noncontrolling interests	—	—	—	—	(440)	(440)
Balance at December 31, 2021	$6,071,762	$90,679	$(28,011)	$6,134,430	$4,531	$6,138,961

The General Partner was formed in 1985, and we believe that it qualifies as a REIT under the provisions of 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 December 31, 2021. 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 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 December 31, 2021, we owned and operated a portfolio primarily consisting of industrial properties and provided real estate services to third-party owners, customers and joint ventures.

Substantially all of our Rental Operations (see Note 9) are conducted through the Partnership. We conduct our Service Operations (see Note 9) 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. The equity interests in these controlled subsidiaries not owned by us are reflected as noncontrolling interests in the consolidated financial statements. All significant intercompany balances and transactions have been eliminated in the consolidated financial statements. Investments in entities that we do not control, and variable interest entities ("VIEs") in which we are not the primary beneficiary (to the extent applicable), are not consolidated and are reflected as investments in unconsolidated joint ventures under the equity method of reporting.

Due to the fact that the Limited Partners do not have kick out rights, or substantive participating rights, the Partnership is a 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 of the Partnership 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.

Certain amounts in the accompanying consolidated financial statements have been reclassified to conform to the 2021 consolidated financial statement presentation.

Rental real property, including land, land improvements, buildings and tenant improvements, are included in real estate investments and are generally stated at cost. Construction in process and undeveloped land are included in real estate investments and are stated at cost. Real estate investments also include our equity interests in unconsolidated joint ventures that own and operate rental properties and hold land for development.

Buildings and land improvements are depreciated on the straight-line method over their estimated lives not to exceed 40 and 15 years, respectively, for properties that we develop, and not to exceed 30 and 10 years, respectively, for acquired properties. Tenant improvement costs are depreciated using the straight-line method over the shorter of the useful life of the asset or term of the related lease.

Direct and certain indirect costs, including interest, clearly associated with the development, construction or expansion of real estate investments are capitalized as a cost of the property. Direct costs include all leasing commissions paid to third parties for new leases or lease renewals. We capitalize a portion of our indirect costs associated with our construction and development efforts. Costs that are incremental to executing a lease are capitalized. In assessing the amount of direct and indirect costs to be capitalized, allocations are made based on estimates of the actual amount of time spent in each activity. We do not capitalize any costs attributable to downtime or to unsuccessful projects.

We capitalize interest and direct and indirect project costs during the period when we commence activities necessary to get the property ready for its intended use, including land entitlement and preconstruction activities, up to the time the property is substantially complete and ready for its intended use. In addition, we capitalize costs, including real estate taxes, insurance and utilities, that have been allocated to vacant space based on the square footage of the portion of the building not held available for immediate occupancy during the extended lease-up periods after construction of the building shell has been completed if costs are being incurred to ready the vacant space for its intended use. If costs and activities incurred to ready the vacant space cease, then cost capitalization is also discontinued until such activities are resumed. Once necessary work has been completed on a vacant space, project costs are no longer capitalized.

We cease capitalization of all project costs on extended lease-up periods when significant activities have ceased, which does not exceed the shorter of a one-year period after the completion of the building shell or when the property attains 90% occupancy.

We evaluate our real estate assets, with the exception of those that are classified as held-for-sale, for impairment whenever events or changes in circumstances indicate that their carrying amounts may not be recoverable. If such an evaluation is considered necessary, we compare the carrying amount of that real estate asset, or asset group, with the expected undiscounted cash flows that are directly associated with, and that are expected to arise as a direct result of, the use and eventual disposition of that asset, or asset group. Our estimate of the expected future cash flows used in testing for impairment is based on, among other things, our estimates regarding future market conditions, rental rates, occupancy levels, costs of tenant improvements, leasing commissions and other tenant concessions, assumptions regarding the residual value of our properties at the end of our anticipated holding period and the length of our anticipated holding period and is, therefore, subjective by nature. These assumptions could differ materially from actual results. If our strategy changes or if market conditions otherwise dictate a reduction in the holding period and an earlier sale date, an impairment loss could be recognized and such loss could be material. To the extent the carrying amount of a real estate asset, or asset group, exceeds the associated estimate of undiscounted cash flows, an impairment loss is recorded to reduce the carrying value of the asset to its fair value.

The determination of the fair value of real estate assets is also highly subjective, especially in markets where there is a lack of recent comparable transactions. We primarily utilize the income approach to estimate the fair value of our income producing real estate assets. We utilize marketplace participant assumptions to estimate the fair value of a real estate asset when an impairment charge is required to be measured. The estimation of future cash flows, as well as the selection of the discount rate and exit capitalization rate used in applying the income approach, are highly subjective measures in estimating fair value.

Real estate assets classified as held-for-sale are reported at the lower of their carrying value or their fair value, less estimated costs to sell. Once a property is designated as held-for-sale, no further depreciation expense is recorded.

Our acquisitions of properties have been accounted for as asset acquisitions as they have not met the definition of a business. Transaction costs related to asset acquisitions are capitalized. To the extent that we gain control of real estate properties that are accounted for as asset acquisitions, as opposed to business combinations, we accumulate the costs of any pre-existing equity interests and consideration paid for additional interest acquired and we do not remeasure our pre-existing equity interest. Generally contingencies arising from an asset acquisition are only recognized when probable.

We allocate the purchase price of asset acquisitions to tangible and identified intangible assets based on their relative fair values, using all pertinent information available at the date of acquisition. Capitalized acquisition costs are also included in the total cost basis of acquired properties that are asset acquisitions. The allocation to tangible assets (buildings, tenant improvements and land) is based upon management's determination of the value of the property as if it were vacant. This “as-if vacant” value is estimated using an income, or discounted cash flow, approach that relies upon internally determined assumptions that we believe are consistent with current market conditions for similar properties. The most important assumptions in determining the allocation of the purchase price to tangible assets are the exit capitalization rate, estimated market rents and the fair value of the underlying land. The purchase price of real estate assets is also allocated to intangible assets consisting of the above or below market component of in-place leases and the value of in-place leases.

The value allocable to the above or below market component of an acquired in-place lease is determined based upon the present value (using a discount rate which reflects the risks associated with the acquired leases) of the difference between (i) the contractual amounts to be received pursuant to the lease over its remaining term and (ii) management's estimate of the amounts that would be received using fair market rates over the remaining term of the lease. The amounts allocated to above market leases are included in deferred leasing and other costs in the

balance sheet and below market leases are included in other liabilities in the balance sheet; both are amortized to rental income over the remaining terms of the respective leases.

Factors considered in determining the value allocable to in-place leases include estimates, during hypothetical expected lease-up periods, of space that is actually leased at the time of acquisition, of lost rent at market rates, fixed operating costs that will be recovered from tenants and theoretical leasing commissions required to execute similar leases. These intangible assets are included in deferred leasing and other costs in the balance sheet and are amortized over the remaining term of the existing lease.

We have equity interests in unconsolidated joint ventures that are primarily engaged in the operation and development of industrial real estate properties.

We consolidate 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, guaranteed returns, protection against losses, or capping of residual returns within the group and (iii) establish whether 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) have the power to direct the activities that most significantly impact the economic performance of the VIE and (ii) have the obligation or rights to absorb losses or receive benefits that could potentially be significant to the VIE, then we would be determined to be the primary beneficiary and would consolidate the VIE. To the extent that 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 VIE's were 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 our 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.

We use the equity method of accounting for those joint ventures where we exercise significant influence but do not have control. Under the equity method of accounting, our investment in each joint venture is included on our balance sheet; however, the assets and liabilities of the joint ventures for which we use the equity method are not included on our balance sheet.

When we sell or contribute properties to unconsolidated joint ventures and retain a non-controlling ownership interest in such assets, we recognize the difference between the consideration received and the carrying amount of the asset sold or contributed when its derecognition criteria are met. The equity method investment we retain in such partial sale transactions is noncash consideration and is measured at fair value. As a result, the accounting for a partial sale results in the recognition of a full gain or loss.

When circumstances indicate there may have been a reduction in the value of an equity investment, we evaluate whether the loss in value is other than temporary. If we conclude it is other than temporary, we recognize an impairment charge to reflect the equity investment at fair value.

In July 2021, we entered into a 20%-owned unconsolidated joint venture with CBRE Global Investors ("CBREGI") with plans to contribute three tranches of properties. We contributed two separate tranches of properties to the joint venture during 2021 (see Note 5) while the third tranche was closed in January 2022 (see Note 14). The joint venture financed the acquisition of these properties with a combination of third party first mortgage loans and equity contributions from our partner in this joint venture.

There were no unconsolidated joint ventures, in which we have any recognized assets or liabilities or have retained any economic exposure to loss at December 31, 2021 that met the criteria to be considered VIEs. At December 31, 2021, we guaranteed the repayment of a loan associated with one of our unconsolidated joint ventures. The maximum guarantee exposure for the loan was approximately $4.8 million.

Investments with an original maturity of three months or less are classified as cash equivalents.

Our determination of the adequacy of our allowances for tenant receivables includes a binary assessment of whether or not the amounts due under a tenant’s lease agreement are probable of collection. For such amounts that are deemed probable of collection, revenue continues to be recorded on a straight-line basis over the lease term. For such amounts that are deemed not probable of collection, revenue is recorded as the lesser of (i) the amount which would be recognized on a straight-line basis or (ii) cash that has been received from the tenant, with any tenant and deferred rent receivable balances charged as a direct write-off against rental income in the period of the change in the collectability determination.

Costs incurred in connection with obtaining financing are deferred and are amortized to interest expense over the term of the related loan. The costs for issuing debt, other than lines of credit, are presented on the consolidated balance sheets as a direct deduction from the debt's carrying value, while debt issuance costs related to the Partnership's unsecured line of credit are presented as assets on the consolidated balance sheets, as part of other escrow deposits and other assets.

Acquired lease-related intangible assets consist of above market lease assets and the value allocable to in-place leases. Above market lease assets are amortized as a reduction to rental income over the remaining terms of the respective leases. In-place lease intangible assets are amortized on a straight-line basis and included within depreciation and amortization in the consolidated statements of operations and comprehensive income.

Deferred leasing costs and acquired lease-related intangible assets at December 31, 2021 and 2020, excluding amounts classified as held-for-sale, were as follows (in thousands):

Amounts recorded related to amortization expense for in-place leases for the years ended December 31, 2021, 2020 and 2019 totaled $20.4 million, $19.5 million and $22.0 million, respectively. Charges to rental income related to the amortization of above market lease assets for the years ended December 31, 2021, 2020 and 2019 totaled $367,000, $639,000 and $703,000, respectively.

The expected future amortization, or charge to rental income, of acquired lease-related intangible assets is summarized in the table below (in thousands):

Noncontrolling interests relate to the minority ownership interests in the Partnership and interests in consolidated property partnerships that are not wholly owned by the General Partner or the Partnership. Noncontrolling interests are subsequently adjusted for additional contributions, distributions to noncontrolling holders and the noncontrolling holders' proportionate share of the net earnings or losses of each respective entity. We report noncontrolling interests as a component of total equity.

When a Common Unit of the Partnership is redeemed (Note 1), the change in ownership is treated as an equity transaction by the General Partner and there is no effect on its earnings or net assets.

Rental income from leases to customers is recognized on a straight-line basis. If a lease provides for tenant improvements, we determine whether we or the tenant is the owner of the tenant improvements. When we are the owner of the tenant improvements, any tenant improvements funded by the tenant are treated as lease payments which are deferred and amortized as revenue over the lease term. When the tenant is the owner of the tenant improvements, and we fund such improvements, we record such tenant improvement allowances as lease incentives and amortize as a reduction of revenue over the lease term.

We record lease termination fees when a tenant has executed a definitive termination agreement with us and the payment of the termination fee is not subject to any material conditions that must be met or waived before the fee is due to us.

General contractor and service fee revenues are comprised primarily of construction and development related revenues earned from third parties while acting in capacity of a developer, as a general contractor or a construction manager. We evaluate the goods and services provided in these construction arrangements to determine whether we are acting as principal or agent and, accordingly, recognize revenue on a gross or net basis based on that evaluation. There are other ancillary streams of revenue included in general contractor and service fee revenues (see Note 9), such as management fees earned from unconsolidated joint ventures in accordance with the terms specific to each arrangement, which are not significant.

Our construction arrangements are typically structured with only one performance obligation, which generally represents an obligation either to construct a new building or to construct fixtures in an existing building, and these single performance obligations are satisfied over time as construction progresses. We recognize revenue as we satisfy such performance obligations using the percentage of completion method, which is an input method. Using this method, profits are recorded based on our estimates of the percentage of completion of individual contracts, commencing when the work performed under the contracts reaches a point where the final costs can be estimated with reasonable accuracy. The percentage of completion estimates are based on a comparison of the contract expenditures incurred to the estimated final costs. We believe the percentage of completion method is a faithful depiction of the transfer of goods and services as changes in job performance and estimated profitability, which result in revisions to costs and income and are recognized in the period in which the revisions are determined, have not historically been significant. We typically receive regular progress payments on the majority of our construction arrangements and such arrangements generally have an original duration of less than one year. As the result of the relatively short duration of our construction arrangements, we apply the optional disclosure exemptions, related to our remaining performance obligations for our in-process construction projects, for which any future variable consideration is not material. Changes in job performance, job conditions and estimated profitability may result in revisions to costs and income and are recognized in the period in which the revisions are determined. To the extent that a fixed-price contract is estimated to result in a loss, the loss is recorded immediately.

Opening and closing balances of construction receivables are presented separately on the Consolidated Balance Sheets. Under billed and over billed receivables on construction contracts totaled $45.8 million and $1.9 million, respectively, at December 31, 2021 and $16.6 million and $105,000, respectively, at December 31, 2020. Over billed receivables are included in other liabilities in the Consolidated Balance Sheets. We generally do not have any contract assets associated with our construction arrangements.

Management fees are based on a percentage of rental receipts of properties managed and are recognized as the rental receipts are collected. Maintenance fees are based upon established hourly rates and are recognized as the services are performed.

Only disposals representing a strategic shift in operations (for example, a disposal of a major geographic area or a major line of business) should be presented as discontinued operations in accordance with ASC 205-20, without consideration of significant continuing involvement.

We recognize gains on sales of properties, including partial sales, of non-financial assets (and in-substance non-financial assets) when the recognition criteria are met. In the typical course of our business, sales of non-financial assets represent only one performance obligation and are recognized when an enforceable contract is in place, collectability is ensured and control is transferred to the buyer.

As a lessor, our primary business is the development, acquisition, and operation of industrial real estate properties that are held for investment and leased to tenants. We manage residual risk through investing in properties that we believe will appreciate in value over time. We also evaluate the collectability of the cash flows of our leases prior to their execution, and on an ongoing basis, to ensure collectability is probable prior to recognizing lease revenues on an accrual basis.

We only capitalize the incremental costs of signing a lease. Non-incremental costs attributable to successful leases, as presented in the Consolidated Statements of Operations, represent internal costs allocable to successful leasing activities and exclude estimated costs related to downtime and/or unsuccessful deals. These costs primarily consist of compensation and other benefits for internal leasing and legal personnel. These costs are not capitalizable "incremental costs" in the context of the applicable lease accounting rules, but we believe separate presentation on the Consolidated Statements of Operations provides useful information for purposes of comparability with economically similar success-based costs incurred by other organizations that outsource their leasing functions, which are generally capitalizable.

We exclude certain lessor costs, such as real estate taxes and insurance, that are paid directly by lessees to third parties, from rental revenue and the associated rental expense. Lessor costs that are paid by the lessor and reimbursed by the lessee continue to be recorded through rental revenue and the associated rental expense.

The applicable lease accounting rules allow a practical expedient for lessors to not separate rental recovery revenue related to lease-related services from the associated rental revenue related to the lease when certain criteria are met. The lease-related services provided to our tenants include property management, common area maintenance ("CAM") and utilities. We assessed the applicable criteria, concluding that the timing and straight-line pattern of transfer to the lessees for rental recovery revenue from our lease-related services and revenue from the underlying leases are the same and that lease classification does not change, and we have consistently applied this practical expedient in all periods presented.

As a lessee, we apply a dual approach, classifying leases as either finance or operating leases based on the principle of whether or not the lease is effectively a financed purchase of the leased asset. This classification determines whether the lease expense is recognized based on an effective interest method or on a straight-line basis over the term of the lease. In the capacity of a lessee, we record a right-of-use ("ROU") asset and a lease liability for all leases with a term of greater than 12 months regardless of classification.

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.

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):


	2021	2020	2019
General Partner
Net income attributable to common shareholders	$852,895	$299,915	$428,972
Less: Dividends on participating securities	(1,356)	(1,447)	(1,487)
Basic net income attributable to common shareholders	851,539	298,468	427,485
Add back dividends on dilutive participating securities	1,356	—	1,487
Noncontrolling interest in earnings of common unitholders	8,354	2,663	3,678
Diluted net income attributable to common shareholders	$861,249	$301,131	$432,650
Weighted average number of common shares outstanding	377,673	370,057	362,234
Weighted average Limited Partner Units outstanding	3,708	3,303	3,118
Other potential dilutive shares	2,095	796	1,987
Weighted average number of common shares and potential dilutive securities	383,476	374,156	367,339

Partnership
Net income attributable to common unitholders	$861,249	$302,578	$432,650
Less: Distributions on participating securities	(1,356)	(1,447)	(1,487)
Basic net income attributable to common unitholders	$859,893	$301,131	$431,163
Add back distributions on dilutive participating securities	1,356	—	1,487
Diluted net income attributable to common unitholders	$861,249	$301,131	$432,650
Weighted average number of Common Units outstanding	381,381	373,360	365,352
Other potential dilutive units	2,095	796	1,987
Weighted average number of Common Units and potential dilutive securities	383,476	374,156	367,339

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):

The General Partner has elected to be taxed as a REIT under the Code, as amended. To qualify as a REIT, the General Partner must meet a number of organizational and operational requirements, including a requirement to distribute at least 90% of its REIT taxable income to its shareholders. Management intends to continue to adhere to these requirements and to maintain the General Partner's REIT status. As a REIT, the General Partner is entitled to a tax deduction for the dividends it pays to shareholders. Accordingly, the General Partner generally will not be subject to federal income taxes as long as it currently distributes to shareholders an amount equal to or in excess of its taxable income. The General Partner is, however, generally subject to federal income taxes on any taxable income that is not currently distributed to its shareholders. If the General Partner fails to qualify as a REIT in any taxable year, it will be subject to federal income taxes and may not be able to qualify as a REIT for four subsequent taxable years.

REIT qualification reduces, but does not eliminate, the amount of state and local taxes we pay. In addition, our financial statements include the operations of taxable corporate subsidiaries that are not entitled to a dividends paid deduction and are subject to federal, state and local income taxes. As a REIT, the General Partner may also be subject to certain federal excise taxes if it engages in certain types of transactions.

The following table reconciles the General Partner's net income to taxable income before the dividends paid deduction, and subject to the 90% distribution requirement, for the years ended December 31, 2021, 2020 and 2019 (in thousands):


	Duke Realty Corporation:
	Management's Report on Internal Control
	Report of Independent Registered Public Accounting Firm
	Duke Realty Limited Partnership:
	Management's Report on Internal Control
	Report of Independent Registered Public Accounting Firm
	Duke Realty Corporation:
	Consolidated Balance Sheets, December 31, 2021 and 2020
	Consolidated Statements of Operations and Comprehensive Income, Years Ended December 31, 2021, 2020 and 2019
	Consolidated Statements of Cash Flows, Years Ended December 31, 2021, 2020 and 2019
	Consolidated Statements of Changes in Equity, Years Ended December 31, 2021, 2020 and 2019
	Duke Realty Limited Partnership:
	Consolidated Balance Sheets, December 31, 2021 and 2020
	Consolidated Statements of Operations and Comprehensive Income, Years Ended December 31, 2021, 2020 and 2019
	Consolidated Statements of Cash Flows, Years Ended December 31, 2021, 2020 and 2019
	Consolidated Statements of Changes in Equity, Years Ended December 31, 2021, 2020 and 2019
	Duke Realty Corporation and Duke Realty Limited Partnership:
	Notes to Consolidated Financial Statements


	2021	2020
Deferred leasing costs	$376,597	$359,646
Acquired lease-related intangible assets	171,314	174,241
	$547,911	$533,887

Accumulated amortization - deferred leasing costs	$(122,789)	$(120,756)
Accumulated amortization - acquired lease-related intangible assets	(87,186)	(83,366)
Total	$337,936	$329,765


Year	Amortization Expense	Charge to Rental Income
2022	$18,168	$352
2023	15,271	353
2024	11,986	59
2025	9,789	—
2026	7,574	—
Thereafter	20,576	—
	$83,364	$764


	2021	2020	2019
Net income	$861,618	$302,760	$432,644
Book/tax differences	(467,205)	63,838	(120,421)
Taxable income before the dividends paid deduction	394,413	366,598	312,223