OPPORTUNITIES IN HEALTH CARE REAL ESTATE

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OPPORTUNITIES IN HEALTH CARE REAL ESTATEMARCH 26, 2013

Keith KonkoliSenior Vice President – HealthcareDuke Realty

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2013 Duke Realty Corporation

Duke Realty Overview

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Publicly traded REIT

• NYSE: DRE

Total assets: $7.6 billion

Listed on S&P MidCap 400 Index

Solid balance sheet

Investment-grade debt ratings:Moody’s and Standard & Poor’s

$850 million line of credit

Large industrial, healthcare and office REIT with strong balance sheet

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Duke Realty’s Healthcare Division

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22+ years experience in healthcareplanning, development, ownership,leasing and management

Formerly BremnerDuke:

• Joint-venture 2004

• Acquired 2007

• Fully integrated

$2.6 billion developed; more than 11million SF of MOB, ASC, ACC space

Physician relations: 6.3 million SFmanaged

Development culture

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Keith KonkoliSenior Vice President – Healthcare

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Joined DukeRealty

Columbus, OH

1997

RegionalAsset Mgr

Indpls, IN

2004

VP, PropertyMgmt

Atlanta, GA

2000

VP, Real EstateOperations

Indpls, IN

2005

Transition toHealthcare

Indpls, IN

2007

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Why Healthcare?

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Our nation’s largest industry

Represents more than 17% of GDP, predicted toexceed 23% by 2020

“Silver Tsunami” – 78 million aging babyboomers

Americans spend more than 5% of pre-taxincome on healthcare; Lower income bracketspay 15% or more

Affordable Care Act - Number of insured to grow30 to 50 million and number of physicians willincrease = more space demand

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2012 Duke Realty Corporation 6

Properties

Investment $

Square Feet

Occupancy

Medical Office PortfolioPre-Acquisition vs. Today

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$128,700,000

668,200

84%

79

$1,431,000,000

6,300,000

93%

2007 2013

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How Did We Grow? Developments

2007 843,186 SF

2008 717,308 SF

2009 793,982 SF

2010 321,935 SF

2011 608,179 SF

2012 297,781 SF

2013projected

704,000 SF

Middle Tennessee Medical Center MOB120,000 SFMurfreesboro, TN

St. Vincent Medical Center NE120,000 SFFishers, IN

St. Joseph Regional Medical Ctr205,591 SFMishawaka, IN

Good Samaritan Med Ctr – Western Ridge45,000 SFCincinnati, OH

Baylor Cancer Center459,717 SFDallas, TX

WakeMed Raleigh Medical Park87,379 SFRaleigh, NC

Eskenazi Health FOB273,479 SFIndianapolis, IN

Total Annual SF Completed

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How Did We Grow? Acquisitions

Project(s) – Year Acquired Location SF

Harbin Clinic (7 assets) -2012

Rome, GA 334,000

Seavest portfolio (14assets) - 2012

NM, WI, VA, FL, LA,TX

1.2 M

Burr Ridge Medical Center -2012

Burr Ridge, IL 104,329

CHRISTUS Santa RosaHospital & MOB - 2011

San Antonio, TX 110,739

Cedar Park MOB - 2011 Austin, TX 83,393

Hammond Clinic (4 assets) -2011

Munster & St. John,IN

194,735

St. Vincent Max SimonPrimary Care - 2011

Indianapolis, IN 84,436

CHRISTUS St. CatherinePlaza I, II, III - 2011

Katy, TX 169,160

Morehead Medical Plaza I -2011

Charlotte, NC 190,773

Harbin Cancer CenterRome, GA

Celebration Health PlazaOrlando, FL

Burr Ridge Medical CenterBurr Ridge, IL

CHRISTUS Santa Rosa MOBSanta Antonio, TX

Cedar Park MOBAustin, TX

Hammond ClinicMunster, IN

St. Vincent Max SimonIndianapolis, IN

CHRISTUS St. CatherinePlaza IIIKaty, TX

Morehead Medical Plaza ICharlotte, NC

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It’s All About Relationships

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What are our customersfocused on today?What are our customersfocused on today?

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Growing Margin

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Can Hospitals Grow Their Way Back to Prosperity?

Source: Advisory Board research and analysis

Median Operating MarginsNot-for-Profit Hospitals 2005-2011

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Migrating from Volume-Based toValue-Based Payment Models

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Variety of methods being tested – stay tuned…


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Managing the Continuum of Care

13Source: Advisory Board research and analysis

Volume-based to Value-based

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More Patients – Bigger Footprint

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Partnering for principled growth


Provider Opportunities for Future Success in a Transitioning Industry

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Managing Capital – Dealing with Limited Resources

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Capital allocation reflecting new market mandates


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How Are These Priorities AffectingHealthcare Real Estate?

How Are These Priorities AffectingHealthcare Real Estate?

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CHANGE

Higher acuity uses moving toMedical Office Buildings

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Healthcare Trends

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EFFECT

More sophisticated design requireshigher level of understanding ofoperations and more capital

Opportunity: Systems need our real estate expertise

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CHANGE

Freestanding ED’s being used in newways

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Healthcare Trends

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EFFECT

Not necessarily a precursor to newhospital

Increase of patients in the system

Deliver primary care

Opportunity: Increased volume will drive demand for real estate

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CHANGE

Partnering will increaseHospitals – Health Systems - Physicians

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Healthcare Trends

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EFFECT

Consolidation

New relationships

More patients

Cost control

Opportunity: Excess real estate – New market positions

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CHANGE

Hospital monetizations continue to grow

Hospitals need capital – real estate isnon-core; Spending 34% of capital onreal estate

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Healthcare Trends

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EFFECT

Sale lease-back

Developer-owner

Opportunity: Established relationships provide better opportunities

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CHANGE

Repurposing will continue to grow

Hospitals/systems delivering care closeto patients’ homes

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Healthcare Trends

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EFFECT

Former big box, retail, theaters willsee life as multi-specialty clinics andprimary care access points

Micro-clinics popping up everywhere

• Kaiser: 300 in next 3 yrs

Opportunity: Creative real estate solutions abound

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CHANGE

Compliance driving decisions

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Healthcare Trends

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EFFECT

Self-reporting aspects of the healthcarereform act causing systems to questionreal estate ownership

Real estate opportunities

Downstream risk

Opportunity: Help clients manage risk

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Summary

Healthcare ischanging OPPORTUNITIES

Growing demand forhealthcare real estate

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OPPORTUNITIES IN HEALTH CARE REAL ESTATE