Third Quarter 2023 Results
- Net Income Attributable to Common Stockholders of
$1.07 Per Diluted Share for Third
Quarter 2023 Compared to $0.87 Per
Diluted Share for Third Quarter 2022
- Funds from Operations ("FFO") of $2.00 Per Share for Third Quarter 2023 Compared
to $1.77 Per Share for Third Quarter
2022, an Increase of 13.0%
- FFO Excluding Gain on Involuntary Conversion and Business
Interruption Claims ($0.05 Per Share
in Third Quarter 2023) of $1.95 Per
Share Compared to $1.77 Per Share for
the Same Quarter Last Year, an Increase of 10.2%
- Same Property Net Operating Income for the Same Property
Pool Excluding Income From Lease Terminations Increased 6.0% on a
Straight-Line Basis and 6.9% on a Cash Basis for Third Quarter 2023
Compared to the Same Period in 2022
- Operating Portfolio was 98.5% Leased and 97.7% Occupied as
of September 30, 2023; Average
Occupancy of Operating Portfolio was 97.7% for Third Quarter 2023
as Compared to 98.3% for Third Quarter 2022
- Rental Rates on New and Renewal Leases Increased an Average
of 55.4% on a Straight-Line Basis
- Acquired an Operating Property Containing 254,000 Square
Feet for Approximately $53
Million
- Acquired 93.4 Acres of Development Land for Approximately
$27 Million
- Started Construction of Three Development Projects
Containing 793,000 Square Feet with Projected Total Costs of
Approximately $132 Million
- Transferred Six Development and Value-Add Projects Totaling
1,134,000 Square Feet to the Operating Portfolio, which are
Collectively 93% Leased
- Development and Value-Add Program Consisted of 18 Projects
in 12 Markets (3.9 Million Square Feet) at September 30, 2023 with a Projected Total
Investment of Approximately $548
Million
- Declared 175th Consecutive Quarterly Cash
Dividend: $1.27 Per Share. Projected
Total Dividends Per Share for 2023 are Expected to Increase 7.2% as
Compared to 2022
- Repaid $50 Million of
Unsecured Debt at Maturity with a Fixed Interest Rate of
3.8%
- Repaid a Mortgage with a Principal Balance of Approximately
$2 Million and a Fixed Interest Rate
of 3.9%, Leaving No Remaining Secured Debt in the
Portfolio
- Refinanced a $100 Million
Senior Unsecured Term Loan with Five Years Remaining, Reducing the
Effective Fixed Interest Rate by 45 Basis Points to 2.61%
- Sold 931,418 Shares of Common Stock Pursuant to the
Company's Continuous Common Equity Offering Program at a Weighted
Average Price of $177.14 Per Share
for Aggregate Net Proceeds of Approximately $163 Million
JACKSON,
Miss., Oct. 24, 2023 /PRNewswire/
-- EastGroup Properties, Inc. (NYSE: EGP) (the "Company",
"we", "us" or "EastGroup") announced today the results of its
operations for the three and nine months ended September 30,
2023.
Commenting on EastGroup's performance, Marshall Loeb, CEO, stated, "Our team's strong
performance continues as evidenced by third quarter FFO per share
rising 13%. The day-to-day industrial market remains resilient,
producing a number of strong metrics such as our percent leased,
quarterly releasing spreads and same store net operating income
growth. We're pleased with our operational results, especially
given continued global economic unease and capital markets
dislocation. This uncertainty is creating several outcomes such as
greater leasing deliberations among our customers along with four
consecutive quarters of materially declining market construction
starts. We remain judicious with capital allocation and incremental
risk, particularly in this continuing uncertain economic climate,
which is one of the primary reasons we continually work to
strengthen our balance sheet. Longer term, I remain bullish on the
continuing external secular trends which benefit our shallow bay,
last mile Sunbelt market portfolio."
EARNINGS PER SHARE
Three Months Ended September 30,
2023
On a diluted per share basis, earnings per common share
("EPS") were $1.07 for the three
months ended September 30, 2023, compared to $0.87 for the same period of 2022. The increase
in EPS was primarily due to the following:
- The Company's property net operating income ("PNOI") increased
by $13,134,000 ($0.29 per share) for the three months ended
September 30, 2023, as compared to
the same period of 2022.
- EastGroup recognized gains on involuntary conversion and
business interruption claims of $2,118,000 ($0.05
per share) during the three months ended September 30, 2023, compared to none during the
three months ended September 30,
2022.
The increase in EPS was offset primarily due to the
following:
- Depreciation and amortization expense increased by $3,244,000 ($0.07
per share) during the three months ended September 30, 2023, as compared to the same
period of 2022.
- Interest expense increased by $1,517,000 ($0.03
per share) during the three months ended September 30, 2023, as compared to the same
period of 2022.
Nine Months Ended September 30,
2023
Diluted EPS for the nine months ended
September 30, 2023 was $3.06
compared to $3.48 for the same period
of 2022. The decrease in EPS was primarily due to the
following:
- EastGroup recognized gains on sales of real estate investments
of $4,809,000 ($0.11 per share) during the nine months ended
September 30, 2023, compared to
$40,999,000 ($0.97 per share) for the nine months ended
September 30, 2022.
- Depreciation and amortization expense increased by $12,751,000 ($0.28
per share) during the nine months ended September 30, 2023, as compared to the same
period of 2022.
- Interest expense increased by $10,037,000 ($0.22
per share) during the nine months ended September 30, 2023, as compared to the same
period of 2022.
The decrease in EPS was offset primarily due to the
following:
- PNOI increased by $44,137,000
($0.99 per share) for the nine months
ended September 30, 2023, as compared
to the same period of 2022.
- EastGroup recognized gains on involuntary conversion and
business interruption claims of $4,187,000 ($0.09
per share) during the nine months ended September 30, 2023, compared to none during the
nine months ended September 30,
2022.
FUNDS FROM OPERATIONS AND PROPERTY NET OPERATING
INCOME
Three Months Ended September 30, 2023
For the
three months ended September 30, 2023, funds from operations
attributable to common stockholders ("FFO") were $2.00 per share compared to $1.77 per share during the same period of 2022,
an increase of 13.0%.
FFO Excluding Gain on Involuntary Conversion and Business
Interruption Claims was $1.95 per
share for the three months ended September 30, 2023 compared
to $1.77 per share for the same
period of 2022, an increase of 10.2%.
PNOI increased by $13,134,000, or
14.5%, during the three months ended September 30, 2023,
compared to the same period of 2022. PNOI increased $7,333,000 from newly developed and value-add
properties, $5,061,000 from same
property operations (based on the same property pool), $546,000 from 2022 and 2023 acquisitions, and
$134,000 from operating properties
sold in 2022 and 2023.
Same PNOI Excluding Income from Lease Terminations increased
6.0% on a straight-line basis for the three months ended
September 30, 2023, compared to the same period of 2022; on a
cash basis (excluding straight-line rent adjustments and
amortization of above/below market rent intangibles), Same PNOI
increased 6.9%.
On a straight-line basis, rental rates on new and renewal leases
(4.2% of total square footage) increased an average of 55.4% during
the three months ended September 30, 2023.
Nine Months Ended September 30, 2023
FFO for the
nine months ended September 30, 2023, was $5.75 per share compared to $5.18 per share during the same period of 2022,
an increase of 11.0%.
FFO Excluding Gain on Involuntary Conversion and Business
Interruption Claims was $5.66 per
share for the nine months ended September 30, 2023 compared to
$5.18 per share for the same period
of 2022, an increase of 9.3%.
PNOI increased by $44,137,000, or
17.0%, during the nine months ended September 30, 2023,
compared to the same period of 2022. PNOI increased $22,762,000 from newly developed and value-add
properties, $13,665,000 from same
property operations (based on the same property pool), and
$7,862,000 from 2022 and 2023
acquisitions; PNOI decreased $126,000
from operating properties sold in 2022 and 2023.
Same PNOI Excluding Income from Lease Terminations increased
6.5% on a straight-line basis for the nine months ended
September 30, 2023, compared to the same period of 2022; on a
cash basis (excluding straight-line rent adjustments and
amortization of above/below market rent intangibles), Same PNOI
increased 8.1%.
On a straight-line basis, rental rates on new and renewal leases
(11.3% of total square footage) increased an average of 52.7%
during the nine months ended September 30, 2023.
The same property pool for the three and nine months ended
September 30, 2023 includes properties which were included in
the operating portfolio for the entire period from January 1, 2022 through September 30, 2023;
this pool is comprised of properties containing 46,514,000 square
feet.
FFO, FFO Excluding Gain on Involuntary Conversion and Business
Interruption Claims, PNOI and Same PNOI are non-GAAP financial
measures, which are defined
under Definitions later in this
release. Reconciliations of Net Income to PNOI and Same
PNOI, and Net Income Attributable to EastGroup Properties, Inc.
Common Stockholders to FFO and FFO Excluding Gain on Involuntary
Conversion and Business Interruption Claims are presented in the
attached schedule "Reconciliations of GAAP to Non-GAAP
Measures."
ACQUISITIONS AND DISPOSITIONS
In September, EastGroup acquired Blue Diamond Business Park,
which contains two recently developed buildings totaling 254,000
square feet, for approximately $53,000,000. The buildings are located in the
Southwest submarket of Las Vegas
and are currently 100% leased. This acquisition increased the
Company's ownership in Las Vegas
to approximately 1,165,000 square feet, which is currently 94%
leased.
During the three months ended September 30, 2023, the
Company closed on the acquisition of development land in three
different markets:
- Denton 35 Exchange Land - 20.3
acres of development land in the Northwest Dallas submarket for approximately
$5,700,000. Subsequent to
quarter-end, EastGroup began construction of two buildings which
will contain 244,000 square feet and have projected total costs of
approximately $34,600,000.
- Crossroads Logistics Park Land - 43.8 acres of development land
at the intersection of I-4 and I-75 in the East Tampa submarket for approximately
$15,100,000. This site will
accommodate the future development of three buildings containing
approximately 500,000 square feet.
- Arista 36 Business Park Land - 29.3 acres of development land
in the Northwest submarket of Denver for approximately $5,900,000. This site was purchased through a
newly formed joint venture, whereby EastGroup holds a 99.5%
controlling interest. Also during the quarter, the Company began
construction of three buildings which will contain 360,000 square
feet and have projected total costs of approximately $80,300,000.
Subsequent to quarter-end, EastGroup acquired McKinney Logistics
Center, a recently developed 193,000 square foot business
distribution building, for approximately $26,000,000. The building is located in the
Northeast submarket of Dallas and
is 100% leased. This acquisition increased the Company's ownership
in this submarket to approximately 838,000 square feet, which is
currently 100% leased.
DEVELOPMENT AND VALUE-ADD PROPERTIES
During the third quarter of 2023, EastGroup began construction
of three new development projects in three markets, which will
contain a total of 793,000 square feet and have projected total
costs of $131,800,000.
The development projects started during the first nine months of
2023 are detailed in the table below:
Development Projects Started in
2023
|
|
Location
|
|
Size
|
|
Anticipated Conversion Date
|
|
Projected Total Costs
|
|
|
|
|
(Square feet)
|
|
|
|
(In thousands)
|
Horizon West
10
|
|
Orlando, FL
|
|
357,000
|
|
|
10/2024
|
|
$
|
44,600
|
|
Eisenhauer Point
10-12
|
|
San Antonio,
TX
|
|
223,000
|
|
|
01/2025
|
|
29,400
|
|
SunCoast 9
|
|
Fort Myers,
FL
|
|
111,000
|
|
|
01/2025
|
|
16,200
|
|
Riverside 1 &
2
|
|
Atlanta, GA
|
|
284,000
|
|
|
02/2025
|
|
33,700
|
|
Horizon West
6
|
|
Orlando, FL
|
|
87,000
|
|
|
03/2025
|
|
12,300
|
|
MCO Logistics
Center
|
|
Orlando, FL
|
|
167,000
|
|
|
03/2025
|
|
24,200
|
|
Braselton 3
|
|
Atlanta, GA
|
|
115,000
|
|
|
05/2025
|
|
14,300
|
|
Gateway South Dade 1
& 2
|
|
Miami, FL
|
|
169,000
|
|
|
05/2025
|
|
33,400
|
|
Skyway 1 &
2
|
|
Charlotte,
NC
|
|
318,000
|
|
|
06/2025
|
|
37,200
|
|
Arista 36
1-3
|
|
Denver, CO
|
|
360,000
|
|
|
11/2026
|
|
80,300
|
|
Total
Development Projects Started
|
|
|
|
2,191,000
|
|
|
|
|
$
|
325,600
|
|
At September 30, 2023, EastGroup's development and
value-add program consisted of 18 projects (3,931,000 square feet)
in 12 markets. The projects, which were collectively 18% leased as
of October 23, 2023, have a projected total cost of
$548,100,000, of which $230,650,000 remained to be funded as of
September 30, 2023.
During the third quarter of 2023, EastGroup transferred six
projects to the operating portfolio (at the earlier of 90%
occupancy or one year after completion/value-add acquisition date).
The projects, which are located in six markets, contain 1,134,000
square feet and were collectively 93% leased as of October 23,
2023.
The development and value-add properties transferred to the
operating portfolio during the first nine months of 2023 are
detailed in the table below:
Development and Value-Add Properties Transferred to
the Operating Portfolio in 2023
|
|
Location
|
|
Size
|
|
Conversion Date
|
|
Cumulative Cost
as of 9/30/23
|
|
Percent Leased
as of 10/23/23
|
|
|
|
|
(Square feet)
|
|
|
|
(In thousands)
|
|
|
Grand West Crossing
1
|
|
Houston, TX
|
|
121,000
|
|
|
02/2023
|
|
$
|
13,684
|
|
|
100 %
|
SunCoast 11
|
|
Fort Myers,
FL
|
|
79,000
|
|
|
02/2023
|
|
9,813
|
|
|
100 %
|
Cypress Preserve 1
& 2(1)
|
|
Houston, TX
|
|
516,000
|
|
|
03/2023
|
|
55,302
|
|
|
100 %
|
Zephyr(1)
|
|
San Francisco,
CA
|
|
82,000
|
|
|
04/2023
|
|
29,045
|
|
|
42 %
|
McKinney 3 &
4
|
|
Dallas, TX
|
|
212,000
|
|
|
05/2023
|
|
26,911
|
|
|
100 %
|
Horizon West
1
|
|
Orlando, FL
|
|
97,000
|
|
|
06/2023
|
|
12,385
|
|
|
100 %
|
Access Point
3(1)
|
|
Greenville,
SC
|
|
299,000
|
|
|
07/2023
|
|
24,390
|
|
|
72 %
|
I-20 West Business
Center
|
|
Atlanta, GA
|
|
155,000
|
|
|
07/2023
|
|
15,047
|
|
|
100 %
|
Arlington Tech
3
|
|
Fort Worth,
TX
|
|
77,000
|
|
|
08/2023
|
|
10,112
|
|
|
100 %
|
Grand Oaks 75
4
|
|
Tampa, FL
|
|
185,000
|
|
|
09/2023
|
|
18,755
|
|
|
100 %
|
LakePort 4 &
5
|
|
Dallas, TX
|
|
177,000
|
|
|
09/2023
|
|
24,194
|
|
|
100 %
|
Steele Creek 11 &
12
|
|
Charlotte,
NC
|
|
241,000
|
|
|
09/2023
|
|
26,566
|
|
|
100 %
|
Total
Projects Transferred
|
|
|
|
2,241,000
|
|
|
|
|
$
|
266,204
|
|
|
94 %
|
|
|
|
|
|
|
|
|
|
|
|
Projected Stabilized Yields(2)
|
|
Yield
|
|
|
|
|
|
|
|
|
Development
|
|
7.6 %
|
|
|
|
|
|
|
|
|
Value-Add
|
|
5.6 %
|
|
|
|
|
|
|
|
|
Combined
|
|
6.8 %
|
|
|
|
|
|
|
|
|
|
(1) Represents
value-add acquisitions.
|
(2) Weighted
average yield based on projected stabilized annual property net
operating income on a straight-line basis at 100% occupancy
divided by projected total costs.
|
DIVIDENDS
EastGroup declared a cash dividend of $1.27 per share in the third quarter of 2023,
raising it from $1.25 per share.
Projected total dividends per share for 2023 are expected to
represent an increase of 7.2% over total dividends declared in
2022. The third quarter dividend, which was paid on October 13, 2023, was the Company's
175th consecutive quarterly cash distribution to
shareholders. The Company has increased or maintained
its dividend for 31 consecutive years and has increased it 28 years
over that period, including increases in each of the last 12
years. The annualized dividend rate of $5.08 per share yielded 3.3% on the closing stock
price of $154.98 on October 23,
2023.
FINANCIAL STRENGTH AND FLEXIBILITY
EastGroup continues to maintain a strong and flexible balance
sheet. Debt-to-total market capitalization was 17.9% at
September 30, 2023. The Company's interest and
fixed charge coverage ratio was 9.10x and 7.99x for the three and
nine months ended September 30, 2023, respectively. The
Company's ratio of debt to earnings before interest, taxes,
depreciation and amortization for real estate ("EBITDAre") was
4.07x and 4.26x for the three and nine months ended
September 30, 2023, respectively. EBITDAre and the Company's
interest and fixed charge coverage ratio are non-GAAP financial
measures defined under Definitions later in this
release. Refer to the schedule "Reconciliations of GAAP to Non-GAAP
Measures" attached for the calculation of the Company's interest
and fixed charge coverage ratio, the debt to EBITDAre ratio, and
the reconciliation of Net Income to EBITDAre.
During the third quarter, EastGroup sold 931,418 shares of
common stock under its continuous common equity offering program at
a weighted average price of $177.14
per share, providing aggregate net proceeds to the Company of
approximately $163,303,000. During
the nine months ended September 30, 2023, EastGroup sold
2,725,021 shares of common stock under its continuous common
equity offering program at a weighted average price of $170.39 per share, providing aggregate net
proceeds to the Company of approximately $459,179,000. Included in the third quarter
activity are 53,364 shares sold on September
28 and September 29, 2023,
which were deemed to be issued and outstanding upon settlement in
October 2023.
In August 2023, the Company made a
scheduled $50,000,000 principal
repayment on its senior unsecured notes with a fixed interest rate
of 3.80%.
In September 2023, EastGroup
repaid a mortgage with a principal balance of $1,905,000, an interest rate of 3.85% and an
original maturity date of November 30,
2026. With this repayment, the Company's debt portfolio is
now 100% unsecured.
In September 2023, the Company
closed on the refinance of a $100,000,000 senior unsecured term loan with five
years remaining. The maturity date remains September 29, 2028, which is unchanged from the
original terms. The amended term loan provides for interest only
payments using SOFR plus the applicable margin, based on the
Company's current credit ratings and consolidated leverage ratio.
This refinance resulted in a 45 basis point reduction in the credit
spread compared to the original term loan. The Company has an
interest rate swap agreement which converts the loan's SOFR rate
component to a fixed interest rate for the entire term of the loan,
providing a total effective fixed interest rate of 2.61%.
OUTLOOK FOR 2023
EPS for 2023 is now estimated to be in the range of $4.11 to $4.15. FFO per share attributable to
common stockholders for 2023 is now estimated to be in the range of
$7.73 to $7.77. The table below reconciles projected net
income attributable to common stockholders to projected FFO. The
Company is providing a projection of estimated net income
attributable to common stockholders solely to satisfy the
disclosure requirements of the U.S. Securities and Exchange
Commission.
EastGroup's projections are based on management's current
beliefs and assumptions about our business, the industry and the
markets in which we operate; there are known and unknown risks and
uncertainties associated with these projections. We assume no
obligation to update publicly any forward-looking statements,
including our outlook for 2023, whether as a result of new
information, future events or otherwise. Please refer to the
"Forward-Looking Statements" disclosures included in this earnings
release and "Risk Factors" disclosed in our annual and quarterly
reports filed with the Securities and Exchange Commission for more
information.
|
|
Low Range
|
|
High Range
|
|
|
Q4 2023
|
|
Y/E 2023
|
|
Q4 2023
|
|
Y/E 2023
|
|
|
(In thousands, except per share
data)
|
Net income attributable
to common stockholders
|
|
$
|
48,859
|
|
|
185,895
|
|
|
50,727
|
|
|
187,763
|
|
Depreciation and
amortization
|
|
43,417
|
|
|
169,336
|
|
|
43,417
|
|
|
169,336
|
|
Gain on sales of real
estate investments and non-operating real estate
|
|
—
|
|
|
(5,255)
|
|
|
—
|
|
|
(5,255)
|
|
Funds from operations
attributable to common stockholders*
|
|
$
|
92,276
|
|
|
349,976
|
|
|
94,144
|
|
|
351,844
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares
outstanding - Diluted
|
|
46,713
|
|
|
45,265
|
|
|
46,713
|
|
|
45,265
|
|
Per share data
(diluted):
|
|
|
|
|
|
|
|
|
Net
income attributable to common stockholders
|
|
$
|
1.05
|
|
|
4.11
|
|
|
1.09
|
|
|
4.15
|
|
Funds
from operations attributable to common stockholders
|
|
1.98
|
|
|
7.73
|
|
|
2.02
|
|
|
7.77
|
|
|
*This is a non-GAAP
financial measure. Please refer to Definitions.
|
The following assumptions were used for the
mid-point:
Metrics
|
|
Revised Guidance for
Year 2023
|
|
July Earnings Release
Guidance for Year 2023
|
|
Actual for Year 2022
|
FFO per
share
|
|
$7.73 -
$7.77
|
|
$7.58 -
$7.68
|
|
$7.00
|
FFO per share increase
over prior year
|
|
10.7 %
|
|
9.0 %
|
|
14.9 %
|
Same PNOI growth: cash
basis(1)
|
|
7.3% -
8.3%(2)
|
|
6.8% -
7.8%(2)
|
|
8.9 %
|
Average month-end
occupancy - operating portfolio
|
|
97.6% -
98.2%
|
|
97.3% -
98.3%
|
|
98.0 %
|
Lease termination fee
income
|
|
$625,000
|
|
$725,000
|
|
$2.7
million
|
Reserves of
uncollectible rent
(Currently no identified bad debt for Q4)
|
|
$1.7
million
|
|
$1.8
million
|
|
$138,000
|
Development
starts:
|
|
|
|
|
|
|
Square feet
|
|
2.7
million
|
|
2.7
million
|
|
2.7
million
|
Projected total
investment
|
|
$360
million
|
|
$360
million
|
|
$329
million
|
Value-add property
acquisitions (Projected total
investment)
|
|
none
|
|
none
|
|
$135
million
|
Operating property
acquisitions
|
|
$145
million
|
|
$60
million
|
|
$378
million
|
Operating property
dispositions
(Potential gains
on dispositions are not included in the projections)
|
|
$40
million
|
|
$60
million
|
|
$52
million
|
Unsecured debt closing
in period
|
|
$100 million at 5.27%
weighted
average interest rate
|
|
$100 million at 5.27%
weighted
average interest rate
|
|
$525 million at 3.82%
weighted
average interest rate
|
Common stock
issuances
|
|
$585
million
|
|
$475
million
|
|
$75
million
|
General and
administrative expense
|
|
$17.3
million
|
|
$18.5
million
|
|
$16.4
million
|
|
(1) Excludes
straight-line rent adjustments, amortization of market rent
intangibles for acquired leases and income from lease
terminations.
|
(2) Includes
properties which have been in the operating portfolio since 1/1/22
and are projected to be in the operating portfolio through
12/31/23; includes 46,437,000 square feet.
|
DEFINITIONS
The Company's chief decision makers use two primary measures of
operating results in making decisions: (1) funds from
operations attributable to common stockholders ("FFO"), including
FFO as adjusted as described below, and (2) property net operating
income ("PNOI"), as defined below.
FFO is computed in accordance with standards established by the
National Association of Real Estate Investment Trusts, Inc.
("Nareit"). Nareit's guidance allows preparers an option as
it pertains to whether gains or losses on sale, or impairment
charges, on real estate assets incidental to a real estate
investment trust's ("REIT's") business are excluded from the
calculation of FFO. EastGroup has made the election to exclude
activity related to such assets that are incidental to our
business. FFO is calculated as net income (loss) attributable to
common stockholders computed in accordance with U.S. generally
accepted accounting principles ("GAAP"), excluding gains and losses
from sales of real estate property (including other assets
incidental to the Company's business) and impairment losses,
adjusted for real estate related depreciation and amortization, and
after adjustments for unconsolidated partnerships and joint
ventures.
FFO Excluding Gain on Involuntary Conversion and Business
Interruption Claims is calculated as FFO (as defined above),
adjusted to exclude gains on involuntary conversion and business
interruption claims. The Company believes that this exclusion
presents a more meaningful comparison of operating performance
across periods.
PNOI is defined as Income from real estate
operations less Expenses from real estate
operations (including market-based internal management fee
expense) plus the Company's share of income and property operating
expenses from its less-than-wholly-owned real estate investments.
EastGroup sometimes refers to PNOI from Same Properties as "Same
PNOI" in this press release and the accompanying reconciliation;
the Company also presents Same PNOI Excluding Income from Lease
Terminations. The Company presents Same PNOI and Same PNOI
Excluding Income from Lease Terminations as a property-level
supplemental measure of performance used to evaluate the
performance of the Company's investments in real estate assets and
its operating results on a same property basis. The Company
believes it is useful to evaluate Same PNOI Excluding Income from
Lease Terminations on both a straight-line and cash basis. The
straight-line basis is calculated by averaging the customers' rent
payments over the lives of the leases; GAAP requires the
recognition of rental income on a straight-line basis. The cash
basis excludes adjustments for straight-line rent and amortization
of market rent intangibles for acquired leases; cash basis is an
indicator of the rents charged to customers by the Company during
the periods presented and is useful in analyzing the embedded rent
growth in the Company's portfolio. "Same Properties" is defined as
operating properties owned during the entire current period and
prior year reporting period. Operating properties are stabilized
real estate properties (land including building and improvements)
that make up the Company's operating portfolio. Properties
developed or acquired are excluded from the same property pool
until held in the operating portfolio for both the current and
prior year reporting periods. Properties sold during the current or
prior year reporting periods are also excluded.
FFO and PNOI are supplemental industry reporting measurements
used to evaluate the performance of the Company's investments in
real estate assets and its operating results. The Company believes
that the exclusion of depreciation and amortization in the
industry's calculations of PNOI and FFO provides supplemental
indicators of the properties' performance since real estate values
have historically risen or fallen with market
conditions. PNOI and FFO as calculated by the Company
may not be comparable to similarly titled but differently
calculated measures for other REITs. Investors should be
aware that items excluded from or added back to FFO are significant
components in understanding and assessing the Company's financial
performance.
The Company's chief decision makers also use Earnings Before
Interest, Taxes, Depreciation and Amortization for Real Estate
("EBITDAre") in making decisions. EBITDAre is computed in
accordance with standards established by Nareit and defined as Net
Income, adjusted for gains and losses from sales of real estate
investments, non-operating real estate and other assets incidental
to the Company's business, interest expense, income tax expense,
depreciation and amortization. EBITDAre is a non-GAAP financial
measure used to measure the Company's operating performance and its
ability to meet interest payment obligations and pay quarterly
stock dividends on an unleveraged basis.
EastGroup's chief decision makers also use its Debt-to-EBITDAre
ratio, a non-GAAP financial measure calculated by dividing the
Company's debt by its EBITDAre, in analyzing the financial
condition and operating performance of the Company relative to its
leverage.
The Company's interest and fixed charge coverage ratio is a
non-GAAP financial measure calculated by dividing the Company's
EBITDAre by its interest expense. We believe this ratio is useful
to investors because it provides a basis for analysis of the
Company's leverage, operating performance and its ability to
service the interest payments due on its debt.
CONFERENCE CALL
EastGroup will host a conference call and webcast to discuss the
results of its third quarter, review the Company's current
operations, and present its revised earnings outlook for 2023 on
Wednesday, October 25, 2023, at
11:00 a.m. Eastern Time. A
live broadcast of the conference call is available by dialing
1-888-346-0688 (conference ID: EastGroup) or by webcast through a
link on the Company's website at www.eastgroup.net. If
you are unable to listen to the live conference call, a telephone
and webcast replay will be available until Wednesday, November 1, 2023. The
telephone replay can be accessed by dialing 1-877-344-7529 (access
code 1255767), and the webcast replay can be accessed through a
link on the Company's website at www.eastgroup.net.
SUPPLEMENTAL INFORMATION
Supplemental financial information is available under Quarterly
Results in the Investor Relations section of the Company's website
at www.eastgroup.net or upon request by calling the Company at
601-354-3555.
COMPANY INFORMATION
EastGroup Properties, Inc. (NYSE: EGP), a member of the S&P
Mid-Cap 400 and Russell 1000 Indexes, is a self-administered equity
real estate investment trust focused on the development,
acquisition and operation of industrial properties in major Sunbelt
markets throughout the United
States with an emphasis in the states of Florida, Texas, Arizona, California and North Carolina. The
Company's goal is to maximize shareholder value by being a leading
provider in its markets of functional, flexible and quality
business distribution space for location sensitive customers
(primarily in the 20,000 to 100,000 square foot
range). The Company's strategy for growth is based on
ownership of premier distribution facilities generally clustered
near major transportation features in supply-constrained
submarkets. The Company's portfolio, including
development projects and value-add acquisitions in lease-up and
under construction, currently includes approximately 59 million
square feet. EastGroup Properties, Inc. press releases
are available on the Company's website at www.eastgroup.net.
The Company announces information about the Company and its
business to investors and the public using the Company's website
(eastgroup.net), including the investor relations website
(investor.eastgroup.net), filings with the Securities and Exchange
Commission, press releases, public conference calls, and webcasts.
The Company also uses social media to communicate with its
investors and the public. While not all the information that the
Company posts to the Company's website or on the Company's social
media channels is of a material nature, some information could be
deemed to be material. Therefore, the Company encourages investors,
the media, and others interested in the Company to review the
information that it posts on the social media channels, including
Facebook (facebook.com/eastgroupproperties), Twitter
(twitter.com/eastgroupprop), and LinkedIn
(linkedin.com/company/eastgroup-properties-inc). The list of social
media channels that the company uses may be updated on its investor
relations website from time to time. The information contained on,
or that may be accessed through, our website or any of our social
media channels is not incorporated by reference into, and is not a
part of, this document.
FORWARD-LOOKING STATEMENTS
The statements and certain other information contained in this
press release, which can be identified by the use of
forward-looking terminology such as "may," "will," "seek,"
"expects," "anticipates," "believes," "targets," "intends,"
"should," "estimates," "could," "continue," "assume," "projects,"
"goals," "plans" or variations of such words and similar
expressions or the negative of such words, 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, and are subject to the
safe harbors created thereby. These forward-looking statements
reflect the Company's current views about its plans, intentions,
expectations, strategies and prospects, which are based on the
information currently available to the Company and on assumptions
it has made. For instance, the amount, timing and frequency of
future dividends is subject to authorization by the Company's Board
of Directors and will be based upon a variety of factors. Although
the Company believes that its plans, intentions, expectations,
strategies and prospects as reflected in or suggested by those
forward-looking statements are reasonable, the Company can give no
assurance that such plans, intentions, expectations or strategies
will be attained or achieved. Furthermore, these forward-looking
statements should be considered as subject to the many risks and
uncertainties that exist in the Company's operations and business
environment. Such risks and uncertainties could cause actual
results to differ materially from those projected. These
uncertainties include, but are not limited to:
- international, national, regional and local economic
conditions;
- disruption in supply and delivery chains;
- construction costs could increase as a result of inflation
impacting the costs to develop properties;
- the competitive environment in which the Company operates;
- fluctuations of occupancy or rental rates;
- potential defaults (including bankruptcies or insolvency) on or
non-renewal of leases by tenants, or our ability to lease space at
current or anticipated rents, particularly in light of the impacts
of inflation;
- potential changes in the law or governmental regulations and
interpretations of those laws and regulations, including changes in
real estate laws, REIT or corporate income tax laws, potential
changes in zoning laws, or increases in real property tax rates,
and any related increased cost of compliance;
- our ability to maintain our qualification as a REIT;
- acquisition and development risks, including failure of such
acquisitions and development projects to perform in accordance with
projections;
- natural disasters such as fires, floods, tornadoes, hurricanes
and earthquakes;
- pandemics, epidemics or other public health emergencies, such
as the coronavirus pandemic;
- availability of financing and capital, increase in interest
rates, and ability to raise equity capital on attractive
terms;
- financing risks, including the risks that our cash flows from
operations may be insufficient to meet required payments of
principal and interest, and we may be unable to refinance our
existing debt upon maturity or obtain new financing on attractive
terms or at all;
- our ability to retain our credit agency ratings;
- our ability to comply with applicable financial covenants;
- credit risk in the event of non-performance by the
counterparties to our interest rate swaps;
- lack of or insufficient amounts of insurance;
- litigation, including costs associated with prosecuting or
defending claims and any adverse outcomes;
- our ability to attract and retain key personnel;
- risks related to the failure, inadequacy or interruption of our
data security systems and processes;
- potentially catastrophic events such as acts of war, civil
unrest and terrorism; and
- environmental liabilities, including costs, fines or penalties
that may be incurred due to necessary remediation of contamination
of properties presently owned or previously owned by us.
All forward-looking statements should be read in light of the
risks identified in Part I, Item 1A. Risk Factors within the
Company's most recent Annual Report on Form 10-K, as such factors
may be updated from time to time in the Company's periodic filings
and current reports filed with the SEC.
The Company assumes no obligation to update publicly any
forward-looking statements, whether as a result of new information,
future events or otherwise.
EASTGROUP PROPERTIES, INC. AND
SUBSIDIARIES
|
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE
INCOME
|
(IN THOUSANDS, EXCEPT PER SHARE
DATA)
|
(UNAUDITED)
|
|
|
|
|
|
|
|
Three Months Ended
|
|
Nine Months Ended
|
|
|
September 30,
|
|
September 30,
|
|
|
2023
|
|
2022
|
|
2023
|
|
2022
|
REVENUES
|
|
|
|
|
|
|
|
|
Income from real estate
operations
|
|
$
|
144,378
|
|
|
125,570
|
|
|
417,153
|
|
|
357,020
|
|
Other
revenue
|
|
2,152
|
|
|
88
|
|
|
4,289
|
|
|
165
|
|
|
|
146,530
|
|
|
125,658
|
|
|
421,442
|
|
|
357,185
|
|
EXPENSES
|
|
|
|
|
|
|
|
|
Expenses from real
estate operations
|
|
40,709
|
|
|
35,033
|
|
|
114,662
|
|
|
98,643
|
|
Depreciation and
amortization
|
|
42,521
|
|
|
39,277
|
|
|
125,830
|
|
|
113,079
|
|
General and
administrative
|
|
3,429
|
|
|
3,967
|
|
|
13,017
|
|
|
12,503
|
|
Indirect leasing
costs
|
|
147
|
|
|
119
|
|
|
436
|
|
|
410
|
|
|
|
86,806
|
|
|
78,396
|
|
|
253,945
|
|
|
224,635
|
|
OTHER INCOME (EXPENSE)
|
|
|
|
|
|
|
|
|
Interest
expense
|
|
(11,288)
|
|
|
(9,771)
|
|
|
(36,888)
|
|
|
(26,851)
|
|
Gain on sales of real
estate investments
|
|
—
|
|
|
—
|
|
|
4,809
|
|
|
40,999
|
|
Other
|
|
474
|
|
|
326
|
|
|
1,661
|
|
|
888
|
|
NET INCOME
|
|
48,910
|
|
|
37,817
|
|
|
137,079
|
|
|
147,586
|
|
Net income attributable
to noncontrolling interest in joint ventures
|
|
(14)
|
|
|
(25)
|
|
|
(43)
|
|
|
(75)
|
|
NET INCOME ATTRIBUTABLE TO EASTGROUP PROPERTIES, INC.
COMMON STOCKHOLDERS
|
|
48,896
|
|
|
37,792
|
|
|
137,036
|
|
|
147,511
|
|
Other comprehensive
income - interest rate swaps
|
|
5,777
|
|
|
17,157
|
|
|
5,717
|
|
|
39,826
|
|
TOTAL COMPREHENSIVE INCOME
|
|
$
|
54,673
|
|
|
54,949
|
|
|
142,753
|
|
|
187,337
|
|
|
|
|
|
|
|
|
|
|
BASIC PER COMMON SHARE DATA FOR NET INCOME
ATTRIBUTABLE TO EASTGROUP PROPERTIES, INC. COMMON
STOCKHOLDERS
|
|
|
|
|
|
|
|
|
Net income attributable
to common stockholders
|
|
$
|
1.07
|
|
|
0.87
|
|
|
3.07
|
|
|
3.49
|
|
Weighted average shares
outstanding - Basic
|
|
45,658
|
|
|
43,467
|
|
|
44,688
|
|
|
42,308
|
|
DILUTED PER COMMON SHARE DATA FOR NET INCOME
ATTRIBUTABLE TO EASTGROUP PROPERTIES, INC. COMMON
STOCKHOLDERS
|
|
|
|
|
|
|
|
|
Net income attributable
to common stockholders
|
|
$
|
1.07
|
|
|
0.87
|
|
|
3.06
|
|
|
3.48
|
|
Weighted average shares
outstanding - Diluted
|
|
45,788
|
|
|
43,581
|
|
|
44,782
|
|
|
42,419
|
|
EASTGROUP PROPERTIES, INC. AND
SUBSIDIARIES
|
RECONCILIATIONS OF GAAP TO NON-GAAP
MEASURES
|
(IN THOUSANDS, EXCEPT PER SHARE
DATA)
|
(UNAUDITED)
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
Nine Months Ended
|
|
|
September 30,
|
|
September 30,
|
|
|
2023
|
|
2022
|
|
2023
|
|
2022
|
|
|
|
|
|
|
|
|
|
NET INCOME ATTRIBUTABLE TO EASTGROUP PROPERTIES, INC.
COMMON STOCKHOLDERS
|
|
$
|
48,896
|
|
|
37,792
|
|
|
137,036
|
|
|
147,511
|
|
Depreciation and
amortization
|
|
42,521
|
|
|
39,277
|
|
|
125,830
|
|
|
113,079
|
|
Company's share of
depreciation from unconsolidated investment
|
|
31
|
|
|
31
|
|
|
93
|
|
|
93
|
|
Depreciation and
amortization from noncontrolling interest
|
|
(2)
|
|
|
(5)
|
|
|
(4)
|
|
|
(14)
|
|
Gain on sales of real
estate investments
|
|
—
|
|
|
—
|
|
|
(4,809)
|
|
|
(40,999)
|
|
Gain on sales of
non-operating real estate
|
|
—
|
|
|
—
|
|
|
(446)
|
|
|
—
|
|
FUNDS FROM OPERATIONS ("FFO") ATTRIBUTABLE TO COMMON
STOCKHOLDERS*
|
|
91,446
|
|
|
77,095
|
|
|
257,700
|
|
|
219,670
|
|
Gain on involuntary
conversion and business interruption claims
|
|
(2,118)
|
|
|
—
|
|
|
(4,187)
|
|
|
—
|
|
FFO ATTRIBUTABLE TO COMMON STOCKHOLDERS - EXCLUDING
GAIN ON INVOLUNTARY CONVERSION AND BUSINESS INTERRUPTION
CLAIMS*
|
|
$
|
89,328
|
|
|
77,095
|
|
|
253,513
|
|
|
219,670
|
|
|
|
|
|
|
|
|
|
|
NET INCOME
|
|
$
|
48,910
|
|
|
37,817
|
|
|
137,079
|
|
|
147,586
|
|
Interest
expense (1)
|
|
11,288
|
|
|
9,771
|
|
|
36,888
|
|
|
26,851
|
|
Depreciation and
amortization
|
|
42,521
|
|
|
39,277
|
|
|
125,830
|
|
|
113,079
|
|
Company's share of
depreciation from unconsolidated investment
|
|
31
|
|
|
31
|
|
|
93
|
|
|
93
|
|
EARNINGS BEFORE INTEREST, TAXES, DEPRECIATION AND
AMORTIZATION ("EBITDA")
|
|
102,750
|
|
|
86,896
|
|
|
299,890
|
|
|
287,609
|
|
Gain on sales of real
estate investments
|
|
—
|
|
|
—
|
|
|
(4,809)
|
|
|
(40,999)
|
|
Gain on sales of
non-operating real estate
|
|
—
|
|
|
—
|
|
|
(446)
|
|
|
—
|
|
EBITDA FOR REAL ESTATE
("EBITDAre")*
|
|
$
|
102,750
|
|
|
86,896
|
|
|
294,635
|
|
|
246,610
|
|
|
|
|
|
|
|
|
|
|
Debt
|
|
$
|
1,674,371
|
|
|
1,697,728
|
|
|
1,674,371
|
|
|
1,697,728
|
|
Debt-to-EBITDAre ratio*
|
|
4.07
|
|
|
4.88
|
|
|
4.26
|
|
|
5.16
|
|
|
|
|
|
|
|
|
|
|
EBITDAre*
|
|
$
|
102,750
|
|
|
86,896
|
|
|
294,635
|
|
|
246,610
|
|
Interest
expense (1)
|
|
11,288
|
|
|
9,771
|
|
|
36,888
|
|
|
26,851
|
|
Interest and fixed charge coverage
ratio*
|
|
9.10
|
|
|
8.89
|
|
|
7.99
|
|
|
9.18
|
|
|
|
|
|
|
|
|
|
|
DILUTED PER COMMON SHARE DATA FOR NET INCOME
ATTRIBUTABLE TO EASTGROUP PROPERTIES, INC. COMMON
STOCKHOLDERS
|
|
|
|
|
|
|
|
|
Net income attributable
to common stockholders
|
|
$
|
1.07
|
|
|
0.87
|
|
|
3.06
|
|
|
3.48
|
|
FFO attributable to
common stockholders*
|
|
$
|
2.00
|
|
|
1.77
|
|
|
5.75
|
|
|
5.18
|
|
FFO attributable to
common stockholders - excluding gain on involuntary conversion and
business interruption claims*
|
|
$
|
1.95
|
|
|
1.77
|
|
|
5.66
|
|
|
5.18
|
|
Weighted average shares
outstanding for EPS and FFO purposes - Diluted
|
|
45,788
|
|
|
43,581
|
|
|
44,782
|
|
|
42,419
|
|
|
(1) Net
of capitalized interest of $4,251 and $3,572 for the three months
ended September 30, 2023 and 2022, respectively; and $11,864
and $8,515 for the nine months ended September 30, 2023 and
2022, respectively.
|
*This is a non-GAAP financial measure. Please refer to
Definitions.
|
EASTGROUP PROPERTIES, INC. AND
SUBSIDIARIES
|
RECONCILIATIONS OF GAAP TO NON-GAAP MEASURES
(Continued)
|
(IN THOUSANDS)
|
(UNAUDITED)
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
Nine Months Ended
|
|
|
September 30,
|
|
September 30,
|
|
|
2023
|
|
2022
|
|
2023
|
|
2022
|
|
|
|
|
|
|
|
|
|
NET INCOME
|
|
$
|
48,910
|
|
|
37,817
|
|
|
137,079
|
|
|
147,586
|
|
Gain on sales of real
estate investments
|
|
—
|
|
|
—
|
|
|
(4,809)
|
|
|
(40,999)
|
|
Gain on sales of
non-operating real estate
|
|
—
|
|
|
—
|
|
|
(446)
|
|
|
—
|
|
Interest
income
|
|
(197)
|
|
|
(36)
|
|
|
(383)
|
|
|
(42)
|
|
Other
revenue
|
|
(2,152)
|
|
|
(88)
|
|
|
(4,289)
|
|
|
(165)
|
|
Indirect leasing
costs
|
|
147
|
|
|
119
|
|
|
436
|
|
|
410
|
|
Depreciation and
amortization
|
|
42,521
|
|
|
39,277
|
|
|
125,830
|
|
|
113,079
|
|
Company's share of
depreciation from unconsolidated investment
|
|
31
|
|
|
31
|
|
|
93
|
|
|
93
|
|
Interest
expense (1)
|
|
11,288
|
|
|
9,771
|
|
|
36,888
|
|
|
26,851
|
|
General and
administrative expense (2)
|
|
3,429
|
|
|
3,967
|
|
|
13,017
|
|
|
12,503
|
|
Noncontrolling interest
in PNOI of consolidated joint ventures
|
|
(16)
|
|
|
(31)
|
|
|
(47)
|
|
|
(84)
|
|
PROPERTY NET OPERATING INCOME
("PNOI")*
|
|
103,961
|
|
|
90,827
|
|
|
303,369
|
|
|
259,232
|
|
PNOI from 2022 and 2023
acquisitions
|
|
(4,807)
|
|
|
(4,261)
|
|
|
(13,548)
|
|
|
(5,686)
|
|
PNOI from 2022 and 2023
development and value-add properties
|
|
(12,433)
|
|
|
(5,100)
|
|
|
(33,295)
|
|
|
(10,533)
|
|
PNOI from 2022 and 2023
operating property dispositions
|
|
—
|
|
|
134
|
|
|
95
|
|
|
(31)
|
|
Other PNOI
|
|
49
|
|
|
109
|
|
|
248
|
|
|
222
|
|
SAME PNOI (Straight-Line
Basis)*
|
|
86,770
|
|
|
81,709
|
|
|
256,869
|
|
|
243,204
|
|
Lease termination fee
income from same properties
|
|
(209)
|
|
|
(24)
|
|
|
(419)
|
|
|
(2,397)
|
|
SAME PNOI EXCLUDING INCOME FROM LEASE TERMINATIONS
(Straight-Line Basis)*
|
|
86,561
|
|
|
81,685
|
|
|
256,450
|
|
|
240,807
|
|
Straight-line rent
adjustments for same properties
|
|
(280)
|
|
|
(935)
|
|
|
(962)
|
|
|
(3,707)
|
|
Acquired leases -
market rent adjustment amortization for same properties
|
|
(115)
|
|
|
(168)
|
|
|
(444)
|
|
|
(1,102)
|
|
SAME PNOI EXCLUDING INCOME FROM LEASE TERMINATIONS
(Cash Basis)*
|
|
$
|
86,166
|
|
|
80,582
|
|
|
255,044
|
|
|
235,998
|
|
|
(1) Net of
capitalized interest of $4,251 and $3,572 for the three months
ended September 30, 2023 and 2022, respectively; and $11,864
and $8,515 for the nine months ended September 30, 2023 and
2022, respectively.
|
(2) Net of
capitalized development costs of $3,171 and $2,388 for the three
months ended September 30, 2023 and 2022, respectively; and
$7,983 and $7,474 for the nine months ended September 30, 2023
and 2022, respectively.
|
*This is a non-GAAP financial measure. Please refer to
Definitions.
|
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SOURCE EastGroup Properties