Second Quarter 2023 Results
- Net Income Attributable to Common Stockholders of
$0.97 Per Diluted Share for Second
Quarter 2023 Compared to $1.09 Per
Diluted Share for Second Quarter 2022 (There Were No Sales of Real
Estate Investments in Second Quarter 2023; Gains on Sales of Real
Estate Investments Were $11 Million,
or $0.25 Per Diluted Share, in Second
Quarter 2022)
- Funds from Operations ("FFO") of $1.91 Per Share for Second Quarter 2023 Compared
to $1.72 Per Share for Second Quarter
2022, an Increase of 11.0%
- FFO Excluding Gain on Casualties and Involuntary Conversion
($0.02 Per Share in Second Quarter
2023) of $1.89 Per Share Compared to
$1.72 Per Share for the Same Quarter
Last Year, an Increase of 9.9%
- Same Property Net Operating Income for the Same Property
Pool Excluding Income From Lease Terminations Increased 5.9% on a
Straight-Line Basis and 6.4% on a Cash Basis for Second Quarter
2023 Compared to the Same Period in 2022
- Operating Portfolio was 98.5% Leased and 98.2% Occupied as
of June 30, 2023; Average Occupancy
of Operating Portfolio was 98.1% in Each of the Second Quarters of
2023 and 2022
- Rental Rates on New and Renewal Leases Increased an Average
of 52.8% on a Straight-Line Basis
- Acquired an Operating Property Containing 156,000 Square
Feet for Approximately $34
Million
- Acquired 116.7 Acres of Development Land for Approximately
$18 Million
- Started Construction of Three Development Projects
Containing 365,000 Square Feet with Projected Total Costs of
Approximately $53 Million
- Transferred Three Development and Value-Add Projects
Totaling 391,000 Square Feet to the Operating Portfolio, Which Are
Collectively 88% Leased
- Development and Value-Add Program Consisted of 21 Projects
in 12 Cities (4.3 Million Square Feet) at June 30, 2023 with a Projected Total Investment
of Approximately $537
Million
- Declared 174th Consecutive Quarterly Cash
Dividend: $1.25 Per Share
- Sold 972,569 Shares of Common Stock Pursuant to the
Company's Continuous Common Equity Offering Program at a Weighted
Average Price of $169.72 Per Share
for Aggregate Net Proceeds of Approximately $163 Million
JACKSON,
Miss., July 25, 2023 /PRNewswire/ -- EastGroup
Properties, Inc. (NYSE: EGP) (the "Company", "we", "us" or
"EastGroup") announced today the results of its operations for the
three and six months ended June 30,
2023.
Commenting on EastGroup's performance, Marshall Loeb, CEO, stated, "Our team's strong
performance continues as evidenced by second quarter growth in FFO
per share of 11%. The day-to-day industrial market remains solid
producing a number of strong metrics, such as our percent leased,
percent occupied, 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. We remain judicious with capital
allocation and incremental risk, particularly in this uncertain
economic climate, which is one of the primary reasons we
continually work to strengthen our balance sheet and maintain dry
powder. Longer term, I remain bullish on the continued growth
prospects for our shallow bay, last mile Sunbelt market
portfolio."
EARNINGS PER SHARE
Three Months Ended June
30, 2023
On a diluted per share basis, earnings per
common share ("EPS") were $0.97 for
the three months ended June 30, 2023, compared to
$1.09 for the same period of 2022.
The Company's property net operating income ("PNOI") increased by
$15,109,000 ($0.34 per share) for the three months ended
June 30, 2023, as compared to the same period of 2022. The
increase in PNOI was offset by the following:
- EastGroup recognized no gains on sales of real estate
investments during the three months ended June 30, 2023, as compared to $10,647,000 ($0.25
per share) during the same period of 2022.
- Depreciation and amortization expense increased by $4,834,000 ($0.11
per share) during the three months ended June 30, 2023, as compared to the same period of
2022.
- Interest expense increased by $3,605,000 ($0.08
per share) during the three months ended June 30, 2023, as compared to the same period of
2022.
Six Months Ended June 30,
2023
Diluted EPS for the six months ended
June 30, 2023 was $1.99 compared
to $2.62 for the same period of 2022.
PNOI increased by $31,003,000
($0.70 per share) for the six months
ended June 30, 2023, as compared to the same period of 2022.
The increase in PNOI was offset by the following:
- EastGroup recognized gains on sales of real estate investments
of $4,809,000 ($0.11 per share) during the six months ended
June 30, 2023, compared to
$40,999,000 ($0.98 per share) for the six months ended
June 30, 2022.
- Depreciation and amortization expense increased by $9,507,000 ($0.21
per share) during the six months ended June
30, 2023, as compared to the same period of 2022.
- Interest expense increased by $8,520,000 ($0.19
per share) during the six months ended June
30, 2023, as compared to the same period of 2022.
FUNDS FROM OPERATIONS AND PROPERTY NET OPERATING
INCOME
Three Months Ended June 30,
2023
For the three months ended June 30, 2023,
funds from operations attributable to common stockholders ("FFO")
were $1.91 per share compared to
$1.72 per share during the same
period of 2022, an increase of 11.0%.
FFO Excluding Gain on Casualties and Involuntary Conversion was
$1.89 per share for the three months
ended June 30, 2023; no Gain on Casualties and Involuntary
Conversion was recognized in the same period of 2022.
PNOI increased by $15,109,000, or
17.5%, during the three months ended June 30, 2023, compared
to the same period of 2022. PNOI increased $7,735,000 from newly developed and value-add
properties, $3,975,000 from same
property operations (based on the same property pool), $3,277,000 from 2022 and 2023 acquisitions, and
$108,000 from operating properties
sold in 2022 and 2023.
Same PNOI Excluding Income from Lease Terminations increased
5.9% on a straight-line basis for the three months ended
June 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
6.4%.
On a straight-line basis, rental rates on new and renewal leases
(4.1% of total square footage) increased an average of 52.8% during
the three months ended June 30, 2023.
Six Months Ended June 30,
2023
FFO for the six months ended June 30, 2023,
was $3.75 per share compared to
$3.41 per share during the same
period of 2022, an increase of 10.0%.
FFO Excluding Gain on Casualties and Involuntary Conversion was
$3.71 per share for the six months
ended June 30, 2023; no Gain on Casualties and Involuntary
Conversion was recognized in the same period of 2022.
PNOI increased by $31,003,000, or
18.4%, during the six months ended June 30,
2023, compared to the same period of 2022. PNOI increased
$15,430,000 from newly developed and
value-add properties, $8,603,000 from
same property operations (based on the same property pool), and
$7,316,000 from 2022 and 2023
acquisitions; PNOI decreased $260,000
from operating properties sold in 2022 and 2023.
Same PNOI Excluding Income from Lease Terminations increased
6.8% on a straight-line basis for the six months ended
June 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 8.7%.
On a straight-line basis, rental rates on new and renewal leases
(7.2% of total square footage) increased an average of 51.0% during
the six months ended June 30, 2023.
The same property pool for the six months ended June 30,
2023 includes properties which were included in the operating
portfolio for the entire period from January
1, 2022 through June 30, 2023; this pool is comprised
of properties containing 46,514,000 square feet.
FFO, FFO Excluding Gain on Casualties and Involuntary
Conversion, 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 Casualties and
Involuntary Conversion are presented in the attached schedule
"Reconciliations of GAAP to Non-GAAP Measures."
ACQUISITIONS AND DISPOSITIONS
In April, EastGroup acquired Craig Corporate Center, a 156,000
square foot building, for $34,400,000. The property is located in the North
submarket of Las Vegas and is 100%
leased. This acquisition increased the Company's ownership in
Las Vegas to approximately 910,000
square feet.
During the three months ended June 30, 2023, the Company
closed on the acquisition of development land in three different
markets:
- Lakeside Station Land - 58.8 acres of development land in the
East submarket of Tampa for
$6,800,000. This site will
accommodate the future development of two buildings containing
approximately 450,000 square feet. This development will expand the
Company's 4,348,000 square feet of operating properties in this
market which are currently 99.5% leased.
- Northeast Trade Center Land - 49.0 acres of development land in
San Antonio's Northeast Submarket
for $6,200,000. This site will
accommodate the future development of five buildings containing
approximately 675,000 square feet. This development will expand the
Company's 1,444,000 square feet of operating properties in this
submarket which are currently 100% leased.
- Gateway Interchange Phase 3 Land - 8.9 acres of development
land in Phoenix for $4,700,000. This site, which will accommodate the
future development of a 125,000 square foot building, is located
next to 50.2 acres acquired by the Company in the first quarter of
2022, known as Gateway Interchange Land.
Subsequent to quarter-end, the Company closed on the acquisition
of 20.3 acres of development land in the Northwest Dallas submarket for approximately
$5,500,000. The site will accommodate
the future development of two buildings containing approximately
245,000 square feet.
In June, the Company sold a 9.9 acre parcel of land in
Houston, Texas for $3,200,000. A gain of $365,000 was recognized and is included
in Other on the Consolidated Statements of Income
and Comprehensive Income; this gain is excluded from FFO.
DEVELOPMENT AND VALUE-ADD PROPERTIES
During the second quarter of 2023, EastGroup began construction
of three new development projects in two cities, which will contain
a total of 365,000 square feet and have projected total costs of
$52,700,000.
The development projects started during the first six 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
|
|
|
Riverside 1 &
2
|
|
Atlanta, GA
|
|
284,000
|
|
|
12/2024
|
|
33,700
|
|
|
Eisenhauer Point
10-12
|
|
San Antonio,
TX
|
|
223,000
|
|
|
01/2025
|
|
29,400
|
|
|
SunCoast 9
|
|
Fort Myers,
FL
|
|
111,000
|
|
|
01/2025
|
|
16,200
|
|
|
Gateway South Dade 1
& 2
|
|
Miami, FL
|
|
169,000
|
|
|
02/2025
|
|
33,400
|
|
|
Horizon West
6
|
|
Orlando, FL
|
|
87,000
|
|
|
02/2025
|
|
12,300
|
|
|
MCO Logistics
Center
|
|
Orlando, FL
|
|
167,000
|
|
|
02/2025
|
|
24,200
|
|
|
Total Development
Projects Started
|
|
|
|
1,398,000
|
|
|
|
|
$
|
193,800
|
|
|
At June 30, 2023, EastGroup's development and value-add
program consisted of 21 projects (4,272,000 square feet) in 12
cities. The projects, which were collectively 38% leased as of
July 24, 2023, have a projected total cost of $536,600,000, of which $190,771,000 remained to be funded as of
June 30, 2023.
During the second quarter of 2023, EastGroup transferred three
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 San
Francisco, Dallas, and
Orlando, contain 391,000 square
feet and were collectively 88% leased as of July 24, 2023.
The development and value-add properties transferred to the
operating portfolio during the first six 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 6/30/23
|
|
Percent Leased as of
7/24/23
|
|
|
|
|
(Square
feet)
|
|
|
|
(In
thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Grand West Crossing
1
|
|
Houston, TX
|
|
121,000
|
|
|
02/2023
|
|
$
|
13,597
|
|
|
100 %
|
SunCoast 11
|
|
Fort Myers,
FL
|
|
79,000
|
|
|
02/2023
|
|
9,664
|
|
|
100 %
|
Cypress Preserve 1
& 2(1)
|
|
Houston, TX
|
|
516,000
|
|
|
03/2023
|
|
54,809
|
|
|
100 %
|
Zephyr(1)
|
|
San Francisco,
CA
|
|
82,000
|
|
|
04/2023
|
|
29,044
|
|
|
42 %
|
McKinney 3 &
4
|
|
Dallas, TX
|
|
212,000
|
|
|
05/2023
|
|
26,911
|
|
|
100 %
|
Horizon West
1
|
|
Orlando, FL
|
|
97,000
|
|
|
06/2023
|
|
12,374
|
|
|
100 %
|
Total Projects
Transferred
|
|
|
|
1,107,000
|
|
|
|
|
$
|
146,399
|
|
|
96 %
|
|
|
|
|
|
|
|
|
|
|
|
Projected Stabilized
Yields(2)
|
|
Yield
|
|
|
|
|
|
|
|
|
Development
|
|
7.3 %
|
|
|
|
|
|
|
|
|
Value-Add
|
|
5.1 %
|
|
|
|
|
|
|
|
|
Combined
|
|
6.1 %
|
|
|
|
|
|
|
|
|
|
(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.
|
|
Subsequent to quarter-end, EastGroup began construction of
Braselton 3 in Atlanta, which will contain 115,000 square
feet and has a projected total cost of approximately $14,000,000.
DIVIDENDS
EastGroup declared a cash dividend of $1.25 per share in the second quarter of 2023.
The second quarter dividend, which was paid on July 14, 2023, was the Company's
174th consecutive quarterly cash distribution to
shareholders. The Company has increased or maintained its
dividend for 30 consecutive years and has increased it 27 years
over that period, including increases in each of the last 11
years. The annualized dividend rate of $5.00 per share yielded 2.7% on the closing stock
price of $186.04 on July 24,
2023.
FINANCIAL STRENGTH AND FLEXIBILITY
EastGroup continues to maintain a strong and flexible balance
sheet. Debt-to-total market capitalization was 18.0% at
June 30, 2023. The Company's interest and fixed charge
coverage ratio was 7.79x and 7.50x for the three and six months
ended June 30, 2023, respectively. The Company's ratio of debt
to earnings before interest, taxes, depreciation and amortization
for real estate ("EBITDAre") was 4.40x and 4.50x for the three and
six months ended June 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 second quarter, EastGroup sold 972,569 shares of
common stock under its continuous common equity offering program at
a weighted average price of $169.72
per share, providing aggregate net proceeds to the Company of
approximately $163,367,000. During
the six months ended June 30, 2023, EastGroup sold 1,793,603
shares of common stock under its continuous common equity offering
program at a weighted average price of $166.88 per share, providing aggregate net
proceeds to the Company of approximately $295,876,000. Included in the second quarter
activity are 75,016 shares sold on June
29 and June 30, 2023, at a
weighted average price of $172.42,
which were deemed to be issued and outstanding upon settlement in
July 2023.
Subsequent to quarter-end, the Company began negotiating terms
with a bank to refinance a $100,000,000 senior unsecured term loan with five
years remaining. The Company expects to agree to an amendment that
would be effective in September 2023.
The maturity date of the unsecured term loan is expected to remain
September 29, 2028, which is
unchanged from the loan's original terms. The amended term loan is
expected to provide for interest-only payments at an interest rate
of SOFR plus, based on the Company's current credit ratings and
consolidated leverage ratio, 85 basis points, which would be 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, which is expected to provide a
total effectively fixed interest rate of 2.61%.
OUTLOOK FOR 2023
EPS for 2023 is now estimated to be in the range of $3.84 to $3.94. FFO per share attributable to common
stockholders for 2023 is now estimated to be in the range of
$7.58 to $7.68. 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
|
|
|
Q3
2023
|
|
Y/E
2023
|
|
Q3
2023
|
|
Y/E
2023
|
|
|
(In thousands,
except per share data)
|
|
|
|
|
|
|
|
|
|
Net income attributable
to common stockholders
|
|
$
|
40,821
|
|
|
173,103
|
|
|
43,557
|
|
|
177,611
|
|
Depreciation and
amortization
|
|
44,536
|
|
|
173,857
|
|
|
44,536
|
|
|
173,857
|
|
Gain on sales of real
estate investments and non-operating real estate
|
|
—
|
|
|
(5,255)
|
|
|
—
|
|
|
(5,255)
|
|
Funds from operations
attributable to common stockholders*
|
|
$
|
85,357
|
|
|
341,705
|
|
|
88,093
|
|
|
346,213
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares
outstanding - Diluted
|
|
45,589
|
|
|
45,079
|
|
|
45,589
|
|
|
45,079
|
|
Per share data
(diluted):
|
|
|
|
|
|
|
|
|
Net income
attributable to common stockholders
|
|
$
|
0.90
|
|
|
3.84
|
|
|
0.96
|
|
|
3.94
|
|
Funds from
operations attributable to common stockholders
|
|
1.87
|
|
|
7.58
|
|
|
1.93
|
|
|
7.68
|
|
*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
|
|
April Earnings
Release Guidance for Year 2023
|
|
Actual for Year
2022
|
FFO per
share
|
|
$7.58 -
$7.68
|
|
$7.49 -
$7.61
|
|
$7.00
|
FFO per share increase
over prior year
|
|
9.0 %
|
|
7.9 %
|
|
14.9 %
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Same PNOI growth: cash
basis(1)
|
|
6.8% -
7.8%(2)
|
|
6.5% -
7.5%(2)
|
|
8.9 %
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average month-end
occupancy - operating portfolio
|
|
97.3% -
98.3%
|
|
97.2% -
98.2%
|
|
98.0 %
|
Lease termination fee
income
|
|
$725,000
|
|
$425,000
|
|
$2.7 million
|
Reserves of
uncollectible rent
(Currently no
identified bad debt for Q3-Q4)
|
|
$1.8 million
|
|
$1.9 million
|
|
$138,000
|
Development
starts:
|
|
|
|
|
|
|
Square
feet
|
|
2.7 million
|
|
2.6 million
|
|
2.7 million
|
Projected total
investment
|
|
$360 million
|
|
$340 million
|
|
$329 million
|
Value-add property
acquisitions (Projected total
investment)
|
|
none
|
|
none
|
|
$135 million
|
Operating property
acquisitions
|
|
$60 million
|
|
$60 million
|
|
$378 million
|
Operating property
dispositions
(Potential gains
on dispositions are not included in the projections)
|
|
$60 million
|
|
$75 million
|
|
$52 million
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unsecured debt closing
in period
|
|
$100 million at 5.27%
weighted
average interest rate
|
|
$200 million at 5.50%
weighted
average interest rate
|
|
$525 million at 3.82%
weighted
average interest rate
|
Common stock
issuances
|
|
$475 million
|
|
$180 million
|
|
$75 million
|
General and
administrative expense
|
|
$18.5
million
|
|
$17.8
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 46,514,000 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") 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 Casualties and Involuntary Conversion is
calculated as FFO (as defined above), adjusted to exclude gain
on casualties and involuntary conversion. The Company believes that
the exclusion of gain on casualties and involuntary conversion
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 second quarter, review the Company's current
operations, and present its revised earnings outlook for 2023 on
Wednesday, July 26, 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, August 2, 2023. The telephone
replay can be accessed by dialing 1-877-344-7529 (access code
9872527), 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 57.6 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," or "plans" and variations of such words or 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. 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 and in its
subsequent Quarterly Reports on Form 10-Q.
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
|
|
Six Months
Ended
|
|
|
June
30,
|
|
June
30,
|
|
|
2023
|
|
2022
|
|
2023
|
|
2022
|
REVENUES
|
|
|
|
|
|
|
|
|
Income from real estate
operations
|
|
$
|
138,811
|
|
|
118,498
|
|
|
272,775
|
|
|
231,450
|
|
Other
revenue
|
|
1,076
|
|
|
55
|
|
|
2,137
|
|
|
77
|
|
|
|
139,887
|
|
|
118,553
|
|
|
274,912
|
|
|
231,527
|
|
EXPENSES
|
|
|
|
|
|
|
|
|
Expenses from real
estate operations
|
|
37,767
|
|
|
32,546
|
|
|
73,953
|
|
|
63,610
|
|
Depreciation and
amortization
|
|
42,295
|
|
|
37,461
|
|
|
83,309
|
|
|
73,802
|
|
General and
administrative
|
|
4,384
|
|
|
4,226
|
|
|
9,588
|
|
|
8,536
|
|
Indirect leasing
costs
|
|
149
|
|
|
116
|
|
|
289
|
|
|
291
|
|
|
|
84,595
|
|
|
74,349
|
|
|
167,139
|
|
|
146,239
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OTHER INCOME
(EXPENSE)
|
|
|
|
|
|
|
|
|
Interest
expense
|
|
(12,575)
|
|
|
(8,970)
|
|
|
(25,600)
|
|
|
(17,080)
|
|
Gain on sales of real
estate investments
|
|
—
|
|
|
10,647
|
|
|
4,809
|
|
|
40,999
|
|
Other
|
|
748
|
|
|
284
|
|
|
1,187
|
|
|
562
|
|
NET
INCOME
|
|
43,465
|
|
|
46,165
|
|
|
88,169
|
|
|
109,769
|
|
Net income attributable
to noncontrolling interest in joint ventures
|
|
(15)
|
|
|
(26)
|
|
|
(29)
|
|
|
(50)
|
|
NET INCOME
ATTRIBUTABLE TO EASTGROUP PROPERTIES, INC. COMMON
STOCKHOLDERS
|
|
43,450
|
|
|
46,139
|
|
|
88,140
|
|
|
109,719
|
|
Other comprehensive
income (loss) - interest rate swaps
|
|
10,202
|
|
|
6,841
|
|
|
(60)
|
|
|
22,669
|
|
TOTAL COMPREHENSIVE
INCOME
|
|
$
|
53,652
|
|
|
52,980
|
|
|
88,080
|
|
|
132,388
|
|
|
|
|
|
|
|
|
|
|
BASIC PER COMMON
SHARE DATA FOR NET INCOME ATTRIBUTABLE TO EASTGROUP PROPERTIES,
INC. COMMON STOCKHOLDERS
|
|
|
|
|
|
|
|
|
Net income attributable
to common stockholders
|
|
$
|
0.97
|
|
|
1.09
|
|
|
1.99
|
|
|
2.63
|
|
Weighted average shares
outstanding - Basic
|
|
44,656
|
|
|
42,211
|
|
|
44,204
|
|
|
41,729
|
|
DILUTED PER COMMON
SHARE DATA FOR NET INCOME ATTRIBUTABLE TO EASTGROUP PROPERTIES,
INC. COMMON STOCKHOLDERS
|
|
|
|
|
|
|
|
|
Net income attributable
to common stockholders
|
|
$
|
0.97
|
|
|
1.09
|
|
|
1.99
|
|
|
2.62
|
|
Weighted average shares
outstanding - Diluted
|
|
44,734
|
|
|
42,316
|
|
|
44,279
|
|
|
41,838
|
|
|
|
|
|
|
|
|
|
|
EASTGROUP
PROPERTIES, INC. AND SUBSIDIARIES
|
RECONCILIATIONS OF
GAAP TO NON-GAAP MEASURES
|
(IN THOUSANDS,
EXCEPT PER SHARE DATA)
|
(UNAUDITED)
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
|
|
Six Months
Ended
|
|
|
June
30,
|
|
June
30,
|
|
|
2023
|
|
2022
|
|
2023
|
|
2022
|
|
|
|
|
|
|
|
|
|
NET INCOME
ATTRIBUTABLE TO EASTGROUP PROPERTIES, INC. COMMON
STOCKHOLDERS
|
|
$
|
43,450
|
|
|
46,139
|
|
|
88,140
|
|
|
109,719
|
|
Depreciation and
amortization
|
|
42,295
|
|
|
37,461
|
|
|
83,309
|
|
|
73,802
|
|
Company's share of
depreciation from unconsolidated investment
|
|
31
|
|
|
31
|
|
|
62
|
|
|
62
|
|
Depreciation and
amortization from noncontrolling interest
|
|
(1)
|
|
|
(6)
|
|
|
(2)
|
|
|
(9)
|
|
Gain on sales of real
estate investments
|
|
—
|
|
|
(10,647)
|
|
|
(4,809)
|
|
|
(40,999)
|
|
Gain on sales of
non-operating real estate
|
|
(365)
|
|
|
—
|
|
|
(446)
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FUNDS FROM
OPERATIONS ("FFO") ATTRIBUTABLE TO COMMON
STOCKHOLDERS*
|
|
85,410
|
|
|
72,978
|
|
|
166,254
|
|
|
142,575
|
|
Gain on casualties and
involuntary conversion
|
|
(1,042)
|
|
|
—
|
|
|
(2,069)
|
|
|
—
|
|
FFO ATTRIBUTABLE TO
COMMON STOCKHOLDERS EXCLUDING GAIN ON CASUALTIES AND INVOLUNTARY
CONVERSION*
|
|
$
|
84,368
|
|
|
72,978
|
|
|
164,185
|
|
|
142,575
|
|
|
|
|
|
|
|
|
|
|
NET
INCOME
|
|
$
|
43,465
|
|
|
46,165
|
|
|
88,169
|
|
|
109,769
|
|
Interest
expense (1)
|
|
12,575
|
|
|
8,970
|
|
|
25,600
|
|
|
17,080
|
|
Depreciation and
amortization
|
|
42,295
|
|
|
37,461
|
|
|
83,309
|
|
|
73,802
|
|
Company's share of
depreciation from unconsolidated investment
|
|
31
|
|
|
31
|
|
|
62
|
|
|
62
|
|
EARNINGS BEFORE
INTEREST, TAXES, DEPRECIATION AND AMORTIZATION
("EBITDA")
|
|
98,366
|
|
|
92,627
|
|
|
197,140
|
|
|
200,713
|
|
Gain on sales of real
estate investments
|
|
—
|
|
|
(10,647)
|
|
|
(4,809)
|
|
|
(40,999)
|
|
Gain on sales of
non-operating real estate
|
|
(365)
|
|
|
—
|
|
|
(446)
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EBITDA FOR REAL
ESTATE ("EBITDAre")*
|
|
$
|
98,001
|
|
|
81,980
|
|
|
191,885
|
|
|
159,714
|
|
|
|
|
|
|
|
|
|
|
Debt
|
|
$
|
1,725,996
|
|
|
1,623,536
|
|
|
1,725,996
|
|
|
1,623,536
|
|
Debt-to-EBITDAre
ratio*
|
|
4.40
|
|
|
4.95
|
|
|
4.50
|
|
|
5.08
|
|
|
|
|
|
|
|
|
|
|
EBITDAre*
|
|
$
|
98,001
|
|
|
81,980
|
|
|
191,885
|
|
|
159,714
|
|
Interest
expense (1)
|
|
12,575
|
|
|
8,970
|
|
|
25,600
|
|
|
17,080
|
|
Interest and fixed
charge coverage ratio*
|
|
7.79
|
|
|
9.14
|
|
|
7.50
|
|
|
9.35
|
|
|
|
|
|
|
|
|
|
|
DILUTED PER COMMON
SHARE DATA FOR NET INCOME ATTRIBUTABLE TO EASTGROUP PROPERTIES,
INC. COMMON STOCKHOLDERS
|
|
|
|
|
|
|
|
|
Net income attributable
to common stockholders
|
|
$
|
0.97
|
|
|
1.09
|
|
|
1.99
|
|
|
2.62
|
|
FFO attributable to
common stockholders
|
|
$
|
1.91
|
|
|
1.72
|
|
|
3.75
|
|
|
3.41
|
|
FFO Excluding Gain on
Casualties and Involuntary Conversion attributable to common
stockholders
|
|
$
|
1.89
|
|
|
1.72
|
|
|
3.71
|
|
|
3.41
|
|
Weighted average shares
outstanding for EPS and FFO purposes - Diluted
|
|
44,734
|
|
|
42,316
|
|
|
44,279
|
|
|
41,838
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) Net of capitalized interest of $3,878 and
$2,699 for the three months ended June 30, 2023 and 2022,
respectively; and $7,613 and $4,943 for the six months ended
June 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
|
|
Six Months
Ended
|
|
|
June
30,
|
|
June
30,
|
|
|
2023
|
|
2022
|
|
2023
|
|
2022
|
|
|
|
|
|
|
|
|
|
NET
INCOME
|
|
$
|
43,465
|
|
|
46,165
|
|
|
88,169
|
|
|
109,769
|
|
Gain on sales of real
estate investments
|
|
—
|
|
|
(10,647)
|
|
|
(4,809)
|
|
|
(40,999)
|
|
Gain on sales of
non-operating real estate
|
|
(365)
|
|
|
—
|
|
|
(446)
|
|
|
—
|
|
Interest
income
|
|
(105)
|
|
|
(6)
|
|
|
(186)
|
|
|
(6)
|
|
Other
revenue
|
|
(1,076)
|
|
|
(55)
|
|
|
(2,137)
|
|
|
(77)
|
|
Indirect leasing
costs
|
|
149
|
|
|
116
|
|
|
289
|
|
|
291
|
|
Depreciation and
amortization
|
|
42,295
|
|
|
37,461
|
|
|
83,309
|
|
|
73,802
|
|
Company's share of
depreciation from unconsolidated investment
|
|
31
|
|
|
31
|
|
|
62
|
|
|
62
|
|
Interest
expense (1)
|
|
12,575
|
|
|
8,970
|
|
|
25,600
|
|
|
17,080
|
|
General and
administrative expense (2)
|
|
4,384
|
|
|
4,226
|
|
|
9,588
|
|
|
8,536
|
|
Noncontrolling interest
in PNOI of consolidated joint ventures
|
|
(15)
|
|
|
(32)
|
|
|
(31)
|
|
|
(53)
|
|
PROPERTY NET
OPERATING INCOME ("PNOI")*
|
|
101,338
|
|
|
86,229
|
|
|
199,408
|
|
|
168,405
|
|
PNOI from 2022 and 2023
acquisitions
|
|
(4,702)
|
|
|
(1,425)
|
|
|
(8,741)
|
|
|
(1,425)
|
|
PNOI from 2022 and 2023
development and value-add properties
|
|
(11,271)
|
|
|
(3,536)
|
|
|
(20,862)
|
|
|
(5,432)
|
|
PNOI from 2022 and 2023
operating property dispositions
|
|
—
|
|
|
108
|
|
|
95
|
|
|
(165)
|
|
Other PNOI
|
|
88
|
|
|
102
|
|
|
199
|
|
|
113
|
|
SAME PNOI
(Straight-Line Basis)*
|
|
85,453
|
|
|
81,478
|
|
|
170,099
|
|
|
161,496
|
|
Lease termination fee
income from same properties
|
|
(172)
|
|
|
(979)
|
|
|
(210)
|
|
|
(2,373)
|
|
SAME PNOI EXCLUDING
INCOME FROM LEASE TERMINATIONS (Straight-Line
Basis)*
|
|
85,281
|
|
|
80,499
|
|
|
169,889
|
|
|
159,123
|
|
Straight-line rent
adjustments for same properties
|
|
(437)
|
|
|
(698)
|
|
|
(682)
|
|
|
(2,772)
|
|
Acquired leases -
market rent adjustment amortization for same properties
|
|
(167)
|
|
|
(221)
|
|
|
(328)
|
|
|
(934)
|
|
SAME PNOI EXCLUDING
INCOME FROM LEASE TERMINATIONS (Cash Basis)*
|
|
$
|
84,677
|
|
|
79,580
|
|
|
168,879
|
|
|
155,417
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) Net of capitalized interest of $3,878 and
$2,699 for the three months ended June 30, 2023 and 2022,
respectively; and $7,613 and $4,943 for the six months ended
June 30, 2023 and 2022, respectively.
|
(2) Net of capitalized development costs of $2,357
and $2,617 for the three months ended June 30, 2023 and 2022,
respectively; and $4,812 and $5,086 for the six months ended
June 30, 2023 and 2022, respectively.
|
*This is a non-GAAP financial measure. Please refer to
Definitions.
|
|
|
|
|
|
|
|
|
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SOURCE EastGroup Properties