FOR MORE INFORMATION, CONTACT: EXHIBIT 99.1
David H. Hoster II, President and Chief Executive Officer
N. Keith McKey, Chief Financial Officer
(601) 354-3555
EASTGROUP PROPERTIES ANNOUNCES
SECOND QUARTER 2005 RESULTS
o Net Income Available to Common Stockholders of $5.2 Million or $.24 Per
Share
o Funds from Operations of $14.3 Million or $.65 Per Share, an Increase of
6.6%
o Percentage Leased 93.2%, Occupancy 91.8%
o Same Property Net Operating Income Growth of 3.7%
o Paid 102nd Consecutive Quarterly Dividend - $.485 Per Share
o Development Projects of $41.4 Million Under Construction or In Lease-Up
o Debt-to-Total Market Capitalization of 29.9% at Quarter End
o Interest Coverage of 3.6x and Fixed Charge Coverage of 3.2x
JACKSON, MISSISSIPPI, July 25, 2005 - EastGroup Properties, Inc. (NYSE-EGP)
announced today the results of its operations for the three and six months ended
June 30, 2005.
FUNDS FROM OPERATIONS
For the quarter ended June 30, 2005, funds from operations (FFO) available to
common stockholders was $.65 per share compared with $.61 per share for the same
period of 2004, an increase of 6.6%. The increase in FFO for the second quarter
was primarily due to higher property net operating income (PNOI) of $2,401,000
(a 12.0% increase in PNOI). This increase in PNOI resulted from $1,189,000
attributable to 2004 and 2005 acquisitions, $472,000 from newly developed
properties and $740,000 from same property growth.
For the six months ended June 30, 2005, FFO was $1.29 per share compared with
$1.20 per share for the same period last year, an increase of 7.5%. The increase
in FFO for 2005 was primarily due to higher PNOI of $4,409,000 (an 11.1%
increase in PNOI). The increase in PNOI resulted from $2,301,000 attributable to
2004 and 2005 acquisitions, $770,000 from newly developed properties and
$1,338,000 from same property growth.
PNOI from same properties increased 3.7% for the quarter, and, before
straight-line rent adjustments, the increase was 6.8%. Rental rate increases on
new and renewal leases averaged 2.5% for the quarter. Before straight-line rent
adjustments, rental rate decreases on new and renewal leases averaged 2.2%.
For the six months ended June 30, 2005, PNOI from same properties increased
3.4%. Before straight-line rent adjustments, the increase was 6.6%. Rental rate
increases on new and renewal leases averaged 2.2% for the six months. Before
straight-line rent adjustments, rental rate decreases on new and renewal leases
averaged 2.0%.
FFO and PNOI are non-GAAP financial measures, which are defined under
Definitions later in this release. Reconciliations of FFO and PNOI to Net
Income, the most directly comparable GAAP financial measure, are presented in
the attached schedule "Reconciliations of Other Reporting Measures to Net
Income."
David H. Hoster II, President and CEO, stated, "We are pleased with our increase
in FFO, which was generated by all three prongs of our growth strategy-new
development, acquisitions and internal operations. Our continuing growth in
property operations during the second quarter deserves special mention since it
was our eighth consecutive quarter of positive same property comparisons."
EARNINGS PER SHARE
On a diluted per share basis, earnings per common share (EPS) was $.24 for the
three months ended June 30, 2005 compared with $.22 for the second quarter of
2004. For the six months, diluted EPS was $.47 compared with $.43 for the same
period in 2004.
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P.O.BOX 22728-JACKSON,MS 39225-TEL.601-354-3555-FAX 601-352-1441
DEVELOPMENT
EastGroup's current development program and properties transferred during 2005
and 2004 to the portfolio increased PNOI by $472,000 in the second quarter of
2005 and $770,000 for the six months. At June 30, 2005, EastGroup had nine
development properties containing 636,000 square feet with a projected total
cost of approximately $41.4 million either in lease-up or under construction.
In May, EastGroup transferred Palm River South I (79,000 square feet) in Tampa
to the portfolio. Palm River, which was completed last December, is currently
92% leased to four customers.
In June, the Company began the development of World Houston 15 and World Houston
21 in our World Houston International Business Center. They will contain a total
of 131,000 square feet with a projected total investment of $9.6 million.
EastGroup's development pipeline currently contains 224 acres, which has the
potential of approximately 2.7 million square feet of new development. In
addition, the Company has another 73 acres in three locations under contract for
purchase.
Mr. Hoster stated, "Our development program has been and will continue to be
both a creator of value and a major contributor to our growth in FFO."
SECOND QUARTER ACQUISITIONS AND SALES
In June 2005, EastGroup acquired Benan Distribution Center, a 44,000 square foot
business distribution building in Tucson, Arizona, for a purchase price of $2.7
million. The property, which was constructed in 2001, is 75% leased to a single
customer. Benan is projected to generate a stabilized yield of 8.0% when 100%
leased.
Also in June, the Company sold Lamar Distribution Center II (151,000 square
feet) in Memphis, Tennessee for $3.925 million, which generated a gain of
$754,000. As part of the transaction, which was a sale in lieu of condemnation,
the outstanding first mortgage balance of $1,781,000 with an interest rate of
6.9% was repaid in full.
Mr. Hoster stated, "Benan Distribution Center is well located in northwest
Tucson along Interstate 10, designed to serve local distribution needs. This
acquisition increases our ownership in Tucson to four properties with a total of
567,000 square feet. The sale of Lamar II is our second Memphis property
disposition this year and reflects our announced strategy of exiting Memphis, a
noncore market, as market conditions permit."
CAPITAL TRANSACTIONS
On March 31, 2005, EastGroup closed the sale of 800,000 shares of its common
stock to Citigroup Global Markets Inc. On May 2, 2005, the underwriter closed on
the exercise of a portion of its over-allotment option and purchased 60,000
additional shares. Total net proceeds from the offering of the shares were
approximately $31.6 million after deducting the underwriting discount and other
offering expenses.
At the end of May 2005, EastGroup closed a nonrecourse first mortgage loan
secured by Industry Distribution Center II in Los Angeles. The Company has a 50%
undivided tenant-in-common interest in the 309,000 square foot warehouse. The
$13.3 million loan has a fixed interest rate of 5.31%, a ten-year term and an
amortization schedule of 25 years. As part of this transaction, the loan
proceeds payable to the co-owner ($6.65 million) were paid to EastGroup to
reduce the $6.75 million note that the Company advanced to the co-owner in
November 2004 related to the property's acquisition. Also at the closing, the
co-owner repaid the remaining balance of $100,000 on this note. The total
proceeds of $13.3 million were used to reduce EastGroup's outstanding variable
rate bank debt.
DIVIDENDS
EastGroup paid dividends of $.485 per share of common stock in the second
quarter of 2005, which was the 102nd consecutive quarterly distribution to
EastGroup's common stockholders. The annualized dividend rate of $1.94 per share
yields 4.4% on the closing stock price of $43.70 on July 22, 2005.
EastGroup also paid quarterly dividends of $.4969 per share on its Series D
Preferred Stock on July 15, 2005 to stockholders of record as of June 30, 2005.
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P.O.BOX 22728-JACKSON,MS 39225-TEL.601-354-3555-FAX 601-352-1441
STRONG FINANCIAL POSITION
EastGroup's balance sheet continues to be strong and flexible with debt-to-total
market capitalization of 29.9% at June 30, 2005. For the quarter, the Company
had an interest coverage ratio of 3.6x and a fixed charge coverage ratio of
3.2x. Total debt at June 30, 2005 was $409.7 million with floating rate bank
debt comprising $88.1 million of that total.
During 2005, the Company has repaid four mortgages, including two which were
repaid on July 1, 2005. The details of these mortgages are shown in the table
below:
Interest Date Amount
Mortgage Debt Rate Repaid Repaid
--------------------------------------------------------------------------------------
Westport Commerce Center 8.000% 03/31/05 $ 2,371,000
Lamar Distribution Center II 6.900% 06/30/05 1,781,000
Exchange Distribution Center I 8.375% 07/01/05 1,762,000
Lake Pointe Business Park 8.125% 07/01/05 9,738,000
---------- ---------------
Weighted Average/Total Amount 7.995% $ 15,652,000
========== ===============
OUTLOOK FOR REMAINDER OF 2005
FFO guidance for 2005 has been narrowed from our previous guidance on an FFO per
share basis to a range of $2.60 to $2.68. Earnings per share for 2005 should be
in the range of $.95 to $.99. The table below reconciles projected net income to
projected FFO.
Low Range High Range
Q3 2005 Y/E 2005 Q3 2005 Y/E 2005
------------------------------------------------------
Net income $ 5,257 23,375 5,699 24,195
Dividends on preferred shares (656) (2,624) (656) (2,624)
------------------------------------------------------
Net income available to common stockholders 4,601 20,751 5,043 21,571
Depreciation and amortization 9,695 38,237 9,695 38,126
Gain on sale of depreciable real estate - (2,331) - (1,131)
------------------------------------------------------
Funds from operations available to common stockholders $ 14,296 56,657 14,738 58,566
======================================================
Diluted shares 22,116 21,826 22,116 21,826
Per share data (diluted):
Net income available to common stockholders $ 0.21 0.95 0.23 .99
Funds from operations available to common stockholders $ 0.65 2.60 0.67 2.68
The following assumptions and completed transactions were used for 2005:
o Average occupancy of 90% to 92.5%.
o Same store PNOI increase of 1.2% to 4.4%.
o Existing development contributing $.14 per share in PNOI.
o Acquisitions, net of dispositions, of $25-30 million during the year. For
the low range, gains on sale of depreciable real estate of $1.2 million in
the remaining six months in addition to $1,131,000 recorded in the first
six months.
o Lease termination fees of $500,000 recorded year-to-date.
o Floating rate bank debt at an average rate of 4.2%.
o New fixed rate debt of $25 million on October 1, 2005 at 6%.
o Common stock offering - $29.4 million (800,000 shares) on March 31, 2005
and $2.2 million (60,000 shares) on May 2, 2005.
DEFINITIONS
The Company's chief decision makers use two primary measures of operating
results in making decisions: property net operating income (PNOI), defined as
income from real estate operations less property operating expenses (before
interest expense and depreciation and amortization), and funds from operations
available to common stockholders (FFO). EastGroup defines FFO consistent with
the National Association of Real Estate Investment Trusts' definition, as net
income (loss) computed in accordance with accounting principles generally
accepted in the United States of America (GAAP), excluding gains or losses from
sales of depreciable real estate property, plus real estate related depreciation
and amortization, and after adjustments for unconsolidated partnerships and
joint ventures.
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P.O.BOX 22728-JACKSON,MS 39225-TEL.601-354-3555-FAX 601-352-1441
PNOI and FFO 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.
CONFERENCE CALL
EastGroup will host a conference call and webcast to discuss the results of its
second quarter and review the Company's current operations on Tuesday, July 26,
2005, at 11:00 A.M. Eastern Daylight Time (EDT). A live broadcast of the
conference call is available by dialing 1-800-362-0571 (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 on Tuesday, July 26, 2005. The
telephone replay will be available until Tuesday, August 2, 2005, and can be
accessed by dialing 1-800-723-6062. The replay of the webcast can be accessed
through a link on the Company's website at www.eastgroup.net and will be
available until Tuesday, August 2, 2005.
SUPPLEMENTAL INFORMATION
Supplemental financial information is available by request by calling the
Company at 601-354-3555, or by accessing the report in the reports section of
the Company's website at www.eastgroup.net.
COMPANY INFORMATION
EastGroup Properties, Inc. 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 a special
emphasis in the states of Florida, Texas, California and Arizona. The Company's
goal is to maximize shareholder value by being the leading provider of
functional, flexible, and quality business distribution space for location
sensitive customers primarily in the 5,000 to 50,000 square foot range. The
Company's strategy for growth is based on ownership of premier distribution
facilities clustered near major transportation features in supply-constrained
submarkets. EastGroup's portfolio currently includes 21.2 million square feet
with an additional 636,000 square feet of properties under development.
EastGroup Properties, Inc. press releases are also available on the Company's
website.
FORWARD-LOOKING STATEMENTS
In addition to historical information, certain statements in this release are
forward-looking, such as those pertaining to the Company's hopes, expectations,
intentions, plans, beliefs, strategies regarding the future, the anticipated
performance of development and acquisition properties, capital resources,
profitability and portfolio performance. Forward-looking statements involve
numerous risks and uncertainties. The following factors, among others discussed
herein, could cause actual results and future events to differ materially from
those set forth or contemplated in the forward-looking statements: defaults or
nonrenewal of leases, increased interest rates and operating costs, failure to
obtain necessary outside financing, difficulties in identifying properties to
acquire and in effecting acquisitions, failure to qualify as a real estate
investment trust under the Internal Revenue Code of 1986, as amended,
environmental uncertainties, risks related to disasters and the costs of
insurance to protect from such disasters, financial market fluctuations, changes
in real estate and zoning laws, increases in real property tax rates and risks
relating to the Company's development program, including weather, delays in
construction schedules, contractor's failure to perform, increases in the price
of construction materials or the unavailability of such materials, difficulty in
obtaining necessary governmental approvals and other matters outside the
Company's control. The success of the Company also depends upon the trends of
the economy, including interest rates and the effects to the economy from
possible terrorism and related world events, income tax laws, governmental
regulation, legislation, population changes and those risk factors discussed
elsewhere in this release. Readers are cautioned not to place undue reliance on
forward-looking statements, which reflect management's analysis only as the date
hereof. The Company assumes no obligation to update forward-looking statements.
See also the Company's reports to be filed from time to time with the Securities
and Exchange Commission pursuant to the Securities Exchange Act of 1934.
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P.O.BOX 22728-JACKSON,MS 39225-TEL.601-354-3555-FAX 601-352-1441
CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
Three Months Ended Six Months Ended
June 30, June 30,
-------------------------------------------------------------
2005 2004 2005 2004
-------------------------------------------------------------
REVENUES
Income from real estate operations $ 31,121 27,858 61,320 55,209
Equity in earnings of unconsolidated investment 127 - 289 -
Mortgage interest income 79 - 198 -
Other 106 79 181 111
-------------------------------------------------------------
31,433 27,937 61,988 55,320
-------------------------------------------------------------
EXPENSES
Operating expenses from real estate operations 8,778 7,916 17,201 15,499
Interest 5,832 4,990 11,770 9,876
Depreciation and amortization 9,751 8,225 18,786 16,388
General and administrative 1,795 1,568 3,693 3,244
Minority interest in joint venture 114 123 243 244
-------------------------------------------------------------
26,270 22,822 51,693 45,251
-------------------------------------------------------------
INCOME FROM CONTINUING OPERATIONS 5,163 5,115 10,295 10,069
DISCONTINUED OPERATIONS
Income (loss) from real estate operations (29) 105 (2) 163
Gain on sale of real estate investments 754 61 1,131 61
-------------------------------------------------------------
INCOME FROM DISCONTINUED OPERATIONS 725 166 1,129 224
-------------------------------------------------------------
NET INCOME 5,888 5,281 11,424 10,293
Preferred dividends-Series D 656 656 1,312 1,312
-------------------------------------------------------------
NET INCOME AVAILABLE TO COMMON STOCKHOLDERS $ 5,232 4,625 10,112 8,981
=============================================================
BASIC PER COMMON SHARE DATA
Income from continuing operations 0.21 0.21 0.42 0.42
Income from discontinued operations 0.03 0.01 0.05 0.01
-------------------------------------------------------------
Net income available to common stockholders $ 0.24 0.22 0.47 0.43
=============================================================
Weighted average shares outstanding 21,755 20,745 21,326 20,716
=============================================================
DILUTED PER COMMON SHARE DATA
Income from continuing operations $ 0.21 0.21 0.42 0.42
Income from discontinued operations 0.03 0.01 0.05 0.01
-------------------------------------------------------------
Net income available to common stockholders $ 0.24 0.22 0.47 0.43
=============================================================
Weighted average shares outstanding 22,073 21,142 21,638 21,128
=============================================================
Dividends declared per common share $ 0.485 0.480 0.970 0.960
5
EASTGROUP PROPERTIES, INC.
RECONCILIATIONS OF OTHER REPORTING MEASURES TO NET INCOME
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
Three Months Ended Six Months Ended
June 30, June 30,
---------------------------------------------------------
2005 2004 2005 2004
---------------------------------------------------------
RECONCILIATIONS OF OTHER REPORTING MEASURES TO NET INCOME:
Income from real estate operations $ 31,121 27,858 61,320 55,209
Operating expenses from real estate operations (8,778) (7,916) (17,201) (15,499)
---------------------------------------------------------
PROPERTY NET OPERATING INCOME (PNOI) 22,343 19,942 44,119 39,710
Equity in earnings of unconsolidated investment (before depreciation) 164 - 363 -
Mortgage interest income 79 - 198 -
Other income 106 79 181 111
General and administrative expense (1,795) (1,568) (3,693) (3,244)
---------------------------------------------------------
EARNINGS BEFORE INTEREST, TAXES, DEPRECIATION AND AMORTIZATION (EBITDA) 20,897 18,453 41,168 36,577
Income from discontinued operations
(before depreciation and amortization) (A) 7 202 70 360
Interest expense (B) (5,832) (4,990) (11,770) (9,876)
Minority interest in earnings (before depreciation and amortization) (149) (159) (313) (315)
Dividends on Series D preferred shares (656) (656) (1,312) (1,312)
---------------------------------------------------------
FUNDS FROM OPERATIONS (FFO) AVAILABLE TO COMMON STOCKHOLDERS 14,267 12,850 27,843 25,434
Depreciation and amortization from continuing operations (9,751) (8,225) (18,786) (16,388)
Depreciation and amortization from discontinued operations (36) (97) (72) (197)
Depreciation from unconsolidated investment (37) - (74) -
Share of joint venture depreciation and amortization 35 36 70 71
Gain on sale of depreciable real estate investments 754 61 1,131 61
---------------------------------------------------------
NET INCOME AVAILABLE TO COMMON STOCKHOLDERS 5,232 4,625 10,112 8,981
Dividends on preferred shares 656 656 1,312 1,312
---------------------------------------------------------
NET INCOME $ 5,888 5,281 11,424 10,293
=========================================================
DILUTED PER COMMON SHARE DATA: (C)
Income from continuing operations $ 0.21 0.21 0.42 0.42
Income from discontinued operations 0.03 0.01 0.05 0.01
---------------------------------------------------------
Net income available to common stockholders $ 0.24 0.22 0.47 0.43
=========================================================
Funds from operations available to common stockholders $ 0.65 0.61 1.29 1.20
=========================================================
Weighted average shares outstanding for EPS and FFO purposes 22,073 21,142 21,638 21,128
=========================================================
(A) Includes interest expense of $32,000 and $33,000 for the three months ended
June 30, 2005 and 2004, respectively; and $64,000 and $66,000 for the six months
ended June 30, 2005 and 2004, respectively.
(B) Net of capitalized interest of $568,000 and $410,000 for the three months
ended June 30, 2005 and 2004, respectively; and $1,069,000 and $910,000 for the
six months ended June 30, 2005 and 2004, respectively.
(C) Assumes dilutive effect of common stock equivalents.
6