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
THIRD QUARTER 2005 RESULTS
o Funds from Operations of $14.8 Million or $.67 Per Share, an Increase of
4.7%
o Net Income Available to Common Stockholders of $5.2 Million or $.23 Per
Share
o Percentage Leased 94.8%, Occupancy 93.6%
o Same Property Net Operating Income Growth of 1.0%
o Paid 103rd Consecutive Quarterly Dividend - $.485 Per Share
o Development Projects of $53.1 Million Under Construction or In Lease-Up
o Debt-to-Total Market Capitalization of 29.6% at Quarter End
o Interest Coverage of 3.7x and Fixed Charge Coverage of 3.3x
JACKSON, MISSISSIPPI, October 24, 2005 - EastGroup Properties, Inc. (NYSE-EGP)
announced today the results of its operations for the three and nine months
ended September 30, 2005.
FUNDS FROM OPERATIONS
For the quarter ended September 30, 2005, funds from operations (FFO) available
to common stockholders was $.67 per share compared with $.64 per share for the
same period of 2004, an increase of 4.7%. The increase in FFO for the third
quarter was primarily due to higher property net operating income (PNOI) of
$1,910,000 (a 9.2% increase). This increase in PNOI resulted from $1,117,000
attributable to 2004 and 2005 acquisitions, $596,000 from newly developed
properties and $197,000 from same property growth.
For the nine months ended September 30, 2005, FFO was $1.96 per share compared
with $1.84 per share for the same period last year, an increase of 6.5%. The
increase in FFO for 2005 was primarily due to higher PNOI of $6,319,000 (a 10.4%
increase). The increase in PNOI resulted from $3,486,000 attributable to 2004
and 2005 acquisitions, $1,533,000 from newly developed properties and $1,300,000
from same property growth.
PNOI from same properties increased 1.0% for the quarter, and, before
straight-line rent adjustments, the increase was 4.0%. Rental rate increases on
new and renewal leases averaged 1.5% for the quarter. Before straight-line rent
adjustments, rental rate decreases on new and renewal leases averaged 5.9%.
For the nine months ended September 30, 2005, PNOI from same properties
increased 2.2%. Before straight-line rent adjustments, the increase was 5.2%.
Rental rate increases on new and renewal leases averaged 2.2% for the nine
months. Before straight-line rent adjustments, rental rate decreases on new and
renewal leases averaged 4.1%.
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
continuing growth in FFO per share with the third quarter representing our fifth
consecutive quarter of increased FFO as compared to the previous year's quarter.
It was the ninth consecutive quarter of positive same property operations for
results both with and without the straight-lining of rents.
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P.O.Box 22728-JACKSON,MS 39225-TEL.601-354-3555-FAX 601-352-1441
"In addition, we finished the quarter with an occupancy of 93.6%-an increase of
1.8% over our June 30 occupancy of 91.8%. This was the highest occupancy we have
achieved in over four years."
EARNINGS PER SHARE
On a diluted per share basis, earnings per common share (EPS) was $.23 for the
three months ended September 30, 2005 compared with $.32 for the third quarter
of 2004. The third quarter of 2004 included $.07 per share from gains on sale of
real estate investments. For the nine months, diluted EPS was $.70 compared with
$.74 for the same period in 2004.
DEVELOPMENT
EastGroup's current development program and properties transferred during 2005
and 2004 to the portfolio increased PNOI by $596,000 in the third quarter of
2005 and $1,533,000 for the nine months.
During the third quarter, EastGroup began construction on four properties with
combined square feet of 261,000 and total projected costs of $16.8 million.
These developments are located in Chandler, AZ, Orlando, FL and two in San
Antonio, TX; one of the San Antonio properties is 41% preleased.
In September, EastGroup acquired, in two separate transactions, 43 acres of land
for future development for a combined purchase price of $5.8 million. The
Freeport land (33 acres) is located in northwest Houston and will complement the
Company's two other development locations. The SunCoast Commerce Park land (10
acres) is located in Fort Myers, Florida, a new market for EastGroup. As part of
the purchase agreement, the Company will acquire a contiguous 20 acres in the
second quarter of 2006.
Also in September, EastGroup transferred World Houston 16 (94,000 square feet)
to the portfolio. World Houston 16, which was completed in January, is currently
86% leased to four customers. Upon completion of World Houston 15 and 21 (a
total of 131,000 square feet with a projected total investment of $9.6 million),
the Company's investment in the World Houston International Business Center will
be approximately $80 million in 1.6 million square feet.
At September 30, 2005, EastGroup had 12 development properties containing
803,000 square feet with a projected total cost of approximately $53.1 million
either in lease-up or under construction. EastGroup's development pipeline
currently contains 247 acres, which has the potential of approximately 3.0
million square feet of new development. In addition, the Company has another 48
acres in three locations under contracts for purchase.
Mr. Hoster stated, "We have expanded EastGroup's development program to reflect
both the strong leasing activity at our development properties and the overall
firming of our development submarkets. Our development program has been and, we
believe, will continue to be a creator of shareholder value and a major
contributor to our growth in FFO."
PROPERTY SALES AND ACQUISITIONS
In September, the Company sold its remaining Sabal parcel of land in Tampa for
$250,000, generating a small gain.
In October, EastGroup acquired two properties in Houston for a combined purchase
price of $6,150,000. Clay Campbell contains 118,000 square feet in two business
distribution buildings and was purchased for $4,025,000. Constructed in 1982, it
is 100% leased to six customers and is projected to generate an unleveraged cash
return of 8.6% at 100% occupancy after anticipated capital improvements. The
Company purchased a 33,000 square foot business distribution building in the
World Houston International Business Center for $2,125,000. Renamed World
Houston 18, the building is 100% leased to a single customer and is projected to
generate an unleveraged cash yield of 8.5% at 100% occupancy.
Mr. Hoster stated, "The two Houston acquisitions complement our existing assets
in submarkets where we already have ownership positions. They increase our
investment in Houston to over 3.5 million square feet."
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P.O.Box 22728-JACKSON,MS 39225-TEL.601-354-3555-FAX 601-352-1441
DIVIDENDS
EastGroup paid dividends of $.485 per share of common stock in the third quarter
of 2005, which was the 103rd consecutive quarterly distribution to EastGroup's
common stockholders. The annualized dividend rate of $1.94 per share yields 4.7%
on the closing stock price of $41.42 on October 21, 2005.
EastGroup also paid quarterly dividends of $.4969 per share on its Series D
Preferred Stock on October 15, 2005 to stockholders of record as of September
30, 2005.
STRONG FINANCIAL POSITION
EastGroup's balance sheet continues to be strong and flexible with debt-to-total
market capitalization of 29.6% at September 30, 2005. For the quarter, the
Company had an interest coverage ratio of 3.7x and a fixed charge coverage ratio
of 3.3x. Total debt at September 30, 2005 was $419.1 million with floating rate
bank debt comprising $113.7 million of that total.
On September 2, 2005, the Company signed an application on a $39 million,
nonrecourse first mortgage loan secured by five properties. The note is expected
to close in late November and will have a fixed interest rate of 4.98%, a
ten-year term and an amortization schedule of 20 years. The proceeds of the note
will be used to reduce floating rate bank borrowings.
During 2005, the Company has repaid five mortgages. 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
JetPort Commerce Park 8.125% 09/30/05 2,783,000
---------- --------------
Weighted Average/Total Amount 8.014% $ 18,435,000
========== ==============
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 $2.64 to $2.67. Earnings per share for 2005 should be
in the range of $.95 to $.97. The table below reconciles projected net income to
projected FFO for 2005.
Low Range High Range
----------------------------------------------------
Q4 2005 Y/E 2005 Q4 2005 Y/E 2005
----------------------------------------------------
Net income $ 6,069 23,340 6,633 23,904
Dividends on preferred shares (656) (2,624) (656) (2,624)
----------------------------------------------------
Net income available to common stockholders 5,413 20,716 5,977 21,280
Depreciation and amortization 9,639 38,129 9,675 38,165
Gain on sale of depreciable real estate - (1,131) - (1,131)
----------------------------------------------------
Funds from operations available to common stockholders $ 15,052 57,714 15,652 58,314
====================================================
Diluted shares 22,018 21,858 22,018 21,858
Per share data (diluted):
Net income available to common stockholders $ .25 .95 .27 .97
Funds from operations available to common stockholders $ .68 2.64 .71 2.67
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P.O.Box 22728-JACKSON,MS 39225-TEL.601-354-3555-FAX 601-352-1441
The following assumptions and completed transactions were used for the year
ending 12/31/2005:
o Average occupancy of 92% to 93%.
o Same store PNOI increase of 2.0% to 2.5%.
o Existing development contributing $.14 per share in PNOI.
o Acquisitions, net of dispositions, of operating properties totaling $50-65
million during the year. No gains on sale of depreciable real estate are
projected in the remaining three months.
o Lease termination fees of $795,000 recorded year-to-date and $80,000 in the
remaining three months for a total of $875,000.
o Floating rate bank debt at an average rate of 4.6%.
o New fixed rate debt of $39 million on November 30, 2005 at 5%.
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.
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
third quarter and review the Company's current operations on Tuesday, October
25, 2005, at 11:00 A.M. Eastern Daylight Time (EDT). A live broadcast of the
conference call is available by dialing 1-800-362-0574 (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, October 25, 2005. The telephone replay will
be available until Tuesday, November 1, 2005, and can be accessed by dialing
1-800-839-6975. 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,
November 1, 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 21.4 million square feet
with an additional 863,000 square feet of properties under development.
EastGroup Properties, Inc. press releases are also available on the Company's
website.
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P.O.Box 22728-JACKSON,MS 39225-TEL.601-354-3555-FAX 601-352-1441
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
EASTGROUP PROPERTIES, INC.
CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
Three Months Ended Nine Months Ended
September 30, September 30,
----------------------------------------------------
2005 2004 2005 2004
----------------------------------------------------
REVENUES
Income from real estate operations $ 31,889 28,991 93,209 84,200
Equity in earnings of unconsolidated investment 88 - 377 -
Mortgage interest income 18 - 216 -
Gain on involuntary conversion - 154 - 154
Other 54 120 235 231
----------------------------------------------------
32,049 29,265 94,037 84,585
----------------------------------------------------
EXPENSES
Operating expenses from real estate operations 9,204 8,216 26,405 23,715
Interest 5,738 5,082 17,508 14,958
Depreciation and amortization 9,605 8,181 28,391 24,569
General and administrative 1,573 1,686 5,266 4,930
Minority interest in joint venture 115 122 358 366
----------------------------------------------------
26,235 23,287 77,928 68,538
----------------------------------------------------
INCOME FROM CONTINUING OPERATIONS 5,814 5,978 16,109 16,047
DISCONTINUED OPERATIONS
Income (loss) from real estate operations - 42 (2) 206
Gain on sale of real estate investments 33 1,389 1,164 1,450
----------------------------------------------------
INCOME FROM DISCONTINUED OPERATIONS 33 1,431 1,162 1,656
----------------------------------------------------
NET INCOME 5,847 7,409 17,271 17,703
Preferred dividends-Series D 656 656 1,968 1,968
----------------------------------------------------
NET INCOME AVAILABLE TO COMMON STOCKHOLDERS $ 5,191 6,753 15,303 15,735
====================================================
BASIC PER COMMON SHARE DATA
Income from continuing operations $ 0.24 0.25 0.66 0.68
Income from discontinued operations 0.00 0.07 0.05 0.08
----------------------------------------------------
Net income available to common stockholders $ 0.24 0.32 0.71 0.76
====================================================
Weighted average shares outstanding 21,799 20,804 21,485 20,746
====================================================
DILUTED PER COMMON SHARE DATA
Income from continuing operations $ 0.23 0.25 0.65 0.66
Income from discontinued operations 0.00 0.07 0.05 0.08
----------------------------------------------------
Net income available to common stockholders $ 0.23 0.32 0.70 0.74
====================================================
Weighted average shares outstanding 22,130 21,179 21,805 21,145
====================================================
Dividends declared per common share $ 0.485 0.480 1.455 1.440
EASTGROUP PROPERTIES, INC.
RECONCILIATIONS OF OTHER REPORTING MEASURES TO NET INCOME
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
Three Months Ended Nine Months Ended
September 30, September 30,
----------------------------------------------------
2005 2004 2005 2004
----------------------------------------------------
RECONCILIATIONS OF OTHER REPORTING MEASURES TO NET INCOME:
Income from real estate operations $ 31,889 28,991 93,209 84,200
Operating expenses from real estate operations (9,204) (8,216) (26,405) (23,715)
----------------------------------------------------
PROPERTY NET OPERATING INCOME (PNOI) 22,685 20,775 66,804 60,485
Equity in earnings of unconsolidated investment
(before interest and depreciation) 204 - 602 -
Mortgage interest income 18 - 216 -
Gain on involuntary conversion - 154 - 154
Other income 54 120 235 231
General and administrative expense (1,573) (1,686) (5,266) (4,930)
----------------------------------------------------
EARNINGS BEFORE INTEREST, TAXES, DEPRECIATION AND
AMORTIZATION (EBITDA) 21,388 19,363 62,591 55,940
Income from discontinued operations (before depreciation and amortization) (A) - 107 70 468
Interest expense (B) (5,738) (5,082) (17,508) (14,958)
Interest expense from unconsolidated investment (91) - (126) -
Minority interest in earnings (before depreciation and amortization) (150) (158) (463) (473)
Gain on sale of nondepreciable real estate 33 - 33 -
Dividends on Series D preferred shares (656) (656) (1,968) (1,968)
----------------------------------------------------
FUNDS FROM OPERATIONS (FFO) AVAILABLE TO COMMON STOCKHOLDERS 14,786 13,574 42,629 39,009
Depreciation and amortization from continuing operations (9,605) (8,181) (28,391) (24,569)
Depreciation and amortization from discontinued operations - (65) (72) (262)
Depreciation from unconsolidated investment (25) - (99) -
Share of joint venture depreciation and amortization 35 36 105 107
Gain on sale of depreciable real estate investments - 1,389 1,131 1,450
----------------------------------------------------
NET INCOME AVAILABLE TO COMMON STOCKHOLDERS 5,191 6,753 15,303 15,735
Dividends on preferred shares 656 656 1,968 1,968
----------------------------------------------------
NET INCOME $ 5,847 7,409 17,271 17,703
====================================================
DILUTED PER COMMON SHARE DATA: (C)
Income from continuing operations $ 0.23 0.25 0.65 0.66
Income from discontinued operations 0.00 0.07 0.05 0.08
----------------------------------------------------
Net income available to common stockholders $ 0.23 0.32 0.70 0.74
====================================================
Funds from operations available to common stockholders $ 0.67 0.64 1.96 1.84
====================================================
Weighted average shares outstanding for EPS and FFO purposes 22,130 21,179 21,805 21,145
====================================================
(A) Includes interest expense of zero and $33,000 for the three months ended
September 30, 2005 and 2004, respectively; and $64,000 and $99,000 for the nine
months ended September 30, 2005 and 2004, respectively.
(B) Net of capitalized interest of $610,000 and $365,000 for the three months
ended September 30, 2005 and 2004, respectively; and $1,679,000 and $1,275,000
for the nine months ended September 30, 2005 and 2004, respectively.
(C) Assumes dilutive effect of common stock equivalents.