EXHIBIT 99.1
FOR MORE INFORMATION, CONTACT:
David H. Hoster II, President and Chief Executive Officer
N. Keith McKey, Chief Financial Officer
(601) 354-3555
EASTGROUP PROPERTIES ANNOUNCES
FOURTH QUARTER AND YEAR 2005 RESULTS
FOURTH QUARTER 2005 RESULTS
o Funds from Operations of $15.1 Million or $.68 Per Share, an Increase of
6.3%
o Net Income Available to Common Stockholders of $4.3 Million or $.19 Per
Share
o Same Property Net Operating Income Growth of .4% and .9% Before
Straight-Line Rent Adjustments
o Percentage Leased 95.3%, Occupancy 94.3%
o Paid 104th Consecutive Quarterly Dividend - $.485 Per Share
o $47 Million Invested in Acquisitions and Development
YEAR 2005 RESULTS
o Total Shareholder Return of 23% for 2005 and Average Annual Total Returns
of 28% for 3 Years, 23% for 5 Years, 21% for 10 Years and 21% for 15 Years
o Funds from Operations of $57.7 Million or $2.64 Per Share, an Increase of
6.0%
o Net Income Available to Common Stockholders of $19.6 Million or $.89 Per
Share
o Same Property Net Operating Income Growth of 1.2% and 3.4% Before
Straight-Line Rent Adjustments
o Paid Annual Dividends of $1.94 Per Share - Thirteenth Consecutive Year of
Dividend Growth With Average Annual Increase of 5.2%
o $135 Million Invested in Acquisitions and Development During the Year
o Fifteen Development Projects with Projected Costs of $68 Million Under
Construction or In Lease-Up at Year End
o Debt-to-Total Market Capitalization of 31.1% at Year End
o Interest Coverage of 3.6x and Fixed Charge Coverage of 3.2x
JACKSON, MISSISSIPPI, February 14, 2006 - EastGroup Properties, Inc. (NYSE-EGP)
announced today the results of its operations for the three months and year
ended December 31, 2005.
FUNDS FROM OPERATIONS
For the quarter ended December 31, 2005, funds from operations (FFO) available
to common stockholders was $.68 per share compared with $.64 for the same period
of 2004, an increase of 6.3% per share. The increase in FFO for the fourth
quarter was mainly due to higher property net operating income (PNOI) of
$1,836,000 (an 8.7% increase). This increase in PNOI was primarily attributable
to $1,312,000 from 2005 acquisitions, $510,000 from newly developed properties
and $85,000 from same property growth.
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P. O. Box 22728-JACKSON, MS 39225-TEL. 601-354-3555-FAX 601-352-1441
For the year ended December 31, 2005, FFO was $2.64 per share compared with
$2.49 per share for 2004, an increase of 6.0% per share. The increase in FFO for
2005 was mainly due to higher PNOI of $8,156,000 (a 10.0% increase). The
increase in PNOI was primarily attributable to $4,898,000 from 2004 and 2005
acquisitions, $2,377,000 from newly developed properties and $935,000 from same
property growth.
FFO for the current quarter and year 2005 included a $.01 per share gain on
involuntary conversion resulting from insurance proceeds exceeding the net book
value of a roof replaced due to hurricane damage. Hurricane damage costs that
were not covered by insurance amounted to $.01 per share for the quarter and
year 2005 and are included in expenses from real estate operations.
PNOI from same properties increased .4% for the quarter and 1.2% for the year.
Before straight-line rent adjustments, the increase was .9% for the quarter and
3.4% for the year. Rental rate decreases on new and renewal leases averaged 1.0%
for the quarter; for the year, rental rate increases averaged 1.4%. Before
straight-line rent adjustments, rental rate decreases on new and renewal leases
averaged 5.5% for the quarter and 3.9% for the year.
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 fourth quarter representing our
sixth consecutive quarter of increased FFO as compared to the previous year's
quarter. It was the tenth consecutive quarter of positive same property
operations for results both with and without the straight-lining of rents.
"In addition, we are maintaining our track record of creating value for our
shareholders over both the short- and long-term. Total shareholder returns for
one, three, five, ten and fifteen year periods all average above 20% per year."
EARNINGS PER SHARE
On a diluted per share basis, earnings per common share (EPS) was $.19 for the
three months ended December 31, 2005 compared with $.23 for the same period of
2004. Diluted EPS for 2005 was $.89 compared with $.98 for 2004. The decrease in
EPS for both the quarter and the year 2005 was primarily from higher
depreciation and amortization expense largely due to properties acquired and
properties transferred from development during 2004 and 2005.
DEVELOPMENT
EastGroup's current development program and properties transferred during 2004
and 2005 to the portfolio increased PNOI by $510,000 in the fourth quarter of
2005 and $2,377,000 for the year.
During the quarter, EastGroup, in two separate transactions, acquired 32 acres
of land for development in the World Houston International Business Center for
$3.6 million. In addition to the land purchases, the Company acquired Castilian
Research Center in Goleta (Santa Barbara), California for $4.1 million.
Castilian, which contains 35,000 square feet and is currently vacant, is being
redeveloped into a state-of-the-art incubator R & D facility with a projected
additional investment of approximately $3.1 million. EastGroup will sell (at
cost) a 20% ownership interest to an entity controlled by its co-developer
partner who is also a 20% co-owner of the Company's University Business Center
complex in the same submarket.
Mr. Hoster stated, "The World Houston land acquisitions will allow us to add
approximately 380,000 square feet of new development, increasing our development
potential there to 673,000 square feet. The purchase and redevelopment of
Castilian provides an opportunity to increase EastGroup's ownership in the
supply-constrained Santa Barbara market and to again partner there with a proven
local developer/operator."
During the fourth quarter, in addition to Castilian, EastGroup began
construction on two more properties with combined square feet of 102,000 and
total projected costs of $8.4 million. These developments are located in Tampa
and Orlando. The Tampa property, Oak Creek III, is 76% preleased.
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P.O.BOX 22728-JACKSON, MS 39225-TEL. 601-354-3555-FAX 601-352-1441
During the year, the Company acquired a total of 188 acres of land for
development for $18.3 million. EastGroup's development pipeline currently
contains approximately 270 acres, which has the potential for approximately 3.3
million square feet of new development. In addition, the Company has another 38
acres in two locations under separate contracts for purchase.
In 2005, EastGroup transferred four properties (301,000 square feet) to the
portfolio with a combined investment of $15.4 million at the date of transfer.
Three of these properties are 100% leased and the remaining is 86% leased. The
Company has transferred two properties to the portfolio in the first quarter of
2006 and expects to transfer two more in the second quarter, all of which are
100% leased.
At December 31, 2005, EastGroup had 15 development properties containing 940,000
square feet with a projected total cost of approximately $68 million either in
lease-up or under construction. These properties were collectively 34% leased at
December 31, 2005.
Mr. Hoster stated, "We are continuing to expand 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 future growth in FFO."
PROPERTY ACQUISITIONS AND SALES
During the fourth quarter of 2005, the Company acquired two properties in
Houston, one in San Antonio and one in Tampa for a combined purchase price of
$26.5 million.
Clay Campbell Distribution Center, located in Houston, contains 118,000 square
feet in two business distribution buildings and was purchased for $4,025,000.
The Company also purchased a 33,000 square foot business distribution building
(renamed World Houston 18) in the World Houston International Business Center
for $2,125,000.
Wetmore Business Center, located in San Antonio, contains 198,000 square feet in
four buildings and was purchased for $13,000,000. Constructed in 1998 and 1999,
Wetmore is currently 85% leased to 13 customers and is projected to generate an
unleveraged cash yield of 8.2% at 95% occupancy.
Mr. Hoster stated, "The acquisition of Wetmore Business Center is EastGroup's
third investment in San Antonio and increases our ownership to 1,081,000 square
feet, including our two properties under development. Wetmore is in the north
central airport submarket of San Antonio and complements our January 2005
purchase of Arion Business Park in the same submarket. The two Houston purchases
are in separate submarkets in which EastGroup already has a successful
presence."
The Company also purchased a 112,000 square foot business distribution building
in Tampa, renamed Oak Creek IV, for $7,350,000. Oak Creek IV is currently 100%
leased to a single customer. The purchase includes land to accommodate a 46,000
square foot expansion to the building. Oak Creek IV is projected to generate an
unleveraged cash yield of 8.4% at 100% occupancy. As part of the acquisition
price, EastGroup assumed the outstanding first mortgage balance of $4.1 million.
This nonrecourse mortgage has a fixed interest rate of 7.26% and matures in
2012. For GAAP purposes, the Company adjusted the interest rate to a fair market
rate of 5.68%.
Mr. Hoster stated, "The acquisition of Oak Creek IV complements our growing
presence in the Oak Creek Commerce Park located in the East Tampa/I-75 corridor
submarket. It increases our ownership to three buildings with a total of 461,000
square feet, in addition to a 61,000 square foot building under construction
(Oak Creek III) and 61 acres of land for future development. We now own 1.2
million square feet in the East Tampa submarket and a total of 2.3 million
square feet in the Tampa metro area."
During 2005, EastGroup acquired seven properties totaling 1.21 million square
feet for a combined purchase price of $75 million. The Company sold two
properties during 2005, both located in Memphis, a noncore market, and 1.9 acres
of land in Tampa that EastGroup decided not to develop.
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P.O.BOX 22728-JACKSON, MS 39225-TEL. 601-354-3555-FAX 601-352-1441
In January 2006, EastGroup sold its land investment in Madisonville, Kentucky
for $825,000, generating a gain of $773,000, of which $592,000 will be
recognized in the first quarter of 2006 and $181,000 will be deferred to future
periods. As part of the transaction, the Company took back a $185,000 note at
7.00% from the buyer, which is scheduled for repayment over the next six years,
beginning in February 2006. The remaining deferred gain will be recognized as
payments on this note are received from the buyer.
DIVIDENDS
EastGroup paid dividends of $.485 per share of common stock in the fourth
quarter of 2005, which was the 104th consecutive quarterly distribution to
EastGroup's common stockholders. The annualized dividend rate of $1.94 per share
yields 4.2% on the closing stock price of $46.00 on February 13, 2006.
EastGroup also paid quarterly dividends of $.4969 per share on its Series D
Preferred Stock on January 15, 2006 to stockholders of record as of December 30,
2005.
STRONG FINANCIAL POSITION
EastGroup's balance sheet continues to be strong and flexible with debt-to-total
market capitalization of 31.1% at December 31, 2005. For the year, the Company
had an interest coverage ratio of 3.6x and a fixed charge coverage ratio of
3.2x. Total debt at December 31, 2005, was $463.7 million with floating rate
bank debt comprising $116.8 million of that total.
On November 30, 2005, the Company closed a $39 million, nonrecourse first
mortgage loan secured by five properties. The note has a fixed interest rate of
4.98%, a ten-year term and an amortization schedule of 20 years. The proceeds of
the note were used to reduce floating rate bank borrowings.
During 2005, the Company repaid five mortgages totaling $18,435,000 with a
weighted average interest rate of 8.014%.
OUTLOOK FOR 2006
EastGroup confirms its previously issued FFO guidance for the first quarter and
the year 2006. FFO per share for 2006 is estimated to be in the range of $2.77
to $2.87. Diluted EPS for 2006 is estimated to be in the range of $.96 to $1.06,
a decrease of $.07 per share from previous earnings per share guidance. The
decrease is due to increased depreciation and amortization on acquisitions. The
table below reconciles projected net income to projected FFO.
Low Range High Range
Q1 2006 Y/E 2006 Q1 2006 Y/E 2006
-------------------------------------------------
Net income $ 6,038 23,780 6,480 25,990
Dividends on preferred shares (656) (2,624) (656) (2,624)
-------------------------------------------------
Net income available to common stockholders 5,382 21,156 5,824 23,366
Depreciation and amortization 10,183 40,241 10,183 40,241
-------------------------------------------------
Funds from operations available to common stockholders $ 15,565 61,397 16,007 63,607
=================================================
Diluted shares 22,140 22,146 22,140 22,146
Per share data (diluted):
Net income available to common stockholders $ 0.24 0.96 0.26 1.06
Funds from operations available to common stockholders $ 0.70 2.77 0.72 2.87
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P.O.BOX 22728-JACKSON, MS 39225-TEL. 601-354-3555-FAX 601-352-1441
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
fourth quarter and review the Company's current operations on Wednesday,
February 15, 2006, at 11:00 A.M. Eastern Time (ET). 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 Wednesday, February 15, 2006. The telephone replay
will be available until Wednesday, February 22, 2006, and can be accessed by
dialing 1-800-283-4593. Also, 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
Wednesday, February 22, 2006.
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 an
emphasis in the states of Florida, Texas, California and Arizona. The Company's
goal is to maximize shareholder value by being a 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
generally clustered near major transportation features in supply-constrained
submarkets. EastGroup's portfolio currently includes 21.9 million square feet
with an additional 815,000 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 Twelve Months Ended
December 31, December 31,
----------------------------------------------------
2005 2004 2005 2004
----------------------------------------------------
REVENUES
Income from real estate operations $ 32,339 29,489 125,548 113,688
Equity in earnings of unconsolidated investment 73 69 450 69
Mortgage interest income 8 65 224 65
Gain on involuntary conversion 243 - 243 154
Other 52 114 287 345
----------------------------------------------------
32,715 29,737 126,752 114,321
----------------------------------------------------
EXPENSES
Operating expenses from real estate operations 9,282 8,268 35,687 31,983
Interest 5,936 5,391 23,444 20,349
Depreciation and amortization 10,843 8,567 39,234 33,135
General and administrative 1,608 1,781 6,874 6,711
Minority interest in joint venture 126 124 484 490
----------------------------------------------------
27,795 24,131 105,723 92,668
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INCOME FROM CONTINUING OPERATIONS 4,920 5,606 21,029 21,653
DISCONTINUED OPERATIONS
Income (loss) from real estate operations - 19 (2) 224
Gain on sale of real estate investments - - 1,164 1,450
----------------------------------------------------
INCOME FROM DISCONTINUED OPERATIONS - 19 1,162 1,674
----------------------------------------------------
NET INCOME 4,920 5,625 22,191 23,327
Preferred dividends-Series D 656 656 2,624 2,624
----------------------------------------------------
NET INCOME AVAILABLE TO COMMON STOCKHOLDERS $ 4,264 4,969 19,567 20,703
====================================================
BASIC PER COMMON SHARE DATA
Income from continuing operations $ 0.20 0.24 0.86 0.92
Income from discontinued operations 0.00 0.00 0.05 0.08
----------------------------------------------------
Net income available to common stockholders $ 0.20 0.24 0.91 1.00
====================================================
Weighted average shares outstanding 21,811 20,845 21,567 20,771
====================================================
DILUTED PER COMMON SHARE DATA
Income from continuing operations $ 0.19 0.23 0.84 0.90
Income from discontinued operations 0.00 0.00 0.05 0.08
----------------------------------------------------
Net income available to common stockholders $ 0.19 0.23 0.89 0.98
====================================================
Weighted average shares outstanding 22,147 21,157 21,892 21,088
====================================================
Dividends declared per common share $ 0.485 0.480 1.940 1.920
EASTGROUP PROPERTIES, INC.
RECONCILIATIONS OF OTHER REPORTING MEASURES TO NET INCOME
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
Three Months Ended Twelve Months Ended
December 31, December 31,
----------------------------------------------------
2005 2004 2005 2004
----------------------------------------------------
RECONCILIATIONS OF OTHER REPORTING MEASURES TO NET INCOME:
Income from real estate operations $ 32,339 29,489 125,548 113,688
Operating expenses from real estate operations (9,282) (8,268) (35,687) (31,983)
----------------------------------------------------
PROPERTY NET OPERATING INCOME (PNOI) 23,057 21,221 89,861 81,705
Equity in earnings of unconsolidated investment (before interest and depreciation) 196 84 798 84
Mortgage interest income 8 65 224 65
Gain on involuntary conversion 243 - 243 154
Other income 52 114 287 345
General and administrative expense (1,608) (1,781) (6,874) (6,711)
----------------------------------------------------
EARNINGS BEFORE INTEREST, TAXES, DEPRECIATION AND AMORTIZATION (EBITDA) 21,948 19,703 84,539 75,642
Income from discontinued operations (before depreciation and amortization) (A) - 72 70 540
Interest expense (B) (5,936) (5,391) (23,444) (20,349)
Interest expense from unconsolidated investment (90) - (216) -
Minority interest in earnings (before depreciation and amortization) (162) (160) (625) (633)
Gain on sale of nondepreciable real estate - - 33 -
Dividends on Series D preferred shares (656) (656) (2,624) (2,624)
----------------------------------------------------
FUNDS FROM OPERATIONS (FFO) AVAILABLE TO COMMON STOCKHOLDERS 15,104 13,568 57,733 52,576
Depreciation and amortization from continuing operations (10,843) (8,567) (39,234) (33,135)
Depreciation and amortization from discontinued operations - (53) (72) (316)
Depreciation from unconsolidated investment (33) (15) (132) (15)
Minority interest depreciation and amortization 36 36 141 143
Gain on sale of depreciable real estate investments - - 1,131 1,450
----------------------------------------------------
NET INCOME AVAILABLE TO COMMON STOCKHOLDERS 4,264 4,969 19,567 20,703
Dividends on preferred shares 656 656 2,624 2,624
----------------------------------------------------
NET INCOME $ 4,920 5,625 22,191 23,327
====================================================
DILUTED PER COMMON SHARE DATA: (C)
Income from continuing operations $ 0.19 0.23 0.84 0.90
Income from discontinued operations 0.00 0.00 0.05 0.08
----------------------------------------------------
Net income available to common stockholders $ 0.19 0.23 0.89 0.98
====================================================
Funds from operations available to common stockholders $ 0.68 0.64 2.64 2.49
====================================================
Weighted average shares outstanding for EPS and FFO purposes 22,147 21,157 21,892 21,088
====================================================
(A)Includes interest expense of zero and $33,000 for the three months ended
December 31, 2005 and 2004, respectively; and $64,000 and $132,000 for the
twelve months ended December 31, 2005 and 2004, respectively.
(B) Net of capitalized interest of $806,000 and $440,000 for the three months
ended December 31, 2005 and 2004, respectively; and $2,485,000 and $1,715,000
for the twelve months ended December 31, 2005 and 2004, respectively.
(C) Assumes dilutive effect of common stock equivalents.