FOR MORE INFORMATION, CONTACT: Exhibit 99.1
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David H. Hoster II, President and Chief Executive Officer
N. Keith McKey, Chief Financial Officer
(601) 354-3555
EASTGROUP PROPERTIES ANNOUNCES
FIRST QUARTER 2006 RESULTS
o Funds from Operations of $15.7 Million or $.71 Per Share, an Increase of
10.9%
o Net Income Available to Common Stockholders of $5.5 Million or $.25 Per
Share
o Same Property Net Operating Income Growth of 3.8%, 5.0% Before
Straight-Line Rent Adjustments
o Percentage Leased 94.4%, Occupancy 93.8%
o Paid 105th Consecutive Quarterly Dividend - $.49 Per Share - Fourteenth
Consecutive Year of Dividend Growth
o Development Projects of $66 Million Under Construction or In Lease-Up
o Debt-to-Total Market Capitalization of 30.0% at Quarter End
o Interest Coverage of 3.5x and Fixed Charge Coverage of 3.2x
JACKSON, MISSISSIPPI, April 26, 2006 - EastGroup Properties, Inc. (NYSE-EGP)
announced today the results of its operations for the three months ended March
31, 2006.
FUNDS FROM OPERATIONS
For the quarter ended March 31, 2006, funds from operations (FFO) was $.71 per
share compared with $.64 for the same period of 2005, an increase of 10.9% per
share. The first quarter of 2006 included gains of $649,000 ($.03 per share)
from sales of land. FFO also increased due to higher property net operating
income (PNOI) of $2,388,000 (an 11.2% increase). This increase in PNOI was
primarily attributable to $1,005,000 from 2005 acquisitions, $584,000 from newly
developed properties and $784,000 from same property growth.
PNOI from same properties increased 3.8% for the quarter. Before straight-line
rent adjustments, the increase was 5.0%. Rental rate increases on new and
renewal leases averaged 8.9% for the quarter. Before straight-line rent
adjustments, rental rate increases on new and renewal leases averaged 1.8%.
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 first quarter of 2006 representing
our seventh consecutive quarter of increased FFO as compared to the previous
year's quarter. It was also the eleventh 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
EARNINGS PER SHARE
On a diluted per share basis, earnings per common share (EPS) was $.25 for the
three months ended March 31, 2006 compared with $.23 for the same period of
2005. EPS increased due to higher FFO as indicated above; however, this increase
was offset by higher depreciation of $.05 per share. The increase in
depreciation was primarily attributable to property acquisitions in 2005 and
transfers from development to real estate properties in 2005 and 2006.
DEVELOPMENT
EastGroup's current development program and properties transferred during 2005
and 2006 to the portfolio increased PNOI by $584,000 in the first quarter of
2006 compared to the same period in 2005.
During the quarter, EastGroup entered into a contract to purchase 17.7 acres of
land in Phoenix which is projected to close during the second quarter of 2006.
The Company expects to begin development of approximately 271,000 square feet on
this site in the fourth quarter.
In addition, the Company has 20 acres of land under contract for purchase in
Fort Myers, Florida which is scheduled to close in the third quarter of 2006.
This land is adjacent to a 10-acre tract of land that the Company purchased for
development in 2005. Construction on the first two Fort Myers buildings is
currently scheduled to commence early in the third quarter of 2006.
During the first quarter, EastGroup transferred three properties (207,000 square
feet) to the portfolio with a combined investment of $14.1 million. These
properties are 100% leased. The Company expects to transfer one development
property in the second quarter which is also 100% leased.
At March 31, 2006, EastGroup had 14 development properties containing 914,000
square feet with a projected total cost of approximately $66 million either in
lease-up or under construction. These properties were collectively 21% leased at
March 31, 2006 and 29% at April 25, 2006.
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 land inventory including
the Fort Myers and Phoenix acquisitions contains 287 acres which will support
approximately 3.7 million square feet of new industrial development. 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 SALES
In January 2006, EastGroup sold its land investment in Madisonville, Kentucky
for $825,000, generating a gain of $777,000, of which $596,000 was recognized in
the first quarter 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 being repaid over six years. The remaining deferred gain will be
recognized as payments on this note are received from the buyer.
In March 2006, EastGroup sold three of its Memphis properties containing a total
of 534,000 square feet for a price of $15,175,000, which generated a gain of
$404,000. The assets sold were Senator I, Senator II and Southeast Crossing. Mr.
Hoster commented, "The sale of these properties reflects our announced strategy
of exiting Memphis as market conditions permit and brings our total of Memphis
sales to five assets over the past 15 months. These dispositions decrease our
ownership in Memphis to less than 500,000 square feet."
DIVIDENDS
EastGroup paid dividends of $.49 per share of common stock in the first quarter
of 2006, which was the 105th consecutive quarterly distribution to EastGroup's
common stockholders. This dividend represented
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P.O.Box 22728 - JACKSON, MS 39225 - TEL. 601-354-3555 - FAX 601-352-1441
an increase of 1% over the previous quarter's distribution and made 2006 the
fourteenth consecutive year of dividend increases. The annualized dividend rate
of $1.96 per share yields 4.4% on the closing stock price of $44.48 on April 25,
2006.
EastGroup also paid quarterly dividends of $.4969 per share on its Series D
Preferred Stock on April 15, 2006 to stockholders of record as of March 31,
2006.
STRONG FINANCIAL POSITION
EastGroup's balance sheet continues to be strong and flexible with debt-to-total
market capitalization of 30.0% at March 31, 2006. For the quarter, the Company
had an interest coverage ratio of 3.5x and a fixed charge coverage ratio of
3.2x. Total debt at March 31, 2006 was $465.9 million with floating rate bank
debt comprising $121.4 million of that total.
On March 9, 2006, the Company signed an application on a $38 million,
nonrecourse first mortgage loan secured by two properties. The loan is expected
to close in August 2006 and will have a fixed interest rate of 5.68%, a ten-year
term and an amortization schedule of 20 years. The proceeds of the note will be
used to repay the maturing mortgages on these properties of approximately $15
million and to reduce floating rate bank borrowings.
OUTLOOK FOR 2006
FFO guidance for the second quarter and the year 2006 is presented below. 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 $.92 to $1.02. The table below
reconciles projected net income to projected FFO.
Low Range High Range
Q2 2006 Y/E 2006 Q2 2006 Y/E 2006
-----------------------------------------------
Net income $ 5,333 23,076 5,777 25,296
Dividends on preferred shares (656) (2,624) (656) (2,624)
-----------------------------------------------
Net income available to common stockholders 4,677 20,452 5,121 22,672
Depreciation and amortization 10,316 41,391 10,316 41,391
Gain on sale of depreciable real estate assets - (419) - (419)
-----------------------------------------------
Funds from operations $ 14,993 61,424 15,437 63,644
===============================================
Diluted shares 22,208 22,214 22,208 22,214
Per share data (diluted):
Net income available to common stockholders $ 0.21 .92 0.23 1.02
Funds from operations $ 0.68 2.77 0.70 2.87
The following assumptions were used for the year 2006:
o Average occupancy of 93% to 95%.
o Same Property NOI increase of 3% to 5%.
o Development properties not transferred to the portfolio by January 1, 2005
(therefore not same properties for the full year 2006) contributing PNOI of
$.21 per share, an increase of $.15 over 2005.
o Gain on sale of land (included in FFO) of $.03 per share in the first
quarter.
o Dispositions of $18.3 million in the first half of 2006 and $18 million in
the second half of 2006. Potential gains on sales of depreciable real
estate have not been included in earnings guidance.
o Acquisitions of income producing properties of $25 million on July 1, 2006.
o Floating rate bank debt at an average rate of 5.6%.
o New fixed rate debt of $38 million in August 2006 at 5.68%.
o Additional fixed rate debt of $62 million on October 1, 2006 at 6.25%.
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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 U.S. generally accepted accounting
principles (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. FFO as
defined by the Company refers to FFO available to common stockholders as it
excludes dividends on preferred stock.
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
first quarter and review the Company's current operations on Thursday, April 27,
2006, 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 Thursday, April 27, 2006. The telephone replay will
be available until Thursday, May 4, 2006, and can be accessed by dialing
1-800-839-1162. 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
Thursday, May 4, 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 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 generally clustered near major transportation features in
supply-constrained submarkets. EastGroup's portfolio currently includes 21.4
million square feet with an additional 1,074,000 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
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P.O.Box 22728 - JACKSON, MS 39225 - TEL. 601-354-3555 - FAX 601-352-1441
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
March 31,
-----------------------------
2006 2005
-----------------------------
REVENUES
Income from real estate operations $ 32,737 29,532
Equity in earnings of unconsolidated investment 74 162
Other income 19 70
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32,830 29,764
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EXPENSES
Expenses from real estate operations 9,058 8,241
Depreciation and amortization 10,482 8,868
General and administrative 1,808 1,898
Minority interest in joint venture 137 129
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21,485 19,136
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OPERATING INCOME 11,345 10,628
OTHER INCOME (EXPENSE)
Interest income 22 124
Interest expense (6,335) (5,937)
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INCOME FROM CONTINUING OPERATIONS 5,032 4,815
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DISCONTINUED OPERATIONS
Income from real estate operations 61 344
Gain on sale of real estate investments 1,068 377
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INCOME FROM DISCONTINUED OPERATIONS 1,129 721
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NET INCOME 6,161 5,536
Preferred dividends-Series D 656 656
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NET INCOME AVAILABLE TO COMMON STOCKHOLDERS $ 5,505 4,880
=============================
BASIC PER COMMON SHARE DATA
Income from continuing operations $ 0.20 0.20
Income from discontinued operations 0.05 0.03
-----------------------------
Net income available to common stockholders $ 0.25 0.23
=============================
Weighted average shares outstanding 21,881 20,891
=============================
DILUTED PER COMMON SHARE DATA
Income from continuing operations $ 0.20 0.20
Income from discontinued operations 0.05 0.03
-----------------------------
Net income available to common stockholders $ 0.25 0.23
=============================
Weighted average shares outstanding 22,208 21,196
=============================
Dividends declared per common share $ 0.490 0.485
EASTGROUP PROPERTIES, INC.
RECONCILIATIONS OF OTHER REPORTING MEASURES TO NET INCOME
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
Three Months Ended
March 31,
----------------------------
2006 2005
----------------------------
RECONCILIATIONS OF OTHER REPORTING MEASURES TO NET INCOME:
Income from real estate operations $ 32,737 29,532
Operating expenses from real estate operations (9,058) (8,241)
----------------------------
PROPERTY NET OPERATING INCOME (PNOI) 23,679 21,291
Equity in earnings of unconsolidated investment (before interest and depreciation) 196 199
Interest income 22 124
Other income 19 70
General and administrative expense (1,808) (1,898)
----------------------------
EARNINGS BEFORE INTEREST, TAXES, DEPRECIATION AND
AMORTIZATION (EBITDA) 22,108 19,786
Income from discontinued operations (before depreciation and amortization) (A) 186 580
Interest expense (B) (6,335) (5,970)
Interest expense from unconsolidated investment (89) -
Minority interest in earnings (before depreciation and amortization) (174) (164)
Gain on sale of nondepreciable real estate 649 -
Dividends on Series D preferred shares (656) (656)
----------------------------
FUNDS FROM OPERATIONS (FFO) AVAILABLE TO COMMON STOCKHOLDERS 15,689 13,576
Depreciation and amortization from continuing operations (10,482) (8,868)
Depreciation and amortization from discontinued operations (125) (203)
Depreciation from unconsolidated investment (33) (37)
Minority interest depreciation and amortization 37 35
Gain on sale of depreciable real estate investments 419 377
----------------------------
NET INCOME AVAILABLE TO COMMON STOCKHOLDERS 5,505 4,880
Dividends on preferred shares 656 656
----------------------------
NET INCOME $ 6,161 5,536
============================
DILUTED PER COMMON SHARE DATA: (C)
Income from continuing operations $ 0.20 0.20
Income from discontinued operations 0.05 0.03
----------------------------
Net income available to common stockholders $ 0.25 0.23
============================
Funds from operations available to common stockholders $ 0.71 0.64
============================
Weighted average shares outstanding for EPS and FFO purposes 22,208 21,196
============================
(A) Includes interest expense of zero and $33,000 for the three months ended
March 31, 2006 and 2005, respectively.
(B) Net of capitalized interest of $919,000 and $501,000 for the three months
ended March 31, 2006 and 2005, respectively.
(C) Assumes dilutive effect of common stock equivalents.