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
SECOND QUARTER 2006 RESULTS
o Funds from Operations of $15.2 Million or $.69 Per Share, an Increase
of 6.2%
o Net Income Available to Common Stockholders of $4.9 Million or $.22
Per Share
o Same Property Net Operating Income Growth of 3.4%, 5.3% Before
Straight-Line Rent Adjustments
o Percentage Leased 94.8%, Occupancy 94.0%
o Paid 106th Consecutive Quarterly Dividend - $.49 Per Share
o Development Projects of $88 Million Under Construction or In Lease-Up
o Debt-to-Total Market Capitalization of 30.9% at Quarter End
o Interest Coverage of 3.5x and Fixed Charge Coverage of 3.2x
JACKSON, MISSISSIPPI, July 31, 2006 - EastGroup Properties, Inc. (NYSE-EGP)
announced today the results of its operations for the three and six months ended
June 30, 2006.
FUNDS FROM OPERATIONS
For the quarter ended June 30, 2006, funds from operations (FFO) was $.69 per
share compared with $.65 for the same period of 2005, an increase of 6.2% per
share. The increase in FFO was mainly due to higher property net operating
income (PNOI) of $2,018,000 (a 9.2% increase in PNOI). This increase in PNOI was
primarily attributable to $501,000 from 2005 acquisitions, $735,000 from newly
developed properties and $736,000 from same property growth.
For the six months ended June 30, 2006, FFO was $1.39 per share compared with
$1.29 per share for the same period last year, an increase of 7.8%. The increase
in FFO for 2006 was primarily due to higher PNOI of $4,405,000 (a 10.2% increase
in PNOI). The increase in PNOI resulted mainly from $1,611,000 attributable to
2005 acquisitions, $1,334,000 from newly developed properties and $1,398,000
from same property growth.
PNOI from same properties increased 3.4% for the quarter. Before straight-line
rent adjustments, the increase was 5.3%. Rental rate increases on new and
renewal leases averaged 11.1% for the quarter. Before straight-line rent
adjustments, rental rate increases on new and renewal leases averaged 4.1%.
For the six months ended June 30, 2006, PNOI from same properties increased
3.4%. Before straight-line rent adjustments, the increase was 4.8%. Rental rate
increases on new and renewal leases averaged 10.0% for the six months, and,
before straight-line rent adjustments, rental rate increases on new and renewal
leases averaged 3.0%.
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."
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P.O. Box 22728-Jackson,MS 39225-TEL.601-354-3555-FAX 601-352-1441
David H. Hoster II, President and CEO, stated, "We are pleased with our
continuing growth in FFO per share with the second quarter of 2006 representing
our eighth consecutive quarter of increased FFO as compared to the previous
year's quarter. It was also the twelfth consecutive quarter of positive same
property results both with and without the straight-lining of rents which
illustrates the ongoing strength of our property operations."
EARNINGS PER SHARE
On a diluted per share basis, earnings per common share (EPS) was $.22 for the
three months ended June 30, 2006 compared with $.24 for the same period of 2005.
The second quarter of 2005 included a $.03 per share gain on the sale of real
estate investments. Diluted EPS was $.47 for both six-month periods.
DEVELOPMENT
EastGroup's current development program and properties transferred during 2006
and 2005 to the portfolio increased PNOI by $735,000 in the second quarter of
2006 and $1,334,000 for the six months compared to the same periods in 2005.
In June, EastGroup acquired 17.7 acres of land in Phoenix for future development
for a purchase price of $5,776,000. The Company expects to begin development of
approximately 270,000 square feet in the Sky Harbor Commerce Center before the
end of the year.
In July, the Company acquired 15.5 acres of land in San Antonio, Texas for
future development for a price of $1,860,000. This land is contiguous to our
existing Wetmore property purchased in late 2005 and will allow us to add
approximately 260,000 additional square feet to our existing ownership in
Wetmore for a total of approximately 460,000 square feet.
Also, 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 in the next 30 days.
EastGroup is currently under contract to develop a 125,000 square foot
build-to-suit property in the World Houston International Business Center in
Houston. The completion of this property and the two other World Houston
properties currently under development will increase our ownership there to over
1.7 million square feet.
During the second quarter, EastGroup transferred the 100% leased Southridge I
property (41,000 square feet) to the portfolio with an investment of $3,666,000
as of the date of transfer. The Company expects to transfer three development
properties to the portfolio in the third quarter, one of which is currently 100%
leased, one 90% leased and the other 85% leased.
At June 30, 2006, EastGroup had 16 development properties containing 1,239,000
square feet with a projected total cost of approximately $88 million either in
lease-up or under construction. These properties were collectively 35% leased at
June 30, 2006 and 42% at July 28, 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, and we are especially pleased
with our recent build-to-suit contract. Our land inventory, including the San
Antonio and Fort Myers acquisitions, contains 271 acres which will support
approximately 3.6 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."
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P.O. Box 22728-Jackson,MS 39225-TEL.601-354-3555-FAX 601-352-1441
PROPERTY SALES
In June 2006, EastGroup sold Lamar Distribution Center I (125,000 square feet)
in Memphis, Tennessee for a price of $3,115,000, which generated a small gain.
Mr. Hoster commented, "The sale of Lamar reflects our announced strategy of
exiting Memphis as market conditions permit and brings our total sales in
Memphis to six assets over the past 18 months. These dispositions have decreased
our ownership there to approximately 370,000 square feet."
55 Castilian, LLC, a wholly-owned subsidiary of EastGroup, acquired Castilian
Research Center in Goleta (Santa Barbara), California for $4.1 million in the
fourth quarter of 2005. As originally contemplated, during the second quarter of
2006, 55 Castilian sold (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. The partner
contributed $350,000 and EastGroup contributed $1,400,000 as capital to 55
Castilian. EastGroup will loan 55 Castilian the remaining acquisition and
construction funds. 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 $3.2 million
for a total investment of over $7 million.
DIVIDENDS
EastGroup paid dividends of $.49 per share of common stock in the second quarter
of 2006, which was the 106th consecutive quarterly distribution to EastGroup's
common stockholders. The annualized dividend rate of $1.96 per share yields 4.1%
on the closing stock price of $47.44 on July 28, 2006.
EastGroup also paid quarterly dividends of $.4969 per share on its Series D
Preferred Stock on July 15, 2006 to stockholders of record as of June 30, 2006.
STRONG FINANCIAL POSITION
EastGroup's balance sheet continues to be strong and flexible with debt-to-total
market capitalization of 30.9% at June 30, 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 June 30, 2006 was $477.9 million with floating rate bank
debt comprising $135.5 million of that total.
As previously reported, the Company signed an application on a $38 million,
nonrecourse first mortgage loan secured by properties containing 778,000 square
feet in March. 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.
On July 19, 2006, the Company executed an application on a $78 million,
nonrecourse first mortgage loan secured by properties containing 1,316,000
square feet. The loan is expected to close in mid October 2006 and will have a
fixed interest rate of 5.97%, a ten-year term and an amortization schedule of 20
years. The proceeds of the note will be used to repay a maturing $20.5 million
mortgage and to reduce floating rate bank borrowings.
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P.O. Box 22728-Jackson,MS 39225-TEL.601-354-3555-FAX 601-352-1441
OUTLOOK FOR REMAINDER OF 2006
FFO guidance for the third quarter and the year 2006 has been narrowed from our
previous guidance on an FFO per share basis to a range of $2.77 to $2.83.
Diluted EPS for 2006 is estimated to be in the range of $.92 to $.98. The table
below reconciles projected net income to projected FFO.
Q3 2006 Y/E 2006
Low High Low High
--------------------------------------------
Net income $ 5,453 5,897 23,173 24,505
Dividends on preferred shares (656) (656) (2,624) (2,624)
--------------------------------------------
Net income available to common stockholders 4,797 5,241 20,549 21,881
Depreciation and amortization 10,550 10,550 41,400 41,400
Gain on sale of depreciable real estate assets - - (429) (429)
--------------------------------------------
Funds from operations $ 15,347 15,791 61,520 62,852
============================================
Diluted operations 22,241 22,241 22,233 22,233
Per share data (diluted):
Net income available to common stockholders $ .22 .24 .92 .98
Funds from operations $ .69 .71 2.77 2.83
The following assumptions and completed transactions 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 recorded in the first six months.
o No acquisitions of income producing properties in 2006.
o Floating rate bank debt at an average rate of 5.75%.
o New fixed rate debt of $38 million in August 2006 at 5.68%.
o New fixed rate debt of $78 million in October 2006 at 5.97%.
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.
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P.O. Box 22728-Jackson,MS 39225-TEL.601-354-3555-FAX 601-352-1441
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, August 1,
2006, at 2:00 P.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, August 1, 2006. The telephone replay will
be available until Tuesday, August 8, 2006, and can be accessed by dialing
1-800-374-1375. 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
Tuesday, August 8, 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 in its
markets 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 21.3
million square feet with an additional 1,307,000 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
EASTGROUP PROPERTIES, INC.
CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
Three Months Ended Six Months Ended
June 30, June 30,
----------------------------------------------------
2006 2005 2006 2005
----------------------------------------------------
REVENUES
Income from real estate operations $ 33,187 30,464 65,808 59,882
Equity in earnings of unconsolidated investment 65 127 139 289
Other income 15 100 34 170
----------------------------------------------------
33,267 30,691 65,981 60,341
----------------------------------------------------
EXPENSES
Expenses from real estate operations 9,287 8,582 18,321 16,800
Depreciation and amortization 10,310 9,540 20,760 18,370
General and administrative 1,636 1,795 3,444 3,693
Minority interest in joint ventures 136 114 273 243
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21,369 20,031 42,798 39,106
----------------------------------------------------
OPERATING INCOME 11,898 10,660 23,183 21,235
OTHER INCOME (EXPENSE)
Interest income 21 85 43 209
Interest expense (6,397) (5,832) (12,732) (11,770)
----------------------------------------------------
INCOME FROM CONTINUING OPERATIONS 5,522 4,913 10,494 9,674
----------------------------------------------------
DISCONTINUED OPERATIONS
Income from real estate operations 38 221 159 619
Gain on sale of real estate investments 16 754 1,084 1,131
----------------------------------------------------
INCOME FROM DISCONTINUED OPERATIONS 54 975 1,243 1,750
----------------------------------------------------
NET INCOME 5,576 5,888 11,737 11,424
Preferred dividends-Series D 656 656 1,312 1,312
----------------------------------------------------
NET INCOME AVAILABLE TO COMMON STOCKHOLDERS $ 4,920 5,232 10,425 10,112
====================================================
BASIC PER COMMON SHARE DATA
Income from continuing operations $ 0.22 0.20 0.42 0.39
Income from discontinued operations 0.00 0.04 0.06 0.08
----------------------------------------------------
Net income available to common stockholders $ 0.22 0.24 0.48 0.47
====================================================
Weighted average shares outstanding 21,932 21,755 21,907 21,326
====================================================
DILUTED PER COMMON SHARE DATA
Income from continuing operations $ 0.22 0.20 0.41 0.39
Income from discontinued operations 0.00 0.04 0.06 0.08
----------------------------------------------------
Net income available to common stockholders $ 0.22 0.24 0.47 0.47
====================================================
Weighted average shares outstanding 22,237 22,073 22,222 21,638
====================================================
Dividends declared per common share $ 0.490 0.485 0.980 0.970
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,
----------------------------------------------------
2006 2005 2006 2005
----------------------------------------------------
RECONCILIATIONS OF OTHER REPORTING MEASURES TO NET INCOME:
Income from real estate operations $ 33,187 30,464 65,808 59,882
Operating expenses from real estate operations (9,287) (8,582) (18,321) (16,800)
----------------------------------------------------
PROPERTY NET OPERATING INCOME (PNOI) 23,900 21,882 47,487 43,082
Equity in earnings of unconsolidated investment
(before interest and depreciation) 187 199 383 398
Interest income 21 85 43 209
Other income 15 100 34 170
General and administrative expense (1,636) (1,795) (3,444) (3,693)
----------------------------------------------------
EARNINGS BEFORE INTEREST, TAXES, DEPRECIATION AND
AMORTIZATION (EBITDA) 22,487 20,471 44,503 40,166
Income from discontinued operations (before depreciation and amortization) (1) 63 468 341 1,107
Interest expense (2) (6,397) (5,832) (12,732) (11,770)
Interest expense from unconsolidated investment (89) (35) (178) (35)
Minority interest in earnings (before depreciation and amortization) (174) (149) (348) (313)
Gain on sale of nondepreciable real estate 6 - 655 -
Dividends on Series D preferred shares (656) (656) (1,312) (1,312)
----------------------------------------------------
FUNDS FROM OPERATIONS (FFO) AVAILABLE TO COMMON STOCKHOLDERS 15,240 14,267 30,929 27,843
Depreciation and amortization from continuing operations (10,310) (9,540) (20,760) (18,370)
Depreciation and amortization from discontinued operations (25) (247) (182) (488)
Depreciation from unconsolidated investment (33) (37) (66) (74)
Minority interest depreciation and amortization 38 35 75 70
Gain on sale of depreciable real estate investments 10 754 429 1,131
----------------------------------------------------
NET INCOME AVAILABLE TO COMMON STOCKHOLDERS 4,920 5,232 10,425 10,112
Dividends on preferred shares 656 656 1,312 1,312
----------------------------------------------------
NET INCOME $ 5,576 5,888 11,737 11,424
====================================================
DILUTED PER COMMON SHARE DATA: (3)
Income from continuing operations $ 0.22 0.20 0.41 0.39
Income from discontinued operations 0.00 0.04 0.06 0.08
----------------------------------------------------
Net income available to common stockholders $ 0.22 0.24 0.47 0.47
====================================================
Funds from operations available to common stockholders $ 0.69 0.65 1.39 1.29
====================================================
Weighted average shares outstanding for EPS and FFO purposes 22,237 22,073 22,222 21,638
====================================================
(1) Includes interest expense of zero and $32,000 for the three months ended
June 30, 2006 and 2005, respectively; and zero and $64,000 for the six months
ended June 30, 2006 and 2005, respectively.
(2) Net of capitalized interest of $1,057,000 and $568,000 for the three months
ended June 30, 2006 and 2005, respectively; and $1,976,000 and $1,069,000 for
the six months ended June 30, 2006 and 2005, respectively.
(3) Assumes dilutive effect of common stock equivalents.