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
THIRD QUARTER 2006 RESULTS
o Funds from Operations of $15.8 Million or $.70 Per Share, an Increase of
4.5%
o Net Income Available to Common Stockholders of $5.3 Million or $.23 Per
Share
o Same Property Net Operating Income Growth of 5.4%, 7.4% Before
Straight-Line Rent Adjustments
o Percentage Leased 96.3%, Occupancy 95.6% - Highest Levels Since 2000
o Paid 107th Consecutive Quarterly Dividend - $.49 Per Share
o Development Projects of $99 Million Under Construction or In Lease-Up
o Debt-to-Total Market Capitalization of 25.6% at Quarter End
o Interest Coverage of 3.6x and Fixed Charge Coverage of 3.3x
JACKSON, MISSISSIPPI, October 25, 2006 - EastGroup Properties, Inc. (NYSE-EGP)
announced today the results of its operations for the three and nine months
ended September 30, 2006.
FUNDS FROM OPERATIONS
For the quarter ended September 30, 2006, funds from operations (FFO) was $.70
per share compared with $.67 for the same period of 2005, an increase of 4.5%
per share. The increase in FFO was mainly due to higher property net operating
income (PNOI) of $2,451,000 (an 11.1% increase in PNOI). This increase in PNOI
was primarily attributable to $448,000 from 2005 acquisitions, $789,000 from
newly developed properties and $1,189,000 from same property growth.
For the nine months ended September 30, 2006, FFO was $2.09 per share compared
with $1.96 per share for the same period last year, an increase of 6.6%. The
increase in FFO for 2006 was primarily due to higher PNOI of $6,856,000 (a 10.5%
increase in PNOI). The increase in PNOI resulted mainly from $2,148,000
attributable to 2005 acquisitions, $2,157,000 from newly developed properties
and $2,464,000 from same property growth.
PNOI from same properties increased 5.4% for the quarter. Before straight-line
rent adjustments, the increase was 7.4%. Rental rate increases on new and
renewal leases averaged 14.1% for the quarter. Before straight-line rent
adjustments, rental rate increases on new and renewal leases averaged 5.1%.
For the nine months ended September 30, 2006, PNOI from same properties
increased 4.0%. Before straight-line rent adjustments, the increase was 5.3%.
Rental rate increases on new and renewal leases averaged 11.3% for the nine
months, and, before straight-line rent adjustments, rental rate increases on new
and renewal leases averaged 3.6%.
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
increased occupancy of 95.6% at September 30, 2006. This is the highest
occupancy level since the fourth quarter of 2000. In addition, we
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P.O.Box 22728-JACKSON,MS 39225-TEL.601-354-3555-FAX 601-352-1441
continue to experience growth in FFO per share with the third quarter of 2006
representing our ninth consecutive quarter of increased FFO as compared to the
previous year's quarter. It was also the thirteenth 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 $.23 for the
three-month periods ended September 30, 2006 and 2005; diluted EPS was $.70 for
both nine-month periods.
DEVELOPMENT
EastGroup's current development program and properties transferred during 2006
and 2005 to the portfolio increased PNOI by $789,000 in the third quarter of
2006 and $2,157,000 for the nine months compared to the same periods in 2005.
In two separate transactions during the third quarter, the Company acquired 17.5
acres of land in San Antonio, Texas for future development for a total price of
$2,471,000. This land is contiguous to EastGroup's existing Wetmore Business
Center purchased in late 2005 and will allow the Company to add approximately
280,000 additional square feet to Wetmore for a total of approximately 480,000
square feet.
As previously announced, the Company has 20 acres of land under contract for
purchase in Fort Myers, Florida which is scheduled to close in the fourth
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 began in September. In addition, EastGroup has 5.1 acres under
contract for purchase in World Houston that is expected to close in late
October.
During the third quarter, EastGroup transferred two Orlando properties (133,000
square feet), both currently 100% leased, to the portfolio with a combined
investment of $8,665,000 as of the date of transfer. The Company transferred
Arion 14 in San Antonio (66,000 square feet - 100% leased) and Techway Southwest
III in Houston (100,000 square feet - 23% leased) to the portfolio in October
and expects to transfer one additional development property in the remainder of
fourth quarter.
At September 30, 2006, EastGroup had 17 development properties containing
1,364,000 square feet with a projected total cost of approximately $99 million
either in lease-up or under construction. These properties were collectively 39%
leased at September 30, 2006 and 44% at October 24, 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 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
EastGroup is currently under contract to acquire three buildings (181,000 square
feet) in Charlotte, North Carolina for a total purchase price of $9.3 million.
Charlotte is a new market for EastGroup and is the third new market for the
Company over the past three years.
Mr. Hoster stated, "We are excited about entering the Charlotte market since it
offers an excellent fit with our investment and operating strategies. It is a
high growth Sunbelt market with a strong industrial property base. Our goal is
to expand to over one million square feet in the next 18 to 24 months."
CAPITAL TRANSACTIONS
On September 13, 2006, the Company closed the sale of 1,437,500 shares of its
common stock to Citigroup Global Markets Inc. Total net proceeds from the
offering of the shares were approximately $68.1
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P.O.Box 22728-JACKSON,MS 39225-TEL.601-354-3555-FAX 601-352-1441
million after deducting the underwriting discount and other offering expenses.
EastGroup used the proceeds to repay borrowings under its credit facility.
As previously announced, in August, the Company closed on a $38 million,
nonrecourse first mortgage loan secured by properties containing 778,000 square
feet. The loan has a fixed interest rate of 5.68%, a ten-year term and an
amortization schedule of 20 years. The proceeds of the note were used to repay
the maturing mortgages on these properties of $15.4 million and to reduce
floating rate bank borrowings.
In October, the Company closed on a $78 million, nonrecourse first mortgage loan
secured by properties containing 1,316,000 square feet. The loan has a fixed
interest rate of 5.97%, a ten-year term and an amortization schedule of 20
years. The proceeds of the note were used to repay a maturing $20.5 million
mortgage and to reduce floating rate bank borrowings.
Mr. Hoster stated, "These capital transactions allowed EastGroup to further
strengthen an already good balance sheet by reducing both our floating rate debt
and our debt-to-total market capitalization ratio, thereby enhancing the
Company's flexibility in funding its development and acquisition programs.
"In addition, we are pleased to announce that Fitch Ratings upgraded EastGroup's
rating from BBB- to BBB, which should further have a positive effect on capital
raising costs in the future."
DIVIDENDS
EastGroup paid dividends of $.49 per share of common stock in the third quarter
of 2006, which was the 107th consecutive quarterly distribution to EastGroup's
common stockholders. The annualized dividend rate of $1.96 per share yields 3.8%
on the closing stock price of $51.87 on October 24, 2006.
EastGroup also paid quarterly dividends of $.4969 per share on its Series D
Preferred Stock on October 15, 2006 to stockholders of record as of September
30, 2006.
STRONG FINANCIAL POSITION
EastGroup's balance sheet continues to be strong and flexible with debt-to-total
market capitalization of 25.6% at September 30, 2006. For the quarter, the
Company had an interest coverage ratio of 3.6x and a fixed charge coverage ratio
of 3.3x. Total debt at September 30, 2006 was $418.3 million with floating rate
bank debt comprising $55.7 million of that total.
OUTLOOK FOR REMAINDER OF 2006
FFO guidance for the fourth quarter and the full year 2006 has been narrowed
from our previous guidance. On a per share basis, the Company anticipates FFO in
the ranges of $.71 to $.73 and $2.81 to $2.83 for the fourth quarter and full
year, respectively. Diluted EPS for 2006 is estimated to be in the range of $.96
to $.98. The table below reconciles projected net income to projected FFO.
Q4 2006 Y/E 2006
Low High Low High
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Net income $ 6,819 7,293 24,476 24,950
Dividends on preferred shares (656) (656) (2,624) (2,624)
----------------------------------------------
Net income available to common stockholders 6,163 6,637 21,852 22,326
Depreciation and amortization 10,750 10,750 42,237 42,237
Gain on sale of depreciable real estate assets - - (429) (429)
----------------------------------------------
Funds from operations $ 16,913 17,387 63,660 64,134
==============================================
Diluted shares 23,736 23,736 22,690 22,690
Per share data (diluted):
Net income available to common stockholders $ .26 .28 .96 .98
Funds from operations $ .71 .73 2.81 2.83
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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
third quarter and review the Company's current operations on Thursday, October
26, 2006, at 11:00 A.M. Eastern Time. A live broadcast of the conference call is
available by dialing 1-800-540-0559 (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, October 26, 2006. The telephone replay will be available
until Thursday, November 2, 2006, and can be accessed by dialing 1-800-839-3607.
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, November 2,
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 21.6
million square feet with an additional 1,198,000 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 Nine Months Ended
September 30, September 30,
----------------------------------------------------
2006 2005 2006 2005
----------------------------------------------------
REVENUES
Income from real estate operations $ 34,168 31,128 99,976 91,010
Equity in earnings of unconsolidated investment 74 88 213 377
Gain on involuntary conversion 185 - 185 -
Other income 36 28 70 144
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34,463 31,244 100,444 91,531
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EXPENSES
Expenses from real estate operations 9,576 8,987 27,897 25,787
Depreciation and amortization 10,559 9,400 31,319 27,770
General and administrative 1,990 1,573 5,434 5,266
Minority interest in joint ventures 179 115 452 358
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22,304 20,075 65,102 59,181
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OPERATING INCOME 12,159 11,169 35,342 32,350
OTHER INCOME (EXPENSE)
Interest income 68 26 111 235
Interest expense (6,314) (5,738) (19,046) (17,508)
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INCOME FROM CONTINUING OPERATIONS 5,913 5,457 16,407 15,077
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DISCONTINUED OPERATIONS
Income from real estate operations - 357 159 1,030
Gain on sale of real estate investments 7 33 1,091 1,164
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INCOME FROM DISCONTINUED OPERATIONS 7 390 1,250 2,194
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NET INCOME 5,920 5,847 17,657 17,271
Preferred dividends-Series D 656 656 1,968 1,968
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NET INCOME AVAILABLE TO COMMON STOCKHOLDERS $ 5,264 5,191 15,689 15,303
====================================================
BASIC PER COMMON SHARE DATA
Income from continuing operations $ 0.24 0.22 0.65 0.61
Income from discontinued operations 0.00 0.02 0.06 0.10
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Net income available to common stockholders $ 0.24 0.24 0.71 0.71
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Weighted average shares outstanding 22,235 21,799 22,017 21,485
====================================================
DILUTED PER COMMON SHARE DATA
Income from continuing operations $ 0.23 0.21 0.65 0.60
Income from discontinued operations 0.00 0.02 0.05 0.10
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Net income available to common stockholders $ 0.23 0.23 0.70 0.70
====================================================
Weighted average shares outstanding 22,553 22,130 22,334 21,805
====================================================
Dividends declared per common share $ 0.490 0.485 1.470 1.455
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,
----------------------------------------------------
2006 2005 2006 2005
----------------------------------------------------
RECONCILIATIONS OF OTHER REPORTING MEASURES TO NET INCOME:
Income from real estate operations $ 34,168 31,128 99,976 91,010
Operating expenses from real estate operations (9,576) (8,987) (27,897) (25,787)
----------------------------------------------------
PROPERTY NET OPERATING INCOME (PNOI) 24,592 22,141 72,079 65,223
Equity in earnings of unconsolidated investment
(before interest and depreciation) 195 204 578 602
Interest income 68 26 111 235
Gain on involuntary conversion 185 - 185 -
Other income 36 28 70 144
General and administrative expense (1,990) (1,573) (5,434) (5,266)
----------------------------------------------------
EARNINGS BEFORE INTEREST, TAXES, DEPRECIATION AND
AMORTIZATION (EBITDA) 23,086 20,826 67,589 60,938
Income from discontinued operations (before depreciation and amortization) (1) - 562 341 1,723
Interest expense (2) (6,314) (5,738) (19,046) (17,508)
Interest expense from unconsolidated investment (88) (91) (266) (126)
Minority interest in earnings (before depreciation and amortization) (217) (150) (565) (463)
Gain on sale of nondepreciable real estate 7 33 662 33
Dividends on Series D preferred shares (656) (656) (1,968) (1,968)
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FUNDS FROM OPERATIONS (FFO) AVAILABLE TO COMMON STOCKHOLDERS 15,818 14,786 46,747 42,629
Depreciation and amortization from continuing operations (10,559) (9,400) (31,319) (27,770)
Depreciation and amortization from discontinued operations - (205) (182) (693)
Depreciation from unconsolidated investment (33) (25) (99) (99)
Minority interest depreciation and amortization 38 35 113 105
Gain on sale of depreciable real estate investments - - 429 1,131
----------------------------------------------------
NET INCOME AVAILABLE TO COMMON STOCKHOLDERS 5,264 5,191 15,689 15,303
Dividends on preferred shares 656 656 1,968 1,968
----------------------------------------------------
NET INCOME $ 5,920 5,847 17,657 17,271
====================================================
DILUTED PER COMMON SHARE DATA: (3)
Income from continuing operations $ 0.23 0.21 0.65 0.60
Income from discontinued operations 0.00 0.02 0.05 0.10
----------------------------------------------------
Net income available to common stockholders $ 0.23 0.23 0.70 0.70
====================================================
Funds from operations available to common stockholders $ 0.70 0.67 2.09 1.96
====================================================
Weighted average shares outstanding for EPS and FFO purposes 22,553 22,130 22,334 21,805
====================================================
(1) Includes no interest expense for 2006 and zero and $64,000 for the three and
nine months ended September 30, 2005, respectively.
(2) Net of capitalized interest of $1,120,000 and $610,000 for the three months
ended September 30, 2006 and 2005, respectively; and $3,096,000 and $1,679,000
for the nine months ended September 30, 2006 and 2005, respectively.
(3) Assumes dilutive effect of common stock equivalents.