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 2006 RESULTS
FOURTH QUARTER 2006 RESULTS
o Funds from Operations of $17.0 Million or $.72 Per Share, an Increase of
5.9%
o Net Income Available to Common Stockholders of $10.9 Million or $.46 Per
Share
o Same Property Net Operating Income Growth of 6.0%, 7.9% Before
Straight-Line Rent Adjustments
o Percentage Leased 96.6%, Occupancy 95.9% - Highest Levels Since 2000
o Paid 108th Consecutive Quarterly Dividend - $.49 Per Share
o $50 Million Invested in Acquisitions and Development
YEAR 2006 RESULTS
o Total Shareholder Return of 23% for 2006 and Average Annual Total Returns
of 24% for 3 Years, 25% for 5 Years, 20% for 10 Years and 22% for 15 Years
o Funds from Operations of $63.7 Million or $2.81 Per Share, an Increase of
6.4%
o Net Income Available to Common Stockholders of $26.6 Million or $1.17 Per
Share
o Same Property Net Operating Income Growth of 4.7%, 6.1% Before
Straight-Line Rent Adjustments
o Paid Annual Dividends of $1.96 Per Share - Fourteenth Consecutive Year of
Dividend Growth With Average Annual Increase of 4.9%
o $97 Million Invested in Acquisitions and Development During the Year
o Nineteen Development Projects with Projected Costs of $108 Million Under
Construction or In Lease-Up at Year End
o Debt-to-Total Market Capitalization of 25.5% at Year End
o Interest Coverage of 3.7x and Fixed Charge Coverage of 3.3x
JACKSON, MISSISSIPPI, February 14, 2007 - EastGroup Properties, Inc. (NYSE-EGP)
announced today the results of its operations for the three months and year
ended December 31, 2006.
FUNDS FROM OPERATIONS
For the quarter ended December 31, 2006, funds from operations (FFO) was $.72
per share compared with $.68 for the same period of 2005, an increase of 5.9%
per share. The increase in FFO was mainly due to higher property net operating
income (PNOI) of $2,588,000 (an 11.7% increase in PNOI). This increase in PNOI
was primarily attributable to $1,327,000 from same property growth, $917,000
from newly developed properties and $253,000 from 2005 and 2006 acquisitions.
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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, 2006, FFO was $2.81 per share compared with
$2.64 per share for 2005, an increase of 6.4% per share. The increase in FFO for
2006 was primarily due to higher PNOI of $9,576,000 (an 11.1% increase in PNOI).
The increase in PNOI resulted mainly from $3,795,000 from same property growth,
$3,148,000 from newly developed properties and $2,455,000 attributable to 2005
and 2006 acquisitions.
PNOI from same properties increased 6.0% for the quarter. Before straight-line
rent adjustments, the increase was 7.9%. Rental rate increases on new and
renewal leases (5.2% of total square footage) averaged 10.8% for the quarter.
Before straight-line rent adjustments, rental rate increases on new and renewal
leases averaged 5.8%.
For the year, PNOI from same properties increased 4.7%. Before straight-line
rent adjustments, the increase was 6.1%. Rental rate increases on new and
renewal leases (21.9% of total square footage) averaged 11.2% for the year, and,
before straight-line rent adjustments, rental rate increases on new and renewal
leases averaged 4.2%.
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 95.9% at December 31, 2006, which is the highest
occupancy level since the third quarter of 2000. In addition, we continue to
experience growth in FFO per share with the fourth quarter of 2006 representing
our tenth consecutive quarter of increased FFO per share compared to the
previous year's quarter. It was also the fourteenth 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."
Mr. Hoster added, "We are proud of our consistent track record of creating value
for our shareholders over both the short and long-term. Total shareholder
returns for the one, three, five, ten and fifteen year periods all average 20%
or greater per year."
EARNINGS PER SHARE
On a diluted per share basis, earnings per common share (EPS) was $.46 for the
three months ended December 31, 2006 compared to $.19 per share in the same
period of 2005. Gain on sales of real estate was $.20 per share in the fourth
quarter of 2006 compared to zero in the same period of 2005. Diluted EPS was
$1.17 in 2006 compared to $.89 in 2005 with increased gain on the sales of real
estate of $.21 per share in 2006.
DEVELOPMENT
During the fourth quarter, the Company acquired 5.1 acres of land in Houston,
Texas for future development for $835,000. This land is located in EastGroup's
World Houston International Business Center and will complement EastGroup's
existing presence there.
The Company also purchased the remaining 20 acres of SunCoast Commerce Park land
in Fort Myers, Florida that had been under contract since 2005 as part of a
total 30-acre purchase. The 20 acres was purchased for $3,126,000 and is
adjacent to a 10-acre tract of land that the Company purchased for development
in 2005. Construction on the first two SunCoast Commerce Park buildings (126,000
square feet) began in September.
Also during the quarter, EastGroup purchased 35 additional acres of land with
extensive frontage on I-75 in Fort Myers for $9,310,000 which is located in the
same submarket as our existing SunCoast Commerce Park. Fort Myers is
strategically located to serve the distribution requirements in southwestern
Florida between Sarasota and Naples along the I-75 corridor.
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P.O.Box 22728-JACKSON, MS 39225-TEL. 601-354-3555-FAX 601-352-1441
During the fourth quarter, EastGroup transferred two Houston properties (168,000
square feet; one 100% and one 54% leased) and one San Antonio property (66,000
square feet and 100% leased) to the portfolio with a combined investment of
$12,617,000. In January 2007, the Company transferred a Chandler, Arizona
property (85,000 square feet and 100% leased) to the portfolio with an
investment of $5,501,000.
At December 31, 2006, EastGroup had 19 development properties containing
1,451,000 square feet with a projected total cost of approximately $108 million
either in lease-up or under construction. These properties were collectively 39%
leased at December 31, 2006 and 42% at February 13, 2007.
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
In mid-December 2006, EastGroup acquired four business distribution buildings in
Charlotte, North Carolina for a purchase price of $19,510,000. The buildings,
which were constructed in 1987 through 1989, contain a total of 322,000 square
feet and are located in the NorthPark Business Park. The multi-tenant properties
are currently 93.4% leased to 18 customers and are projected to generate a 7.0%
stabilized unleveraged cash yield at 95% occupancy.
David H. Hoster II, President and CEO stated, "This acquisition is our first in
Charlotte and represents EastGroup's entry into our third new market over the
past three years. As a growth Sunbelt market with a good industrial base, we
believe Charlotte offers an excellent fit with our investment and operating
strategies. The NorthPark buildings are high quality distribution properties in
Charlotte's strongest industrial submarket and give us a good base from which to
expand our ownership in the market."
In January 2007, EastGroup continued its expansion into the Charlotte market and
acquired three additional business distribution buildings there for a purchase
price of $9,300,000. Westinghouse Distribution Center, which was constructed in
1983, contains 104,000 square feet and is 100% leased to three customers.
Lindbergh Business Park I and II, built in 2001 and 2003, have 77,000 square
feet in two buildings and are 69% leased to five customers. In total, the
buildings are 87% leased and are projected to generate an 8.1% stabilized
unleveraged cash yield at 95% occupancy.
Mr. Hoster stated, "The purchase of Westinghouse and Lindbergh is EastGroup's
second acquisition in Charlotte since mid-December and increases our ownership
to 503,000 square feet in seven buildings. Charlotte is an attractive market in
which we plan to grow to over one million square feet in the next 12 to 24
months."
Also in January 2007, the Company purchased North Stemmons III (60,000 square
feet) in Dallas for $2,850,000. North Stemmons III is located in an existing
EastGroup submarket in Dallas and will complement EastGroup's current presence
there. The building is 100% leased and is projected to generate a 7.8%
unleveraged cash yield.
EastGroup is currently under separate contracts to purchase properties with
231,000 square feet in San Antonio and 68,000 square feet in Denver. These
acquisitions are expected to close during the first quarter of 2007.
PROPERTY SALES
In December, EastGroup sold two properties in separate transactions. The
Company's Auburn Hills building (114,000 square feet), a single tenant
office/R&D facility located in the Detroit, Michigan metro area, was sold for a
price of $17,850,000. The sale generated a gain of $4,224,000 and a deferred
gain of $329,000 which we expect to realize in the first quarter of 2007.
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P.O.Box 22728-JACKSON, MS 39225-TEL. 601-354-3555-FAX 601-352-1441
Also in December, EastGroup sold its Crowfarn Distribution Center (106,000
square feet) in Memphis for $2,750,000 which generated a gain of $387,000. This
transaction reduced the Company's ownership in Memphis to 264,000 square feet
with a net investment of less than $5,000,000.
David H. Hoster II, President and CEO stated, "The sales of Auburn Hills and
Crowfarn are part of our ongoing strategy to dispose of non-core assets as
market conditions permit. Both of these properties were originally acquired
through a merger, and the sale proceeds will be reinvested in new development
and core market acquisitions."
In addition, the Company sold a small portion of its Sun Coast land for $270,000
to the City of Fort Myers for right of way purposes in lieu of eminent domain.
The sale generated a gain of $123,000.
DIVIDENDS
EastGroup paid dividends of $.49 per share of common stock in the fourth quarter
of 2006, which was the 108th consecutive quarterly distribution to EastGroup's
common stockholders. The annualized dividend rate of $1.96 per share yields 3.4%
on the closing stock price of $57.23 on February 13, 2007.
EastGroup also paid quarterly dividends of $.4969 per share on its Series D
Preferred Stock on January 15, 2007 to stockholders of record as of December 29,
2006.
STRONG FINANCIAL POSITION
EastGroup's balance sheet continues to be strong and flexible with debt-to-total
market capitalization of 25.5% at December 31, 2006. For the year, the Company
had an interest coverage ratio of 3.7x and a fixed charge coverage ratio of
3.3x. Total debt at December 31, 2006 was $446.5 million with floating rate bank
debt comprising $29.1 million of that total.
As previously announced, 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.
OUTLOOK FOR 2007
EastGroup confirms its previously issued FFO guidance for the first quarter and
the year 2007. FFO per share for 2007 is estimated to be in the range of $2.93
to $3.03. Diluted EPS for 2007 is estimated to be in the range of $1.12 to
$1.22. The table below reconciles projected net income to projected FFO.
Low Range High Range
Q1 2007 Y/E 2007 Q1 2007 Y/E 2007
------------------------------------------------------
Net income $ 6,710 29,262 7,186 31,638
Dividends on preferred shares (656) (2,624) (656) (2,624)
------------------------------------------------------
Net income available to common stockholders 6,054 26,638 6,530 29,014
Depreciation and amortization 10,747 42,963 10,747 42,963
------------------------------------------------------
Funds from operations available to common stockholders $ 16,801 69,601 17,277 71,977
======================================================
Diluted shares 23,754 23,758 23,754 23,758
Per share data (diluted):
Net income available to common stockholders $ 0.25 1.12 0.27 1.22
Funds from operations available to common stockholders $ 0.71 2.93 0.73 3.03
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P.O.Box 22728-JACKSON, MS 39225-TEL. 601-354-3555-FAX 601-352-1441
The following assumptions were used:
o Average occupancy of 94.0% to 96.5%.
o Same property NOI increase of 1% to 4%.
o Non-same property NOI:
o Development properties not transferred to the portfolio as of January
1, 2006 contributing PNOI of $.37 per share.
o Dispositions of operating properties totaling $10 million on July 1,
2007.
o Operating property acquisitions of $19 million in December 2006 and $9
million in January 2007, which have closed.
o Additional operating property acquisitions of $50 million on July 1,
2007.
o No lease termination fees.
o No sales of nondepreciable real estate.
o Floating rate bank debt at an average rate of 6%.
o New fixed rate debt of $50 million on August 15, 2007 at 5.7%.
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
fourth quarter and review the Company's current operations on Thursday, February
15, 2007, at 11:00 A.M. Eastern Time. A live broadcast of the conference call is
available by dialing 1-800-795-1259 (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, February 15, 2007. The telephone replay will be available
until Thursday, February 22, 2007, and can be accessed by dialing
1-888-219-1269. 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, February 22, 2007.
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.
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P.O.Box 22728-JACKSON, MS 39225-TEL. 601-354-3555-FAX 601-352-1441
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 22.1
million square feet with an additional 1,458,000 square feet of properties under
development. EastGroup Properties, Inc. press releases are also available on the
Company's website.
FORWARD-LOOKING STATEMENTS
The Company's assumptions and financial projections in this release are based
upon "forward-looking" information and are being made pursuant to the safe
harbor provisions of the Private Securities Litigation Reform Act of 1995.
Forward-looking statements are inherently subject to known and unknown risks and
uncertainties, many of which the Company cannot predict, including, without
limitation:
o changes in general economic conditions;
o the extent of tenant defaults or of any early lease terminations;
o the Company's ability to lease or re-lease space at current or anticipated
rents;
o changes in the supply of and demand for industrial/warehouse properties;
o increases in interest rate levels;
o increases in operating costs;
o the availability of financing;
o natural disasters and the Company's ability to obtain adequate insurance;
o changes in governmental regulation, tax rates and similar matters; and
o other risks associated with the development and acquisition of properties,
including risks that development projects may not be completed on schedule
or that development or operating costs may be greater than anticipated.
Although the Company believes that the expectations reflected in the
forward-looking statements are based upon reasonable assumptions at the time
made, the Company can give no assurance that such expectations will be achieved.
The Company assumes no obligation whatsoever to publicly update or revise any
forward-looking statements.
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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,
----------------------------------------------------
2006 2005 2006 2005
----------------------------------------------------
REVENUES
Income from real estate operations $ 34,503 31,141 133,144 120,710
Equity in earnings of unconsolidated investment 74 73 287 450
Other income (loss) (73) 269 182 413
----------------------------------------------------
34,504 31,483 133,613 121,573
----------------------------------------------------
EXPENSES
Expenses from real estate operations 9,719 8,945 37,354 34,496
Depreciation and amortization 10,589 10,476 41,525 37,871
General and administrative 1,967 1,608 7,401 6,874
Minority interest in joint ventures 148 126 600 484
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22,423 21,155 86,880 79,725
----------------------------------------------------
OPERATING INCOME 12,081 10,328 46,733 41,848
OTHER INCOME (EXPENSE)
Gain on sale of nonoperating real estate 123 - 123 -
Interest income 31 12 142 247
Interest expense (5,570) (5,936) (24,616) (23,444)
----------------------------------------------------
INCOME FROM CONTINUING OPERATIONS 6,665 4,404 22,382 18,651
----------------------------------------------------
DISCONTINUED OPERATIONS
Income from real estate operations 276 516 1,125 2,376
Gain on sale of real estate investments 4,636 - 5,727 1,164
----------------------------------------------------
INCOME FROM DISCONTINUED OPERATIONS 4,912 516 6,852 3,540
----------------------------------------------------
NET INCOME 11,577 4,920 29,234 22,191
Preferred dividends-Series D 656 656 2,624 2,624
----------------------------------------------------
NET INCOME AVAILABLE TO COMMON STOCKHOLDERS $ 10,921 4,264 26,610 19,567
====================================================
BASIC PER COMMON SHARE DATA
Income from continuing operations $ 0.26 0.17 0.88 0.74
Income from discontinued operations 0.21 0.03 0.31 0.17
----------------------------------------------------
Net income available to common stockholders $ 0.47 0.20 1.19 0.91
====================================================
Weighted average shares outstanding 23,425 21,811 22,372 21,567
====================================================
DILUTED PER COMMON SHARE DATA
Income from continuing operations $ 0.25 0.17 0.87 0.73
Income from discontinued operations 0.21 0.02 0.30 0.16
----------------------------------------------------
Net income available to common stockholders $ 0.46 0.19 1.17 0.89
====================================================
Weighted average shares outstanding 23,749 22,147 22,692 21,892
====================================================
Dividends declared per common share $ 0.490 0.485 1.960 1.940
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,
----------------------------------------------------
2006 2005 2006 2005
----------------------------------------------------
RECONCILIATIONS OF OTHER REPORTING MEASURES TO NET INCOME:
Income from real estate operations $ 34,503 31,141 133,144 120,710
Expenses from real estate operations (9,719) (8,945) (37,354) (34,496)
----------------------------------------------------
PROPERTY NET OPERATING INCOME (PNOI) 24,784 22,196 95,790 86,214
Equity in earnings of unconsolidated investment
(before interest and depreciation) 195 196 773 798
Interest income 31 12 142 247
Other income (loss) (73) 269 182 413
General and administrative expense (1,967) (1,608) (7,401) (6,874)
----------------------------------------------------
EARNINGS BEFORE INTEREST, TAXES, DEPRECIATION AND AMORTIZATION (EBITDA) 22,970 21,065 89,486 80,798
Income from discontinued operations (before depreciation and amortization) (1) 401 883 1,817 3,811
Interest expense (2) (5,570) (5,936) (24,616) (23,444)
Interest expense from unconsolidated investment (88) (90) (354) (216)
Minority interest in earnings (before depreciation and amortization) (186) (162) (751) (625)
Gain on sale of nondepreciable real estate 129 - 791 33
Dividends on Series D preferred shares (656) (656) (2,624) (2,624)
----------------------------------------------------
FUNDS FROM OPERATIONS (FFO) AVAILABLE TO COMMON STOCKHOLDERS 17,000 15,104 63,749 57,733
Depreciation and amortization from continuing operations (10,589) (10,476) (41,525) (37,871)
Depreciation and amortization from discontinued operations (125) (367) (692) (1,435)
Depreciation from unconsolidated investment (33) (33) (132) (132)
Minority interest depreciation and amortization 38 36 151 141
Gain on sale of depreciable real estate investments 4,630 - 5,059 1,131
----------------------------------------------------
NET INCOME AVAILABLE TO COMMON STOCKHOLDERS 10,921 4,264 26,610 19,567
Dividends on preferred shares 656 656 2,624 2,624
----------------------------------------------------
NET INCOME $ 11,577 4,920 29,234 22,191
====================================================
DILUTED PER COMMON SHARE DATA: (3)
Income from continuing operations $ 0.25 0.17 0.87 0.73
Income from discontinued operations 0.21 0.02 0.30 0.16
----------------------------------------------------
Net income available to common stockholders $ 0.46 0.19 1.17 0.89
====================================================
Funds from operations available to common stockholders $ 0.72 0.68 2.81 2.64
====================================================
Weighted average shares outstanding for EPS and FFO purposes 23,749 22,147 22,692 21,892
====================================================
(1) Includes no interest expense for 2006 and zero and $64,000 for the three and
twelve months ended December 31, 2005, respectively.
(2) Net of capitalized interest of $1,240,000 and $806,000 for the three months
ended December 31, 2006 and 2005, respectively; and $4,336,000 and $2,485,000
for the twelve months ended December 31, 2006 and 2005, respectively.
(3) Assumes dilutive effect of common stock equivalents.