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 2007 RESULTS
o Funds from Operations of $19.0 Million or $.80 Per Share, an Increase of
14.3%
o Net Income Available to Common Stockholders of $7.1 Million or $.30 Per
Share
o Same Property Net Operating Income Growth of 6.5%, 6.1% Before
Straight-Line Rent Adjustments
o $33 Million Invested in Acquisitions and Development
o 22 Development Properties with Projected Costs of $159 Million Under
Construction or In Lease-Up
o Percentage Leased 97.0%, Occupancy of 95.7%
o Paid 111th Consecutive Quarterly Dividend - $.50 Per Share
o Debt-to-Total Market Capitalization of 33.7% at Quarter End with a Stock
Price of $45.26 Per Share
o Interest Coverage of 3.8x and Fixed Charge Coverage of 3.5x
JACKSON, MISSISSIPPI, October 24, 2007 - EastGroup Properties, Inc. (NYSE-EGP)
announced today the results of its operations for the three and nine months
ended September 30, 2007.
FUNDS FROM OPERATIONS
For the quarter ended September 30, 2007, funds from operations (FFO) was $.80
per share compared with $.70 for the same period of 2006, an increase of 14.3%
per share. The increase in FFO was mainly due to higher property net operating
income (PNOI) of $4,427,000 (an 18.3% increase in PNOI). This increase in PNOI
was primarily attributable to $1,547,000 from same property growth, $1,517,000
from newly developed properties and $1,395,000 from 2006 and 2007 acquisitions.
Included in same property growth was $.04 per share in termination fees for the
third quarter of 2007 mainly from one tenant's early termination (this space has
already been re-leased), compared to $.01 per share in the same quarter of 2006.
Without termination fees, the increase in FFO per share for the third quarter
would have been 10.1%.
For the nine months ended September 30, 2007, FFO was $2.26 per share compared
with $2.09 for the same period of 2006, an increase of 8.1% per share; excluding
land sales of $.03 per share for the nine months ended September 30, 2006, the
increase was 9.2% per share. The increase in FFO was mainly due to higher
property net operating income (PNOI) of $10,421,000 (a 14.7% increase in PNOI).
This increase in PNOI was primarily attributable to $3,165,000 from same
property growth, $3,954,000 from newly developed properties and $3,409,000 from
2006 and 2007 acquisitions. Included in same property growth was $.04 per share
in termination fees for the nine months in 2007 mainly from one tenant's early
termination (this space has already been re-leased), compared to $.02 per share
in the same period of 2006. Without termination fees and land sales for the nine
months, the increase in FFO per share would have been 8.8%.
PNOI from same properties increased 6.5% for the quarter; 6.1% before
straight-line rent adjustments. Rental rate increases on new and renewal leases
(5.8% of total square footage) averaged 11.7% for the quarter; 2.2% before
straight-line rent adjustments.
-MORE-
P. O. Box 22728 - JACKSON, MS 39225 - TEL. 601-354-3555 - FAX 601-352-1441
For the nine months ended September 30, 2007, PNOI from same properties
increased 4.6%; 5.3% before straight-line rent adjustments. Rental rate
increases on new and renewal leases (17.5% of total square footage) averaged
11.1% for the nine months; 3.0% before straight-line rent adjustments.
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
continued stable leasing and occupancy results. In addition, we continue to
achieve growth in FFO per share with the third quarter of 2007 representing our
thirteenth consecutive quarter of increased FFO per share compared to the
previous year's quarter. It was also the seventeenth consecutive quarter of same
property PNOI growth 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 $.30 for the
three-month period ended September 30, 2007 compared with $.23 for the same
period of 2006. Diluted EPS was $.78 for the nine-month period in 2007 compared
to $.70 in 2006. The nine months ended September 30, 2006 included $.05 per
share gain on the sale of real estate investments compared to $.01 per share in
the same period of 2007.
DEVELOPMENT
Since the beginning of 2007, EastGroup has transferred ten development
properties to the portfolio as detailed below:
Percent Projected
Real Estate Properties Transferred Date Leased Stabilized
from Development in 2007 Size Transferred Cost at 10/24/07 Yield (1)
- ---------------------------------------------------------------------------------------------------------------------
(Square feet) (In thousands)
Santan 10 II, Chandler, AZ............... 85,000 01/01/07 $ 5,523 100% 10.0%
Oak Creek III, Tampa, FL................. 61,000 03/23/07 3,591 100% 9.7%
Southridge VI, Orlando, FL............... 81,000 04/01/07 5,327 100% 10.7%
Arion 16, San Antonio, TX................ 64,000 04/20/07 3,899 100% 10.2%
Southridge III, Orlando, FL.............. 81,000 04/20/07 5,441 100% 9.9%
Southridge II, Orlando, FL............... 41,000 05/01/07 4,242 100% 10.5%
World Houston 15, Houston, TX............ 63,000 05/01/07 6,088 100% 10.0%
World Houston 23, Houston, TX............ 125,000 05/01/07 7,859 100% 10.3%
Arion 17, San Antonio, TX................ 40,000 06/01/07 3,628 100% 10.2%
Beltway Crossing II, Houston, TX......... 50,000 09/01/07 3,114 100% 9.7%
------------- -------------
Total Developments Transferred........ 691,000 $48,712
============= =============
(1) Based on 100% occupancy and rents computed on a straight-line basis.
During the third quarter, we began construction of five additional developments
with 451,000 square feet in four cities and two states. These five have a
projected total investment of $29.9 million.
Also during the third quarter, the Company purchased a total of 130.5 acres of
land consisting of 60.5 acres in two locations in Houston, expanding current
developments, and 70 acres in San Antonio which includes a portion of
residential land that is currently being marketed for sale.
For the full year, we expect to have development starts of over $115 million
with a total of approximately 1.8 million square feet.
At September 30, 2007, EastGroup had 22 development properties containing
2,279,000 square feet with a projected total cost of approximately $159 million
either in lease-up or under construction. These properties were collectively 41%
leased at September 30, 2007 and 43% at October 24, 2007.
-MORE-
P. O. Box 22728 - JACKSON, MS 39225 - TEL. 601-354-3555 - FAX 601-352-1441
Mr. Hoster stated, "EastGroup's development program is the strongest it has ever
been. This is a reflection of both the strong leasing activity at our
development properties and the vibrancy 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. Our goal
is to add quality, state-of-the-art investments to our portfolio and thereby
increase total returns to our shareholders in both the short and long term."
ACQUISITIONS AND SALES
In October, EastGroup sold Delp Distribution Center I (152,000 square feet) in
Memphis for $3,275,000 and realized a gain of approximately $600,000.
Mr. Hoster stated, "The sale of Delp I reflects the Company's continued plan of
reducing ownership in Memphis and other noncore markets, as market conditions
permit. With this sale, the Company has only two properties (112,000 square
feet) in Memphis."
DIVIDENDS
EastGroup paid dividends of $.50 per share of common stock in the third quarter
of 2007, which was the 111th consecutive quarterly distribution to EastGroup's
common stockholders. The annualized dividend rate of $2.00 per share yields 4.5%
on the closing stock price of $44.71 on October 23, 2007.
EastGroup also paid quarterly dividends of $.4969 per share on its Series D
Preferred Stock on October 15, 2007 to stockholders of record as of September
28, 2007.
STRONG FINANCIAL POSITION
EastGroup's balance sheet continues to be strong and flexible with debt-to-total
market capitalization of 33.7% at September 30, 2007. For the quarter, the
Company had an interest coverage ratio of 3.8x and a fixed charge coverage ratio
of 3.5x. Total debt at September 30, 2007 was $563.6 million with floating rate
bank debt comprising $94.7 million of that total.
On August 8, 2007, the Company closed on a $75 million, nonrecourse first
mortgage loan secured by properties containing 1,448,000 square feet. The loan
has a fixed interest rate of 5.57%, a ten-year term and an amortization schedule
of 20 years. The proceeds of this mortgage were used to reduce variable rate
bank borrowings.
Mr. Hoster stated, "This capital transaction allowed EastGroup to further
strengthen an already sound financial position by reducing our floating rate
debt and increasing our debt coverage ratios, thereby enhancing the Company's
flexibility in funding its development and acquisition programs.
"In addition, we are pleased to announce that Fitch Ratings recently affirmed
EastGroup's rating of BBB, which should have a positive effect on capital
raising costs in the future."
OUTLOOK FOR 2007
FFO per share for 2007 is estimated to be in the range of $3.10 to $3.12 ($.10
per share more than our previous estimate). The midpoint was increased from
$3.01 per share to $3.11 per share. Diluted EPS for 2007 is estimated to be in
the range of $1.12 to $1.14. Guidance was increased due to improved third
quarter results and a condemnation award (discussed below) to be recorded in the
fourth quarter of 2007.
-MORE-
P. O. Box 22728 - JACKSON, MS 39225 - TEL. 601-354-3555 - FAX 601-352-1441
The table below reconciles projected net income to projected FFO.
Low Range High Range
Q4 2007 Y/E 2007 Q4 2007 Y/E 2007
-------------------------------------------------
(In thousands except for per share data)
-------------------------------------------------
Net income $ 8,731 29,299 9,207 29,775
Dividends on preferred shares (656) (2,624) (656) (2,624)
-------------------------------------------------
Net income available to common stockholders 8,075 26,675 8,551 27,151
Depreciation and amortization 12,500 47,940 12,500 47,940
Gain on sale of depreciable real estate (600) (900) (600) (900)
-------------------------------------------------
Funds from operations available to common stockholders $ 19,975 73,715 20,451 74,191
=================================================
Diluted shares 23,780 23,779 23,780 23,779
Per share data (diluted):
Net income available to common stockholders $ 0.34 1.12 0.36 1.14
Funds from operations available to common stockholders $ 0.84 3.10 0.86 3.12
The following assumptions and completed transactions were used:
o Average occupancy of 95.0% to 96.0%.
o Fourth quarter same property NOI increase of 0.9% to 2.9%.
o Non-same property NOI:
o Development properties not transferred to the portfolio as of
January 1, 2006 contributing PNOI of $.35 per share.
o No additional lease termination fees beyond the fees recorded
through September 30, 2007. The previously announced termination
fee of $796,000 projected for the fourth quarter was recognized
in the third quarter.
o No sales of depreciable real estate other than the sale of Delp I
in October with a gain of $600,000.
o A gain resulting from a condemnation award, primarily compensation for
land in Arion Business Park, of $.11 per share. It is anticipated that
this award will be received in the fourth quarter. No other sales of
nondepreciable real estate are projected.
o General and administrative expense increase of $.03 per share in the
fourth quarter due to increased performance-based compensation.
o Floating rate bank debt at an average rate of 6.3% for the fourth
quarter.
o No additional fixed rate debt for the remainder of the year.
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
-MORE-
P. O. Box 22728 - JACKSON, MS 39225 - TEL. 601-354-3555 - FAX 601-352-1441
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
25, 2007, at 11:00 A.M. Eastern Time. A live broadcast of the conference call is
available by dialing 1-800-894-5910 (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 25, 2007. The telephone replay will be available
until Thursday, November 1, 2007, and can be accessed by dialing 1-800-723-0479.
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 1,
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.
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, Arizona and California. 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 23.3
million square feet with an additional 2,279,000 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, terrorism, riots and acts of war, 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.
-MORE-
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,
----------------------------------------------------
2007 2006 2007 2006
----------------------------------------------------
REVENUES
Income from real estate operations $ 39,153 33,674 112,192 98,554
Other income 20 221 65 255
----------------------------------------------------
39,173 33,895 112,257 98,809
----------------------------------------------------
EXPENSES
Expenses from real estate operations 10,490 9,438 30,759 27,542
Depreciation and amortization 12,200 10,396 35,312 30,827
General and administrative 1,993 1,990 5,868 5,434
----------------------------------------------------
24,683 21,824 71,939 63,803
----------------------------------------------------
OPERATING INCOME 14,490 12,071 40,318 35,006
OTHER INCOME (EXPENSE)
Equity in earnings of unconsolidated investment 65 74 214 213
Interest income 38 68 94 111
Interest expense (7,086) (6,314) (20,162) (19,046)
Minority interest in joint ventures (133) (179) (441) (452)
----------------------------------------------------
INCOME FROM CONTINUING OPERATIONS 7,374 5,720 20,023 15,832
----------------------------------------------------
DISCONTINUED OPERATIONS
Income from real estate operations 31 193 87 734
Gain on sale of real estate investments 309 7 323 1,091
----------------------------------------------------
INCOME FROM DISCONTINUED OPERATIONS 340 200 410 1,825
----------------------------------------------------
NET INCOME 7,714 5,920 20,433 17,657
Preferred dividends-Series D 656 656 1,968 1,968
----------------------------------------------------
NET INCOME AVAILABLE TO COMMON STOCKHOLDERS $ 7,058 5,264 18,465 15,689
====================================================
BASIC PER COMMON SHARE DATA
Income from continuing operations $ 0.29 0.23 0.76 0.63
Income from discontinued operations 0.01 0.01 0.02 0.08
----------------------------------------------------
Net income available to common stockholders $ 0.30 0.24 0.78 0.71
====================================================
Weighted average shares outstanding 23,562 22,235 23,548 22,017
====================================================
DILUTED PER COMMON SHARE DATA
Income from continuing operations $ 0.29 0.22 0.76 0.62
Income from discontinued operations 0.01 0.01 0.02 0.08
----------------------------------------------------
Net income available to common stockholders $ 0.30 0.23 0.78 0.70
====================================================
Weighted average shares outstanding 23,778 22,553 23,767 22,334
====================================================
Dividends declared per common share $ 0.50 0.49 1.50 1.47
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,
----------------------------------------------------
2007 2006 2007 2006
----------------------------------------------------
RECONCILIATIONS OF OTHER REPORTING MEASURES TO NET INCOME:
Income from real estate operations $ 39,153 33,674 112,192 98,554
Expenses from real estate operations (10,490) (9,438) (30,759) (27,542)
----------------------------------------------------
PROPERTY NET OPERATING INCOME (PNOI) 28,663 24,236 81,433 71,012
Equity in earnings of unconsolidated investment
(before interest and depreciation) 184 195 574 578
Interest income 38 68 94 111
Other income 20 221 65 255
General and administrative expense (1,993) (1,990) (5,868) (5,434)
----------------------------------------------------
EARNINGS BEFORE INTEREST, TAXES, DEPRECIATION AND
AMORTIZATION (EBITDA) 26,912 22,730 76,298 66,522
Income from discontinued operations (before depreciation and amortization) 72 356 237 1,408
Interest expense (1) (7,086) (6,314) (20,162) (19,046)
Interest expense from unconsolidated investment (86) (88) (261) (266)
Minority interest in earnings (before depreciation and amortization) (175) (217) (562) (565)
Gain on sale of nondepreciable real estate 9 7 23 662
Dividends on Series D preferred shares (656) (656) (1,968) (1,968)
----------------------------------------------------
FUNDS FROM OPERATIONS (FFO) AVAILABLE TO COMMON STOCKHOLDERS 18,990 15,818 53,605 46,747
Depreciation and amortization from continuing operations (12,200) (10,396) (35,312) (30,827)
Depreciation and amortization from discontinued operations (41) (163) (150) (674)
Depreciation from unconsolidated investment (33) (33) (99) (99)
Minority interest depreciation and amortization 42 38 121 113
Gain on sale of depreciable real estate investments 300 - 300 429
----------------------------------------------------
NET INCOME AVAILABLE TO COMMON STOCKHOLDERS 7,058 5,264 18,465 15,689
Dividends on preferred shares 656 656 1,968 1,968
----------------------------------------------------
NET INCOME $ 7,714 5,920 20,433 17,657
====================================================
DILUTED PER COMMON SHARE DATA: (2)
Income from continuing operations $ 0.29 0.22 0.76 0.62
Income from discontinued operations 0.01 0.01 0.02 0.08
----------------------------------------------------
Net income available to common stockholders $ 0.30 0.23 0.78 0.70
====================================================
Funds from operations available to common stockholders $ 0.80 0.70 2.26 2.09
====================================================
Weighted average shares outstanding for EPS and FFO purposes 23,778 22,553 23,767 22,334
====================================================
(1) Net of capitalized interest of $1,572,000 and $1,120,000 for the three
months ended September 30, 2007 and 2006, respectively; and $4,425,000 and
$3,096,000 for the nine months ended September 30, 2007 and 2006, respectively.
(2) Assumes dilutive effect of common stock equivalents.