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 2008 RESULTS
o Funds from Operations of $19.8 Million or $.80 Per Share, an Increase of
8.1%
o Net Income Available to Common Stockholders of $9.1 Million or $.37 Per
Share
o Same Property Net Operating Income Growth of 0.9%, 2.7% Before
Straight-Line Rent Adjustments
o $14 Million Invested in Development During the Quarter
o 23 Development Projects with Estimated Costs of $144 Million Under
Construction or In Lease-Up at Quarter-End
o 95.6% Leased, 95.0% Occupied
o Paid 114th Consecutive Quarterly Dividend - $.52 Per Share
o Debt-to-Total Market Capitalization of 36.0% at Quarter-End with a Stock
Price of $42.90 Per Share
o Interest Coverage of 3.7x and Fixed Charge Coverage of 3.4x
JACKSON, MISSISSIPPI, July 23, 2008 - EastGroup Properties, Inc. (NYSE-EGP)
announced today the results of its operations for the three and six months ended
June 30, 2008.
David H. Hoster II, President and CEO, stated, "We are pleased to report that
EastGroup's funds from operations (FFO) per share for the second quarter
exceeded the upper range of our guidance and represented an increase of 8.1%
over last year's second quarter. This was the 16th consecutive quarter of
increased FFO per share compared to the previous year's quarter. It was also the
20th consecutive quarter of same property net operating income growth both with
and without the straight-lining of rents."
FUNDS FROM OPERATIONS
For the quarter ended June 30, 2008, FFO was $.80 per share compared to $.74 for
the same period of 2007, an increase of 8.1% per share. Property net operating
income (PNOI) increased 11.7% primarily due to additional PNOI of $2,089,000
from newly developed properties, $826,000 from 2007 and 2008 acquisitions and
$243,000 from same property growth.
For the six months ended June 30, 2008, FFO was $1.63 per share compared with
$1.46 for the same period of 2007, an increase of 11.6% per share. PNOI
increased 12.5% primarily due to additional PNOI of $3,762,000 from newly
developed properties, $2,013,000 from 2007 and 2008 acquisitions and $794,000
from same property growth.
Same property operating results increased 0.9% for the quarter; 2.7% before
straight-line rent adjustments. Rental rate increases on new and renewal leases
(4.9% of total square footage) averaged 9.4% for the quarter; 1.2% before
straight-line rent adjustments.
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P. O. Box 22728 - JACKSON, MS 39225 - TEL. 601-354-3555 - FAX 601-352-1441
For the six months ended June 30, 2008, same property operating results
increased 1.6%; 2.3% before straight-line rent adjustments. Rental rate
increases on new and renewal leases (9.2% of total square footage) averaged
11.0% for the six months; 3.3% 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."
EARNINGS PER SHARE
On a diluted per share basis, earnings per common share (EPS) was $.37 for the
three months ended June 30, 2008, compared to $.23 for the same period of 2007.
Diluted EPS was $.68 for the six-month period in 2008 compared to $.48 in 2007.
The Company recognized gains on sales of real estate investments, gains on sales
of securities, gain on involuntary conversion, and lease termination fee income
during the first six months of 2008. These transactions increased EPS in the
first six months of 2008 by $.13 per share as compared to the same period of
2007.
DEVELOPMENT
During the first six months of 2008, EastGroup transferred seven development
properties to the portfolio as detailed below:
Percent Projected
Real Estate Properties Transferred Date Leased Stabilized
from Development in 2008 Size Transferred Cost at 07/23/08 Yield (1)
- -------------------------------------------------------------------------------------------------------------------------------
(Square feet) (In thousands)
Beltway Crossing IV, Houston, TX............ 55,000 01/21/08 $ 3,436 100% 9.4%
Beltway Crossing III, Houston, TX........... 55,000 02/01/08 3,231 100% 9.9%
Southridge XII, Orlando, FL................. 404,000 03/20/08 18,852 100% 10.1%
Arion 18, San Antonio, TX................... 20,000 03/31/08 2,607 91% 9.0%
Southridge VII, Orlando FL.................. 92,000 04/01/08 6,509 100% 9.6%
Wetmore II, Bldg C, San Antonio, TX......... 69,000 05/29/08 3,691 100% 9.7%
Interstate Commons III, Phoenix, AZ......... 38,000 06/01/08 3,096 39% 8.1%
----------- ------------
Total Developments Transferred........... 733,000 $ 41,422
=========== ============
(1) Based on 100% occupancy and rents computed on a straight-line basis.
During the second quarter, EastGroup began construction of five additional
development properties totaling 373,000 square feet. These buildings, which are
located in Houston, Tampa, West Palm Beach and Tucson, have a projected total
investment of $28.5 million. Two of the properties, World Houston 28 and 29, are
build-to-suit developments and are 100% leased.
For the full year, EastGroup expects to have development starts of $65 to $70
million with a total of approximately 1.1 million square feet.
At June 30, 2008, EastGroup had 23 development properties containing 1,989,000
square feet with a projected total cost of approximately $144 million either in
lease-up or under construction. These properties were collectively 32% leased at
June 30, 2008 and 33% leased at July 23, 2008.
Subsequent to quarter-end, EastGroup acquired 12th Street Distribution Center, a
150,000 square foot building in Jacksonville, Florida. This purchase was part of
the Company's Orlando build-to-suit transaction with United Stationers. The
Company purchased the vacant property for $3,730,000 and plans to redevelop
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P. O. Box 22728 - JACKSON, MS 39225 - TEL. 601-354-3555 - FAX 601-352-1441
it for multi-tenant use for a projected total investment of $4,685,000. In
addition, the Company completed the acquisition of 12.2 acres of land in San
Antonio, Texas, for future development. The price was $1.9 million, and the
Company plans to construct three buildings with a total of 176,000 square feet.
PROPERTY SALES
During the second quarter, EastGroup received a condemnation award from the
State of Texas for its North Stemmons I property in Dallas. The Company was
awarded $4,698,000 as payment for the building and a portion of the land
associated with the property. A gain of $1,949,000 (not included in FFO) was
recognized as a result of this transaction. The Company plans to develop a new
business distribution building on the remaining 4.9 acres.
DIVIDENDS
EastGroup paid dividends of $.52 per share of common stock in the second quarter
of 2008, which was the 114th consecutive quarterly distribution to the Company's
common shareholders. The annualized dividend rate of $2.08 per share yields 4.5%
on the closing stock price of $46.51 on July 22, 2008.
EastGroup also paid quarterly dividends of $.4969 per share on its Series D
Preferred Stock on July 15, 2008, to shareholders of record as of June 30, 2008.
STRONG FINANCIAL POSITION
EastGroup's balance sheet continues to be strong and flexible with debt-to-total
market capitalization of 36% at June 30, 2008. For the quarter, the Company had
an interest coverage ratio of 3.7x and a fixed charge coverage ratio of 3.4x.
Total debt at June 30, 2008 was $623.4 million comprised of $535.6 million of
fixed rate mortgage debt and $87.8 million of floating rate bank debt.
During the second quarter, the Company sold 1,198,700 shares of its common stock
to Merrill Lynch, Pierce, Fenner & Smith Incorporated. Net proceeds from the
offerings were $57.2 million. The Company used the proceeds to repay
indebtedness outstanding under its revolving credit facility and for other
general corporate purposes.
Also during the second quarter, the Company announced that it would redeem all
of its 1,320,000 shares of 7.95% Series D Cumulative Redeemable Preferred Stock.
The redemption took place on July 2, 2008, at a redemption price of $25.00 per
share plus accrued and unpaid dividends for the period from July 1, 2008,
through and including the redemption date of $.011 per share, for an aggregate
redemption price of $25.011 per Series D Preferred Share. Original issuance
costs of $674,000 ($.03 per share) were expensed in July. If this transaction
had occurred on June 30, 2008, debt-to-total market capitalization would have
increased from 36.0% to 37.9%.
Mr. Hoster commented, "This year EastGroup has improved an already strong
balance sheet through a series of attractive transactions. These include its new
$200 million, unsecured revolving bank credit facility in January; a $78
million, non-recourse, seven-year first mortgage with a 5.5% interest rate in
March; and the issuance of 1,198,700 shares of common stock in April with net
proceeds of $57.2 million. All of these were accomplished in a difficult
economic environment."
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P. O. Box 22728 - JACKSON, MS 39225 - TEL. 601-354-3555 - FAX 601-352-1441
OUTLOOK FOR REMAINDER OF 2008
FFO per share for 2008 is estimated to be in the range of $3.24 to $3.34.
Diluted EPS for 2008 is estimated to be in the range of $1.18 to $1.28. The
table below reconciles projected net income to projected FFO.
Low Range High Range
Q3 2008 Y/E 2008 Q3 2008 Y/E 2008
--------------------------------------------------
(in thousands, except per share data)
--------------------------------------------------
Net income $ 6,829 31,182 7,831 33,646
Costs of redemption - Series D Preferred (674) (674) (674) (674)
Dividends on preferred shares (14) (1,326) (14) (1,326)
--------------------------------------------------
Net income available to common stockholders 6,141 29,182 7,143 31,646
Depreciation and amortization 13,392 52,607 13,392 52,607
Gain on sale of depreciable real estate investment - (1,949) - (1,949)
--------------------------------------------------
Funds from operations available to common stockholders $ 19,533 79,840 20,535 82,304
==================================================
Diluted shares 25,043 24,642 25,043 24,642
Per share data (diluted):
Net income available to common stockholders $ 0.25 1.18 .29 1.28
Funds from operations available to common stockholders $ 0.78 3.24 .82 3.34
The following assumptions were used:
o Original issuance costs of $674,000 ($.03 per share) related to the
redemption of the Series D Preferred Stock expensed in the third quarter of
2008.
o Average occupancy of 93.5% to 95.5% for the year.
o Same Property NOI increase of 0% to 2.5% for the year.
o Non-same Property NOI:
o Development properties not transferred to the portfolio by January 1,
2007, contributing PNOI of $.51 per share for 2008.
o Acquisitions of operating properties of $10 million in the second half
of 2008.
o Dispositions of operating properties of $20 million in the second half
of 2008.
o No termination fees for the remainder of the year.
o No sales of land or other non-depreciable real estate.
o No gains on sales of securities for the remainder of the year.
o Floating rate bank debt at an average rate of 4.0%.
o New fixed rate debt of $70 million in the fourth quarter of 2008 at 6.5%.
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.
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P. O. Box 22728 - JACKSON, MS 39225 - TEL. 601-354-3555 - FAX 601-352-1441
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
second quarter and review the Company's current operations on Thursday, July 24,
2008, at 11:00 a.m. Eastern Daylight Time. A live broadcast of the conference
call is available by dialing 1-800-862-9098 (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, July 24, 2008. The telephone replay will be
available until Thursday, July 31, 2008, and can be accessed by dialing
1-800-283-4783. 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, July 31, 2008.
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 25.1
million square feet with an additional 2.0 million square feet of properties
under development. EastGroup Properties, Inc. press releases are 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 not in the present or past tense and can be
identified by the words "will," "anticipates," "expects," "believes," or other
words or phrases that indicate future trends or events. 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 the availability of financing;
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P. O. Box 22728 - JACKSON, MS 39225 - TEL. 601-354-3555 - FAX 601-352-1441
o changes in the supply of and demand for industrial/warehouse properties;
o increases in interest rate levels;
o increases in operating costs;
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,
development or operating costs may be greater than anticipated or
acquisitions may not close as scheduled.
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 Six Months Ended
June 30, June 30,
----------------------------------------------------
2008 2007 2008 2007
----------------------------------------------------
REVENUES
Income from real estate operations $ 41,458 36,955 81,564 72,814
Other income 21 20 216 45
----------------------------------------------------
41,479 36,975 81,780 72,859
----------------------------------------------------
EXPENSES
Expenses from real estate operations 11,536 10,173 22,382 20,191
Depreciation and amortization 12,625 11,931 25,007 23,047
General and administrative 2,018 1,847 4,099 3,876
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26,179 23,951 51,488 47,114
----------------------------------------------------
OPERATING INCOME 15,300 13,024 30,292 25,745
OTHER INCOME (EXPENSE)
Equity in earnings of unconsolidated investment 79 73 159 149
Gain on sales of land 5 7 12 14
Gain on sales of securities - - 435 -
Interest income 27 34 64 56
Interest expense (7,509) (6,905) (14,882) (13,076)
Minority interest in joint ventures (137) (158) (293) (308)
----------------------------------------------------
INCOME FROM CONTINUING OPERATIONS 7,765 6,075 15,787 12,580
----------------------------------------------------
DISCONTINUED OPERATIONS
Income from real estate operations 32 57 101 139
Gain on sales of real estate investments 1,949 - 1,949 -
----------------------------------------------------
INCOME FROM DISCONTINUED OPERATIONS 1,981 57 2,050 139
----------------------------------------------------
NET INCOME 9,746 6,132 17,837 12,719
Preferred dividends-Series D 656 656 1,312 1,312
----------------------------------------------------
NET INCOME AVAILABLE TO COMMON STOCKHOLDERS $ 9,090 5,476 16,525 11,407
====================================================
BASIC PER COMMON SHARE DATA
Income from continuing operations $ 0.29 0.23 0.60 0.47
Income from discontinued operations 0.08 0.00 0.09 0.01
----------------------------------------------------
Net income available to common stockholders $ 0.37 0.23 0.69 0.48
====================================================
Weighted average shares outstanding 24,488 23,550 24,086 23,541
====================================================
DILUTED PER COMMON SHARE DATA
Income from continuing operations $ 0.29 0.23 0.60 0.47
Income from discontinued operations 0.08 0.00 0.08 0.01
----------------------------------------------------
Net income available to common stockholders $ 0.37 0.23 0.68 0.48
====================================================
Weighted average shares outstanding 24,647 23,776 24,238 23,761
====================================================
Dividends declared per common share $ 0.52 0.50 1.04 1.00
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,
----------------------------------------------------
2008 2007 2008 2007
----------------------------------------------------
RECONCILIATIONS OF OTHER REPORTING MEASURES TO NET INCOME:
Income from real estate operations $ 41,458 36,955 81,564 72,814
Expenses from real estate operations (11,536) (10,173) (22,382) (20,191)
----------------------------------------------------
PROPERTY NET OPERATING INCOME (PNOI) 29,922 26,782 59,182 52,623
Gain on sales of securities - - 435 -
Equity in earnings of unconsolidated investment
(before interest and depreciation) 198 193 396 390
Interest income 27 34 64 56
Other income 21 20 216 45
General and administrative expense (2,018) (1,847) (4,099) (3,876)
----------------------------------------------------
EARNINGS BEFORE INTEREST, TAXES, DEPRECIATION AND
AMORTIZATION (EBITDA) 28,150 25,182 56,194 49,238
Income from discontinued operations (before depreciation and amortization) 49 152 154 313
Interest expense (1) (7,509) (6,905) (14,882) (13,076)
Interest expense from unconsolidated investment (86) (87) (171) (175)
Minority interest in earnings (before depreciation and amortization) (188) (199) (393) (387)
Gain on sales of land 5 7 12 14
Dividends on Series D preferred shares (656) (656) (1,312) (1,312)
----------------------------------------------------
FUNDS FROM OPERATIONS (FFO) AVAILABLE TO COMMON STOCKHOLDERS 19,765 17,494 39,602 34,615
Depreciation and amortization from continuing operations (12,625) (11,931) (25,007) (23,047)
Depreciation and amortization from discontinued operations (17) (95) (53) (174)
Depreciation from unconsolidated investment (33) (33) (66) (66)
Minority interest depreciation and amortization 51 41 100 79
Gain on sales of depreciable real estate investments 1,949 - 1,949 -
----------------------------------------------------
NET INCOME AVAILABLE TO COMMON STOCKHOLDERS 9,090 5,476 16,525 11,407
Dividends on preferred shares 656 656 1,312 1,312
----------------------------------------------------
NET INCOME $ 9,746 6,132 17,837 12,719
====================================================
DILUTED PER COMMON SHARE DATA: (2)
Income from continuing operations $ 0.29 0.23 0.60 0.47
Income from discontinued operations 0.08 0.00 0.08 0.01
----------------------------------------------------
Net income available to common stockholders $ 0.37 0.23 0.68 0.48
====================================================
Funds from operations available to common stockholders $ 0.80 0.74 1.63 1.46
====================================================
Weighted average shares outstanding for EPS and FFO purposes 24,647 23,776 24,238 23,761
====================================================
(1) Net of capitalized interest of $1,648 and $1,413 for the three months ended
June 30, 2008 and 2007, respectively; and $3,353 and $2,853 for the six
months ended June 30, 2008 and 2007, respectively.
(2) Assumes dilutive effect of common stock equivalents.