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 2008 RESULTS
FOURTH QUARTER 2008 RESULTS
o Funds from Operations of $21.2 Million or $.85 Per Share, a Decrease of
1.2% Compared to the Same Quarter Last Year; Excluding Gains on Land Sales,
FFO Per Share Increased 11.8%
o Net Income Available to Common Stockholders of $8.4 Million or $.34 Per
Share
o Same Property Net Operating Income Growth of 2.1% With and Without
Straight-Line Rent Adjustments
o 94.8% Leased, 93.8% Occupied
o Customer Retention Rate of 77% for the Fourth Quarter
o Paid 116th Consecutive Quarterly Dividend - $.52 Per Share
o Interest and Fixed Charge Coverages of 3.8x for the Fourth Quarter
o Closed on a $59 Million Non-recourse Mortgage at 5.75% Fixed Interest Rate
YEAR 2008 RESULTS
o Funds from Operations of $81.3 Million or $3.30 Per Share, an Increase of
5.8% Compared to 2007
o Net Income Available to Common Stockholders of $32.1 Million or $1.30 Per
Share
o Same Property Net Operating Income Growth of 0.3%, 0.7% Without
Straight-Line Rent Adjustments
o $132 Million Invested in Development and Acquisitions During the Year
o 17 Development Projects with Estimated Costs of $119 Million Under
Construction or In Lease-Up at Year-End
o Customer Retention Rate of 74% for the Year
o Paid Annual Dividends of $2.08 Per Share - Sixteenth Consecutive Year of
Dividend Growth With Average Annual Increase of 4.7%
o Interest Coverage of 3.8x and Fixed Charge Coverage of 3.6x for the Year
o Issued 1,198,700 Shares of Common Stock with Net Proceeds of $57.2 Million
o Redeemed 1,320,000 Shares of Series D Preferred Stock for $33 Million and
Expensed Original Issuance Costs of $674,000 ($.03 per share)
o Debt Maturities of $31.4 Million in 2009 and None in 2010
o Bank Line Capacity of $115 Million as of December 31, 2008
JACKSON, MISSISSIPPI, February 11, 2009 - EastGroup Properties, Inc. (NYSE-EGP)
announced today the results of its operations for the three months and year
ended December 31, 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 fourth quarter met the
upper end of our guidance and represented an increase of 11.8% over last year's
final quarter when gains on land sales are excluded from both periods.
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P.O. Box 22728 - JACKSON, MS 39225 - TEL.601-354-3555 - FAX 601-352-1441
We also achieved same property net operating income growth of 2.1% for the
quarter in a difficult environment."
FUNDS FROM OPERATIONS
For the fourth quarter ended December 31, 2008, FFO was $.85 per share compared
to $.86 for the same period of 2007, a decrease of 1.2% per share. FFO for the
fourth quarter of 2008 included gains on land sales of $8,000 as compared to
$2,579,000 in the same period of 2007. Excluding these gains for both periods,
FFO per share increased 11.8%. Property net operating income (PNOI) increased
11.2% primarily due to additional PNOI of $1,865,000 from newly developed
properties, $740,000 from 2007 and 2008 acquisitions, and $587,000 from same
property growth.
Same property operating results increased 2.1% for the quarter with and without
straight-line rent adjustments. Rental rates on new and renewal leases (3.7% of
total square footage) increased an average of 4.5% for the quarter; rental rates
decreased 0.7% without straight-line rent adjustments.
For the year ended December 31, 2008, FFO was $3.30 per share compared to $3.12
for the same period of 2007, an increase of 5.8% per share. Gain on sales of
non-operating real estate was $321,000 ($.01 per share) for 2008 and $2,602,000
($.11 per share) for 2007. Costs on redemption of preferred shares was $682,000
($.03 per share) for 2008. PNOI increased 10.8% primarily due to additional PNOI
of $7,966,000 from newly developed properties, $3,660,000 from 2007 and 2008
acquisitions, and $282,000 from same property growth.
For the year, same property operating results increased 0.3%; 0.7% without
straight-line rent adjustments. Rental rate increases on new and renewal leases
(18.9% of total square footage) averaged 11.1% and were 4.2% without
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 $.34 for the
three months ended December 31, 2008, compared to $.36 for the same period of
2007. Gain on sales of real estate increased EPS by $.14 in the fourth quarter
of 2007, and the effect in the fourth quarter of 2008 was less than $.01.
Diluted EPS was $1.30 for the year ended December 31, 2008 compared to $1.14 in
2007. Gain on sales of real estate increased EPS by $.10 per share in 2008
compared to $.15 per share in 2007.
DEVELOPMENT
In November, EastGroup began construction of World Houston 30 (88,000 square
feet) with a projected total investment of $5.8 million. This project is the
only development start since the end of the third quarter of 2008, and no
construction starts are planned for 2009.
During the quarter, the Company acquired 8.1 acres of land in Houston
(additional World Houston land) for $1,229,000 and 0.5 acres of land in San
Antonio (additional Thousand Oaks land) for $242,000. EastGroup also purchased
94.3 acres of land in Orlando for $9,111,000. The Company is currently under
contract to purchase an additional 35.0 acres in a second phase of this
acquisition for $5 million. This transaction is expected to close during the
fourth quarter of 2009.
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P.O. Box 22728 - JACKSON, MS 39225 - TEL.601-354-3555 - FAX 601-352-1441
Mr. Hoster stated, "Our development program has had a good, long run adding
quality, state-of-the-art investments to our portfolio, but we do not expect to
see opportunities for new development in the near term other than a possible
build-to-suit. These opportunities will reappear, and we plan to be ready to
take advantage of them when they do."
For the year, EastGroup purchased 125 acres of development land for a total cost
of $13.4 million and one property for re-development (150,000 square feet) for
$3.8 million. The Company had 2008 development starts of over $48 million with a
total of 765,000 square feet.
At December 31, 2008, EastGroup had 17 development properties containing
1,668,000 square feet with a projected total cost of approximately $119 million
either in lease-up or under construction. These properties were collectively 21%
leased at December 31, 2008 and 22% leased at February 10, 2009.
During 2008, EastGroup transferred 16 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 2/10/09 Yield (1)
- --------------------------------------------------------------------------------------------------------------------------------
(Square feet) (In thousands)
Beltway Crossing IV, Houston, TX............ 55,000 01/21/08 $ 3,444 100% 9.3%
Beltway Crossing III, Houston, TX........... 55,000 02/01/08 3,428 100% 9.9%
Southridge XII, Orlando, FL................. 404,000 03/20/08 18,850 100% 10.3%
Arion 18, San Antonio, TX................... 20,000 03/31/08 2,623 91% 8.7%
Southridge VII, Orlando, FL................. 92,000 04/01/08 6,516 100% 9.6%
Wetmore II, Bldg C, San Antonio, TX......... 69,000 05/29/08 3,704 100% 10.0%
Interstate Commons III, Phoenix, AZ......... 38,000 06/01/08 3,108 69% 8.0%
SunCoast I, Fort Myers, FL.................. 63,000 07/01/08 5,333 67% 7.8%
World Houston 27, Houston, TX............... 92,000 07/01/08 5,463 100% 10.5%
Wetmore II, Bldg D, San Antonio, TX......... 124,000 08/01/08 8,074 100% 9.3%
World Houston 24, Houston, TX............... 93,000 09/01/08 6,065 86% 9.5%
Centennial Park, Denver, CO................. 68,000 10/01/08 5,666 100% 8.7%
World Houston 25, Houston, TX............... 66,000 11/01/08 4,119 100% 9.0%
Beltway Crossing V, Houston, TX............. 83,000 12/01/08 4,807 72% 9.7%
Wetmore II, Bldg A, San Antonio, TX......... 34,000 12/01/08 3,377 73% 10.2%
Oak Creek A & B, Tampa, FL.................. 35,000 12/31/08 3,030 0% 7.9%
------------ --------------
Total Developments Transferred........... 1,391,000 $ 87,607
============ ==============
(1) Based on 100% occupancy and rents computed with straight-line adjustments.
PROPERTY ACQUISITIONS AND SALES
There were no acquisitions or sales in the fourth quarter, except for the land
acquisitions mentioned above under Development.
In February 2008, EastGroup acquired a portfolio of five operating properties
(669,000 square feet) in metropolitan Charlotte, North Carolina, for a total
cost of $41 million.
In August, EastGroup purchased a 128,000 square foot warehouse in Tampa as part
of the Orlando build-to-suit transaction with United Stationers. The Company
acquired and then sold this building through its taxable REIT subsidiary and
recognized a gain of $294,000, which was included in FFO and EPS.
Also in August, EastGroup sold Delp Distribution Center III, a 20,000 square
foot warehouse in Memphis, for $635,000 and recognized a gain of $83,000. In
addition, EastGroup sold 41 acres of residential land in
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P.O. Box 22728 - JACKSON, MS 39225 - TEL.601-354-3555 - FAX 601-352-1441
San Antonio in September for $841,000 with no gain or loss. This property was
acquired as part of the Company's Alamo Ridge industrial land acquisition in
September 2007.
EastGroup also received a condemnation award from the State of Texas in May for
its North Stemmons I property in Dallas. The Company was awarded $4.7 million as
payment for the building and a portion of the land associated with the property.
A gain of $1.9 million (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 when market conditions improve.
DIVIDENDS
EastGroup paid dividends of $.52 per share of common stock in the fourth quarter
of 2008, which was the 116th consecutive quarterly distribution to the Company's
common shareholders. The Company's dividend payout ratio of funds from
operations was 63% for the year. The annualized dividend rate of $2.08 per share
yields 7.0% on the closing stock price of $29.55 on February 10, 2009.
STRONG FINANCIAL POSITION
EastGroup's balance sheet continues to be strong and flexible with a
debt-to-total market capitalization of 43.8% at December 31, 2008. For the
quarter, EastGroup had interest and fixed charge coverage ratios of 3.8x. For
the year, the Company had an interest coverage ratio of 3.8x and a fixed charge
coverage ratio of 3.6x. Total debt at December 31, 2008 was $695.7 million
comprised of $585.8 million of fixed rate mortgage debt and $109.9 million of
floating rate bank debt.
The Company has debt maturities of only $31.4 million in 2009 and has no debt
maturities in 2010. EastGroup has revolving credit facilities of $200 million
and $25 million, and neither matures until 2012.
In December, EastGroup closed on a $59 million, non-recourse first mortgage loan
secured by properties containing 1.3 million square feet. The loan has a fixed
interest rate of 5.75%, a 5-year term and a 20-year amortization schedule. The
proceeds of this mortgage loan were used to reduce variable rate bank
borrowings.
On January 2, 2009, the mortgage note payable of $9,365,000 on the Tower
Automotive Center was repaid and replaced with another mortgage note payable for
the same amount. The previous mortgage was a variable rate demand note, and
EastGroup had entered into a swap agreement to fix the LIBOR rate. In the fourth
quarter of 2008, the bond spread over LIBOR required to re-market the notes
increased from a historical range of 3 to 25 basis points to a range of 200 to
500 basis points. Due to the volatility of the bond spread costs, EastGroup
redeemed the note and replaced it with a recourse mortgage with a bank on the
same payment terms except for the interest rate. The effective interest rate on
the previous note was 5.30% until the fourth quarter of 2008 when the weighted
average rate was 8.00%. The effective rate on the new note, including the swap,
is 6.03%.
OUTLOOK FOR 2009
The Company's initial outlook for 2009 is FFO per share to be in the range of
$3.09 to $3.21. Diluted EPS for 2009 is estimated to be in the range of $.89 to
$1.01. The table below reconciles projected net income to projected FFO.
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P.O. Box 22728 - JACKSON, MS 39225 - TEL.601-354-3555 - FAX 601-352-1441
Low Range High Range
Q1 2009 Y/E 2009 Q1 2009 Y/E 2009
-------------------------------------------------------
(In thousands, except per share data)
Net income available to common stockholders $ 6,276 22,368 6,778 25,378
Depreciation and amortization 13,533 55,132 13,533 55,132
-------------------------------------------------------
Funds from operations available to common stockholders $ 19,809 77,500 20,311 80,510
=======================================================
Diluted shares 25,075 25,081 25,075 25,081
Per share data (diluted):
Net income available to common stockholders $ 0.25 0.89 0.27 1.01
Funds from operations available to common stockholders $ 0.79 3.09 0.81 3.21
The following assumptions were used:
o Average occupancy of 90.5% to 92.5% for the year.
o No acquisitions or dispositions during the year.
o No development construction starts during the year.
o Increased general and administrative expense of $.07 per share
compared to 2008, resulting from a projected decrease in
compensation ($.04 per share) offset by reduced capitalization of
internal development costs ($.10 per share) and other overhead
factors ($.01 per share).
o Bad debt, net of termination fees, of $.05 per share for the
year.
o Floating rate bank debt at an average rate of 2.4% for the year.
o New fixed rate debt of $60-70 million on May 1, 2009 at 6.0-7.5%.
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.
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
12, 2009, at 11:00 a.m. Eastern Time. A live broadcast of the conference call is
available by dialing 1-800-862-9098 (conference ID EastGroup) or by
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P.O. Box 22728 - JACKSON, MS 39225 - TEL.601-354-3555 - FAX 601-352-1441
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 12, 2009. The telephone replay will be
available until Thursday, February 19, 2009, and can be accessed by dialing
1-800-243-8160. 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 19, 2009.
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 25.8
million square feet with an additional 1.5 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;
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 Twelve Months Ended
December 31, December 31,
----------------------------------------------------
2008 2007 2008 2007
----------------------------------------------------
REVENUES
Income from real estate operations $ 43,912 38,287 168,327 150,083
Other income 16 27 248 92
----------------------------------------------------
43,928 38,314 168,575 150,175
----------------------------------------------------
EXPENSES
Expenses from real estate operations 12,815 10,312 47,374 40,926
Depreciation and amortization 12,793 12,553 51,221 47,738
General and administrative 2,198 2,427 8,547 8,295
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27,806 25,292 107,142 96,959
----------------------------------------------------
OPERATING INCOME 16,122 13,022 61,433 53,216
OTHER INCOME (EXPENSE)
Equity in earnings of unconsolidated investment 77 71 316 285
Gain on sales of non-operating real estate 8 2,579 321 2,602
Gain on sales of securities - - 435 -
Interest income 104 212 293 306
Interest expense (7,714) (7,152) (30,192) (27,314)
Minority interest in joint ventures (164) (168) (626) (609)
----------------------------------------------------
INCOME FROM CONTINUING OPERATIONS 8,433 8,564 31,980 28,486
----------------------------------------------------
DISCONTINUED OPERATIONS
Income from real estate operations - 77 130 288
Gain on sales of real estate investments - 660 2,032 960
----------------------------------------------------
INCOME FROM DISCONTINUED OPERATIONS - 737 2,162 1,248
----------------------------------------------------
NET INCOME 8,433 9,301 34,142 29,734
Preferred dividends-Series D - 656 1,326 2,624
Costs on redemption of Series D preferred shares - - 682 -
----------------------------------------------------
NET INCOME AVAILABLE TO COMMON STOCKHOLDERS $ 8,433 8,645 32,134 27,110
====================================================
BASIC PER COMMON SHARE DATA
Income from continuing operations $ 0.34 0.34 1.22 1.10
Income from discontinued operations 0.00 0.03 0.09 0.05
----------------------------------------------------
Net income available to common stockholders $ 0.34 0.37 1.31 1.15
====================================================
Weighted average shares outstanding 24,923 23,605 24,503 23,562
====================================================
DILUTED PER COMMON SHARE DATA
Income from continuing operations $ 0.34 0.33 1.21 1.09
Income from discontinued operations 0.00 0.03 0.09 0.05
----------------------------------------------------
Net income available to common stockholders $ 0.34 0.36 1.30 1.14
====================================================
Weighted average shares outstanding 25,059 23,819 24,653 23,781
====================================================
Dividends declared per common share $ 0.52 0.50 2.08 2.00
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,
----------------------------------------------------
2008 2007 2008 2007
----------------------------------------------------
RECONCILIATIONS OF OTHER REPORTING MEASURES TO NET INCOME:
Income from real estate operations $ 43,912 38,287 168,327 150,083
Expenses from real estate operations (12,815) (10,312) (47,374) (40,926)
----------------------------------------------------
PROPERTY NET OPERATING INCOME (PNOI) 31,097 27,975 120,953 109,157
Gain on sales of securities - - 435 -
Equity in earnings of unconsolidated investment
(before interest and depreciation) 194 190 787 764
Interest income 104 212 293 306
Other income 16 27 248 92
General and administrative expense (1) (2,198) (2,427) (8,547) (8,295)
----------------------------------------------------
EARNINGS BEFORE INTEREST, TAXES, DEPRECIATION AND AMORTIZATION (EBITDA) 29,213 25,977 114,169 102,024
Income from discontinued operations (before depreciation and amortization) - 120 201 608
Interest expense (2) (7,714) (7,152) (30,192) (27,314)
Interest expense from unconsolidated investment (84) (86) (339) (347)
Minority interest in earnings (before depreciation and amortization) (214) (219) (827) (783)
Gain on sales of non-operating real estate 8 2,579 321 2,602
Dividends on Series D preferred shares - (656) (1,326) (2,624)
Costs on redemption of Series D preferred shares - - (682) -
----------------------------------------------------
FUNDS FROM OPERATIONS (FFO) AVAILABLE TO COMMON STOCKHOLDERS 21,209 20,563 81,325 74,166
Depreciation and amortization from continuing operations (12,793) (12,553) (51,221) (47,738)
Depreciation and amortization from discontinued operations - (43) (71) (320)
Depreciation from unconsolidated investment (33) (33) (132) (132)
Minority interest depreciation and amortization 50 51 201 174
Gain on sales of depreciable real estate investments - 660 2,032 960
----------------------------------------------------
NET INCOME AVAILABLE TO COMMON STOCKHOLDERS 8,433 8,645 32,134 27,110
Dividends on Series D preferred shares - 656 1,326 2,624
Costs on redemption of Series D preferred shares - - 682 -
----------------------------------------------------
NET INCOME $ 8,433 9,301 34,142 29,734
====================================================
DILUTED PER COMMON SHARE DATA:
Income from continuing operations $ 0.34 0.33 1.21 1.09
Income from discontinued operations 0.00 0.03 0.09 0.05
----------------------------------------------------
Net income available to common stockholders $ 0.34 0.36 1.30 1.14
====================================================
Funds from operations available to common stockholders $ 0.85 0.86 3.30 3.12
====================================================
Weighted average shares outstanding for EPS and FFO purposes 25,059 23,819 24,653 23,781
====================================================
(1) Net of capitalized development costs of $816 and $1,098 for the three
months ended December 31, 2008 and 2007, respectively; and $3,717 and
$3,686 for the twelve months ended December 31, 2008 and 2007,
respectively.
(2) Net of capitalized interest of $1,902 and $1,661 for the three months ended
December 31, 2008 and 2007, respectively; and $6,946 and $6,086 for the
twelve months ended December 31, 2008 and 2007, respectively.