EastGroup Properties Announces Fourth Quarter and Year 2023 Results
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Insights
The reported increase in net income attributable to common stockholders, from $0.89 to $1.35 per diluted share year-over-year for Q4, is a substantial growth indicator. This suggests a robust operational performance, likely driven by effective asset management and strategic dispositions. The 11.5% rise in FFO per share for the same period accentuates the company's ability to generate cash flow from its operations, which is a critical metric for real estate investment trusts (REITs). Investors would interpret these figures as a positive sign of the company's financial health and potential for delivering shareholder value.
Moreover, the reported 6.8% increase in Same Property Net Operating Income (NOI) on a straight-line basis indicates strong underlying property performance, which is vital for sustained revenue growth. The 62.0% increase in rental rates on new and renewal leases is exceptional and far exceeds industry norms, reflecting a potentially aggressive pricing strategy or a very favorable market position. However, the increase in depreciation, amortization and interest expenses should be monitored as they could impact future earnings.
The operational portfolio's high occupancy rates, at 98.7% leased and 98.2% occupied, are indicative of strong demand and effective property management. This is particularly significant in the context of global economic uncertainty and could signal resilience in the industrial real estate sector, especially in the Sunbelt region where the company operates. The acquisition of new properties and development land, along with the construction of new development projects, demonstrates confidence in future growth and an expansion strategy that could cater to increasing demand for industrial spaces.
The disposal of properties, resulting in gains of $13 million not included in FFO, is a strategic move to capitalize on asset values and could be seen as a proactive approach to portfolio optimization. The forward equity sales agreements indicate a strategic approach to financing that could provide flexibility and liquidity for future investments or debt management.
The expansion of borrowing capacity from $475 million to $675 million, alongside the closure of a $100 million senior unsecured term loan at a fixed interest rate of 5.27%, indicates the company's proactive capital management. The repayment of higher interest debt and refinancing to a lower rate is a positive step towards reducing interest expense, thereby potentially improving net interest margins. The lack of remaining secured debt in the portfolio could be viewed favorably by investors as it suggests a lower risk profile and greater financial flexibility.
However, the increase in weighted average shares due to the equity offering program dilutes existing shareholders' equity. While this provides capital for growth, it may also exert downward pressure on EPS in the short term. The weighted average initial forward price of $183.92 per share for the forward equity sales agreements suggests management's confidence in the company's valuation and future performance.
Fourth Quarter 2023 Results
- Net Income Attributable to Common Stockholders of
$1.35 $0.89 $13 Million $0.28 - Funds from Operations ("FFO") of
$2.03 $1.82 11.5% - Same Property Net Operating Income for the Same Property Pool Excluding Income From Lease Terminations Increased
6.8% on a Straight-Line Basis and7.5% on a Cash Basis for Fourth Quarter 2023 Compared to the Same Period in 2022 - Operating Portfolio was
98.7% Leased and98.2% Occupied as of December 31, 2023; Average Occupancy of Operating Portfolio was98.1% for Fourth Quarter 2023 as Compared to98.4% for Fourth Quarter 2022 - Rental Rates on New and Renewal Leases Increased an Average of
62.0% on a Straight-Line Basis - Acquired Three Operating Properties Totaling 577,000 Square Feet for Approximately
$78 Million - Acquired 118.2 Acres of Development Land for Approximately
$26 Million - Started Construction of One Development Project Containing 244,000 Square Feet with Projected Total Costs of Approximately
$35 Million - Transferred One Development Project, which Contains 100,000 Square Feet and is
100% Leased, to the Operating Portfolio - Sold Two Operating Properties Totaling 106,000 Square Feet for Approximately
$29 Million $13 Million - Declared 176th Consecutive Quarterly Cash Dividend:
$1.27 - Sold 1,369,875 Shares of Common Stock Pursuant to the Company's Continuous Common Equity Offering Program at a Weighted Average Price of
$171.55 $232 Million - Entered into Forward Equity Sales Agreements under the Company's Continuous Common Equity Offering Program with Respect to 406,041 Shares with a Weighted Average Initial Forward Price of
$183.92
Year 2023 Results
- Net Income Attributable to Common Stockholders of
$4.42 $4.36 $18 Million $0.40 $41 Million $0.96 - FFO of
$7.79 $7.00 11.3% - FFO Excluding Gain on Involuntary Conversion and Business Interruption Claims (
$0.09 $7.70 $7.00 10.0% - Same Property Net Operating Income for the Same Property Pool Excluding Income From Lease Terminations for 2023 Increased
6.6% on a Straight-Line Basis and8.0% on a Cash Basis Compared to 2022 - Average Occupancy of the Operating Portfolio was
98.0% for 2023, which is the Same as the Average for 2022 - Rental Rates on New and Renewal Leases Increased an Average of
55.0% on a Straight-Line Basis - Acquired Five Operating Properties Containing 987,000 Square Feet for Approximately
$165 Million - Acquired 328.3 Acres of Development Land for Approximately
$71 Million - Started Construction of 11 Development Projects Containing 2,435,000 Square Feet with Projected Total Costs of
$363 Million - Transferred 13 Development and Value-Add Projects, which Contain 2,341,000 Square Feet and are Collectively
100% Leased, to the Operating Portfolio - Sold Three Operating Properties Totaling 231,000 Square Feet and Two Parcels of Land Totaling 11.9 Acres for Approximately
$43 Million $18 Million - Expanded the Borrowing Capacity of the Unsecured Bank Credit Facilities from
$475 Million $675 Million - Closed a
$100 Million 5.27% - Repaid
$115 Million 2.96% - Repaid a Mortgage with a Principal Balance of Approximately
$2 Million 3.85% , Leaving No Remaining Secured Debt in the Portfolio - Refinanced a
$100 Million 2.61% - Sold 4,094,896 Shares of Common Stock Pursuant to the Company's Continuous Common Equity Offering Program at a Weighted Average Price of
$170.77 $691 Million - Entered into Forward Equity Sales Agreements under the Company's Continuous Common Equity Offering Program with Respect to 406,041 Shares with a Weighted Average Initial Forward Price of
$183.92
Commenting on EastGroup's performance, Marshall Loeb, CEO, stated, "Our strong performance continues as evidenced by FFO per share rising
EARNINGS PER SHARE
Three Months Ended December 31, 2023
On a diluted per share basis, earnings per common share ("EPS") were
- The Company's property net operating income ("PNOI") increased by
$15,153,000 $0.32 - EastGroup recognized gains on sales of real estate investments of
$13,156,000 $0.28
The increase in EPS was offset primarily by the following:
- Depreciation and amortization expense increased by
$4,689,000 $0.10 - Weighted average shares increased by 3,387,000 on a diluted basis during the three months ended December 31, 2023, as compared to the same period of 2022.
Twelve Months Ended December 31, 2023
Diluted EPS for the twelve months ended December 31, 2023 was
- PNOI increased by
$59,290,000 $1.31 - EastGroup recognized gains on involuntary conversion and business interruption claims of
$4,187,000 $0.09
The increase in EPS was offset primarily by the following:
- EastGroup recognized gains on sales of real estate investments of
$17,965,000 $0.40 $40,999,000 $0.96 - Depreciation and amortization expense increased by
$17,440,000 $0.38 - Interest expense increased by
$9,497,000 $0.21 - Weighted average shares increased by 2,619,000 on a diluted basis during the twelve months ended December 31, 2023, as compared to the same period of 2022.
FUNDS FROM OPERATIONS AND PROPERTY NET OPERATING INCOME
Three Months Ended December 31, 2023
For the three months ended December 31, 2023, funds from operations attributable to common stockholders ("FFO") were
PNOI increased by
Same PNOI Excluding Income from Lease Terminations increased
On a straight-line basis, rental rates on new and renewal leases (
Twelve Months Ended December 31, 2023
FFO for the twelve months ended December 31, 2023, was
FFO Excluding Gain on Involuntary Conversion and Business Interruption Claims was
PNOI increased by
Same PNOI Excluding Income from Lease Terminations increased
On a straight-line basis, rental rates on new and renewal leases (
The same property pool for the three and twelve months ended December 31, 2023 includes properties which were included in the operating portfolio for the entire period from January 1, 2022 through December 31, 2023; this pool is comprised of properties containing 46,437,000 square feet.
FFO, FFO Excluding Gain on Involuntary Conversion and Business Interruption Claims, PNOI and Same PNOI are non-GAAP financial measures, which are defined under Definitions later in this release. Reconciliations of Net Income to PNOI and Same PNOI, and Net Income Attributable to EastGroup Properties, Inc. Common Stockholders to FFO and FFO Excluding Gain on Involuntary Conversion and Business Interruption Claims are presented in the attached schedule "Reconciliations of GAAP to Non-GAAP Measures."
ACQUISITIONS AND DISPOSITIONS
In October 2023, EastGroup acquired McKinney Logistics Center, a recently developed 193,000 square foot business distribution building, for
In November 2023, the Company acquired Park at Myatt in
In December 2023, EastGroup acquired Pelzer Point Commerce Center 1, a 213,000 square foot business distribution building, and a 13.1 acre adjacent land parcel, for
Also in December, the Company acquired Basswood North Land, which contains 105.1 acres of development land in the
In aggregate, during 2023, EastGroup acquired 987,000 square feet of operating properties for
During the three months ended December 31, 2023, the Company sold two operating properties. Ettie Business Center, a 29,000 square foot building located in
In aggregate, during the full year 2023, the Company sold three operating properties totaling 231,000 square feet, for
Subsequent to year-end, EastGroup closed the following transactions:
- Acquired Spanish Ridge Industrial Park - three recently developed business distribution buildings totaling 231,000 square feet, for approximately
$55,000,000 Las Vegas and are100% leased. This acquisition increased the Company's ownership inLas Vegas to approximately 1,396,000 square feet, which is currently95.3% leased. - Acquired Brightstar Land - 34.3 acres of development land in the I-20 West submarket of
Atlanta for approximately$3,200,000
DEVELOPMENT AND VALUE-ADD PROPERTIES
During the fourth quarter of 2023, EastGroup began construction of one new development project in
The development projects started during 2023 are detailed in the table below:
Development Projects Started in 2023 | Location | Size | Anticipated | Projected | |||||||||||||||||||||||||
(Square feet) | (In thousands) | ||||||||||||||||||||||||||||
MCO Logistics Center | 167,000 | 07/2024 | $ | 25,300 | |||||||||||||||||||||||||
Horizon West 10 | 357,000 | 10/2024 | 45,200 | ||||||||||||||||||||||||||
SunCoast 9 | 111,000 | 01/2025 | 16,200 | ||||||||||||||||||||||||||
Horizon West 6 | 87,000 | 03/2025 | 12,300 | ||||||||||||||||||||||||||
Eisenhauer Point 10-12 | 223,000 | 04/2025 | 29,400 | ||||||||||||||||||||||||||
284,000 | 04/2025 | 33,700 | |||||||||||||||||||||||||||
115,000 | 05/2025 | 14,300 | |||||||||||||||||||||||||||
Gateway | 169,000 | 05/2025 | 34,900 | ||||||||||||||||||||||||||
244,000 | 09/2025 | 34,600 | |||||||||||||||||||||||||||
Skyway 1 & 2 | 318,000 | 10/2025 | 37,200 | ||||||||||||||||||||||||||
Arista 36 1-3 | 360,000 | 05/2026 | 80,300 | ||||||||||||||||||||||||||
Total Development Projects Started | 2,435,000 | $ | 363,400 | ||||||||||||||||||||||||||
At December 31, 2023, EastGroup's development and value-add program consisted of 18 projects (4,077,000 square feet) in 12 markets. The projects, which were collectively
During the fourth quarter of 2023, EastGroup transferred one project to the operating portfolio. The project, which is located in
The development and value-add properties transferred to the operating portfolio during 2023 are detailed in the table below:
Development and Value-Add | Location | Size | Conversion | Cumulative | Percent | |||||||||||||||||||||||||||
(Square feet) | (In thousands) | |||||||||||||||||||||||||||||||
Grand West Crossing 1 | 121,000 | 02/2023 | $ | 13,701 | 100 % | |||||||||||||||||||||||||||
SunCoast 11 | 79,000 | 02/2023 | 9,823 | 100 % | ||||||||||||||||||||||||||||
Cypress Preserve 1 & 2(1) | 516,000 | 03/2023 | 55,402 | 100 % | ||||||||||||||||||||||||||||
Zephyr(1) | 82,000 | 04/2023 | 29,046 | 100 % | ||||||||||||||||||||||||||||
212,000 | 05/2023 | 26,921 | 100 % | |||||||||||||||||||||||||||||
Horizon West 1 | 97,000 | 06/2023 | 12,402 | 100 % | ||||||||||||||||||||||||||||
Access Point 3(1) | 299,000 | 07/2023 | 24,351 | 100 % | ||||||||||||||||||||||||||||
I-20 West Business Center | 155,000 | 07/2023 | 15,075 | 100 % | ||||||||||||||||||||||||||||
Arlington Tech 3 | 77,000 | 08/2023 | 10,128 | 100 % | ||||||||||||||||||||||||||||
Grand Oaks 75 4 | 185,000 | 09/2023 | 19,310 | 100 % | ||||||||||||||||||||||||||||
177,000 | 09/2023 | 24,252 | 100 % | |||||||||||||||||||||||||||||
Steele Creek 11 & 12 | 241,000 | 09/2023 | 26,660 | 100 % | ||||||||||||||||||||||||||||
SunCoast 10 | 100,000 | 12/2023 | 13,297 | 100 % | ||||||||||||||||||||||||||||
Total Projects Transferred | 2,341,000 | $ | 280,368 | 100 % | ||||||||||||||||||||||||||||
Projected Stabilized Yields(2) | Yield | |||||||||||||||||||||||||||||||
Development | 7.8 % | |||||||||||||||||||||||||||||||
Value-Add | 5.6 % | |||||||||||||||||||||||||||||||
Combined | 7.0 % | |||||||||||||||||||||||||||||||
(1) | Represents value-add acquisitions. |
(2) | Weighted average yield based on projected stabilized annual property net operating income on a straight-line basis at |
DIVIDENDS
EastGroup declared a cash dividend of
FINANCIAL STRENGTH AND FLEXIBILITY
EastGroup continues to maintain a strong and flexible balance sheet. Debt-to-total market capitalization was
During the fourth quarter, EastGroup sold 1,369,875 shares of common stock under its continuous common equity offering program at a weighted average price of
During the three months ended December 31, 2023, EastGroup's continuous common equity offering program was updated to provide EastGroup with the ability to sell shares of its common stock on a forward basis, pursuant to which, at EastGroup's discretion, the financial institutions that have agreed to act as forward counterparties will borrow from third parties, and subsequently sell, a number of shares of its common stock. The use of a forward equity sale agreement provides the ability to lock in a share price on the sale of shares of our common stock but defer settling and receiving the proceeds from the sale of shares until a later date. During the fourth quarter of 2023, the Company entered into forward equity sales agreements with respect to 406,041 shares of common stock with an initial weighted average forward price of
There was no new debt activity in the three months ended December 31, 2023. During the twelve months ended December 31, 2023, the Company's debt related activity included the following:
- Expanded the capacity on its unsecured bank credit facilities from
$475,000,000 $675,000,000 - Closed a
$100,000,000 5.27% . - Repaid a
$65,000,000 2.31% . - Made a scheduled
$50,000,000 3.80% - Repaid a mortgage with a principal balance of
$1,905,000 3.85% and an original maturity date of November 30, 2026, making the Company's debt portfolio100% unsecured. - Refinanced a
$100,000,000 2.61% .
COMPANY UPDATES
We are pleased to announce that Staci H. Tyler has been named Chief Administrative Officer of the Company effective January 1, 2024. In addition to this role, she continues to serve as Senior Vice President, Chief Accounting Officer and Secretary of the Company.
Mr. Loeb stated, "I'm very pleased to see Staci's well-earned recognition with this promotion. Staci plays a prominent role across our organization which is better reflected with her new title."
OUTLOOK FOR 2024
EPS for 2024 is estimated to be in the range of
EastGroup's projections are based on management's current beliefs and assumptions about our business, the industry and the markets in which we operate; there are known and unknown risks and uncertainties associated with these projections. We assume no obligation to update publicly any forward-looking statements, including our outlook for 2024, whether as a result of new information, future events or otherwise. Please refer to the "Forward-Looking Statements" disclosures included in this earnings release and "Risk Factors" disclosed in our annual and quarterly reports filed with the Securities and Exchange Commission for more information.
The following table presents the guidance range for 2024:
Low Range | High Range | |||||||||||||||||||||||||
Q1 2024 | Y/E 2024 | Q1 2024 | Y/E 2024 | |||||||||||||||||||||||
(In thousands, except per share data) | ||||||||||||||||||||||||||
Net income attributable to common stockholders | $ | 45,596 | 198,871 | 49,436 | 208,589 | |||||||||||||||||||||
Depreciation and amortization | 47,033 | 197,887 | 47,033 | 197,887 | ||||||||||||||||||||||
Funds from operations attributable to common stockholders* | $ | 92,629 | 396,758 | 96,469 | 406,476 | |||||||||||||||||||||
Weighted average shares outstanding - Diluted | 47,998 | 48,589 | 47,998 | 48,589 | ||||||||||||||||||||||
Per share data (diluted): | ||||||||||||||||||||||||||
Net income attributable to common stockholders | $ | 0.95 | 4.09 | 1.03 | 4.29 | |||||||||||||||||||||
Funds from operations attributable to common stockholders | 1.93 | 8.17 | 2.01 | 8.37 | ||||||||||||||||||||||
*This is a non-GAAP financial measure. Please refer to Definitions. |
The following assumptions were used for the mid-point:
Metrics | Initial Guidance for | Actual for | ||||||||||||
FFO per share | ||||||||||||||
FFO per share increase over prior year | 6.2 % | 11.3 % | ||||||||||||
FFO per share increase over prior year excluding gain on involuntary conversion and business interruption claims | 7.4 % | 10.0 % | ||||||||||||
Same PNOI growth: cash basis(1) | 8.0 % | |||||||||||||
Average month-end occupancy - operating portfolio | 98.0 % | |||||||||||||
Lease termination fee income | ||||||||||||||
Reserves of uncollectible rent (Currently no identified bad debt for 2024) | ||||||||||||||
Development starts: | ||||||||||||||
Square feet | 2.1 million | 2.4 million | ||||||||||||
Projected total investment | ||||||||||||||
Operating property acquisitions | ||||||||||||||
Operating property dispositions (Potential gains on dispositions are not included in the projections) | ||||||||||||||
Unsecured debt closing in period | none |
| ||||||||||||
Common stock issuances (Gross proceeds) | ||||||||||||||
General and administrative expense |
(1) | Excludes straight-line rent adjustments, amortization of market rent intangibles for acquired leases and income from lease terminations. |
(2) | Includes properties which have been in the operating portfolio since 1/1/23 and are projected to be in the operating portfolio through 12/31/24; includes 51,668,000 square feet. |
DEFINITIONS
The Company's chief decision makers use two primary measures of operating results in making decisions: (1) funds from operations attributable to common stockholders ("FFO"), including FFO as adjusted as described below, and (2) property net operating income ("PNOI"), as defined below.
FFO is computed in accordance with standards established by the National Association of Real Estate Investment Trusts, Inc. ("Nareit"). Nareit's guidance allows preparers an option as it pertains to whether gains or losses on sale, or impairment charges, on real estate assets incidental to a real estate investment trust's ("REIT's") business are excluded from the calculation of FFO. EastGroup has made the election to exclude activity related to such assets that are incidental to our business. FFO is calculated as net income (loss) attributable to common stockholders computed in accordance with
FFO Excluding Gain on Involuntary Conversion and Business Interruption Claims is calculated as FFO (as defined above), adjusted to exclude gains on involuntary conversion and business interruption claims. The Company believes that this exclusion presents a more meaningful comparison of operating performance across periods.
PNOI is defined as Income from real estate operations less Expenses from real estate operations (including market-based internal management fee expense) plus the Company's share of income and property operating expenses from its less-than-wholly-owned real estate investments. EastGroup sometimes refers to PNOI from Same Properties as "Same PNOI" in this press release and the accompanying reconciliation; the Company also presents Same PNOI Excluding Income from Lease Terminations. The Company presents Same PNOI and Same PNOI Excluding Income from Lease Terminations as a property-level supplemental measure of performance used to evaluate the performance of the Company's investments in real estate assets and its operating results on a same property basis. The Company believes it is useful to evaluate Same PNOI Excluding Income from Lease Terminations on both a straight-line and cash basis. The straight-line basis is calculated by averaging the customers' rent payments over the lives of the leases; GAAP requires the recognition of rental income on a straight-line basis. The cash basis excludes adjustments for straight-line rent and amortization of market rent intangibles for acquired leases; cash basis is an indicator of the rents charged to customers by the Company during the periods presented and is useful in analyzing the embedded rent growth in the Company's portfolio. "Same Properties" is defined as operating properties owned during the entire current period and prior year reporting period. Operating properties are stabilized real estate properties (land including building and improvements) that make up the Company's operating portfolio. Properties developed or acquired are excluded from the same property pool until held in the operating portfolio for both the current and prior year reporting periods. Properties sold during the current or prior year reporting periods are also excluded.
FFO and PNOI 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.
The Company's chief decision makers also use Earnings Before Interest, Taxes, Depreciation and Amortization for Real Estate ("EBITDAre") in making decisions. EBITDAre is computed in accordance with standards established by Nareit and defined as Net Income, adjusted for gains and losses from sales of real estate investments, non-operating real estate and other assets incidental to the Company's business, interest expense, income tax expense, depreciation and amortization. EBITDAre is a non-GAAP financial measure used to measure the Company's operating performance and its ability to meet interest payment obligations and pay quarterly stock dividends on an unleveraged basis.
EastGroup's chief decision makers also use its Debt-to-EBITDAre ratio, a non-GAAP financial measure calculated by dividing the Company's debt by its EBITDAre, in analyzing the financial condition and operating performance of the Company relative to its leverage.
The Company's interest and fixed charge coverage ratio is a non-GAAP financial measure calculated by dividing the Company's EBITDAre by its interest expense. We believe this ratio is useful to investors because it provides a basis for analysis of the Company's leverage, operating performance and its ability to service the interest payments due on its debt.
CONFERENCE CALL
EastGroup will host a conference call and webcast to discuss the results of its fourth quarter, review the Company's current operations, and present its earnings outlook for 2024 on Thursday, February 8, 2024, at 11:00 a.m. Eastern Time. A live broadcast of the conference call is available by dialing 1-800-836-8184 (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 until Thursday, February 15, 2024. The telephone replay can be accessed by dialing 1-888-660-6345 (access code 77265#), and the webcast replay can be accessed through a link on the Company's website at www.eastgroup.net.
SUPPLEMENTAL INFORMATION
Supplemental financial information is available under Quarterly Results in the Investor Relations section of the Company's website at www.eastgroup.net or upon request by calling the Company at 601-354-3555.
COMPANY INFORMATION
EastGroup Properties, Inc. (NYSE: EGP), a member of the S&P Mid-Cap 400 and Russell 1000 Indexes, 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 Company announces information about the Company and its business to investors and the public using the Company's website (eastgroup.net), including the investor relations website (investor.eastgroup.net), filings with the Securities and Exchange Commission, press releases, public conference calls, and webcasts. The Company also uses social media to communicate with its investors and the public. While not all the information that the Company posts to the Company's website or on the Company's social media channels is of a material nature, some information could be deemed to be material. Therefore, the Company encourages investors, the media, and others interested in the Company to review the information that it posts on the social media channels, including Facebook (facebook.com/eastgroupproperties), X (twitter.com/eastgroupprop), and LinkedIn (linkedin.com/company/eastgroup-properties-inc). The list of social media channels that the company uses may be updated on its investor relations website from time to time. The information contained on, or that may be accessed through, our website or any of our social media channels is not incorporated by reference into, and is not a part of, this document.
FORWARD-LOOKING STATEMENTS
The statements and certain other information contained in this press release, which can be identified by the use of forward-looking terminology such as "may," "will," "seek," "expects," "anticipates," "believes," "targets," "intends," "should," "estimates," "could," "continue," "assume," "projects," "goals," "plans" or variations of such words and similar expressions or the negative of such words, constitute "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, and are subject to the safe harbors created thereby. These forward-looking statements reflect the Company's current views about its plans, intentions, expectations, strategies and prospects, which are based on the information currently available to the Company and on assumptions it has made. For instance, the amount, timing and frequency of future dividends is subject to authorization by the Company's Board of Directors and will be based upon a variety of factors. Although the Company believes that its plans, intentions, expectations, strategies and prospects as reflected in or suggested by those forward-looking statements are reasonable, the Company can give no assurance that such plans, intentions, expectations or strategies will be attained or achieved. Furthermore, these forward-looking statements should be considered as subject to the many risks and uncertainties that exist in the Company's operations and business environment. Such risks and uncertainties could cause actual results to differ materially from those projected. These uncertainties include, but are not limited to:
- international, national, regional and local economic conditions;
- disruption in supply and delivery chains;
- construction costs could increase as a result of inflation impacting the costs to develop properties;
- the competitive environment in which the Company operates;
- fluctuations of occupancy or rental rates;
- potential defaults (including bankruptcies or insolvency) on or non-renewal of leases by tenants, or our ability to lease space at current or anticipated rents, particularly in light of the impacts of inflation;
- potential changes in the law or governmental regulations and interpretations of those laws and regulations, including changes in real estate laws, REIT or corporate income tax laws, potential changes in zoning laws, or increases in real property tax rates, and any related increased cost of compliance;
- our ability to maintain our qualification as a REIT;
- acquisition and development risks, including failure of such acquisitions and development projects to perform in accordance with projections;
- natural disasters such as fires, floods, tornadoes, hurricanes and earthquakes;
- pandemics, epidemics or other public health emergencies, such as the coronavirus pandemic;
- availability of financing and capital, increase in interest rates, and ability to raise equity capital on attractive terms;
- financing risks, including the risks that our cash flows from operations may be insufficient to meet required payments of principal and interest, and we may be unable to refinance our existing debt upon maturity or obtain new financing on attractive terms or at all;
- our ability to retain our credit agency ratings;
- our ability to comply with applicable financial covenants;
- credit risk in the event of non-performance by the counterparties to our interest rate swaps;
- how and when pending forward equity sales may settle;
- lack of or insufficient amounts of insurance;
- litigation, including costs associated with prosecuting or defending claims and any adverse outcomes;
- our ability to attract and retain key personnel;
- risks related to the failure, inadequacy or interruption of our data security systems and processes;
- potentially catastrophic events such as acts of war, civil unrest and terrorism; and
- environmental liabilities, including costs, fines or penalties that may be incurred due to necessary remediation of contamination of properties presently owned or previously owned by us.
All forward-looking statements should be read in light of the risks identified in Part I, Item 1A. Risk Factors within the Company's most recent Annual Report on Form 10-K, as such factors may be updated from time to time in the Company's periodic filings and current reports filed with the SEC.
The Company assumes no obligation to update publicly any forward-looking statements, including its Outlook for 2024, whether as a result of new information, future events or otherwise.
EASTGROUP PROPERTIES, INC. AND SUBSIDIARIES | ||||||||||||||||||||||||||
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME | ||||||||||||||||||||||||||
(IN THOUSANDS, EXCEPT PER SHARE DATA) | ||||||||||||||||||||||||||
(UNAUDITED) | ||||||||||||||||||||||||||
Three Months Ended | Twelve Months Ended | |||||||||||||||||||||||||
December 31, | December 31, | |||||||||||||||||||||||||
2023 | 2022 | 2023 | 2022 | |||||||||||||||||||||||
REVENUES | ||||||||||||||||||||||||||
Income from real estate operations | $ | 149,026 | 129,797 | 566,179 | 486,817 | |||||||||||||||||||||
Other revenue | 123 | 43 | 4,412 | 208 | ||||||||||||||||||||||
149,149 | 129,840 | 570,591 | 487,025 | |||||||||||||||||||||||
EXPENSES | ||||||||||||||||||||||||||
Expenses from real estate operations | 39,368 | 35,272 | 154,030 | 133,915 | ||||||||||||||||||||||
Depreciation and amortization | 45,248 | 40,559 | 171,078 | 153,638 | ||||||||||||||||||||||
General and administrative | 3,740 | 3,859 | 16,757 | 16,362 | ||||||||||||||||||||||
Indirect leasing costs | 146 | 136 | 582 | 546 | ||||||||||||||||||||||
88,502 | 79,826 | 342,447 | 304,461 | |||||||||||||||||||||||
OTHER INCOME (EXPENSE) | ||||||||||||||||||||||||||
Interest expense | (11,108) | (11,648) | (47,996) | (38,499) | ||||||||||||||||||||||
Gain on sales of real estate investments | 13,156 | — | 17,965 | 40,999 | ||||||||||||||||||||||
Other | 774 | 322 | 2,435 | 1,210 | ||||||||||||||||||||||
NET INCOME | 63,469 | 38,688 | 200,548 | 186,274 | ||||||||||||||||||||||
Net income attributable to noncontrolling interest in joint ventures | (14) | (17) | (57) | (92) | ||||||||||||||||||||||
NET INCOME ATTRIBUTABLE TO EASTGROUP PROPERTIES, INC. COMMON STOCKHOLDERS | 63,455 | 38,671 | 200,491 | 186,182 | ||||||||||||||||||||||
Other comprehensive income (loss) - interest rate swaps | (17,200) | (4,757) | (11,483) | 35,069 | ||||||||||||||||||||||
TOTAL COMPREHENSIVE INCOME | $ | 46,255 | 33,914 | 189,008 | 221,251 | |||||||||||||||||||||
BASIC PER COMMON SHARE DATA FOR NET INCOME ATTRIBUTABLE TO EASTGROUP PROPERTIES, INC. COMMON STOCKHOLDERS | ||||||||||||||||||||||||||
Net income attributable to common stockholders | $ | 1.35 | 0.89 | 4.43 | 4.37 | |||||||||||||||||||||
Weighted average shares outstanding - Basic | 46,831 | 43,472 | 45,224 | 42,599 | ||||||||||||||||||||||
DILUTED PER COMMON SHARE DATA FOR NET INCOME ATTRIBUTABLE TO EASTGROUP PROPERTIES, INC. COMMON STOCKHOLDERS | ||||||||||||||||||||||||||
Net income attributable to common stockholders | $ | 1.35 | 0.89 | 4.42 | 4.36 | |||||||||||||||||||||
Weighted average shares outstanding - Diluted | 46,980 | 43,593 | 45,331 | 42,712 | ||||||||||||||||||||||
EASTGROUP PROPERTIES, INC. AND SUBSIDIARIES | ||||||||||||||||||||||||||
RECONCILIATIONS OF GAAP TO NON-GAAP MEASURES | ||||||||||||||||||||||||||
(IN THOUSANDS, EXCEPT PER SHARE DATA) | ||||||||||||||||||||||||||
(UNAUDITED) | ||||||||||||||||||||||||||
Three Months Ended | Twelve Months Ended | |||||||||||||||||||||||||
December 31, | December 31, | |||||||||||||||||||||||||
2023 | 2022 | 2023 | 2022 | |||||||||||||||||||||||
NET INCOME ATTRIBUTABLE TO EASTGROUP PROPERTIES, INC. COMMON STOCKHOLDERS | $ | 63,455 | 38,671 | 200,491 | 186,182 | |||||||||||||||||||||
Depreciation and amortization | 45,248 | 40,559 | 171,078 | 153,638 | ||||||||||||||||||||||
Company's share of depreciation from unconsolidated investment | 31 | 31 | 124 | 124 | ||||||||||||||||||||||
Depreciation and amortization from noncontrolling interest | (1) | (3) | (5) | (17) | ||||||||||||||||||||||
Gain on sales of real estate investments | (13,156) | — | (17,965) | (40,999) | ||||||||||||||||||||||
Gain on sales of non-operating real estate | — | — | (446) | — | ||||||||||||||||||||||
FUNDS FROM OPERATIONS ("FFO") ATTRIBUTABLE TO COMMON STOCKHOLDERS* | 95,577 | 79,258 | 353,277 | 298,928 | ||||||||||||||||||||||
Gain on involuntary conversion and business interruption claims | — | — | (4,187) | — | ||||||||||||||||||||||
FFO ATTRIBUTABLE TO COMMON STOCKHOLDERS - EXCLUDING GAIN ON INVOLUNTARY CONVERSION AND BUSINESS INTERRUPTION CLAIMS* | $ | 95,577 | 79,258 | 349,090 | 298,928 | |||||||||||||||||||||
NET INCOME | $ | 63,469 | 38,688 | 200,548 | 186,274 | |||||||||||||||||||||
Interest expense (1) | 11,108 | 11,648 | 47,996 | 38,499 | ||||||||||||||||||||||
Depreciation and amortization | 45,248 | 40,559 | 171,078 | 153,638 | ||||||||||||||||||||||
Company's share of depreciation from unconsolidated investment | 31 | 31 | 124 | 124 | ||||||||||||||||||||||
EARNINGS BEFORE INTEREST, TAXES, DEPRECIATION AND AMORTIZATION ("EBITDA") | 119,856 | 90,926 | 419,746 | 378,535 | ||||||||||||||||||||||
Gain on sales of real estate investments | (13,156) | — | (17,965) | (40,999) | ||||||||||||||||||||||
Gain on sales of non-operating real estate | — | — | (446) | — | ||||||||||||||||||||||
EBITDA FOR REAL ESTATE ("EBITDAre")* | $ | 106,700 | 90,926 | 401,335 | 337,536 | |||||||||||||||||||||
Debt | $ | 1,674,827 | 1,861,744 | 1,674,827 | 1,861,744 | |||||||||||||||||||||
Debt-to-EBITDAre ratio* | 3.92 | 5.12 | 4.17 | 5.52 | ||||||||||||||||||||||
EBITDAre* | $ | 106,700 | 90,926 | 401,335 | 337,536 | |||||||||||||||||||||
Interest expense (1) | 11,108 | 11,648 | 47,996 | 38,499 | ||||||||||||||||||||||
Interest and fixed charge coverage ratio* | 9.61 | 7.81 | 8.36 | 8.77 | ||||||||||||||||||||||
DILUTED PER COMMON SHARE DATA FOR NET INCOME ATTRIBUTABLE TO EASTGROUP PROPERTIES, INC. COMMON STOCKHOLDERS | ||||||||||||||||||||||||||
Net income attributable to common stockholders | $ | 1.35 | 0.89 | 4.42 | 4.36 | |||||||||||||||||||||
FFO attributable to common stockholders* | $ | 2.03 | 1.82 | 7.79 | 7.00 | |||||||||||||||||||||
FFO attributable to common stockholders - excluding gain on involuntary conversion and business interruption claims* | $ | 2.03 | 1.82 | 7.70 | 7.00 | |||||||||||||||||||||
Weighted average shares outstanding for EPS and FFO purposes - Diluted | 46,980 | 43,593 | 45,331 | 42,712 | ||||||||||||||||||||||
(1) Net of capitalized interest of | ||||||||||||||||||||||||||
*This is a non-GAAP financial measure. Please refer to Definitions. | ||||||||||||||||||||||||||
EASTGROUP PROPERTIES, INC. AND SUBSIDIARIES | ||||||||||||||||||||||||||
RECONCILIATIONS OF GAAP TO NON-GAAP MEASURES (Continued) | ||||||||||||||||||||||||||
(IN THOUSANDS) | ||||||||||||||||||||||||||
(UNAUDITED) | ||||||||||||||||||||||||||
Three Months Ended | Twelve Months Ended | |||||||||||||||||||||||||
December 31, | December 31, | |||||||||||||||||||||||||
2023 | 2022 | 2023 | 2022 | |||||||||||||||||||||||
NET INCOME | $ | 63,469 | 38,688 | 200,548 | 186,274 | |||||||||||||||||||||
Gain on sales of real estate investments | (13,156) | — | (17,965) | (40,999) | ||||||||||||||||||||||
Gain on sales of non-operating real estate | — | — | (446) | — | ||||||||||||||||||||||
Interest income | (496) | (58) | (879) | (100) | ||||||||||||||||||||||
Other revenue | (123) | (43) | (4,412) | (208) | ||||||||||||||||||||||
Indirect leasing costs | 146 | 136 | 582 | 546 | ||||||||||||||||||||||
Depreciation and amortization | 45,248 | 40,559 | 171,078 | 153,638 | ||||||||||||||||||||||
Company's share of depreciation from unconsolidated investment | 31 | 31 | 124 | 124 | ||||||||||||||||||||||
Interest expense (1) | 11,108 | 11,648 | 47,996 | 38,499 | ||||||||||||||||||||||
General and administrative expense (2) | 3,740 | 3,859 | 16,757 | 16,362 | ||||||||||||||||||||||
Noncontrolling interest in PNOI of consolidated joint ventures | (15) | (21) | (62) | (105) | ||||||||||||||||||||||
PROPERTY NET OPERATING INCOME ("PNOI")* | 109,952 | 94,799 | 413,321 | 354,031 | ||||||||||||||||||||||
PNOI from 2022 and 2023 acquisitions | (5,989) | (3,926) | (19,165) | (9,471) | ||||||||||||||||||||||
PNOI from 2022 and 2023 development and value-add properties | (14,444) | (7,385) | (47,739) | (17,918) | ||||||||||||||||||||||
PNOI from 2022 and 2023 operating property dispositions | (445) | (390) | (1,813) | (1,753) | ||||||||||||||||||||||
Other PNOI | (82) | 102 | 166 | 324 | ||||||||||||||||||||||
SAME PNOI (Straight-Line Basis)* | 88,992 | 83,200 | 344,770 | 325,213 | ||||||||||||||||||||||
Lease termination fee income from same properties | (488) | (311) | (907) | (2,708) | ||||||||||||||||||||||
SAME PNOI EXCLUDING INCOME FROM LEASE TERMINATIONS (Straight-Line Basis)* | 88,504 | 82,889 | 343,863 | 322,505 | ||||||||||||||||||||||
Straight-line rent adjustments for same properties | (283) | (745) | (1,238) | (4,361) | ||||||||||||||||||||||
Acquired leases - market rent adjustment amortization for same properties | (92) | (171) | (536) | (1,273) | ||||||||||||||||||||||
SAME PNOI EXCLUDING INCOME FROM LEASE TERMINATIONS (Cash Basis)* | $ | 88,129 | 81,973 | 342,089 | 316,871 | |||||||||||||||||||||
(1) Net of capitalized interest of | ||||||||||||||||||||||||||
(2) Net of capitalized development costs of | ||||||||||||||||||||||||||
*This is a non-GAAP financial measure. Please refer to Definitions. | ||||||||||||||||||||||||||
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SOURCE EastGroup Properties
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