EastGroup Properties Announces Fourth Quarter and Year 2009 Results
JACKSON, Miss., Feb. 10 /PRNewswire-FirstCall/ --
FOURTH QUARTER 2009 RESULTS
- Funds from Operations of $19.7 Million or $.75 Per Share, a Decrease of 11.8% Compared to the Same Quarter Last Year
- Net Income Available to Common Stockholders of $5.7 Million or $.22 Per Share
- Same Property Net Operating Income Decline of 5.6% With and Without Straight-Line Rent Adjustments
- 90.0% Leased, 89.4% Occupied
- Paid 120th Consecutive Quarterly Cash Dividend – $.52 Per Share
- Interest and Fixed Charge Coverages of 3.3x
YEAR 2009 RESULTS
- Funds from Operations of $80.6 Million or $3.14 Per Share, a Decrease of 4.8% Compared to 2008
- Net Income Available to Common Stockholders of $26.7 Million or $1.04 Per Share
- Same Property Net Operating Income Decline of 4.3%; 4.0% Decrease Without Straight-Line Rent Adjustments
- $53 Million Invested in Development and Acquisitions
- Six Development Projects With Estimated Costs to Complete of $5.5 Million at Year-End
- Paid Annual Cash Dividends of $2.08 Per Share
- Total Capital Raised of $125.6 million
- Issued 1,600,000 Shares of Common Stock With Net Proceeds of $57.6 Million
- Completed a $67 Million Mortgage at 7.5% Fixed Interest Rate With a 10-Year Term
- Sold a Property for $1 Million
- Reduced Floating Rate Bank Debt by $20.7 Million
- Interest and Fixed Charge Coverages of 3.5x
- No Debt Maturities in 2010
- Bank Line Capacity of $133 Million as of December 31, 2009
EastGroup Properties, Inc. (NYSE: EGP) announced today the results of its operations for the three months and year ended December 31, 2009.
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David H. Hoster II, President and CEO, stated, "We are pleased to report that funds from operations for the fourth quarter met the mid-point of guidance and that occupancy increased 50 basis points to 89.4% at December 31 as compared to the end of the third quarter. We expect occupancy to decline in the first quarter of 2010 due to several large move-outs and lease terminations but to then improve in each subsequent quarter of the year."
FUNDS FROM OPERATIONS
For the quarter ended December 31, 2009, funds from operations (FFO) was $.75 per share compared to $.85 per share for the same period of 2008, a decrease of 11.8% per share. Property net operating income (PNOI) decreased 2.1% primarily due to a decrease in PNOI of $1,711,000 from same property operations, offset by additional PNOI of $681,000 from newly developed properties and $311,000 from 2008 and 2009 acquisitions.
Same property operating results decreased 5.6% for the quarter with and without straight-line rent adjustments. Rental rates on new and renewal leases (4.5% of total square footage) decreased an average of 4.4% for the quarter; rental rates decreased 10.4% without straight-line rent adjustments.
For the year ended December 31, 2009, FFO was $3.14 per share compared with $3.30 for 2008, a decrease of 4.8% per share. PNOI increased 0.8% mainly due to additional PNOI of $4,479,000 from newly developed properties and $1,218,000 from 2008 and 2009 acquisitions, offset by a decrease of $4,843,000 from same property operations.
For the year, same property operating results decreased 4.3%; 4.0% without straight-line rent adjustments. Rental rates on new and renewal leases (19.3% of total square footage) decreased an average of 5.3%; rental rates decreased 10.1% 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 $.22 for the three months ended December 31, 2009, compared to $.34 for the same period of 2008. Diluted EPS was $1.04 for the year ended December 31, 2009, compared to $1.30 for 2008. EastGroup recognized gain on sales of real estate, gain on sales of securities, and a gain on involuntary conversion totaling $3.0 million ($.12 per share) during the year ended December 31, 2008.
PROPERTY ACQUISITIONS AND SALES
During 2009, EastGroup acquired two multi-tenant, business distribution complexes with a total of five buildings for $17.7 million. Arville Distribution Center contains 142,000 square feet and is located in Las Vegas, Nevada, a new market for the Company. Interstate Distribution Center V, VI and VII, with a total of 226,000 square feet, are located in Dallas, Texas, and are either adjacent to or across the street from existing EastGroup assets.
Subsequent to year-end, EastGroup closed on the acquisition of two business distribution buildings containing 193,000 square feet in Charlotte, North Carolina, for $5.3 million. The buildings, which have been renamed Commerce Park 2 and 3, are located in the city's southwest submarket and increase the Company's ownership in Charlotte to over 1.8 million square feet. The buildings are currently 87% occupied by nine customers and are projected to generate an annualized 11.7% yield at their current occupancy and rents.
Also subsequent to year-end, the Company acquired Ocean View Corporate Center, a three-building, multi-tenant business distribution complex in San Diego, California, for $17 million. Located in the Otay Mesa submarket, Ocean View contains 274,000 square feet and is presently 87% occupied by 14 customers. The property is expected to generate an annualized yield of 9.6% at its current occupancy and rents. This acquisition increases EastGroup's ownership in the south San Diego market to 465,000 square feet.
Mr. Hoster commented, "Our January acquisitions represent our third and fourth new investments in the last nine months and bring our total to 835,000 square feet and approximately $40 million over that period. We are optimistic that we will begin to see an increasing number of attractive investment opportunities over the balance of 2010."
In December, EastGroup sold Butterfield Trail (Building G), a vacant 62,000 square foot warehouse in El Paso, Texas, for $979,000 and recognized a small gain.
DEVELOPMENT
At December 31, 2009, EastGroup's development program consisted of six properties. These properties contain 447,000 square feet and have a projected total cost of $35.5 million, of which $30.0 million had been spent as of December 31, 2009. The six properties were collectively 36% leased at December 31, 2009 and 38% leased at February 9, 2010.
In December, the Company purchased the 35.9 acre, second phase of its Sand Lake development land in Orlando, Florida, for $4.9 million. The acquisition increased this land holding to 130 acres with a total investment of $15.7 million.
During the fourth quarter, EastGroup began construction on a 20,000 square foot expansion at Arion 8 in San Antonio, Texas, to accommodate the growth of an existing customer. This project has a projected total cost of $1.9 million and a projected stabilized yield of 10.4%. There are currently no other planned development starts.
Also during the quarter, the Company transferred 12th Street Distribution Center to the real estate portfolio. This property, which is located in Jacksonville, Florida, contains 150,000 square feet and is currently 100% leased.
During 2009, EastGroup transferred 12 development properties to the real estate portfolio as detailed below:
Real Estate Properties Percent
Transferred from Development Date Leased
in 2009 Size Transferred Cost at 2/9/10
-----------------------------------------------------------------------
(Square (In
feet) thousands)
40th Avenue, Phoenix, AZ 90,000 01/01/09 $6,715 100%
Wetmore II, Building
B, San Antonio, TX 55,000 02/01/09 3,790 55%
Beltway Crossing VI,
Houston, TX 128,000 04/01/09 6,426 50%
World Houston 28,
Houston, TX 59,000 04/24/09 4,590 100%
Oak Creek VI, Tampa, FL 89,000 05/01/09 5,657 84%
Southridge VIII,
Orlando, FL 91,000 06/01/09 6,771 100%
Techway SW IV,
Houston, TX 94,000 06/01/09 6,174 100%
SunCoast III, Fort
Myers, FL 93,000 07/01/09 6,955 0%
Sky Harbor, Phoenix, AZ 264,000 08/01/09 25,328 51%
World Houston 26,
Houston, TX 59,000 08/01/09 3,590 100%
World Houston 29,
Houston, TX 70,000 08/08/09 4,909 100%
12th Street,
Jacksonville, FL 150,000 11/23/09 5,171 100%
------- -----
Total Developments
Transferred 1,242,000 $86,076
Dividends
EastGroup paid cash dividends of $.52 per share of common stock in the fourth quarter of 2009, which was the 120th consecutive quarterly cash distribution to the Company's common shareholders. The Company's dividend payout ratio to funds from operations was 66% for the year. The annualized dividend rate of $2.08 per share yielded 5.9% on the closing stock price of $35.54 on February 9, 2010.
FINANCIAL strength and flexibility
During the fourth quarter, EastGroup issued additional new common equity and continued to achieve strong debt ratios. Debt-to-total market capitalization was 40.3% at December 31, 2009. For the quarter, EastGroup had interest and fixed charge coverage ratios of 3.3x. For the year, the Company's interest and fixed charge coverage ratios were 3.5x. Total debt at December 31, 2009 was $692.1 million comprised of $602.9 million of fixed rate mortgage debt and $89.2 million of floating rate bank debt.
In the fourth quarter, EastGroup completed its continuous equity program by issuing 717,020 shares of common stock at an average price of $38.59 per share. During the year, EastGroup issued 1,600,000 shares of common stock at an average price of $36.48 per share with net proceeds to the Company of $57.6 million. The purpose of the equity program was to better position the Company for growth through future acquisitions while maintaining a strong balance sheet.
EastGroup has revolving credit facilities of $200 million and $25 million, of which $133 million was available to borrow as of December 31, 2009. These credit facilities mature in 2012. The Company has no debt maturities that require balloon payments in 2010.
OUTLOOK FOR 2010
FFO per share for 2010 is estimated to be in the range of $2.75 to $2.95. Diluted EPS for 2010 is estimated to be in the range of $.66 to $.86. The table below reconciles projected net income to projected FFO.
Low Range High Range
Q1 2010 Y/E 2010 Q1 2010 Y/E 2010
------- -------- ------- --------
(In thousands, except per share data)
Net income available to
common stockholders $4,773 17,712 5,845 23,073
Depreciation and amortization 13,979 55,911 13,979 55,911
------ ------ ------ ------
Funds from operations
available to common
stockholders $18,752 73,623 19,824 78,984
------- ------ ------ ------
Diluted shares 26,802 26,805 26,802 26,805
Per share data (diluted):
Net income available to
common stockholders $0.18 0.66 0.22 0.86
Funds from operations
available to common
stockholders $0.70 2.75 0.74 2.95
The following assumptions were used:
- Average occupancy of 85% to 89% for the year.
- Same property NOI decrease of 3.25% to 5.75% for the year.
- Operating property acquisitions in addition to the $22.3 million mentioned above of $40 million with $20 million on July 1, 2010 and $20 million on October 1, 2010.
- No dispositions during the year.
- No development construction starts during the year.
- Termination fees, net of bad debt, of $.04 per share for 2010.
- Floating rate bank debt at an average rate of 1.2% for the year.
- New fixed rate debt of $65 million on October 1, 2010 at 6.25%.
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 11, 2010, 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 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 11, 2010. The telephone replay will be available until Thursday, February 18, 2010, and can be accessed by dialing 1-800-839-3613. 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 18, 2010.
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 acquisition, development 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 28 million square feet. 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. Words such as "will," "anticipates," "expects," "believes," "intends," "plans," "seeks," "estimates," variations of such words and similar expressions are intended to identify such forward-looking statements, which generally are not historical in nature. All statements that address operating performance, events or developments that the Company expects or anticipates will occur in the future, including statements relating to rent and occupancy growth, development activity, the acquisition or sale of properties, general conditions in the geographic areas where the Company operates and the availability of capital, are forward-looking statements. Forward-looking statements are inherently subject to known and unknown risks and uncertainties, many of which the Company cannot predict, including, without limitation:
- changes in general economic conditions;
- the extent of customer defaults or of any early lease terminations;
- the Company's ability to lease or re-lease space at current or anticipated rents;
- the availability of financing;
- changes in the supply of and demand for industrial/warehouse properties;
- increases in interest rate levels;
- increases in operating costs;
- natural disasters, terrorism, riots and acts of war, and the Company's ability to obtain adequate insurance;
- changes in governmental regulation, tax rates and similar matters; and
- 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. See also the information contained in the Company's reports filed or to be filed from time to time with the Securities and Exchange Commission pursuant to the Securities Exchange Act of 1934, as amended.
EASTGROUP PROPERTIES, INC.
CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
Three Months Twelve Months
Ended Ended
December 31, December 31,
------------ ------------
2009 2008 2009 2008
---- ---- ---- ----
REVENUES
Income from real estate operations $42,755 43,865 172,273 168,255
Other income 20 16 81 248
--- --- --- ---
42,775 43,881 172,354 168,503
------ ------ ------- -------
EXPENSES
Expenses from real estate operations 12,334 12,786 50,259 47,259
Depreciation and amortization 14,055 12,775 53,953 51,144
General and administrative 2,098 2,198 9,071 8,547
----- ----- ----- -----
28,487 27,759 113,283 106,950
------ ------ ------- -------
OPERATING INCOME 14,288 16,122 59,071 61,553
OTHER INCOME (EXPENSE)
Equity in earnings of
unconsolidated investment 75 77 320 316
Gain on sales of non-operating real
estate 8 8 31 321
Gain on sales of securities - - - 435
Interest income 73 104 302 293
Interest expense (8,665) (7,714) (32,520) (30,192)
------ ------ ------- -------
INCOME FROM CONTINUING OPERATIONS 5,779 8,597 27,204 32,726
----- ----- ------ -------
DISCONTINUED OPERATIONS
Income (loss) from real estate
operations (25) - (139) 10
Gain on sales of real estate
investments 29 - 29 2,032
--- --- --- -----
INCOME (LOSS) FROM DISCONTINUED
OPERATIONS 4 - (110) 2,042
--- --- ---- -----
NET INCOME 5,783 8,597 27,094 34,768
Net income attributable to
noncontrolling interest in joint
ventures (105) (164) (435) (626)
---- ---- ---- ----
NET INCOME ATTRIBUTABLE TO EASTGROUP
PROPERTIES, INC. 5,678 8,433 26,659 34,142
----- ----- ------ ------
Dividends on Series D preferred shares - - - 1,326
Costs on redemption of Series D
preferred shares - - - 682
--- --- --- ---
NET INCOME AVAILABLE TO EASTGROUP
PROPERTIES, INC. COMMON
STOCKHOLDERS $5,678 8,433 26,659 32,134
------ ----- ------ ------
BASIC PER COMMON SHARE DATA FOR
INCOME ATTRIBUTABLE TO
EASTGROUP PROPERTIES, INC.
Income from continuing operations $0.22 0.34 1.04 1.23
Income (loss) from discontinued
operations 0.00 0.00 0.00 0.08
---- ---- ---- ----
Net income available to common
stockholders $0.22 0.34 1.04 1.31
----- ---- ---- ----
Weighted average shares
outstanding 26,208 24,923 25,590 24,503
------ ------ ------ ------
DILUTED PER COMMON SHARE DATA
FOR INCOME ATTRIBUTABLE TO
EASTGROUP PROPERTIES, INC.
Income from continuing operations $0.22 0.34 1.04 1.22
Income (loss) from discontinued
operations 0.00 0.00 0.00 0.08
---- ---- ---- ----
Net income available to common
stockholders $0.22 0.34 1.04 1.30
----- ---- ---- ----
Weighted average shares
outstanding 26,327 25,059 25,690 24,653
------ ------ ------ ------
AMOUNTS ATTRIBUTABLE TO EASTGROUP
PROPERTIES, INC. COMMON
STOCKHOLDERS
Income from continuing
operations $5,674 8,433 26,769 30,092
Income (loss) from discontinued
operations 4 - (110) 2,042
--- --- ---- -----
Net income available to common
stockholders $5,678 8,433 26,659 32,134
------ ----- ------ ------
Dividends declared per common share $0.52 0.52 2.08 2.08
EASTGROUP PROPERTIES, INC.
RECONCILIATIONS OF OTHER REPORTING MEASURES TO NET INCOME
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
Three Months Twelve Months
Ended Ended
December 31, December 31,
------------ ------------
2009 2008 2009 2008
---- ---- ---- ----
RECONCILIATIONS OF OTHER REPORTING
MEASURES TO NET INCOME:
Income from real estate
operations $42,755 43,865 172,273 168,255
Expenses from real estate
operations (12,334) (12,786) (50,259) (47,259)
------- ------- ------- -------
PROPERTY NET OPERATING INCOME
(PNOI) 30,421 31,079 122,014 120,996
Gain on sales of securities - - - 435
Equity in earnings of unconsolidated
investment (before interest and
depreciation) 190 194 783 787
Interest income 73 104 302 293
Other income 20 16 81 248
General and administrative
expense (1) (2,098) (2,198) (9,071) (8,547)
------ ------ ------ ------
EARNINGS BEFORE INTEREST, TAXES,
DEPRECIATION
AND AMORTIZATION (EBITDA) 28,606 29,195 114,109 114,212
Income (loss) from discontinued
operations (before depreciation
and amortization) (17) 18 (88) 158
Interest expense (2) (8,665) (7,714) (32,520) (30,192)
Interest expense from
unconsolidated
investment (82) (84) (331) (339)
Noncontrolling interest in
earnings (before depreciation
and amortization) (158) (214) (641) (827)
Gain on sales of non-operating
real estate 8 8 31 321
Dividends on Series D preferred
shares - - - (1,326)
Costs on redemption of Series D
preferred shares - - - (682)
--- --- --- ----
FUNDS FROM OPERATIONS (FFO) AVAILABLE
TO COMMON STOCKHOLDERS 19,692 21,209 80,560 81,325
Depreciation and amortization
from continuing operations (14,055) (12,775) (53,953) (51,144)
Depreciation and amortization
From discontinued operations (8) (18) (51) (148)
Depreciation from unconsolidated
investment (33) (33) (132) (132)
Noncontrolling interest
depreciation
and amortization 53 50 206 201
Gain on sale of depreciable
real estate investments 29 - 29 2,032
--- --- --- -----
NET INCOME AVAILABLE TO
EASTGROUP PROPERTIES, INC.
COMMON STOCKHOLDERS 5,678 8,433 26,659 32,134
Dividends on Series D preferred
shares - - - 1,326
Costs on redemption of Series D
preferred shares - - - 682
--- --- --- ---
NET INCOME ATTRIBUTABLE TO
EASTGROUP PROPERTIES, INC. $5,678 8,433 26,659 34,142
------ ----- ------ ------
DILUTED PER COMMON SHARE DATA FOR
INCOME ATTRIBUTABLE TO
EASTGROUP PROPERTIES, INC.:
Income from continuing operations $0.22 0.34 1.04 1.22
Income (loss) from discontinued
operations 0.00 0.00 0.00 0.08
---- ---- ---- ----
Net income available to common
stockholders $0.22 0.34 1.04 1.30
----- ---- ---- ----
Funds from operations available to
common stockholders $0.75 0.85 3.14 3.30
----- ---- ---- ----
Weighted average shares outstanding
for EPS and FFO purposes 26,327 25,059 25,690 24,653
------ ------ ------ ------
(1) Net of capitalized development costs of $430 and $816 for the three
months ended December 31, 2009 and 2008, respectively; and $1,439 and
$3,717 for the twelve months ended December 31, 2009 and 2008,
respectively.
(2) Net of capitalized interest of $1,142 and $1,902 for the three
months ended December 31, 2009 and 2008, respectively; and $5,856 and
$6,946 for the twelve months ended December 31, 2009 and 2008,
respectively.
SOURCE EastGroup Properties, Inc.
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