EASTGROUP PROPERTIES INC Q3 FY2024 earnings call

• Expressed concern for markets affected by recent hurricanes, noting team and buildings had limited damage. - Thanked the team for a strong quarter with FFO up 9.2%, occupancy at 96.5%, and same-store NOI growth. - Highlighted a diversified rent roll with top 10 tenants at 7.5% of rents. - Announced acquisition of Hays Commerce Center in South Austin. - Adjusted 2024 development starts forecast to $230 million. - Mentioned balance sheet strength with unadjusted debt-to-EBITDA at 3.6x and interest/fixed charge coverage at 11.6x.

Funds from operations (FFO) rose 9.2% excluding involuntary conversions. Cash same-store NOI rose 5.9% for the quarter and 6.3% year-to-date. Quarter-end leasing was 96.9% with occupancy at 96.5%. Average quarterly occupancy was 96.7%. The top 10 tenants fell to 7.5% of rents, down 70 basis points from third quarter 2023. Revenue contribution details were not explicitly broken down by product segment beyond the overall portfolio performance.

• Forecasted FFO for fourth quarter in range of $2.13 to $2.17 per share and full year $8.33 to $8.37, a $0.02 per share increase from prior guidance. - Revised guidance includes increased acquisition opportunities and corresponding increase in capital proceeds, with over $500 million of capital proceeds already executed for the year. - Anticipated market tightening in 2025 due to low construction pipeline.

• Known and unknown risks, uncertainties in forward-looking statements as per SEC filings. - Bad debt related to a few California tenants, with collections affected by slower processes in California compared to other states. - Slower leasing due to tenant deliberation and tight capital markets leading to a seven-year low in construction pipeline.

Q: Craig Mailman asked about acquisitions, specifically timing, expected yields, and capital proceeds.

A: Marshall Loeb discussed existing rents in acquisitions with higher 5s cap rate, and Brent Wood talked about capital proceeds with $307 million received to-date and $275 million expected in fourth quarter.

Q: Rich Anderson inquired about market trend reversal and 2025 outlook.

A: Marshall Loeb stated no real reversal, but fundamentals strong with low vacancy in 100,000 feet and below spaces, expecting a V-shaped turn.

Q: Andrew Berger asked about excess capacity and slower decision-making.

A: Marshall Loeb said excess capacity predominantly pertains to bigger box spaces, not affecting their size space.

Q: Samir Khanal asked about updated market rent views.

A: Marshall Loeb stated mid-single digit rent growth, 4% to 5% for the year.

Q: Todd Thomas asked about development and leasing.

A: Marshall Loeb mentioned slower leasing due to tenant deliberation, but long-term value creation strong.

Q: Blaine Heck asked about election impact on industrial.

A: Marshall Loeb said stability and predictability from election would help tenants, with onshoring/near-shoring benefiting markets like Dallas, Austin, etc.

Q: Michael Carroll asked about lease termination income and bad debt.

A: Brent Wood explained successful negotiations with green energy tenants driving term fees, and bad debt related to a few California tenants with slower processes.

Q: Alexander Goldfarb asked about bad debt and demand.

A: Brent Wood and Marshall Loeb discussed bad debt as a handful of California tenants, with demand fundamentals strong.

Q: Nick Thillman asked about development starts.

A: Marshall Loeb mentioned development starts in Florida, Houston, Arizona, with mix of markets.

Q: Mike Mueller asked about development yields.

A: Marshall Loeb said yields influenced by construction cost reduction and rent growth, with development yields typically above initial underwriting.

Q: Jessica Zheng asked about Austin development.

A: Marshall Loeb discussed Austin as a great market with land picked up at discounted prices, excited about presence.

Q: John Kim asked about bad debt historical average and Conn's.

A: Brent Wood said bad debt slightly above historical average, Conn's current as of October with no reserve needed.

Q: Brendan Lynch asked about data center conversions.

A: Marshall Loeb said exploring data center opportunities in markets like Dallas, Austin, etc., but sticking to industrial for now.