On October 23, 2024, EastGroup Properties Inc (EGP, Financial) released its 8-K filing detailing the financial results for the third quarter of 2024. EastGroup Properties Inc is an equity real estate investment trust focused on the development, acquisition, and operation of industrial properties in Sunbelt markets throughout the United States, with a significant presence in Florida, Texas, Arizona, California, and North Carolina.
Performance Overview
EastGroup Properties Inc reported a net income attributable to common stockholders of $1.13 per diluted share for the third quarter of 2024, slightly below the analyst estimate of $1.14. This represents an increase from $1.07 per diluted share in the same period of 2023. The company's funds from operations (FFO), excluding gains on involuntary conversion and business interruption claims, rose by 9.2% to $2.13 per share, surpassing the previous year's $1.95 per share.
The company's operating portfolio was 96.9% leased and 96.5% occupied as of September 30, 2024, with an average occupancy of 96.7% for the quarter. However, this marks a slight decline from the 97.7% occupancy in the third quarter of 2023, indicating some challenges in maintaining high occupancy levels.
Financial Achievements and Challenges
EastGroup Properties Inc's property net operating income (PNOI) increased by $15.03 million, or 14.5%, during the third quarter of 2024 compared to the same period in 2023. This growth was driven by contributions from same property operations, newly developed and value-add properties, and recent acquisitions. However, the company faced increased depreciation and amortization expenses, which rose by $6.40 million during the quarter.
Marshall Loeb, CEO, commented, "Our solid performance continued this quarter as evidenced by FFO per share excluding gain on involuntary conversions and business interruption claims rising 9.2%. Our portfolio remains resilient, producing a number of other strong metrics such as our percent leased, year to date releasing spreads and same store net operating income."
Income Statement and Key Metrics
For the nine months ended September 30, 2024, diluted EPS was $3.49, up from $3.06 in the same period of 2023. The increase was primarily due to a $40.76 million rise in PNOI and gains on sales of real estate investments. Interest expense also decreased by $7.12 million, contributing positively to the earnings.
EastGroup Properties Inc's debt-to-total market capitalization was 15.1% at the end of the quarter, reflecting a strong balance sheet. The company's interest and fixed charge coverage ratio stood at 11.55x for the quarter, indicating robust financial health and the ability to meet its debt obligations.
Development and Acquisitions
During the third quarter, EastGroup Properties Inc acquired an operating property in Austin, Texas, and commenced construction on two development projects totaling 310,000 square feet. The company also transferred three development projects to its operating portfolio, adding 735,000 square feet of space.
| Development Projects Started in 2024 | Location | Size (Square feet) | Projected Total Costs (In thousands) |
|---|---|---|---|
| Northeast Trade Center 1 | San Antonio, TX | 264,000 | $32,100 |
| Crossroads 1 | Tampa, FL | 124,000 | $20,000 |
| Horizon West 5 | Orlando, FL | 85,000 | $12,800 |
Analysis and Outlook
EastGroup Properties Inc's performance in the third quarter of 2024 highlights its ability to generate strong FFO growth despite a challenging leasing environment. The company's strategic focus on Sunbelt markets and its robust development pipeline position it well for future growth. However, the slight decline in occupancy rates and increased depreciation expenses may pose challenges in maintaining profitability.
Overall, EastGroup Properties Inc's financial results demonstrate resilience and adaptability in a competitive real estate market, making it a noteworthy consideration for value investors seeking exposure to the industrial REIT sector.
Explore the complete 8-K earnings release (here) from EastGroup Properties Inc for further details.
