Eastgroup Properties Inc Q4 2024 Earnings Call Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Andrew Berger - Bank of America - Analyst : Hey, good morning. This is Andrew on for Jeff Spector. Marshall, you mentioned the word green shoots earlier. I'm just curious if you're seeing this in any particular market?

Question: Andrew Berger - Bank of America - Analyst : Got it. I appreciate that color. And maybe as just a follow-up. I know your portfolio is more focused on consumption, but obviously, with tariffs being pretty topical over the past several weeks, I'm curious if that's come up in any conversations with your tenants and any themes that are worth calling out? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. FEBRUARY 07, 2025 / 4:00PM, EGP.N - Q4 2024 Eastgroup Properties Inc Earnings Call

Question: Andrew Berger - Bank of America - Analyst : Great. Thank you very much.

Question: Alexander Goldfarb - Piper Sandler & Co. - Analyst : Oh, hey, morning down there. And I forget if it's one or two questions, but it sounds it like it was 2. So just with that in mind, Marshall, on the development side, I think you said it was record leasing. It's an operating portfolio, but the development leasing was a little bit slower, but then you commented that you want to ramp development. So are you anticipating a return of the eventual development demand? Or are you seeing it real time where your positive development comments are supported by increased expansion demand by tenants?

Question: Alexander Goldfarb - Piper Sandler & Co. - Analyst : I'll keep it to one. I'll keep it to one.

Question: Alexander Goldfarb - Piper Sandler & Co. - Analyst : Thank you.

Question: Craig Mailman - Citigroup Inc. - Analyst : Hey, good morning. Just want to touch on the delevering you guys have been doing, when I look at the balance sheet, right? You guys are down to 3.4 times debt to EBITDA, and you issued some equity that was relative to us, a little bit below NAV. Just kind of trying to get a sense of, are you guys trying to position the balance sheet to do a bigger transaction? Or is the capital deployment on the development side, just not pencil with where debt rates are today? Just trying to get a sense of where you think the optimal leverage is for you guys? Or is this just kind of building capacity for the future?

Question: Craig Mailman - Citigroup Inc. - Analyst : Okay. That's helpful. I'm going to sneak a second one in here. On your comment, Marshall, around kind of development decision-making is later in the process. I know historically, that had been the case in this last cycle, pre-leasing was happening. Just can you give us a sense on the tenant pool for the available development space you have and even the Starship space and comp space that you guys got back?

Question: Craig Mailman - Citigroup Inc. - Analyst : Great, thank you. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. FEBRUARY 07, 2025 / 4:00PM, EGP.N - Q4 2024 Eastgroup Properties Inc Earnings Call

Question: AJ Peak - KeyBanc Capital Markets - Analyst : Hi, good morning, this is, AJ Peak calling on for Todd. So just to piggyback real quick off of Craig's question. Could you just quantify a little bit the development leasing in regards. So I think back in November, you said that the decision making is taking 15 to 16 months. Previously, it had been

Question: AJ Peak - KeyBanc Capital Markets - Analyst : Okay. That's helpful. And then just real quick, how are you thinking about rent change in '25? I guess, what sort of range would you expect to achieve on new and renewal leasing? And how far through the 2025 lease expirations are you? And what has rent changed looking like so far

Question: AJ Peak - KeyBanc Capital Markets - Analyst : Alright perfect. Thank you, guys.

Question: Rich Anderson - Wedbush Securities - Analyst : Okay. Just a five-part question here, just kidding. I'll tell the line. Marshall, I just want to make sure I better understand sort of the cadence of your developments and the $300 million of starts. In the past, one development informs the next, just from the -- on the ground activity that you saw and it gives you the confidence to go forward. Is that sort of not exactly happening yet, but what you see is so much less supply. So you want to be in front of it before and prepared for that. perhaps to start to come together later this year. So is it sort of like sitting in the abstract a little bit right now in terms of how you typically start developments but you feel like it's going to come eventually. So you're sort of talking about starts in the $300 million range. Do I have that kind of right? Maybe you can just sort of fill in the blanks.

Question: Rich Anderson - Wedbush Securities - Analyst : Okay great, thanks.

Question: Nicholas Thillman - Robert W. Baird & Co. - Analyst : Thank you. Maybe I just wanted to touch a little bit on the pickup in leasing costs in the quarter. Obviously, some of it could be related to just mix with the more new leasing. Wanted to get a little bit more color on that? Was there any individual leases that we're pulling that number up? And then also, Brent, maybe just any comments you have on expectations for retention in 2025? Thank you.

Question: Nicholas Thillman - Robert W. Baird & Co. - Analyst : Thank you.

Question: Eric Borden - BMO Capital Markets - Analyst : Hey, good morning, everyone. Brent, I just wanted to go back to your comments around the bad debt guidance assumption of 30 basis points. It sounds like that is just general conservatism for the year? Or correct me if I'm wrong, is there any specific tenant that, that was allocated to? And then I was just curious if I get your thoughts on your current thinking for lease termination income for the year. Thank you.

Question: Eric Borden - BMO Capital Markets - Analyst : Thank you I appreciate it. I'll leave it there.

Question: Blaine Heck - Wells Fargo Securities - Analyst : Great, thanks. Good morning. We saw some interesting and maybe counterintuitive moves in the operating portfolio lease rates in some of your markets quarter-over-quarter. So I was hoping you could comment on the decreases in Texas markets, San Antonio and Fort Worth in particular, and then increases in California where San Francisco, LA and San Diego saw a pretty significant positive movement, whether those are driven by specific situations or be more indicative of any trends that you're seeing in those markets?

Question: Blaine Heck - Wells Fargo Securities - Analyst : Okay. Great. Sounds like more specific situations, which makes sense. I'll respectfully leave it there.

Question: Steve Sakwa - Evercore ISI - Analyst : Yeah, thanks. Good morning. I was wondering if you could just provide a little commentary around the pricing on the acquisitions in the fourth quarter. And maybe just the capital flows that you guys are seeing. And I know acquisition cap rates can kind of be all over the board. But do you think about unlet IRRs? And where do you think unlevered IRRs are for industrial today? Thanks.

Question: Steve Sakwa - Evercore ISI - Analyst : Thank you. That's it for me.

Question: Michael Carroll - RBC Capital Markets - Analyst : Yeah, thanks. I guess, Marshall, I wanted to touch back on your prepared remarks that you're seeing an uptick in prospect active. I mean can you give us some color on what this means? Is it just that you're seeing increased poor activity? Or are these prospective tenants further along like you're trading paper and they're now ready to make decisions where before they weren't?

Question: Michael Carroll - RBC Capital Markets - Analyst : Okay great. Thank you.

Question: Ronald Camden - Morgan Stanley - Analyst : Great. Just a quick one. I just want to -- the occupancy guide of 96, I was wondering if you could talk about sort of the cadence of the year. Do you have a seasonal dip in 1Q and then you build. And then the second question or the follow-up would just be on the -- would love to get an update on El Paso, Phoenix and San Diego, which are some of the near-shoring and onshoring markets and just what your expectations are for this year and what you're seeing on the grounds there? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. FEBRUARY 07, 2025 / 4:00PM, EGP.N - Q4 2024 Eastgroup Properties Inc Earnings Call

Question: Ronald Camden - Morgan Stanley - Analyst : You're helpful, thank you.

Question: Omotayo Okusanya - Deutsche Bank - Analyst : Can you hear me?

Question: Omotayo Okusanya - Deutsche Bank - Analyst : Good. So I just wanted to kind of go back to guidance for a quick minute. Some of your comments around just to get rating high-end fourth quarter and some tightness in the acquisitions market. I guess that helps to understand acquisition guidance a little bit better versus how much you did '24. But I guess from the occupancy perspective, again, you're not really calling for any increase in occupying in '25 versus '24. But there's been a lot of commentary on the call just around green shoes and improve tours and things like that. So I'm just curious why not a better occupancy guidance, maybe there's some offsets towards some of the green shoots in demand that you've been talking about?

Question: Blaine Heck - Wells Fargo Securities - Analyst : Helpful, thank you.

Question: Vince Tibone - Green Street - Analyst : Hi, good morning. Could you discuss how much incremental NOI from development projects that are currently unlet is baked into '25 guidance? I'm just trying to get a sense of how much spec leasing volumes and the timing of that? And like what's exactly kind of incorporated within guidance?

Question: Vince Tibone - Green Street - Analyst : No, go ahead. I didn't mean to cut you off Marshall, sorry.

Question: Vince Tibone - Green Street - Analyst : No, I just wanted to confirm because you had a lot of helpful numbers and I'll have to look at the transcript. But the $6 million that you mentioned, that's like incremental leasing. That's not any leases that were signed in '24 thus far. I just wanted to confirm that kind of --

Question: Vince Tibone - Green Street - Analyst : Perfect. That's great detail. Thank you.