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EP

EASTGROUP PROPERTIES INC (EGP)·Q1 2025 Earnings Summary

Executive Summary

  • Solid start to 2025 with leasing momentum and balance sheet strength: FFO per share rose to $2.15 (ex-involuntary conversion $2.12), up 8.6% YoY; portfolio 97.3% leased/96.5% occupied; cash same-property NOI +5.2% despite lower average occupancy of 95.8% vs 97.5% LY .
  • Q1 results were above Wall Street consensus: EPS $1.14 vs $1.11*; revenue (income from real estate ops) $172.6M vs $169.9M*; FFO/share $2.15 vs $2.10*, with leverage at 3.0x Debt/EBITDAre and 15.0x interest coverage .
  • Guidance nudged higher at the midpoint: FY25 FFO/share to $8.84–$9.04 (from $8.80–$9.00), cash same-property NOI growth to 5.8%–6.8% (from 5.4%–6.4%), with development starts reduced from $300M to $250M reflecting macro/tariff uncertainty and a more selective stance on growth .
  • Management highlighted near-term trade/tariff uncertainty as a watch item (notably in Southern California) but reiterated long-term secular tailwinds (population migration, near/onshoring, shrinking supply pipeline) and balance sheet optionality as key stock catalysts .

Values with * are from S&P Global consensus estimates.

What Went Well and What Went Wrong

What Went Well

  • Leasing and pricing power: New/renewal rental rate increases averaged 46.9% GAAP and 31.1% cash; EGP signed 30% more SQFT of operating portfolio leases vs 1Q24 (two of the last three quarters among the best ever for signed SQFT) .
  • Same-store NOI growth despite lower occupancy: Same PNOI ex-terminations +5.3% (SL) and +5.2% (cash) YoY in Q1 .
  • Balance sheet strength and flexibility: Debt/EBITDAre 3.0x; interest coverage 15.0x; minimal revolver usage; refinanced $100M term loan with 30 bps spread reduction and repaid $50M at maturity .

What Went Wrong

  • Lower average occupancy vs LY and softness in LA: Avg occupancy 95.8% (down 170 bps YoY); management cited weakness and negative absorption in Los Angeles and paused port-adjacent tenants amid tariff headlines .
  • Reduced 2025 development starts: Management lowered planned starts from $300M to $250M and pushed timing later in the year given macro/tariff uncertainty and equity market volatility .
  • Slightly elevated bad debt vs long-term run-rate: Q1 bad debt was 0.49% of revenue (company planning ~45 bps for 2025) with California still over-indexing, though improving vs 2024 .

Financial Results

Headline P&L and Per-Share Metrics

MetricQ1 2024Q4 2024Q1 2025 (Actual)Q1 2025 Consensus*Vs Consensus*
Total Revenues ($M)$154.224 $164.044 $174.449 $169.850*+$4.60M / +2.7%*
Income from Real Estate Ops ($M)$154.074 $163.767 $172.644 $169.850*+$2.79M / +1.6%*
Diluted EPS ($)$1.22 $1.16 $1.14 $1.11*+$0.03 / +2.8%*
FFO/Share (REIT) ($)$1.98 $2.15 $2.15 $2.10*+$0.05 / +2.3%*
FFO/Share ex Invol. Conv. ($)$1.98 $2.15 $2.12 n/an/a

Values with * are from S&P Global consensus estimates. Values retrieved from S&P Global.

Notes:

  • Q1 2025 included $1.763M of gains on involuntary conversion/business interruption claims (~$0.03/share); ex these gains, FFO/share was $2.12 .

Portfolio & Leasing KPIs

KPIQ3 2024Q4 2024Q1 2025
% Leased (end of period)96.9% 97.1% 97.3%
% Occupied (end of period)96.5% 96.1% 96.5%
Avg Occupancy (quarter)96.7% 95.8% 95.8%
GAAP Re-leasing Spread50.9% 46.6% 46.9%
Cash Re-leasing Spread——31.1%
Same PNOI YoY (cash)5.9% 3.4% 5.2%
Bad Debt (% of revenue)——0.49%

Balance Sheet & Coverage

MetricQ4 2024Q1 2025
Debt / EBITDAre (x)3.20x 3.0x
Interest & Fixed Charge Coverage (x)12.77x 15.0x
Debt / Total Market Cap15.4% 13.7%

Selected Geographic Operating Stats (Q1 2025)

Market% of Total SF% LeasedSame PNOI Change (SL)Same PNOI Change (Cash)
Dallas, TX10.6%97.8%7.0%9.0%
Houston, TX10.0%97.8%0.9%0.0%
Orlando, FL8.5%99.6%10.9%10.2%
Tampa, FL7.3%96.7%3.4%5.5%
Los Angeles, CA5.1%100.0%4.4%9.4%
Total Operating Properties100%97.3%5.3%5.2%

Guidance Changes

MetricPeriodPrevious Guidance (Feb 6, 2025)Current Guidance (Apr 23, 2025)Change
EPS (GAAP), dilutedFY 2025$4.71–$4.91 $4.67–$4.87 Maintained range width; midpoint slightly lower (mix)
FFO/Share (REIT)FY 2025$8.80–$9.00 $8.84–$9.04 Raised
FFO/Share ex Invol. Conv.FY 2025$8.80–$9.00 $8.81–$9.01 Raised
Cash Same PNOI GrowthFY 20255.4%–6.4% 5.8%–6.8% Raised
Avg Month-End OccupancyFY 202595.5%–96.5% 95.6%–96.6% Slightly higher
Development Starts (SF)FY 20252.5M SF / $300M 1.8M SF / $250M Lowered
AcquisitionsFY 2025$150M $150M Maintained
DispositionsFY 2025$15M $20M Raised
Capital ProceedsFY 2025$450M $260M Lowered
G&A ExpenseFY 2025$21.1M $22.8M Raised (lower capitalization, equity comp timing)

Management commentary noted Q2’25 FFO/share guidance of $2.13–$2.21 and FY25 ex-involuntary conversion FFO/share of $8.81–$9.01, reflecting slightly higher same-store growth and occupancy, lower development activity, and reduced external capital flows .

Earnings Call Themes & Trends

TopicPrevious Mentions (Q3 2024)Previous Mentions (Q4 2024)Current Period (Q1 2025)Trend
Leasing momentum & pricingRe-leasing +50.9% GAAP; resilient portfolio Record leased SQFT in Q4; +46.6% GAAP spreads +46.9% GAAP; 30% more SQFT signed YoY Stable-strong
Supply pipelineShrinking pipeline; positioned for opportunities Materially shrinking pipeline Starts are historically low; expect further delays aiding rent power Supportive
Tariffs/macroNot prominentNot prominentTariff discussions raising uncertainty; LA/port-adjacent tenants cautious New risk
Development postureStarts in 2024 ongoing Starts 2025 planned at $300M Reduced to $250M; back-end loaded; higher underwriting thresholds More conservative
Balance sheetDebt/EBITDAre ~3.6x; coverage ~11.5x Debt/EBITDAre 3.20x; coverage 12.77x Debt/EBITDAre 3.0x; coverage 15.0x; forwards available Stronger
Tenant health/bad debt——Bad debt 0.49% in Q1; planning ~45 bps for FY25 Stable/slight improvement

Management Commentary

  • “The past two quarters marked two of our three historic highs for square feet of operating portfolio leases signed during the quarter… Long term, I remain bullish on the continuing external secular trends…” — CEO Marshall Loeb .
  • “FFO per share for the quarter exceeded the midpoint of our guidance range… our balance sheet remains flexible and strong with record financial metrics.” — CFO Brent Wood .
  • “We’ve raised our threshold for new investments and development starts until there’s better economic visibility.” — CEO Marshall Loeb .
  • “We reduced development starts by $50 million and reduced our capital proceeds by $190 million… revised guidance increases midpoints for cash same-store growth and average occupancy.” — CFO Brent Wood .

Q&A Highlights

  • Leasing pace and tariffs: Demand remains broadly intact; uncertainty most visible in Southern California (Dominguez redevelopment near LA/Long Beach saw tenants pause to await clarity). Elsewhere, Carolinas/Atlanta/Florida are pacing better; Texas steady .
  • Development strategy: Starts pulled to $250M and later in 2025 out of conservatism; willingness to accelerate if demand/visibility improves; construction costs down ~10–12% YoY with limited tariff cost impact expected (some rebar/storefront pressure) .
  • LA market dynamics: Few Q1 rolls led to a low ~5% GAAP spread datapoint; management expects improvement but notes ongoing negative absorption in LA .
  • Capital allocation & acquisitions: Underwriting thresholds raised; one deal re-bid +50–60 bps cap rate amid tighter equity access; some sellers may delay processes .
  • Credit/bad debt: Q1 bad debt 0.49%; FY plan ~0.45% of revenue; California still outsized but improving; collections remain healthy .
  • Spec development contribution: Only ~$0.05–$0.06 FFO tailwind embedded for FY25, largely 4Q-weighted; reduced vs original guide .

Estimates Context

Metric (Q1 2025)ActualConsensus*Beat/(Miss)*
Diluted EPS ($)1.14 1.11*+0.03*
FFO/Share (REIT) ($)2.15 2.10*+0.05*
Revenue – Income from Real Estate Ops ($M)172.644 169.850*+2.794*

Values with * are from S&P Global consensus estimates. Values retrieved from S&P Global.

Where estimates may adjust:

  • Modestly higher FY cash same-store NOI growth and average occupancy, coupled with conservative spec leasing contribution and lower development starts, support incremental upward revisions to FY FFO/Share midpoints despite macro caution .

Key Takeaways for Investors

  • Pricing power intact: Re-leasing spreads of ~47% GAAP/31% cash and +5% same-store NOI growth on cash basis underpin internal growth even with slightly lower occupancy .
  • Balance sheet an offensive weapon: 3.0x Debt/EBITDAre, 15x coverage, and forward equity capacity position EGP to act on dislocations while maintaining dividend safety (current quarterly DPS $1.40) .
  • Macro/tariff watch list: Most pressure centered in Southern California and port-adjacent demand; rest of footprint remains steady-to-strong, especially Southeast .
  • 2025 guidance de-risked: Lower development starts/capital proceeds and conservative spec leasing embed cushion; raised FFO/share and same-store NOI midpoints signal confidence .
  • Trading setup: With consensus beats on EPS, FFO, and revenue in Q1 and a tightened but constructive FY outlook, catalysts include stabilization/clarity on trade policy and continued supply moderation supporting rent growth .
  • Market exposure mix matters: EGP’s shallow-bay, last-mile, Sunbelt orientation and diversified rent roll (Top 10 tenants only 7.1% of ABR) reduce single-tenant and port risk relative to peers .
  • Watch Dominguez (LA) redevelopment: Lease-up timing is pushed to late 2025; any earlier leasing win would be an upside surprise given LA softness .