Executive Summary

Q2 2025 delivered resilient growth amid macro uncertainty: FFO per diluted share was $2.21 (+7.8% YoY ex. involuntary conversion), diluted EPS was $1.20 (+5.3% YoY), and Same PNOI rose 6.6% straight-line and 6.4% cash, while average occupancy dipped to 95.9% (vs. 97.0% YoY) .
Management raised the full-year FFO range to $8.89–$9.03 (midpoint up $0.02), and guided Q3 FFO per share to $2.22–$2.30; balance sheet metrics remain strong (Debt/EBITDAre ~2.9x in Q2; interest coverage ~16.1x) .
Leasing fundamentals remain robust (GAAP re-leasing spreads 44.4% in Q2), but development leasing pace slowed and occupancy was pressured by conversions with vacancy; management trimmed 2025 starts and lowered average occupancy assumptions slightly .
Subsequent to quarter-end, EGP acquired two Raleigh assets (318k sf) for ~$61M, expanding a strategic presence near Research Triangle Park and reinforcing NAV growth via accretive capital deployment .

What Went Well and What Went Wrong

What Went Well
- FFO and Same PNOI growth: FFO/share up 7.8% YoY ex. involuntary conversion; Same PNOI +6.6% (SL) and +6.4% (cash) in Q2 .
- Pricing power: Rental rates on new/renewal leases increased 44.4% GAAP (30.1% cash) in Q2; weighted average retention 68.4% .
- Strategic messaging and balance sheet strength: “I’m proud of our quarterly results… long term, I remain bullish…” (CEO); interest coverage 16.1x; Debt/EBITDAre ~2.9x .
What Went Wrong
- Occupancy compression: Operating portfolio average occupancy fell to 95.9% (from 97.0% YoY), with 96.0% period-end occupied; conversions before full occupancy weighed on overall occupancy .
- Development leasing pace slower: Management reduced 2025 starts and noted elongated decision-making timelines, especially >50k sf deals; Q2 development leasing was smaller deals (~180k sf) .
- Southern California headwinds: Management cited 10 consecutive negative absorption quarters in Los Angeles and aggressive concessions in that market .

Financial Results

Metric	Q4 2024	Q1 2025	Q2 2025
Income from Real Estate Operations ($USD ‘000)	$163,767	$172,644	$177,256
Total Revenues ($USD ‘000)	$164,044	$174,449	$177,286
Diluted EPS ($)	$1.16	$1.14	$1.20
FFO per Diluted Share ($)	$2.15	$2.12 (ex. involuntary)	$2.21 (ex. involuntary)
PNOI ($USD ‘000)	$120,867	$126,178	$129,184
Average Occupancy (Operating Portfolio) (%)	95.8	95.8	95.9

KPIs

KPI	Q4 2024	Q1 2025	Q2 2025
Same PNOI Growth (Straight-Line, YoY)	+3.6%	+5.3%	+6.6%
Same PNOI Growth (Cash, YoY)	+3.4%	+5.2%	+6.4%
Re-leasing Spreads (GAAP)	46.6%	46.9%	44.4%
Re-leasing Spreads (Cash)	29.2%	31.1%	30.1%
Period-End Occupancy (%)	96.1	96.5	96.0
Interest & Fixed Charge Coverage (x)	12.77	15.0	16.1
Debt-to-EBITDAre (x)	3.20 (Q4) / 3.36 (TTM)	3.0	2.9

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
FFO/share (diluted)	FY2025	$8.84–$9.04	$8.89–$9.03	Midpoint raised
FFO/share ex. involuntary claims	FY2025	$8.81–$9.01	$8.85–$8.99	Midpoint raised
Same PNOI (Cash)	FY2025	5.8%–6.8%	6.0%–7.0%	Raised
Avg. Month-End Occupancy (Operating)	FY2025	95.6%–96.6%	95.6%–96.4% (95.3%–96.1% for Q3)	Slightly lowered
Development Starts (SF)	FY2025	1.8M sf / $250M	1.7M sf / $215M	Lowered
Operating Property Acquisitions	FY2025	$150M	$160M	Raised
Operating Property Dispositions	FY2025	$20M	$60M	Raised
Gross Capital Proceeds	FY2025	$260M	$265M	Slightly raised
G&A Expense	FY2025	$22.8M	$23.4M	Raised
Q3 2025 FFO/share (diluted)	Q3 2025	N/A	$2.22–$2.30	New detail

Earnings Call Themes & Trends

Topic	Q4 2024 (Q-2)	Q1 2025 (Q-1)	Q2 2025 (Current)	Trend
Tariffs/Macro	Noted uncertainty; focus on consumption vs ports	Tariff headlines elongating decisions; stress tests run; guidance lifted modestly	Macro uncertainty persists; larger leases delayed; teams accelerating lease execution	Still cautious; gradual improvement
Development leasing cadence	Decision-making later; starts weighted to 2H	Underwrite 12 months; actual 16; yields holding/improving	Slower pace esp. >50k sf; smaller deals progressing	Slow-to-improve
Southern California	L.A. weakness; specific vacancies (Dominguez)	L.A. GAAP spreads sample low, still embedded growth	10 consecutive negative absorption quarters; aggressive concessions	Continuing headwind
Acquisitions strategy	Accretive, land-constrained submarkets (DFW, Phoenix)	Trimmed underwriting due to capital costs; patience favored	Raleigh expansion ($61M); low-mid 5% entry yields; stable competition	Targeted, accretive
Balance sheet leverage	Delevered to ~3.4x; equity utilization	Sub-3x; revolver ~5.2% contemplated	Debt/EBITDAre ~2.9–3.0x; interest coverage 16x	Very strong
Tenant health/bad debt	Watchlist steady; 30bps bad debt run rate	~0.49% in Q1; 40–50bps FY placeholder	~30bps in Q2; CA ~half of bad debt; few tenants drive majority	Normalizing
Rent spreads	Strong (Q4 GAAP 46.6%)	Strong (Q1 GAAP 46.9%)	Strong (Q2 GAAP 44.4%)	Elevated, plateauing

Management Commentary

CEO: “I’m proud of our quarterly results… long term, I remain bullish on the continuing external secular trends which benefit our shallow bay, last mile, high-growth market portfolio.” .
CFO: “FFO per share for the quarter met the high end of our guidance range… we estimate FFO per share in a range of $8.89 to $9.03 with a midpoint up $0.02 per share from our prior guidance.” .
On development/leasing: Larger deals (>50k sf) taking longer; strategy is to move quickly on lease paper and avoid over-negotiation risk amid headline volatility .
On capital deployment: Subsequent-acquisition in Raleigh expanded market presence, targeting NAV growth via accretive acquisitions in supply-constrained submarkets .

Q&A Highlights

Leasing cadence and occupancy: Same-store occupancy ~100 bps above total portfolio due to development conversions pre-full occupancy; overall portfolio occupancy guided 95.3%–96.1% for Q3 .
Development starts and leasing: Starts reduced and back-half weighted; Q2 development leasing concentrated in smaller deals (~180k sf); spec office readiness aids fast move-ins .
Raleigh acquisitions: Low-mid 5% going-in cash yields; upper-5% net-effective; brand-new assets, fully leased; strategy emphasizes state capital/university markets for stability and growth .
Rent spreads outlook: Elevated spreads likely to persist with shallow-bay vacancy low and supply at decade lows; expect renewed rent growth as demand normalizes .
Balance sheet and funding mix: Revolver (~low 5% SOFR-based) expected to be used more in 2H; leverage policy ceiling ~“5-handle,” no strict floor; flexibility remains high .

Estimates Context

Q2 2025 Wall Street consensus (SPGI) for EPS and revenue was not available via our data retrieval, so we cannot present an “actual vs consensus” comparison for Q2.
Forward consensus (SPGI) suggests continued stability:
- Primary EPS Consensus Mean*: Q3 2025: 1.26 (actual), Q4 2025: 1.309 (estimate)
- Revenue Consensus Mean* ($USD): Q3 2025: 182.136M (actual), Q4 2025: 185.338M (estimate)
- EBITDA Consensus Mean* ($USD): Q3 2025: 119.724M (actual), Q4 2025: 132.102M (estimate)
- Target Price Consensus Mean*: ~$193.84
- of Estimates*: Revenue (Q3/Q4): 9/8; EPS (Q3/Q4): 5/5
Values retrieved from S&P Global.
Management’s Q3 FFO/share guidance of $2.22–$2.30 implies continued operational strength amid slower development leasing .

Key Takeaways for Investors

Elevated rent spreads and Same PNOI growth offset modest occupancy pressure from development conversions; this supports FFO trajectory and dividend sustainability .
Guidance raise (midpoint +$0.02) signals confidence; watch Q3 occupancy cadence and net new leasing as near-term catalysts .
Southern California remains an outlier headwind; broader portfolio strength in Texas, Florida, Arizona, and Carolinas underpins diversified cash flows .
Balance sheet provides significant optionality (Debt/EBITDAre ~3x, coverage ~16x); expect selective revolver usage and opportunistic dispositions/acquisitions to fund growth .
Development starts trimmed and back-end loaded; faster leasing of smaller spaces continues, with larger deals requiring patience—monitor spec lease-up in 2H for upside .
Strategic expansion in Raleigh highlights focus on land-constrained, high-quality submarkets aligned with secular demand drivers (nearshoring, population migration) .
Trading lens: Near-term performance hinges on conversion of pipeline to leases and stabilization of development assets; any acceleration in larger deal decisions or improvement in California fundamentals could be a positive surprise .

Sourcing and Citations: All figures and statements cited from company filings and transcripts: Q2 2025 8-K/press release/supplement [13:x], Q2 2025 call [1:x] [2:x], Q1 2025 8-K/press release [9:x], Q4 2024 8-K/press release [12:x].
Estimates marked with * are Values retrieved from S&P Global via GetEstimates.

EASTGROUP PROPERTIES INC (EGP)·Q2 2025 Earnings Summary