EastGroup Properties, Inc. (EGP)

EastGroup Properties, Inc. Q1 2025 Financial Report

Report Date: 2025-04-25
Period Covered: January 1, 2025 – March 31, 2025
Form Type: 10-Q

Executive Summary

• Net Income (attributable to common shareholders): $59.423 million (vs. $58.644 million in Q1 2024, +1.35%)
• Funds From Operations (FFO): $111.973 million (215 cents per share)
• Total Debt (net): $1.461 billion (down ~3.2% from end of 2024)
• Same-Property Net Operating Income (Property NOI): $126.178 million (+13.3%)
• Portfolio Leasing: 2.59 million sq ft of new and renewal leases; average rent up 4.69% on renewals.

Profit and Loss Analysis

• Revenue: $174.449 million, up 13.1% year-over-year, driven by lease income increases and new acquisitions.
• Expenses:
  • Real estate operating: $46.760 million
  • Depreciation & amortization: $52.520 million (+16.3% vs. Q1 2024)
  • G&A: $7.954 million (+19.0%)
• Interest Expense: $8.025 million (down 20.3%) reflecting lower weighted cost after refinancings.
• FFO Drivers:
  • Property NOI growth (+$14.8 million)
  • Reduced interest cost
  • Partially offset by higher G&A and depreciation on newly acquired and developed assets.

Balance Sheet & Liquidity

• Total Assets: $5.108 billion
• Unsecured Debt: $1.457 billion (net of issuance costs) plus $3.345 million drawn on credit lines.
• Equity: $3.345 billion (up 1.6% since 12/31/2024)
• Liquidity: $20.515 million cash + $672.4 million undrawn revolver + $190.0 million forward-equity line.
• Dividend: $0.7075 per share declared for Q2 2025.

Drivers of Performance

1. Leasing Momentum: 97.3% leased/96.5% occupied; rent renewal spreads +4.7%.
2. Development Pipeline: 4.03 million sq ft under lease-up/construction; $573 million spent YTD.
3. Strategic Acquisitions: $61.6 million of accretive purchases closed in 2024; stabilizing NOI.

Pros and Cons

Pros:

• Stable cash flow under triple-net leases
• Attractive cost of capital via swaps and recent refinancings
• Low leverage relative to peers (Net Debt/EBITDA < 5x)
• Well-located portfolio in growth markets

Cons:

• Exposure to inflationary cost pressures
• Rising interest-rate environment may increase funding costs
• Tenant concentration risk in distribution sector

Outlook and Recommendations

EastGroup continues to demonstrate quarter-to-quarter growth in NOI and FFO, supported by low leverage and an active development/acquisition pipeline. We recommend a “Buy” rating, with a price target reflecting ~5% FFO yield compression and continued dividend growth potential.

Revenue breakdown (Q1 2025):
• Lease income (fixed triple-net): $130.066 million
• Variable lease income: $42.578 million
• Other operations: $1.805 million

Expense breakdown (Q1 2025):
• Real estate operating: $46.760 million
• Depreciation & amortization: $52.520 million
• G&A: $7.954 million
• Interest expense: $8.025 million

Property NOI by segment (Q1 2025):
• Core industrial: $120.0 million
• Business/distribution: $6.2 million

EastGroup’s stable leasing performance, disciplined capital deployment and conservative balance sheet underpin a positive growth trajectory. Key indicators:

• Leverage remains moderate (Net Debt/EBITDA ~4.8x).
• Interest coverage strong (Fixed charge >4.5x).
• Pipeline supports attractive mid-single-digit same-store NOI growth.

Challenges include navigating higher inflation-driven expenses and potential rate volatility. Opportunities lie in accretive acquisitions in supply-constrained markets and selective joint-venture partnerships. Overall financial health remains robust with ample liquidity to fund distributions and growth.