EastGroup Properties Inc. 2026 Q3 Earnings Call

Thanks, Casey. Good morning. I want to start by thanking our team. We added a strong quarter to what's been a solid year so far. I'm proud of the results achieved, and our quarterly results demonstrate the portfolio's quality and the resiliency within the industrial market. Some of our quarterly stats were funds from operations for $2.45 per share, $0.04 above our guidance midpoint, and up 7.9% from third quarter 2025. Year to date, FFO per share is up 7.7%. For over a decade now, our quarterly FFO per share has exceeded the FFO per share reported in the same quarter prior year. Truly a long-term growth trend. Quarter end leasing was 97.3%, with occupancy at 96.5%. Also notable was quarter end same-store occupancy at 97%. Our quarterly re-leasing spreads were 36% GAAP, 21% cash for leases signed during the quarter.

Year to date results were similar at 36% and 20% GAAP and cash, respectively. Cash same store NOI exceeded our expectations for the quarter at 7.1% and stand at 8.2% year to date. Finally, we have the most diversified rent roll in our sector, with our top 10 tenants falling to 6.5% of rents, down 40 basis points from third quarter last year. We target geographic and tenant diversity as strategic paths to stabilize earnings regardless of the economic environment. In summary, we're pleased with our results, which again allow us to raise earnings guidance. We remain excited about the quantity of the leases we signed during the quarter, along with the ongoing continued prospect activity. Reid will now walk you through more of our quarterly summary.

Thank you, Marshall, and good morning. We delivered strong Q3 results, setting numerous company records across all three pillars of our business: operations, development, and investments. Industrial demand has remained steady, and the operating environment continues to be healthy. The demand we're seeing for our properties is diverse and broad-based. That demand is supported by multiple tailwinds, including e-commerce, advanced manufacturing, and data center related uses. Tenants increasingly want to be near the end consumer in modern, functional buildings, which aligns well with EastGroup's portfolio. The end result, we completed 2.9 million square feet of second gen deals, setting a new record for EastGroup. In development, the supply environment for shallow bay industrial remains favorable. The economics of new development are becoming more challenging for many regional competitors, which should constrain new supply.

As a result, the value of our entitled land, local market expertise, and proven development platform keeps rising. Leasing momentum with the development pipeline gave us the confidence to increase our projected development starts to $390 million, which would be a new record for EastGroup. We also added to our land position this quarter, acquiring three sites. Two sites will expand our development in existing parks, and the third will support a new development in South Florida, which is one of our key growth markets.

Lastly, on the investment side, during the third quarter and through October, we acquired five projects for a total investment of $320 million. Our strong financial position allowed us to take advantage of tighter liquidity in the capital markets. Each of these projects deepens our presence in existing markets, strengthening our platform over the long term. Stacy will now speak to several topics, including assumptions within our updated 2026 guidance.

Thanks, Reed, and good morning, everyone. We are proud of our strong third quarter results, reflecting excellent execution by our team, the quality of our portfolio, and the strength of the markets in which we operate. As Marshall noted, third quarter FFO exceeded our guidance midpoint, primarily due to higher than projected same property net operating income. On a cash basis, we exceeded our same PNOI projections by 170 basis points, achieving 7.1% growth compared to third quarter last year. Average month-end same property occupancy of 96.9% exceeded projections by 50 basis points, and our average month-end portfolio occupancy of 96.1% also exceeded projections by 50 basis points. Our occupancy outperformance was complemented by continued strength in new and renewal re-leasing spreads. In addition to a strong quarter of operations, we were also active in deploying capital into both development projects and accretive acquisition opportunities.

In order to fund these and our planned fourth quarter investments, we entered into forward equity share agreements totaling $485 million during third quarter. Combined with forward agreements already outstanding from activity earlier this year, we now have $695 million in forward equity share agreements outstanding at a weighted average price of approximately $202 per share. Our financing plans for fourth quarter include continuing to utilize our $675 million unsecured bank credit facilities, which had a balance of $195 million outstanding as of quarter end. As fourth quarter progresses, we plan to settle forward equity share agreements in order to make repayments on our unsecured bank credit facility, all to fund our near-term investment activity, including $325 million in recent property acquisitions, along with land acquisitions and spending related to increased development starts, in addition to $140 million in fourth quarter unsecured debt maturities.

Our balance sheet remains strong and flexible, with debt to total market capitalization of 14.6% at quarter end, third quarter annualized debt to EBITDAre ratio of 3.2 times, and interest and fixed charge coverage of 14.7 times. This financial strength allows us to pursue attractive development and acquisition opportunities in this ever-changing investment environment. Looking ahead to fourth quarter, FFO is estimated to be in the range of $2.47-$2.53, with a midpoint of $2.50 per share, which is $0.02 ahead of our previous fourth quarter projections. For the year, we increased the midpoint of our 2026 FFO guidance by $0.06 to $9.65 per share, which represents a 7.5% increase over 2025 actual results. We are projecting strong cash same property net operating income results to continue, and we raised the midpoint of our guidance assumption by 70 basis points to 7.5% for the year.

These strong projections are driven by rental rate increases on in-place and budgeted leases and expected same property occupancy of 97%, which is 30 basis points ahead of our prior guidance. Projected average month-end occupancy for our operating portfolio is now 95.9%, a 20 basis point increase over prior guidance. As Reid mentioned, we are pleased to increase our projected 2026 development starts by $65 million to $390 million. Year to date, we have started construction of $285 million of development projects, and we are planning for $105 million of starts in the fourth quarter. The overall increase in development starts reflects the strength of both development leasing we have accomplished year to date and the current leasing environment. The projects already underway, together with those expected to begin in the fourth quarter, provide a meaningful runway for future earnings growth as these investments lease and stabilize.