SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 8-K
Current Report
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (date of earliest event reported): October 21, 2003
EASTGROUP PROPERTIES, INC.
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(Exact Name of Registrant as Specified in its Charter)
Maryland 1-7094 13-2711135
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(State or Other Jurisdiction (Commission File Number) (IRS Employer
of Incorporation) Identification No.)
300 One Jackson Place, 188 East Capitol Street, Jackson, MS 39201
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(Address of Principal Executive Offices, including zip code)
(601) 354-3555
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(Registrant's telephone number, including area code)
Not Applicable
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(Former name or former address, if changed since last report)
Page 1 of 4 Pages
ITEM 7. Financial Statements, Pro Forma Financial Information and Exhibits
(c) Exhibits.
The following exhibits are filed with this Form 8-K:
99.1 Press Release dated October 21, 2003
ITEM 9. Regulation FD Disclosure (Information provided under Item 12 -
Disclosure of Results of Operations and Financial Condition).
Pursuant to Securities and Exchange Commission Release No. 33-8216, dated March
27, 2003, the information provided herein required by Item 12 of Form 8-K is
being filed under Item 9 of Form 8-K.
On October 21, 2003, we issued a press release, which sets forth our results of
operations for the quarter ended September 30, 2003. A copy of the press release
is attached hereto as Exhibit 99.1 and is incorporated herein by reference. Such
information shall not be deemed "filed" for purposes of Section 18 of the
Securities Exchange Act of 1934, as amended, and is not incorporated by
reference into any filing of the company, whether made before or after the date
hereof, regardless of any general incorporation language in such filing.
Page 2 of 4 Pages
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Date: October 21, 2003
EASTGROUP PROPERTIES, INC.
By: /s/ N. KEITH MCKEY
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N. Keith McKey
Executive Vice President, Chief Financial
Officer and Secretary
Page 3 of 4 Pages
Exhibit Index
Exhibit 99.1 Press Release dated October 21, 2003.
Page 4 of 4 Pages
Exhibit 99.1
FOR MORE INFORMATION, CONTACT:
David H. Hoster II, President and Chief Executive Officer
N. Keith McKey, Chief Financial Officer
(601) 354-3555
EASTGROUP PROPERTIES ANNOUNCES
THIRD QUARTER 2003 RESULTS
o Funds from Operations of $10.6 Million and $.53 Per Share
o Net Income Available to Common Stockholders of $2.4 Million and $.13 Per
Share
o Same Property Results Increase 1.5%
o Paid 95th Consecutive Quarterly Dividend, $.475 Per Share
o Percentage Leased 91.6%, Occupancy 91.0%
o Development Projects of $30 Million Under Construction or In Lease-Up
o Debt-to-Total Market Capitalization of 37.0% at Quarter End
o Fitch Ratings Initiated Coverage and Assigned an Issuer Rating of BBB-
JACKSON, MISSISSIPPI, October 21, 2003 - EastGroup Properties, Inc. (NYSE-EGP)
announced today the results of its operations for the three and nine months
ended September 30, 2003.
FUNDS FROM OPERATIONS
For the quarter ended September 30, 2003, funds from operations (FFO) was $.53
per share compared with $.62 per share in the same period of 2002, a decrease of
14.5%. FFO per share for the third quarter of 2003 was reduced by $.09 per share
due to the write-off of the original issuance costs of the Series A Preferred
Stock which was redeemed on July 7, 2003. FFO per share for the third quarter of
2002 included $.02 per share from gains on securities.
For the nine months ended September 30, 2003, FFO was $1.74 per share compared
with $1.93 per share for the same period of 2002, a decrease of 9.8% per share.
As mentioned above, a decrease of $.09 per share resulted from the write-off of
the original issuance costs of the Series A Preferred Stock. Gains on securities
were $.02 per share in 2003 compared with $.09 per share in 2002.
Property net operating income (PNOI) (GAAP basis) from same properties held for
both the current and past reporting periods increased 1.5% for the three months
and was flat for the nine months ended September 30, 2003, respectively. Rental
decreases on new and renewal leases averaged 10.1% for the quarter.
David H. Hoster II, President and CEO, stated, "We are pleased to have achieved
a 1.5% increase in same property operations for the third quarter on a GAAP
basis. This growth is a definite positive given the current state of real estate
fundamentals."
EARNINGS PER SHARE
On a diluted per share basis, earnings per common share (EPS) was $.13 and $.50
for the three and nine months ended September 30, 2003 compared with $.16 and
$.66 for the same periods in 2002. Diluted EPS for the third quarter of 2003 was
reduced by $.09 due to the write-off of the original issuance costs of the
Series A Preferred Stock which was redeemed on July 7, 2003. Increases to EPS
were primarily a result of the positive effect on the EPS calculation due to the
conversion of the convertible preferred stock.
DEVELOPMENT
The incremental growth of EastGroup's current development program and 2002
property transfers to the portfolio increased PNOI by $598,000 in the third
quarter of 2003. At September 30, 2003, EastGroup had seven development
properties containing 543,000 square feet with a projected total cost of
approximately $30 million either in lease-up or under construction. Of this
total, approximately 31% of the space was leased as of October 20, 2003.
During the third quarter, EastGroup purchased 72 acres of land for new
development in Orlando Central Park, Orlando's premier industrial location, for
a price of $5.1 million. The property is strategically located in the northwest
quadrant of the intersection of the Beeline Express and John Young with 3,400
feet of frontage on the Beeline, the major connector between Orlando
International Airport and Interstate 4. EastGroup will create a master planned
business park to be named SouthRidge Commerce Center which is projected to
ultimately contain approximately 750,000 square feet of industrial space in
eight to eleven business distribution type buildings. Site development costs are
projected to total approximately $2 million as the land is developed. SouthRidge
will offer a park setting with lakes, upscale landscaping and extensive highway
visibility. Construction of the first building is scheduled for late in the
first quarter of next year.
Metro Airport Commerce Center (32,000 square feet) in Jackson, Mississippi, with
total costs of $1,782,000, was transferred from development to the portfolio
during the third quarter of 2003. This property is currently 33% leased with an
expected straight-line yield of 11% upon lease-up.
In October, the Company announced that it is developing a 66,450 square foot
build-to-suit facility for Devon Energy Production Company, LP. The distribution
building, which has a projected total cost of approximately $3.4 million, will
be located on 4.22 acres in EastGroup's World Houston International Business
Center development in north Houston between Beltway 8 and George Bush
Intercontinental Airport. The initial term of the lease is 15 years.
ACQUISITIONS
In September 2003, EastGroup purchased a business distribution property in
Dallas, Texas for a price of $4,425,000. Shady Trail Distribution Center, which
contains 118,000 square feet, was built in 1998 and is located in the Walnut
Hill/Stemmons Freeway submarket of Dallas. The property is currently 50%
occupied and is projected to generate an unleveraged stabilized yield upon
lease-up of approximately 9.5%.
In October 2003, the Company purchased Crown Park Commerce Center (72,000 square
feet) in Tampa, Florida for a price of $4,850,000. It is located in the Tampa
International Airport submarket and is a multi-tenant business distribution
building which was constructed in 2001. The property, which is 100% leased to
five tenants, is projected to generate an unleveraged first year yield of
approximately 9.5%.
DIVIDENDS
EastGroup paid dividends of $.475 per share of common stock in the third quarter
of 2003, which represented 90% of funds from operations per diluted share for
the quarter. This dividend was the 95th consecutive quarterly distribution to
EastGroup's common stockholders and represents an annualized dividend rate of
$1.90 per share, which yields 6.5% on the closing stock price of $29.04 on
October 20, 2003. EastGroup also paid quarterly dividends of $.547 per share on
its Series B Preferred Stock and $.4914 per share on its Series D Preferred
Stock on October 15, 2003 to stockholders of record as of September 30, 2003.
CAPITAL TRANSACTIONS
On July 2, 2003, EastGroup closed a public offering of 1,320,000 shares of 7.95%
Series D Cumulative Redeemable Preferred Stock with a liquidation preference of
$25 per share. The offering resulted in
approximately $32.3 million of net proceeds. In connection with the issuance of
the Series D Preferred Stock, Fitch Ratings initiated coverage of EastGroup and
assigned an issuer rating of BBB- along with a preferred stock rating of BB+.
On July 7, 2003, EastGroup redeemed all of its outstanding 9.00% Series A
Cumulative Redeemable Preferred Stock (Series A). The redemption price of these
shares (excluding accrued dividends) was $43.125 million. The original issuance
costs of $1,768,000 related to Series A in 1998 were recorded as a preferred
issuance cost and reported similar to a preferred dividend in the third quarter.
During the third quarter of 2003, 850,000 shares of 8.75% Series B Cumulative
Convertible Preferred Stock were converted into 965,940 shares of common stock.
For the nine months ended September 30, 2003, 2,250,000 preferred shares have
been converted into 2,556,900 common shares. There were 550,000 Series B
preferred shares outstanding at September 30, 2003.
In August 2003, EastGroup closed a $45.5 million, nonrecourse first mortgage
loan secured by ten properties in Texas, Arizona and Florida. The note has a
fixed interest rate of 4.75%, a ten-year term, and an amortization schedule of
25 years. The proceeds were used to reduce floating rate bank borrowings.
Mr. Hoster stated, "We have strengthened the balance sheet with the capital
transactions completed during the second and third quarters. Debt-to-total
market capitalization is at a healthy 37.0% at September 30, 2003, preferred
dividend costs have decreased and common shares outstanding have increased by
21.7% in 2003. We are in a good position to take advantage of future acquisition
and development opportunities with these transactions."
"In addition, we are pleased that, after a review of EastGroup, Fitch issued an
investment grade rating for us. This should have a positive effect on capital
raising costs in the future."
OUTLOOK FOR 2003
FFO per share for 2003 is estimated to be in the range of $2.35 to $2.38.
Earnings per share for 2003 should be in the range of $.70 to $.73. The table
below reconciles projected net income to projected FFO.
Low Range High Range
4th Qtr Y/E 2003 4th Qtr Y/E 2003
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Net income $ 4,845 20,531 5,450 21,136
Issuance costs - Preferred Stock - Series A - (1,778) - (1,778)
Dividends on preferred shares (957) (6,220) (957) (6,220)
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Net income available to common stockholders 3,888 12,533 4,493 13,138
Depreciation and amortization 8,154 31,563 8,154 31,563
Share of joint venture depreciation and amortization (35) (145) (35) (145)
Gain on sale of depreciable real estate assets - (106) - (106)
Dividends on Series B convertible preferred shares 301 2,899 301 2,899
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Funds from operations available to common stockholders $ 12,308 46,744 12,913 47,349
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Diluted shares for earnings per share 19,552 17,980 19,552 17,980
Potential common shares: convertible preferred stock 625 1,915 625 1,915
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Diluted shares for funds from operations 20,177 19,895 20,177 19,895
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Per share data (diluted):
Net income available to common stockholders $ 0.20 0.70 0.23 0.73
Funds from operations available to common stockholders $ 0.61 2.35 0.64 2.38
EastGroup Properties will provide earnings guidance for 2004 in December.
CONFERENCE CALL
EastGroup will host a conference call to discuss the results of its third
quarter and review the Company's current operations on Wednesday, October 22,
2003, at 2:00 P.M. EDT. The number for the conference call is 1-800-482-5547, ID
#252811. A taped recording of the call can be accessed 24 hours a day through
Wednesday, October 29, 2003 by dialing 1-800-615-3210; the pass code is 252811.
SUPPLEMENTAL INFORMATION
Supplemental financial information is available by request by calling the
Company at 601-354-3555, or by accessing the report in the reports section of
the Company's website at www.eastgroup.net.
EastGroup Properties, Inc. is a self-administered equity real estate investment
trust focused on the acquisition, ownership and development of industrial
properties in major Sunbelt markets throughout the United States. Its strategy
for growth is based on its property portfolio orientation toward premier
distribution facilities clustered near major transportation centers. EastGroup's
portfolio currently includes 19.1 million square feet with an additional 609,000
square feet of properties under development. EastGroup Properties, Inc. press
releases are also available on the Company's website.
FORWARD-LOOKING STATEMENTS
In addition to historical information, certain statements in this release are
forward-looking, such as those pertaining to the Company's hopes, expectations,
intentions, beliefs, strategies regarding the future, the anticipated
performance of development and acquisition properties, capital resources,
profitability and portfolio performance. Forward-looking statements involve
numerous risks and uncertainties. The following factors, among others discussed
herein, could cause actual results and future events to differ materially from
those set forth or contemplated in the forward-looking statements: defaults or
nonrenewal of leases, increased interest rates and operating costs, failure to
obtain necessary outside financing, difficulties in identifying properties to
acquire and in effecting acquisitions, failure to qualify as a real estate
investment trust under the Internal Revenue Code of 1986, as amended,
environmental uncertainties, risks related to disasters and the costs of
insurance to protect from such disasters, financial market fluctuations, changes
in real estate and zoning laws and increases in real property tax rates. The
success of the Company also depends upon the trends of the economy, including
interest rates, income tax laws, governmental regulation, legislation,
population changes and those risk factors discussed elsewhere in this release.
Readers are cautioned not to place undue reliance on forward-looking statements,
which reflect management's analysis only as the date hereof. The Company assumes
no obligation to update forward-looking statements. See also the Company's
reports to be filed from time to time with the Securities and Exchange
Commission pursuant to the Securities Exchange Act of 1934.
EASTGROUP PROPERTIES, INC.
CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
Three Months Ended Nine Months Ended
September 30, September 30,
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2003 2002 2003 2002
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REVENUES
Income from real estate operations $ 27,302 25,906 80,320 75,872
Interest 7 26 17 304
Gain on securities - 365 389 1,836
Other 58 54 160 535
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27,367 26,351 80,886 78,547
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EXPENSES
Operating expenses from real estate operations 8,083 7,686 23,698 21,806
Interest 4,796 4,363 14,137 12,703
Depreciation and amortization 7,978 7,848 23,409 22,275
General and administrative 1,246 1,102 3,746 3,279
Minority interest in joint ventures 107 103 320 286
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22,210 21,102 65,310 60,349
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INCOME BEFORE GAIN ON SALE OF REAL ESTATE INVESTMENTS 5,157 5,249 15,576 18,198
Gain on sale of real estate investments - - - 93
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INCOME FROM CONTINUING OPERATIONS 5,157 5,249 15,576 18,291
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DISCONTINUED OPERATIONS
Loss from real estate operations - (10) (2) (14)
Gain (loss) on sale of real estate investments 6 (66) 112 (66)
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INCOME (LOSS) FROM DISCONTINUED OPERATIONS (A) 6 (76) 110 (80)
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NET INCOME 5,163 5,173 15,686 18,211
Preferred dividends-Series A 76 970 2,016 2,910
Preferred dividends-Series B 300 1,532 2,598 4,596
Preferred dividends-Series D 649 - 649 -
Redemption of Series A preferred stock 1,778 - 1,778 -
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NET INCOME AVAILABLE TO COMMON STOCKHOLDERS $ 2,360 2,671 8,645 10,705
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BASIC PER COMMON SHARE DATA
Income from continuing operations $ 0.13 0.17 0.50 0.68
Income (loss) from discontinued operations 0.00 0.00 0.01 0.00
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Net income available to common stockholders $ 0.13 0.17 0.51 0.68
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Weighted average shares outstanding 18,451 15,901 17,089 15,856
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DILUTED PER COMMON SHARE DATA
Income from continuing operations $ 0.13 0.16 0.49 0.66
Income (loss) from discontinued operations 0.00 0.00 0.01 0.00
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Net income available to common stockholders $ 0.13 0.16 0.50 0.66
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Weighted average shares outstanding 18,818 16,264 17,453 16,228
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(A) In accordance with SFAS No. 144, "Accounting for the Impairment or Disposal
of Long-Lived Assets," income (loss) from discontinued operations
represents the operations and gain (loss) on disposal for properties
classified to held for sale subsequent to 12/31/01. Prior period amounts
have been reclassified to be consistent with the 2003 presentation.
EASTGROUP PROPERTIES, INC.
RECONCILIATIONS OF OTHER REPORTING MEASURES TO NET INCOME
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
Three Months Ended Nine Months Ended
September 30, September 30,
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2003 2002 2003 2002
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RECONCILIATIONS OF OTHER REPORTING MEASURES TO NET INCOME:
Income from real estate operations $ 27,302 25,906 80,320 75,872
Operating expenses from real estate operations (8,083) (7,686) (23,698) (21,806)
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PROPERTY NET OPERATING INCOME (PNOI) (A) 19,219 18,220 56,622 54,066
Interest income 7 26 17 304
Gain on securities - 365 389 1,836
Other income 58 54 160 535
General and administrative expense (1,246) (1,102) (3,746) (3,279)
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EARNINGS BEFORE INTEREST, TAXES, DEPRECIATION AND AMORTIZATION (EBITDA) 18,038 17,563 53,442 53,462
Income (loss) from discontinued operations (before depreciation
and amortization) - (5) (2) 32
Interest expense (B) (4,796) (4,363) (14,137) (12,703)
Minority interest in earnings (before depreciation and amortization) (141) (140) (430) (415)
Gain on sale of nondepreciable real estate investments 6 - 6 -
Dividends on Series A preferred shares (76) (970) (2,016) (2,910)
Dividends on Series D preferred shares (649) - (649) -
Redemption of Series A preferred stock (1,778) - (1,778) -
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FUNDS FROM OPERATIONS (FFO) AVAILABLE TO COMMON STOCKHOLDERS (A) 10,604 12,085 34,436 37,466
Depreciation and amortization from continuing operations (7,978) (7,848) (23,409) (22,275)
Depreciation and amortization from discontinued operations - (5) - (46)
Share of joint venture depreciation and amortization 34 37 110 129
Gain (loss) on sale of depreciable real estate investments - (66) 106 27
Dividends on Series B convertible preferred shares (300) (1,532) (2,598) (4,596)
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NET INCOME AVAILABLE TO COMMON STOCKHOLDERS 2,360 2,671 8,645 10,705
Dividends on preferred shares 1,025 2,502 5,263 7,506
Redemption of Series A preferred stock 1,778 - 1,778 -
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NET INCOME $ 5,163 5,173 15,686 18,211
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DILUTED PER COMMON SHARE DATA: (C)
Income from continuing operations $ 0.13 0.16 0.49 0.66
Income (loss) from discontinued operations 0.00 0.00 0.01 0.00
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Net income available to common stockholders $ 0.13 0.16 0.50 0.66
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Weighted average shares outstanding 18,818 16,264 17,453 16,228
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Funds from operations available to common stockholders $ 0.53 0.62 1.74 1.93
====================================================
Weighted average shares outstanding for FFO purposes 20,133 19,446 19,803 19,410
====================================================
(A) The Company's chief decision makers use two primary measures of operating
results in making decisions: property net operating income (PNOI), defined as
income from real estate operations less property operating expenses (before
interest expense and depreciation and amortization), and funds from operations
(FFO). EastGroup defines FFO consistent with the National Association of Real
Estate Investment Trusts' (NAREIT) definition, as net income (loss) (computed in
accordance with accounting principles generally accepted in the United States of
America (GAAP)), excluding gains or losses from sales of depreciable real estate
property, plus real estate related depreciation and amortization, and after
adjustments for unconsolidated partnerships and joint ventures.
PNOI and FFO are supplemental industry reporting measurements used to
evaluate the performance of the Company's investments in real estate assets and
its operating results. The Company believes that the exclusion of depreciation
and amortization in the industry's calculations of PNOI and FFO provide
supplemental indicators of the properties' performance since real estate values
have historically risen or fallen with market conditions. PNOI and FFO as
calculated by the Company may not be comparable to similarly titled but
differently calculated measures for other REITs. Investors should be aware that
items excluded from or added back to FFO are significant components in
understanding and assessing the Company's financial performance.
(B) Net of capitalized interest of $518,000 and $532,000 for the three months
ended September 30, 2003 and 2002, respectively; and $1,520,000 and $1,620,000
for the nine months ended September 30, 2003 and 2002, respectively.
(C) Assumes dilutive effect of common stock equivalents.