EastGroup Properties Inc. (EGP, Financial) filed Quarterly Report for the period ended 2009-06-30.
EastGroup Properties is a self-administered real estate investment trust focused on ownership acquisition and selective development of industrial properties. The company pursues a three-pronged investment strategy that includes: the acquisition of industrial properties at favorable initial yields with opportunities to improve cash flow performance through management; selective development of industrial properties in markets where they already has a presence and where market conditions justify such investments; and the acquisition of existing public & private companies. EastGroup Properties Inc. has a market cap of $934.8 million; its shares were traded at around $37.08 with and P/S ratio of 5.5. The dividend yield of EastGroup Properties Inc. stocks is 5.6%. EastGroup Properties Inc. had an annual average earning growth of 2.7% over the past 10 years.
EastGroup Properties, Inc.
-
Accumulated
Additional Distributions Other Noncontrolling
Common Paid-In In Excess Comprehensive Interest in
Stock Capital Of Earnings Loss Joint Ventures Total
-
BALANCE, DECEMBER 31, 2008........................ $ 3 528,452 (117,093) (522) 2,536 413,376
Comprehensive income
Net income.................................... - - 14,834 - 233 15,067
Net unrealized change in fair value of
interest rate swap........................... - - - 103 - 103
-
Total comprehensive income................. 15,170
-
Common dividends declared - $1.04 per share..... - - (26,568) - - (26,568)
Stock-based compensation, net of forfeitures.... - 1,104 - - - 1,104
Issuance of 737,041 shares of common stock,
common stock offering, net of expenses........ - 24,633 - - - 24,633
Issuance of 53,436 shares of common stock,
options exercised............................. - 1,095 - - - 1,095
Issuance of 4,468 shares of common stock,
dividend reinvestment plan.................... - 135 - - - 135
Withheld 3,628 shares of common stock to
satisfy tax withholding obligations in
connection with the vesting of restricted
stock......................................... - (129) - - - (129)
Distributions to noncontrolling interest........ - - - - (197) (197)
-
BALANCE, JUNE 30, 2009............................ $ 3 555,290 (128,827) (419) 2,572 428,619
=
SUPPLEMENTAL CASH FLOW INFORMATION
Cash paid for interest, net of amount capitalized of $3,398 and $3,353
for 2009 and 2008, respectively..................................................... $ 14,498 14,711
Fair value of common stock awards issued to employees and directors,
net of forfeitures.................................................................. 2,444 1,258
EastGroup has one reportable segment - industrial properties. These
properties are concentrated in major Sunbelt markets of the United States,
primarily in the states of Florida, Texas, Arizona and California, have similar
economic characteristics and also meet the other criteria that permit the
properties to be aggregated into one reportable segment.
The Company reviews long-lived assets for impairment whenever events or
changes in circumstances indicate that the carrying amount of an asset may not
be recoverable. Recoverability of assets to be held and used is measured by a
comparison of the carrying amount of an asset to future undiscounted net cash
flows (including estimated future expenditures necessary to substantially
complete the asset) expected to be generated by the asset. If the carrying
amount of an asset exceeds its estimated future cash flows, an impairment charge
is recognized by the amount by which the carrying amount of the asset exceeds
the fair value of the asset. As of June 30, 2009 and December 31, 2008, the
Company determined that no impairment charges on the Company\'s real estate
properties were necessary.
Depreciation of buildings and other improvements, including personal
property, is computed using the straight-line method over estimated useful lives
of generally 40 years for buildings and 3 to 15 years for improvements and
personal property. Building improvements are capitalized, while maintenance and
repair expenses are charged to expense as incurred. Significant renovations and
improvements that extend the useful life of or improve the assets are
capitalized. Depreciation expense for continuing and discontinued operations was
$11,022,000 and $21,920,000 for the three and six months ended June 30, 2009,
respectively, and $10,298,000 and $20,520,000 for the same periods in 2008.
The Company\'s real estate properties at June 30, 2009 and December 31, 2008
were as follows:
June 30, 2009 December 31, 2008
-
(In thousands)
Real estate properties:
Land................................................ $ 197,076 187,617
Buildings and building improvements................. 905,610 867,506
Tenant and other improvements....................... 207,749 197,159
Development............................................ 130,677 150,354
-
1,441,112 1,402,636
Less accumulated depreciation....................... (332,271) (310,351)
-
$ 1,108,841 1,092,285
=
Upon acquisition of real estate properties, the Company applies the
principles of Statement of Financial Accounting Standards (SFAS) No. 141R,
Business Combinations, which requires that acquisition-related costs be
recognized as expenses in the periods in which the costs are incurred and the
services are received. The Statement also provides guidance on how to properly
determine the allocation of the purchase price among the individual components
of both the tangible and intangible assets based on their respective fair
values. Goodwill is recorded when the purchase price exceeds the fair value of
the assets and liabilities acquired. The Company determines whether any
financing assumed is above or below market based upon comparison to similar
financing terms for similar properties. The cost of the properties acquired may
be adjusted based on indebtedness assumed from the seller that is determined to
be above or below market rates. Factors considered by management in allocating
the cost of the properties acquired include an estimate of carrying costs during
the expected lease-up periods considering current market conditions and costs to
execute similar leases. The allocation to tangible assets (land, building and
improvements) is based upon management\'s determination of the value of the
property as if it were vacant using discounted cash flow models.
The purchase price is also allocated among the following categories of
intangible assets: the above or below market component of in-place leases, the
value of in-place leases, and the value of customer relationships. The value
allocable to the above or below market component of an acquired in-place lease
is determined based upon the present value (using a discount rate which reflects
the risks associated with the acquired leases) of the difference between (i) the
contractual amounts to be paid pursuant to the lease over its remaining term,
and (ii) management\'s estimate of the amounts that would be paid using fair
market rates over the remaining term of the lease. The amounts allocated to
above and below market leases are included in Other Assets and Other
Liabilities, respectively, on the Consolidated Balance Sheets and are amortized
to rental income over the remaining terms of the respective leases. The total
amount of intangible assets is further allocated to in-place lease values and
customer relationship values based upon management\'s assessment of their
respective values. These intangible assets are included in Other Assets on the
Consolidated Balance Sheets and are amortized over the remaining term of the
existing lease, or the anticipated life of the customer relationship, as
applicable. Amortization expense for in-place lease intangibles was $690,000 and
$1,256,000 for the three and six months ended June 30, 2009, respectively, and
$961,000 and $1,703,000 for the same periods in 2008. Amortization of above and
below market leases was immaterial for all periods presented.
The Company acquired one operating property, Arville Distribution Center in
Las Vegas, during the six months ended June 30, 2009. The purchase price was
$11,050,000, of which $9,998,000 was allocated to real estate properties. The
Company allocated $5,066,000 of the purchase price to land using third party
land valuations for the Las Vegas market. The market values used are considered
to be Level 3 inputs as defined by SFAS No. 157, Fair Value Measurements (see
Note 12 for additional information on SFAS No. 157). In accordance with SFAS No.
141R, intangibles associated with the purchase of real estate were allocated as
follows: $663,000 to in-place lease intangibles and $389,000 to above market
leases (both included in Other Assets on the Consolidated Balance Sheets). These
costs are amortized over the remaining lives of the associated leases in place
at the time of acquisition. During the first six months of 2009, the Company
expensed acquisition-related costs of $41,000 (included in General and
Administrative Expenses on the Consolidated Statements of Income) in connection
with the Arville Distribution Center acquisition.
The Company periodically reviews the recoverability of goodwill (at least
annually) and the recoverability of other intangibles (on a quarterly basis) for
possible impairment. In management\'s opinion, no material impairment of goodwill
and other intangibles existed at June 30, 2009 and December 31, 2008.
A summary of the Company\'s Other Assets follows:
June 30, 2009 December 31, 2008
-
(In thousands)
Leasing costs (principally commissions), net of accumulated amortization.......... $ 21,749 20,866
Straight-line rent receivable, net of allowance for doubtful accounts............. 15,318 14,914
Accounts receivable, net of allowance for doubtful accounts....................... 2,296 4,094
Acquired in-place lease intangibles, net of accumulated amortization
of $5,623 and $5,626 for 2009 and 2008, respectively............................ 3,777 4,369
Mortgage loans receivable, net of discount of $74 and $81 for 2009 and
2008, respectively.............................................................. 4,165 4,174
Loan costs, net of accumulated amortization....................................... 4,131 4,246
Goodwill.......................................................................... 990 990
Prepaid expenses and other assets................................................. 7,257 7,308
-
$ 59,683 60,961
=
The Company\'s interest rate swap is reported at fair value and is shown on
the Consolidated Balance Sheets under Other Liabilities. SFAS No. 157, Fair
Value Measurements, defines fair value as the price that would be received to
sell an asset or paid to transfer a liability in an orderly transaction between
market participants at the measurement date. SFAS No. 157 also provides guidance
for using fair value to measure financial assets and liabilities. The Statement
requires disclosure of the level within the fair value hierarchy in which the
fair value measurements fall, including measurements using quoted prices in
active markets for identical assets or liabilities (Level 1), quoted prices for
similar instruments in active markets or quoted prices for identical or similar
instruments in markets that are not active (Level 2), and significant valuation
assumptions that are not readily observable in the market (Level 3). The fair
value of the Company\'s interest rate swap is determined by estimating the
expected cash flows over the life of the swap using the mid-market rate and
price environment as of the last trading day of the reporting period. This
market information is considered a Level 2 input as defined by SFAS No. 157.
On January 1, 2009, the Company adopted the provisions of SFAS No. 161,
Disclosures About Derivative Instruments and Hedging Activities, which requires
all entities with derivative instruments to disclose information regarding how
and why the entity uses derivative instruments and how derivative instruments
and related hedged items affect the entity\'s financial position, financial
performance, and cash flows. EastGroup has an interest rate swap agreement to
hedge its exposure to the variable interest rate on the Company\'s $9,365,000
Tower Automotive Center recourse mortgage, which is summarized in the table
below. Under the swap agreement, the Company effectively pays a fixed rate of
interest over the term of the agreement without the exchange of the underlying
notional amount. This swap is designated as a cash flow hedge and is considered
to be fully effective in hedging the variable rate risk associated with the
Tower mortgage loan. Changes in the fair value of the swap are recognized in
accumulated other comprehensive gain (loss) (see Note 11). The Company does not
hold or issue this type of derivative contract for trading or speculative
purposes.
Type of Current Notional Maturity Fixed Effective Fair Value Fair Value
Hedge Amount Date Reference Rate Interest Rate Interest Rate at 6/30/09 at 12/31/08
-
(In thousands) (In thousands)
Swap $ 9,365 12/31/10 1 month LIBOR 4.03% 6.03% ($419) ($522)
Read the The complete ReportEGP is in the portfolios of Third Avenue Management.
EastGroup Properties is a self-administered real estate investment trust focused on ownership acquisition and selective development of industrial properties. The company pursues a three-pronged investment strategy that includes: the acquisition of industrial properties at favorable initial yields with opportunities to improve cash flow performance through management; selective development of industrial properties in markets where they already has a presence and where market conditions justify such investments; and the acquisition of existing public & private companies. EastGroup Properties Inc. has a market cap of $934.8 million; its shares were traded at around $37.08 with and P/S ratio of 5.5. The dividend yield of EastGroup Properties Inc. stocks is 5.6%. EastGroup Properties Inc. had an annual average earning growth of 2.7% over the past 10 years.
Highlight of Business Operations:
EastGroup Properties, Inc.
-
Accumulated
Additional Distributions Other Noncontrolling
Common Paid-In In Excess Comprehensive Interest in
Stock Capital Of Earnings Loss Joint Ventures Total
-
BALANCE, DECEMBER 31, 2008........................ $ 3 528,452 (117,093) (522) 2,536 413,376
Comprehensive income
Net income.................................... - - 14,834 - 233 15,067
Net unrealized change in fair value of
interest rate swap........................... - - - 103 - 103
-
Total comprehensive income................. 15,170
-
Common dividends declared - $1.04 per share..... - - (26,568) - - (26,568)
Stock-based compensation, net of forfeitures.... - 1,104 - - - 1,104
Issuance of 737,041 shares of common stock,
common stock offering, net of expenses........ - 24,633 - - - 24,633
Issuance of 53,436 shares of common stock,
options exercised............................. - 1,095 - - - 1,095
Issuance of 4,468 shares of common stock,
dividend reinvestment plan.................... - 135 - - - 135
Withheld 3,628 shares of common stock to
satisfy tax withholding obligations in
connection with the vesting of restricted
stock......................................... - (129) - - - (129)
Distributions to noncontrolling interest........ - - - - (197) (197)
-
BALANCE, JUNE 30, 2009............................ $ 3 555,290 (128,827) (419) 2,572 428,619
=
SUPPLEMENTAL CASH FLOW INFORMATION
Cash paid for interest, net of amount capitalized of $3,398 and $3,353
for 2009 and 2008, respectively..................................................... $ 14,498 14,711
Fair value of common stock awards issued to employees and directors,
net of forfeitures.................................................................. 2,444 1,258
EastGroup has one reportable segment - industrial properties. These
properties are concentrated in major Sunbelt markets of the United States,
primarily in the states of Florida, Texas, Arizona and California, have similar
economic characteristics and also meet the other criteria that permit the
properties to be aggregated into one reportable segment.
The Company reviews long-lived assets for impairment whenever events or
changes in circumstances indicate that the carrying amount of an asset may not
be recoverable. Recoverability of assets to be held and used is measured by a
comparison of the carrying amount of an asset to future undiscounted net cash
flows (including estimated future expenditures necessary to substantially
complete the asset) expected to be generated by the asset. If the carrying
amount of an asset exceeds its estimated future cash flows, an impairment charge
is recognized by the amount by which the carrying amount of the asset exceeds
the fair value of the asset. As of June 30, 2009 and December 31, 2008, the
Company determined that no impairment charges on the Company\'s real estate
properties were necessary.
Depreciation of buildings and other improvements, including personal
property, is computed using the straight-line method over estimated useful lives
of generally 40 years for buildings and 3 to 15 years for improvements and
personal property. Building improvements are capitalized, while maintenance and
repair expenses are charged to expense as incurred. Significant renovations and
improvements that extend the useful life of or improve the assets are
capitalized. Depreciation expense for continuing and discontinued operations was
$11,022,000 and $21,920,000 for the three and six months ended June 30, 2009,
respectively, and $10,298,000 and $20,520,000 for the same periods in 2008.
The Company\'s real estate properties at June 30, 2009 and December 31, 2008
were as follows:
June 30, 2009 December 31, 2008
-
(In thousands)
Real estate properties:
Land................................................ $ 197,076 187,617
Buildings and building improvements................. 905,610 867,506
Tenant and other improvements....................... 207,749 197,159
Development............................................ 130,677 150,354
-
1,441,112 1,402,636
Less accumulated depreciation....................... (332,271) (310,351)
-
$ 1,108,841 1,092,285
=
Upon acquisition of real estate properties, the Company applies the
principles of Statement of Financial Accounting Standards (SFAS) No. 141R,
Business Combinations, which requires that acquisition-related costs be
recognized as expenses in the periods in which the costs are incurred and the
services are received. The Statement also provides guidance on how to properly
determine the allocation of the purchase price among the individual components
of both the tangible and intangible assets based on their respective fair
values. Goodwill is recorded when the purchase price exceeds the fair value of
the assets and liabilities acquired. The Company determines whether any
financing assumed is above or below market based upon comparison to similar
financing terms for similar properties. The cost of the properties acquired may
be adjusted based on indebtedness assumed from the seller that is determined to
be above or below market rates. Factors considered by management in allocating
the cost of the properties acquired include an estimate of carrying costs during
the expected lease-up periods considering current market conditions and costs to
execute similar leases. The allocation to tangible assets (land, building and
improvements) is based upon management\'s determination of the value of the
property as if it were vacant using discounted cash flow models.
The purchase price is also allocated among the following categories of
intangible assets: the above or below market component of in-place leases, the
value of in-place leases, and the value of customer relationships. The value
allocable to the above or below market component of an acquired in-place lease
is determined based upon the present value (using a discount rate which reflects
the risks associated with the acquired leases) of the difference between (i) the
contractual amounts to be paid pursuant to the lease over its remaining term,
and (ii) management\'s estimate of the amounts that would be paid using fair
market rates over the remaining term of the lease. The amounts allocated to
above and below market leases are included in Other Assets and Other
Liabilities, respectively, on the Consolidated Balance Sheets and are amortized
to rental income over the remaining terms of the respective leases. The total
amount of intangible assets is further allocated to in-place lease values and
customer relationship values based upon management\'s assessment of their
respective values. These intangible assets are included in Other Assets on the
Consolidated Balance Sheets and are amortized over the remaining term of the
existing lease, or the anticipated life of the customer relationship, as
applicable. Amortization expense for in-place lease intangibles was $690,000 and
$1,256,000 for the three and six months ended June 30, 2009, respectively, and
$961,000 and $1,703,000 for the same periods in 2008. Amortization of above and
below market leases was immaterial for all periods presented.
The Company acquired one operating property, Arville Distribution Center in
Las Vegas, during the six months ended June 30, 2009. The purchase price was
$11,050,000, of which $9,998,000 was allocated to real estate properties. The
Company allocated $5,066,000 of the purchase price to land using third party
land valuations for the Las Vegas market. The market values used are considered
to be Level 3 inputs as defined by SFAS No. 157, Fair Value Measurements (see
Note 12 for additional information on SFAS No. 157). In accordance with SFAS No.
141R, intangibles associated with the purchase of real estate were allocated as
follows: $663,000 to in-place lease intangibles and $389,000 to above market
leases (both included in Other Assets on the Consolidated Balance Sheets). These
costs are amortized over the remaining lives of the associated leases in place
at the time of acquisition. During the first six months of 2009, the Company
expensed acquisition-related costs of $41,000 (included in General and
Administrative Expenses on the Consolidated Statements of Income) in connection
with the Arville Distribution Center acquisition.
The Company periodically reviews the recoverability of goodwill (at least
annually) and the recoverability of other intangibles (on a quarterly basis) for
possible impairment. In management\'s opinion, no material impairment of goodwill
and other intangibles existed at June 30, 2009 and December 31, 2008.
A summary of the Company\'s Other Assets follows:
June 30, 2009 December 31, 2008
-
(In thousands)
Leasing costs (principally commissions), net of accumulated amortization.......... $ 21,749 20,866
Straight-line rent receivable, net of allowance for doubtful accounts............. 15,318 14,914
Accounts receivable, net of allowance for doubtful accounts....................... 2,296 4,094
Acquired in-place lease intangibles, net of accumulated amortization
of $5,623 and $5,626 for 2009 and 2008, respectively............................ 3,777 4,369
Mortgage loans receivable, net of discount of $74 and $81 for 2009 and
2008, respectively.............................................................. 4,165 4,174
Loan costs, net of accumulated amortization....................................... 4,131 4,246
Goodwill.......................................................................... 990 990
Prepaid expenses and other assets................................................. 7,257 7,308
-
$ 59,683 60,961
=
The Company\'s interest rate swap is reported at fair value and is shown on
the Consolidated Balance Sheets under Other Liabilities. SFAS No. 157, Fair
Value Measurements, defines fair value as the price that would be received to
sell an asset or paid to transfer a liability in an orderly transaction between
market participants at the measurement date. SFAS No. 157 also provides guidance
for using fair value to measure financial assets and liabilities. The Statement
requires disclosure of the level within the fair value hierarchy in which the
fair value measurements fall, including measurements using quoted prices in
active markets for identical assets or liabilities (Level 1), quoted prices for
similar instruments in active markets or quoted prices for identical or similar
instruments in markets that are not active (Level 2), and significant valuation
assumptions that are not readily observable in the market (Level 3). The fair
value of the Company\'s interest rate swap is determined by estimating the
expected cash flows over the life of the swap using the mid-market rate and
price environment as of the last trading day of the reporting period. This
market information is considered a Level 2 input as defined by SFAS No. 157.
On January 1, 2009, the Company adopted the provisions of SFAS No. 161,
Disclosures About Derivative Instruments and Hedging Activities, which requires
all entities with derivative instruments to disclose information regarding how
and why the entity uses derivative instruments and how derivative instruments
and related hedged items affect the entity\'s financial position, financial
performance, and cash flows. EastGroup has an interest rate swap agreement to
hedge its exposure to the variable interest rate on the Company\'s $9,365,000
Tower Automotive Center recourse mortgage, which is summarized in the table
below. Under the swap agreement, the Company effectively pays a fixed rate of
interest over the term of the agreement without the exchange of the underlying
notional amount. This swap is designated as a cash flow hedge and is considered
to be fully effective in hedging the variable rate risk associated with the
Tower mortgage loan. Changes in the fair value of the swap are recognized in
accumulated other comprehensive gain (loss) (see Note 11). The Company does not
hold or issue this type of derivative contract for trading or speculative
purposes.
Type of Current Notional Maturity Fixed Effective Fair Value Fair Value
Hedge Amount Date Reference Rate Interest Rate Interest Rate at 6/30/09 at 12/31/08
-
(In thousands) (In thousands)
Swap $ 9,365 12/31/10 1 month LIBOR 4.03% 6.03% ($419) ($522)
Read the The complete ReportEGP is in the portfolios of Third Avenue Management.
