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    EGP
    Earnings call· Mar 2026(Q1 FY26)

    EASTGROUP PROPERTIES Q1 FY26 earnings call EGP

    Apr 23, 2026 Source

    Executive summary

    EastGroup Properties Q1 FY26 — Strong FFO Growth and Development Leasing Momentum

    EastGroup Properties delivered robust Q1 FY26 results, driven by strong FFO growth and significant development leasing activity, particularly from data center related users. The company raised its full-year FFO and development starts guidance, reflecting confidence in market demand and its strategic land bank. While decision cycles remain somewhat extended, management is optimistic about sustained momentum and the portfolio's resilience, despite anticipating a slight dip in average same-store occupancy for the remainder of the year.

    Highlights

    6

    • FFO per share of $2.30, up 8.5% quarter-over-quarter, exceeding guidance midpoint.

    • Quarterly cash same-store NOI rose a strong 9.2%.

    • Quarterly re-leasing spreads were 37% GAAP and 20% cash for leases signed.

    • Development leasing reached 54% of last year's total year-to-date, with 685,000 sq ft leased, half of which was data center related.

    • Increased 2026 development starts guidance by $15 million to $265 million.

    • Moody's upgraded issuer rating to Baa1 with a stable outlook, with debt to total market capitalization at 14% and debt-to-EBITDA at 3x.

    Concerns

    4

    • Decision cycles for development leasing remain extended, despite recent pick-up.

    • Anticipated decline in average same-store occupancy for the remainder of the year to 96.4% from Q1's 97.3%.

    • Higher G&A expenses projected for Q2 due to timing and management transitions.

    • Cap rates on acquisitions have seen downward pressure, with deals becoming more competitive.

    Guidance & targets

    6
    CategoryTargetConfidence
    FFO per share
    $2.30 to $2.38 per share
    high materiality
    High
    FFO per share
    $9.52 per share
    high materiality
    High
    Cash Same-Property Net Operating Income growth
    6.2%
    medium materiality
    High
    Same-Property Occupancy
    96.4%
    medium materiality
    High
    Development Starts
    $265 million
    high materiality
    High
    Gross Capital Proceeds
    $300 million
    medium materiality
    High

    Operational metrics

    24
    FFO per share
    $2.30up 8.5% QoQ
    Q1 FY26

    Excluding voluntary conversions. Exceeded midpoint of guidance range.

    Occupancy rate
    96.5%
    Q1 FY26
    Occupancy rate
    95.9%
    Q1 FY26
    Occupancy rate
    96.1%up 30 bps from Q1 FY25
    Q1 FY26
    Occupancy rate
    97.4%
    Q1 FY26
    Tenant concentration
    6.7%down 40 bps from prior year
    Q1 FY26

    Reflects diversified rent roll.

    Development leasing volume
    54%of last year's total
    YTD FY26

    Encouraged by continued demand.

    Development leasing volume
    685,000
    YTD FY26

    Half of this volume was related to data center users.

    Development starts
    4
    Q1 FY26
    Development starts value
    $105 million
    Q1 FY26 & April

    For 4 projects in Q1 and 1 project in April.

    Available liquidity
    $675 million
    Q1 FY26
    Debt to total market capitalization
    14%
    Q1 FY26

    Sector-leading balance sheet metric.

    Interest and fixed charge coverage
    14.8x
    Q1 FY26
    Equity capital raised (ATM)
    $70 million
    Q1 FY26

    Issued through common equity offering program.

    Forward equity sale agreements
    $50 million
    Q1 FY26

    Additional available for issuance.

    Capital proceeds remaining
    $180 million
    FY26

    Out of $300 million total gross capital proceeds guidance, after $70M issued and $50M in forward agreements.

    Debt maturities
    $140 million
    later FY26

    Provides flexibility for remaining capital proceeds.

    First generation space
    775,000
    Q1 FY26

    Space from projects delivered last year that came in under-leased.

    Speculative development leasing NOI
    $0.04
    FY26

    Assumed for the second half of the year, with nothing in Q2. The difference from initial guidance ($0.03) has moved to actual signed leases.

    Customer retention rate
    75%
    typical

    Typical rate, Q1 FY26 was 83%.

    Customer retention rate
    83%
    Q1 FY26

    Higher than typical rate.

    Development yields
    steady uptick
    since Q1 FY25

    Dominguez redevelopment accounts for about 50 bps of the increase.

    Cap rate
    —
    Q1 FY26

    Varied market, some sub-5% for quality assets, others low to mid-5%. Downward pressure due to increased competition.

    G&A expenses
    highervs Q3/Q4 FY26
    Q2 FY26

    Due to timing and items related to management transitions, relocations, and new hires.

    Industry KPIs

    9
    MetricValueDetails
    Occupancy rate97.4%%
    Net debt adjusted EBITDA3xx
    Quarterly leasing volume685,000sq ft
    Leasing spread cash basis20%%
    Market fundamentals rent growthinflation plus a little bit
    Leasing spread net effective basis37%%
    Investment cap rate stabilized yield—
    Development starts dollar value and mix$265 millionUSD
    Same store noi growth cash vs net effective9.2%%

    Orderbook & backlog

    2
    First generation space available for lease775,000 sq ftQ1 FY26

    Space from projects delivered in 2025, will be in 2027 same-store pool.

    Development starts projected for H2 FY26$160 millionQ1 FY26

    Remaining starts from the $265 million FY26 guidance, projected for the second half of the year.

    Deals & partnerships

    3
    —Acquisition of two Class A buildings

    Two Class A buildings totaling 177,000 square feet in the Jacksonville market.

    —Sale of a building

    A 46,000 square foot building in Jacksonville, subsequent to quarter close.

    —Exit from market

    Previously announced exit from the Fresno market, involving 398,000 square feet.

    Risks & headwinds

    4
    Extended decision cycles for development leasingongoing

    Decision cycles continue to remain extended

    Mitigation: Anticipate users will be increasingly required to accelerate decision-making as markets experience positive absorption and new development starts remain limited.

    Macro uncertainty, inflation, and geopolitical volatility (e.g., Middle East unrest, gas prices)near-term to longer-term

    No direct impact on decision-making yet, but potential future impact on consumer balance sheet and shipping costs

    Mitigation: Focus on fast-growing markets, e-commerce growth, and last-mile locations to mitigate impact of higher transportation costs.

    Higher G&A expenses in Q2 FY26Q2 FY26

    Projected to be higher in Q2 than in Q3 and Q4

    Mitigation: Due to timing and management transitions, expected to normalize in later quarters.

    Increased competition leading to downward pressure on acquisition cap ratesQ1 FY26 and potentially ongoing

    Some sub-5% cap rates for quality assets, others low to mid-5%; more competitive deals year-to-date

    Mitigation: Remaining flexible with capital sources, focusing on development opportunities where yields are increasing.

    What to watch in Q2 FY26

    5

    Development leasing pace

    next quarter
    Current685,000 sq ft YTD, 54% of last year's total
    TargetContinued strong and steady pace

    Why it matters

    Sustained development leasing is key to achieving FFO guidance and capitalizing on the development pipeline.

    But we believe that, that's an opportunity between the projects that we have currently in the development pipeline and the 775,000 that we referred to in first generation. So definitely see that as an opportunity, particularly if the pace of development leasing can remain strong and steady as it has been over the last couple of months.

    Q&A highlights

    5

    Are tenants moving quicker now that the pipeline is emptying out, and what is the gestation period for recent deals?

    Reid Dunbar confirmed that some tenants are moving quicker, citing an Atlanta project where competition led to a faster-than-anticipated lease signing. He anticipates decision cycles will shorten as demand picks up and supply tightens.

    “And we are actually seeing some tenants move a little bit quicker than we have in the past. We had a good example of that in our Atlanta -- one of our Atlanta projects where we had a vacancy in our second gen -- or excuse me, our first gen development portfolio, and we had 2 users that came in both wanted the space, and we were able to create some competition the team did locally and ended up signing 107,000 square feet in that project and that happened quicker than we anticipated, which was a good sign.”

    asked by Craig Mailman · answered by R. Dunbar

    2 min read5 chapters

    Detailed Narrative

    01

    Development Leasing Momentum

    EastGroup saw a significant pick-up in development leasing activity, with year-to-date volume reaching 54% of last year's total. This included a 107,000 sq ft lease in Atlanta secured faster than anticipated due to competitive demand. The company commenced construction on four projects totaling 586,000 sq ft in Q1, with 27% pre-leased, and one project in April, totaling $105 million in starts. Development leasing was broad-based, occurring in nine different markets, with projects active in 13 markets.

    02

    Data Center and Advanced Manufacturing Demand

    A new source of demand is emerging from data center suppliers and advanced manufacturing, contributing significantly to recent leasing. Approximately half of the 685,000 sq ft of development leasing year-to-date was related to data center users, including those focused on construction and servicing. This trend is seen as crowding the demand field for industrial space, potentially leading to higher rents and more development opportunities, without displacing existing customer bases.

    03

    Market Fundamentals and Rent Growth Outlook

    Management is more constructive on market fundamentals, noting that while supply has been down for a few years, an inflection point in rents has not yet been seen outside of California. However, the recent pickup in demand, if sustained, is expected to eventually lead to rent growth. Fast-growing markets like Raleigh, Charlotte, Atlanta, Florida, Dallas, Houston, and Phoenix are showing strong activity, while some larger California markets remain slower.

    04

    Balance Sheet Strength and Capital Strategy

    The company's balance sheet remains strong, evidenced by Moody's upgrade to Baa1 with a stable outlook. EastGroup ended the quarter with no draws on its $675 million unsecured bank credit facility. The company issued $70 million in common stock through its ATM program at over $1.91 per share and has an additional $50 million in forward equity sale agreements. This opportunistic access to equity markets has diversified its capital proceeds mix for the year.

    05

    Last Mile Criticality

    Higher diesel prices and increasing traffic congestion in fast-growing cities are making last-mile locations more critical for tenants. This trend allows tenants to save on fuel costs by being closer to end consumers, which in turn supports higher rents for well-located shallow bay properties. The company observes customers increasingly needing space in multiple parts of a market due to traffic challenges, reinforcing the value of its diversified portfolio.

    AI-generated summary of the company’s earnings call. Not investment advice.