Earnings call transcript: EastGroup Properties Q2 2025 shows strong FFO growth

EastGroup Properties (EGP) reported a robust performance for the second quarter of 2025, with Funds from Operations (FFO) per share rising by 7.8% year-over-year to $2.21. The company maintained high occupancy rates and achieved notable growth in cash same-store Net Operating Income (NOI). Trading at $169.76, the stock has gained nearly 10% over the past six months, demonstrating its resilience. According to InvestingPro data, the company has maintained dividend payments for an impressive 48 consecutive years, with a current dividend yield of 3.67%.

Key Takeaways

• FFO per share increased by 7.8% year-over-year.
• Occupancy rate stood at a solid 96%.
• Development pipeline adjusted to $215 million for 2025.
• Market ownership in Raleigh expanded with two new property investments.
• Debt to total market capitalization remained low at 14.2%.

Company Performance

EastGroup Properties demonstrated resilience in Q2 2025, with a strong focus on expanding its portfolio and maintaining high occupancy rates. The company’s strategic investments in Raleigh and adjustments to its development pipeline highlight its proactive approach to market opportunities. InvestingPro analysis shows the company maintains a strong financial health score of 3.18 (rated as "GREAT"), with particularly high marks in growth and cash flow metrics. Despite challenges in the broader industrial market, particularly for larger spaces, EastGroup has capitalized on its strength in smaller bay industrial spaces, maintaining a healthy gross profit margin of 73%.

Financial Highlights

• FFO per share: $2.21, up 7.8% year-over-year.
• Quarter-end leasing: 97.1%.
• Cash same-store NOI growth: 6.4%.
• Top 10 tenants account for 6.9% of rents, reduced by 90 basis points from last year.

Outlook & Guidance

EastGroup Properties is optimistic about the remainder of 2025, with full-year FFO per share guidance set between $8.89 and $9.03. Based on current analyst consensus available on InvestingPro, the stock has an upside potential of 11%, with price targets ranging from $174 to $218. The company anticipates upward rent pressure due to limited availability of modern facilities and expects demand recovery before any significant increase in supply. The guidance for cash same-store NOI growth has been revised upward to 6.5%, supported by the company’s strong 14% revenue CAGR over the past five years.

Executive Commentary

Marshall Loeb, President and CEO, expressed satisfaction with the company’s mid-year results and emphasized their strategic advantage in capitalizing on development opportunities faster than private peers. Loeb also highlighted the steady leasing activity, particularly in smaller spaces, despite broader market uncertainties.

Risks and Challenges

• Slower leasing activity for larger spaces due to macroeconomic uncertainties.
• Potential impacts of tariffs and trade agreements on tenant decision-making.
• Continued negative absorption in key markets like Southern California.
• Reliance on smaller tenants could pose risks if market conditions shift unfavorably.

Q&A

During the earnings call, analysts focused on leasing activity and tenant decision-making timelines. Questions revolved around the impact of macroeconomic factors, such as tariffs, on leasing strategies and the company’s focus on smaller tenant leases. EastGroup’s management reiterated their commitment to flexibility and readiness to adapt to changing market conditions.

Full transcript - EastGroup Properties Inc (EGP) Q2 2025:

Conference Call Operator: Good morning ladies and gentlemen and welcome to the EastGroup Properties second quarter 2025 earnings conference call and webcast conference call. At this time all lines are in listen only mode. Following the presentation, we will conduct a question and answer session. If at any time during this call you require immediate assistance, please press 0 for the operator. This call is being recorded on Thursday, July 24, 2025. I will now hand over the call to Marshall Loeb, President and CEO, to begin the conference. Please go.

Marshall Loeb, President and CEO, EastGroup Properties: Good morning and thanks for calling in for our second quarter 2025 conference call. As always, we appreciate your interest. Brent Wood, our CFO, is also on the call. Since we’ll make forward looking statements, we ask you listen to the following disclaimer.

Please note that our conference call today will contain financial measures such as PNOI and FFO that are non-GAAP measures as defined in Regulation G. Please refer to our most recent Financial Supplement and our Earnings Press Release, both available on the Investor page of our website, and to our periodic reports furnished or filed with the SEC for definitions and further information regarding our use of these non-GAAP financial measures and a reconciliation of them to our GAAP results. Please also note that some statements during this call are forward-looking statements as defined in and within the safe harbors under the Securities Act of 1933, the Securities Exchange Act of 1934, and the Private Securities Litigation Reform Act of 1995.

Forward-looking statements in the Earnings Press Release along with our remarks are made as of today and reflect our current views of the Company’s plans, intentions, expectations, strategies, and prospects based on the information currently available to the Company and on assumptions it has made. We undertake no duty to update such statements or remarks, whether as a result of new information, future or actual events, or otherwise. Such statements involve known and unknown risks, uncertainties, and other factors that may cause actual results to differ materially. Please see our SEC filings, including our most recent Annual Report on Form 10-K for more detail about these risks.

Thanks, Kasey. Good morning. I’ll start by thanking our team. They’ve worked hard this year and we’ve made solid progress towards our 2025 goals and I’m proud of the results we’ve achieved. Our second quarter results demonstrate the quality of the portfolio and resiliency within the industrial market. Some of the results produced include Funds from Operations were $2.21 per share, up 7.8% for the quarter over prior year excluding involuntary conversions. Now, for over a decade, our quarterly FFO per share has exceeded the FFO per share reported in the same quarter prior year. Truly a long term trend. Quarter end leasing was 97.1% with occupancy at 96%. Average quarterly occupancy was 95.9%, which although historically strong, is down 110 basis points from second quarter 2024. Quarterly releasing spreads were 44% GAAP, 30% cash, and year to date results are similar at 46% and 31% GAAP and cash, respectively.

Cash same-store NOI rose 6.4% for the quarter despite the lower occupancy. Finally, we have the most diversified rent roll in our sector with our top 10 tenants falling to 6.9% of rents, down 90 basis points from last year. We target geographic and revenue diversity as strategic paths to stabilize earnings regardless of the economic environment. In summary, we’re pleased with our mid-year results. The tariff discussions raised market uncertainty towards long term capital decisions. To address the uncertainty, we’re focusing on a couple of things. The first is leasing to maintain occupancy and we’re making the best quick leasing decisions we can. Today’s environment likely won’t be tomorrow’s environment, literally. Secondly, we’re grateful our balance sheet positions us well during volatile moments.

This strength allowed us to invest $61 million in two new properties, raising our market ownership in Raleigh to roughly 600,000 square feet, all near the growing Research Triangle Park. In terms of leasing, second quarter square footage slowed compared to the record-setting prior two quarters. In terms of total leases, however, the actual signed was greater during the quarter. As it played out, the market bifurcated such that we’re continuing to convert prospects roughly 50,000 square feet and below and our larger spaces have prospects, but decision making time is elongated much like we experienced last year. That’s impacting us in several ways. First, delaying expansions means the portfolio remains well leased and is ahead of initial forecast. On the other hand, our development pipeline is leasing and maintaining projected yields, but at a slower pace.

This in turn lowered development start projections from earlier in the year, and our starts, as we’ve stated before, are pulled by market demand within the park. Based on current demand levels, we’re reforecasting 2025 starts to $215 million with a lean towards the back end of the year. We’re making solid progress on development leasing. However, larger square footage decision making is slower. Our emphasis is on forecasted expectations as our active prospects thankfully remain active, and things can swing rapidly like they did late last year. In terms of starts, we ultimately follow demand on the ground to dictate pace. Longer term, the continued decline in the supply pipeline is promising. Starts were historically low again this quarter. We expect the uncertainty to further dampen new starts. Near term, the limited availability in modern facilities will put upward pressure on rents as demand stabilizes and as demand improves.

Our goal is to capitalize earlier than our private peers on development opportunities based on the combination of our team’s experience, our balance sheet strength, existing tenant expansion needs, and the land and permits we have in hand. Brent will now speak to several topics including assumptions within our updated 2025 guidance.

Brent Wood, CFO, EastGroup Properties: Good morning. Our second quarter results reflect the terrific execution of our team, the solid overall performance of our operating portfolio, and the continued success of our time-tested strategy. FFO per share for the quarter met the high end of our guidance range at $2.21 per share compared to $2.05 for the same, an increase of 7.8% excluding involuntary conversion gains. From a capital perspective, we took advantage of favorable equity pricing early in the year, which allowed us to enter the quarter with the reserve of outstanding forward equity agreements. During the quarter and after quarter end, we settled all of our outstanding forward equity agreements for gross proceeds of $194 million at an average price of $182 per share. Our guidance for the remainder of the year contemplates that we utilize our credit facilities, which currently have the full $675 million capacity available.

Although capital markets are fluid, our balance sheet remains flexible and strong with near record financial metrics. Our debt to total market capitalization was 14.2%, unadjusted debt to EBITDA ratio 3.0 times, and our interest and fixed charge coverage increased to 16 times. Looking forward, we estimate FFO guidance for the third quarter to be in the range of $2.22 to $2.30 per share with an average month end occupancy range of 95.3% to 96.1%. For the year, we estimate FFO per share in a range of $8.89 to $9.03 with a midpoint up $0.02 per share from our prior guidance. Those midpoints represent increases of 6.1% and 7.3% compared to the prior year. Our revised guidance increases the midpoint for cash same-store NOI growth by 20 basis points to 6.5% and decreases average occupancy by 10 basis points.

The decrease is primarily due to the conversion of a few development projects prior to full occupancy. Considering the slower pace of development leasing, we reduced starts by $35 million. Our tenant collections remain healthy, and we continue to estimate uncollectible rents to be in the 35 to 45 basis point range as a percentage of revenues, slightly ahead of our historic run rate. In closing, we are pleased with the first half of the year, especially considering the continual macroeconomic uncertainty. As we have in both good and uncertain times in the past, we will rely on our financial strength, the experience of our team, and the quality and location of our multi-tenant portfolio to lead us into the future. Now Marshall will make final comments.

Marshall Loeb, President and CEO, EastGroup Properties: Thanks, Brent. We’re pleased with our execution year to date, putting us ahead of original expectations. Our management team has worked through periods of uncertainty before, and we’re navigating our way through this turn as well as regardless of the environment. Our goals are to drive FFO per share growth and raise portfolio quality. If we do those, we’ll continue creating NAV growth for our shareholders. Stepping back from the near term, I like our positioning as our portfolio is benefiting from several long-term positive secular trends such as population migration, near shoring and onshoring trends, evolving logistic chains, and historically lower shallow bay market vacancies. We also have a proven management team with a long-term public track record.

Our portfolio quality in terms of buildings and markets improves each quarter, our balance sheet is stronger than ever, and we’re upgrading our diversity in both our tenant base as well as our geography. We’d now like to open up the call for your questions.

Conference Call Operator: Thank you, ladies and gentlemen. We will now begin the question and answer session. Should you have a question, please press star followed by the number one on your touch tone phone. You will hear a prompt that your hand is being raised. Should you wish to decline from the polling process, please press the star followed by the number two. If you are using a speakerphone, please lift the handset before pressing any keys. Kindly note to please limit your question to one per person. One moment, please, for your first question. Your first question comes from Samir Kanal from BofA. Please go ahead.

Thank you and good morning everybody. I guess Marshall, thank you for the opening commentary. Maybe you can talk about the cadence of leasing through the second quarter and any color you can provide in July as well, the first few weeks here, whether it’s in your core portfolio or the leasing on the development side. Thanks.

Marshall Loeb, President and CEO, EastGroup Properties: Sure. Good morning, Samir. Happy to be helpful. I think really the first quarter and kind of the tail end of last year were really strong, where a market pickup from where a lot of most of 2024 was. I think the tariff news shocked people. People seem to be maybe you get pushback on your heels a little bit and maybe once the shock, combination of the shock going away or more and more tariff agreements like we saw Japan this week, and every day there’s a new rumor about a next tariff agreement or new deadline. I think people are becoming a little bit more numb to it or realizing they have to operate their business. The good news, during second quarter we continued, our portfolio has stayed full.

It’s development leasing, as we mentioned, that’s taken a little bit slop, a little bit longer, a little bit slower. Even if you dug through our development, kind of the leases that are getting signed, it’s the 50,000 ft and below. We’ve signed several development leases month to date. We have seen pickup like a number of a couple of our peers have mentioned. June got a little better. July maybe a little bit better still. It’s been that 30,000 to 50,000 square feet that are coming across the finish line and throughout it. We’ve got a full pipeline, we have prospects for bigger spaces. It is just the decision-making time.

I will add, I guess the other thing that’s been interesting in a negative way this year, I can think about close to a handful of times where we’ve had development leases out for signature where the tenants change their minds. Typically that happens, but it’s happened more frequently this year. The good news, if I pull back, where those prospects haven’t, it’s not like we changed our mind and we went to another building. They put decision-making on hold. We recently had another development lease where they haven’t gone anywhere. We were close to lease signing and corporately it’s a national tenant. They put things on hold, they put a freeze on new leases. It’s been a little bit frustrating with the tariff news. I think people are working there.

I’m blaming it all on tariffs, are working their way through it, and it seems to be the market’s thawing and we’re kind of watching it and we’ll go as fast as the market lets us go. The other kind of thing as we prepare, maybe one thing to note on our developments, we’ll go in and build out. We call it spec office. All of our vacancy has spec office. If things move or people are ready to move quickly, other than a demising wall, potentially we can have tenants in very as quickly as they want to be in. We, and not all of our competition does that. A lot of the private peers and things like that, they’ll tailor the office.

A lot of times you’ll get especially a 3PL or someone that wants to move in quickly, so it can turn quickly, which more quickly than I expected. Late last year I was pleasantly surprised, and it feels like things are getting better. Not dramatically, but gradually better now.

Conference Call Operator: Thank you so much. Your next question comes from Dwayne Hegg from Wells Fargo. Please go ahead.

Great, thanks. Good morning. Just along those same lines, it looks as though you’re expecting a bit more downside to average month-end occupancy in the third quarter. Can you just talk about whether that’s driven mainly by additional underleased development properties coming online during the quarter, or whether there are any other significant factors, and maybe touch on the leasing activity at those projects that are coming into the portfolio with vacancy, and maybe how much of that vacancy is in spaces over 50,000 square feet, which you noted to be a little slower. Yeah.

Brent Wood, CFO, EastGroup Properties: Hey, good morning, this is Brent off to kind of take the first part of that, then let Marshall speak to leasing at the projects. Just add some clarity. You know, we had a few questions post release about a little bit of decrease in occupancy at your same store increase. Help us kind of sync that together. Just want to point out as Marshall, as we mentioned in our prepared comments, development conversions that aren’t full occupancy are factored into that overall portfolio occupancy. For example, third quarter, we put a footnote this time at the bottom of our guidance table showing a guide of 95.7% for the entire portfolio. In the third quarter for same store only, that’s we’re projecting 96.7%. That’s a 100 basis point difference. Again, that’s being impacted. We had a couple of projects second quarter, there are three that converted July 1st.

That’s in that July figure. A few of those aren’t even occupied to the extent they’re leased. We’re still getting tenants in. That had the biggest impact for the last six months. We’re showing same store occupancy running about 90 basis points higher than the portfolio. You saw our midpoint same store increase. That’s a direct attribution to the 60 million square foot operating portfolio doing very, very well. That’s just being mitigated a little bit by the slower development leasing, which I’ll just let Marshall touch kind of on how that’s going at the project level.

Marshall Loeb, President and CEO, EastGroup Properties: Yeah, and thanks, Brent. The only color I would add, if it helps, is typically we’ll say we build, I’ll pick a 120,000 foot building. We may put spec office certainly in one corner of it and maybe on both ends. If someone wants to move in, you’re ready. It really just depends on how many bays in that building you want. We’ll put the demising wall. We’ll build a 120,000 foot building that can probably accommodate up to typically four different tenants. In a stronger market, it’s not uncommon for one tenant to take the full building and then we’re scrambling to deliver and build the next building. They really aren’t designed unless you get to the very end of what space is left.

We can tailor it for whatever you need. I remember someone describing it to me once, it’s a salami and we can cut it as thick or as thin as you want it. We’re kind of waiting for that demand, and as the building plays out, you kind of work your way towards the middle of it.

Conference Call Operator: Thank you so much. Your next question comes from Greg Melman from CIPI. Please go ahead.

Hey, good morning guys. Marshall, maybe just sticking on the topic of leasing, just kind of a two parter here. Number one, earlier in your prepared remarks you had mentioned focusing more on occupancy and just getting deals done. Could you talk about how the mechanisms you’re doing there, is it rent, is it concessions? In what markets maybe are you seeing some elasticity to moving some of the economics around to spur demand? The other part of the question is, you mentioned at the end of last year you were surprised at how quickly the demand could turn on. Earlier to some of the other questions you had said that you’ve been frustrated that some deals are kind of stalling at the finish line.

I’m just curious, as you look at your leasing pipeline, maybe if you could kind of tranch it, like how much of your leasing pipeline is in that really advanced stage to where if people just decide tomorrow to make that decision, how quickly those deals, like what magnitude could start to cross the finish line versus some deals that are kind of earlier in the life cycle.

Marshall Loeb, President and CEO, EastGroup Properties: Hey Craig, good morning. Happy, I guess. Make sure I cover all your points if I miss one. In terms of leasing response, maybe as I think about it, as I mentioned earlier, we’ve had a couple of deals really get to the finish line and get put on hold by corporate or someone in the C-suite at the tenant. The good news is in our developments when we look at them, if you look at what’s transferred over, we’re getting mid sevens in terms of yields on what we’re building and what we’ve transferred over. It’s not that we’re having to drop. Things aren’t stalling over economics, broadly speaking. We’re maintaining or really beating our investment committee yields on projects as they do wrap up. Rents have been a little higher and it’s just taking longer to lease, but thankfully it’s not concessions.

Maybe the exception I would say to that is in California and especially in Los Angeles where we’ve just had 10 consecutive negative quarters of absorption. That market, people are getting pretty aggressive on rent and free rent and things like that. That is one of the buildings where we’ve had leases out a couple of times or more and things stall there. What we try to focus on is before the next political cycle headline comes out and someone at corporate puts the expansion on hold, let’s get comfortable and know kind of where our TI rents work through the legal process. Let’s not get hung up on an eminent domain clause or things that rarely ever come up and have it be legal difficulties. Every deal has a shelf life. You can kill it. Let’s go ahead and try to get things done quickly. It’s not so much.

Our teams and our brokers that work with us know where the market is and if something’s market, let’s try to get it signed quickly. In an up market we heard about people waiting that 60, 90 days later rents were going to be higher. We’re not going to lease up our development. I’ll take the blame. Maybe I was just too chicken. We wanted to get the bird in hand because things can turn pretty quickly. In terms of turning, I was surprised. I kept hearing post election people were waiting for the election and the brokers always have a reason why it’s not leased. It turned out fourth quarter was our record quarter for leasing square footage. Prologis made the same comment. First quarter was our third best quarter in terms of our company’s history in terms of leasing square footage.

I thought there would be more of a lag effect that people would feel comfortable and then leases would get signed. Really, fourth quarter, especially the end of fourth quarter, everybody’s on, you know, the elections, a weekend in November and the second half of December, whether it’s the broker, the attorney, someone at the client is away for the holidays. Understandably, that’s usually a little bit slower. It’s hard to say. I think our pipeline has stayed full last year. It’s pretty full again. We have a number of, a few larger deals that are close. I hate to jinx us closer to the finish line that I’m hopeful of, but we’ve had, you know, I thought we were in the eighth inning and we were back to the first inning.

That’s where it probably got overheated after Covid and now it feels like the pendulum has swung a little bit too far on the corporate concern again. I think tariffs were a shock to people. They wanted to see what was going to happen. Is inflation going to take off? If you think back to last quarter, a lot of the concern was have you stress tested your guidance for the low end? That doesn’t, you know, 90 days later. That’s at least listening to our peers and our call so far. That’s not what’s on people’s minds. I think people are kind of absorbed it and that’s maybe where that June and July has been a little better and I’m optimistic, you know, that maybe August and September are a little better still and we’ll try to again on development starts.

We have the land and we’ll have the permit in hand and really have the same construction groups that we’ve worked with. We can move really quickly or as quickly as the market will let us to break ground on something or by having the space built out if, and we’ve had a few of those where if somebody wants to be in, in 30, 45, we can get you in. We may or may not have a demising wall, but we can a lot of cases put that in around you. I think our pipeline is pretty well spaced out. Normally where some are, we’ve got, we’re trading paper, some are lease out, some are the leases are pretty far advanced. Really where it’s gotten, if you talk to our teams when you get in the red zone is where things seem to move a little bit more elongated.

It’s hey, we have a letter of intent, the attorneys are working through the agreement. I get paranoid if you’re just waiting for that news that corporates put things on hold and we’re back to square one again.

Conference Call Operator: Thank you so much. Your next question comes from Nick Tillman from Baird. Please go ahead.

Good morning. Maybe just wanted to touch a little bit on the transaction activity and maybe some of the yields you’re seeing and characteristics of the Raleigh assets in particular. Also, maybe touch a little bit on the increase in disposition guidance and kind of the assets you’re looking to sell here in the second half of the year.

Marshall Loeb, President and CEO, EastGroup Properties: Sure. Hey, Nick, good morning. It’s Marshall. Yeah, we’re excited. We entered Raleigh last year and we bought that Research Triangle really between Raleigh, Chapel Hill, Durham. It’s a pretty unique feature within that area in terms of the companies that are investing really hundreds of millions and billions of dollars into that research project. There’s very low vacancy in that submarket. We like it. Maybe as we think about where we’re kind of moving our capital, alter our dispositions into this. One trait we like is if you can get a state capital that has a large university presence, that university presence usually leads to technology jobs and higher income. When things turn bad in a market like that, those are great stabilizers. The lows aren’t as low in a market with a state capital and understandably in a university presence, the technology.

You get into topography challenges in a number of those markets. When I say that, you’ve seen us grow in Austin International and now Raleigh, they all end up that way. Because of topography, those markets also end up being pretty elongated. They usually end up going, you know, wherever you can grow. Those markets really get stretched out. We like those attributes and they’re excited about, you know, and we’ve got some older markets that have really, I’d say almost outgrown those traits like Phoenix and Atlanta, where you also have those. Those cities have gotten to be so large. We like that in terms of dispositions and really the capital markets we’re on the Raleigh assets. I’ll blend it and try to be a little bit careful because of our confidentiality agreements.

We’re kind of call it low to mid 5% going in cash and then upper 5% in terms of net effective and really mark to market. They were brand new assets, one delivered in 2023, one in 2024. We’ve not seen cap rates move. We saw development leasing slow a little bit in second quarter because of the tariff news. We thought the acquisition market may get thrown a little bit sideways. To date the competition’s held in there. It’s not a completely green light on acquisitions, but we’re kind of working our way through. We’re always looking at things more strategically or within existing submarkets and things like that.

Maybe because of our stock price and the impact and the cap rates were holding up, you saw us last year, we’ve got some service center buildings that are our last ones, kind of flex buildings in Houston on the market under contract. Fingers crossed those will close. They’re leased. There’s nothing wrong with them. They’re just service centers, not distribution buildings. We sold a small building you saw in the Bay Area that we’d gotten in a portfolio a few years ago, 12,000 ft. We’ve talked about as we add dots within our map like Raleigh and Nashville, some of the older, slower growth markets like a Jackson, New Orleans, and a Fresno, California that I think as we move our investors’ capital around, we’d like to get it in places where we think, one, our acquisitions are immediately accretive and they’re well positioned for long-term NAV growth.

Not that it’s not there in Jackson, New Orleans, and Fresno, but it will grow faster and it’s a good source of capital. When the equity market’s a little bit closed, we viewed that as an attractive source of capital. It’s probably not accretive. What we’re selling is older. We’ll sell it at a slightly higher cap rate than what we’re buying. I think we should always be kind of pruning from the bottom of our portfolio and putting it where that capital has a better opportunity to grow.

Conference Call Operator: Thank you so much. Your next question comes from Alex Goldfarb from Piper Sandler. Please go ahead.

Hey, morning down there, Marshall.

Brent Wood, CFO, EastGroup Properties: As you look over the next 12 to 24.

Months, obviously you guys have benefited as the industry has from the sharp Covid rent run-ups, and you’re still clipping.

I think you said 30% cash rent releasing spreads over the next sort of 12 months. Do you see those, you know, most of your market still?

Remaining pretty healthy on the releasing spreads.

Are we sort of getting to the tail end of that?

Over that time period, we should start seeing a dramatic slowdown in the releasing spreads, and maybe it breaks up geographically. Maybe certain markets are, you’re more concerned about those spreads coming in, tightening sooner versus some of the other markets.

Just looking for some color as.

We look over the next 12 months.

Marshall Loeb, President and CEO, EastGroup Properties: Good morning Alex, a good question and again you’re right, probably each market will be a little bit different on timing, but in essence of time, broadly speaking, you’re right. We are two ways to think about. Yes, we’re working our way through. We’ve still got about 14, 15% of our leases rolling per year, that Covid run up. We’ve still got a fair amount of embedded rent growth that we’re working through, thankfully within our portfolio just by the nature of when our leases roll. If I look out over the next, and this is where you get into where I get danger of economic forecasting, 12 to 24 months.

What I’m excited about for EastGroup Properties and really for the industrial space, but especially where we fit in in the shallow bay, where if I use our quarter end numbers and it’s about where we are today, we’re roughly 3% vacant. If you look, and it’s in our investor presentation about page 10 or 12, there’s about 4% vacancy, and 200,000 square feet and below, the vacancy that’s out there in industrial is in the bigger box on the edge of town, not the infill shallow bays. We’re generally full, our peers are generally full. Construction’s at a 10, 11 year low. It’s going to take a while. We see how hard zoning is, so it wouldn’t take much of a pickup in demand.

I would anticipate in the next 12 to 24 months there’s going to be another period of pretty decent rent growth, where as things pick up, construction pricing, we’re not there yet, but it should pick up as well as the economy improves. It’s going to be a scramble for people to add new product. I’m anticipating demand to pick up much more quickly than supply. We’ll overbuild again, but demand is going to arrive much earlier than supply does. As we work our way through our embedded growth, I’m more of an optimist. I don’t see any secular reasons why. I think industrials just slowed down a little bit because of the headlines. I don’t see any secular reason why people onshoring, nearshoring, population, migration, e-commerce, you name it. Traffic in any of the cities we’re in is bad and getting worse.

Why our infill locations shouldn’t be more valuable. We just need a little bit better headlines for, you know, for a couple of months and I think rent growth will pick up pretty quickly. Short term, we still have embedded growth we’re working our way through, and then a little bit longer term, and I’ve been calling it too early, you know, for the last 12 months. I think there’s not much inventory out there when people come back to the store and are ready to transact. We will be able to push rents and our development pipeline, which we really tailored to what the market’s telling us. We’ve been as high as $400 million. Right now we’re closer to that $200 million level. I would anticipate us getting back to $400 million fairly quickly and that’ll stress Brent and his team out on how we fund all that.

We’ll deal with that when it comes to.

Brent Wood, CFO, EastGroup Properties: Thank you.

Marshall Loeb, President and CEO, EastGroup Properties: Sure.

Conference Call Operator: Thank you so much. Your next question comes from John Kim from BMO Capital Markets. Please go ahead.

Thank you. Maybe a question for Brent. You discussed using the credit facility more and that certainly makes sense. Your debt to EBITDA is below three times now. Can you discuss how you view that the cost of that line in the back half of the year versus your cost of equity, given they seem to be right on top of each other right now?

Brent Wood, CFO, EastGroup Properties: Good morning, John. Yeah, that’s a good observation. It’s something that we really continuously monitor. We’ve monitored more frequently over the last 24 months, you know, different various opportunities to acquire capital in various ways than we have in all the years prior. It’s just been a fluid, you know, the markets are fluid. The 10-year up and down. We were very pleased to enter the second quarter with, we had stockpiled what we viewed as an attractive price in the first quarter and it turned out to be that we virtually liquidated all our outstanding forwards for that $194 million at $182 a share, which we feel like there’s really good execution. Yeah, you’re right. What we projected in the back half of the year at this point is utilizing that revolver, which is around that. It’s variable, but it’s based off SOFR and it’s pretty stable.

It doesn’t move a lot and it moves more in lockstep with rates or rate cuts. We’re around the low fives, like 5.2%. I won’t get too detailed in how we view equity, but, you know, obviously we look at that, commiserate with consensus and relative to our earnings growth and our earnings per share and, you know, it’s been priced below. You saw, we just did a dab this quarter. The pricing pretty immediately went away from us in our view. We had the forward stockpile, so we didn’t need that immediate access. Yeah, we’ve factored in utilizing our revolver. For the first time in a while, we have the full capacity available. That can change as soon as we’ve got a ton of capacity for debt. I mean, we’ve gone sub 3 now on our debt to EBITDA and we’ve had the good fortune of being patient.

If anything comes in line with what we feel like is a better opportunity, we will pull that lever and pivot as needed. It’s good to have all that cushion and it’s good that Marshall and the team continue to find, you know, value creative opportunities for us to need capital. They continue to fund strategic acquisitions. We continue to spend development dollars, albeit at a slower pace than we’d like. We’re pleased that we’re continuing to be able to, you know, access funds that are accretive to our shareholders right out of the gate.

Great, thank you. Yes.

Elon, we’ll take the next question.

I can ask a follow up if we have time.

Sure.

Where do you feel comfortable as far as net debt? EBITDA? I mean, is the lower the better?

You know, I think it’s important as a company to have a policy on the top side. You know, where are you comfortable with sort of your max leverage? We’ve always said on a maximum basis we want it to maintain a five handle and ideally be sub five. We’re obviously well below that. There isn’t necessarily a floor as such. I mean, for us it’s been about being opportunistic and our shareholders have what I would view as kind of rewarded our good stewardship of our capital investment over the last couple of years. We kind of get lost forest for the trees, but we’ve had good access to equity for the most part of the past couple of years in this higher interest rate environment.

By virtue of having that, we’ve driven our debt to EBITDA down more as a byproduct of that function rather than that being a goal. That being said, it would be terrific to unleash that runway in the future when we have better pricing on the debt side and we can push that back up. I guess, John, I’d say it’s important. I think really important to have a ceiling of where your max leverage would be. On the downside, it’s when you have that opportunity to create that flexibility, it’s nice to do it. We certainly put ourselves in that position. Look, if equity rebounds and we can tap into it, we’ll push it lower if that’s the best opportunity. At some point, debt’s going to come. This inversion has been way more elongated than I would have anticipated.

At some point they’re going to, as you mentioned earlier, kind of getting on top of each other. At some point maybe it’ll go the other way and then we’ll cost match or we’ll just select what’s best for us and we’ve got a lot of flexibility to go either way.

Your next question comes from the line of Mike Mueller from J.P. Morgan. Please go ahead.

Marshall Loeb, President and CEO, EastGroup Properties: Yeah, hi. Looks like you controlled about 1,000 acres of land for development at quarter end. And you’ve definitely been adding to that. I guess two questions tied to that. One, are you still expecting to be fairly active over the near term and kind of, you know, further supplementing that? And then are there any parts of the land bank that are more likely to be sitting for a while compared to some other parts of the bank? There might be some. Hey, Mike, it’s Marshall. Good question. Some may be a little, you know, we kind of look really, the reality is, look at it when you think it’s kind of market by market and then especially within our land bank, we can have, you look at a market like Atlanta. We can have land on different sides or different parts of Atlanta. You try to always.

About a third historically of our development leasing is existing tenants. We try to have that inventory handy. We lost a tenant or two in Florida earlier in the year. We really did not have the development where we needed it to be. We backfilled the space thankfully. That’s where you end up with someone in a couple of different buildings and things like that, and that’s not optimal for them. It’s always, it’s incredibly hard to find the land. You’ve seen us, you know, this year buy land. We’ve looked at all kinds of different. One was an office building in Florida that we’re going to demo. It’s usually second generation, different type use. It’s a struggle to find land. Zoning’s gotten harder. We’ve kind of called it the Amazon effect, where everybody wants a package delivered quickly, but no one wants it to originate in their neighborhood.

It’s harder to find good land sites in our markets than I think people realize. We kind of go through what submarkets and I’ll stick with Atlanta. In Atlanta, where in Atlanta do you want to be and how do we have enough land available that we can keep accommodating either our neighbors’ growth or our own tenants’ growth. That’s kind of how we look at it. I’m sure there’ll be some markets like I pick like a San Antonio. We’ve got a good land bank there. It’s not as fast growing market. It’s just not as deep as say a Dallas or Atlanta or a Phoenix or things like that where it’ll take a little bit longer to work our way through it. That said, we’ll mix in different types of buildings and you can work your way through the land fairly quickly.

Then we get stressed of where are we going to find the next land in that market. Got it. Thank you. Sure.

Your next question comes from the line of Michael Carroll from RBC Capital Markets. Please go ahead. Thanks, Marshall. I want to ask a similar question, I guess related to the Raleigh acquisitions. I mean, how aggressive do you want to expand in Raleigh and should we think about these recent acquisitions more of a strategic way for EastGroup Properties to kind of get their foot in the market? You kind of needed to do that before you can start buying land and building new assets in that Raleigh area.

Yeah, no, we like the market. If we find the right opportunity, we’ll grow there. It just worked out, oddly enough, that we had two opportunities and two opportunities all kind of, we picked that Research Triangle Park area. It’s not the only area, but things have turned out our way and we were able to pick up a couple of acquisitions. I think some of it, once you are active in a market, people take you more seriously and they know you’re willing to commit. Maybe if things are close with the balance sheet status, thankfully that we’ve got, people know we’re a legitimate buyer and you might get an award. If we were the same size in Raleigh in two years, that would be okay. We certainly would look for development or even buying vacant buildings, depending where we are in the cycle.

Typically, we’ll enter a market, usually we’ll miss out on the first few bids and we did in Raleigh as well. Then we were able to get our first one last year. It’s a good way to learn the market. When you’ve got a building or two that you’ve acquired, you’ve got some tenants rolling, you’re building those broker relationships. You certainly feel more comfortable bidding on the next new investment, whether that’s a building or land. Certainly, we’ll look for land, but we don’t. Typically, once we’re in a market, I will say, and we’re there in Raleigh with the proximity to be self-managed. Typically, the numbers are about a million square feet. We can go to self-management, which is our preference in terms of managing our own customers there. You just don’t want to go to a market and only have 150,000 ft² five years later.

We really don’t set a timeline. It felt like these more just good fortune fell into place more than, I don’t think we should stretch to say just because we’re there, we need to justify the next acquisition or two because you could end up, we can do it. I just don’t want to overpay for them just to pay a newcomer tax.

Great, thanks.

Sure, you’re welcome.

Your next question comes from the line of Vikram Malhorta from Mizuho. Please ask your question. Morning. Thanks for the question. Marshall, two clarification. One, your peer, one of your larger peers suggested that at current U.S. 7.5% vacancy you probably don’t see market rent growth for another year or so, maybe two years. I’m wondering specifically, can you give us some numbers like what sort of rent growth are you observing in your key markets? Second, they also suggested that tenants are ready to go, ready to sign. They’re much more comfortable with the current degree of uncertainty. They highlighted a very active build to suit pipeline. I’m just trying to get a sense of that versus what you’re observing in your markets. That sort of mid sized box 100,000. Seeing slower decision making. If you can just square those two things. Thanks.

Yeah, no, I can’t. Good morning. To speak for them, I would say we’re nationally maybe that’s about right. Vacancy 7.5% we think it seems to have peaked, and certainly construction and starts have been down for about 10 quarters now, but within our type space, and I’m doing from memory, I think the number is 88% of our revenue comes from tenants 200,000 ft² and below. That vacancy rate is closer to 4% than 7.5%. It historically runs lower, and that’s why we like kind of where we fit on the playground, that there’s not as much competition. The starts were a whole lot less. We think our current rent growth is probably somewhere around inflation, 0% to 5% depending on the market.

It’s hard to pick this year, and I think our rents will, we should benefit in an economic recovery earlier than our peers because our vacancy rate is so much lower. I also have heard people say you want a market to be 5% vacant or lower for it to become a landlord market. We’re already there today, and we’re seeing good steady activity. It’s just smaller spaces. We’re seeing good conversion in smaller spaces, and we’re seeing good activity kind of in all size spaces. It’s just the conversion rate on some of those or the gestation period has gotten a little bit longer like it did last year. That’s where, and on the build to suit, we delivered one earlier this year. We’ll do some of that if we built the bigger buildings. Look, it’s a business where you can make money and things.

It’s really not usually people that want. Our average tenant size is 35,000 ft² in our portfolio. Our average building size is a little under 100,000 ft². We’ll do a pre-lease building every once in a while, but it’s really not our bread and butter. I’m glad for them that they have that opportunity, but those are typically bigger buildings and larger capital decisions. I do agree that I think, kind of moving from April 3 through today, people are getting more comfortable being uncomfortable. That’s probably what some of the comments that June was a little bit better than maybe April and May, and July is holding up, and we think people kind of will get numb to all the volatility and hopefully just get back to running their business. That’s what we internally will typically try to do.

Look, we can’t control the political settings and things like that. We just need to go lease Suncoast building number nine regardless of what’s going on. That’s really what our teams and our company is trying to do. I think things will settle out, and I think in a recovery, knock on wood, I think we’ll benefit more quickly than our peers because the vacancy rates and the starts are low. Those are simply just really, it’s easier to find a big box site on the west side of Phoenix than it is a shallow bay infill site in the east valley of Phoenix.

Thank you, Chair. Your next question comes from the line of Michael Griffin from Evercore. Please ask your question. Thanks. Maybe just going back to the development pipeline for a bit. It seems with your commentary that expectations are for probably a longer lease uptime, just given the uncertainty in decision making there. Can you give us a sense when these projects were initially underwritten, was it under the premise of getting some of those larger 50,000 square foot tenants that just aren’t back yet? Could you try to maybe find more of those 20 to 40,000 square foot tenants to make up the difference? Do you really need those larger space takers to come back to start that development pipeline engine rolling?

Yeah. Hey Michael, good morning. It’s Marshall. You know, even we’ll always underwrite the project and assume a 12 month lease up, and that’s when they’ll roll into the portfolio, the sooner of 90% occupancy or 12 months after completion. At the peak of the market, the early kind of 2000s, that was about a six or seven month period we were running through, and those bigger tenants were taking space, and that was really what was pulling the next landslide off the shelf. We were rolling through it pretty quickly. The good news, even though kind of last year and this kind of recent time period of this year, we kidded, we said we’ve gone from 6 to 16 months of lease up. The good news is we’ve been able to maintain or even improve our yields over that time period.

It’s just the buildings aren’t, they’re not, they’re designed to be multi tenant, and we’re, yeah, you’re filling them up with 30,000 foot tenants, which is, which works. It just takes longer to get that done than if somebody had taken 90,000 ft. I don’t think it’s any kind of permanent change. It’s just those are, when you think about it, bigger capital decisions for a company. It’s not just with the 90,000 ft you’re taking, you’re probably also at either you’re starting a new business or a lot of them expanding your business maybe from 50,000 ft. That’s a lot more equipment they’re buying and hiring and things like that, so that’s where people are being maybe a little bit cautious in this environment. Given the headlines, it’s taking on those bigger spaces.

You could take on 30 or 40,000 square feet, and it’s not as big a capital investment as taking on the bigger spaces. I expect that to shift back to a more, you know, if the pendulum will swing, it’ll be a more normalized environment. Until it does, that’s what slowed our development leasing. I’ll compliment the team. That’s why you’ve seen us bring our starts down both quarters. Each time we’ve reported each quarter this year, we’ll go fast or slow, and it’s really listening to what the market will tell you. You’ve seen us buy vacant buildings when our own development pipeline was moving quickly, and that’s not something we’ve been looking at of late, just because we’re not seeing people at least on a bigger scale be comfortable making those big decisions quite yet.

That’s why build to suit is such a high percentage of the starts right now too, as people can’t find that inventory and are having to build it.

Great, thanks so much.

You’re welcome.

Your next question comes from the line of Vince Thimon from Green Street. Please ask your question.

Hi, good morning.

You mentioned earlier that you potentially consider taking on leasing risk with acquisitions. Are there many value add opportunities on the market today? Curious to hear how leasing risk is being priced in the private market versus a more stabilized asset. What kind of yield premium can you get, you know, to lease a vacant building versus, you know, like a Raleigh where you, you know, there’s durable income on day one.

Hey Vance, good morning. It’s Marshall. I apologize if I misspoke earlier. We’ve really shied away from, I guess we call it leasing risk or value add. We’ll shift back to it when kind of the new leasing expansions are happening a little more rapidly. Earlier this week we looked at something that was in an existing submarket. We know the seller said there’s really only one thing wrong with the building before we really even got into pricing. It’s just not what we’re looking for. You see a scaling around development pipeline back to take on someone else’s development pipeline right now. We’ve not seriously gotten into those questions, but it’s a little bit alchemy. I don’t know where we would shift to where that would look attractive. It’s probably a good, you know, we usually say 150 basis points over a market cap rate to justify new developments.

To maybe take on a value add where the building’s built and we’re taking the leasing on, 75, 100 basis points, something like that. We really have not seriously looked at anything. We’ve seen locations we like and buildings we like. Right now it’s because it’s taking that 16 month period rather than six. We’d rather go buy what we’re able to buy in the market with its lease that’s new with below market rents. We think that’s a better risk reward proposition and that’ll change in a couple of months. That’s kind of how we see it today.

Makes sense. I appreciate the clarification and color. Thank you.

Sure. Thanks, Vince.

Your next question is from the line of Ronald Camden from Morgan Stanley. Please go ahead. Hey, just really quickly, a two parter, just one starting with Southern California. I know you guys don’t have as much exposure as your peers, but would just sort of love to hear what you’re hearing on the ground in terms of activity, in terms of the 3PL, and you know, when you think about sort of that cash re-leasing spread, is this a market where, you know, we should be sort of bracing for things to slow down pretty quickly. My quick follow up to the opening comments, which were that, you know, the development pipeline leasing has slowed, which makes sense. I guess my question is what’s going to sort of, is there a specific catalyst? Is it an election?

Is it the last trade deal announced that’s going to get that to unlock? Or is this just time used to go by and we need to see how it goes. Thanks. Yeah.

Hey Ron, good morning. I think on Southern California it’s more unique than markets I’ve seen after having done this for a while. Usually what slows the market down is oversupply, and it’s not oversupply. Maybe in Covid all the 3PLs took really false, created some false demand, and that bubble’s popped. For 10 consecutive quarters of negative absorption, and it was over a million square feet. Louisiana Inland Empire was also negative absorption. We just need something to turn there, and until it turns, from our perspective it’s hard to predict market rents until you have at least kind of flat absorption. I think when there’s negative demand in the market, we’re spoiled and just not used to that. I think Dallas has had close to 60 consecutive quarters of positive absorption.

I just read where Austin had its, it wasn’t a big number, but its 44th quarter, consecutive quarter of positive absorption. The Bay Area has been negative seven of the last nine quarters. LA is 10 and counting. We’ll see what this quarter holds. I know port demand’s down and things like that. We’re working hard to release the building that we’re redeveloping there that we’ve owned. We’ve also tried throwing out a bigger net of saying, look, we’re willing to lease it or at the right price, we’ll sell the building too if a user comes along or someone wants to. It’s just been a more tricky market there especially to see. In terms of what turns, I guess to me I thought this kind of period of uncertainty was all man made with tariffs.

I’m assuming it’s kind of some numbness to tariff news, which I think is where we’re getting to, or kind of each week there’s maybe a new trade agreement reached. I think China seems to be the big one once you get there, and people kind of know what that certainty is. As Brent mentioned, at least the big beautiful bill is done, so at least there’s some tax certainty for people to plan. There’s Japan certainty now. I think at some point you’ll reach more of a tipping point where people cumulatively decide it’s safe to get in the water again. When that happens, that’s where I get excited about our low vacancy and the low vacancy.

I think given how long this downturn has taken, not all, but a number of our private developer peers, it’s going to take them a while to accumulate the land, get their capital stack ready, get their construction teams either rehired or re-engaged. We’ll have a good head start on a number of our peers because we already have those elements in place. I’m estimating what that catalyst is. I’ll admit I’ve called it, you know, I’ve been an economist calling for the economy to go up the wrong way for a while now. Eventually I’ll be right and I’ll stick with it. I think it’ll be as people get comfortable with tariff news.

Great, thanks so much.

Conference Call Operator: Sure.

Marshall Loeb, President and CEO, EastGroup Properties: Thanks, Ron.

Your next question is from the line of Brendan Lynch from Barclays, please ask your question. Great, thanks for taking my question. It sounds like most of your tenants are working through the macro challenges reasonably well. Can you give us an update on your watch list and how you’re tracking versus your bad debt assumptions for the year?

Brent Wood, CFO, EastGroup Properties: Yeah, sure, Brendan. Yeah, we continue our tenancy continues to be in good health. We’ve seen basically quarter over quarter the same number of tenants kind of on the active watch list. We were about 30 basis points of bad debt in second quarter to revenue. We’re still trending lower than last year. We were a bit ahead of budget for the quarter relative to just the bad debt number, spot number for second quarter. We’re still looking at that 35 to 45 basis points of revenue kind of being the run rate we’re using in the last six month guide. I think the key number there is we didn’t see, like I said, we didn’t see our number of tenant watch grow quarter over quarter. You’re talking maybe somewhere in the range of 30 out of over 1,500 tenants or so.

The common thread that we’ve been talking about for a while, it’s down a little bit from last year, but California is still pretty much through six months of the year, California based tenants representing about half of the bad debt so far. It’s still the actual bad debt still being contained. A pretty small number of tenants. I mean the bad debt of what was it, $509,000 for the second quarter, 93% of that was just contained within five tenants. Few tenants having the impact. All in all we’re very pleased with where that is and nothing outside the norm. Norm’s really jumping out at us there, thankfully.

Great, thank you. Next question is from the line of Ki Bin Kim from Truist. Please go ahead. Good morning. Thank you for taking my question. Just a couple follow ups here on the balance sheet with your leverage where it is. I was curious, Brent, besides the math working out such that the cost of equity is not too far off near term versus the cost of debt, are there any other kind of major considerations that would kind of make you lean towards maintaining a three times lever balance sheet?

You know, Kevin, it’s something we just have to weigh. I mean, we certainly, if all things being equal, if debt’s more attractive to us in our evaluation at any given moment relative to equity, we’re certainly willing to have that number come up. In fact, we look forward to that coming up, meaning we’re raising capital for the team to put to work. We’re just continuing to monitor, keep it. I’m pleased that they’re tracking closer to one another. It’s good to have more options than fewer. Seeing that come in line, more in line, it’s something we’re doing and we look at all different avenues. We were looking at private placement, public debt, unsecured term loans, equity, the revolver, all different facets that we can keep track of. We do keep track of. Like I say, there’s no magic in being near around that three.

We certainly would grow, be comfortable raising that if given the opportunity, if all things being equal. We’ve had a rule of thumb that’s worked well that when equity is available, if you like it, you get it. You’d rather get it when it’s available and not put yourself in a situation where you’ve got to do something. We’re very, very pleased that operating the balance sheet that way has given us a lot of flexibility. We’ll still kind of continue to look at it through those lens.

Okay. This last one for Marshall, I guess any just high level views. Broad question on the bid ask spreads for acquisitions. Do you feel like overall you’re getting paid for risk, and are those spreads, bid ask spread, tightening to a reasonable level?

Marshall Loeb, President and CEO, EastGroup Properties: Hey, Keena. Brent, good morning. No, I think we said there was a period of time where it felt like acquisitions were favorable in terms of the buyer versus the seller, where we were getting the call where something didn’t close and are you still interested? That’s what led us to implement Brent and the team, the forward equity and things like that. We were pretty active. It feels like the acquisition market now has gotten pretty efficient and there’s a number of bidders. I think the private bidders, certainly when you’re running an IRR, they probably look through the tariff news and cap rates have not really moved since April and in fact may have even gone down a little bit. It’s hard to say exactly, it feels a little bit tighter. That was part of our comfort level of raising our disposition guidance.

Also, I mentioned earlier we would consider selling our Dominguez building in LA that’s under development. That’s not in our guidance. If we sold it, it would be on top of that. Because the acquisition market or the disposition market’s been pretty attractive, we view that we like where our balance sheet is, but it’s also a good source of capital if we can find the right strategic investments, whether they be an acquisition or development today.

Okay, thank you. Sure.

You’re welcome.

Ladies and gentlemen, as a reminder, if you would like to ask a question, please press star followed by the number one on your touch-tone phone. If you are using a speakerphone, please make sure to lift your handset before pressing any keys. Your next question comes from the line of Blaine Heck from Wells Fargo. Please go ahead. Great. Thanks for hanging in there and taking the follow-up here. Early on in the call you kind of mentioned a few development leases being signed in July. Just wondering if there’s any way you can quantify that leasing progress you’ve made after the quarter or even put it in the context of how much of your FFO guidance is dependent on additional leasing at this point. I think last quarter you mentioned $0.05 to $0.06.

Yeah, thankfully we’re down. Brent, chime in. I think we’re down. Look, we’ve got a lot of development leasing we’re working on currently. In terms of that nickel, maybe when we were together in Charleston, that’s down to about a penny at this point. Within our, call it, our $0.896 of FFO, we’ve got about $0.01 of development leasing still to go. Thankfully that number’s come down. We could, depending on how the rest of the year plays out, end up having upside to that, I hope, in terms of leasing. Since quarter end, it’s around, you know, they’re probably three leases and probably around, you know, they’re all again kind of smaller, that 100,000 ft in total.

Great, perfect. Thanks so much, Marshall.

You’re welcome. Thanks, Mike.

Your last question is from the line of Omukayo Okutsamia from Deutsche Bank. Please ask your question. Yes, thanks for taking my question. Just curious, in terms of the full year occupancy guided and back half of 2025 if there’s any significant move out there built into guidance.

Along those lines, if you could.

Talk a little bit just about the overall tenant watch list, especially maybe some of the retail distributions on it.

Brent Wood, CFO, EastGroup Properties: Yeah, I’ll take that. Amateo, good to talk to you. Yeah, there’s not, thankfully, any significant move outs dialed into the back half of the year. As I mentioned earlier, the actual same-store portfolio is running about anywhere from 80 to 100 basis points higher than the overall portfolio forecasted average for the last six months. That’s being driven by the conversion of developments prior to being fully occupied, weighing down on the overall portfolio average. There’s no known move outs. We’ve got our remaining rollover for the year down to a pretty de minimis amount. I think we’re down in the 4% range or something like that for the year. That part of it feels good. The operating portfolio, you know, we up the midpoint. All of that feels well. I’m trying to remember what was your second part or second part of the question, Matteo.

Your tenant watch list, especially maybe anything on the retail front.

The watch list remains steady, and if there’s any common theme within it, it would be a bit 3PL oriented, a bit California oriented. We’re running below the run rate last year, and we’re still using that. We’re only 30 basis points second quarter. We’re using about a 35 to 45 basis point run rate for the last 6 months of the year, and we hope that proves to be conservative. Time will tell. No specific retail type tenants or anything like that have jumped out to us. It’s been more broader based than that, other than just maybe the California based tenancy. Yeah, hope that’s helpful.

That’s helpful. Okay, one quick one. What was total leasing development in square feet in 2Q? I can’t seem to find that number in the press release or the sub relative to the 414,000 from last quarter.

Yeah, we had five leases signed during the quarter. I’m looking at the numbers, but I don’t have a back quarter total breakdown. We can email that to you offline.

Marshall Loeb, President and CEO, EastGroup Properties: I think it was around 180,000 ft² and just in 2Q. Let’s confirm that. Tao, it’s right around that range. I believe so. Again, thank you. Smaller deals coming across, larger deals floating. You’re welcome.

There are no further questions at this time. I’d like to turn the call over to Mr. Marshall Loeb for closing comments. Sir, please go ahead.

Everyone, thank you for your time and your interest in EastGroup Properties this morning. I hope we got to your question. If not, or if there’s follow-up questions, Brent and I are certainly available and look forward to speaking with you again soon. Take care. Thank you.

This concludes today’s conference call. Thank you very much for your participation. You may now disconnect.

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