EastGroup Properties at Citi Conference: Strategic Positioning in Sunbelt Markets

On Tuesday, March 4, 2025, EastGroup Properties (NYSE: EGP) presented at Citi’s 30th Annual Global Property CEO Conference, outlining its strategic focus on last-mile industrial properties in the Sunbelt region. CEO Marshall Loeb highlighted the company’s strong leasing performance and market positioning, while also addressing potential economic challenges such as tariffs and interest rate uncertainties.

Key Takeaways

• EastGroup Properties is 97.1% leased with a focus on shallow bay, last-mile industrial properties in fast-growing Sunbelt markets.
• The company signed 1,438,000 square feet of new and renewal leases with significant rental rate increases.
• EastGroup is optimistic about future growth but remains cautious due to potential economic headwinds.
• The company plans to leverage capital markets opportunities and maintain a flexible balance sheet.

Financial Results

• Occupancy: 97.1% leased and 95.8% occupied as of February 27, 2025.
• Rental Rate Increases: Achieved 45.0% increase on a straight-line basis and 30.9% on a cash basis for new leases.
• Forward Equity Sales: Entered agreements for 611,956 shares at an average price of $180.27, raising approximately $110 million.
• Settled Forward Equity Sales: Issued 214,138 shares for net proceeds of approximately $37 million.
• Dividend: Declared a cash dividend of $1.40 per share in Q4 2024.
• Same Store NOI: Projects a 5.5% increase for the industrial group.

Operational Updates

• Leasing Activity: Increased demand post-election, with development leases in Atlanta totaling 150,000 square feet.
• Conn’s Lease: Secured a 20% rental rate increase for a 300,000 square foot lease in Charlotte.
• Florida and Jacksonville: Signed 18 renewals or expansions in Florida; full occupancy in Jacksonville, seeking more land.
• Starship Vacancy: Plans to re-lease or redevelop a 450,000 square foot space in South Bay, Los Angeles.

Future Outlook

• Occupancy Growth: Anticipates upward pressure on occupancy and rents due to limited supply.
• Development Pipeline: Expects an increase in the lease-up pipeline under construction.
• Capital Markets Strategy: Prepared to act on opportunities amidst interest rate and stock market uncertainties.
• Acquisition and Disposition Strategy: Willing to sell weaker assets to reinvest in high-growth markets like Nashville.

Q&A Highlights

• Election Impact: Noted an uptick in leasing activity attributed to reduced policy uncertainty.
• Tariff Concerns: Minimal direct impact observed, but potential risks acknowledged, especially in border markets.
• Construction Costs: Decreased by 10% to 15% due to reduced supply and increased contractor competition.
• Labor Costs: No significant impact yet, but real estate seen as a hedge against inflation.

In conclusion, EastGroup Properties remains strategically positioned for growth in the Sunbelt region, balancing optimism with caution amid potential economic challenges. For a detailed discussion, please refer to the full transcript.

Full transcript - Citi’s 30th Annual Global Property CEO Conference 2025:

Craig Mailman, Analyst, Citi Research: Good morning, everyone. Welcome to Citi’s twenty twenty five Global Property CEO Conference. I’m Craig Mailman with Citi Research, and we’re pleased to have those EastGroup properties and CEO Marshall Loeb.

This session is for Citi clients only, and disclosures have been made available at the corporate access desk. To ask a question, you can raise your hand or go to liveqa.com, enter code GPC25. Just the big questions. Marshall, we’ll turn it over to you to introduce your company, your team, provide any opening remarks, tell the audience the top reasons investors should buy your stock today, and then we can get to q and a.

Marshall Loeb, CEO, EastGroup Properties: Okay. Great. Good morning, Craig. Thanks. Good morning, everyone.

Thanks for your time. Happy to try to get to anyone’s questions. If there’s anything we don’t cover today, feel free to reach out. With me today, kind of starting to my far right, Todd Johnson. Todd runs our Florida operations.

John Coleman, some of you probably know. We’re divided into three regions. We can maybe later talk about our structures a little different than our peers, but John is really responsible for everything that happens from The Carolinas down to here, down to Miami, and then Casey Edgecomb, who is over our investor relations. So in terms of EastGroup, if I paint with a broad brush, we’re a shallow bay, last mile industrial owner and developer. Our footprint are the fast growing markets and that people will say the smile states.

So we’re California, Nevada, Arizona, Texas through Georgia, Florida, and the Carolinas. So really where the population in The US has been moving for a number of decades, and we’re in the major cities in in each of those states is probably our is where our footprint falls. And and as I say, we’ve been Shallow Bay last mile. We’ve been in those markets for twenty, thirty years, most of them. When my reasoning for about why you should buy EastGroup, what I would say a couple of things would be, one, when you look at our track record over that, pick a time period, five years, ten years, twenty years, if we’re not if our and we have some very good peers and a lot have merged over the years.

If we’re not the highest industrial return, we’re going to be in the top two or three. So we have a very I’m proud of the track record the company has built over the years within the industrial space. We have a very good track record. Along with that, when you look at some of the industrial REITs, we during that time, we’ve had a lot of tenure. So it’s the same team.

Todd has twenty five years in the we’ve been a public company since the eighties. Todd is twenty five years. John is thirty years. The vast majority of that twenty plus years with EastGroup. I started as a summer intern at EastGroup, have over thirty years.

I know. I know. It’s hard to believe when you look at me right there. I can’t be that old. So I’ve got over thirty years of public read experience, and Casey’s is measured in months.

But our senior team has has been with us. So we’ve been through I know we’ve gotten questions this morning about tariffs and the election, and there’s always, you know, Greek debt. We’ve been through the GFC. We’ve been through COVID. So to me, the fact that we’ve been able to put up the track record we have, we have tenure within the team that has dealt with, there’s always some black swan event, and we’ve been able to work our way through it with a time tested strategy.

I do think, you know, probably every year I’ve thought this is a unique time, but my pitch as to why you should like EastGroup today in that shallow base space. I’ll admit industrial supply got out ahead of demand because things were great for several years, got out ahead. But when you look at spaces our size, our average tenant size is 35,000 feet. Our average building size is 95,000 feet, and about 88 of our rents come from tenants under 150,000 feet. So if you kind of take that that spot, we just put out our operating update ahead of the conference.

We’re we’re 3% vacant. We were 97.1% leased. 100,000 feet and below nationally is only 4% vacant and supply is at an eight year low. So what I like again, the it’s real estate. It’s a cyclical business.

The pendulum swings the other way. We would say demand has picked up, And a lot of our peers, the people that were building what we build, the big companies, it’s hard. Our average development is maybe a you know, call it 120,000, one hundred and 40 thousand foot building, maybe $15,000,000 People, it’s easier to go to the edge of town they need to to put the kind of capital out to go build big boxes. Not many people build Shallow Bay. A lot of the ones that were building what we built, were local regional developers.

They’ve been on the sidelines and really be restarting their business. So as things turn, there’s we’re 3% vacant. The market’s 4% vacant. There’s not much supply there. We’re expecting there to be a push upward push on occupancy, even though it’s pretty good today, which will lead next to an upward push on rents.

And then with all of our so many of our peers being sidelined for a couple of years because of the capital markets, we’ll be one of the first developers out there. The competition will catch up, but we think we’ll have a couple of years given how long it takes to get through zoning, permitting, acquire the land, and really have our peers be up and running.

Craig Mailman, Analyst, Citi Research: Perfect. Thanks, Marshall. Kind of curious, does the messaging change today versus what it was yesterday given what went into effect? Or is it the uncertainty just too hard to handicap? And as you pointed out, your tenant segment and space segment is trending well ahead of the overall national average.

And so you’re kind of not expecting to see as much potential impact.

Marshall Loeb, CEO, EastGroup Properties: I mean, I guess, a good question and probably several part answer to it. I mean, with all the uncertainty and the tariffs, we really if you said, what do we look for in a site? And and this hasn’t changed. We wanna be where I mentioned where the population’s going in fast growing markets, and we also wanna be as close to the end consumer. That’s what we’ve like, if I use a couple of markets like Jacksonville and Houston, which are two of our markets, we’ve been there for over thirty years, but we’re nowhere near the Port Of Jacksonville or the Port Of Houston because we think that because of tariffs and East Coast port strikes, West Coast port strikes, the amount of the water level in the Panama Canal, that’s really volatile and hard to predict.

I feel pretty good if you pick one of our markets, Atlanta, Austin, Texas, Phoenix, that there’s there are gonna be more people there in five or ten years because there’s more people than were there from five or ten years ago. And so that demand, wherever the product comes from, is going to continually grow. So it does reinforce maybe it doesn’t change our thinking, but reinforces, look, we’ve probably missed opportunities at the ports of Jacksonville and Houston, but that’s a different animal than what we do. I think our tenants our tenants serve the local metro area. We’ll look at the GDP in our metro area.

And if you market weighted our portfolio versus the national average over the last five years and ten years, it’s about the same, but our the the GDP is about 60% faster than the national average. Look. Austin’s growing faster. Dallas, Tampa, you name it. Those markets, are in they’re servicing their local market.

They still have to source that product, so there’ll be some ripple effects. But I’m that makes us wanna be reinforce that sticky end consumer demand to date. And I know it’s just as of yesterday, but since the election, I can think of only a couple of instances where I’ve heard of our tenants missing tariffs. One was in LA, in South Bay LA, so I get it. You’re so close to we’re near the Port Of Long Beach and LA, so I get that one.

And then another one where prospect moved away, but we really it’s the discussion level in our meetings on tariffs to date has been here, and the the actual impact has been much lower than that.

Craig Mailman, Analyst, Citi Research: Appreciate that.

Marshall Loeb, CEO, EastGroup Properties: Can I add, Craig, one other thought I should? Keep going. Also, given that given that headline risk, we’ve said if we have the right needs because the market look, I feel confident our earnings are going up this year. I’m less confident about where interest rates, stock market, things like that, that when the when we have the needs and we have to have those first, we should move quickly on the capital markets because that window could close pretty quickly based on headlines day to day. We’re not going to do anything rash, but our confidence level don’t get complacent on that the availability of debt or the availability of equity.

Craig Mailman, Analyst, Citi Research: Okay. That was definitely helpful. And you brought up the operating update you guys put out, and you’re 97.1% occupied. So talk about the volume of leases you’ve seen even post earnings, which I assume included the Conn’s lease, right, because you didn’t talk about that on the call. So that was a great backfill.

Maybe also talk about how Starship, the backfill of that kind of is going and the timing on that.

Marshall Loeb, CEO, EastGroup Properties: Why not? I’ll talk Starship and then I’ll let since John did the cons lease, I’ll let John speak on that. And then maybe Todd, just Just in terms of demand, Starship, as I mentioned, we’ve got thankfully, we’ve only got one vacancy in LA, but to us, it’s a big one. And we had as I mentioned, our tenant sizes, we had a perfect storm in a negative way. We’ve got 20 tenants that are over 200,000 feet, but two of those went bankrupt in fourth quarter.

One Asian ’3 PL near the Port Of LA, Long Beach. It’s an asset we’ve owned since the mid nineties. It’s always been full. That market, looking at the options that we have, there’s a lot of options. If you’re if I were your tenant rep broker and you said, let’s go look at options in the South Bay between 450,000 feet, there’s probably 20 options out there, which is a record that I can remember.

I was the original asset manager on this asset. So I can remember South Bay. There hasn’t been land. You’re just South of downtown near the Port Of L. A, Long Beach, where Carson, there hasn’t been land there in decades.

So for it to have that many options of vacancy, I would have argued historically, it’s maybe the best submarket we’ve had in our company or one of the best. We’ve we’ve had prospects. We’ve even been lease out on the space, but that is one of the ones where tariffs comes up in conversation. So it’s we’ll see. We’ll get it released.

I’m comfortable on that. It’s not a long term problem. The building’s been leased 99% of the time we’ve owned it. It’s been leased to the point that we’ll actually you’ll see it in our redevelopment most likely and that we it doesn’t have ESFR sprinkling. We need to redo the office, some things like that.

So it’ll be, now that it’s finally vacant, we’ll have a chance to do some redevelopment and we’ll get at least we’ve been close. We were going to do it a few years ago and it got leased before someone came along and said, I’ll pay the rent without the redevelopment. That was Starship, so we did that deal and then they went out of business. So we’ll try it again. And then the other large bankruptcy was 300,000 feet in Charlotte.

And I’ll let John maybe speak to the success on it.

John Coleman, EVP, Head of Eastern Regional, EastGroup Properties: Great. Thanks, Marshall. Taking a step back, we look at the demand. And post election, we saw a noticeable increase in demand in our markets, which was great, but we were cautious. Well, let’s see if we can then convert that demand into signed leases.

A prospect for the cons space was part of that increased demand. And then we were

Craig Mailman, Analyst, Citi Research: successful in February converting cons into a 300,000

John Coleman, EVP, Head of Eastern Regional, EastGroup Properties: square foot lease of the also able to get that occupancy sooner. So we’re looking at an occupancy in this space by the March. That helped our Charlotte occupancy or percentage lease go from 92% to 98%. So good win with cons, quick backfill, 20% approximate 20% GAAP rental rate growth. But we also saw some productive development leasing as part of this new activity in February.

There were three spaces in Atlanta that we leased development spaces in Atlanta leased for a total of 150,000 square feet. So again, another example where we saw that new activity getting converted into signed leases and still have some additional activity that we hope to get signed up in the first quarter in Atlanta and in Charlotte. And then Todd can maybe speak to some of the activity he’s seen on the demand side in Florida.

Todd Johnson, Senior Vice President, EastGroup Properties: Sure. So in Florida, second, third quarter was pretty slow last year, but we did notice for whatever reason when the elections came around after they’re completed, between Thanksgiving and Christmas, when you’re usually slow, we were about as busy as we had been. And we’re seeing those convert. You know, people that were tire kicking and window shopping during that time, over the last the December of last year are starting to materialize into leases. In Florida, we alone, we’ve signed 18 renewals or expansions in Florida, and we’re very close on five new development leases in Florida.

Marshall Loeb, CEO, EastGroup Properties: So we’re happy, Craig. I mean, we mentioned on our call, you know, green shoots, that it felt like and look, and I thought it would come earlier. I’ll admit, I thought it was coming earlier than it is. And a hundred days isn’t a long or whatever the time period, a long term trend since mid November to today. But, you know, at first, we were like, okay.

We we had our most productive leasing quarter and fourth quarter that we’ve had in our company’s history, and And then it was interesting to hear Prologis say the same thing. It was a nice confirmation of kind of what’s going on. They had the same statistic in theirs. And you we’ve we’ve thought, is this a pull forward? And is the wave you know, is it gonna ebb and flow?

Is it gonna But knock on wood, to date, we’ve been able to convert a number of those leases. And there’s been, as as Todd mentioned, still another I hope by the time we report first quarter, some of those will convert into development leases and will continue to fill the portfolio. And if it if it does, that that would give us the opportunity. We’re not there, but hopefully, development leasing occurs a little bit earlier in the year. And then as we build out our parks or campus settings, what that does is pull forward that next start.

So that’s where I mentioned earlier, we get excited about starts. It’s as soon as tenants start to expand or want space, we’ll build out a park and as many phases as the land will allow rather than build it all at once. And about a third of our development leasing has historically been expansion. So we feel like we’re on the early end of that. And I look, I hope a hundred days from now, I feel as good as we do.

January was a little bit better. Again, the budget was brand new, so it’s hard to be hopefully, you’re not off too much. We felt a little bit better in January than budget. The the gap got a little bit bigger in February. We still got ten months of the year, so who knows what can happen.

But year to date, I’d say we feel better than we did as a about the leasing environment than we did to start the year.

Craig Mailman, Analyst, Citi Research: No, that’s great. I have a couple follow ups following those comments. I mean, as we think about the Conn’s lease with the March kind of March commencement date at a 20% gap, I don’t know what it is on cash, but probably somewhere 10% to 15% ish.

John Coleman, EVP, Head of Eastern Regional, EastGroup Properties: It’s a seven year lease, so yes, probably in that 10% to 15%.

Craig Mailman, Analyst, Citi Research: I mean, what was dialed into guidance on the backfill of that? Like how much sooner is that than what you guys had thought?

John Coleman, EVP, Head of Eastern Regional, EastGroup Properties: So when we did our budget for 2025, we had budgeted for we’re actually going to split the space into two spaces. It’s a front load building, so we’re going to do two one hundred and fifty thousand square foot leases. One was in the third quarter and fourth quarter. So that really accelerated the schedule with and then the full building lease.

Craig Mailman, Analyst, Citi Research: Oh, wow. All right. And then, Todd, you had kind of mentioned some Florida leasing in the development pipeline. I’m just looking at the schedule here. I know you got some space in Fort Myers.

You got some space in Miami, Orlando. Like where are you seeing the pickup in activity around the vacancy that you have?

Todd Johnson, Senior Vice President, EastGroup Properties: So hopefully, I’ll have half of the vacancy in Fort Myers leased by the March. So good activity there. Orlando, the, we have two buildings, that have completed our Horizons West development. We have 40,000 square feet in Horizon 6 and just delivered Horizons 5 in December. And I expect to have the remainder of Horizon 6 leased up also this month as well.

We’re seeing good activity throughout Orlando. There’s been a lot of product delivered in the Fort Myers area. So that’s probably impacted our leasing efforts there, just the amount of product that’s come on board.

Marshall Loeb, CEO, EastGroup Properties: So it’s good news. I guess I’d say, Todd, I’m putting words in your spot. But it’s been throughout, you know, Central Florida really strong, South Florida strong. And I look in Jacksonville, we’d like we we need land in Jacksonville. We’re pretty full in Jacksonville.

We’ve even to accommodate growth, we’ve lost a tenant trying to accommodate growth. So that’s partially why land having ideally contiguous land is so important. But from my seat, I like that it’s been pretty consistent. It’s not a Tampa’s really doing well. It’s been all of Todd’s markets and and all of John’s region a little bit pretty throughout the company, maybe absent California, where it feels like activity has picked up.

Craig Mailman, Analyst, Citi Research: And you had also mentioned Atlanta. How much space are you talking about getting leased there?

John Coleman, EVP, Head of Eastern Regional, EastGroup Properties: We had three leases signed in February. So they’re and they were all development leasing. So development leases, that was 150,000 square feet. And then I have a pending lease similar to Todd in Atlanta and then also in Charlotte for another 120,000 square feet. Not signed, but hopeful to have those done in March also.

Craig Mailman, Analyst, Citi Research: All right. So I know when I look last quarter, the lease up pipeline under construction, the pre leasing was a little bit slower. It sounds like as we stand here today, the lease up pipeline is going to go from 20 to something much higher.

Marshall Loeb, CEO, EastGroup Properties: Yes. Hang on. I guess I hope you’re right. Maybe I’m a two or three part answer. I hope you’re right.

I will say I worry a whole lot less about leases going out than I do leases coming back. So, you know, look, we could get emails or calls this afternoon. Look, I’m happy the team is where we are, but but don’t raise our guidance just yet. I mean, look, a lot of times people change their mind as you, you know, as you alluded to earlier, headline risk is pretty great right now. So look, we feel better, and I’m glad we’ve gotten the leases signed that we have a good timing to have our update come out Friday.

I’m excited about the lease activity we have in the portfolio. It it feels like the needles the nose of the plane’s pointing up more than down, but we need to get them back in and signed. And and we’ll look we’ll be the first of you’ll be the you’ll hear me yell when they come in and things like that. But until they’re signed by the tenant, it’s it’s just paper for now. But but we’re optimistic.

So I’m I’m you know, people and I always feel better when they start indemnifying us for tenant improvements or hiring a third party attorney and things like that. People don’t like wasting their money. Again, corporations can have a change in a meeting, but you feel better when someone starts spending money and they’re doing space plans and things like that. So knock on wood, we feel good, but don’t don’t count it just yet.

Craig Mailman, Analyst, Citi Research: Just tell Brent the risk of not coming to conferences is means you have to

Marshall Loeb, CEO, EastGroup Properties: raise numbers and get back. I’ll tie you down. I’m I’m a confess. I’m a lifelong Saints New Orleans Saints fans. I’ve seen enough fourth quarter losses in my life, so we’re good.

Those things happen.

Craig Mailman, Analyst, Citi Research: I’m a Jets fan. Trust me. I have a little lower than that. But, I mean, it’s been a pretty consistent message, right, is I think one company put it as cautious optimism around activity improving. I mean, as you sit here today, how much sleep do you lose at night that this is totally going to reverse because there’s some tariffs versus it may be a speed bump, but where we sit today, new supply, we know that pipeline is largely empty now.

New starts, I mean, talk about maybe that in your market, especially for your comparable space is pretty minimal. So as you just look at the math of if companies want to expand, they’ve been sitting on the sidelines for three years, and you get back to a more normalized level of absorption and supply ebbs. You kind of talk about the math as you see it for your property type and competitive set over the next twelve to eighteen months.

Marshall Loeb, CEO, EastGroup Properties: No. I like it. And certainly, we watch tariffs. I mean, it’s it’s every day there’s a new story, and I do think it’s, I could think being the key word, a negotiation strategy that look. I don’t think the administration’s gonna run up inflation and throw the economy in the tank and things like that.

But I can see how it would put a freeze on tenant decision making or corporate decision making, especially around some of our border markets. We’re in Southern California. We’re in San Diego. We’re in Arizona. We’re in Texas.

It could have that impact. Again, I I think the end consumer, who is the vast majority of our tenant base, there’s gonna be more people in Atlanta or Dallas or any of our markets, and they’re gonna order more online or traffic is terrible in about every of our markets. So you’re gonna need a we have the same tenant in a number of cities in different parts of the city because the traffic is so bad. You could go to South Dallas and have lower rent. But if if if you’re a hotel and your AC is out in the summer, you don’t want to wait for the air conditioning repair person to get there.

So I think that plays in. And I I love where we sit in terms of our peer developers have been sidelined for a couple of years. They’re private, so their their corporate structure, not all, but a lot wasn’t to carry the land, thankfully, like we’ve been able to and keep the permits and carry the construction team. So I like the lack of supply and high vacancy. I Kenneth, I don’t remember much about econ one zero one, but I like where the supply demand picture’s going even with kind of headlines that could scare you to death.

And I’ll maybe tie that into our long term public track record and long term tenure and that there’s always a headline that scares us to death. This is just the the new one that we work through and things like that. So I think our tenants will work their way through it. I think expansions have been on hold. It feels like that ICE is starting to thaw and break up a little bit post election.

I just hope it continues because if it does, then it look. It’s a cyclical business. We’re on the backside of the cycle again. And and I’ll credit the team. Look.

When development slowed down, we we we bought we were able to buy what we would have built because the capital markets were in flux. So there’s always a strategy. It’s just you hope whatever the environment is, it lasts long enough for you to implement your strategy. And I think that acquisition window is closed as well. Look, we’ve bid on things, and we closed a fair amount in fourth quarter, but we’ve gotten our head handed to us on any number.

Where we were the second buyer, we’re just not seeing that opportunity anymore where something didn’t trade. Is your offer still good, and can you close in thirty days? And we were able to buy about a dozen buildings in markets like Las Vegas, Phoenix, Atlanta, Nashville, Raleigh at around a six cap, and now we’re seeing things back in the four fours and low fours on some of those again. So, look, that that window’s closed, so it’ll will be if if people are willing to pay fours, we’re happy to to develop to a seven if that’s where the demand comes.

Craig Mailman, Analyst, Citi Research: And you guys have been a have been able to use equity to kind of finance your business plan. You have sold assets as well. But if the acquisition market cap rates continue to tighten despite the ten year moving higher, I mean, the I know you guys selectively sell, but like could that be a bigger part of the financing plan versus equity even though your cost of equity has also improved, right? You guys hit the ATM a bit. Just talk about, I guess, sources of capital versus the deployment yields that you’re seeing.

And you guys are an active developer. Are you what are you expecting on the construction side as it relates to labor costs, right, with the immigration outlook that this administration has on inputs with tariffs, right? Like what kind of yield degradation could you see from just higher costs versus rents growth that you’re seeing in your mind.

Marshall Loeb, CEO, EastGroup Properties: Yeah. Maybe I

Craig Mailman, Analyst, Citi Research: know that’s a lot of questions.

Marshall Loeb, CEO, EastGroup Properties: Yeah. And remind me which parts I forget. And I’ve had my answer.

Craig Mailman, Analyst, Citi Research: No. I forgot half of it.

Marshall Loeb, CEO, EastGroup Properties: I’ll work on the sources uses and then maybe let John talk on the development side. But I look, we like ideally, and and I’ll credit Brent and our finance team to have all, you know, perfect world we have, debt, equity, and dispositions available to us. It’s been the first time in my career where I can remember even short term debt was higher than our implied cap rate. So we our balance sheet leverage is lower than our target today. We like the dry powder.

When opportunities show up, we have that opportunity. There’ll be a point in time where debt maybe I don’t know, interest rates are coming down anytime soon, but we would have the ability to lean into debt, and we’re not going to over lever our balance sheet. But we could get our if we raise debt to EBITDA back up to about a 4.5 times and and we’ve kind of modeled it this way, say you could reinvest at 150 basis points above your cost of debt. And again, that’s anytime you have that many assumptions in any model, I start to question it. But there’s probably $0.25 to $0.3 of FFO growth we could gain just from rebalancing the balance sheet.

On dispositions, I think, or we think we should always be selling our weakest assets. We’ll ask the team, as I mentioned, our structure’s a little different. We don’t have a chief investment officer or a chief operating officer. Really, if you have your region like John, we’ve got three regions. You’re responsible for acquisitions, development, renewals, property management, all of that.

And and Brent and I were each our CFO were regional asset managers. So I like that model because you’re really a generalist, and and we’ll ask them, if you got a call in the morning and the tenant’s bankrupt, which building are you hoping that’s not in? And that’s really our disposition list. And then we’ll work our way through that batting order as much as without blowing up our earnings or needing to. We’ve had upward dividend pressure, thankfully, the last couple of decades, but without destroying our dividend or earnings.

So we have a batting order where last year we sold our Jackson assets where we’re down to one building. We needed to get a renewal done, which we have. We got one building with one tenant, and we need one buyer in Jackson. We’d like to take your capital to our other markets. Rents are going to grow faster in Nashville than Jackson, Mississippi.

We’re there, and there’s other markets we’ll we’ll sell service center. So we’ll keep working our way through and pending where the markets are and and kind of how this year plays out. We there’s other things we’d like to sell. So we can maybe get a little ahead on that dispositions target. So we feel like equity is regionally priced today.

Debt is hopefully the line of credit, at least, coming back our way and dispositions. In terms of construction and tariffs, really with the supply pipeline at a low, construction costs have come down probably 10% to 15%. And there’s components like steel and aluminum, like HVAC contracting. I think the the flip side of that where I get excited is just land prices have been sticky during this downturn. I mean, maybe there were some people that had tied up land on the way up that couldn’t close that we took out, but it’s gonna put upward pressure on rents.

The other nice thing of tariffs is we also own 61,000,000 square feet, so it’s gonna be hard for someone to come down the street if if labor gets we’re we’re

Craig Mailman, Analyst, Citi Research: not

Marshall Loeb, CEO, EastGroup Properties: feeling it yet on labor. We’re not feeling it yet. And John can I’ll let John comment on construction prices. But if we do, it’s gonna also have an upward impact. Look, real estate’s the, you know, the long term hedge against inflation anyway.

So that’s where we’ll we’ll be from that end and maybe on the ground today on construction.

John Coleman, EVP, Head of Eastern Regional, EastGroup Properties: Marshall hit the nail on the head. I think we’ve seen the reduction 10 to 15%. But what that dynamic has done is also because of the reduced new construction starts and the reduced supply. That market has gotten much more competitive. We’ve seen an improvement on construction schedules, one to two months quicker delivery.

But because of the competition, I think that’s and that reduction in cost is a combination of material and labor. So subcontractors are also getting more competitive to find jobs and get jobs. So don’t know what will happen on the labor if that becomes more of an issue. But right now, we’ve been talking to general contractors that they’re going to they’ve committed to maintain their same shell pricing if they can keep our account with this competitive environment. So we’ll see what happens.

Craig Mailman, Analyst, Citi Research: And we had a question come in on live QA. What do you think caused the leasing uptick after the election? Why has it continued? Seems like business consumer confidence is rolling over.

Marshall Loeb, CEO, EastGroup Properties: Yeah. It’s hard to, you know, heading into the election, I’m kidding, brokers always have a reason why the leases. It’s it’s the holiday. It’s summer break. You know, the attorney’s on vacation.

Someone’s in Europe. You know, there’s and we were hearing people are waiting on the election, and I discounted it till about the third time I heard it. And what someone said, you have two candidates, was so divergent policies, so people are waiting to see what happened. So I don’t you know, it’s hard to you know, maybe it’s a gift horse. I don’t want to look in the mouth.

I’m not sure. Todd and I were talking about this earlier. I’m not sure what made people feel more confident. Maybe they maybe the election’s behind you. You have a feel shaky, but

Craig Mailman, Analyst, Citi Research: a

Marshall Loeb, CEO, EastGroup Properties: Mideast, you know, ceasefire. And I think interest rates, when you look at I was looking at something one of our bankers had showed us, the interest rate projection and the downward curve projected a year ago versus now. So maybe, Phil, at some point, people just have to feel a little more comfortable in this environment as best you can. It’s maybe a little more certain than it was last fall, even though it’s not completely certain today with tariffs. And I don’t know that we’re Todd, I’d say you haven’t heard it from tenants.

You just started getting RFPs and requests.

Craig Mailman, Analyst, Citi Research: Perfect. Maybe we’ll, in the interest of time, just jump to the rapid fire questions. In 2026, what do you think same store NOI for the industrial group will be?

Marshall Loeb, CEO, EastGroup Properties: For our group, I think there’s gonna be an upward push based on supply. I’d say five and a half.

Craig Mailman, Analyst, Citi Research: And twelve months from now, will be more, same, or the less amount of public industrial companies?

Marshall Loeb, CEO, EastGroup Properties: I think there’ll be less. Just the amount of dry powder on the sidelines and and the rebound in industrial that we think we’re seeing and experience, I think it’s going to lead to more M and A.

Craig Mailman, Analyst, Citi Research: Perfect. Well, thank you guys so much. All right. Thanks,

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