Q4 2023 EastGroup Properties Inc Earnings Call

Following the presentation, we will conduct a question and answer session.

Operator: For this presentation, we will conduct the question and answer session in a moment. If, at any time during this call, you require immediate assistance, please press star zero for the. This call is being recorded.

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This call is being recorded.

Marshall A. Loeb: I would now like to turn the conference over to Marshall Loeb, President and CEO. Please go ahead. Good morning, and thanks for calling in for our fourth quarter 2023 conference call. As always, we appreciate your interest. Brent Wood, our CFO, is also on the call. Since we'll make four forward-looking statements, we ask that 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 to 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 The Securities Exchange Act of 1934 and the Private Securities Litigation Reform Act of 1995.

Now like to turn the conference over to Marshall Loeb, President and CEO. Please go ahead.

Marshall A. Loeb: Good morning, and thanks for calling in for our fourth quarter 2023 conference call.

Marshall A. Loeb: Always we appreciate your interest Brent Wood, our CFO is also on the call since we'll make forward looking statements. We ask that you listen to the following disclaimer.

Speaker Change: Please note that our conference call today will contain financial measures such as P. N O Y and SSL that are non-GAAP measures as defined in regulation G. Please refer to our most recent financial supplement and to our earnings press release, that's available on the Investor page of our website into our periodic reports furnished or filed.

Marshall A. Loeb: 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.

Marshall A. Loeb: 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.

Marshall A. Loeb: The Securities Exchange Act of 1934 in the private Securities Litigation Reform Act at 1995.

Marshall A. Loeb: Forward-looking statements in the earnings press release, along with our remarks, are made as of today and reflect our current views about 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, Kena. Good morning.

Marshall A. Loeb: Forward looking statements in the earnings press release, along with our remarks are made as of today.

Marshall A. Loeb: That's our current views about the company's plans intentions expectations strategies and prospects based on the information currently available to the company and on assumptions. It is made we undertake no duty to update such statements or remark, whether as a result of new information future or actual events or otherwise.

Marshall A. Loeb: 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.

Marshall A. Loeb: Thanks, Dana good morning, I'll start by thanking our team for a strong quarter and year in which we delivered record <unk> per share and record releasing spreads. Our team continues performing at a high level and finding opportunities in an evolving market.

Marshall A. Loeb: I'll start by thanking our team for a strong quarter and year in which we delivered record FFO for share and record release and spread. Our team continues to perform at a high level and find opportunities in an evolving market. Our fourth quarter and full year results demonstrate the quality of the portfolio we've built and the continued resiliency of the industrial market. Some of the results include funds from operations coming in above guidance, up 11.5% for the quarter and 11.3% for the year. For over a decade, our quarterly FFO per share has exceeded the FFO per share reported in the same prior year, truly a long-term trend. Quarter-end occupancy rose 50 basis points from the prior quarter to 98.2 percent.

Marshall A. Loeb: Our fourth quarter and full year results demonstrate the quality of the portfolio, we felt and the continued resiliency of the industrial market.

Marshall A. Loeb: Some of the results produced include funds from operations coming in above guidance at all.

Marshall A. Loeb: 11, 5% for the quarter and 11, 3% for the year.

Marshall A. Loeb: For over a decade, our quarterly <unk> per share has exceeded the <unk> per share reported in the same quarter prior year truly a long term trend.

Marshall A. Loeb: Warner and occupancy rose 50 basis points from prior quarter to 98, 2% occupancy would have been 30 basis points higher but for leased but not occupied late December acquisition.

Marshall A. Loeb: Occupancy would have been 30 basis points higher, but for a lease, an unoccupied, late December acquisition. Our percent lease was 20 basis points, and five quarters at 98.7. Average occupancy was 98.1%, which although historically strong, was down 30 basis points from 2022. Quarterly release spreads reached a record at 62% gap and 43% cash. These results broke the previous record set last quarter and pushed year-to-date spreads to 55% gap and 38% cap. Cash transfer ROI was strong, up 7.5% for the quarter and 8% year-to-date.

Marshall A. Loeb: Our percent leased rose 20 basis points from prior quarter to $98 seven.

Marshall A. Loeb: Average occupancy was 98, 1%, which although historically strong was down 30 basis points from 2022.

Marshall A. Loeb: Quarterly releasing spreads reached a record at 62% GAAP and 43% cash.

Marshall A. Loeb: These results broke the previous record set last quarter and push year to date spreads to 55% GAAP and 38% cash.

Marshall A. Loeb: Cash same store NOI was strong up seven 5% for the quarter and 8% year to date, and finally I'm happy to finish the quarter with <unk> rising to $2 <unk> per share helping us achieve these results is thankfully, having the most diversified rent roll in our sector with our top 10.

Marshall A. Loeb: And finally, I'm happy to finish the quarter with FFO rising to $2.03 per share. Helping us achieve these results is, thankfully, having the most diversified rent roll in our sector, with our top 10 tenants falling to 7.9% of rent, down 70 basis points from fourth quarter 22 and in more locations. We view our geographic and tenant diversity as ways to stabilize future earnings regardless of the economic environment.

Marshall A. Loeb: Tenants falling to seven 9% of rents down 70 basis points from fourth quarter 'twenty, two and in more locations, we view, our geographic and tenant diversity as ways to stabilize future earnings regardless of the economic environment.

Marshall A. Loeb: In summary, I'm proud of the performance last year, especially given the larger economic backdrop. We continue responding to strength in the market and user demand for industrial products by focusing on value creation via raising rents, development, and more recently, acquisition. This strength allowed us to achieve 98.7% lead and push length throughout the portfolio. Due to current capital markets, we're seeing broader strategic acquisition opportunities. It's hard to accurately gauge how large the opportunity may be or when the window may close, but we're pleased with our ability to acquire newer, fully leased properties with below market rents at a creative yield. As stated before, our development starts to pull by market demand with NFR. Based on our read-through, we're forecasting 2024 starts at $300 million.

Marshall A. Loeb: In summary, I'm proud of the performance last year, especially given the larger economic backdrop.

Marshall A. Loeb: We continue responding to strengthen the market end user demand for industrial product by focusing on value creation via raising rents development and more recently acquisitions.

Marshall A. Loeb: This strength allowed us to end the quarter 98, 7% leased and push rents throughout the portfolio.

Marshall A. Loeb: Due to current capital markets, we're seeing broader strategic acquisition opportunities, it's hard to accurately gauge how large the opportunity may be a window window may close, but we're pleased with our ability to acquire newer fully leased properties with below market rents at accretive yields.

Marshall A. Loeb: Stated before our development starts are pulls on market demand within our parks based on our read through we're forecasting 2024 starts a $300 million.

Marshall A. Loeb: And there are developments continue leasing was solid prospect interest, we're seeing longer deliberate decision making.

Marshall A. Loeb: And though our developments continue leasing with solid prospect interest, we're seeing longer, deliberate decision-making. While we forecast $300 million in starts, we'll ultimately follow demand on the ground to dictate the pace. Based on the decision-making timeframes we're seeing, I expect starts to be more heavily weighted to the second half of 2024. Furthermore, in this environment, we're seeing two promising trends. The first thing to decline was an industrial start, and it started to fall in five consecutive quarters, with fourth quarter 2023 being roughly 60% lower than third quarter 2022 when the decline began.

Marshall A. Loeb: While we forecast $300 million in starts will ultimately follow demand on the ground to dictate the pace.

Marshall A. Loeb: Just on the decision making timeframe. So we're seeing I expect starts to be more heavily weighted to the second half of 2024.

Marshall A. Loeb: Further in this environment, we're seeing two promising trends.

Marshall A. Loeb: First thing the decline in industrial starts starts to fall in five consecutive quarters with fourth quarter 2023, being roughly 60% lower than third quarter 2022, when the decline began.

Marshall A. Loeb: Assuming reasonably steady demand, the markets will tighten in 2024, allowing us to continue pushing rents and creating development opportunities. The second trend is the rise in investment opportunities with developers who've completed significant site prep work prior to closing and need capital to move forward. This allows us to take years off our traditional development timeline and materially reduce the site development's legal risk. Brent will now speak to several topics, including assumptions within our initial 2024 guidance.

Marshall A. Loeb: Assuming reasonably steady demand the markets will tighten in 2024, allowing us to continue pushing Ras and create development opportunities.

Marshall A. Loeb: The second trend as the rise in investment opportunities with developers, who have completed significant site prep work prior to closing and need capital to move forward. This allows us to take years off our traditional development timeline and materially reduce the site development legal risk.

Marshall A. Loeb: Yes.

Marshall A. Loeb: Brent will now state to several topics, including assumptions within our initial 2024 guidance as always we'll update our forecast as the year unfolds. My belief is that when or if interest rates began to fall confidence and stability within the business community will rise.

Brent W. Wood: As always, we'll update our forecast as the year unfolds. My belief is that when or if interest rates begin to fall, confidence and stability within the business community will increase. Good morning, our fourth quarter results reflect the terrific execution of our team, the resilient performance of our portfolio, and the continued success of our time-tested strategy. FFO per share for the fourth quarter was $2.03 per share compared to $1.82 for the same quarter last year, an increase of 11.5%.

Brent W. Wood: Good morning, our fourth quarter results reflect the terrific execution of our team.

Brent W. Wood: The resilient performance of our portfolio and the continued success of our time tested strategy <unk> per share for the fourth quarter was $2 <unk> per share compared to $1 82 for the same quarter last year, an increase of 11, 5%.

Brent W. Wood: The outperformance continues to be driven by stellar operating portfolio results and the success of our development and acquisition program. From a capital perspective, the strength of our stock price continues to provide the opportunity to access the equity market. During the quarter, we sold shares for growth proceeds of $235 million, at an average price of $171.55 per share.

Brent W. Wood: The outperformance continues to be driven by stellar operating portfolio results and the success of our development and acquisition programs from a capital perspective, the strength of our stock price continued to provide the opportunity to access the equity markets.

Marshall A. Loeb: During the quarter, we sold shares for gross proceeds of $235 million at.

Marshall A. Loeb: At an average price of $171 55 per share.

Brent W. Wood: Additionally, we executed on our Forward Equity Program for the first time, securing growth proceeds of $75 million at an average initial price of $183.92 per share. Subsequent to year end, we settled $50 million, with $25 million in commitment still outstanding. Although capital markets are fluid, our balance sheet remains flexible and strong with solid financial metrics. Our debt-to-total market capitalization was 16%, and for the quarter, our unadjusted debt-to-ebon-dollar ratio was down to 3.9 times, and our interest and fixed-card coverage ratio was 9.6 times.

Marshall A. Loeb: Additionally, we executed on our forward equity program for the first time, securing gross proceeds of $75 million at an average initial price of $183 92 per share.

Marshall A. Loeb: Subsequent to year end, we settled 50 million with $25 million in commitment still outstanding.

Marshall A. Loeb: Although capital markets are fluid our balance sheet remains flexible and strong with solid financial metrics, our debt to total market capitalization was 16% and for the quarter, our unadjusted debt to EBITDA ratio was down to three nine times and our interest and fixed charge coverage ratio was nine six times.

Marshall A. Loeb: <unk>.

Brent W. Wood: Looking forward to 2024, FFO guidance for the first quarter is estimated to be in the range of $1.93 to $2.01 per share and $8.17 to $8.37 for the year. Those midpoints represent increases of 8.2% and 7.4% compared to the prior year, excluding involuntary conversion gain as a result of insurance claims, respectively. Notable operating assumptions that comprise our 2024 guidance include an average occupancy midpoint of 97.0%, cash tank property midpoint of 6.0%, bad debt of $2 million, $300 million in new development starts, and $130 million in strategic acquisitions, $55 million of which has already been executed. During this period of elevated interest rates, we continue to view equity proceeds as our most attractive capital source. In our guidance for the year, we are projecting $465 million in common stock issuance.

Marshall A. Loeb: Looking forward to 2024 <unk> guidance for the first quarter is estimated to be in the range of $1 93 to two or one per share and $8.17 to $8 37 for the year.

Marshall A. Loeb: Those mid point represent increases of eight 2% and seven 4% compared to the prior year, excluding involuntary conversion gain as a result of insurance claims respectively.

Marshall A. Loeb: Notable operating assumptions that comprise our 2024 guidance include an average occupancy a midpoint of 97, 8% cash same property in midpoint of six 8%.

Marshall A. Loeb: Bad debt of 2 million $300 million in new development starts and $130 million of strategic acquisitions 55 million of which has already been executed.

Marshall A. Loeb: During this period of elevated interest rates, we continue to view equity proceeds is our most attractive capital source and our guidance for the year, we are projecting $465 million in common stock issuances 75 million of which has already been secured via the forward equity program as mentioned earlier.

Brent W. Wood: 75 million of which has already been secured via the Ford Equity Program, as mentioned earlier. 2024 has minimal debt maturing, with $50 million in August and the remaining $120 million not until December. In summary, we are pleased with our solid 2023 results. Thank you, Eastgroup team members that are listening to the call. As we turn the page to 2024, we will continue to allow our financial strength, the experience of our team, and the quality and location of our portfolio to maintain our momentum. Now, Marshall will make his final comments.

Marshall A. Loeb: 2024 has minimal debt maturing with $50 million in August and the remaining 120 million not until December.

Marshall A. Loeb: In summary, we are pleased with our solid 2023 results. Thank you eastgroup team members that are listening to the call as we turn the page to 2024, we will continue to roll out our financial strains.

Marshall A. Loeb: Appearance of our team and the quality and location of our portfolio to maintain our momentum now Marshall will make final comments.

Marshall A. Loeb: Thanks, Brent. In closing, I'm proud of the results and the value our team is generating. Internally, operations remain strong, and we continue to strengthen the balance sheet. Externally, the capital markets and overall environment remain clouded, which is leading to the continued decline in stars.

Marshall A. Loeb: Thanks, Brent in closing I'm proud of the results and the value. Our team has generated internally operations remained strong and we continue to strengthen the balance sheet.

Marshall A. Loeb: Externally the capital markets and overall environment remain clouded. This is leading to the continued decline in starts.

Marshall A. Loeb: So in the meantime, we're working to maintain high occupancies while pushing rents. And in spite of the uncertainty, I like our positioning, as our portfolio is benefiting from several long-term positive secular trends, such as population migration, nearshoring and onshoring trends, and evolving logistics chains, for example. We also have a proven management team with a long-term public track record.

Marshall A. Loeb: In the meantime, we are working to maintain high occupancy while pushing rents.

Marshall A. Loeb: And in spite of the uncertainty 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 and evolving logistics change for example.

Marshall A. Loeb: We also have a proven management team with a long term public track record our portfolio quality in terms of buildings and markets is continually improving each quarter, our balance sheet is stronger than ever and we're expanding our diversity and both our tenant base as well as our geography.

Speaker Change: That we'd like to open up the call for your questions.

Speaker Change: Yeah.

Operator: Our portfolio quality in terms of buildings and markets is continually improving each quarter, our balance sheet is stronger than ever, and we're expanding our diversity in both our tenant base as well as our geography. With that, we'd like to open up the call to your questions. Thank you. Ladies and gentlemen, we will now begin the question and answer session. Did you have a question? Please press star 1 on your touch-tone phone.

Speaker Change: Thank you ladies and gentlemen, we will now begin the question and answer session.

Speaker Change: Should you have a question. Please press star one and you touched touchtone phone.

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Operator: You will hear a prompt that your hand has been raised. If you wish to decline from the polling process, please press start. If you're using a speakerphone, please lift the handset before pressing any button.

Speaker Change: If you're using a speaker phone please lift the handset before pressing any keys.

Speaker Change: Please be advised that each participant can have one question and one follow up.

Operator: It would be advised that each participant can have one question and one follow-up. If you have any other questions, you can come back. One moment, please, for your. Your first question comes from Craig Mailman from Citibank. Your line is already open. Hey, good morning, everybody.

Speaker Change: You have any other question you can come back on the Q1 moment. Please for your first question.

Speaker Change: Your first question comes from Craig Mailman from Citibank. Your line is already open.

Craig Mailman: Hey, good morning, everybody Marshall just wanted to touch on the acquisition environment getting a little bit better for you guys. You know you did more of a develop over the last couple of years. What are you seeing from a pricing perspective is that on a risk adjusted basis.

Craig Mailman: Um, Marshall, just wanted to touch on the acquisition environment getting a little bit better for you guys. You know, you've been more of a developer over the last couple years. What are you seeing from a pricing perspective that, on a risk-adjusted basis, is compelling relative to where you're developing here, and how much of the remaining https://www.larryweaver.com that you guys are targeting? Thanks, Craig. Good morning.

Speaker Change: You know compelling relative to where you're developing and you know how much of the remaining.

Speaker Change: So that was about 80 million $75 million and then your guidance, what's the visibility and kind of where the markets are.

Speaker Change: But you guys are targeting.

Marshall A. Loeb: Hey, Thanks, Scott Good morning, and if you'll allow me maybe before we dive in and I'll, let Pepe.

Marshall A. Loeb: And if you'll allow me, maybe before we dive in, I'll let people on the call know a little bit of bait and switch. We pre-recorded the call. Brent Wood has the flu or is under the weather today, so you've got Stacey Tyler.

Speaker Change: People on the call a little bit of a bait and switch we prerecorded the call. Brent one has the flu or is under the weather today. So you've got Stacy Tyler, whereas Stacy is capable hands in mind. So if you don't hear Brad Hill.

Marshall A. Loeb: We're in Stacey's capable hands and mine, so if you don't hear from Brent, he'll be back tomorrow, but under the weather today. In the acquisition environment, we've been encouraged... In the sense that it's almost two different buckets on a portfolio of property. Cap rates have remained low, and they feel more competitive, and by portfolio, I'm thinking three or four buildings where our team's been successful in finding opportunities, and if I go back to about the midpoint last year till today, we've acquired six buildings, kind of a little bit of color if it helps, a little over, what do you call The average age is a year and a half old, so there are new buildings with rents, typically slightly below market, where they got leased up, and it's added about eight cents a year to our run rate in terms of FFO. If you match it with the equity that we issued in the quarter we closed, it's kind of how we were looking at it. They've all been different, and they've been one-offs, but in some cases, it's been a seller who needed to close by a certain date.

Speaker Change: He'll be back tomorrow, but it's under the weather today.

Speaker Change: On the acquisition environment, we've been encouraged in the sense that it doesn't it's almost two different two different buckets on the on our portfolio of properties.

Speaker Change: Rates have remained low and they feel more competitive and by portfolio I'm thinking three or four buildings, where our team has been successful in finding opportunities and if I go back to about the mid point last year told today, we have acquired six buildings that kind of a little bit of color. If it helps a little.

Speaker Change: To call it 225 million.

Speaker Change: Average age is a year and a half old so they've been new buildings with rents typically slightly below market, where they where they got leased up and its added about eight cents a year on a run rate in terms of F. F. O. If you match it with the equity that we issued in the quarter. We closed just kind of how we were looking at it.

Speaker Change: They've all been different and then they've been one off but in some cases, it's been.

Speaker Change: A seller who needed to close by a certain day one it was a group that had a property tied up had gotten at least and needed funds to close so we assume the contract a marketing process that didnt work out the way the brokers we werent originally in it we came in later and our our pitches and we may not be here.

Marshall A. Loeb: One, it was a group that had a property tied up, had gotten at least one and needed funds to close, so we assumed the contract. A marketing process that didn't work out the way the brokers did it, we weren't originally in it. We came in later, and our pitch has been, we may not be your highest offer, but because of our line, and we've been issuing equity, we're your certain path to closing. And two years ago, a year ago, that really wasn't a point of differentiation.

Speaker Change: Our highest offer but because of our line and we've been issuing equity where you're certain path to closing and two years ago, a year ago that really wasn't a point of differentiation and all of a sudden it's become an ability and we've kind of viewed it as we want to own.

Marshall A. Loeb: And all of a sudden, it's become an ability, and we've kind of viewed it as we want to own, you know, well-located infill industrial buildings in our markets; whether we build them or acquire them, we'll adjust to kind of where the risk returns are. And of that batch, our average cap rate, their lease, and it's been about a six and a half percent gap return. So that's when you compare it to an equity cost in the fours and a gap return of six and a half on a blended average on brand new buildings that are, usually, we underwrite a year to lease up a development, and these were a year and a half old.

Speaker Change: You know well located infill industrial buildings in our markets, whether we build them or acquire them will adjust to kind of where the risk returns are and all of that batch average GAAP cap rate, they're leased and it's been about a six and a half type GAAP return. So that's what's when you can.

Speaker Change: And equity cost in the fours.

Speaker Change: And our GAAP return at six and a half.

Speaker Change: On a blended average on brand new buildings that are like that usually we underwrite a year to lease up of development and these were a year and a half old. So that's that was really been a new development in the market and I'll I'll tie it to interest rates all of a sudden the people that we're underwriting and using low cost debt.

Marshall A. Loeb: So that was really a new development in the market, and I'll tie it to interest rates. All of a sudden, people that were underwriting and using low-cost debt; we had a more competitive cost of equity or cost of capital using our equity than we normally do. And I think that window will slam shut on us, unfortunately, when interest rates start coming the other way. But in the meantime, we've kind of turned over a lot of stones and found some really unique situations, but it doesn't take that many to add eight cents a year to our FFO. So we've got a longer answer than maybe we're seeking, but that's really kind of how they played out. And we've got, I say visibility. We're always in the market bidding on a handful of properties in our markets, and that's probably where we are today. Nothing bid is coming, and the last comment I'll make, I've been a little bit on that bottleneck.

Speaker Change: We had a more competitive cost of equity and our cost of capital using our equity than we normally do and I I think that window will slam shot on us. Unfortunately, when interest rates start coming the other way, but in the meantime, we've kind of turned over a lot of stones and found some.

Speaker Change: Really what I would call unique situations, but it doesn't take that many you know to add eight cents a year or two or F. O. So we're excited longer answer than maybe you were seeking but that's that's really kind of how they've played out and we've got.

Speaker Change: Say visibility, we're always in the market bidding on a handful of properties in our in our markets and that's probably where we are today nothing bad coming in and the last comment I'll make.

Speaker Change: It's been a little bit on that bottleneck, we could have done more.

Craig Mailman: We could have done more. I'll take the blame for not wanting to use our line, run up our line, and then issue equity. That's really what led us to add the forward component to our ATM in the fourth quarter. So now it allows us to match fund the acquisitions a whole lot better than we did because before, I was probably a light switch to the teams in the field saying we've got capital, we don't have capital, and it usually takes six weeks to a month to run through more of the bidding process on a property. Okay, and that's really helpful.

Speaker Change: I'll take the blame for not wanting to use online run up online and then issue equity that's really what led us to add the forward component to our ATM in fourth quarter.

Speaker Change: So now it allows us to match fund the acquisition as a whole lot better than we did because before I was probably a light switch to the teams in the field, saying, we've got capital we don't have capital and it usually takes six weeks to a month to run two or more of the bidding process on our property.

Speaker Change: Okay. No that's really helpful. So about six and a half it's probably what low six high fives and so when you compare that to your house or a cash cow.

Craig Mailman: So that six and a half is probably what, low six, high five, fill it in, so when you compare that to your high five, kind of development return to the just-for-profit area. Yeah. Yeah.

Speaker Change: To develop when we kind of adjust for costa carried with.

Marshall A. Loeb: Yeah, if you look maybe two parts in our supplement, and I may be off slightly, but about pages 11 and 12, we're developing to about a 6-9 gap, so if we can buy a 6-1?2 and take leasing and construction risk away, I will say, and it's been a function of the team mainly and the market rents, last year what we developed, what we delivered all leased, and it was in the higher sevens, so we've been coming out ahead of where we thought we would be, thankfully, on our developments, but a new building and that delta between a development and an acquisition all of a sudden looks more attractive for this moment in time. And you let me know what my next question is going to be, the introduction of the fellows.

Speaker Change: You guys kind of yes, its very favorable.

Speaker Change: If you look maybe two parts in our supplement and I may be off slightly about about pages 11, and 12, where we're developing to about a six nine GAAP. So if we can buy a six and a half and take leasing and construction risk away I will say and it's been a function of the team's mainly in the market rents last.

Speaker Change: Here, what we developed what we delivered all leased and it was in the higher Sevens. So we've been coming out ahead of where we thought we would be fully on our developments, but you know when a.

Speaker Change: A new building and that that delta between a development and an acquisition all of a sudden looked more attractive for this moment in time.

Speaker Change: Okay.

Speaker Change: Next question was going to be doing the introductions of forward. So really you're kind of use the ATM to fund near term spend that you need in the forward is more for when do you think you're going to be kind of closing the acquisition. We may employ that if it makes sense.

Marshall A. Loeb: So really, you'll kind of use the ATM to fund near-term spend that you need, and the fellows are more for when you think you're going to be kind of closing on an acquisition, you may implore that. Yeah, and I think the other thing I think that's true and, And I know we'll see you here in a month, so more input's welcome when we sit down.

Speaker Change: Yes, I mean, I think the other thing I think that's true.

Speaker Change: And I know, we'll see you here in a month some more inputs welcome when we sit down we viewed the forward if it's an attractive price and attractive meaning you now at or above our internal N. A V at or above the street and we feel pretty good about ideally the use is being it's our own development pipeline or acquisitions.

Marshall A. Loeb: We viewed the forward, if it's an attractive price, an attractive meaning, you know, at or above our internal NAV, at or above the street, and we feel pretty good about, ideally, the uses, being it's our own development pipeline or acquisitions, if we can get out of, if we have a year to take down the forward, if we can get out ahead of it, and really pre-fund some, so we know we've got that capital, but we don't have to pull it down today. Really, it's another kind of tool in the tool kit, and a nice one, because acquisitions are so clunky, coming and going, I didn't want to, I was nervous, I didn't want to get, run the line up, and then you have to issue equity to kind of get back to where you want to be, because if we're using debt, which is kind of where you went, you're buying at a low six cash, and you're funding at a low six cash today, so we don't like that, but if we can use our equity, and maybe get a little bit ahead, and we'll either use it on developments, which you know we'll have, or a leap of faith, that out of the five properties we're always bidding on, someone's going to say yes to us, eventually. Yes, and one thing I would add to that, Craig, is just the timing.

Speaker Change: If we can get out a year to take down the forward. If we can get out ahead of it and really pre fund. Some so we know we've got that capital, but we don't have to pull it down today, it's really it's another kind of tool in the tool kit and a nice one.

Speaker Change: Because acquisitions are so so clunky coming and going we yeah I didn't want to I was nervous I didn't want to get run the line up and then you have to issue equity to kind of get back to where you want to be because it if we're using that where it's kind of where you were at youre buying at a low six cash and your funding at a low fixed cash today.

Speaker Change: So we don't like that but if we can use our equity and maybe get a little bit ahead and Oh.

Speaker Change: Well he didn't use it on development, which we know will have a leap of faith that out of the five properties. We're always bidding on someone's going to say, yes to us eventually.

Speaker Change: Yeah, one thing I would add to that Craig is just the timing like so much of the year. We're in blackout data earnings you know as a public company. So it just gives us flexibility on the timing of when we can receive the cash we don't have to be in an open trading window in order to actually received the funds.

Speaker Change: So that gives us some additional flexibility.

Speaker Change: If I could slip one more in him okay.

Speaker Change: Okay and by the way congrats on your promotion.

Craig Mailman: I appreciate that thank you [laughter] the G&A a ramp this year looks a little bit more than what you typically have is there something one time in that number.

Craig Mailman: So much of the year, we're in blackout due to earnings, you know, as a public company. So it just gives us flexibility on the timing of when we can receive the cash. We don't have to be in an open trading window in order to actually receive the funds. So that gives us some additional flexibility. Thank you. I think we still have one more. Okay. By the way, congrats on your...

Craig Mailman: The main driver there about two thirds of the additional DNA and our 24 God is due to a slowdown in development starts say, we have our internal development came they spent their time on development and construction activities, we capitalize a portion of the costs related to that team.

Craig Mailman: Based on the development projects that they're working on so in our guide where in 'twenty. Three we had 360 million of development starts and our guide for 'twenty. Four is 300 million. So that slowdown in development starts means that we have you know less in development phase that we'll be recording when we record those fees so reduction to <unk>.

Craig Mailman: Thank you. The GNA ramp this year looks a little bit more than what you typically have. Is there something special about that number?

Brent W. Wood: The main driver there, about two-thirds of the additional DNA in our 24 Guide is due to a slowdown in development starts. So we have our internal development team that spends its time on development and construction activities. We capitalize a portion of the costs related to that team based on the development projects that they're working on. So in our Guide, for 23, we have $360 million in development starts, and our Guide for 24 is $300 million. So that slowdown in development starts means that we have less in development fees that we'll be recording. When we record those fees, it's a reduction in DNA, and it adds to the basis of the properties. So hopefully, there's some upside in that hopefully DNA ends up being less because we're able to start more development projects. But to be conservative with making prudent business decisions, we felt like it was best to lower the Guide for development starts. And, in turn, that added about a nickel of DNA compared to 23.

Craig Mailman: G&A and it adds to the basis of the properties. So hopefully, there's some upside and that hopefully DNA ends up being less because we're able to start more development projects, but to be conservative with you now.

Craig Mailman: Prudent business decisions, we felt like it was best to lower the guide for development starts and in turn that added about a nickel of G&A compared to 23. That's the main driver and then we you know our team is growing as the company grows so we.

Craig Mailman: You know, adding a few people to the team and then typical additional investments and other aspects of G&A ESG and some other matters, but the main driver there is that development phase.

Craig Mailman: Is that partially offset though by lower.

Craig Mailman: Cap interest drag from starting those projects over the full five sensors or something smaller.

Brent W. Wood: That's the main driver. Our team is growing as the company grows. So we're adding a few people to the team and then typical additional investments and other aspects of DNA, EFG, and some other matters. But the main driver there is development fees. Is that partially offset though by lower cap interest drag from starting this project? So is it a full five steps, or is it something else really? Well, it's really two separate things.

Craig Mailman: Well its really its really two separate things. So we have we have capitalized interest, but then these internal development costs are really more personnel costs, so that the impact.

Craig Mailman: Impact to G&A is for our team's time that they spend on the development projects.

Craig Mailman: So, it's all setting salaries and other compensation costs as well.

Craig Mailman: Your next question comes from Jeff Spector.

Brent W. Wood: We have capitalized interest, but then these internal development costs are really more personnel costs. So the impact to G&A is for our team's time that they spend on the development project. So it's all setting salaries and other compensation costs for our clients. Your next question comes from Jeff Spector. Thank you for listening. Your line is now ready. Great, thank you. Good morning.

Jeffrey Spector: Bank of America.

Jeffrey Spector: Your line is already open.

Jeffrey Spector: Great. Thank you good morning.

Jeffrey Spector: First question I know, we constantly talk about onshore near shoring Marcia I know you mentioned it quickly I guess can we just touch on that anything new there.

Jeffrey Spector: First question, I know we constantly talk about onshore and nearshoring. Marshall, I know you mentioned it quickly. I guess, could we just touch on that? Anything new there? In light of, you know, what we're seeing in terms of, you know, potential impact on ports, etc. I guess, you know, if we could touch on that for a second. Sure. Hey, good morning, Jeff.

Jeffrey Spector: In light of what we're seeing in terms of potential.

Jeffrey Spector: Impact on ports et cetera, I guess, if we could touch on that first.

Marcia: Sure Hey, good morning, Jeff.

Speaker Change: I guess, we view it or my view.

Speaker Change: Okay. So it's wrong, it's really a long term trends when people make the decision on their kind of China, plus one manufacturing.

Marshall A. Loeb: You know, we, I guess we view it, or my view, in case it's wrong, it's really a long-term trend, you know, when people make the decision on their kind of China plus one manufacturing, which port it comes through. And I think that, I'm kind of reading through some of the pieces on the Suez Canal, that's why, look, you can make money being an owner and a developer around ports, but We want to be near the consumer and a growing base of consumers because I don't think that flips from Houston to L.A. gaining market share from L.A. and then last year LA is gaining it back and things like that, although we like both of those markets.

Speaker Change: Which poured it comes through.

Speaker Change: And I think that I'm kind of reading through some of the pieces on the Suez Canal that that's why there is look you can make money being an owner and developer around ports, but it really reinforced to me that's a very fluid dynamic environment, we wanted to be near the consumer and a growing base of consumers because I don't think that flip.

Speaker Change: From Houston is gaining market share from L. A and then last year L. A is gaining it back and things like that although we like both of those markets. We do feel when I look at El Paso were 100% leased Phoenix 99, San Diego strong in some of our best rent growth.

Speaker Change: <unk> markets and our company are in those in our portfolio are in those markets. So we still feel.

Speaker Change: Long term strong and it really is a function of we're looking for opportunities and all of those markets to kind of.

Marshall A. Loeb: We do feel, when I look at El Paso, we're 100% leased, Phoenix 99, San Diego's strong, and some of our best rent, growth markets, and our company are in those in our portfolio in those markets. So we still feel long term strong, and it really is a function of us looking for opportunities in all of those markets to kind of, you know, take steps one at a time to grow our portfolio. We're really looking for that next opportunity in San Diego and El Paso. We're active there. Phoenix, we've got some development land. It's really a timing issue of when we kick that off. But we like that segment of our portfolio. What I like, and I was reading, you know, when you look at where so many of the EV manufacturers are... Besides the near-shoring, which I know was your question, but on the on-shoring, it really, they run through the Carolinas, Georgia, and into Florida, and certainly Texas is seeing a lot of this kind of technology manufacturing alike.

Speaker Change: Take you know take steps one at a time to grow our portfolio. We're really we've looked for that next opportunity in San Diego in El Paso, We're active there Phoenix, we've got some development land, it's really a timing issue of when we kicked that off but we like that segment of our portfolio.

Speaker Change: What I like and I was reading you know when you look at where so many of the EV manufacturers are.

Speaker Change: Besides the near shoring, which I know everybody here question, but on the onshoring it really they run through the Carolinas, Georgia and into Florida, and certainly, Texas is seeing a lot of kind of technology manufacturing alike.

Speaker Change: The tailwind we have whether it's green energy, we seem to get an awful lot of it within our footprint in the Carolinas and Georgia, and then what we're seeing in Dallas and Austin, especially in terms of more tech and we again, we won't have the manufacturer, but we'll have the supplier and if we don't have the supplier they will still be.

Speaker Change: That ripple effect of just growth in the local economy.

Speaker Change: Yeah.

Speaker Change: Great. Thank you.

Speaker Change: And then I guess.

Marshall A. Loeb: The tailwinds we have, whether it's green energy, we seem to get an awful lot of it within our footprint in the Carolinas and Georgia, and then what we're seeing in Dallas and Austin, especially, in terms of more tech. And again, we won't have the manufacturer, but we'll have the supplier, and if we don't have the supplier, there'll still be that ripple effect of just growth in the local economy. Great And then a follow up on the acquisition guidance. I believe you talked about the $130 million. That's strictly for operating properties.

Speaker Change: A follow up on the acquisition guidance I believe you talked about the $130 million.

Speaker Change: Is that strictly for operating properties can you talk about I guess land purchases in 'twenty four.

Speaker Change: Sure, we've got a little bit of linear and on acquisitions I'll preface. It that's always a hard look we've usually miss that number obviously, we spent a fair amount of that.

Speaker Change: The Spanish ridge in Las Vegas, which we closed I hope we beat that number if we find the right opportunities and we have affordable capital, we'd like to beat that number on land.

Marshall A. Loeb: Can you talk about, I guess, land... 24. Sure, we've got a little bit of land here, and on acquisitions, I'll preface it by saying that that's always a hard number to look at. We usually miss that number. Obviously, we spent a fair amount of that. We had the Spanish Ridge in Las Vegas, which we closed. I hope we beat that number.

Speaker Change: I'll say, we've we have land that we have tied up as eastgroup, maybe it's kind of come in the last year.

Speaker Change: Two different ways land that we tie up and we'll try to get as far through the zoning and permitting and wetlands issue and everything else that may come up before closing.

Speaker Change: Minimize that time between closing and we've got a few parcels tied up currently you saw US close and then some like in Atlanta, This year, where it's the other kind of newer.

Marshall A. Loeb: If we find the right opportunities, and we have affordable capital, we'd like to beat that number. On land, I'll say we have land that we have tied up as Eastgroup. They did come in the last year in two different ways.

Speaker Change: Newer path to finding land has been someone's approached us and they've done all of that work, but now youre not selling forward lands.

Speaker Change: Forward sale that you used to and that's expenses, so they've come to us and we've seen it in Denver and Tampa, Atlanta, and then I'll spend a couple of times, where it's another local regional developer has done all the legal work and things are ready and they could use our help in closing either way we buy.

Marshall A. Loeb: Land that we tie up, and we'll try to get as far through the zoning, and permitting, and wetlands issues, and everything else that may come up before closing, to minimize that time between closing. We've got a few parcels tied up currently. You saw us close, and then some, like in Atlanta this year, where the other newer, newer path to finding land has been someone's approach to us, and they've done all of that work, but now you're not selling forward land on a forward sale that you used to and debt expenses. So they've come to us, and we've seen it in Denver and Tampa, Atlanta, and in Austin a couple of times, where And that's been an interesting new path, kind of given the constrained capital markets, where the legal risk, because sometimes we don't get through the zoning. Everyone, we said, wants their package delivered quickly; you just don't want it to originate from your neighborhood.

Speaker Change: I it completely for them or work out some kind of venture where they have upside and that's been an interesting new path kind of given the constrained capital markets, where the legal risks because sometimes we don't get the zoning everyone. We said once their package delivered quickly you just don't want it to originate from your neighborhood so kind of that.

Speaker Change: NIMBY effect, where we've tied up land and sometimes we don't close it and it's a kind of a dry well.

Speaker Change: At some time and money into it and you have to walk away, but we like where people have come to us at the 11th hour to kind of help them get it closed and that's the other part so which the land we have on our balance sheet, we feel good about and there is always another kind of tool.

Speaker Change: It sounds like an iceberg the part you don't see if we've got another.

Speaker Change: 100 to 200 acres tied up here and there where we're kicking tires and if everything checks out. We'll go ahead and close but we have we have it under control, but we haven't closed yet so we felt it's market by market, but overall I'd say, we felt pretty good about the land we have and I think one thing I think it's things are going to <unk>.

Speaker Change: Turn given the drop in supply.

Speaker Change: Where when the business environment does stable stabilize a little bit where I'd be could be optimistic optimistic about our starts this year.

Speaker Change: It'll be a fairly quick reasonably quick turn work.

Speaker Change: Buildings are going to fill up and theres not a lot of inventory in the stores, especially in our size range right now the vacancies higher than the big box and it's still fairly tight and kind of the 200000 and below size buildings.

Marshall A. Loeb: So kind of that NIMBY effect, where we tie up land, and sometimes we don't close it, and it's kind of a dry well. You put some time and money into it, and you have to walk away, but we like where people have come to us at the 11th hour to kind of help them get it closed, and that's the other part. So it's the land we have on our balance sheet that we feel good about, and there's always another kind of, to me, it sounds like an iceberg, the part you don't see. We've got another, you know, 100 to 200 acres tied up here and there where we're kicking tires, and if everything checks out, we'll go ahead and close, but we have it under control, but we haven't

Speaker Change: Great. Thank you.

Speaker Change: You're welcome.

Speaker Change: Your next question comes from Alexander Goldfarb of Piper Sandler.

Alexander Goldfarb: Your line is open.

Alexander Goldfarb: Oh, Great Hey, good morning, and Stacey echoing Jeff's comments congrats on all the times on the on the promotion so that's awesome.

Alexander Goldfarb: Thank you Alex.

Alexander Goldfarb: And hopefully the comp committee takes notice.

Alexander Goldfarb: [laughter].

Marshall A. Loeb: So we feel, you know, it's market by market, but overall, I think we feel pretty good about the land we have, and I think when things, I think things are going to turn, given the drop in supply, where when the business environment does stabilize a little bit, where I could be optimistic about our starts this year, I think it'll be a fairly quick or reasonably quick turn where buildings are going to fill up, and there's not The vacancy's higher in the big box stores, and it's still fairly tight in kind of the 200,000 and below size buildings. Great, thank you, you are up. Your next question comes from Alexander Goldfarb. Hi Perkins.

Speaker Change: Two questions here first just going back to the ATM Marshall.

Alexander Goldfarb: This group has long used.

Speaker Change: T M to fund it.

Speaker Change: Investments.

Speaker Change: Going to a forward is that's sort of a playbook out of what the apartment guys have done more over the past few years. So do you see you shifting in terms of how you use the ATM or what was it about the forward issuance now where traditionally you guys have been quite comfortable using.

Alexander Goldfarb: Your line is already up. Oh, great. Hey, good morning.

Speaker Change: Yes sort of a traditional Atms mindset and then Stacy does this affect timing of the settlement of the shares you guys have issuance in the guidance, but I'm not sure now if we should think about this settling later in the year or sort of modeling ratable as we normally would.

Alexander Goldfarb: And Stacy, echoing Jeff's comments, congrats on all the pubs on the, The Ultimate Parody Site-Lite Contents Company, LLC. All rights reserved. Thank you. All right. Uh, two questions here. First, just going back to the ATM. Eastgroup has long, The A.C.M. Department, www.ExtendedCircle.com are going to a show.

Speaker Change: Okay.

Alex: Alex Good morning.

Stacy Tyler: But look we still like the ATM a lot and we intend to use both and really as we've again, where we thought given where youre always historically tempted to use your line short term debt with long term assets is how you get in trouble as a REIT.

Alexander Goldfarb: You know, that's sort of a playbook from what the apartment guys and John G........

Alexander Goldfarb: , now, where traditionally, you know, you guys have been, you know, quite comfortable using, you know, sort of a traditional ATM mindset. And then, Stacy, does this affect the timing of the settlement? You guys have issuance and the guidance, but I'm not sure now if. And so we should think about this settlement later in the year or, you know, sort of modeling routable as we normally would. Hey, Alex.

Stacy Tyler: But our line cost is higher than our equity cost for this past year. So we will use their traditional ATM, probably until we really get the line to a fairly low or are flat balance and at that point, if we still like the price given the blackout periods and things like that Stacy mentioned earlier, that's probably where you know it sounds like.

Alex: <unk>, that's where we will toggle over to the Ford and it's money that we know we will have a good use for and were at attractive pricing and we can kind of put that on the shelf for it's really when you need it you give the banks a couple of years.

Marshall A. Loeb: Good morning. On the ATM, look, we still like the ATM a lot, and we intend to use both. And really, as we've, again, we've thought, given where our, you're always historically tempted to use your line, short-term debt with long-term assets is how you get in trouble as a REIT, but our line cost is higher than our equity cost for this past year. So we'll probably use the traditional ATM probably until we really get the line to a fairly low or flat balance. And at that point, if we still like the price, given the blackout period and things like that that Stacy mentioned earlier, that's probably where, you know, if I generalize, that's where we'll toggle over to the forward, and it's money that we know we will have a good use for, and we're at attractive prices, and we can kind of put that on the shelf for when you really need it. You give the bank the couple, 48 or 72 hours notice, and bring it down later.

Alex: 48, or 72 hours notice and bring it down later so that's that's how we're thinking we'll still use both.

Alex: And we'll probably have a limit where we will have a limit on how much we have of each were not going to get out too far over our skis in terms of uses.

Alex: But it gives us an ability to kind of have equity on the shelf like when we closed Las Vegas earlier in the year, even though we're in a blackout, we were able to fund that through the forward and Stacy I'll, let you I'll echo the congrats definitely well deserve, but I'll, let you talk about the timing, yes. It sounds good yes, and I agree.

Stacy Tyler: With what Marshall was saying that the board will continue to issue under the regular ATM as well. It's all part of one program. So we can easily toggle back and forth and some of that will just depend on the market pricing timing, whether we're in blackout, but what we have built into our.

Stacy Tyler: <unk> is funding lately more heavily weighted to the back half of the year and that really is in line with the timing of potential development starts and acquisitions, but.

Marshall A. Loeb: So that's, that's how we think. We'll still use both, and we'll probably have a limit, well, we will have a limit on how much we have of each. We're not going to get out too far over our seas in terms of usage.

Stacy Tyler: All of that will obviously change based on market conditions and actual but in terms of the actual funding when we execute our forward.

Marshall A. Loeb: But it gives us an ability to kind of have equity on the shelf, like when we closed Las Vegas earlier in the year, even though we're in a blackout, we were able to fund that through the Ford and Stacey, I'll let you, I'll echo the congrats, definitely well-deserved, but I'll let you talk about the timing. Sounds good, yes, and I agree with what Marshall was saying, but the forward will continue to issue under the regular ATM as well. It's all part of one program, so we can easily toggle back and forth, and some of it will just depend on the market, pricing, timing, whether we're in blackout, but what we have built into our guidance is funding more heavily weighted to the back half of the year, and that really is in line with the timing of potential development starts and acquisitions, but all of that will obviously change based on market conditions and actual, but in terms of the actual funding, when we execute a forward, like Marshall said, we can have that forward outstanding, and then whenever we need the funding, we just get 24, 48 hours notice, and then we issue the shares and actually receive the cash, so it gives us a lot of flexibility in terms of our cash need, and we know that we have the forwards that we have outstanding on the shelf. We'll hope to add to that, and then in the meantime, we can issue under the regular ATM as long as we're not in a blackout. Okay, second question is, and Brent's not on the line.

Stacy Tyler: Like Marshall said weekend.

Stacy Tyler: Have that forward outstanding and then whenever we need the funding we.

Stacy Tyler: Just give 24 48 hours notice and then we issued the shares and actually received the cash. So it gives us a lot of flexibility in terms of our cash needs and we know that we have the forwards that we have outstanding on the shelf well had to add to that and then in the meantime, we can issue under the regular ATM as long as we're not in a blackout.

Speaker Change: Okay second question is.

Speaker Change: And Brent is not on the call. So you guys will have to.

Speaker Change: Bill and for his conservative assumptions, but you know.

Speaker Change: In the past this year and in the past two years, you guys have come out with expectations of occupancy drop and sort of things.

Speaker Change: Things could get worse and in fact, the markets hold up well year performance holds up well in the occupancy outperforms everything does well.

Speaker Change: Yes, we hear your comments about just normal caution hey, it's the third year in a row, but still what.

Speaker Change: Is it just normal eastgroup caution, that's causing you to think occupancy could drop 100 bps or are you actually seeing.

Speaker Change: Pushback of client of tenants or.

Alexander Goldfarb: You guys will have to fill in. (Inaudible) But, you know, the past as well. Yes, we hear comments about the normal cost. Bill, what is it just normal Eastgroup caution that's caused Documents you could drop a hundred bits or are you actually experiencing pushback from clients, of tenants, or..., credit issues or trouble backfilling. Longer downtime, et cetera, that's leading you to the office.

Speaker Change: Potential for credit issues or trouble back filling space longer downtime et cetera, that's leading you.

Speaker Change: To the occupancy drop.

Speaker Change: Good question and I'll, Stacy jumping that I'll say, it's really more.

Speaker Change: Yes.

Speaker Change: Return to the norm the last two years, given our 40 year history, we've had a record occupancy and tied it at 98%. The last two years. So theres no major known move outs. There is no major identified bad debt or anything that's any specific space that's keeping.

Alexander Goldfarb: Good question, and I'll say it's really more, the last two years, you know, given our 40-year history, we've had our record occupancy in the, tied it at 98% the last two years, so there's no major known move-outs, there's no major identified bad debt or anything that's, any specific space that's keeping us up at night. It's more things have been really good for a few years, I think, at the beginning of the year, especially. Are they going to keep doing this?

Speaker Change: Up at night, it's more things have been really good for a few years I think at the beginning of the year, especially.

Speaker Change: Are they going to keep on this path and then, especially now with higher interest rates global entities that it feels like things could rotate back to the normal a little more.

Marshall A. Loeb: past, and especially now with higher interest rates, global unease, that it feels like things could rotate back to the normal a little more. And then I think the other thing that affects us on our same store, because people are, this is unique to Eastgroup. A little more deliberate right now, understandably, in growing their businesses, about a third at one point of our development leasing was to our existing tenants, and so we still have that. We've seen, especially Florida and Texas, where our developments are leasing up to customers and what we were seeing in the budget, where before we may have 60 days of downtime, now it's four months of, you know, we'll try to minimize it, that's our goal, as best we can, but we underwrote a little more vacant, vacant downtime before, when that tenant goes to phase, or building six in a park, for us to release building two, will probably take us a couple more months.

Speaker Change: And then I think the other thing that affects us on our same store because people are this is a unique to eastgroup.

Speaker Change: A little more deliberate right now understandably in growing their businesses about a third at one point of our development leasing was to our existing tenants and so we still have that.

Speaker Change: Florida, and Texas, where our developments are leasing up to customers and what we're seeing in the budget, where before we may have 60 days of downtime now it's four months look we'll try to minimize it that's our goal as best we can but we underwrote a little more vacant vague downtime before.

Speaker Change: When that tenant goes to phase or building six and apart for us to re lease building too will probably take US a couple of more months, so that that hits, our occupancy and it hit, especially hits, our same store, but we view it as someone's going to Canada.

Speaker Change: One of our tenants needs to grow someone's going to accommodate that growth and that's why we like the parks and that's part of our initial sales pitch when they come in as we can always tailor your space for you up or down moving you within a park and so that's still happening and as one broker described it if that was a good way with rents.

Marshall A. Loeb: So that hits our, let's see, and it especially hits our same store, but we view it, someone's going to Canada, if one of our tenants needs to grow, someone's going to accommodate that growth, and that's why we like the parks, and that's part of our initial sales pitch when we bring them in, is we can always tailor your space for you, up or down, moving you within a park. And so that'

Speaker Change: Being higher and the lease commitment commenced commitments being higher in dollars. It's moved from a real estate manager decision to our CFO decision that so many of these companies and so people are being slower and may be deliberate because of the environment and again kind of like acquisitions, except on the.

Speaker Change: Flip side, and maybe tying too much to interest rate moves I think when interest rates do come down there'll be a little bit of a lag effect, but that's one I'm, hoping that pent up demand will will take off that our retention rates are higher and a lot of tenants have renewed really across the country.

Marshall A. Loeb: Still happening, and as one broker described it, I thought it was a good way, with rents being higher and the lease commitments being higher in dollars, it's moved from a real estate manager decision to a CFO decision in so many of these companies, and so people are... I think the economic demand is lower and maybe deliberate because of the environment. Again, kind of like acquisitions except on the flip side, and I may be tying too much to interest rate moves. I think when interest rates do come down, there'll be a little bit of a lag effect, but that's when I'm hoping that tenant demand will take off as retention rates are higher, and a lot of tenants have renewed really across the country, if you look at some of the stats. But I think people will move back to growth, and what I get excited about is that there have been those starts. And if we can keep our balance sheet safe and we have the right land, we'll be able to pick up our development pipeline faster than our private peers can. Okay, uh... You're welcome.

Speaker Change: Look at some of the stats.

Speaker Change: But I think people will move back to growth and what I get excited about is there's been no starts and if we can keep our balance sheet safe and we have the right land will be able to pick up our development pipeline faster than our private peers well.

Speaker Change: Okay.

Speaker Change: Thank you.

Speaker Change: Youre welcome.

Speaker Change: Your next question comes from Todd Thomas of Keybanc capital markets.

Todd Thomas: Your line is already open.

Todd Thomas: Hi, Thanks first can can you talk about.

Todd Thomas: The leasing activity that's embedded in guidance within the lease up portfolio you have a few conversions scheduled for <unk> and <unk> about 1.4.

Todd Thomas: <unk> square feet in total that's scheduled to transition to the operating portfolio during the year, what what's budgeted in guidance in terms of leasing and can you just talk about your confidence around getting those buttoned up ahead of the conversion date.

Todd Thomas: Your next question comes from Todd Thomas. Your line is already, talk about, sponsored by the U.S. Department of State. Todd, good morning. If I'm following you, I think what we would say of our, you know, kind of looking at our 24, 2024 transfers, we're today, as we said, we're about 60% leased on those. Feel good about the activity.

Speaker Change: Yes, Todd.

Todd Thomas: Good morning.

Todd Thomas: Following you I think what we would say are kind of looking at our 24 2020 for transfers.

Speaker Change: Today as we sit we're about 60% leased on those feel good about the activity I'd say leasing activity was a little bit slow.

Marshall A. Loeb: I'd say leasing activity was a little bit slow, you know, and the brokers would probably tell me it's because of the holidays. It felt slow to, In terms of people out kicking tires late last year, it feels like things have picked up or have picked up in the last 30, 45 days. So we have activity; we need to convert that into signed leases. Transfers this year, the majority of it is in the back half of the year. So we still have some, look, we've got, that's really our half this year.

Speaker Change: And the brokers would probably tell me, it's because of holidays. It felt slow the <unk>.

Speaker Change: In terms of people out kicking tires late last year. It feels like things have picked up or they have in the last 30 45 days.

Speaker Change: We have activity, we need to convert that into signed leases of the transfers. This year. The majority of it is the back half of the year. So we still have some work we've got that's really our task. This year, we've got that budgeted leasing up kind of.

Marshall A. Loeb: We've got that budgeted, leasing up kind of, you know, in pieces here. And then if we're fortunate, like you saw with one of the Orlando projects, we were able to get that leased this quarter, and all of a sudden it jumps from a 2025 stabilization to a 2024. So that one will move up the ladder.

Speaker Change: And pieces here and then if we're fortunate like you saw on one of the Orlando projects, we were able to get that leased this quarter and all of a sudden it jumps from a 2025 stabilization to a 2024, so that one will move up the ladder or the other maybe upside to our budget if I D.

Marshall A. Loeb: The other, maybe upside to our budget, if I daydream about it, is we get some leasing done on some of the ones that are projected to stabilize next year or just stabilize early. And that's the other thing that will lead to more starts, because we like having that available inventory within our parks, especially, to kind of keep moving through. And so we've got a, you know, per item now. I think the back half of the year is our portfolio. We think occupancy will probably, it usually does dip a little bit through, call it June, and then it builds towards the back half of the year. And that's probably where the economy will go too, I think, as supply dwindles and hopefully confidence picks up, that's where I think the back half of our year Not that the first half will be bad; I think it'll just be better.

Speaker Change: Dream about it as we get some leasing done on some of the ones that are projected to stabilize next year, just stabilize early and thats. The other thing that will lead to more starts because we like having that available inventory within our parks, especially to kind of keep moving through and so we've got a.

Speaker Change: Pro rata amount I think the back half of the year as our portfolio. We think occupancy will probably it usually does dips a little bit through call. It June and then it builds towards the back half of the year and that's probably where the economy. We will go to I think as supply dwindles and hopefully confidence picks.

Speaker Change: Shop, that's where I think the back half of our year will be better than the first half of the year not that the first half will be bad I think it will just be better.

Speaker Change: Okay, and then you mentioned that activity picked up I guess in the last 30 45 days, we've heard similar commentary on on other calls this quarter.

Marshall A. Loeb: Um, and then I mentioned that I characterize it as, "It's probably very similar to pre-pandemic, other than, as I mentioned earlier, the lease commitment's greater. And so the description I've heard from one of the tenants, I have more approvals to get, you know, the brokers. Like, it takes more approvals to get this done, which adds time. There's activity, I'll say, you know, maybe post-pandemic, and I think that's maybe what happened in Southern California. People had a fear of losing out on space.

Speaker Change: Just curious if you can characterize demand in touring activity today.

Speaker Change: Relative to pre pandemic levels 2019 for example, how would you sort of.

Speaker Change: Compare and contrast.

Speaker Change: Probably very similar to pre pandemic.

Speaker Change: Other than that as I mentioned earlier, the lease commitments greater and so the description I heard from one of our tenants have more approvals to get their brokers like it takes more approvals to get this done which adds time theres activity I'll say.

Speaker Change: Maybe post pandemic and I think thats, maybe what happened in southern California people had a fear of losing out on space and so there was a tenant rep broker told me my jobs not fun anymore, because as soon as I leave Theres two or three other peoples looking at this space I would say tenants don't have a sense a sense of.

Marshall A. Loeb: And so there was, a tenant rep broker told me my job's not funding more because as soon as I leave, there are two or three other people working at this space. I would say tenants don't have a sense of urgency right now that they had maybe in late 21, and into early 22, but they're out there, and they're looking at it. And I think people at one of the charts we were looking at in terms of renewals, the last several years, about one in every four square feet has been a renewal. And then over the last year, it's moved to one.

Speaker Change: Urgency right now that they had maybe in late 'twenty, one and into early 'twenty, two but they're out there and theyre looking at it.

Speaker Change: And I think people at one of the charts, we were looking at.

Speaker Change: In terms of renewals the last several years about one in every four square feet has been a renewal and then over the last year, it's moved to one while safely theres pent up demand about one in every three square feet. So renewals have jumped up from call it 25% to a third of the leasing activity and.

Marshall A. Loeb: While I say there's pent up demand, about one in every three square feet. So renewals have jumped up and call it 25% to a third of the leasing activity. And I think it's my, Amateur analysis of that is that people are probably being patient and waiting to see what happens, whether it's interest rates or global unease or an election year, but once they feel like it's safe to come back in the water, I think the gate will be open, and that's where I hope we have a head start, either in maybe two ways, pushing rents within our portfolio, or we've got the land and we'll try to have the, our goal is to have the permit in hand and the balance sheet too, whether it's through the forward or the ATM, to really move several quarters ahead of our private peers, which is really who we compete an awful lot with on our size buildings rather than the bigger groups have more capital they've got to put out so they lean towards the big box development rather than our $15 million building. You're welcome.

Speaker Change: I think my.

Speaker Change: Amateur analysis is that is that people are probably being patient and waiting to see what happens whether it's interest rates or global on either an election year, but once they felt like it's safe to come back in the water I think the gate will be open and that's where I hope we have a head start either in maybe two ways pushing rent.

Speaker Change: Within our portfolio are.

Speaker Change: We've got the land and we'll try to have our goal is to have the permit in hand, and the balance sheet too whether it's through the forward or the ATM to really move several quarters ahead of our private peers, which is really who we compete an awful lot with on our size buildings, rather than the bigger groups have more cash.

Speaker Change: <unk>, they've got to put out so they leaned towards the big box development, rather than our $15 million of buildings.

Speaker Change: Alright, great. Thank you.

William A. Crow: Your next question comes from Bill Crow of Raymond. Your line is already open. Thanks. Gordon, Marshall, and Stacey.

Speaker Change: Sure Youre welcome.

Speaker Change: Your next question comes from Bill Crow of Raymond James Your line is already open.

William A. Crow: I want to say good morning to Brent as well......... www.

Speaker Change: Thanks.

William A. Crow: Good morning, Marshall and Stacey.

William A. Crow: Hey, good morning, Brent as well he should be asleep, but I'm sure he's listening.

William A. Crow: EastgroupProperties.com, Marshall, just a follow-up question on the guidance on... I just wanted to work towards, all of it. Hello. Not really. Hey Bill, good morning.

William A. Crow: Yes.

William A. Crow: Marshall just a follow up question on the guidance.

William A. Crow: You can see I am just wondering if fourth quarter.

William A. Crow: Occupancy was boosted at all by the seasonal demand that you saw.

William A. Crow: Not really. We kind of, it was within our budget, and actually, we came out ahead of our budget. You know, usually at the end of the year, probably what we've talked about before is the post office or someone like that will take over the station for a 90-day period. But I can't really say. I don't think we had any of that. This year, it was really just a pickup in demand, and thankfully, our occupancy picked back up, and we've kind of said that's, If it helps, kind of our goal is if we can hang on to our occupancy until all this supply gets absorbed, because there's nothing coming in the pipeline behind it, that'll be a really good time to play offense. So it was, thankfully, it wasn't seasonal.

Marshall A. Loeb: No not really not that hey, bill good morning.

Marshall A. Loeb: Not really I mean, we we kind of it was within our budget and then actually we came out ahead of our budget.

Speaker Change: Usually at the end of the year Prime day, but we've probably talked about before is the post office or someone like that will take space on a 90 day basis, but I can't really say I don't think we had any of that.

William A. Crow: This year it was really just to pick up and demand in and thankfully our occupancy pick back up and we've kind of said that.

William A. Crow: If it helps kind of our goal is if we can hang onto our occupancy.

William A. Crow: Until all this supply gets absorbed because there's nothing coming in the pipeline behind it that'll be a really good time to play offense. So it wasn't thankfully it wasn't seasonal I mean, I do think our occupancy may drift down like it typically does in the first quarter. It may not be 98, plus but at least through February.

William A. Crow: We're pretty much in the same ZIP code as where we ended the year. It's still it's not like there's been any big movements I'm sure, it's 20 or 30 basis points, one way or the other but it's not not much movement.

Marshall A. Loeb: I mean, I do think our occupancy may drift down like it typically does in the first quarter. It may not be 98 plus, but at least through February, we're pretty much in the same zip code as where we ended the year. It's not like there's been any big movements. I'm sure it's 20 or 30 basis points one way or the other, but it's not much movement.

William A. Crow: Alright.

William A. Crow: The area of guidance I want to challenge you on a little bit is is on the equity issuance assumption I guess more ambivalent and others about where it's coming from which bucket that's coming from but.

William A. Crow: Maybe stacy it would it be helpful. If you gave us.

William A. Crow: In respect of the area of guidance I want to challenge you on..., on the equity issue. I'll put the numbers about where... Maybe Stacy would be helpful. Thank you.

Stacy Tyler: Sources and uses.

Stacy Tyler: Feels like.

Stacy Tyler: So heavily and maybe unnecessarily so on the equity portion of funding.

William A. Crow: For this year.

Brent W. Wood: We'll certainly monitor the debt markets as well. But, just as we were putting the building blocks together for 24 guidance, you know, at the time, it just seems more prudent and makes more sense at a lower cost of capital for us to issue equity. We can certainly easily shift that to debt if rates come down or if, for whatever reason, the equity markets were to get away from us. We have $170 million in debt maturing later in the year, so that's, you know, a use and we'll need to fund for those repayments and then for our development starts and acquisitions that we have included in guidance.

Stacy Tyler: Well, we'll certainly monitor the debt markets as well, we just as we were putting the building blocks together for 'twenty for guidance.

William A. Crow: At the time, it just seems more pregnant and to make more sense at a lower cost of capital for us to issue equity.

William A. Crow: We can certainly easily shift that to that if rates come down or if for whatever reason the equity markets, where it can't get away from us.

William A. Crow: 170 million in debt maturing later in the year, So that's a use and.

William A. Crow: We'll need need to find today's repayments and then for our development starts and acquisitions that we have included in guidance.

Brent W. Wood: We, you know, just felt given the cost of capital when we evaluated the options, equity is the lower cost of capital and seems to make the most sense today, but we could easily see where that shifts and if the total stayed $465 million, maybe $100 or $150 million could shift to debt, but that's just not an assumption that we wanted to build in given the current cost of that event. At this point, you're assuming that the overall debt outstanding goes down. Go to https://www.youtube.com or the YouTube channel of your choice.

William A. Crow: Just felt given the cost of capital when we evaluate the options equity is still lower cost of capital and things to make the most sense today, but we could easily see where that shifts and if the title stay at 465 million, maybe 100 100.

William A. Crow: $50 million could shift to that but that's just not an assumption that we wanted to build and given the current cost of that.

William A. Crow: Got.

William A. Crow: At this point Youre, assuming that the overall debt outstanding goes down.

Brent W. Wood: Yes, yes, that's fair, with the maturities that we have in August and December. That's correct. It's not a we're trying to, We like our balance sheet today. It's not that we're trying to strengthen it so much as Casey said. I don't remember many times in my career where our cost of equity has been materially lower than our cost of short-term debt. But I think as that does evolve, it will shift back to kind of, I assume, the historic norm that we'll have a balance sheet in a position where we'll have a fair amount of debt capacity and still have a very safe balance sheet. That's it for me. Thank you.

William A. Crow: 100 or $170 million this year.

William A. Crow: Is that fair.

Speaker Change: Yes, yes, that's fair with the maturities that we have.

Speaker Change: In August and December that's correct.

Speaker Change: Not a we're trying to.

Speaker Change: We're very we like our balance sheet today, but if it helps it's not that we're trying to strengthen it so much as Stacy said its just.

Speaker Change: I don't remember many if any times in my career, where our cost of equity has been materially lower than our cost of short term debt.

Speaker Change: But I think that does evolve it will and it will shift back to kind of assume that historic norm.

Speaker Change: We'll have a balance sheet in a position, where we don't have a fair amount of debt capacity and still have a very safe balance sheet.

Speaker Change: Alright, that's it from me. Thank you okay. Thanks Bill Thanks.

William A. Crow: Okay, thanks Bill. Your next question comes from Samir Khanal of Evergreen. Your line is already open. Thank you. Hey, Marshall, can you provide a bit more color on California? You know, when I looked at the page where you provided the market breakdown. You know, looking at Paris-Francisco, NOI growth slowed considerably, and then... I guess the perfect span of kind of what you're seeing in Southern California as well... Sure. Good morning, Samir.

Speaker Change: Your next question comes from Samir Khanal of Evercore. Your line is already open.

Samir Upadhyay Khanal: Thank you Hey, Marshall can you provide a bit more color on California, you know when I looked at the page where you provided the market breakdown.

Samir Upadhyay Khanal: Looking at San Francisco NOI growth.

Samir Upadhyay Khanal: Slowed considerably and then.

Samir Upadhyay Khanal: I guess, just expand on kind of what you're seeing in southern California as well.

Marshall A. Loeb: San Francisco, we've had, and we've got it. We had some vacancy there. We had a value add. We bought this now 100% lease, but it took us a little bit longer than we had hoped to get that. It was 60,000 feet of vacancy to get that put to bed. And then in the Tulloch portfolio, there was a 3PL that left. We've got about half of that space leased now, and there is activity on the balance. But that's because it was really vacant.

Samir Upadhyay Khanal: San Diego.

Samir Upadhyay Khanal: Sure.

Speaker Change: Good morning, Sameer I would say San Francisco, we've had and we've got we had some vacancy there we had a value add we bought that's now 100% leased but it took us a little bit longer than we had hope to get that.

Speaker Change: 60000 foot vacancy to get that put to bed and then in the <unk> portfolio. There was a three PL that left we've got about half of that space lease now and activity on the balance, but that's really vacant thats what impacted our same store pulled our growth down in occupancy down in San Francisco It has.

Marshall A. Loeb: That's what impacted our same store or pulled our growth down and occupancy down in San Francisco. It has, it's, Both of those markets, maybe a little bit more San Francisco and L.A., they've been great historically, and those are markets where you watch, and there certainly were a lot of layoffs in technology in the Bay Area. It feels like it's stabilized. We're not really in the city.

Speaker Change: Both of those markets, maybe a little bit more San Francisco and L. A they've been great historically and those are markets, where you watch and it.

Speaker Change: Certainly had a lot of layoffs and technology in the Bay area. It feels like it's stabilized we're not really in the city. What we read is this kind of reading through at the city stats are not great weather in East Bay, and then the North shore North Bay market those have been a little more stable and then in L. A.

Marshall A. Loeb: What we read is, kind of, reading through it, the city stats are not great. We're in the East Bay and in the North Shore, North Bay market. Those have been a little more stable. And then in L.A., it's still there.

Speaker Change: It feels there.

Marshall A. Loeb: Especially as you get into the Inland Empire, and we're not in the Inland Empire East, we have some in the Inland Empire West and some in South Bay, which are the ports and mid-counties markets, that it was so red hot, it really got out, almost like you get out over your skis, and then a lot of the 3PLs have given space back, and rents have gone up. Backward in those, they ran up, they more than doubled, and now they're retreating a little bit and kind of finding stability, we think, in those markets. Thankfully, we've been full, and it's really been more hearing and reading about L.A. than really impacting our portfolio. We have a couple of places turning this year in L.A., not a lot, but, you know, for us, it's about 6% of our NOI that we'll address.

Speaker Change: Especially as you get into the inland Empire and we're not in the inland Empire East we have some in the inland Empire West and Southern South Bay, which is the ports in mid mid counties markets.

Speaker Change: It was so red hot it really got out almost like you get out over your skis and then a lot of the three pls have given space back and rents have come.

Speaker Change: Backwards and they ran up they more than doubled and now they are retreating a little bit.

Speaker Change: Finding stability, we think in those markets thankfully, we've been full and we've really.

Speaker Change: It's been more hearing and reading about la than really impacting our portfolio we have a.

Speaker Change: Couple of spaces, turning this year in L. A not a lot but for us it's about 6% of our NOI that will address but that market.

Speaker Change: If you said, which ones that we're in fill like they've had the most and stability it's that one but it's probably because.

Marshall A. Loeb: But that market, if you said which ones that we're in feel like they've had the most instability, it'd be that one. But it's probably because, you know, we've, I kid it, as we look at our own, something that takes off like a rocket usually lands about as gracefully as a rocket, so it was one of the hottest markets, and that's why we like diversity in geography, and we like diversity in our tenant base, too. Look, we enjoyed the run-up, but it makes you a little nervous when things start to turn. There's no—we can go to Florida, right, and build buildings or lease and do things like that. San Diego has been stable throughout it. We like San Diego a lot.

Speaker Change: Kidded as we look at our own thing.

Speaker Change: That takes off like a rocket usually lands about as gracefully as a rocket. So it was one of the hottest markets and that's why we like diversity in geography, and we like diversity in our tenant base to equally enjoyed the run up but it makes you a little nervous when things turn there is no. We can go to Florida, Brian and Bill.

Speaker Change: Buildings are leased and do things like that Sandy.

Speaker Change: San Diego has been stable throughout it we like San Diego a lot that's been the most stable of the three markets, we'd love to find the next value creation opportunity there and the Bay area, we just need to get the space leased but I'll admit it's taken a little bit longer than our historically would've thought that those markets maybe have gone I know I've talked to one.

Marshall A. Loeb: That's been the most stable of the three markets. We'd love to find the next value creation opportunity there. And the Bay Area, we just need to get the space fleet, but I'll admit it's taken a little bit longer than I historically would have thought that those markets maybe have gone—and I'll talk to one of our peers, we're saying they've gone from good to great, maybe, or great to good in those markets. Got it.

Speaker Change: Our peers were saying they've gone from good to great Navy.

Speaker Change: Right to good in those markets.

Speaker Change: Got it and then I guess just a second question on maybe development starts I mean, you did talk about.

Samir Upadhyay Khanal: And then I guess just a second question on maybe development starts. When you did talk about supply coming down right in the second half, which is similar to what your peers have stated, would we see new lands up here? Development starts. I'm going to have to pay you. Yeah, I hope so. And if it's helpful, maybe, two slides I'll mention. Here's what the danger is. I wish it was a Zoom call rather than a call on...

Speaker Change: Supply coming down right in the second half, which is similar to what youre tiers of state it so.

Speaker Change: I mean could we see you ramp up your development starts I mean, how are you thinking about that.

Speaker Change: Yes, I hope so and if it if it's helpful. Maybe.

Speaker Change: Two slides I'll mention here is what's the danger I wish it was a zoom call rather than a call on.

Marshall A. Loeb: Page 10 of our, if you go to our investor relations, our slide deck starts, so people can look, and that's all sizes, but that'll show you kind of how fast they've come down the last year plus now, and I expect first quarter to look similar to fourth quarter last year. It won't be much of a pickup, so there's... When people do come back, the shelves of the store are going to be pretty empty. And then on page 12, there is really the vacancy by size range. And to me, these are both CBRE slides, by the way.

Speaker Change: Page 10 of our own if you go to our kind of Investor relations our slide deck as starts. So people can look at that's all sizes, but that'll show you kind of how fast they've come down the last year, plus now and I expect first quarter to look similar to fourth quarter last year it won't be much of a pickup.

Speaker Change: There is when.

Speaker Change: When people do come back the shelves of the store are going to be pretty empty and then on page 12, as really the vacancy by size range and to me that these are both CBRE slides by the way that's pretty impactful where you can see the supply that has not gotten absorbed over the past year.

Marshall A. Loeb: That's pretty impactful where you can see the supply that has not gotten absorbed over the past year. It's really in the big box space that the shallow bay is still pretty full, and our starts have come down as much, if maybe not more, because it's less institutional. So where we've modeled our starts, and I think we're being prudent, when we see people moving, deliberately, we'll go as fast or as slow as the kind of field dictates on our start.

Speaker Change: It's really in the big box space that the shallow bay is still pretty full and our starts have come down as much if maybe not more because it is less institutional so.

Speaker Change: Where we've modeled our starch then I think we're being prudent when we see people moving.

Speaker Change: Deliberately.

Speaker Change: We'll go as fast or as slow as kind of the feel dictates on our starts with model $300 million, we've modeled it more towards the backend of the year, that's really a heavier for starts and as Stacy mentioned that that cost us about a nickel in earnings which isn't fun I mean at least start to hit on it.

Marshall A. Loeb: We've modeled $300 million. We've modeled it more towards the back end of the year. That's really heavy on starts, and as Stacey mentioned, that cost us about a nickel in earnings, which isn't fun.

Marshall A. Loeb: I mean, at least it hit our G&A, but we think it's the right thing to do; it's a long-term business. That's a prudent business decision. I think certainly if people feel better about the economy and want space, we'll try to get inventory on the shelves as quickly as we can. That's what we like.

Speaker Change: G&A, but we think it's the right. It's a long term business thats the prudent business decision.

Speaker Change: And I think certainly if people feel better about the economy and won't space, we'll try to get inventory on the shelves as quickly as we can that's why we like <unk>.

Marshall A. Loeb: You know, having our long-standing relationships with the general contractors, having the permits in hand, having the GCs, everything ready to go. And I like industrial compared to some other product types because we can deliver it pretty quickly and certainly in this environment, because I think there'll be a lag effect for supply to catch up with demand by, you know, several quarters, and that's where I... I hope that should be a good opportunity for our company. Cheers to you all. Your next question comes from Vincent T Bone of Green. The line is already open. Hi, good morning.

Speaker Change: Having our long standing relationships with the general contractors, having the permits in hand, having the gcs everything ready to go and I like about industrial compared to some other product types that we can deliver it pretty quickly.

Speaker Change: And certainly in this environment, because I think there'll be a lag effect for supply to catch up for demand.

Speaker Change: Several quarters and Thats, where our.

Speaker Change: I hope that should be a good offer what we need to capitalize on it but that should be a really good opportunity for our company.

Speaker Change: Thank you.

Speaker Change: Sure Youre welcome.

Speaker Change: Your next question comes from Vincent <unk> of Green Street. Your line is already open.

Vincent: Hi, good morning.

Marshall A. Loeb: I'd like to keep the dialogue going on just the broader supply landscape. So just within your market, what percentage of new supply do you have? Be light and dust for your old competitors. And then also, are there any markets where you're concerned about, you know, overbuilding and potentially, you know, market rent declines for your type of, you know, your type of building in the near term? Yeah. Hey, Ben. Good morning.

Vincent: Keep the dialogue going on just the broader supply landscape. So just within your market what percentage of new supply you estimate to be light industrial and competitive with your portfolio. And then also are there any markets, where you're concerned about overbuilding and potentially market rent declines for your type of.

Vincent: Your type of building in the near term.

Marshall A. Loeb: We typically, I won't say, and I don't think that was any aberration, 10% to 15% of supply is competitive supply, because although we get questions about can they break up a big box for more shallow bays, really, the dimensions, and it almost helps if we had an architect's plan in front of us, those spaces get awfully long, awfully narrow, and awfully expensive for those landlords. So the loading, the runs for the forklift get awfully long, the loading, you get two doors rather than 10 doors, dock loading doors, and things like that. So 10% to 15%. And the markets where we're watching, besides LA, that I mentioned earlier, that we're watching supply the most... It would be Austin and Phoenix, where there's a little bit of supply.

Vincent: Yes.

Speaker Change: Good morning.

Speaker Change: Typically I will say and I don't think now is any aberration, 10% to 15%.

Speaker Change: Of supply as competitive supply.

Speaker Change: Because although we get questions of Ken they breakup, a big box for more shallow bay really the dimensions and it almost helps if we had.

Speaker Change: Architect plan in front of us those spaces get awfully long awfully narrow an awfully expensive for those landlords so the loading.

Speaker Change: The runs for the forklifts get awfully long the loading you get two doors, rather than 10 doors dock loading doors and things like that so 10% to 15%.

Speaker Change: And the markets, where we're watching besides L. A that I mentioned earlier that we're watching supply the most.

Speaker Change: It would be Austin, and Phoenix that Theres, a little bit of supply. We've got good sites, there and Thats, maybe where we've pulled back on starts and inputs. Welcome Leafs I've kind of said in case I'm wrong. It's made it I'd rather be a quarter to two late than a quarter to two early so we're going to try to let some of the supply.

Marshall A. Loeb: We've got good sites there, and that's maybe where we've pulled back on starts and inputs. I've kind of said, in case I'm wrong, it's me, that I'd rather be a quarter to two late than a quarter to two early, so we're going to try to let some of the supply that's out there clear the market. And then I think they'll be calm, and again, it'll take us 10 months to a year to deliver, so we're not putting the space on the shelves today, but when do we pull the trigger? We've got sites that I really like long-term in both markets, but we said, "Let's be a little bit... I never want the team in the field to feel pressure from corporate to have a start, so let's be patient and watch it, and we're watching it closely, and as the inventory gets absorbed, how fast do we go? I've not seen rents come backward in any market other than LA right now. That's the only one I'm aware of that I'd say, well, I've seen rents actually turn, and especially turn in our product type, because the vacancies are, thankfully, at a lower rate than in the big box. And that's all really helpful color.

Speaker Change: Thats out there clear the market.

Speaker Change: And then I think there'll be calm and then again, we will take US 10 months to a year to deliver so it's not we're not putting the space on the shelves today, but when do we pull the trigger we've got sites that I really like long term in both markets, but we've said, let's be a little bit I never want the team in the field to feel pressure from.

Speaker Change: Corporate to have a start to let's be patient and watch it and we're watching it closely and as the inventory gets absorbed how fast do we go I've not seen rents come backwards in any market other than L. A right now that's the only one I'm aware of that I'd say, what I have seen rents actually turn and especially <unk>.

Speaker Change: Turn and our product type because the vacancies are low thankfully a lot less a lower rate than in the big box.

Speaker Change: No. That's all really helpful color I appreciate that I just have one quick follow up on the same store guide.

Marshall A. Loeb: I just have one quick follow-up on the same-store guide. Are you able to provide cash-releasing spreads that are assumed within 24-guide? We really have not, one, because we haven't been all that accurate on it, have not disclosed that.

Speaker Change: Are you able to provide cash releasing spreads that are assumed within 24 guidance.

Stacey Tyler: I think, you know, last year maybe two parts of the same store, Thankfully, our same store occupancy, and this is in our supplement, was 98.4 percent, so I think it will be a good number. We budgeted 97, so a good number is just coming off what I think is a record, and I would expect really some spreads. I think rent growth will moderate this year. I think it will still be positive, but it will be moderate. But I think with our embedded growth, I would expect our release spreads to be similar. They actually, on a gap basis, got better, you know; each quarter was better last year for us. I don't see that trend changing materially this year, and so the cash releasing should follow that or will follow that as well, and that's, without saying a number, that's pretty much what we've modeled, maybe a hair below it, just in case it does moderate some. That's perfect.

Speaker Change: We really have not one because we haven't been all that accurate on I have not disclosed that I think last year, maybe two parts to same store are thankfully our same store occupancy and it's this is in our supplement was 98, 4%. So I think it'll be a good number we budgeted 97, so a good.

Speaker Change: Number it's just coming off what I think sort of record.

Speaker Change: I would expect re leasing spreads I think the rent growth is not will moderate this year I think will still be positive it will moderate but I think with our embedded growth I would expect our re leasing spreads to be similar they actually on a GAAP basis got better.

Speaker Change: Each quarter was better last year for us I don't see that trend changing materially this year and so the cash re leasing should should follow that or will follow that as well and that's without saying a number that's a that's probably that's pretty much what we've modeled maybe a hair below adjusting case it does moderate some.

Speaker Change: No that's perfect. Thank you so much.

Stacey Tyler: Thank you so much. You're welcome. Your next question comes from Ki-Bin Kim of Truist. Your line is already open. Thank you and congratulations, Stacey.

Speaker Change: Youre welcome.

Ki Bin Kim: Your next question comes from key bin Kim of Truest your.

Ki Bin Kim: Your line is already open.

Ki Bin Kim: Thank you and congratulations Stacey.

Speaker Change: Thank you Steven.

Speaker Change: So Marshall just wanted to go back to some of the comments you made I mean, you guys have an excellent balance sheet and.

Ki Bin Kim: So Marshall, I just wanted to go back to some of the comments you made. You guys have an excellent balance and significant Financial Flexibility, and, like you mentioned, your cost of equity is lower than your cost of debt. Going back historically, Eastgroup has, I don't think it's ever been known to do very large-scale M&A or portfolio deals, but given that the situation is a little bit different for you guys, does that change your thinking at all on larger-scale portfolio deals, or is it more of a philosophical thing where when you buy portfolios, you end up having to sell a decent chunk, so maybe that's how it works? Yeah, good morning to you.

Speaker Change: And significant financial flexibility and like you mentioned that your cost of equity is lower than your cost of debt.

Speaker Change: You know going back historically eastgroup has I don't think its ever been known to do very large scale M&A or portfolio deals, but given that the situation is a little bit different for you guys does that change your thinking at all on larger scale portfolio deals or is it more of a philosophical.

Speaker Change: Where when you buy portfolios, yet you end up having to sell a decent chunk, so maybe thats something that attractive.

Marshall A. Loeb: You're right, that's One. We don't want to make reckless moves, but I'd like to think, look. We did buy the San Francisco portfolio, and that was a unique situation where just about everything, 90-plus percent of the NOI was what we wanted. It's usually twofold. Either we don't like enough of the portfolio to make kind of the net cost when you think of the cost of selling those assets that you don't want and things like that. Or, I'm being modest, and the real reason we don't is we usually just get clobbered by somebody bigger that's willing to underwrite higher rent growth and a lower levered IRR and things like that. So usually, we just ask the homecoming queen out a lot, and we don't get a yes.

Speaker Change: Yes.

Speaker Change: And keeping that Youre right that's.

Speaker Change: One we don't want to make reckless moves, but I'd like to thank OCA, we did by the San Francisco portfolio and that was a unique.

Speaker Change: Situation, where just about everything 90 plus percent of the NOI was what we wanted it's usually two fold.

Speaker Change: We don't like enough of the portfolio to make kind of the net cost when you think of the cost of selling those assets that you don't want and things like that or probably I'm being modest in the real reason why we don't usually just get clobbered by somebody bigger that's willing to underwrite higher rent growth in a lower.

Speaker Change: Levered IRR and things like that so usually we just we asked the homecoming cleaned out a lot and we don't get it yes.

Marshall A. Loeb: So we, you know, look, I'd love to find opportunities to grow the portfolio smartly. We're all about it. Usually, portfolios are all... Call more attention, and you get more people bidding on them, you know, to a certain scale where it becomes maybe only a game in Blackstone or Lync. But outside of that, you usually end up with a lot of complications, and we don't, we don't win those bids. But if we found one that lined up... You know, like we did in the Bay Area, we're willing to roll up our sleeves and try to make it work at a number that works for what we think for our shareholders. Do you think portfolio deals have a discount today and, you know, approximately what does that look like?

Speaker Change: Look I'd love to find if we can find opportunities to grow the portfolio smartly. We're all about it usually portfolio has drawn.

Speaker Change: Draw more attention and you get more people bidding on them to a certain scale, where it becomes maybe only pro largest and blackstone or link but outside of that you usually end up with a lot of competition and we don't we don't win those bids, but if we found one that lined up.

Speaker Change: Like we like we did in the Bay area, we're willing to roll up our sleeves and try to make it work at a number that works for what we think for our shareholders.

Speaker Change: Do you think portfolio deals.

Speaker Change: Have a discount today and.

Speaker Change: Approximately what does that look like.

Marshall A. Loeb: I'm out, probably have a discount on where they were, where I remember the broker saying if you put things together in a portfolio, they're actually worth more. You know, it's hard because we've done better finding one-off kind of unique situations buying. When I look at not every one of the six we've bought, and call it the last six months, but the majority of them, there was something unusual about it, and it was a timing situation or something where we've, I think we've gotten better value than the market really at that moment in time, and most of those. So I still think, and what we did with portfolios, there was one in, I think, Georgia. It was in Atlanta. There was one in Texas fairly recently,

Speaker Change: They probably have a discount to where they were where I remember the brokers, saying if you put things together in a portfolio they are actually worth.

Speaker Change: More.

Speaker Change: It is hard because we've done better finding one off kind of unique situations buying when I look at that not every one of the six we bought in call. It the last six months, but the majority of them there was something unusual.

Speaker Change: Data and it was a timing situation or something where we've I think we've gotten better value than the market really at that moment in time in most all of those.

Speaker Change: So I still think and where we bid on portfolios there was one in Georgia.

Speaker Change: Georgia It was Atlanta, there was one in Texas fairly recently.

Speaker Change: A handful of buildings, where we did not make it to the second round and so I still I don't think the premiums maybe what it was but there is still a premium or are just there is one on the market now and it's a large portfolio.

Marshall A. Loeb: It were, you know, a handful of buildings where we did not make it to the second round. And so I still, I don't think the premiums may be what they used to be, but there's still a premium, or I just, there's one on the market now, and it's a large portfolio. But even then, and I'm sure they've taken an offer on all of it, they've broken it into about five different buckets that you could bid on. So usually, people say, we'll take an offer on all of it or on any part of it, but human nature, their preference is probably still to bundle it and get as much of it out the door to one buyer.

Speaker Change: But even then and I am sure they take an offer on all of it they've broken it into about five different buckets that you can bid on so usually people say, we'll take an offer on all of it or any parts of it but.

Speaker Change: Human nature of their preference is probably still to bundle it and get as much of it out the door to one buyer. So we will certainly look I like your thoughts and we've got the balance sheet today thankfully, we want to be mindful of that but if we can find a portfolio acquisition.

Speaker Change: I'd love to say well, you'll be the first to know about it we'll have it. It's just historically, we like two thirds of it our three quarters and we don't like the other part and then we got to sell it and you have the transaction cost in your effective yield goes down with all of that or are we like it but there's 10 people in line that.

Marshall A. Loeb: So we'll certainly, I like your thoughts, and we've got the balance sheet today; thankfully, we want to be mindful of that. But if we can find a portfolio acquisition, I'd love to say, well, you'll be the first to know about it, we'll have it.

Speaker Change: We're willing to take on more risk than we feel it's worth at that moment in time.

Speaker Change: Okay. Thank you.

Speaker Change: Sure Youre welcome.

Marshall A. Loeb: It's just historically, we like two-thirds of it or three-quarters of it, and we don't like the other part, and then we've got to sell it, and you have the transaction costs, and your effective yield goes down with all of that. Or we like it, but there are 10 people in line that, you know, are willing to take on more risk than we feel it's worth at that moment in time. Take care.

Speaker Change: Okay.

Speaker Change: Your next question comes from Michael Carroll of RBC capital markets. Your line is already open.

Michael Carroll: Yes. Thanks, Marshall just wanted to circle back on your comments regarding development. So for eastgroup to kind of be more aggressive pursuing new development starts do you need to lease up your.

Michael Carroll: Thank you. Your next question comes from Michael Carroll of RBC Capital. The line is already open.

Marshall A. Loeb: Yeah, thanks. Marshall, I just wanted to circle back on your comments regarding development. So, for Eastgroup to kind of be more aggressive in pursuing new development starts, do you need to lease up your projects and lease up right now that are in process, or do you need to see the broader competitive set? Hey, good morning, Michael.

Michael Carroll: Projects in lease up right now or an in process or do you need to see the broader competitive set see some leasing.

Marshall A. Loeb: Yeah. Good morning, Michael Yes, I guess I'm kind of I don't mean to give a short answer but a little bit of both I mean, I think in Austin and Phoenix as I mentioned, we are watching the competition on the ground in there.

Marshall A. Loeb: Yes, I guess I'm kind of, I don't mean to give a short answer, but a little bit of both. I mean, in Austin and Phoenix, as I mentioned, we're watching the competition on the ground, and there, especially in Phoenix, we're full, and we don't have a development underway, but we said, "Let's, you know, feel clear a little bit before we jump in about it Typically, it is, It's also our existing product, and the way it would work would be, we're in phase three of a part. If the roles are reversed, Stacy and I will call you and say, hey, Michael, we're 50% leased, I've got another lease out, and I've got three proposals out. I'm going to run out of inventory, and the tenant rep brokers want to see that visibility that when they promise their customers it's going to be delivered, so that's why we build spec, and so we'll get out ahead of that and start putting more inventory out there. And that's really why I like our model.

Marshall A. Loeb: And in Phoenix, where were full and we don't have a development underway, but we said let's.

Marshall A. Loeb: Let's let the field clear a little bit before we jump ahead of it typically is.

Speaker Change: Yes.

Speaker Change: But it's also our existing product and the way it would work would be we're in phase three of our park, if rolls reverse Stacy and I will call, you and say, Hey, Michael where 50% lease I've got another lease out I've got three proposals out I'm going to run out of inventory and the tenant rep brokers want to.

Speaker Change: See that visibility that when they promise there their customers, it's going to be delivered so that's why we built spec and so we will get out ahead of that and starting foot putting more inventory out there and that's really to me our like our model.

Speaker Change: It's reactive to the market and it makes it really easier for me.

Speaker Change: Look we know our phase III isn't leasing up kind of in your question.

Speaker Change: Building phase four doesn't solve our vacancy issue in phase.

Marshall A. Loeb: It's reactive to the market, and it makes it really easier for me. Look, we know if phase three isn't leasing up, kind of in your question. Building phase four doesn't solve our vacancy issue, but if phase three's going really rapidly, we'll try to get to phase four as quickly as we can and then try to buy the land adjacent to or around that park as close to that park as we can because we know we've got a proven product and it really becomes a manufacturing process of just putting similar buildings up and hopefully, then you get a critical mass of tenants, more than you So that's really reactive to calls, but every once in a while, like right now, we'll say even though we're full in Austin and we're full in Phoenix, there are a lot of people that are out there with space on the ground that we'd like to see clear a little bit before we jump into those markets.

Speaker Change: Phase III is going really rapidly we will try to get to phase four as quickly as we can and then try to buy the land adjacent to or around that park as close as we can because we know we've got a proven product and it really becomes a manufacturing process of just putting similar buildings up and.

Speaker Change: Hopefully then you get a critical mass of tenants Martin you want to know and then we're then we're really help.

Martin: Helping our customers grow and moving them within the park, so thats really reactive to calls but every once in a while like right now we will say, even though we are full in Austin and were full and Phoenix. There is a lot of people that are out there with space on the ground that we'd like to see that clear a little bit before we jump into.

Martin: Those markets and look if I pick two of our fastest growing markets and our portfolio if those aren't the two there right they're added.

Martin: Historically top five growth cities in the country. So I think that inventory will get absorbed pretty quickly in those markets and then.

Marshall A. Loeb: And look, if I pick two of our fastest-growing markets in our portfolio, if those aren't the two, they're out at the historically top five fastest growing cities in the country, so I think that inventory will get absorbed pretty quickly in those markets, and then we don't need to be the third developer. We may not be the first developer to follow too early, but I don't want to be the third one either.

Martin: If it's big box that is vacant that really doesn't doesn't it may it will be a hotel that really doesn't affect our thinking and in those markets. There is a decent amount of shallow bay that's out there that's either delivered or being delivered enough.

Michael Carroll: And those projects that you're kind of mentioning that you want to get leased up in the broader market, are those, I guess, shallow bay properties that are directly competitive with yours, or are they more outside the market, kind of the larger buildings that might not directly compete? Yeah, no, good thought. If it's a big box, if it's vacant, that really doesn't, it may as well be a hotel, that And those markets, there's a decent amount of shallow bay that's out there that's either delivered or being delivered enough to kind of tell us like, look, maybe the right long-term decision is to wait. A quarter or two, and there's really not much downside to, you know, being patient. Hopefully, we'll get, actually, hopefully there's a reward for being patient and seeing how things play out.

Martin: To kind of tell us like look at that maybe the right long term decision, let's wait.

Martin: Or two and Theres really not much downside being patient hopefully, we get actually hopefully, there's a reward for being patient and seeing how things play out.

Martin: And then Hey, we bought this land we got it we've got to go just because we put it on a sheet of paper that we said we're going to break ground. This quarter. So that's kind of how we're looking at it we'll monitor it and hopefully it picks up during the year as soon as that starts to clear we will.

Martin: Get moving fairly quickly on those.

Speaker Change: Okay and then just last one for me like what do you doing all the pre development work on on your projects I mean, how quickly once you decided to go vertical can can you have it completed and delivered.

Martin: Okay.

Speaker Change: Got it used to be six months whats kind of answered during COVID-19. It got as long as a year, it's probably back to nine to 10 months electrical equipment construction cost have come down from.

Martin: From the peak, maybe 10% to 15% Thankfully and right now where I guess, maybe it's the push towards Green energy getting the electrical equipment transformer switchgear all of the things like that will order it but that's still about a year lead time, so the supply chain is better but it's not perfect.

Marshall A. Loeb: Then, hey, we bought this land; we've got to go just because we put it on a sheet of paper that we said we're going to break ground this quarter. So that's kind of how we're looking at it. We'll monitor it, and hopefully it picks up during the year. As soon as that starts to clear, we'll get moving fairly quickly on those. And then just last one for me, like with you doing all the pre-development work on your project, I mean, how quickly can you have it completed and delivered? It got, six months was kind of our answer during COVID, it got as long as a year, it's probably back to nine to ten months.

Speaker Change: Okay, great. Thank you.

Speaker Change: Youre welcome.

Speaker Change: Your next question comes from Jason Belcher of Wells Fargo.

Jason Belcher: Line is already open.

Jason Belcher: Good morning out there.

Jason Belcher: I was wondering if you could talk a little bit about any pockets of strength or weakness you're seeing across your different tenant industries, whether or not there are any groups that might.

Jason Belcher: <unk> been more aggressive than others and taking space or.

Michael Carroll: Electrical equipment, construction costs have come down from the peak, maybe 10 to 15% thankfully, and right now, we're, I guess maybe it's the push towards green energy, getting the electrical equipment, transformers, switchgear, all the things like that. We'll order it, but that's still about a year lead time, so the supply chain's better, but it's not perfect. Okay, great, thank you. You're

Jason Belcher: If others have maybe decrease requirements more abruptly than others.

Speaker Change: Sure good morning.

Speaker Change: In food and beverage is kind of one that's picked up of late construction, a little bit which is odd, but maybe it's the government projects and things like that homebuilding, maybe some of that so we've seen some construction some food and beverage.

Speaker Change: And then if it is.

Speaker Change: Mentioned earlier, but I think things hopefully turn later the first type of tenancy that we're usually the first in either direction or the third party logistics firms. So we're still seeing activity from them and I think when things turn I think there'll be the first ones out there picking up contracts and gobbling up space.

Jason Belcher: Your next question comes from Jason Belcher of Wells Fargo. Your line is already open. Good morning out there.

Marshall A. Loeb: I'm wondering if you could talk a little bit about any pockets of strength or weakness you're seeing across your different tenant industries, whether or not there are any groups that might be more aggressive than others and taking space, or others have maybe decreased requirements more abruptly than others. Sure. Good morning.

Speaker Change: But those that we've seen kind of a.

Speaker Change: A lot more green energy within our portfolio and maybe it because it was we had so little.

Speaker Change: But someone store storing batteries distributing batteries work in some kind of conversion or energy related has been a new pocket of demand and then I think food and beverage also within kind of medical we've seen a pickup in medical.

Marshall A. Loeb: You know, food and beverage is kind of one that's picked up of late; construction, a little bit, which is odd, but maybe it's the government projects and things like that; home building may be some of that. So we've seen some construction, some food and beverage, and then if it, and as I mentioned earlier, I think things, hopefully, will turn later, the first type of tenancy that they're usually the first in either direction of the third-party logistics firms. So we're still seeing activity from them, and I think when things turn, I think they'll be the first ones out there taking up contracts and gobbling up space. But those that, you know, we've seen a lot more green energy within our portfolio. Maybe it's because we had so little, but someone, you know, storing batteries, distributing batteries, working some kind of conversion, or energy-related has been a new pocket of demand.

Speaker Change: As an aside one we have a number of tenants that basically it's.

Speaker Change: And then industrial building, but a pharmacy, where you order prescriptions or medical products online and so we've seen a pickup of that a couple have been relocations from California to the Dallas market for example that we've picked up.

Speaker Change: Thank you that's helpful and then.

Speaker Change: Secondly, can you just talk a little bit about <unk>.

Speaker Change: Contractual rent increases or rent bumps, what you all are incorporating into newly signed leases there and whether you're getting any pushback on that aspect of the lease agreement and then if you could also just remind us where your average escalator is across the portfolio.

Jason Belcher: And I think food and beverage also within the kind of medical. We've seen a pickup in medical, and as an aside, one, we have a number of tenants that, basically, it's an industrial building but a pharmacy where you order prescriptions or medical products online. And so we've seen a pick-up in that. A couple have been relocations from California to the Dallas market, for example, that we've picked up. Thank you. That's helpful. And then

Speaker Change: We've definitely seen that increase stay where it is.

Speaker Change: A couple of years ago, we would've been working up toward an average of 3% now arm portfolio average would be in the threes and on new leases that we're signing we're seeing days three 5% to 4%.

Speaker Change: In some cases, it's been above that but I would say the norm has been in that three 5% to 4% range. They definitely still seeing strength. There we have not seen any pullback from that recently, so continue and our expectations would be for that to continue.

Stacey Tyler: Secondly, can you just talk a little bit about your contractual rent increases or rent bumps and what you all are incorporating into newly signed leases there, whether you're getting any pushback on that aspect of the lease. And then, can you also just remind us where your average escalator is located?

Speaker Change: And the three 5% to 4% range for new leases that we're signing.

Stacey Tyler: We've definitely seen that increase, though, where a couple years ago, we would have been working up toward an average of 3 percent. Now our portfolio average would be, you know, in the 3s. And on new leases that we're signing, we're seeing those 3.5 to 4 percent. You know, in some cases it's been above that, but I would say the norm has been in the 3.5 to 4 percent range. So I am definitely still seeing strength there.

Speaker Change: Got it thanks again.

Speaker Change: Sure.

Speaker Change: Your next question comes from Roanoke Cam.

Roanoke Cam: Morgan Stanley Your line is already open.

Roanoke Cam: Great Hey, two quick ones from me just.

Roanoke Cam: Pulling back sort of the rank growth commentary for the portfolio I think you said.

Roanoke Cam: Positive, but was curious if you can give a little bit more color around there and maybe also by market I think ele me, but maybe slow but curious.

Jason Belcher: We have not seen any pullback from that recently. So, continue, and, you know, our expectations would be for that to continue, in the three and a half to four percent range for new leases that we're signing. Thanks again. Your next question comes from Ronald Camden of Morgan Stanley. I hate it. Just going back to the rent growth commentary. Hey, Ron, good morning.

Roanoke Cam: Sort of what you go through the markets.

Speaker Change: Are the ones that are sort of on the higher end on the lower end that would be helpful. Thanks.

Speaker Change: Okay, Hey, Ron good morning.

Speaker Change: I think our expectations market rent growth not not our re leasing spreads for market rent growth.

Ron: Probably inflationary maybe a hair above for the market I think for our product type.

Marshall A. Loeb: You know, I think our expectations for market rent growth, and not our release rates, but the market rent growth, probably inflationary, maybe a hair above. For the market, I think for our product type, I would add 100 to 200 basis points just because the vacancy rate tradition is lower, so maybe that might get you to mid-single digits. And I think it will pick up; I think it will be better in 25 and into 26 with supply and demand, mainly because demand's fallen off so much. There are better markets; the Florida markets have been strong, Central Florida, Miami, those markets; Las Vegas has been a strong market as well. I know I mentioned Phoenix for an oversupply, but that was one of those who were our best.

Ron: Add 100 to 200 basis points, just because the vacancy rate traditionally slower so maybe you get to.

Speaker Change: That might get you to mid single digits and I think it will pick up I think it will be better in 'twenty five and into 26 with supply demand, mainly because demand has fallen off so much.

Speaker Change: Our better markets are the Florida markets have been strong.

Speaker Change: I'll say that central Florida, Miami those markets Las Vegas has been a strong market as well.

Speaker Change: No I mentioned Phoenix with oversupply, but that was that one of those two were our best embedded growth rent markets last year Atlanta is still a good market. So thankfully.

Speaker Change: A few years ago, we would've told you out, California is really driving our our rent growth and now it's really spread off.

Speaker Change: Throughout the portfolio.

Speaker Change: Portfolio and with the falloff in supply I think that's only going to get better.

Speaker Change: Over the next May.

Speaker Change: It may take six to eight months, but I think it's going to be better over the next 24 months following that.

Speaker Change: Got it and then just to close the thought I think we've all sort of.

Marshall A. Loeb: Embedded Growth Rent Markets Last year. Atlanta's still a good market. So thankfully, you know, a few years ago, we would have told you California was really driving our rent growth. And now it's really spread out, you know, throughout the portfolio. And with the fall off in supply, I think that's only going to get better over the next, you know, it may take six to eight months, but I think it's gonna be better over the next 24 months following that. And then just to close us off, I think we've all. ,,, That's because I'm trying to figure it out.

Speaker Change: Touched on that the balance sheet can be pretty under Levered based on based on how much equity you are going to be issuing.

Speaker Change: And I guess trying to figure out Opportunistically are you seeing anything in the acquisition market today that suggests that there may be sort of either distressed or opportunities for eastgroup to come in or is it.

Speaker Change: Fill it.

Marshall A. Loeb: The, maybe not broad brush distress. I mean, we're not seeing banks or things, although you read about banks still needing to reduce commercial real estate exposure, and that industrial will get pulled into that bucket. And they're not distressed, but we have seen instances, one of the properties we bought, the seller had not owned it all that very long at all, and supposedly they sold it at a loss.

Speaker Change: Maybe not broad brush distress I mean, we're not seeing.

Speaker Change: Banks are things, although you read about banks still needing to reduce commercial real estate exposure and that industrial will get pulled into that bucket.

Speaker Change: And theyre not distressed, but we have seen instances one of the properties we bought.

Speaker Change: The seller had not owned it all that very long at all and they supposedly they sold at a loss, but they needed liquidity within their portfolio and what they were able to sell what we were talking about the brokers was the industrial versus it's hard to sell office or maybe some other product types. So.

Marshall A. Loeb: But they needed liquidity within their portfolio, and what they were able to sell, what we were told by the brokers, was the industrial, versus it's hard to sell office or maybe some other product type. So, you know, I don't know if I'd call it distress. We're people in a capital bond where a group had tied up a vacant building and gotten it leased. And then they were having difficulty sourcing their capital, and we were able to let them make a little bit of money, but we stepped into their position and assumed the contract had still got what we thought was a very attractive yield on the property. Yeah, I guess it's a little bit distressed, but I don't know that it's, you know. I'm trying to, without violating our confidentiality agreement from some of those, describe them a little bit where there is a capital squeeze and whether it may not be an entity-level distress, it's a developer who's having trouble meeting the closing date, or someone needs to sell something, and our pitch is, we may not I'll lock your eyes if you do!

Speaker Change: I don't know if I'd call it distress.

Speaker Change: Or are people and our capital buying where a group of tied up a vacant building gotten at least and then they were having difficulty sourcing their capital.

Speaker Change: And we were able to let them make a little bit of money, but we stepped into their position and assumed the contracted still got what we thought was a very attractive yield on the property.

Speaker Change: So.

Speaker Change: Yes, I guess, it's a little bit distress, but I don't know that its I guess im kind of trying to without violating our confidentiality agreements on some of those.

Speaker Change: Describe them, a little bit where it's it's a capital squeeze and whether it may not be an entity level of distress.

Speaker Change: It's a developer who's having trouble meeting the closing date.

Speaker Change: Or someone needs to sell something and our pitches.

Speaker Change: We may not be your highest bid, but where your surest path to the closing table.

Speaker Change: Alright, Okay. So maybe not distressed maybe just motivated or something yes.

Speaker Change: I like your adjective thank you.

Speaker Change: That's it for me thanks, so much.

Speaker Change: Thanks, Ron.

Speaker Change: Your next question comes from.

Ronald Camden: Thank you. Alright, thanks a lot. Your next question comes from Vikram Malhotra of Mizuho.

Speaker Change: Vikram Malhotra of Mizuho. Your line is already open.

Vikram Malhotra: Your line is already, Hey, this is Georgie on behalf of Vikram. Just a quick one. We want to credit... Please see review 108757 on PissedConsumer.com, and myself. Thank you. If you can provide any call around the broadening of demand from Richard, thank you. Sure.

Speaker Change: Hey, this is George on for Vikram, just had two quick ones from me.

Speaker Change: Is it a place holder or is in a segment, where you're anticipating a sector issue.

Speaker Change: And my second question would be if you can provide any color on broadening of demand from recently thank you.

Stacey Tyler: On the credit, tenant credit, and the bad debt that we have included in our guidance, our actual bad debt in 23 was $1.5 million, which represented about 27 basis points in terms of percentage of revenue. And for 24, we have $2 million baked into the guidance, which is about 32 basis points of revenue. And that's really just, you know, what an anticipated level I guess.

Speaker Change: Sure.

Speaker Change: On the credit tenant credit and the bad debt that we have included in our guidance our actual bad debt and 23 was $1 5 million, which represented about 27.

Speaker Change: Basis points in terms of percentage of revenue and for 24, we have 2 million baked into the guidance, which is about 32 basis points of revenue and Thats really just.

Stacey Tyler: If we look back at our 10-year average, our bad debt has run about 20 basis points of revenue. So, last year was a bit higher, but we don't really have any reason to believe that there would be a major change from last year. With the growth of the company, the number grows just a bit, and given some uncertainty in the economy, even though we haven't really felt the negative impacts, it just seems reasonable for us to include $2 million in our bad debt guidance.

Speaker Change: You know what and anticipated I guess level, if we look back at our 10 year average our bad debt has ran about 20 basis points of revenue.

Speaker Change: So.

Speaker Change: Last year was a bit higher but we don't really have any reason to believe that there would be a major change from last year.

Speaker Change: With the growth of the company. The number grows just about and given some uncertainty in the economy, even though we havent really felt negative impacts. It just seems reasonable for us to include $2 million and our bad debt guidance, but we don't have any bad debts identified and really have not seen.

Stacey Tyler: But, we don't have any bad debts identified and really have not seen a big impact on any particular tenant industry or any particular market where we can detect a trend in any credit deterioration. It's just been, you know, each one has a story, but nothing too significant. And if we look at our watch list of tenants that we have a reserve for, out of about 1,600 leases, you know, we're in the 15 to 20 range on the number of tenants that we have on our watch list where we might have a reserve.

Speaker Change: Any particular tenant industry or any particular market, where we can detect a trend in any credit deterioration its just been.

Speaker Change: Each one has a story, but nothing too significant and if we look at our watch list of tenants that we have a reserve for out of about 1600 leases.

Speaker Change: We're in the 15 to 20 range on number of tenants.

Marshall A. Loeb: So, still a very small percentage of the total overall, and no trends that we've been able to detect, and no overall deterioration. And on nearshoring, you know, what we like about it, it feels like a slow, steady, long-term build rather than a rush, which may be more temporary, but, you know, we've seen El Paso has been a strong market now for three years, and we've been there for 20, that's the best three years in the last three. Phoenix is a strong market on its own in Tucson. But they've both been solid markets for us, and a little bit, you know, El Paso is a border market more so, where Phoenix and San Diego are their own markets that also benefit from onshore and nearshoring.

Speaker Change: That we have on our watch list, where we might have a reserve.

Speaker Change: Still a very small percentage of total overall and no trends that we've been able to detect and no overall deterioration.

Speaker Change: And then on near shoring.

Speaker Change: What we like about it it feels like a slow steady long term build rather than a rush, which may be more temporary but we've seen el Paso has been a strong market now for three years and we've been there 20, but the best three years, if I'd been in the last three.

Speaker Change: Phoenix is a strong market on its own in Tucson.

Speaker Change: But they've both been solid markets for us.

Speaker Change: A little bit El Paso is a boarder market more so.

Speaker Change: Phoenix, and San Diego or their own markets that also benefit from onshore and near shoring. So we're seeing more certainly manufacturing and the southern half of the U S. Whether it's green energy.

Marshall A. Loeb: So we're seeing more, certainly, manufacturing in the southern half of the U.S., whether it's green energy, that type of thing, and then we're seeing more nearshoring. I think those are certainly long-term decisions that companies make, but whether it's a labor strike in L.A. or the Suez Canal, I have to think all that, just volatility, will push people to come here; the border's open every The ports have their own challenges and benefits in any given quarter. It seems to fluctuate, at least if we're not a port-related portfolio, but you see the issues those have, and I would have to think it pushes manufacturers to, if they can make the numbers work, go to Juarez, go to Tijuana, go to Nogales, Mexico, and just cross the border, and that's where we... I like that we're not totally dependent on the border in Phoenix and San Diego, but that's one more benefit besides growth that those cities offer.

Speaker Change: Type related and then we're seeing more near shoring I think those are certainly long term decisions that companies make but.

Speaker Change: Whether it's a labor strike in L. A are the Suez Canal I have to thank all of that just volatility will push people look the borders open every day.

Speaker Change: Ports have their own challenges and benefits in any given quarter. It seems to fluctuate at least just were not up.

Speaker Change: Port related portfolio, but you see the issues those have than I would have to think it pushes manufacturers to if they can make the numbers work go to war as go to Tijuana go to Nogales, Mexico, and just cross the border and Thats, where we are like that we're not totally dependent on the border and Phoenix and San Diego.

Speaker Change: But we also that's up that's one more benefit besides growth that those cities offer.

Operator: There are no further questions at this time. I would hand over the call to Marshall Loeb. Thank you for your closing comments. Thank you, everyone, for your time today. I know if we didn't get to your questions, Stacey and I, and Brent, too, since he's back in the office, are certainly available. Feel free to email or call us if there's anything we didn't get to. We'll hopefully see you all here in a few weeks at an upcoming conference. But I appreciate your time and hope to speak to you all soon. Take care. Ladies and gentlemen, this concludes today's conference call. Thank you for your participation, and you may now disconnect. www. EastgroupProperties.com

Speaker Change: Okay.

Speaker Change: Okay.

Speaker Change: There are no further questions at this time I would hand over the call to Marshall Loeb for closing comments. Please proceed.

Marshall A. Loeb: Okay. Thank you everyone for your time today.

Marshall A. Loeb: If we didn't get to your question Stacy and I are and then Brent to synthesis backer back in the office are certainly available feel free to email us call us if theres anything we didn't get to we'll hopefully see you all here in a few weeks.

Marshall A. Loeb: Coming conference, but I appreciate your time.

Speaker Change: And I hope to speak to you all soon take care.

Speaker Change: Ladies and gentlemen, this concludes today's conference call. Thank you for your participation and you may now disconnect.

Speaker Change: Okay.

Speaker Change: Okay.

Speaker Change: Okay.