East Properties(US:EGP)2022-10-27 00:25Financial Data and Key Metrics Changes - Funds from operations (FFO) increased by over 14% for the quarter, marking 38 consecutive quarters of higher FFO per share compared to the prior year quarter [9][16] - Quarterly occupancy averaged 98.3%, up 120 basis points from Q3 2021, with a quarter-end occupancy of 99% leased and 98.5% occupied, matching the company record [9][11] - Cash same store NOI reached 8.7% for the quarter and stands at 8.9% year to date [11][12] - Annual FFO guidance raised to $6.93 per share, up 13.8% from the 2021 record [12] Business Line Data and Key Metrics Changes - Quarterly releasing spreads were strong, with GAAP spreads above 39% and cash spreads at 23% [10] - Year-to-date releasing spreads were similar at 36% GAAP and 22% cash [10] Market Data and Key Metrics Changes - The company has a diversified rent roll, with the top 10 tenants accounting for only 8.9% of rents [13] - The company completed 11 development and value-add projects, with 10 rolling into the operating portfolio fully leased at an average yield of 6.6% [13][14] Company Strategy and Development Direction - The company is focusing on value creation through raising rents and new development in response to market demand for industrial products [11][12] - A measured approach is being taken on new core investments due to shifts in capital markets [15] - The company is adjusting its development pipeline to ensure higher returns, with current projected yields at 6.8% [33][62] Management's Comments on Operating Environment and Future Outlook - The management expressed confidence in the industrial market's long-term trends, including population shifts and evolving logistics [25][27] - The company remains vigilant about potential economic volatility but is optimistic about maintaining high occupancy and pushing rents [26][39] - Management noted that while there are concerns about certain sectors, overall demand remains strong, with no significant impacts observed from major tenants like Amazon and FedEx [49][51] Other Important Information - The Florida portfolio sustained minimal damage from Hurricane Ian, with no anticipated meaningful financial impact [23] - The company is taking a cautious approach to acquisitions and development due to rising costs and market volatility [62][64] Q&A Session Summary Question: Impact of Hurricane Ian on development timelines - Management indicated minimal damage and some revenue loss in Q4 due to delayed development schedules, with some buildings pushed back to January [28][29] Question: Development pipeline and yield considerations - Management acknowledged tighter capital costs and is evaluating development projects more carefully, with a focus on maintaining higher yields [31][32] Question: Changes in tenant location preferences - Management noted that larger tenants are moving to suburbs for cheaper land, while smaller tenants prefer locations near their customers [41][42] Question: Demand pipeline in Houston - Management expressed confidence in Houston's market stability despite some space being given back, with a strong leasing team actively backfilling [45][46] Question: Overall demand and tenant impacts - Management reported no significant impacts from sectors like homebuilding, with other tenants offsetting any slowdowns [49][51] Question: Cap rates and acquisition strategies - Management is cautious about acquisitions, focusing on unique opportunities and monitoring cap rate movements closely [55][56] Question: Rent growth across markets - Management highlighted strong rent growth in markets like Tampa and Las Vegas, with expectations for continued upward pressure on rents [80][81]