East Properties(US:EGP)2022-02-09 21:53Financial Data and Key Metrics Changes - Funds from operations (FFO) increased by 17% for Q4 2021 and 13% for the full year, marking 35 consecutive quarters of higher FFO per share compared to the prior year [7][11] - Quarterly occupancy averaged 97.3%, up 40 basis points from Q4 2020, with year-end occupancy at 98.7% leased and 97.4% occupied [7][8] - Cash same-store NOI rose by 6.4% for the quarter and 5.7% for the full year [8][12] - FFO per share for Q4 was $1.62, an increase of 17.4% from $1.38 in Q4 2020 [11] Business Line Data and Key Metrics Changes - Quarterly releasing spreads were 31.5% GAAP and 18% cash, with annual results at 31.2% GAAP and 18.4% cash, indicating strong demand [8] - The company plans to focus on value creation through development and value-add investments in response to market demand [8][10] Market Data and Key Metrics Changes - Houston's leasing rate was reported at 95.9%, projected to represent under 11% of 2022's NOI total, down 130 basis points from 2021 [9] - The company anticipates development starts of $250 million in 2022, down from $341 million in 2021, reflecting a strategic response to market conditions [10][13] Company Strategy and Development Direction - The company aims to capitalize on the strong industrial market by focusing on development and value-add investments [8][10] - The management emphasizes a diversified rent roll, with the top 10 tenants accounting for only 7.6% of rents, enhancing stability [9] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the future, citing strong demand for last-mile distribution space and growth in Sunbelt markets [15] - The management remains cautious about external factors, including supply chain issues, which may persist into 2022 [18][20] Other Important Information - The company issued $120 million of equity at an average price of $205 per share and repaid a $33 million mortgage loan at a rate of 4.1% [11][12] - The dividend was increased from $0.90 to $1.10 per share, a 22% increase, with expectations for normalization in 2022 [12][13] Q&A Session Summary Question: Supply chain normalization timeline - Management indicated that most tenants feel optimistic about demand but expect supply chain issues to persist throughout 2022 [18][20] Question: Concerns about pricing push-back - Management remains conservative, acknowledging potential challenges but expressing confidence in maintaining occupancy and rental growth [21][23] Question: Impact of higher borrowing rates - Management is actively monitoring borrowing rates and has locked in favorable rates for upcoming loans, indicating a proactive approach to capital allocation [30][31] Question: On-shoring trends and labor costs - Management noted a trend of tenant relocations to states like Texas and Florida, with optimism about near-shoring due to labor cost considerations [43][44] Question: Guidance for NOI and rental growth - Management provided guidance for a midpoint NOI growth of 5.6%, emphasizing a conservative approach to assumptions for the year [48][49]