East Properties(US:EGP)2021-02-10 23:05Financial Data and Key Metrics Changes - Funds from operations (FFO) increased by 8.7% compared to the fourth quarter of the previous year, marking 31 consecutive quarters of higher FFO per share year-over-year [7][16] - FFO for the year rose 8% to a record $5.38 per share, exceeding the original pre-COVID forecast by $0.08 [7][12] - Quarterly occupancy averaged 96.9%, with a year-end occupancy rate of 98% leased and 97.3% occupied [8][10] - Same store net operating income (NOI) rose 2.2% for the quarter and 3.2% for the year [9] Business Line Data and Key Metrics Changes - Quarterly releasing spreads were strong at 15.4% GAAP and 7.9% cash, with annual re-leasing spreads setting records at 21.7% GAAP and 12.3% cash [9] - The company maintained a high retention rate of 80% for the year, contributing to strong occupancy levels [8] Market Data and Key Metrics Changes - Houston, the largest market, had a leasing rate of 97.2% with a 10-month average rent collection of over 99% [11] - Houston's contribution to rents decreased to 13.1%, down 80 basis points from the fourth quarter of 2019 [11] Company Strategy and Development Direction - The company is focusing on value creation through development and value-add investments, with a forecast of $205 million in development starts for 2021 [10][13] - Strategic dispositions included selling the last of four buildings in Santa Barbara and another asset in Houston [15][24] - The company aims to diversify its rent roll, with the top 10 tenants accounting for only 8.2% of rents [12][13] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the future, citing strong performance amidst a challenging environment and the potential for positive trends post-pandemic [24][25] - The company is prepared for uncertainties regarding the economy's reopening and recovery, with a focus on maintaining financial strength [12][20] Other Important Information - The company collected approximately 99% of monthly rents for January, indicating resilience in rent collections [12] - Bad debt for the fourth quarter was $1.1 million, primarily due to a single tenant transition [19] Q&A Session Summary Question: Long-term market exposure in Houston - Management indicated a desire to reduce exposure in Houston, aiming for a low double-digit percentage of total rents, while managing market diversity [27][30] Question: Balance sheet and capital needs - Management stated they are not capital constrained and have access to both debt and equity for funding needs, with plans to issue both throughout the year [31][32] Question: Acquisitions and guidance - The company closed the year with $122 million in acquisitions, with a robust pipeline for value-add and land acquisitions, indicating that the $65 million guidance for 2021 is a placeholder [34][36] Question: Market conditions in Atlanta - Management acknowledged mixed signals in the Atlanta market but expressed confidence in the demand for their properties, noting a lower market vacancy rate [40][41] Question: Nashville and other markets - Nashville is a market of interest, but the company prefers to grow in existing markets where they have established operations [46][49] Question: Bad debt impact on NOI - Bad debt is expected to decrease by 35% in 2021, with a positive impact on same property NOI [62][66] Question: Supply picture in multi-tenant properties - New supply is primarily large-scale developments on the outskirts of cities, which may affect vacancy rates in core markets [68] Question: Land acquisition and valuations - The company is actively looking for more land, with stable land prices and plans for development starts identified on owned land [91][92]