East Properties(US:EGP)2025-10-24 16:00Financial Data and Key Metrics Changes - Funds from operations (FFO) per share for Q3 2025 was $2.27, an increase of 6.6% compared to the same quarter last year [6][11] - Quarter-end leasing was at 96.7%, with occupancy at 95.9%, and average quarterly occupancy was 95.7%, down 100 basis points from Q3 2023 [6][7] - Cash same-store NOI rose 6.9% for the quarter and 6.2% year-to-date [7] Business Line Data and Key Metrics Changes - Quarterly releasing spreads were 36% GAAP and 22% cash for leases signed during the quarter, with year-to-date results at 42% and 27% GAAP and cash, respectively [6][11] - Retention rate rose to almost 80%, indicating tenants' cautious nature [8][19] Market Data and Key Metrics Changes - The market remains somewhat bifurcated, with improved activity in smaller spaces (50,000 square feet and below) but larger spaces experiencing delays in decision-making [7][19] - The supply pipeline continues to decline, with historically low starts this quarter, which is expected to put upward pressure on rents as demand stabilizes [9][10] Company Strategy and Development Direction - The company aims to capitalize on development opportunities earlier than private peers, leveraging its balance sheet strength and existing tenant expansion needs [10][15] - The focus remains on geographic and tenant diversity to stabilize earnings regardless of economic conditions [7][11] Management's Comments on Operating Environment and Future Outlook - Management expressed cautious optimism about improving market conditions and the potential for increased leasing activity as macro uncertainties subside [13][15] - The company is reforecasting 2025 starts to $200 million based on current demand levels, with a focus on maintaining a strong balance sheet [9][12] Other Important Information - The company settled all outstanding forward equity agreements for gross proceeds of $118 million at an average price of $183 per share [11] - Tenant collections remain healthy, with uncollectible rents estimated to be in the 35 to 40 basis point range as a percentage of revenues [12][13] Q&A Session Summary Question: Can you expand on leasing and the development pipeline? - Management noted that conversations with prospects have improved since May, with a high retention rate indicating strong portfolio performance [19][20] Question: How have construction costs trended recently? - Construction pricing has come down by about 10% to 12%, but demand remains the primary constraint on starting new projects [24][25] Question: What is the status of the development pipeline and leasing activity? - Management indicated that while leasing activity has been muted, there is a growing number of prospects, and they are optimistic about future developments [28][33] Question: How do you view the market conditions for next year? - Management expressed hope for a stronger market next year, with potential for increased starts if demand picks up [76][78] Question: What is the current level of bad debt and tenant watchlist? - Bad debt remains low at around 30 to 35 basis points relative to total revenue, with a consistent watchlist [57] Question: How do you see the impact of interest rates on leverage levels? - The company is monitoring interest rates closely and plans to issue $200 million to $250 million in unsecured term loans in the fourth quarter [58][59]