East Properties(US:EGP)2023-07-26 20:19Financial Data and Key Metrics Changes - Funds from operations (FFO) per share for Q2 2023 was $1.91, exceeding the upper end of guidance and up from $1.72 in the same quarter last year, representing a 10% increase year-over-year [91] - Cash same-store NOI increased by 6.4% for the quarter and 8.7% year-to-date [123] - Revised guidance for same-store growth midpoint increased to 7.3%, up 30 basis points from the previous quarter [5] Business Line Data and Key Metrics Changes - Average occupancy increased to 98.2% at quarter-end, up 30 basis points from March 31 [123] - Quarterly releasing spreads reached approximately 53% GAAP and 38% cash, pushing year-to-date spreads to 51% GAAP and 35% cash [123] Market Data and Key Metrics Changes - Strong rental rate growth observed in El Paso, with historical performance resembling California-like markets [1] - Industrial starts forecasted at $360 million for 2023, with a notable decrease in industrial starts due to capital market volatility and credit tightening [3] Company Strategy and Development Direction - The company is focusing on long-term positive trends in last-mile distribution and shallow-bay markets, particularly in sunbelt regions [6] - Increased stock issuance assumption from $180 million to $475 million, with $300 million already completed, reflecting a strategic approach to capital raising [4] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the future, citing strong demand in key markets and a favorable occupancy rate [6][81] - The company is closely monitoring demand and adjusting development starts accordingly, with a cautious approach due to current economic conditions [3][40] Other Important Information - The company has no variable rate debt other than revolver facilities, and its near-term maturity schedule is light, with only $50 million scheduled to mature through July 2024 [125] - The company is strategically opportunistic in pursuing core investment opportunities while focusing on development [124] Q&A Session Summary Question: How is the company thinking about new development starts given current construction costs and demand? - Management noted that while the market is not as frenetic as in previous years, they see strong demand and are encouraged by the tapering supply, which may lead to increased development opportunities [8][16] Question: What is holding back the company from pushing development starts higher? - Management indicated that they will adjust development starts based on market demand and leasing performance, remaining flexible to market conditions [40][60] Question: How have initial targeted yields for new development projects changed over time? - Management stated that the threshold for new developments has risen by about 100 basis points due to higher construction and financing costs, but market rents have kept yields consistent [43][44] Question: What are the current trends in the industrial market? - Management highlighted that while there is a slowdown in some areas, overall demand remains strong, particularly in markets like Texas and Florida, with a focus on last-mile delivery and on-shoring trends [55][112]