EastGroup Properties, Inc. Q2 FY26 Earnings Analysis

- Full-year guidance for 2026 raised, with acceleration expected in the back half of the year, particularly in Q3 and Q4 due to speculative lease-ups kicking in then (Page 15, Staci Tyler). - Second quarter FFO growth projected at 6% over Q2 2025, with a ramp-up through the second half of 2026 (Page 15). - Speculative development leasing starts no impact in Q2 but contributing significantly in Q3 and Q4, supporting growth (Page 15). - Positive leasing momentum and strong demand across diverse markets; occupancy remains high though expected to slightly decline over the year due to natural turnover (Pages 11, 8). - Development yields and leasing velocity improving, with pipeline flexibility to accelerate new project starts as demand continues (Pages 13, 10). - 2027 earnings expected to exceed 2026, assuming successful lease-ups and sustained demand (Page 15).

- 2026 FFO guidance midpoint raised to $9.52 per share, a 6.4% increase over 2025 actuals and 30 basis points above initial guidance. - Strong same-property cash NOI growth expected at 6.2%, driven by rental rate increases and 96.4% projected occupancy. - Q2 2026 FFO estimated between $2.30-$2.38 per share, a 6% growth over Q2 2025. - Development leasing, particularly speculative leasing, expected to accelerate in the second half of 2026, supporting earnings growth. - Development starts increased to $265 million for 2026, with the potential for further upside. - 2027 earnings expected to be better than 2026, although specific guidance not provided yet due to timing. - Leverage flexibility and strong balance sheet position EastGroup well for pursuing growth opportunities.

- 2026 development starts guidance increased to $265 million, up $15 million from prior guidance, driven by a 100,000 sq ft pre-leased building expansion. - Construction commenced on 4 projects totaling 586,000 sq ft during Q1; 27% pre-leased. - New development sites in targeted infill locations remain challenging due to sourcing, entitlements, and zoning delays. - Development pipeline includes 775,000 sq ft of opportunity leasing from 2025 transferred projects. - Development yields have increased steadily; mix includes redevelopment (e.g., Dominguez accounting for ~50 bps in yields). - Potential for additional development starts beyond current guidance, possibly up to $300 million subject to market conditions. - Exploring value-add acquisitions (buying leased or vacant last mile shallow bay buildings) as a shadow development pipeline to increase development exposure. - Capital proceeds guidance for 2026 remains $300 million, a mix of debt and equity raised opportunistically. - Balance sheet flexibility with $675 million available capacity on credit facility to fund growth opportunities.

- EastGroup currently has $675 million available capacity on its credit facility with no balance drawn at quarter-end. - They issued $70 million in common stock in Q1 via their common equity offering program (at over $1.91 per share). - An additional $50 million in forward equity sale agreements remains available for issuance (at over $1.96 per share). - The company plans to remain flexible in evaluating capital sources, including both debt and equity, throughout the year. - They have $300 million in gross capital proceeds guidance for 2026, with a shift from 100% debt to a mix of debt and equity. - $140 million debt maturities are due later this year, and about $180 million in proceeds are yet to be sourced for the remainder of the year. - The balance sheet is strong with room to increase leverage to a target range of 4.5x to sub-5x debt-to-EBITDA, depending on market conditions.

- The company has several development projects, including 775,000 square feet of "opportunity leasing" from '25 development projects transferred into the portfolio. - Development starts guidance was raised this quarter, with current projections around $265 million, but potentially higher if market conditions are favorable. - There is a pipeline of developments active in 13 different markets, with leasing activity broad-based geographically. - About half of the 685,000 square feet of development leasing done year-to-date relates to data center suppliers. - The leasing velocity is expected to pick up, with examples of quicker-than-expected leases signed recently. - There is a potential "shadow development pipeline" from buying vacant buildings, which may reopen if demand continues. - Speculative leasing contributes about $0.04 to NOI guidance, mostly expected in the second half of the year, ramping up in Q4. - Some starts projected for second half have accelerated to first half due to tenant demand, e.g., Houston project.