HOUSTON-A lack of acquisitions and increased development were among the main topics during EastGroup Properties' second quarter earnings call. The 1.4-million-sf World Houston International Business Center took center stage with two projects breaking ground along with its leasing gains.
Senior executives from the Jackson, MS-based REIT told analysts and shareholders yesterday that the slow acquisition environment led to a stronger emphasis on development. In the Houston park, work has begun on a spec project, the 68,000-sf World Houston 22, and the 125,000-sf World Houston 22, a build-to-suit that will be taken down by Kuehne + Nagle early in 2007.
EastGroup president and CEO David H. Hoster II and CFO N. Keith McKey acknowledged that a lack of acquisitions nationwide wasn't due to a lack of product, but rather, location of available portfolios. "We saw a number of packages where there were multiple cities and would just bid on one or two," McKey said. "Generally sellers like to sell to a buyer who buys the whole package. We lost out on attractive properties that way."
Last year, the REIT managed to get some off-market deals plus "saw a number of good assets with unattractive mortgages that could be assumed," Hoster said during the call. "We're not seeing more assets right now with hair on them that might scare off other buyers."
Following the conference call, Hoster told GlobeSt.com that Houston has been a strong market for the REIT, proven by the lease-up of the 68,000-sf World Houston 21, which went on line three months ago and the preleasing of World Houston 22, which is two-thirds committed although it won't be finished for another six months. "We've been developing World Houston for several years, but since the beginning of this year, development is moving faster than we'd anticipated because of demand and based on the leasing success we've recently experienced," Hoster said.
As a result, several more buildings for the industrial park are in the pipeline, in various stages of design development and permitting processes. "We'd hope to start one more building before the end of this year," Hoster added.
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