The second quarter numbers showed funds from operations at just above $20 million, same as last year, while customer retention rate was steady at 65%. Furthermore, the balance sheet benefitted from an influx of $24.6 million thanks to the issuance of 737,000 shares of common stock, while the company closed on a 10-year, $67 million mortgage with a 7.5% fixed interest rate.
Putting that together with no debt maturities requiring balloon payments through 2010 and only $8 million remaining in development costs, and EastGroup is in good shape "to take advantage of a number of attractive opportunities for the next 12 to 18 months, while maintaining a good balance sheet," said David H. Hoster II, the company's president and CEO.
One of those opportunities was a May acquisition of the 142,000-square-foot Arville Distribution Center in Las Vegas, NV, marking EastGroup's entry into the city. In the meantime, Hoster said the company has other acquisitions in the pipeline in Dallas and El Paso, TX.
"The seller we've seen to date are institutional, and it seems they have a variety of reasons for selling. There's no single thread through all of it," Hoster remarks. "There's been an awful lot of press about a great influx of properties to the market, but we certainly haven't seen it in industrial."
He acknowledges EastGroup has made offers on assets that came to nothing because of pricing. But the strategy is going to stay as it is. "We have our criteria and we stick pretty close to it. We've done that for years and it's worked fine for us," he comments.
In the meantime, leasing activity seems to be picking up. Hoster acknowledged what he's seeing in the market might be somewhat subjective, but his belief is that things are picking up because businesses can't put off making decisions any longer.
"They realize their companies aren't going to go broke, they'll be around, and now they're running out of time and have to decide what they need." Though this hasn't translated into a takeoff in occupancy, Hoster says he's grateful for the increase in velocity.
"We had the sense before that people were hiding under their desks, and the world was going to cave in on them," he said. "Now they're needing to make decisions."
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