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JACKSON, MS-Citing continued leasing success in two Texas markets, EastGroup Properties Inc. executives say they’re planning to start two developments, totaling $50 million, in the fourth quarter and early 2009. The REIT’s plans, economy permitting, call for a construction start on World Houston 30 and Alamo Ridge, a 41-acre project in San Antonio.

David H. Hoster II, EastGroup’s president and CEO, says World Houston 30 will be a spec front-park, rear-load in the 1.9-million-sf World Houston International Business Center at the junction of Vickery Drive and World Houston Parkway. “We have almost no vacancy left in that type of product there,” says Hoster during EastGroup’s earnings call. “We have 14% vacancy in World Houston 24. Everything else with that prototype is completely leased up.” He adds that it made sense to build a spec structure, given the environment and demand for space at World Houston.

Plans for Alamo Ridge on Culebra Road and Loop 410 in San Antonio is not, however, quite so clear cut. During Q3, the company sold 41 acres of the property, leaving about 30 acres for its use. “We haven’t determined if we’ll break ground on Alamo Ridge fourth quarter of this year or early next year,” Hoster says.

Hoster says both Houston and San Antonio are showing success in leasing, which increases the confidence level in both markets. “We’re comfortable with the project yields on both projects,” he adds.

The company also has 130 acres under contract in Orlando, FL, which could hold up to 1.2 million sf of industrial product. Hoster says the land is “an unusual buy, a tremendous location with miles of frontage along the beach boulevard.” He continues that the company was able to negotiate an attractive price and rate structure on the acreage due to market conditions.

Overall, Hoster and CFO N. Keith McKey anticipate there will be less development in the coming quarters in the REIT’s markets. Hoster points out that the company works on phased developments so the preference is already-built structures will need to be at least 75% leased or higher before more space is added. “We need to have a certain comfort in the market,” he points out.

The Q3 results saw a high renewal rate portfolio-wide, reflecting “that our customers don’t want to make changes,” McKey says. “The bad news is the same customers have a whole lot less interest in signing long-term leases in new buildings.”

Third quarter figures showed 75% of the signed leases were renewals and 8% were new tenants. The average lease length is 4.8 years, with the average tenant improvement at $1.68 per sf for the life of the lease.

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