David Hoster - Chief Executive Officer Keith McKey - Chief Financial Officer Marshall Loeb - President Brent Wood - Senior Vice President.

Jamie Feldman - Bank of America Merrill Lynch George Auerbach - Credit Suisse Vance Edelson - Morgan Stanley Brad Burke - Goldman Sachs Brendan Maiorana - Wells Fargo Ki Bin Kim - SunTrust Robinson Humphrey Alex Goldfarb - Sandler O'Neill John Guinee - Stifel Manny Korchman - Citi Ross Nussbaum - UBS Dillon Essma - Green Street Advisor Craig Mailman - KeyBanc Capital Management.

Please standby, your program is about to begin. Good morning. And welcome to the EastGroup Properties First Quarter 2015 Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, you will have the opportunity to ask questions during the question-and-answer session.

[Operator Instructions] Please note this call maybe recorded. I’ll be standing by, if you should need any assistance. Now it is my pleasure to introduce David Hoster, CEO. Please go ahead, sir..

Thank you. Good morning. And thanks for calling in for our first quarter 2015 conference call. We appreciate your interest in EastGroup. In addition to Keith McKey, our CFO; Marshall Loeb, President; and Brent Wood, Senior Vice President will be participating on the call.

Since we will be making forward-looking statements today, we ask that you listen to the following disclaimer covering these statements..

The discussion today involves forward-looking statements. Please refer to the Safe Harbor language included in the company's news release announcing results for this quarter that describes certain risk factors and uncertainties that may impact the company's future results, and may cause the actual results to differ materially from those projected.

Also, the content of this conference call contains time-sensitive information that's subject to the Safe Harbor statement included in the news release is accurate only as of the date of this call.

The company has disclosed reconciliations of GAAP to non-GAAP measures in its quarterly supplemental information, which can be found on the company’s website at www.eastgroup.net..

Thank you. The first quarter continued EastGroup’s strong earnings momentum. Earnings from operations per share met the upper end of our guidance and represented a 6.1% increase as compared to the first quarter of last year. We achieved quarter end occupancy of over 96% for the third consecutive quarter, which exceeded our internal expectations.

Same property cash net operating results were positive for the 16th consecutive quarter. And we continued to expand our development program, which has been a major value creator for us for many years. At quarter end, we were 96.2% occupied and 97.0% leased.

As a result, we have extended our record of occupancy at 95% or above for the seventh consecutive quarter and we expect this trend to continue through each quarter of 2015. As of March 31st, our California markets continue to be our strongest at 98.6% leased, followed by North Carolina at 97.7% and Texas at 97.0%.

Houston, our largest market with over 6.2 million square feet was 97.2% leased and 96.4% occupied. In the first quarter, we renewed or signed early renewals for 1.9 million square feet and signed new leases on another 208,000 square feet of the expiring space.

We also leased $360,000 square feet that either determining at early during the quarter or was vacant at the beginning of the quarter. In addition, we have leased and renewed $205,000 square feet since the end of the quarter.

For the quarter, GAAP rent spreads were up 11.1%, which was the eighth consecutive quarter of being positive, while cash spreads were up 3.5%. Looking at just renewal leases, GAAP rent spreads have been positive for 12 straight quarters and cash spreads have been positive for five of the last six quarters.

The weighted average lease length was 4.0 years, which is in line with our recent results. Tenant improvements were $1.16 per square foot for the lease term or $0.29 per square foot per year of the lease, which is about a third below our recent average.

As a result of our continued strong occupancy and improving rent spreads, first quarter same property operating results increased 4.4% on a cash basis and 2.9% on a GAAP basis. We expect same property results to continue to be positive for both categories for each quarter of 2015.

But they will be lower due to the large termination fees received in 2014 and also because occupancies for same property comparisons were above 96% for the second half of the last year.

Overall, leasing activity continues to be good in all our major markets and we are especially encouraged by the increase demand from smaller users in the 15,000 to 25,000 square foot range. On a quarter-to-quarter basis more specifically, we are experiencing increase prospect activity in all of our Florida markets.

Since the price of oil and its effect on Houston's industrial real estate markets has been a major topic of discussion. We thought it would be good for Brent Wood to make some comments on Houston. For anyone who does not know Brent.

He is one of our three regional Senior Vice President and he is based in our Houston office with responsibility for all EastGroup’s operations in Texas.

Brent?.

Good morning. I want to begin my comments with reminder of the strength of the Houston economy as we were faced with the certain drop in oil prices late last year.

Since the bottom of the recession, the city has added 465,000 net new jobs, or nearly three times the jobs lost during the recession, including 105,000 new jobs in 2014 and Florida growth is expected to slow this year, but economist are still projecting 30,000 to 50,000 new jobs for 2015. Houston’s February unemployment rate fell to 4.3%.

Population growth has been equally impressive, adding 500,000 new residents and the 38,000 new residents in 2014. This momentum has helped offset the immediate impact of lower oil prices within industrial markets specifically showing some resiliency through the first quarter of the year.

The vacancy rate was 10 basis points lower to 4.9% even with 1.5 million square feet of new development space being delivered. That was the result of 2 million square feet of positive net absorption during the quarter.

Although market fundamentals remain favorable, there is some impact being felt in the market as a result of the uncertainty in the upstream old markets. Today, this has primarily been a slowdown in deal velocity. As demonstrated in the first quarter, lease transactions are still getting done but the respective tenant holds seems to have less debt.

As you might expect, this has felt most in the newly developed buildings where owners including us are being more aggressively spaced. This has resulted in free rent in centers in equation again but on a moderate level thus far. From an operating portfolio standpoint, conditions remain stable for most high quality institutional portfolios.

This holds true for each group. Our operating portfolio finished the quarter above 97% leased and rents were up 6.8% on a cash basis and 14.4% on a GAAP basis. Just as last quarter’s rent decrease was not a trend, the same is true this quarter as numbers on a quarterly basis can be easily swayed by individual transactions.

In the near term, we expect cash rents to be relatively flat while GAAP spreads per single digit positive result. Our original projections for Houston showed 2.5% decrease in same-property operating results. Our revised number improved to 1.8% decline.

We continue to see prospect activity at our development projects where it is consistently we enjoyed over the past several years. With current levels of activity, we believe that our projects will continue to enter the portfolio substantially leased during our budgeted 12-month lease-up period.

As always, our direct results in on the ground feedback will dictate the potential for future new project starts.

As previously reported, we started construction of three development projects in the first quarter with a total 282,000 square feet and total projected cost of $20.6 million, Kyrene 202 building VI in Phoenix and West Road IV and World Houston 42 both in Houston. A 94,000 square foot World Houston 42 is 100% pre-leased.

Also during the quarter, we transferred four buildings with 333,000 square feet and a total combined investment of $23.5 million ended fourth quarter. Horizon I in Orlando, Kyrene 202 II in Phoenix and Steele Creek II and III in Charlotte, they are currently 84% leased.

In April, we initiated construction of two additional developments, Horizon III in Orlando with 109,000 square feet and Oak Creek VIII in Tampa with 108,000 square feet which is 100% pre-leased. They have a combined projected investment of $15.3 million.

As of today, our development program consists of 21 projects with 2 million square feet and a total projected cost of $144 million. For the full year 2015, we hope to start a total of 1.7 million square feet of new development with combined investment of $122 million.

These projections include just two additional buildings in Houston at our World Houston Park. We did not have any operating property acquisitions in the first quarter and currently do not have under contract to purchase.

In January, we sold a small parcel of land in New Orleans for $170,000 and recorded a gain of $123,000 which was included in first quarter FFO. In April, we sold the last of our three Ambassador Row Warehouses in Dallas, which had 185,000 square feet for $5.3 million. We expect to record a gain of approximately $2.9 million in the second quarter.

Keith will now review variety of financial topics, including our updated guidance for 2015..

Good morning. FFO per share for the quarter was $0.87 compared to $0.82 for the quarter last year, an increase of 6.1% and was $0.01 above the midpoint for our guidance. The $0.01 increase was primarily due to better net operating income from occupancy. We also lost $0.01 per share from bad debt.

Bad debt expense for the year in 2014 was virtually zero compared to $355,000 for the first quarter of 2015. Three customers drove 75% of the increase and only 11% of this total relates to Houston.

And some bad debt net of termination fees reduced FFO by $294,000 in the first quarter of 2015, compared to an increase of $106,000 in first quarter of 2014. Our debt metrics remain strong. Debt to total market cap was 33.1% at March 31st.

For the quarter, the interest and fixed charge coverage ratios were 4.2 times, the debt to EBITDA ratio was 6.5 times and the adjusted debt to adjusted EBITDA was 5.9 times.

Our bank debt was $114 million at March 31st and with bank lines of $250 million, we had $136 million of borrowing capacity at quarter-end plus the accordion feature on our bank line.

In March, we paid off secured debt with the balance of $57.4 million and an interest rate of 5.5% and closed $75 million unsecured financing with an effective interest rate of 3.031%.

Due to both the weakness in the stock price in the first quarter and good existing debt ratios, we sold only 108,000 of shares -- $108,000 of shares in our continuous equity program. Our projections for 2015 still assumes sale of 50 million of common stock for the year.

Also in March, Moody’s affirmed EastGroup’s issuer rating of BAA2 with a stable outlook and Fitch ratings affirmed the company’s issuer rating of BBB with a stable outlook. In March, we paid our 141st consecutive quarterly cash distribution to common stockholders.

This quarterly dividend of $0.57 per share equates to an annualized rate of $2.28 per share. Our dividend to FFO payout ratio was 66% for the quarter. Rental income from properties amounts to almost all of our revenues so our dividend is 100% covered by property and net operating income.

And again we believe this revenue stream gives stability to the dividend. We have increased the midpoint of our FFO guidance for 2015 from $3.62 to $3.65 per share. This is a 5.2% increase compared to 2014 results. The $0.03 increase in the midpoint is primarily due to an increase in property net operating income.

We increased average occupancy from 95% to 95.8% and increased same property NOI from 1.1% to 2.0%. Earnings per share is estimated to be in the range of $1.28 to $1.38. Now David will make some final comments..

Industrial property fundamentals continue to be good and are actually improving further in many of our markets. Our development program is growing and our balance sheet is strong as just Keith just reported. We like where we are and what we are doing. We will now take your questions..

[Operator Instructions] And we’ll take our first question from Jamie Feldman from Bank of America Merrill Lynch..

Great. Thank you and good morning. I guess just starting out. I think you had commented that you are seeing particular strength in North Carolina, California and Florida and among smaller tenants.

Can you give us, kind of a bigger picture what you are seeing in the local economies there and as you are thinking about -- you raised your guidance once but what would kind of get you to even more positive through the end of the year and what you are thinking of those markets that could drive it?.

Well, it’s about all of the $0.03 increase and our raise in guidance is due to growth in NOI due to occupancy. And one of the big factors and being able to have little more confidence about that is that we reduced the amount of square footage maturing, culminating in 2015 from over 14% at year end to about 7.5% today, so we’ve almost cut in half.

We do see explorations by 2.2 million square feet, so that’s really where that confidence comes from. Higher occupancy obviously will give us increased opportunity for better results in the midpoint of our guidance.

But what we’ve done is, as you’ve seen from the press release is an increased average occupancy for the year, from just over 95% to 95.8%. So, I’m not sure how much room is left there. We have a goal of staying above 96%. But I’m just looking at stabilized results that stuff to do.

Before the last three quarters that we’ve had over 96%, I looked back the last 15 years and there was only one quarter previously where we were over 96%. So, we think that’s a -- look, where we are today is a pretty good accomplishment. As you mentioned, the markets have shown great improvement. Florida, recovery has trailed significantly.

Texas, I think a factor for giving Miami, which has been strong for a long time. The rest of Florida reduced as in-migration picking back up on a quarterly basis and tourism picking up, and a little bit of a pick up in housing. So we think that’s going to continue. Charlotte is going industrial base and not that much new property being built.

And I think we are the only ones with building what we call our business distribution building. So that’s helped us a great deal there. Phoenix is a market where large users dominated, coming out of recession three or four years ago. And now as I mentioned, it’s on the clearest run square.

Smaller users have picked up a lot and that’s why our occupancy there has improved. Hopefully that answers your question..

Yes. Thank you. And then I guess just a follow-up. Focusing on Texas and Houston specifically, I guess first question is we’ve been hearing more and more from brokers that there’s really been a split in the market between the east side and the west side of town. East side benefiting more from the gas and west side getting hurt more from oil.

I think your land and development pipeline is more on the west. I think most of the REIT development is on the west.

How should we be thinking about the bifurcation in the market?.

Let me start and then I will turn it over to Brent. The west side of town is not where really the decision makers live and you are over there to serve primarily the report and some of the petrochemical related operations. So if you’ve driven out there, it’s a very different environment than what you see in the rest of Houston.

But Brent, I’d let you give some specifics..

Yeah. Jamie, the blue collar job growth out there is certainly a positive for the city this year. I mean, that’s really the positive job growth that economists are talking about. That’s what’s occurring, that’s going to offset some of the white collar jobs lost on the west side.

But from an industrial perspective that’s limited impact, the port so far will move from where everybody lives, operates. It’s 35 miles or so from west side of Houston, inner west side of Houston out to the port and even further than that to some of the residential communities. So from most of the prospects, it won’t be out there, we will be.

As David said, port oriented, petrochemical oriented but it’s unattractive par we are sitting in terms of work and Chamber of Commerce events out in that part. But it’s a good economic driver but from an industrial standpoint, you are not going to see us or really any of the other players other than some bulk spec construction occur out there.

There is really not a barrier, density. There is a lot of land out there.

So, last thing I would say, we are at Houston, we are really against the line that I saw on your chart there right there at 59 above right of north and our tenants there like to access to their port obviously, but also the easy access that it provides there to the east side till the port.

So, we do have some of our freight forwarding tenants that bring in containers from the port and that type thing. But again, they can then go from there and go to the communities that they live in. Again, they are not going to operate those facilities out on the east side..

Okay. And then just a follow-up on that.

What are you seeing just in terms of access space in current lease space? So, is there a risk now we will see a lot of sublease come back because of unused capacity?.

We haven’t seen that so far, Jamie. It’s really the operating portfolios, ours included have been still highly leased, so not much out of space to speak up at all. It’s more -- just been the development space has been coming on line. People still are trying to fill that as we go and people are continuing to make progress through it.

As I mentioned, the prospect desk has just been more shallow but deals still getting made. The vacancy of north restricted up more than the other submarkets but that’s a direct correlation to where people delivered space. Those are the most desirable sub-markets.

So some of that development space that’s coming into the market has pushed out little bit but no subtenant space really on material rental to speak up..

All right. Great. Thanks. I appreciate it..

Thank you..

And we will go next to George Auerbach from Credit Suisse..

Thanks. Good morning. Brent, you talked about the slowdown in deal velocity and less depth in the pipeline.

Was wondering if you could maybe quantify for us how much lower the demand pipeline is today versus last year and if possible, split that between oil and gas tenants and work super driven tenants?.

George, let me plugged in my formal area and stay with it. It’s hard to put a number on it. Just from the overall prospect depth, just talking to leasing guys, the number of proposals we are putting out, it’s just less. I can’t say if that’s half as much or what. I mean, it’s a tight situation.

If you have a prospect for a space -- in your mind, if you don’t make that deal that you don’t have another gas standing behind him or before, maybe there was two or three that means that they struck 67% or anything. So it’s been slower but again, deals getting made.

There has been even oil and gas related prospects in the market and continue to be in the market. We’ve signed some of -- the deal we signed at World Houston 41 was an oil and gas oriented type group going in there for a training facility. We have one good prospect right now. They were in the market for 90,000 fees, they are a valve company.

They are now looking at 45,000 square feet. As an example, they lowered or less than their desired amount but they are still in the market to transact a deal at 45,000 square feet. I’m glad they did because at 90,000 square feet, we would have been in the hunt because we didn’t have a space. So it’s just slower. I can’t put a number to it..

I guess, Brent, you’ve been in the market a long time, so you think that tenant activity comes back just with oil price here sort of stabilizing in the 50, mid 50 range or do you think it needs to see oil higher for the tenant activity to come back?.

We are seeing activity. We are seeing now with the price, with the problem having just hit us very quickly towards end of the year. Certainly, if the price goes up, it’s going to benefit. But to open my comments with the -- I think people lose track at the four, five year, just dynamic the city has had.

So we are trying to find the place for 500,000 people to live, work, buy all their goods, a lot of new companies have relocated to Houston for the Texas in general, but Houston specifically for the business friendly environment.

And so at specific imposed, A, sort of positive job growth, I have been telling David as long the number done have a bracket own at the end of the year, I think the city will have some activity just from the metropolitan growth not -- and then if oil and gas comes back the sooner the better and that could be the impetus to push it further along.

But I think we will be okay through the end of the year in terms of loan activity..

Thanks, Brent. Just I guess one last question for David or Keith.

As you think about funding the development pipeline going forward, are there any thoughts changing the funding strategy to rely less on equity and more of that sales just given your stock is trading at 6.5% implied GAAP rate?.

Well, I will try to answer that first and Keith can add something is that we’ve in our own projections, if we issue no equity this year which I would be surprised if that occurred, if we issued no equity our debt to total market cap would still only be 35%.

So we are very -- because we have kept such a clean and strong balance sheet, it gives us tremendous flexibility going forward..

Great. Thanks, guys..

Thank you..

And we will go next to Vance Edelson from Morgan Stanley..

Terrific. Thanks. So for either David or Brent, could you talk about Texas beyond Houston? You’ve got the development starts in Houston and you also just bought property in San Antonio. So just painting a picture of overall bullishness.

So could you just give us a feel for whether there is any contagion at all from the price of oil across the state, or are other markets just moving along as if nothing has changed?.

Vance, the other markets are moving along as nothing changes. Then maybe even surprised to me that it just doesn’t -- has had any impact especially in Dallas, it’s a non-event to those guys there. It was at a conference, breakfast conference things couple of weeks ago and it’s just not the topic.

They are much more tied to Fortune 500 to the national economy with their more distribution type oriented market. We look within our own portfolio. We of course have the Houston supplemental sheet in here now. But in balance we have one oil and gas oriented tenant in our portfolio. In San Antonio, we have three.

And one of those three as at least we just signed within the past couple of months. San Antonio, you think because this proximity at Eagle Ford it might be more impacted, but it’s still so close to Houston that people didn’t put a duplicate operation in San Antonio, most of that activity went out into the oil field itself.

So those areas filling up small community out there, I am sure you’re feeling the impact of Midland to Destin, but outside of Houston it’s not been any impact we’ve seen at all in the market..

Okay. That’s great to hear. And then David I will give Brent a break and then move on to another region.

So you mentioned the California strength, could you comment on whether the West Coast port slowdown during the negotiations had any impact on business or whether that was really just a blip for you?.

Our customers out there tend not to be major distributors. They are distributing like in our other markets to the metropolitan area where they are located. And so we have not had any feedback.

I guess we did have one customer, whose business was hurt because they didn’t get their product in time, but other than that, nobody is going to change their plans as a result. I think that if it’s going to having an effect, it’s going to be out in the air -- further out in the Inland Empire and the big boxes that are distributing to large regions.

So it’s generally not our type customer..

Okay. Makes sense. And then one last question for me. You had a small profit on the land sale in New Orleans and you’ve also been actively acquiring land.

So can you give us a feel for how land prices are trending and then whether any markets throughout your regions are more heated than others?.

Well, until couple of months ago, I would say Houston was very heated, the price also doubled I guess from a couple of years ago, but it’s too early to tell right now what. There haven’t been enough the land transactions to be able to say that it’s still up there, it’s coming down.

The property that we bought in San Antonio we have been working on for two years and it was out of a land fund. So I am not sure that’s how to value that from the standpoint of prices going up. South Florida shot up. And that’s one of the reasons we have had trouble, great deal of trouble finding sites to grow down their through development.

And we are seeing in Orlando prices moving up also because their developers looking to come to that market..

Okay. That’s very helpful. Thanks, guys..

Thank you..

And we will go next to Brad Burke from Goldman Sachs..

Thank you. Good morning. I guess maybe same on the topic of land.

With the land purchases in the quarter, I wanted to get a sense of how well the land bank you currently have lines up with where you actually want to develop, maybe even some guide post on how we should think about land purchases going forward as a percentage to support development?.

That’s a hard one to answer because it’s changing every month or every quarter. For example we had not budgeted or projected any development in our Oak Creek project on southeast side of Tampa and the prospect came along and we’re able to do a pre-lease of -- 100% pre-leased of a building there. So we thought we’re planning a land now.

We are looking again to add some land in that sub market.

We’ve never seen to have enough land in the Greater Phoenix Metro area because that’s just an area where we’ve gotten smaller pieces like we just announced and are going to put one or two buildings on it rather than an entire park we did one there at Sky Harbor, but an entire park like we are trying to do in other markets.

So as demand changes, it changes how we look at it. But as I said before we are feeling, we are missing that on some what’s going on in South Florida and we certainly like to own more land there in Charlotte. We have additional land under contract to further expand our Steele Creek development. So it’s deal by deal..

Okay. I appreciate it. And I also wanted to touch on the continuous equity program. I think this is the least we’ve seen you issue in a quarter and over four years. So I wanted to know whether we should think about you had been more tactical in selling shares going forward.

And just wanted to get a sense of your conviction in the $50 million figure that you continue to guide today based on some things that you said today. It sounds like if you left conviction that you actually hit that number versus maybe a quarter ago..

Well, we did very little as Keith reported in the first quarter for two reasons. One was that the price dropped right after we thought about doing it. And secondly, we did and maybe even somewhere more importantly we weren’t buying anything. We sold the property and an awful lot of our development program is in the second half of the year.

So we didn’t feel pressure to do it. This is something we evaluate continually going forward..

Okay. I appreciate it. Thanks guys..

Thank you..

And we will go next to Brendan Maiorana from Wells Fargo..

Thanks. Good morning. Brent or maybe David, so I think you had in Houston three or four tenants that thought were around 300,000 square feet that were expected move out, Your role in Houston is down to 268,000 square feet from over 600,000 at the beginning of the year.

Did you address some of those? Or did those tenants that were the expected move outs hit in Q1, or are some of those still expected for the later half of the year?.

We’ve had some of that Brendan, roll through the numbers thus far and we’ve had some success backfilling some of that space. Of the 268,000, we still got about 143,000 square feet of known move outs. Of course, some of the other tenants move out.

But 143,000 amongst two tenants that will happen in the second quarter that’s reflected in our budgeted numbers, having that occupancy dip a little bit in the middle of the year as a result of that. So we work through a good portion of it and a little bit left to go..

Okay. Great. And Brent, I guess, given that you’ve got two projects that at least are as in the budget to start at World Houston.

I gather that means that you expect that the leasing activity on the two World Houston projects that are in lease about, still feels pretty good and you’d expect to get lease up before commencing construction on the two additional projects there?.

Yeah. We feel good about it currently. I mean, World Houston 39 is a building where 50% of the next lease we signed, it goes to a 100% because it was the two tenant, small cross start. In World Houston 41, we pushed almost 60%. I think one more lease there. We would be feeling good about that as well.

So, yeah, lease of each of those and we could see moving forward. We put that more toward the back of the year just being conservative hopefully. But at current levels if the market doesn’t slow more, we would hope to do that, that’s right around the corner in our largest part and so we still have that plugged into the numbers..

Okay..

And Brendan, some of our approach too is, if you can’t build the World Houston, you probably not going to build anywhere in the Houston market given its success in central location and quality of the park.

And I would add to that, that in our development numbers, we increase some, I guess $11 million or $12 million from our first quarter guidance and if we did not start either of those buildings, they wouldn’t effect this year much because at the end of the year as Brent said.

But also it would just reduce our number back to the original guidance we gave a couple of months ago. So, Houston development from starts has very little effect on FFO, if any FFO numbers for 2015..

Yeah. Understood. So just kind of my next question, just looking at the progression for the year, you guys did $0.87 in the quarter and you took a penny hit on bad debt expense, sort of net of that you kind of beat your own guidance and certainly were above the midpoint. Next quarter is $0.90. So it sort of implies back half of the year, $0.93, $0.94.

My recollection was the G&A, sort of higher G&A cost this year were kind of ratable throughout the year, throughout the quarters but it was higher in Q1.

So how much of that growth in earnings is driven by a drop-off in G&A in the back half of the year versus just better NOI progression and the development deliveries?.

In the first quarter, we had $4.5 million of G&A and you were correct. It gets ratable over the last three quarters about $3.8 million to $3.5 million in that range. $15.6 million, we’re projecting for the year, so it does drop-off from the first quarter..

Okay..

And as we reported in our previous calls, there is a transition expense in there, which will certainly go down next year, is part of Marshall coming in and my moving out..

Yeah. And so just last one, David, is kind of high level on the capital outlook or equity issuance or what have you. I mean, if your share price remained at, just call it $60 and you’re getting the kind of returns on the development that you get. I assume that you still think that issuance of equity at $60.

You are still creating value, growing earnings, if you’re moving that capital into development, is that a fair outlook?.

I would say, yes, absolutely. But I don’t want to put a number on where we might be issuing shares if when and if we do. But you’re correct, that’s one of the ways that we look at the decision..

Sure. Okay. All right. Thanks..

Thank you..

And we’ll go next to Ki Bin Kim from SunTrust Robinson Humphrey..

Thank you.

Could you put your lease spreads and the vintage of the lease spreads into some perspective? What is the average vintage of what was coming due in 2015 and what is expected to come due in 2016?.

We don’t report that individually because when we talk lease spreads, it gets very complicated because unlike of lot of other companies, we include re-leasing of space that has been vacant, could be one, two or three years.

And when we talk of lease spread, we compare today’s rent or the new customers rent today to the previous customers rent no matter how far back in time it was. And so those lease spreads on an individual quarter can be effective by which they can seize, we actually lease. We can talk later.

I’ll give you some long related examples about how that’s difficult to report. And that’s why in my prepared remarks, pointed out how positive they have been for renewal leases because that’s, I think a much better apples-to-apples comparison..

Okay. But maybe I’m asking in a different way. I mean, if you had to -- in your internal budget progressions for this year and I’m not sure if you guys work on it for next year as well.

But if you had to kind of draw a picture, it seems like we’re -- if I look at the trend of lease spreads, will there be new or renewal? It seems like we’re climbing up that camel’s hump rate.

So just curious, what does that -- if you reach that kind of really favorable vintage year or kind of mix of leases coming due, what does that kind of peak lease spread on the new or renewal basis? What does that number ultimately kind of look like? And where do you think, if the U.S.

industrial markets kind of settle out where they are today, in terms of like maybe a couple of percent of rent growth per year.

What is that kind of ultimate plateau of lease spread we should expect from your portfolio?.

That’s not a number we’ve tried to calculate. What I can tell you is some of our historical experience, you have to keep in mind is that when you look at cash rents that very large percent of our leases have build-in bumps then probably are averaging maybe two and three quarters percent, we haven’t calculated that exactly.

But you have to keep that in mind. If you look back at ‘06 to ’08 period, which as a recovery time, we work for cash. 8, 10, quarters in there, GAAP rents were up double-digit anyway from the high 9% to 16% or 17% in cash rents because of the bumps were not nearly as much. They were up from a couple of percent to 7% or 8%.

And it’s all on the timing of when they rule because all there were average lease length on vacant space and renewals is four years to average lease length in the portfolio as to about five and a quarter of years.

And so which leases are turning when and that’s not something we’ve tried to individually look at, we just budget each space each quarter on what we think is going to happen for the balance of the year in that space..

Okay, that’s it for me. Thank you..

Thank you..

And we’ll go next to Alex Goldfarb from Sandler O'Neill..

Good morning. Thank you for taking the questions. Brent, to continue the Houston theme I appreciate you being on the call. Can you just -- when we read in the headlines about the cut back in rigs and drilling and roughnecks.

Can you just talk about how that manifest into Huston industrial demand? And then specifically how that impacts your portfolio that way to kind of better understanding when we read stuff in the paper, how we can translate it to the market?.

Yeah, that’s a good question. It’s a tricky question because you picked up on a lot of the jobs and lay-off has been talked about have been in the old build itself. We haven’t seen the direct impact of that yet. Obviously all the leases don’t roll at one given time to where people readjust their square footages overnight. It’s obviously too early.

We’ve got a prospect. It was looking at more square footage and now they’ve down sized it. I will say there’s still a fair amount of oil and gas prospect activity that are still seeing their business grow due to the midstream and downstream industry, the petrochemical plants that are being built, the LNG plants.

There’s tens of billions of dollars of plants under construction along Louisiana, Texas coast. And we are talking early about blue cover job growth on these sides. That’s picking up some of the slack. It’s really picking up some of the workers that were in oil fields, they are going over to East Houston and working on these construction jobs.

So Alex, there’s not been an immediate that we would connect from saying hey they shut down as many rig, so extend this to our tenants. I am sure some are more impacted than others, but nothing that’s tangible that could give you quantitatively at this point..

So it doesn’t -- so overall your exposure to exploration type tenants is how much your exposure in Houston is for that versus other parts of the energy sector?.

I don’t really have a way -- we don’t have that broken down. It would -- I am not even sure we would -- knowing within each oil and gas particularly use or they may be doing a number of things, all the upstream, downstream.

Yeah I would say most of these oil and gas companies and they’ve had a very strong strength a year as most of these companies are in a very stable financial position for the most part because if you haven’t made money over the last five years in Houston oil and gas business, you probably deserve to go out of business.

So it’s not been this early in the process, a stress point for most of the companies in terms of that..

Okay.

And then a point of clarification, Brent, did you say you guys are now expecting Houston to be negative 1% NOI versus originally negative 5?.

Its negative -- it was negative a 2.3 or 2. -- it's 1.8, down 1.8 and without term fees its down just 0.3 for the year..

Okay, okay, you are just giving me actual -- okay that’s fine. And then next question is you -- David, you spoke about doing a lot of proactive leasing this quarter. Can you just talk about some of the ways you incented, I mean presumably you guys are always aggressive on the leasing front.

So was there anything different that you guys did this year more aggressive on rents or if this is normal that you guys are always being proactive on the leasing front?.

I think it is normal. I mean we didn’t have any change in strategy or memo from Jackson to the people in the field to give more concessions or get more aggressive. It’s just what we try to do everyday and leasing has just raised occupancy.

And it sounds stupid to say we raised occupancy and pushed rents as hard as we think we can in any given sub market and every lease is different. I think it’s a real positive that we are 96 plus percent occupied and that we are giving the results, we are.

And I think it’s a direct reflection of the quality of our assets and location of those assets and the states where we are operating where there is pro-business environments and above average growth in population and jobs..

Okay. I appreciate it. Thanks..

Thank you..

And we’ll go next to Erin Aslakson from Stifel..

Hi. I am John Guinee here. Two comments or two questions, one for David and one for Marshall.

David for the first time in four or five years on a national basis developments starts and industrial has declined for first quarter ’15? Do you think that was an abrasion, maybe weather-related or do you think supplies and check nationally?.

Maybe a little bit above, I would -- if I have to bet, I would say, it was an abrasion. But I think a certain amount of it is the local small time developer is having trouble, still borrowing money.

And so the developments that we see underway are the REITs who are well capitalized and regional merchant type builders that who attracted institutional money.

I mean, in Huston it is specific, sort of examples is, there are number of developers who bought a site, drew up plans and immediately are trying to pre-sale the building and that worked a couple of times.

Where an institution came in and was going to buy an empty building, and probably get a yield halfway between having to pay for new and leased up versus what you would get like we do it taking all the risks. And that has stopped very quickly in Huston because the institutions are backed off on taking that risk.

So, let’s look at that question again next quarter..

Okay. Great. And then, Marshall, first welcome you aboard. Congratulations..

Thank you..

And then, one thing that David has done extraordinarily well or the entire team of EastGroup has done extraordinarily well is keep G&A down in an era where G&A is going up egregiously? Do you think you can keep G&A at that sort of $13 million number going forward annually?.

Actually, I hate to commit to exact number this early on. I mean, I think, we’ve certainly well aspire to keep G&A at the level it is today or around that or certainly in check, anywhere the asset size goes or markets or any things like that.

But I admire the track record they’ve had on G&A run rates over the years and that’s something we’ll try to keep in check and inline with our industry..

And he gets rid of me next year so that’s the first big step..

Well, you could double your G&A and keep it inline with the industry, if that’s what you wanted..

That was a good idea..

Thanks for giving me a big runway..

Yeah. Dave, you better on retire. All right. Thanks a lot guys..

Thank you..

And we’ll go next to Michael Bilerman from Citi..

Hey. Manny Korchman here with Michael. If we think about the expirations in ’15, you took care of it in Huston.

It looks like a bunch of those were pushed on a short-term basis sort of a year to three years and some stuff further than that? How many of those from new leases or just shorter term and how many of them were renewals in place so to keep tenant or the space occupied?.

We had a couple of leases, I think, our [Technical Difficulty] good question, volume was low. But we had a couple of renewals that we did. You are right we are 14 months, I think we had a 23 months.

We noticed our energy related tenants that went basically down for this year, but the number picked up for '16, and that’s because we did renew one group 14 months and went to the next year. But that was just a couple examples. But for the most part, most of the transactions were in the typical three to five-year.

There were just a couple that were a short term in nature..

Were you driving them to be short-term or is the tenants coming to you and saying we don’t want to make decision now, let’s just sort of push it?.

No, I didn’t push any five-year leases. I didn’t ask major bank to the one. We were pushing as much as we could. Some of these tenants differed for a lot of different reasons, mainly that lesser term. The one oil & gas one that we did for short-term, actually FMC Technologies they’re building a campus and eventually going to move on to that campus.

But we are always pushing for as much term and as much as we get..

And then maybe the other one for Marshall, you’ve been on for I guess a little bit over a month now.

What have you seen that sort of surprised you with anything?.

A couple of surprises, I guess as I think about it. One have been the shareholder of the company for years and followed it and kept up with friends here. The quality of the portfolio surprises me. I mean, I'm still getting out, I’m seeing the number of the markets, next week I’ll see three more markets.

But the quality is actually as all expect what your expectations are is better than I expected. And I think as David alluded to earlier, you see that in the re-leasing spreads and in the occupancy. Another surprise, and maybe I don’t you’ve covered retail as well where there is a lower new development.

You read about the wall of capital, but seeing out this investing in industrial being out in Dallas last week. I said to David, you really see that wall for stand.

We are out -- we’re at a ParkView development is and there is just every industrial REIT, institutional owner owns the building, or has tied up land just a competitiveness on the acquisitions is probably pretty intense there.

And I think the other good news differentiating those is although there you see a lot of that development in Houston and in Dallas not all in -- thankfully not all industrial development is equal.

And that the majority of what we drove by is getting built, are they big box kind of Ballmer is one of our guys called them for the large single tenant users and that business distributions centers where we focused is really very little development being delivered there thankfully.

But there is a lot of money chasing industrial product which is good for a NAV and it’s hard on our acquisition fronts. So those have been probably the two big surprise.

I think the other non surprise which is great is things that was referred to you is the semi-insider coming back or semi-outsiders that the culture I left here years ago is still here intact and it’s made it fairly easy adjusting.

I have been here in month and it feels like two months, probably thing that, it’s been pretty easy in a moving car to jump into because of the people and the team there. So that’s kind of my, ask me again in the next quarter. But so far, those are my takeaways..

We will keep asking. Thanks, guys..

Thanks, Manny..

And we’ll take our next question from Jeremy Metz from UBS..

Hey, guys. This is actually Ross Nussbaum here with Jeremy. I don’t know who wants to take this one.

But David following the succession at the CEO position, we’ve received some questions from your investors regarding the CFO role and what Keith’s plans are for the future and how much longer he plans on sticking around?.

Well, I’m not nearly as old as David is. But I plan to be around for a while and we’re very well I think with Marshall and we’ve known each other for a long time. And so I expect to be here for a while..

Appreciate that. Well, I got you. The line of credit, you got about a $150 million out on you $250 million of lines.

What’s the game plan for terming out that at this point?.

We projected $75 million loan in the latter part of the year. The rates have been good all the year. But I don’t really see them going up that much. So I don’t think there is any urgent need for us to go ahead and get 10-year term right now. So we’ll probably stay with our plan of getting another 75 and above.

We’ve got $15 million of acquisitions, I guess, projected, which may or may not happen and we may have more than that. So depending on how that also plays as depending on how much capital we will need also..

Okay. And does the stock now being at 60, which is give or take toward the lower end where it’s been for last two year.

Does that influence at all? How you are thinking about that debt equity mix over the next year?.

We would like to get equity mix in there. No debt about that. And but we are in a good position where we can pick and choose the times that we get in. And as you saw in the first quarter, we thought there was weakness in the stock and we want to wait awhile on that. So we just have to play that as it goes along during the year..

Okay. And then last one, Marshall, I’ve got this one for you.

You have been at three different REITs and three different properties types in the last, what I guess, 15 to 20 years? I’m curious what lessons do you bring back to EastGroup from being at Parkway and Glimcher that you think having seen EastGroup operate a decade plus ago? Are there best practices that you've picked up from those organizations that you think can be implemented at EastGroup or is it plug and play?.

Gosh. That probably a longer conversation over a beer at NAREIT or something like that. I think EastGroup has proven to be a great performer over a long time and up and down cycles. So it is certainly not a turnaround situations where you come in with a meat cleaver and make wholesale changes, it’s continue to evolve.

Yeah, I hope those things I’ve learned, you earn things in every different situation, property type or context, I -- good friend had a sign over his desk, just said lease space collect rent. And so I think whether it’s resale or office or industrial, if we can do that good things follow whether it’s financing or stock price and things like that.

So, yeah, there is a lot of thing will gradually evolve or do that you hope you bring to the story or to the team. But I think those will -- I guess leading some of the analyst speeches, I would say, certainly the plans aren’t to make any major changes here, but if we also have to continue to evolve. And as Brent stated, we haven’t lost anyone.

We -- he remind it may we add Marshall. So I think my goal, if you say where is my stress, it’s really more to continue implementing the strategy as effectively as it has over the past 20 years.

And if we can do that and it will be a success and hopefully you bring some things you can blend into the team and they will grab me by the sleeve if I am off and/or they will be open-minded if I have, hey, have you guys thought of this..

Okay. And are you -- I appreciate that.

Are you relocated yet or are you commuting, how’s that playing?.

I’m relocated and have a house that’s mostly full of boxes still here in Jackson and have my former home. It’s available if you need a seasonal address in Columbus, Ohio..

I think I will end the call there. Thank you..

Thank you..

And we’ll take our next question from Eric Frankel from Green Street Advisor..

Yes. This is Dillon Essma with Eric.

We just wanted to touch on? Do you -- are you guys seeing -- are concerned with more supply in those markets that are starting to pick up more in Charlotte and Florida, I think in those markets?.

Well, that’s something we are always looking over our shoulder and worrying about. So far in Charlotte there is nobody else building our business distribution product in our submarket, what probably happen that, there has been big box development there and most of it in a whole different quadrant in where we are.

We are seeing some competitive development in Orlando. None in Tampa today, but that will probably happen. San Antonio, there is very little development going on and none where we are building and none of our products. So we are pretty optimistic within our different development markets at this point.

On thing I will say and I am saying this for probably year is that, as new supply does come online that our lease up periods and this is certainly going to be true in Houston. Our lease up period is going to probably take a little longer and maybe be the full 12 months that we pro forma for each development.

We have been spoiled over the last couple years with a lot of lease up during construction and as soon as the doors open. Traditionally multi-tenant industrial really doesn’t start to lease until the building is done, landscape exam, because it’s just a very different time schedule for prospects than it is in other property types..

All right. Thanks for that..

Thank you..

And we will take our last question from Craig Mailman from KeyBanc Capital Management..

Hey, guys. Not to beat that horse here on on Houston.

But Brent just want to go back to your comments about free rent coming back to the market, particularly in the new development side? But just what kind of free rent levels are today versus six months ago? And you have been there for couple of cycles, kind of how far behind there the rent declines that kind of the developers are going to start giving as incentives to lease up space if this is non-vacancy?.

Yeah. Well, the second part, here I would be curious to see it. I don’t know how much, one might be willing to compress their pro forma some and move rates down, trying to get deal. To date it has been more, as I mentioned on the pre-rent side. Pre -- let’s pre-end of the year before the oil price really dropped in November.

You probably had the token one or two months free, just to move the guy, have been justified moving expense.

Maybe that’s moved to three or four months and again if you had the right credit senior deal, let’s start staying maybe there will be a little more but that would compare say back in the recession where we might be six, seven months or certainly not to that level. It’s more as a care to try to lower someone over.

I mean, they have an empty bogie to give a few more months free. It’s easier to justify that and to see that guarantee cash flow. So it’s not really that makes progress with same people, gravitate that. But so from the rent side for the most part guys have held pretty firm..

I would add, when you have a development with a 12 months lease-up projection and you have a good prospect as you’re finishing construction, it’s not very painful to give somebody a number of months of free rent because they are still leasing during that 12-months pro forma period. So as when you get beyond that, it becomes painful if that occurs..

Right. And I guess, is there all the kind of comments you guys had together with just sold and lease velocity unless debts of the tenant pull and now guys are getting free rents. I would assume some less well capitalized developers than you guys or some of the other guys who have pension fund money maybe get a little bit worried here.

And I’m just -- we haven’t seen it yet and clearly that concern the market with oil prices not rebounding here. How long this is going to last and the rig count comments by Schlumberger today. Just -- I guess, we haven’t seen a crack at Houston yet. And it seems like things are still good today.

But it’s -- I guess, I’m just trying to get at when the people kind of get a little bit more worried and just direct cuts are coming?.

Our experience today is that with other -- with merchant building developers, with merchant builder developers that they are very reluctant to cut rents because they lose their promote. And so we haven’t seen that starting to happen yet.

Everybody has a different opinion, what’s going to happen at Houston but it seems that the people outside Houston are whole lot more worried about it than the lot of the people in Houston. And it’s just a couple summary closing comments on that. We tried to point out to people that Houston is not going to turn out the lights and shut the door.

I mean, it still has positive job growth and sure it has been probably the leading city with growth in the U.S. up to now but if it falls back and as Brent said, remains at all positive, we think we’re going to do very well Larry.

It’s not going to lead our FFO growth but it’s certainly going to be a contributor and we believe that the other cities that we’ve talked about already have picked up the slack plus some. And that’s how we can project higher FFO that we have. So sure, things have changed there.

They say nobody is turning out the lights and shutting the door and heading for the exits as some people in other parts of the country might be. Thank you. We appreciate everybody’s interest in EastGroup and calling in and we will be available for a while if we didn’t cover your questions.

You didn’t get a chance to ask one, please just give anyone, the four of us a call at the office. Have a good weekend..

And that concludes today’s program. Thank you for your participation. You may disconnect at anytime..