East Group Properties

East Group Properties



Table of content

CHAPTER I- INTRODUCTION4

Overview of the organization and your focus4

Statement of purpose6

Description of Situation6

Research question7

Hypothesis7

Major Descriptive Taskse8

Working Objectives8

Theoretical perspective8

Research contributes to the existing base of the knowledge9

CHAPTER II- LITERATURE REVIEW10

Introduction10

Review of Current Theory Or Literature13

eReview of empirical studies13

eEast Group properties , Recession and Changes in Behavior15

CHAPTER III- METHODOLOGY16

Research Methodology16

Data Collection16

Primary sources16

Secondary source18

Modeling the Relationship Between maintained success of East Group properties and Recession18

A Conditional VAR for East Group properties and Recession21

Methodology25

CONCLUSIONS37

References40

Appendices43

East Group Properties

Chapter I- Introduction

Overview of the organization and your focus

For 117 consecutive quarters, holders of East Group common stock have received a quarterly dividend. That is the equivalent of 29 years andone quarter. The Jackson-based real estate investment trust's latest quarterly dividend, announced by company March 5, is $0.52 per share. The overall real estate market - commercial and residential - has taken a serious hit with the downturn in the economy. The average time homes stay on the market has soared as prices have dropped. Commercial properties sit empty as the businesses that used to occupy them close their doors. East Group, though, is holding its own. Its 2008 fourth quarter/year filing with the Securities and Exchange Commission shows some encouraging numbers mixed with evidence of a struggling economy.

Funds from operations (FFO) for 2008 were $81.3 million, which represented a 5.8 percent increase from 2007. The fourth quarter of 2008 did see a decline in FFO when compared with the same period of 2007, down 1.2 percent on a $21.2-million total. The annualized dividend for 2008 was $2.08 per share, marking the 16th consecutive year of dividend growth. "I think we've fared fairly well because we have a strong and conservative balance sheet," said East Group president and CEO David Hoster. "Our debt is low, and we have had a conservative dividend policy over the years." East Group's occupancy rate did slip in 2008, particularly in the fourth quarter, and the company "expects it to keep slipping," Hoster said. In its latest filing with the SEC, East Group occupancy rate is 93.8 percent, with 94.8 percent of its properties leased. The customer retention rate came in at 77 percent. The customer renewal rate, Hoster said, can be attributed to the company's willingness to offer its tenants flexibility in their leases. With the large amount of uncertainty surrounding the exact state of the economy and the moving target date for its recovery, tenants are skittish about making a move to a different facility or committing to a long-term lease.

"That's what most of our tenants tell us - if we can give them a little flexibility with short-term leases, that will help them and increase the chances they'll stay with us," Hoster said. "That's something we've embraced, because prospects for vacancies are fewer than they have been (in the past)." The recession has also shifted who holds the most leverage in the commercial real estate market. Until the economy began to spiral, landlords held sway due to the high demand for their ...