EastGroup Properties

IThe business

EastGroup Properties builds, buys and rents warehouses. Not the giant ones that fill an Amazon network, but the small ones: buildings 200 feet deep or less, 24 to 32 feet high, cut into units of 20,000 to 100,000 square feet, with a truck court out the back and an office at the front.² A tenant might be a plumbing supplier, a parts distributor, a food wholesaler or a firm that ships to customers in the same city. It rents the space on a lease of a few years and pays a share of the taxes, insurance and upkeep.³ The company is a real estate investment trust, a REIT, based in Ridgeland, Mississippi, first organised in 1969, and run by its own staff: 103 full-time employees at the end of 2025.²

At 30 September 2026 it owned 569 properties in 12 states. With buildings still being built or filled, the portfolio was 66,997,000 square feet: 527 business distribution properties of 60.9 million square feet, 20 bulk distribution buildings of 5.2 million, and 22 business service properties of 0.9 million.³ The core markets are Texas, Florida, California, Arizona and North Carolina. The largest are Houston and Dallas, 9.5% and 10.9% of annualized base rent at the end of 2025.² The company has developed about half of what it owns.² At the end of 2025 the operating portfolio was 97.0% leased to tenants under about 1,700 leases, and no one tenant was more than about 1.5% of base rent.² Base rent, the monthly cash rent times twelve, was about $560M a year, which I get by dividing the $73.4M that expires in 2026 by its 13.1% share C (calculated).²

How it earns money

Almost all of it is rent. In the nine months to September 2026 the company took in $583.0M. Of that, $442.5M was lease income and $140.4M was variable income, mostly tenants paying back property taxes, insurance and common-area costs.³ Costs of running the buildings were $153.0M, so property net operating income, which the company calls PNOI, was $430.8M for the nine months and $147.9M in the third quarter.⁴ That is 74% of the quarter’s revenue C (calculated). Most leases are triple net, which means the tenant pays the building’s operating costs, so the owner’s main exposure is to empty space, because an empty unit pays nothing and the owner then carries its taxes and insurance.³

The profit per share does not come only from rent on what it already owns. It comes from three engines. The first is the rent increases built into each lease and the jump when a lease ends and the space is re-let. In the third quarter, new and renewal leases on 4.6% of the portfolio signed 36.3% above the rents they replaced, measured on a straight-line basis, and over the nine months the figure was 35.6% on 12.3% of the portfolio.⁴ In 2025 it was 40.1% on 15.1%.² The second engine is development: the company buys land, builds, leases and then keeps the building. The third is acquisition of finished buildings. I come back to both below, because they are why the company keeps raising money.

The lease schedule explains why the first engine runs for a while. At the end of 2025, leases for 13.1% of base rent were due to expire in 2026, 17.2% in 2027, 16.3% in 2028, 15.0% in 2029 and 14.4% in 2030, 76% over five years C (calculated).² By 20 October 2026 only 1.0% of base rent was still due to expire in the rest of 2026.³ If each lease that ends is re-let well above the old rent, profit grows with no new building at all. If the gap between old rents and market rents closes, that engine slows. The gap is already narrowing: 40.1% in 2025, 36.3% in the third quarter.²⁴

Where the building comes from

At 30 September 2026 the development and value-add programme had 21 projects of 4,061,000 square feet in 14 markets, with a projected cost of $636.7M, of which $251.5M was still to be spent. They were 25% leased by 20 October.⁴ Seven projects of 1,344,000 square feet moved into the operating portfolio in the first nine months, at a cost of $145.7M; they were 94% leased and are projected to earn a stabilised 9.4% on cost, or 7.7% without one redevelopment.⁴ Another $394.2M sits in land held for future building, enough for 11.2 million square feet.³ Starts for 2026 are guided to $390M, up from $179M in 2025, with acquisitions of $360M.⁴ That is $750M a year of new money against about $520M of FFO.

Buying finished buildings is the smaller engine. In 2026 it bought three operating properties for $148.1M in the first nine months. After quarter-end it closed on another $262M: three business distribution buildings in northeast Dallas for about $89M, one in the Dallas–Fort Worth airport area for about $30M, three in north Denver for about $95M and 24.9 acres of Miami land for about $48M.³⁴ It also sold two operating properties in the first half, in Fresno and Jacksonville, for $42.9M net, and recorded a $30.1M gain.³ That gain is in earnings and out of FFO.

The year so far

The nine months to September 2026 were stronger than the company had planned. FFO was $7.15 a share against $6.64 a year earlier, and $7.11 without a $0.04 insurance gain, up 7.6%.⁴ The third quarter was $2.45 against $2.27, up 7.9%, and $0.04 above the midpoint of what the company had guided.⁴ Same-property profit, which looks only at buildings owned throughout both periods, rose 6.3% in nine months on the straight-line basis the accounts use and 8.2% on a cash basis.⁴ The guide for 2026, without the insurance gain, has gone up three times: $9.40 to $9.60 in February, $9.42 to $9.62 in April, $9.48 to $9.62 in July and $9.58 to $9.64 in October.⁵³¹⁴ Occupancy ended September at 96.5%, but by 20 October it was 95.9% occupied and 96.7% leased.³ The dividend went up 12.9% to $1.75 a quarter, or $7.00 a year.⁴

IIThe moat

A durable advantage is a cost or a habit that a rival with money and talent cannot copy in a reasonable time. A warehouse is not hard to copy. Anyone can acquire land, hire a builder and put up a steel shell. So I ask a plain question: does EastGroup have anything that makes a building of its own earn more than the building across the road, or lets it add buildings more cheaply than others can?

I think it has four things, and each is real but limited. The first is land and location. The 10-K says the buildings are clustered near major transportation features, such as ports, airports and interstate junctions, in submarkets where it is hard to add supply.² Land near these junctions in growing cities is scarce, and the company owns $394.2M of it for later building.³ That is hard for a small rival to match, but a large one such as Prologis can and does.

The second is the product. Buildings of 20,000 to 100,000 square feet are rented to many small and mid-sized businesses. A single tenant is rarely more than 1.5% of rent, and about 1,700 leases are spread across 12 states.² A big-box warehouse can lose a third of its income when one customer leaves. Here, one tenant leaving costs a rounding error. The rent per square foot is higher too: the same-property average rental rate was $9.46 a square foot in the third quarter.⁴ Diversification is not the same as pricing power, but it lowers the downside.

The third is the cost of building. The company developed about half of its portfolio.² A building that costs $100 to build and earns $7.70 is a 7.7% yield on cost, against a 5% to 6% price for a finished building, and the seven projects delivered in 2026 are projected to earn 9.4% including one redevelopment and 7.7% without it.⁴ If that spread persists, each dollar built is worth more than a dollar. I treat it as the core of the advantage. It has a clear limit. The 10-K lists construction costs above estimates, from tariffs, high interest rates and labour, as a risk, and the spread falls as land and steel get dearer.²

The fourth is money. In February 2026 Moody’s raised the issuer rating to Baa1 with a stable outlook, and the company had debt of 14.6% of total market capitalisation and 3.2 times earnings before interest, tax, depreciation and amortisation on 30 September.³⁴ Its fixed-rate debt averages 3.43%.³ A rival with the same rating pays the same, so this is not unique. But the stock has been priced at a premium to the value of the buildings, and the company sells new shares at that premium, which lowers the cost of capital. I come back to why that is also a weakness.

Now the limits. The 10-K says it competes for tenants with nearby buildings and new development, that no single competitor is dominant in its markets, and that it may have to give concessions or pay for tenant improvements to win leases.² Concessions are rising. In the third quarter it signed 50 leases with rent concessions on 1,697,000 square feet, worth $5.4M over the lease terms, against 36 leases on 901,000 square feet worth $1.8M a year earlier. Over nine months the concessions were $16.7M against $6.6M.³ Most of that is free rent on new leases in new buildings, and it is not a warning on its own. But it is what a landlord does when it needs to fill space.

So I call this a narrow advantage that is wide enough to earn a good return on new buildings in markets where supply is limited, but not wide enough to let it set prices. What I look for is proof in the numbers: occupancy above 96%, rent increases on lease renewals, and development that leases up. It has had all three so far in 2026, and the next section tests that against its rivals.

IIIThe competitive advantage

The cleanest comparison is with the other large industrial landlords that report in the same quarter. Prologis is the world’s biggest, with a much larger and more global portfolio. Rexford owns small buildings in southern California. First Industrial is a US landlord of warehouses of many sizes. The table puts them side by side on the latest results and the 2026 guide.

Two things stand out. First, EastGroup’s operating results are at or near the top of this group. Its cash same-property profit is growing about as fast as Prologis’s guide, faster than First Industrial’s quarter, and Rexford is shrinking. Occupancy is 96.5%. Second, the price already says so. EastGroup trades at 20.9 times FFO, level with Prologis at 21.0 and well above Rexford at 16.2 and First Industrial at 17.5 C (calculated). Prologis has a far bigger and more diverse business and earns fees from managing other people’s money. I do not find a discount to the leader that pays me for the difference in size.

Rexford is the instructive one. It owns the same kind of small building, in a market with a very different supply story. Its same-property cash profit fell 1.1% in the third quarter, driven, it says, by higher rent abatement, lower average occupancy and higher bad debt.⁷ That is the shape of a downside for this product when local rents fall. EastGroup’s own footprint is mostly Sunbelt, where the supply has been heavier. In Jacksonville, where EastGroup acquired and sold in 2026, vacancy was 9.9% in the third quarter, up 2.6 points in a year, and in Charlotte, where it has projects, it was 9.1% with 3.0% of the stock under construction.³¹⁰¹⁶ In Dallas, its largest market, vacancy was 7.8% and 4.0% of the stock was being built.¹⁷ These are figures from Matthews, a broker, for all grades of building, not EastGroup’s, and its own occupancy has held. But they show that the Sunbelt is not short of supply.

Scale that shares

One more thing. EastGroup is small next to Prologis, which is the point of its strategy: it has 103 employees and spent $24.0M on general and administrative costs in 2025, 3.3% of revenue C (calculated).²⁴ A small team with local knowledge can move fast on a site that a big landlord’s committee would miss. But a small company also has to raise its own money, in public, at the market’s price. That is where the next sections go.

IVManagement

The people who run EastGroup are long-serving and mostly home-grown. Marshall Loeb, 63, has been chief executive since 2016. He started at the company as an intern in 1991, rose to senior vice president, left in 2000 to be finance chief of Parkway Properties, then president and chief operating officer of Glimcher Realty Trust, and came back as President in 2015.⁸ On 1 January 2026 the board made three appointments. Reid Dunbar, 50, became President; he joined in 2017 after twelve years at Prologis. Staci Tyler, 45, a certified public accountant who joined as assistant controller in 2007, became chief financial officer. Brent Wood, 56, with the company since 1996 and finance chief from 2017 to 2025, became chief operating officer.⁸⁹ John Coleman, 66, an executive vice president, intended to retire on 30 June 2026.⁸ On 1 October 2026 the board added two independent directors, taking it from seven to nine.¹⁸

The changes at the top are an internal reshuffle, not a new strategy. The former finance chief moved to operations, a long-serving accountant took over finance, and the chief executive’s old title of President went to a man who spent twelve years at the biggest industrial landlord. I like that the bench is deep. I cannot judge a person I have not met, and a new finance chief will meet her first equity raise in a market that has paid a premium for the stock.

How they are really paid

Loeb was paid $9.44M for 2025: $885,000 in salary, $2.34M in a cash bonus and $5.90M in stock, up from $7.12M in 2024 and $6.89M in 2023.⁸ The ratio of his pay to the median employee’s was 65 to 1.⁸ The other four named executives were paid $1.96M to $3.50M each.⁸ The pay is not what concerns me. The measures are.

The annual bonus has four company measures: FFO per share, growth in cash same-property profit, debt to EBITDAre and the fixed-charge coverage ratio. Each executive also has individual goals worth 20% or 30% of the award.⁸ The goals were set from the guidance in the 6 February 2025 release, and the company beat them: the corporate part paid 144% of target, 96% of the maximum.⁸ A target set from the first guide of the year is easy to beat when the company guides prudently. The stock awards run for three years. Seventy percent depend on the company’s three-year total return ranked against the members of the Nareit industrial index, and the other 30% vest with time over four years.⁸

What does that pay executives to do? To raise FFO per share, with a safe balance sheet. It does not pay anyone for the return on the buildings they put up, or for AFFO. FFO per share goes up when the company builds a warehouse with borrowed money and shares sold at a high price, whatever the building later earns, and it ignores the interest the company capitalises into the cost of development: $17.6M in the first nine months of 2026, 39% of all its interest.³ I do not say they build for the sake of the measure. The individual goals do include yields and PNOI on development projects.⁸ I say the pay allows it, and it is a reason to watch the capital record.

Their own money

Loeb reported 167,634 shares on 31 March 2026, worth about $34M at $201.00 C (calculated).⁸¹ Wood had 121,342 shares ($24M) and Coleman 101,489.⁸ All directors and executive officers as a group had 549,844 shares, 1.0% of the company, about $111M C (calculated).⁸ The proxy lists three holders above 5%, each from its own latest filing and with its own date: Vanguard at 12.4% (as of December 2023, and Vanguard has since said it no longer reports beneficial ownership at that level), BlackRock at 10.7% (March 2025) and Cohen & Steers at 5.3% (September 2025).⁸ Insiders have meaningful money in, much of it from restricted stock that vests, and it is a small share of the company. I did not check their trading in the Form 4 filings for this page.

What they did with the money, over a full cycle

I take 2016 to 2025 as the cycle. It includes a pandemic, the 2021 and 2022 boom in warehouse rents, and the 2023 rate shock. In those ten years operating cash flow added up to $2.66B. Dividends took $1.57B, development $2.88B, purchases of buildings $1.14B, and improvements to existing buildings $0.42B C (calculated).¹³¹² To pay for the gap the company sold $2.72B of new shares, and its debt rose with them.¹³

I draw three conclusions. First, they paid shareholders very well. The price and dividends together returned 15.7% a year over the decade, and FFO per share compounded at 9.3% while the share count grew 60%.¹¹³ That is growth in the thing that matters, per share, through a decade that included a high-rate shock. Second, they sold shares when the price was high and slowed when it was not. Share sales were $273M in 2021, when the stock paid 32.5 times FFO, then $76M in 2022 when the multiple fell to 22 times, then $692M and $718M in 2023 and 2024, with the multiple near 21 times.¹³¹ Selling stock above what the buildings are worth is exactly what an owner wants a manager to do, and the company has done it at an average of $191.46 a share in 2026, with forward sales at $199.00 to $202, against my base value of $166 E (estimate).³ Third, selling shares only helps owners if the money earns more than it costs. The company says the seven buildings it finished in 2026 are projected to earn 9.4% on cost, or 7.7% without one redevelopment, which is well above a 3.7% AFFO yield on its own stock.⁴ I could not check those yields against the books, and a projection is not a result.

A word on the market’s own scorecard. The 10-K’s five-year performance graph, to the end of 2025, shows $100 invested at the end of 2020 growing to $148.98 with dividends reinvested, against $137.82 for the FTSE Nareit equity REIT index and $196.16 for the S&P 500.² That is ahead of REITs and well behind the market. It is the honest summary of a good, not spectacular, stretch that started from the peak of 2021.

VFinancials

A property company’s accounts hide as much as they show. Net income is struck after depreciation, and depreciation here is a fixed schedule over 40 years, not a measure of what it costs to keep a warehouse earning. It was $216.7M in 2025, and a building that is well kept in a growing city usually gains in value.² So no one values these companies on earnings. They use funds from operations, FFO, which adds depreciation back and leaves out gains and losses on sales. EastGroup reports FFO and nothing beyond it. It does not publish AFFO or a figure for recurring capital spending. I want a third step, which I call AFFO, adjusted FFO: what an owner could take out after keeping the buildings leasable. Mine is an estimate.

Why not plain earnings

Earnings per share were $4.87 in 2025. FFO was $8.95. The difference is 84% of earnings, and almost all of it is depreciation C (calculated).⁵ Over the last four quarters earnings were $5.90 a share, which is $1.27 for the fourth quarter of 2025 plus $4.63 for nine months of 2026, and $0.65 of that is gains on selling buildings and land.⁵⁴ Price over those trailing earnings is 34.1 times C (calculated). That number tells me almost nothing, because it is mostly accounting. Price over FFO is 20.9 times the 2026 guide C (calculated). That tells me more. But FFO leaves out the money spent to keep buildings leasable, a real cost every year, so I go one step further. The table walks through it.

The $1.75 is the number I can least see. The company does not call any of its spending recurring. I take two things it does report: real estate improvements, which are roofs, parking lots, building work and tenant improvements, and capitalised leasing costs, mostly commissions, on new and renewing tenants in buildings it already has, leaving out the part tied to development.³² In the first nine months of 2026 those added up to $43.6M plus $22.0M, or $65.6M, which is $87M a year at that pace. In 2025 they were $75.8M plus $34.8M less $8.0M of development leasing, $102.6M. In 2024 they were $84.4M. Per square foot of the operating portfolio that is $1.39, $1.67 and $1.43.²²⁰³ The 2026 pace is light, with real estate improvements down 26% on a year earlier, and I do not trust one light year. I use the three-year average of $1.50 a square foot on 62.9M square feet, or $94M, and show a range from $1.30 to $1.70 E (estimate).

The result is about $7.46 a share, 22% below FFO. That gap is much wider than it would be for a warehouse owner with long leases and big tenants, and it is the cost of the small-unit model. Many small tenants mean many leases, and each new lease costs a commission and some fit-out. It is also what a lot of the 36% rent increase pays for. Two more items sit outside both measures, and they matter for what an owner can take out. The company capitalised $17.6M of interest and $6.8M of its own staff costs into new buildings in nine months, about $0.60 a share a year C (calculated).³ That is a fair way to account for a building under construction. But if the company stopped building, that interest would become an expense, and FFO would fall by that much unless it paid down debt.

Ten years

The chart shows the pattern, and it is a good one. FFO per share rose every year, from $4.02 in 2016 to $8.95 in 2025, and the company guides to about $9.61 for 2026 R (reported).¹²²⁴ The growth rate from 2016 to 2025 is 9.3% a year. It was steady, not the result of one boom: the yearly rise ran from 6.0% to 14.9%, and was 7.9% in 2024 and 7.7% in 2025.^{12221923242511202}

Same-property profit tells the same story from the buildings. It grew between 2.1% and 3.8% a year from 2016 to 2020, jumped to 6.8%, 7.2% and 6.6% in 2021 to 2023 as warehouse rents ran away, slowed to 4.8% in 2024 and recovered to 7.0% in 2025.^{12221923242511202} Over nine months of 2026 it is 6.3% on the straight-line basis and 8.2% on cash.⁴ It has not gone negative in this decade. That is what you would want from a landlord with lots of tenants. The years that mattered were the ones when rents were rising faster than costs, and the question for the next ten is what happens when they are not.

The dividend is $7.00 a share at the current rate, after a 12.9% rise in the third quarter.⁴ It was $2.44 in 2016 and $5.90 in 2025.¹³ In 2025 it was 66% of FFO, and at $7.00 against 2026 FFO it is 73% C (calculated). On my AFFO it is 94%. A company that pays out nearly all of its AFFO has no retained cash to grow with, so growth comes from outside money. The company has increased or held its dividend for 34 years and raised it in each of the last 15.⁴

Operating cash flow was $480.7M in 2025. Dividends took $302.5M, so $178M was left. The company spent $321.9M on development, $143.1M on buildings and $75.8M on improvements, plus $34.8M on leasing commissions.² The gap, about $400M, came from selling shares and borrowing. That is the model, in a number: EastGroup returns most of its cash, then raises new money for growth.

Over the ten years shares outstanding rose from 33.3 million to 53.3 million, and the company sold $2.72B of stock.¹³ In nine months of 2026 it sold 365,620 shares directly at an average $191.46 for $69.3M. It also agreed, through forward contracts, to sell another 3,443,388 shares at an initial average of $201.88; at 20 October they stood at $199.00 for net proceeds of about $685M, to settle between February 2027 and February 2028.³ A forward contract fixes the price now and delivers the shares later. It is cheap capital while the stock stays high. It is also a promise to sell 6.4% more shares (6.4% of those outstanding), and I count them in my values.

Debt is modest. At 30 September 2026 the company owed $1,615M of term loans and notes at an average 3.43%, either fixed or swapped to fixed, and $196.5M on its bank lines at 4.64%, due July 2028.³ Debt was 14.6% of total market capitalisation, 3.2 times EBITDAre, and interest and fixed charges were covered 14.7 times.⁴ Moody’s raised the rating to Baa1 in February 2026.³ Credit is not a threat. The cost of refinancing is a small drag. The loans maturing through 2030 are $140M at 2.49%, $175M at 2.64%, $160M at 3.04%, $155M at 3.88% and $300M at 3.83%.³ In November 2025 the company fixed two new term loans at 4.11% and 4.15%.³ If all $930M is replaced at 5.0%, interest rises about $16M a year, or $0.30 a share, about 3% of FFO, over four years E (estimate). A $100M loan at 1.98% was repaid at maturity on 10 October.⁴

The price tells its own story. In November 2016 the market paid 16.2 times FFO, the lowest in my data, and at the time the ten-year Treasury yielded under 2%. In October 2021 it paid 32.5 times, the peak. Today it pays 20.9 times the guide, with the ten-year at 4.90% C (calculated).¹²⁶ The median of the ten Octobers is 21.2 times. So the stock is about as dear as it has been on average, in a decade when rates were a good deal lower than they are now.

Here are the numbers, ten years in one place.

VIValuation

Start with what would go wrong

Before any numbers, I ask what would most likely make this a bad investment from here, and work back from that. For EastGroup the buildings are not the most likely problem. The price, and what the company does to keep growing at that price, are. Here are three ways it goes badly wrong, in the order I think most likely.

1. The multiple falls and the growth machine slows with it. The stock trades at 26.9 times my AFFO. The company grows FFO per share by building and acquiring with money from selling stock at that price. At $201.00 each $360M of stock costs 1.8 million shares. At $140 it costs 2.6 million, and my base growth of 6.0% a year becomes 4.6% E (estimate). With no outside money at all it is 3.8% E (estimate). So price and fundamentals are linked: a lower price slows the growth that justifies a higher one. If my base AFFO comes through and in 2036 the market pays 20 times it, the return from $201.00 is about 6.1% a year with dividends E (estimate). That is only 1.2 points above a Treasury. Nothing has to break for this to happen.
2. Sunbelt supply and the end of the rent catch-up. The 36% jump on renewals is the gap between old rents and today’s. It is already narrower than 2025’s 40%. Jacksonville’s vacancy is up 2.6 points in a year to 9.9%, per Matthews, Charlotte’s is 9.1% with 3.0% of its stock under construction, and Dallas has 4.0% under construction.¹⁰¹⁶¹⁷ The company’s own pipeline is $636.7M and 25% leased.⁴ Each point of yield on that cost is $6.4M a year, or $0.12 a share C (calculated). If the buildings lease at 6% instead of 8%, that is $0.24 a share, about 3% of AFFO. If same-property growth slows from 7% to 3%, base growth loses about 2 points a year E (estimate).
3. Rates go up, or the window shuts. Cap rates in the Matthews broker reports I cite, which are third-party estimates and not filings, are 6.0% to 7.2%, above the 5.75% I use for the base value.¹⁰¹⁶¹⁷ If EastGroup’s buildings trade at those averages the base net asset value is nearer $144 than $165. A shut equity window would stop acquisition and development funded by shares, and the company would be left with its $930M of cheap debt maturing by 2030 and the $0.30 a share it costs to replace it E (estimate).³

I can’t put honest odds on the second and third. I can show what the first does, and I do below.

What an owner can take out, and how far it is from reported earnings

The tables so far walk from earnings of $4.87 to FFO of $8.95. I take the further step to what an owner could pull out of the business without letting it run down. For 2026 that is $7.46 a share, with a range of $7.23 to $7.69 E (estimate). Earnings are $5.90 over the last four quarters, and $0.65 of it is gains on sales.⁵⁴ So the cash an owner can take is 1.3 times earnings C (calculated). A plain price-to-earnings figure of 34.1 makes the stock look dear. On AFFO it is 26.9, which is also dear. The gap between FFO and AFFO is 22%.

Stock pay is already inside these numbers, because FFO does not add it back. In 2025 it was $11.8M, or $0.22 a share C (calculated).¹³ I did not take it out twice. I did not take out the $0.60 a share of capitalised interest and internal costs either; it is the cost of buildings still being built, and I say so above.

What the price implies

The cap rate row needs a word. A cap rate is the building’s profit divided by what the building is worth. If I take the market value, add the debt, and subtract my values for everything that is not an operating building, the buildings are being priced at a cap rate of 4.8%. The brokers’ averages for the same cities are 6.0% to 7.2%, but those cover buildings of every age and vacancy, and EastGroup’s are newer and fuller. A gap of one point or more still tells me the market is paying for growth, not for the buildings. I show later what value that implies.

Reverse DCF: what the price needs

At my 8.5% hurdle, the price needs AFFO per share to grow 8.5% a year for ten years, to about $16.86 in 2036, and the dividend to grow with it C (calculated). FFO per share grew 9.3% a year from 2016 to 2025, so the number is not out of reach. But that decade had a pandemic boom in warehouse rents, two years of 13% to 15% growth, and shares sold at 25 to 32 times FFO.¹²²¹ My base has 5.0% a year after the refinancing drag, which does not reach the price. At a 7.5% hurdle the price needs 5.8% a year, between my base and my bull. So the verdict turns on the rate I require.

Where 6% a year comes from

My base case has AFFO per share growing 6.0% a year for five years, then 4.5%. That is below the 9.3% of the last nine years, so I owe a reason. The 6.0% has parts, and I build them from the company’s own numbers.

Why is that less than the nine-year history of 9.3%? Three reasons. Same-property growth was 6.6% to 7.2% in 2021 to 2023 and 7.0% in 2025, and I assume 4.5%, because the rent gap is closing and costs are rising. The company sold shares at 25 to 32 times FFO in the earlier years, and I use 21 times, so each dollar of growth costs more shares. And the base is bigger: $9.61 a share on 54 million shares is harder to grow than $4.02 a share on 33 million. The sharpest line in the table is the last one. Remove the outside money and growth is 3.8%. The business growing on its own is a good business. The business growing at 6% needs a market that pays for it.

The discount rate

I discount at 8.5%. The capital asset pricing model with the 4.90% ten-year Treasury and Damodaran’s 4.20% implied equity risk premium gives 8.6% on EastGroup’s beta against the market over 119 months, 8.9% over 60 and 8.1% over 36 C (calculated).²⁶²⁷²⁸ The three betas are 0.88, 0.94 and 0.76, from monthly price returns with dividends not added. All three land close to 8.5%, so I use it. A REIT with Baa1 credit has less business risk than its beta suggests, and more rate risk. I do not want my verdict to depend on a choice I can’t defend to the decimal. So I show the whole range below. At 9.0%, the dividend discount base falls from $154 to $141.

The other end matters too. The best alternative use of the same dollar is a Treasury note. The ten-year yields 4.90%, and the AFFO yield here is 3.7%, with growth on top.²⁶ An owner of the shares needs a reason to expect more than that, and growth is the reason; the yield is lower than the note. The closest comparison on this site is a REIT in a very different business, Extra Space Storage. Its page has an AFFO yield of 4.84%, a dividend yield of 4.02%, a price 25% above its base value and a base return of 7.0% a year. EastGroup’s AFFO yield is 3.7%, its dividend yield 3.5%, its price 21% above its base and my base returns 7.2% at today’s price. Both stocks trade above what I think the cash flows are worth. EastGroup’s growth is faster and its balance sheet is lighter, and it pays more for it.

Three ways to value it, and one rule

I value the company three ways and take the same weight from each. The rule is set before the numbers: bear, base and bull are the plain average of a dividend discount, a net asset value and a multiple of AFFO. None of the three is tuned to agree with the others.

The dividend discount is the cash an owner is paid. I take AFFO per share, grow it in each case, pay out 94% of it as dividends, discount at 8.5%, and add a value after 2036 equal to the dividend divided by the discount rate less growth. The net asset value values the operating buildings at a cap rate, buildings under construction and land at cost, and subtracts overhead, debt and other liabilities. The multiple method applies a price to AFFO taken from the stock’s own history. Each is a different way to be wrong.

Net asset value

This method asks what the buildings would sell for. It is the standard way to value a REIT, and its weak point is the cap rate. The company does not give one. I use 6.5% in the bear, 5.75% in the base and 5.0% in the bull. The broker averages I cite are higher, 6.0% in Dallas, 6.5% in Charlotte and 7.2% in Jacksonville, for buildings of every grade.¹⁰¹⁶¹⁷ I put the base below them because EastGroup’s buildings are mostly newer and full, and the market’s own cap rate on this stock is 4.8% E (estimate). I can’t observe private sale prices in a filing, so the grid shows what each rate gives. If the average Dallas rate is the right one, the base net asset value is about $157.

The multiple method, and the exit hidden in a discount

The multiple method asks what the market has been willing to pay. Over ten years of year-ends it paid 16.2 times FFO at the lowest and 21.2 at the median C (calculated).¹ The low was in November 2016, when the ten-year Treasury yielded 1.79%; the peak, in October 2021, came with a yield of 1.55%.²⁹³⁰¹ Today’s yield is 4.90%. FFO is 1.29 times my AFFO, so those become 20.9 and 27.4 times AFFO. I use 20.9 in the bear, the average of the two, 24.1, in the base, and the median in the bull. This method is generous to the stock. The low and the peak were both struck when the ten-year yielded under 2%, and today it is 4.90%. I leave the multiples as they were because I do not know how to adjust them.

A dividend discount has a multiple hidden inside it. When I stop in 2036 and capitalise the dividend, I am assuming a buyer then pays 16.0, 17.6 or 19.4 times AFFO in the three cases C (calculated). Today’s price is 26.9 times. That hidden gap is most of why the dividend discount sits below the price. Here is what the base case returns if the buyer in 2036 pays more.

Only the last row, a buyer in 2036 who pays what buyers pay today, returns about my 8.5% hurdle. That is the real bet in this price: not a faster business, but a multiple that stays where it is for ten years.

Three cases

My base case is EastGroup carrying on roughly as it has in 2026: same-property profit growing 4% to 5% a year as rents catch up, $600M a year of new buildings at about 7% on cost, funded by debt and shares at about today’s price, less the refinancing drag. That gives AFFO of $9.73 in 2031 and $12.19 in 2036, and FFO of about $11.88 in 2031 E (estimate). The bull case has same-property profit growing near 7% for five years, as it did in 2025, and new buildings earning more than 7%, with the drag small. The bear case has rent growth near inflation, occupancy slipping, and the equity window narrowing, so growth slows E (estimate).

What I can’t judge

Some inputs I can’t know, and I would rather say so than pretend. I don’t know how much of the capital spending is upkeep; I show a range from $82M to $107M. I don’t know the cap rate at which these buildings sell today, because deals are private and the company does not say. I don’t know whether the yields on the buildings now in lease-up will reach 7% to 9%, because 25% of them are leased. I don’t know how long the market will pay a premium for the shares, and that matters more than anything else on this page. I can’t judge how the new finance chief will use the balance sheet. Where I can’t know, I give a range and a reason.

Multiply it out

My base needs several things at once. Same-property NOI keeps growing 5% or more a year for five years: I would give that 45%. Rents on new and renewal leases keep rising by a third or more, then by a fifth: 60%. No Sunbelt supply glut or recession cuts occupancy below 94% for a year: 75%. Funding stays cheap: equity near today’s price and debt near 5%: 70%. Development earns the 7% to 8% yields it promises: 80%. Multiplied, that is about 11% E (estimate). They overlap, since good rents help every other line, so the true figure is higher, perhaps a quarter. And missing one doesn’t ruin the case. But the price needs more than my base. It needs all of that and a buyer in 2036 who pays today’s multiple. The odds are my guesses and are not used in the values.

Quality and price are two questions

How good is the business? Very good: 96.5% occupied, rents rising by a third on renewal, same-property profit up 6% to 8%, net debt at 3.2 times earnings, a dividend raised for 15 years running, and FFO per share that has doubled in nine years. How good is the price? Poor, on my numbers. At $201.00 the price is 21% above my base and 3% above my bull, and the dividend discount alone, the most direct measure of what an owner is paid, finds $191 even in the bull. A good business can be a poor purchase at the wrong price. On this evidence that is what this looks like. I say that knowing the stock has done what the history asks of it: it returned 15.7% a year over ten years. The question is the next ten.

The margin of safety

My margin-of-safety price is $116, 30% below my base value. At $116 the dividend discount returns 8.7% a year in the bear, 10.2% in the base and 11.5% in the bull C (calculated). The bear case at that price returns about my 8.5% hurdle. A 30% cushion is what I use for a business with predictable rents; here the multiple and the dependence on outside money argue for it. The price is 73% above it. The stock last closed below $116 in June 2020, and last closed below my bear value of $140 in October 2022.¹

VIIThe case for the price

What most people miss

EastGroup runs about 63 million square feet with 103 employees and spent $24.0M on overhead in 2025, 3.3% of revenue C (calculated).²⁴ Most of the cost is in the buildings and passes through to tenants. Next, almost no rent is left to roll this year: by 20 October only 1.0% of base rent was still due to expire in 2026, and 13.1% was up for renewal at the start of the year; leases signed in the nine months came in 35.6% above the old rents.³²⁴ And the balance sheet leaves room. Debt is 14.6% of market capitalisation and 3.2 times EBITDAre, at an average 3.43%, and the variable part is only $196.5M: a 10% move in its rate, about 46 basis points, costs $0.9M a year.⁴³

The bull case

In plain words: EastGroup owns the small buildings that growing Sunbelt businesses need, supply will thin out because building costs and interest rates make new projects harder to finance, and the company will keep building at yields well above what it costs to raise money. The company makes this case itself. In the October 2026 release Marshall Loeb said the team and the portfolio performed ahead of expectations, that the leasing market has been steadier than the headlines suggest, and that he is bullish on the outside trends that help its shallow-bay, last-mile, high-growth-market portfolio.⁴ Reid Dunbar said continued leasing gave the company the confidence to raise development starts to $390M for the year and acquisitions to $360M, backed by a strong balance sheet.⁴ The numbers behind it are real: the guide has gone up three times in 2026, and the dividend rose 12.9%.⁵⁴

I found no outside investor or analyst with a published, current view on EastGroup that I could check against a filing, so I name none. The proxy lists Vanguard, BlackRock and Cohen & Steers as holders above 5%, as last reported on dates between December 2023 and September 2025, but those are the positions of index and sector funds, and I do not read a view into them.⁸

Against reality

Much of the bull case is true today: occupancy is 96.5%, same-property cash profit is up 8.2%, and the guide has risen.⁴ My bull case gives it more, with same-property profit growing near 7% for five years and new buildings earning more than 7% on cost, and is worth $196 E (estimate). So if EastGroup hits that, the price of $201.00 is possible. It needs AFFO per share to grow 8.5% a year for ten years, or FFO of about $13.36 a share by 2031 against my base of $11.88 C (calculated). FFO per share grew 9.3% a year over nine years, and 7% to 8% in each of the last two.¹²²⁴

The stock closed at $175.06 on 4 November 2025 and $201.00 in Q4 2026, up 15%, while the guide for the year moved from $9.50 at the start of 2026 to $9.61 now, up 1%.¹⁵⁴ The shares closed at $223.38 on 16 July 2026, the highest close of the past year, and are 12% under the December 2021 high close of $228.56.¹ Most of the year’s rise in the price is the multiple. It may be right to pay it for steadier growth, and that is the argument. I count it as a risk.

What a 10x would take. Ten times $201.00 is $2,010 a share, about $115B of market value on today’s share count with the forward shares C (calculated). At the same 20.9 times FFO that needs about $96 a share of FFO, or $5.5B a year in total, against about $518M guided for 2026 C (calculated).⁴ In ten years that is a growth rate of 26% a year in the share price. A company worth $115B would be close to the size of Prologis today, which is about $127B at $131.36 a share on 968.5 million diluted shares C (calculated).¹⁴⁶ EastGroup itself rose 3.1 times in ten years, and FFO per share rose 2.4 times, with 60% more shares C (calculated).¹¹²⁴ This is a mature, rent-collecting business with a dividend that takes nearly all of its AFFO. A tenfold move is not plausible, and I would not build a case on it.

Where I come down

The third quarter moved me, and so did a guide that has gone up three times and a dividend that rose 12.9%. The price did not: it is up 15% over the year to the Q4 2026 close on a 1% change in the guide, and sits above my bull case. Same-property growth above 7% for several more quarters with leasing spreads holding near 30%, new buildings leasing faster than 25%, or shares sold at a price near my base value would raise my values, and so would a lower ten-year Treasury. My values stay at $140, $166 and $196.

VIIIRisks, and what would change my view

The three ways this goes badly wrong are at the start of Valuation. These are the rest.

• The pipeline. Twenty-one projects of 4.06 million square feet cost $636.7M, and $251.5M is still to be spent. They were 25% leased on 20 October.⁴ Another $394.2M is in land. The 10-K lists cost overruns, tariffs, lease-up delays and building moratoriums among its development risks.²³ A slowdown while the pipeline is half empty is what hurts most.
• Concentration. Texas, Florida, California, Arizona and North Carolina are the core markets, and Houston and Dallas together were 20.4% of base rent at the end of 2025.² The 10-K names hurricanes, floods and other storms among the risks, and says insurance may not cover all losses.²
• Small tenants. About 1,700 tenants means many small businesses. A recession can bring bankruptcies and leasing delays, and the 10-K lists both.² Rent concessions, now $16.7M over the nine months against $6.6M a year earlier, would grow first.³
• Taxes and insurance. Most leases pass these on to tenants, but empty space does not, and the company bears them there. Property taxes payable were $93.7M at 30 September against $14.7M at the end of 2025, a seasonal swing.³
• Leadership change. A new President, chief financial officer and chief operating officer started on 1 January 2026, and a veteran executive vice president was due to retire on 30 June 2026.⁹⁸ All are internal or long-serving. I cannot judge how they will act when the stock is not at a premium.
• Forward contracts. The 3.44 million shares under forward contracts settle between February 2027 and February 2028. The price adjusts for interest and dividends, so it is not a free option for the company.³
• Information. The company does not publish AFFO, a cap rate for its buildings or its recurring capital spending. My AFFO and my net asset value rest on estimates that I explain, and the answer moves with them.

What would raise my base value: the fourth-quarter report, expected in early February 2027, showing same-property growth above 7%, spreads near 30% and a 2027 guide near $10.16. What would lower it: a 2027 guide near $9.91, new debt priced above 5.5%, occupancy under 94.5%, or a pause in share sales at prices near $150.⁴