JACKSON — In the last two years, Mississippi’s publicly-traded real estate companies have outperformed their peer groups and continued to be steady players in the rocky world of REITs — real estate investment trusts.
“Until three or four months ago, REITs had been out of favor for some time,” said Ashby Foote, president of Vector Money Management in Jackson. “There’s been a nice bouncing back as REITs are seen as a safe haven for market volatility. EastGroup and Parkway have fared very well, participating in that bounce back.”
Parkway Properties (NYSE: PKY) is an UPREIT, an umbrella partnership real estate investment trust, which invests primarily in commercial buildings in Texas and the Southeast. The company owns, or has interests in, nearly 50 office properties with approximately 6.9 million square feet of leaseable space, and targets acquisitions in central business districts and suburban markets.
Subsidiary services include property management to the UPREIT, including third-party clients, and the company employs approximately 170. In 1999, sales totaled $115.3 million, a 13.8% increase over the previous year. Net sales were $26.3 million, representing a 4% growth.
“We’ve continued to do well because we’ve maintained our focus,” said James M. Ingram, senior vice president of Parkway Properties. From 1995 to 1999, Parkway Properties was listed as the top real estate company in the S&P 500 for annualized total return, at 28.2%, according to a long-term performance report by Goldman Sachs Investment Research.
“Parkway is a small cap office company, predominantly in the Sun Belt, that has done everything right in our opinion for the past four years,” said Christopher Haley, director of First Union Securities Equity Research. “Management supports the stock individually, and it has one of highest growth rates of a large cap or a small cap company, at one of the cheapest valuations to earnings and growth.”
EastGroup Properties Inc. (NYSE:EGP) is a REIT that focuses on industrial properties, primarily warehouses and distribution sites in fast-growing areas in the Sun Belt, including Arizona, California, Florida and Texas.
With roughly 80 properties that have more than 16 million square feet of industrial space, another million square feet is under development. With growth through acquisitions of properties and other REITs, such as Meridian Point Realty Trust, which added 2.6 million square feet to the company’s portfolio, EastGroup sells its interests in office and residential property to focus on its core operations.
“As of June 30, the total return for EastGroup, with appreciation and dividend, was 21.2%,” said David H. Hoster II, president and CEO of EastGroup. “That puts us second in our peer group. Pacific Gulf is only ahead because they announced their liquidation and that ran stock up.”
EastGroup’s 1999 sales totaled $101.5 million, reflecting a 17.3% sales growth over the previous year, and reported net income of $38.4 million, a 31% growth, over 1998. The company employs 46.
“In the last two years, Parkway has been up 3% while the industry group is down 5%, and EastGroup, a broader real estate group, is up 5% over the past two years while the industry group is down 6%,” Foote said. “They’ve gone through a period where REITs were an under performing group, but in the past three months, they’ve done very well against the market because of the volatility we’ve seen in the broad stock market.”
Investors recognize EastGroup’s strategy that includes a long and steady track record of growth is working very well, said Hoster.
“With the volatility in high-tech stocks, investors are looking for high yield investments like REITs,” Hoster said. “It’s essential to look at the total return — price appreciation and dividends. Sometimes, people only look at price appreciation, which only takes it up to around 7%, but the dividend takes the total return much higher.”
Contact MBJ contributing writer Lynne Wilbanks Jeter at firstname.lastname@example.org or (601) 853-3967.