By TED CARTER
Leland Speed, a Jackson real estate icon who sold his first piece of raw dirt at 18 and never looked back, is stepping away from leadership of EastGroup Properties, the real estate investment trust he created nearly 40 years ago.
The Jan. 1 chairmanship handoff will go to David H. Hoster II, who joined EastGroup Properties 32 years ago and has led the publicly traded developer of warehouse distribution space as CEO since 1998.
“David has developed well over one third of the properties we own,” including 1.1 million square feet under construction from Florida to California, Speed said.
“David and I became associated in 1983 when our group of companies acquired Riviere Realty Trust in Washington, D.C.,” Speed said. “He was president of that trust. I asked him to move to Mississippi and join our group.”
The 83-year-old Speed noted he is handing the chairmanship to an executive whose tenure as CEO through the end of last year earned shareholders an average compounded annual return of 15.5 percent, an average Speed says beat Wall Street wizard Warren Buffet by one half of a percent over the same period.
Hoster’s term has also included continuation of what today totals 42 consecutive quarters of paying cash dividends, most recently with a Q2 dividend of 57 cents a share. The quarter also marked eight consecutive quarters of occupancy of 95 percent or more and four straight quarters of occupancy of 96 percent or more.
With Wall Street clobbering the shares of most all industrial real estate REITs, the Jackson-based EastGroup’s shares have had a mostly down year so far. “The market isn’t going to love you forever,” Speed said, referring to industrial real estate REITs as a whole.
Hoster said he thinks the market is overlooking EastGroup’s earnings per share, 92 cents in the second quarter compared to 84 cents in 2014’s second quarter. “We currently have the best earnings per share in our company’s history,” he said. “The market is not giving us credit for that.”
Some of the market’s concern stems from EastGroup’s heavy investment in Houston, where the oil industry is taking a hit as petroleum prices continue to fall, Hoster said.
“Twenty percent of our cash flow” comes from Houston, he said. “A lot of the market thinks that because of the drop in oil we could have problems with our cash flow. But we are still doing very well in Houston.”
Marshall Loeb, who worked for EastGroup through the 1990s and as CFO of Parkway Properties from 2005 to 2005, will take over for Hoster as CEO. Loeb most recently served as president and COO of Columbus, Ohio-based Glimcher Realty Trust, a retail REIT Simon Property Group acquired last year.
Looking beyond this year, Speed said he expects the 70-employee company to continue to thrive in a niche of building and leasing 5,000-to-50,000 square-foot distribution spaces in booming cities in the Sunbelt West and East and sticking to a borrowing strategy in which debt makes up only around one-third of total capitalization.
That debt is drawn from unsecured credit facilities of $225 million and $25 million and is to be increased to $300 million and $35 million next year, EastGroup said in its second quarter earnings report.
The earnings report noted the company’s development program consisted of 22 projects totaling 2.2 million square feet. EastGroup started seven of the projects in 2015, 14 in 2014, and one in 2013. The projects, collectively 38 percent leased at midyear, have a projected cost of $162.2 million.
While assets have grown significantly over the years, the employee head count at EastGroup Properties has not, according to Speed. He noted the company has the same size staff as 15 years ago, when it had one-third fewer assets than today.
“This is the sweetest little company,” Speed said, referring to the employees who staff the headquarters at One Jackson Place and regional offices in Orlando, Houston and Phoenix; asset management offices in Charlotte and Dallas; and property management offices in San Antonio and the Florida cities of Jacksonville, Fort Lauderdale and Tampa.
Staff longevity at EastGroup is such that “about the only turnover we have had been in the receptionist position,” Speed said.
At a companywide holiday gathering not too long ago, Speed sat a table with eight other employees. “They averaged 23 years at the company. That is a real tribute to David Hoster,” he said.
With the New Year, Speed will transition into a role as one of nine board directors. EastGroup will designate him chairman emeritus, but Speed said he would rather it didn’t. “I don’t like that term,” he said, explaining that to him, “It means you used to be chairman and you’re not dead yet.”
Speed will divide his time between Jackson and a second home in Charlotte.
Hoster and family will move to Jackson, Wyo., a town of around 6,000 people in the Jackson Hole Valley. “We’ve had this planned,” Hoster said. “I never thought I’d work until 70.”
In addition to board chair, Hoster will head the board’s investment committee.
He’s headed to cowboy country but he prefers fly fishing to riding horses. “I’m a little too old” for that, he said.
Speed’s focus will be on assisting in the growth of the Re-Public Schools, a non-profit that has opened three charter schools in Tennessee and last month opened South Jackson Reimagine Prep on West McDowell Street with 121 African-American fifth graders in classrooms staffed by specialists in the subjects taught.
“We’re teaching computer coding to fifth graders – not how to operate computers but how to read coding,” Speed said.
Re-Public’s plan, he said, is to grow the West McDowell school to include fifth through eighth grades and to expand to five additional public charter schools, including a high school, a middle school and three elementary schools.
So far, charters for two additional schools have been issued, according to Speed, who has been joined in the effort by Jackson civic leader Bishop Ronnie Crudup. The next Reimagine school will open in the former Broadmoor Baptist Church building on Jackson’s Northside Drive.
Speed said Re-Public’s Jackson schools intend to duplicate the success of public charter schools in New Orleans, where he said the student failure rates have dropped from 66 percent to 7 percent. He also sees potential to match the success of the Kipp public charter academies in Helena, Ark. “They’ve got 85 percent of their kids going to college,” he said.
“I have been involved in a lot of ‘do-good’ stuff in my lifetime, but nothing gets me fired up like this,” he said of joining the push to re-create public education in Mississippi.
Meanwhile, EastGroup won’t miss a beat upon his departure, Speed said. “I expect it to keep on doing just like it has been doing. When you’ve got a plan and the plan is working, life is good.”
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