$97.78
$193.52
bear $97.78
base $132.44
bull $193.52
margin of safety $95.00
market price* $196.37
EastGroup Properties owns and develops industrial buildings across the Sunbelt: about 550 properties and roughly 65 million square feet in 12 states, concentrated in Texas, Florida, California, Arizona and North Carolina. Most of the space is multi-tenant "shallow-bay" distribution buildings of 20,000 to 100,000 square feet clustered near major transportation routes, leased to about 1,700 tenants, with no tenant above roughly 1.5% of rent. Tenants pay most property operating costs, and most leases include scheduled rent increases. The operating portfolio was 97.0% leased at the end of 2025. How we measured earnings. We start from cash generated by operations, remove short-term swings in receivables and payables, deduct stock compensation as a real cost, and deduct the spending needed to keep the buildings competitive: building improvements plus leasing commissions ($110.6 million in 2025, of which about $97.9 million we treat as upkeep after allowing for portfolio growth). New development and building purchases are treated as expansion investment, not upkeep. On that basis, owner earnings per share rose every year for a decade, from $2.94 in 2016 to $7.14 in 2025. To value the business before its lenders, we add back cash interest paid ($30.6 million in 2025), giving business cash flow of $7.23, $7.46 and $7.71 per share in 2023, 2024 and 2025. One judgement matters: the "accrued income" line, which is mostly straight-line rent recognized ahead of cash, is treated as part of the working-capital swing. Netted against payables it adds only about $5.8 million (roughly $0.11 per share) in 2025, so the effect is small. Starting point. We anchor on $7.46 per share, the middle of 2023 to 2025. These are the years that reflect today's larger portfolio and the rent reset of 2021 to 2023, and the figure deliberately sits below 2025's $7.71. Per-share growth in 2025 was only 3.4% because the company issued shares to pay down debt; total business cash flow grew 11.6%. The first half of 2026 shows operating cash flow up 9.0% on 2.6% more shares. On that evidence, plus developments already built, the base case's first year is $7.96. That is 6.7% above the anchor and about 3% above 2025's $7.71, slower than the roughly 6% per-share pace of the first half of 2026. Base case ($132 per share). Rents on the existing buildings grow 4% in the first year, easing to 2% a year by year six through year ten. This rests on rents re-setting as leases expire (about 12% to 13% of rent expires each year, and new and renewal leases in 2025 were signed at rents averaging 40.1% above the prior leases) and then on scheduled rent increases alone. The 17 projects in the development pipeline ($499.9 million projected cost, 18.8% leased in February 2026) lease up over three years at a 6.5% return on cost. After year ten we credit no further growth: the buildings and land keep earning at that level, with upkeep already paid for. We give no credit to future development starts, because at today's construction yields they add little value. The business is worth about $8.74 billion. It owes about $1.61 billion, made up of roughly $1.45 billion of net debt and $161 million still to be spent finishing the pipeline, which leaves about $7.13 billion, or $132 per share. Bear case ($98 per share). The named risks are new industrial supply in Sunbelt markets, tenants hurt by tariffs or trade disruption (the company's own risk disclosures), and about 13% of rent expiring each year. In this case occupancy falls and expiring leases re-sign flat, so cash flow drops 5% in each of the next two years. Growth then resumes at 1.5% a year from scheduled rent increases. The pipeline leases slowly over five years at a 5% return, maturing debt is refinanced at about 6.5%, and nothing grows after year ten. The business is worth about $6.87 billion, it owes $1.61 billion, and $5.26 billion, or $98 per share, is left. Even in this case cash flow covers interest about five times over. Bull case ($194 per share). Re-leasing spreads stay strong for longer: rents grow 6% in the first year, easing to 3% by year six. The pipeline leases within two years at a 7% return. The long-running development program continues at about $150 million a year funded from retained cash, at a 7% return. After year ten, rents keep growing 1.5% a year from the scheduled increases built into leases. The business is worth about $12.0 billion; after $1.61 billion owed, about $10.4 billion, or $194 per share, remains. Debt. EastGroup has $1.615 billion of unsecured fixed-rate debt at an average 3.43%. Maturities are $140 million in 2026, $175 million in 2027, $160 million in 2028, $155 million in 2029, $300 million in 2030 and $685 million later. Its $675 million of bank credit lines were almost undrawn at year-end, and Moody's rates it Baa2 with a positive outlook. Because the existing debt costs well under 6% until it matures, we count it as about $132 million cheaper than its face value. As it matures, it will be refinanced at higher rates. What would make this wrong. Upkeep spending is rising faster than rent: building improvements went from $51 million in 2023 to $76 million in 2025 while revenue rose 26%. If that gap persists, true upkeep is higher than we assume. A long industrial downturn worse than the bear case, with occupancy well below 90%, would also break the case. On the other side, the company has a long record of creating value through development, which only the bull case credits. Compared with our previous estimate (bear $50, base $115, bull $166), all three values are higher. Before, risk was charged through a higher required return. Now we use one 6% required return in every case, build risk into each case's business story, and credit the low fixed rates on the existing debt. Our growth assumptions are lower than before, not higher.