이스트그룹 프로퍼티스(EGP) 2026년 3분기 실적 발표 컨퍼런스 콜: FFO 7.9% 증가, 가이던스 상향

주요 내용

• 2026년 3분기 주당 영업활동자금(FFO)은 2.45달러로 2025년 3분기 대비 7.9% 증가했으며, 회사의 가이던스 중간값보다 0.04달러 상회했습니다. 연초 대비 주당 FFO는 7.7% 증가했습니다.
• 분기 말 임대율은 97.3%, 포트폴리오 점유율은 96.5%, 동일 자산 점유율은 97.0%에 달했습니다. 이스트그룹은 회사 역대 최대 규모인 290만 제곱피트의 2세대 임대 계약을 체결했습니다.
• 재임대 스프레드는 GAAP 기준 36%, 현금 기준 21%로 견조한 수준을 유지했습니다. 현금 기준 동일 자산 순영업소득(NOI)은 3분기에 7.1%, 연초 대비 8.2% 증가했습니다.
• 이스트그룹은 2026년 주당 FFO 가이던스 중간값을 0.06달러 올려 9.65달러로 제시했으며, 이는 2025년 실적 대비 7.5% 성장을 의미합니다. 4분기 주당 FFO는 2.47달러에서 2.53달러로 전망됩니다.
• 회사는 2026년 착공 예정 개발액을 6,500만 달러 늘린 3억 9,000만 달러로 증액하고, 자산 매입 가이던스를 1억 4,500만 달러 상향한 3억 6,000만 달러로 제시했습니다.
• 경영진은 전자상거래, 첨단 제조업 및 데이터 센터 관련 고객의 수요에 힘입어 전반적인 수요가 견조하게 유지되고 있다고 밝혔습니다. 데이터 센터 관련 활동은 연초 대비 신규 임대의 약 15%를 차지했지만, 매출에서 차지하는 비중은 약 1.5%에 불과했습니다.

주요 재무 데이터

사업 및 영업 실적

점유율 호조는 주로 신규 및 갱신 임대에 의해 견인되었습니다. 경영진은 연초 대비 임차인 유지율이 거의 79%에 달해 점유율을 뒷받침하고 재임대 비용을 줄였다고 밝혔습니다. 분기 점유율 상승분 중 일부(약 10~15bp)는 임대 만기일 이후에도 체류한 임차인에게서 발생했습니다.

개발 자산 임대 면적은 해당 분기 중 50만 제곱피트, 연초 대비 약 200만 제곱피트에 달해 2025년 연간 약 130만 제곱피트와 대비되었습니다. 경영진은 계획된 착공 물량 증가가 사전 임대가 완료된 건물 및 피닉스의 메사 게이트웨이 임대 호조 등 주로 임차인 수요에 기인한 것이라고 설명했습니다.

이스트그룹은 3분기 및 10월까지 총 약 3억 2,000만 달러를 투자해 5개 프로젝트를 매입했습니다. 경영진은 매입 자산의 안정화된 정액 기준 수익률이 약 6.5% 수준이며, 일부 공실이 포함되어 있어 추가적인 임대 상승 여력을 제공할 수 있다고 언급했습니다. 관측된 매입 자본환원율(Cap Rate)은 약 20~30bp 상승했습니다.

회사는 3분기 중 4억 8,500만 달러 규모의 선도주식 발행 계약을 체결했습니다. 이전 활동을 포함하면 잔여 선도 계약 규모는 주당 가중평균가 약 202달러 기준 총 6억 9,500만 달러에 달합니다. 경영진은 이 자금을 자산 매입, 개발 지출, 토지 매입 및 4분기 만기 예정인 1억 4,000만 달러의 무담보 채무 상환에 사용할 계획입니다.

수요는 이스트그룹의 여러 시장에 걸쳐 다변화되었습니다. 경영진은 노스·사우스캐롤라이나, 조지아, 텍사스, 애리조나, 플로리다에서 연초 대비 전반적으로 5% 안팎의 견조한 임대료 상승률을 기록했다고 언급했습니다. 캘리포니아 시장은 여전히 불균일한 모습을 보였으나, 경영진은 일부 세부 시장에서 안정화 및 개선 징후가 나타나고 있다고 지적했습니다.

경영진 가이던스

경영진은 4분기 동일 자산 NOI 증가율 둔화가 현재 영업 조건의 악화 예상 때문이 아니라 2025년 4분기의 특히 높았던 점유율 기저효과에 따른 것일 것으로 예상합니다.

리스크 및 주목할 점

• 철강, 경유, 인건비 및 데이터 센터와 첨단 제조 프로젝트의 수요가 압박 요인으로 작용하면서 건설 비용은 추정치 기준 5%에서 10% 증가했습니다.
• 경영진은 2027년으로 들어서면서 소비 약세, 금리 인상, 전반적인 경제 교란을 주요 수요 리스크로 꼽았습니다.
• NOI의 약 14%를 차지하는 캘리포니아는 전반적으로 가장 취약한 지역으로 남아 있으며, 일부 세부 시장에서는 여전히 정체되거나 음(-)의 흡수율을 기록하고 있습니다.
• 데이터 센터 관련 수요가 둔화될 수 있으나, 경영진은 이스트그룹의 건물이 해당 사용자를 위해 특별히 설계된 것이 아니므로 기존 임차인에게 재임대될 수 있다고 밝혔습니다.
• 미국 국채 금리 상승과 불확실한 매각 자본환원율(exit cap rate)로 인해 특히 민간 개발업체(merchant developer)의 신규 개발 수익성 확보가 더욱 어려워지고 있습니다.
• 경영진은 직원 유지율 또한 중요한 운영 고려사항으로 강조했습니다.

애널리스트 Q&A 주요 내용

개발 및 공급: 경영진은 착공 증가가 투기적 목적이 아닌 수요 주도형이라고 밝혔습니다. 우호적인 소형 물류창고(shallow-bay) 공급 조건과 이스트그룹의 인허가 완료 토지 보유량은 지속적인 개발을 뒷받침하는 반면, 비용 상승은 경쟁 프로젝트를 제약할 수 있습니다.

임대료 상승률 및 임대 스프레드: 경영진은 점유율이 높게 유지되고 대체 비용이 계속 상승할 경우 내년 시장 임대료 상승세가 강화될 수 있을 것으로 예상합니다. 가장 취약한 시장은 거의 정체 수준에 머물 수 있는 반면 가장 강한 시장은 10%대 초반의 임대료 상승률을 달성할 수 있을 것으로 추정했으나, 해당 전망의 불확실성을 강조했습니다.

매입 환경: 이스트그룹은 일부 매수자가 거래를 종결하지 못하거나 매도자가 가격을 재평가함에 따라 더 많은 자산이 시장으로 돌아오는 것을 확인하고 있습니다. 경영진은 즉각적인 수익 증대가 가능하고 입지가 우수하며 포트폴리오 최상위 수준의 자산에 집중하면서 선별적인 태도를 유지할 것이라고 밝혔습니다.

데이터 센터 노출도: 이스트그룹은 3분기 중 약 13만 5,000제곱피트 규모의 데이터 센터 관련 임대 계약을 체결했습니다. 경영진은 공급업체들이 일반적으로 전력, HVAC 및 기타 서비스를 위해 표준 산업용 건물을 사용하므로 특수 건물 구조의 필요성이 제한적이라고 설명했습니다.

수요 전망: 경영진은 임대 수요가 특정 시장이나 임차인 유형에 의존하지 않고 꾸준하고 광범위하다고 평가했습니다. 전자상거래, 첨단 제조업, 인구 증가, 데이터 센터 공급업체는 이번 실적 발표에서 논의된 주요 수요 동인으로 남아 있습니다.

실적 발표 컨퍼런스 콜 전문

전체 실적 발표 컨퍼런스 콜 녹취록

경영진 발표

Operator

Good morning, ladies and gentlemen, and welcome to EastGroup Properties Third Quarter 2020 Earnings Conference Call.

[Operator Instructions]

This call is being recorded on Thursday, October 22, 2026.

I would now like to turn the conference over to Casey Edgecombe, Investor Relations. Please go ahead.

Casey Edgecombe

Good morning, and welcome to EastGroup Properties Third Quarter 2026 Earnings Conference Call. Today's call will be led by Marshall Loeb, CEO; Reid Dunbar, President; Staci Tyler, CFO; and Brent Wood, COO.

Before we begin, I'd like to remind everyone today that our conference call will contain financial measures such PNOI and FFO, that are non-GAAP measures as fine in Regulation G. Please refer to our most recent financial supplement in our earnings press release, both available on the Investor page of our website and to our periodic reports furnished or filed with the SEC for definitions and further information regarding our use of these non-GAAP financial measures and a reconciliation of them to our GAAP results. Please also note that some statements during this call are forward-looking statements as defined in and within the safe harbors under the Securities Act of 1933, the Securities Exchange Act of 1934 and the Private Securities Litigation Reform Act of 1995.

Forward-looking statements in the earnings press release along with our remarks are made as of today and reflect our current views of the company's plans intentions, expectations, strategies and prospects based on the information currently available to the company and on assumptions that it has made. We undertake no duty to update such statements or remarks, whether as a result of new information, future or actual events or otherwise. Such statements involve known and unknown risks, uncertainty and other factors that may cause actual results to differ materially. Please see our SEC filings, including our most recent annual report on Form 10-K for more details about these risks.

Now I will hand the call over to Marshall.

Marshall Loeb

Thanks, Casey. Good morning. I want to start by thanking our team. We added a strong quarter to what's been a solid year so far. I'm proud of the results achieved and our quarterly results demonstrate the portfolio quality and the resiliency within the industrial market. Some of our quarterly stats were funds from operations were $2.45 per share $0.04 above our guidance midpoint and up 7.9% from third quarter 2025. Year-to-date FFO per share is up 7.7%, and for over a decade now, our quarterly FFO per share has exceeded the FFO per share reported in the same quarter prior year, truly a long-term growth trend. Quarter-end leasing was 97.3% with occupancy at 96.5% and also notable was quarter-end same-store occupancy at 97%. Our quarterly re-leasing spreads were 36% GAAP, 21% cash for leases signed during the quarter. Year-to-date results were similar at 36% and 20% [ GAAP ] and cash, respectively. Cash same-store NOI exceeded our expectations for the quarter at 7.1% and stand at 8.2% year-to-date.

Finally, we have the most diversified rent roll in a sector with our top 10 tenants falling to 6.5% of rents, down 40 basis points from third quarter last year, we target geographic and tenant diversity as strategic paths to stabilize earnings regardless of the economic environment. In summary, we're pleased with our results, which again allow us to raise earnings guidance. And we remain excited about the quantity of the leases we signed during the quarter, along with the ongoing continued prospect activity. Reid will now walk you through more of our quarterly summary.

R. Dunbar

Thank you, Marshall, and good morning. We delivered strong Q3 results, setting numerous company records across all 3 pillars of our business: Operations, development and investments. Industrial demand has remained steady, and the operating environment continues to be healthy. The demand we're seeing for our properties is diverse and broad based. That demand is supported by multiple tailwinds, including e-commerce, advanced manufacturing and data center related uses. Tenants recently want to be near the end consumer and modern functional buildings, which aligns well with East Group's portfolio. The end result, we completed 2.9 million square feet of second gen deals, setting a new record for EastGroup.

In development, the supply environment for shallow bay industrial remains favorable. The economics of new development are becoming more challenging for many REIT competitors, which should constrain new supply. As a result, the value of our entitled land, local market expertise and proven development platform keeps rising. Leasing momentum with the development pipeline gave us the confidence to increase our projected development starts to $390 million, which would be a new record for EastGroup. We also added to our land position this quarter, acquiring 3 sites. Two sites will expand our development in existing parks. And the third will support a new development in South Florida, which is one of our key growth markets. Lastly, on the investment side, during the third quarter and through October, we acquired 5 projects for a total investment of $320 million.

Our strong financial position allowed us to take advantage of tighter liquidity in the capital markets. And each of these projects deepens our presence in existing markets, strengthening our platform over the long term. Staci will now speak to several topics, including assumptions within our updated 2026 guidance.

Staci Tyler

Thanks, Reid, and good morning, everyone. We are proud of our strong third quarter results, reflecting excellent execution by our team, the quality of our portfolio and the strength of the markets in which we operate. As Marshall noted, third quarter FFO exceeded our guidance midpoint, primarily due to higher-than-projected same property net operating income. On a cash basis, we exceeded our same PNOI projections by 170 basis points. achieving 7.1% growth compared to third quarter last year. Average month-end same-property occupancy of 96.9% exceeded projections by 50 basis points. And our average month end portfolio occupancy of 96.1% also exceeded projections by 50 basis points. Our occupancy outperformance was complemented by continued strength in new and renewal re-leasing spreads.

In addition to a strong quarter of operations, we were also active in deploying capital into both development projects and accretive acquisition opportunities. In order to fund these and our planned fourth quarter investments, we entered into forward equity share agreements totaling $485 million during third quarter. Combined with forward agreements already outstanding from activity earlier this year, we now have $695 million in 4 equity share agreements outstanding at a weighted average price of approximately $202 per share.

Our financing plans for fourth quarter include continuing to utilize our $175 million unsecured bank credit facilities, which had a balance of $195 million outstanding as of quarter end. And as Forwarder progresses, we plan to settle forward equity share agreements in order to make repayments on our unsecured bank credit facility, all to sign our near-term investment activity, including $325 million in recent property acquisitions along with land acquisitions and spending related to increased development starts. In addition to $140 million in fourth quarter unsecured debt maturities.

Our balance sheet remains strong and flexible with debt to total market capitalization of 14.6% at quarter end, third quarter annualized debt-to-EBITDA ratio of 3.2x and interest and fixed charge coverage of 14.7x. This financial strength allows us to pursue a development and acquisition opportunities in this ever-changing investment environment.

Looking ahead to fourth quarter, FFO is estimated to be in the range of $2.47 to $2.53, with a midpoint of $2.50 per share, which is $0.02 ahead of our previous fourth quarter actions. For the year, we increased the midpoint of our 2026 FFO guidance by $0.06 to $9.65 per share, which represents a 7.5% increase over 2025 actual results. We are projecting strong cash same-property net operating income results to continue, and we raised the midpoint of our guidance assumption by 70 basis points to 7.5% for the year. These strong projections are driven by rental ratings on in-place and budgeted leases and expected same-property occupancy of 97%, which is 30 basis points ahead of our prior guidance.

Projected average month-end occupancy for our operating portfolio is now 95.9%, a 20 basis point increase over our prior guidance. As Reid mentioned, we are pleased to increase our projected 2026 development starts by $65 million to $390 million. Year-to-date, we've started construction of $205 million of development projects and we are planning for $105 million of starts in the fourth quarter. The overall increase in development starts reflects the strength of both development leasing we have accomplished year-to-date and the current leasing environment. The projects already underway, together with those expected to begin in the fourth quarter provide a meaningful runway for future earnings growth as these investments lease and stabilize.

We also increased our acquisition guidance by $145 million to $360 million for the year. To support our increased investment activity, we raised our 2026 gross capital proceeds guidance from $300 million to $625 million. We will continue to monitor the capital markets and remain flexible as the year progresses. Our rent collections currently remain healthy, and our tenant watch list is steady.

Now Marshall will make some final comments.

Marshall Loeb

Thanks, Staci. In closing, we're excited about our performance year-to-date and the momentum it's carrying us towards 2027. Market demand has been steady for several consecutive quarters. And regardless of the environment, our goals are to drive FFO per share growth while raising portfolio quality. If we can do those, we'll continue creating NAV growth for our shareholders. And stepping back from the near term, I like our positioning as our portfolio is benefiting from several long-term positive secular trends such as population migration, e-commerce growth advanced manufacturing and more recently, data center suppliers in certain markets. We also have a proven management team with a long-term public track record. Our portfolio quality in terms of buildings and markets is continually improving. Our balance sheet is stronger than ever, we're upgrading our diversity in both our tenant base as well as our geography.

With that, we'd like to open up the call for any questions.

Operator

[Operator Instructions]

Your first question comes from Blaine Heck with Wells Fargo.

질의응답

Blaine Heck

You took development starts up against the $390 million. Can you just talk about the drivers behind that increase? How much of it is demand pulled versus true speculative projects that you're comfortable launching at current economics. And kind of tied to that, are there any markets where you're running into competition from data center developers or where construction costs or entitlement time lines are keeping you or competitors on the sidelines even with the demand that you're seeing?

Marshall Loeb

Blaine, this is Marshall. Maybe I'll take the second one first. With data centers, we're not -- usually, they need -- their requirements are so specific with power and things. So we really haven't lost out on sites to data center development that I'm aware of. What we do see though with some with the data centers and the advanced manufacturing, it's just steel rising construction costs and things like that. So it's more of a ripple effect from them. That's where we're feeling their presence. And I would say the good news is our developments, we raised about $65 million, as Reid mentioned, hopefully, it's a record. And it's really market pull. We got a pre-lease opportunity signed within our pipeline. So that building is 100% leased, and that was one of the bigger jobs. And then just kind of steady progress within what we had kind of what's in lease-up, not several new starts. So it was really the team running out of inventory in our Mesa Gateway in Phoenix, for example, they signed a good 3, 4, 5 leases during the last quarter.

So that pushed us up over 70% with prospect activity. So it was a little bit of a mix of a pre-lease and which -- and then just as a lot of 20,000, 50,000, 60,000-foot leases that kind of pulled that ticket for the next. And then, look, I'm hopeful we've got some other opportunities we're working on that are pre-lease that whether it's late this year or early next year that we can kind of keep that momentum moving forward.

R. Dunbar

Yes, Blaine, this is Reid. And I would just add, as far as being pulled, we signed 500,000 square feet of development leases in the quarter, which takes us to right at 2 million square feet for the year. And so to put that in perspective, year-to-date, 2 million compares to the full year of last year, right at 1.3 million, it's higher than '24, higher in '23. So we're seeing a resurgence in development leasing and the key to our strategy is being able to continue to feed that. And with the teams in the field putting us in a position with the right land sites, we can continue to pull these projects out as demand dictates that.

Operator

Your next question comes from Craig Mailman with Citi.

Craig Mailman

Just on the accelerating capital deployment piece here. I mean, the development sounds like there's good demand there. It looked like yields are rising on new starts. So maybe talk a little bit about where replacement cost rents are trending in your market. I know you talked about construction costs going higher, but where we should expect kind of that traditional 7% to 8% yield kind of trending on incremental starts that pass investment committee? And then just how you view the balance of acquisitions and given sort of the uncertainty there and where cap rates are going, what that mix could look like over the next 12 months, particularly given your capital availability?

Marshall Loeb

Craig, it's Marshall. I'll catch me if I missed something in your comments. So maybe I'll start on the acquisitions a little bit and that those -- that's a window we didn't expect. Earlier in the year, if we met it, say, NAREIT in June, we told people we thought we may miss our acquisition goals rather than exceed it. But the market had been tighter than we expected it in terms of kind of where borrowing costs were and equity pricing. And then it really felt like in third quarter, and it always seems to go this way. When the window opens, it gets flung open and then it sand shut.

We got an acquisition or 2, and we kind of internally said it feels like with the rise in the 10-year cap rates are moving. Staci and her team did a nice job of match funding it with all the equity we raised, which kind of has we placed it between acquisitions, developments and then some debt maturities coming up this quarter. And we continue to see cap rates rise. Now on every transaction, there's a few I can think of Florida, Arizona, where the market didn't seem to really blink. And I think it's still playing out. And then there's 1 or 2 our later acquisitions were at higher yields where we bid, but not -- usually, the brokers will give you guidance as you go through the rounds, and we didn't move our pricing up really kind of thing this price works for us, we think cap rates are moving, and we still got the opportunity as a -- we like to say we're a certain -- you may not like our price, but we're a certain closure. And so that buyer pool seems thinner than it was.

You're right with -- and then on the development side, construction costs are up probably 5% to 10% and continue to move up. I don't think between diesel cost and steel that I mentioned and then just labor being more and demand with all the data center advanced manufacturing, everything else we're seeing in some of our markets that construction costs will rise. And I think rents have to follow that or they will with the demand and just rising construction costs, the other complicating factor, and I'm thankful we've been able to raise the equity. And when we raise it, we always make sure we have the uses, what we're buying, we've stayed disciplined on. It fits -- it's immediately accretive. It fits the top, third top quartile of our portfolio, and we bought with rents typically slightly below market in a market where we like rents are going to rise because of construction costs over the next few years faster than they have the last 2 years. So we feel good about that.

And then I think if you're a merchant developer, I don't really know what will slow down supply somewhat, although it's picked up a little bit, is I don't know how to solve with all those rising costs and rising treasuries for your exit cap rate. It's just a harder model for them to make work. They've got to really push rents, and then hope they don't lose it on their exit as a cap rate. Well, we're not looking for that exit 1 year, 1.5 years from now.

So that's a long answer, but I hope I hit everything.

Operator

Thank you. Ladies and gentlemen, as a reminder, we ask analysts to limit themselves strictly to 1 question. Your next question comes from Samir Khanal with Bank of America.

Samir Khanal

Marshall, your spreads accelerated in the quarter. I guess how much of that is coming from as you think about embedded mark-to-market versus actual market rent growth? And I guess, just to expand a little bit more. I mean, what are you seeing in terms of market rent growth in some of your major markets, especially on the Sunbelt side? And I guess what's your view into next year?

Marshall Loeb

Good question, Samir. And as you'd expect a little uneven across our markets, but probably Carolinas, Georgia, Texas, Arizona, that Florida is bad. We're seeing pretty good rent growth kind of year-to-date, maybe mid-single digits. And I think with demand, where full our markets are tightening up and rising construction costs that I mentioned, we would expect higher rent growth next year. I'm not sure you're seeing it and on a re-leasing spread just -- it certainly helps. I think that ramp-up is still more to come in terms of our re-leasing spreads. It's drifted down over the last couple of years, still helped to but down from its peak, but I think we'll reinflate given where the environment is today. But -- so we're happy to see those rising rents and even California stabilizing and recovering a little bit, certainly submarket by submarket there, but it's better than it was years a year ago, for sure.

Operator

Your next question comes from Michael Mueller with JP Morgan.

Michael Mueller

Sorry about that, had a phone issue here. Staci, you talked about beating your expectations on NOI and occupancy. Can you drill down a little bit more on that? Would you chuck it up? Is it faster openings, less planned fallouts or just something tied to bad debt?

Staci Tyler

Sure. In terms of our actual third quarter occupancy outperformance, yes. So we signed a company record of 2.9 million square feet of second-generation leases during third quarter. So that certainly drive most of the outperformance. So I would say the large majority of that 50 basis point occupancy outperformance is attributable to new and renewal leases that we signed. Obviously, those that were signed earlier in the quarter had more of an impact as those tenants occupied as the quarter progressed. We did have a few tenants, a couple I can think of that held over by a few weeks or maybe a month on the past their lease maturity date. So that accounts for about 10 to 15 basis points of our outperformance. But the large majority was lease signings and then we had a couple of instances also where we were able to get a tenant in the space few weeks earlier a month early, and that helped incrementally as well. So I would say, overall, it's really just due to the core strength of the operating environment and the continued demand that we're seeing from a broad range of tenants and across a broad range of markets.

You can't really point to 2 or 3 markets that drove outperformance. It was -- it was broad-based. If I were to list the markets, it would take me a minute to list all of the markets where we saw some outperformance. So we're pleased with that, pleased with our tenant retention being higher than we had projected. So signing those renewal leases and keeping tenants in the space certainly helps continue to drive that outperformance in occupancy as well. So it seems every quarter that's gone by this year. Thus far, we've outperformed our projections and -- we continue to do the best we can as we project. We do when we look to fourth quarter, we do know that, call it, 10 to 15 bps of that occupancy that was hold over occupancy, but that's not as long term as the rest of our outperformance.

So we have increased our occupancy guidance for fourth quarter 40 basis points, and that's really due to those leases that we signed during third quarter now being occupied. So very pleased with the demand, the strength of the demand that we're seeing across a variety of our markets.

Operator

Thank you. Your next question comes from Todd Thomas with KeyBanc.

Todd Thomas

I just wanted to go back to acquisitions. And the increased guidance there, which I think accounts for all of our year-to-date acquisition activity at this point. What's the pipeline like today as you begin to shift focus to '27. Do you see the pace of acquisitions, sort of, maintaining or picking up from here? And then with regard to the increase in cap rates that you mentioned, Marshall, can you just quantify that a little bit, what you're seeing in instances where you are seeing higher yield opportunities?

Marshall Loeb

Sure. Todd, I would say on cap rates, it's fluid and then it's still a moving target a little bit but probably 20, 30, call it, 25 basis points is what we've seen to date. You're right, everything we have in our guidance, we've closed on and Staci and the team have thankfully funded -- so we're not -- and look, if we bought something between now and year end, we really wouldn't -- it will move our numbers in '27, but not '26 as much just given where we are in the year.

I would say, and it's atypical that we can -- usually, there's developments and good opportunity or acquisitions. It's not -- it's atypical to have both opportunities. We've certainly spent more time in the last 2 to 3 weeks, Reid, Brent and I, with the teams in the field, looking at acquisitions, some things that have been awarded that have come back to market some things that people aren't getting the pricing and opportunities. And I think the key for us is, one, to make sure we don't want to run up our line or do things to get ourselves in a tricky financial position. We want to make sure our stock price supports if we fund the equity, we can be a debt now, but we'll look at both avenues and make sure mainly we just stay disciplined. If it's something that's improves the growth profile, meaning top quartile of our portfolio and is accretive what we bought also has had a little bit of vacancy, a few of them have, kind of, call it, 90%. So that's helped us get a little bit better premium yields.

And it feels like that window is still open based on all the calls we're seeing from the field and then it always feels like it will close quickly. So you're right, if cap rates are moving higher, but it's given us an opportunity on the flip side to really play offense and raise our growth profile as well because usually, we get outbid on things, and we're better off building them. But right now, we're able to kind of accretively buy some great projects and continue building as well because the demand has been steady for several quarters now.

R. Dunbar

Todd, this is Reid. And I would add, we're raising the bar. We're seeing more opportunities, and it feels like there's some pent-up sellers where they were hoping maybe earlier in the year that they would bet on lower interest rates. And obviously did not go their way. So we're seeing more activity, more deals, but we're only going to place bets on acquisitions that are opportunistic and strategic for us. So we're not going to lower our bar and make sure we have good liquidity to access to our capital.

So between those, we'll be disciplined, as Marshall said, and find the right opportunities if they present themselves.

Operator

Your next question comes from Tom Catherwood with Bancorp.

William Catherwood

Excellent. Marshall, I wanted to go back to some of your earlier comments about leasing spreads, tenant retention, Staci, you mentioned it kind of running higher this quarter, and it's been running higher all year, which it's a bit surprising, but I know that can fluctuate. Maybe where are you able in your portfolio to push rents right now? And where are you still prioritizing occupancy?

Marshall Loeb

Tom, I don't know that -- look, we don't typically always is to prioritize our occupancy. It's hard to know. Look, there's always things rolling more of a dollar cost average of let's get spaces leased at market and make the best deal we can and move on. And you're right, our retention rate, look, if someone were just picking up coverage of each group, I'd say and really probably any REIT, 70% to 75% retention, and we've been running almost 79% year-to-date. So it's great in terms of re-leasing costs and keeping the portfolio full, but it's been surprisingly higher for a longer period of time than I would have guessed in a good economic environment. Usually, it's higher in a bad environment.

Our rents are probably growing fastest it's those markets that have data center development and the advanced manufacturing. It seems like it's the same ones, meaning in the Texas markets, Atlanta, a little bit in the Carolinas and in Arizona, [ specifically ] Phoenix. We're 100% leased now, thankfully, in tonic and things like that. So those are not that Florida is bad. It's just maybe not quiet. And probably the market where it's thankfully demand has turned positive, but rents aren't there yet are still the California markets. And it really depends on some areas of markets in California, if it's Class A and it's near defense or advanced manufacturing, those rents are good or near Silicon Valley, but by and large, Oakland and South San Diego, [indiscernible], some of those markets are still flat to negative absorption, unfortunately.

So those are probably our weakest markets, but -- and those are California is 14% of our total NOI. So it's -- and we're 99% leased in L.A. Thankfully, we don't have a lot of vacancy. But those markets are choppy and then our traditional sun belt markets, which is kind of the bread and butter, doing pretty well and we're able to push rents there and stay full.

Operator

Your next question comes from Nick Thillman with Baird.

Nicholas Thillman

Maybe following off that comment you just made, Marshall, what percentage of the portfolio do you think you have the ability to push rents? And then as we look at your best performing market rent growth over the next 12 months versus your risk performing, what do you think that gap will be between those market performance?

Marshall Loeb

Yes. I think our best opportunity, and that's not probably not fair, but I'd say many percent we can push rents. I'm calling California 14% and probably not all of that. There's probably pending some buildings, we'll be able -- we'll have embedded rent growth, but really margin. And then I would -- here's one with the preface that I'm not great at predictions someone said, if I were, you could -- you're welcome to take my yacht to my island with me anytime. But I would say maybe the worst markets will be pretty flat next year and the best will be low double digits.

Brent Wood

Yes. I think -- this is Brent. Nick, I think the exciting thing, and you see it on our schedules is that I don't think there's 1 or 2 markets that stand out as being the only ones that we can push rents going back a few years ago, where L.A. and some of the California markets ran so hot and pushed so far above the other markets. But it's very broad-based. You see our Texas, Florida, Carolina region numbers being very consistent in terms of rent growth. As Marshall alluded to, the California markets have lagged after their hot run. But it's broad-based. Really, I think we're going to be in a position to push in most all of our markets saving except maybe that 14% in California. And by and large, those are improving.

I mean, L.A. had 4 consecutive quarters of positive net absorption, really -- South Bay, [ San Gabriel Valley ], Inland Empire West, all with very strong results in vacancy. Inland Empire East still a little flattish and about double the vacancy rate than the rest of that. But I think that's the exciting part. It's broad-based. And in terms of the percentage and what like Marshall said, we've been very consistent with our portfolio with that 20% cash increase in that mid-30% gap. That's been sticking -- feels like there's more pressure to the upside with that, considering rise in cost and the markets are still healthy. So it feels like the more wind at our back is to push that versus not, of course, that can change based on conditions. But we feel good all across the portfolio about our ability to modestly push.

Operator

Your next question comes from Alexander Goldfarb with Piper.

Alexander Goldfarb

Question actually on specific deal that you guys did. At DFW, you bought a ground lease, and I think you have a few other ground leases in the portfolio. just given that, that's caused some angst with other REITs, especially here in New York, just want to get a better sense of how you look at ground leases, what the reset structures are, if they're deals -- basically, it's the resets that seem to create the issue with these. So I'm just sort of curious what the reset is here and how you underwrite them so that it's truly an investment asset versus a defined holding period asset.

Marshall Loeb

Alex, it's Marshall. Of that, on the ground leases, yes, look, we're 95-plus percent fee simple. So yes, we prefer that were right. We prefer to own it. And where we do have ground leases, we've tried to be extremely strategic about them. We've sold some. And really, I can kind of think of 2 places where we've picked up ground leases, it would be ride at the DFW Airport. Those are 40-year leases. The ground lease payment as a substitute for your taxes. And those are often lower than the tax rate. So you actually have a cost advantage currently and then they do reset, though, you're right. There is a reset, but we look at that over a longer period of time over the term of the lease and the tenants like it because they can fix their cost up until whenever the reset [ heads ].

And then the other place, when it makes sense, when you think about it is, we have a tribal lease in Arizona where there's literally no land because anything that's fee simple has been built 20 miles in either direction, and we picked up a tribal lease there. So it's really the land that's can't be replaced. I've made several trips to the Pima Indian reservation in Scottsdale, and things like that. And if you unsuccessfully, I'll add as well. But -- so we've tried to be very strategic with these are irreplaceable locations, but they just happen to be on a ground lease. And even that's it, it's a great location. We've sold some to manage that number down and keep at a very minimal part of the portfolio and in one where -- if we have one, we better have a really good reason. It's kind of how we've looked at it.

So being near the cargo terminal and one of the top 5 to 10 airports in the country, are being on tribal land in a city that's sprawled way out beyond that tribal land today and continuing on. So that's how we think about it. And you're right, it's not our typical business, but this was one that was a secured yard bonded brand-new warehouse leased to large public logistics company that we -- and we felt like we got the pricing that reflected the ground lease as well on it.

Operator

Your next question comes from John Kim with BMO Capital Markets.

John Kim

I wanted to ask on some of the demand drivers that you're seeing today. If you can provide an update on how much the data center suppliers were part of your development leasing this quarter versus the 20% last quarter. And then on e-commerce, just wanted to see if you could provide any views on Amazon Project Mercury, in terms of what you're expecting in terms of impact to your markets overall or to the portfolio specifically?

R. Dunbar

This is Reid. As far as data center-related uses, we signed about 135,000 square feet in the quarter. Year-to-date, that's about 15% of our overall activity on new leases has been data center related as we define it. So that continues to be one of the tailwinds of the many -- and I'm glad you brought up the e-commerce because it does feel like e-commerce will see some acceleration. The Amazon project Mercury, we've read about it. It feels like it's still early stages. But the way it's described between the need for 100,000 to 200,000 square foot facilities and infill locations, feels like that would fit our portfolio and our strategy really well.

So I think between the data center, the e-commerce, the advanced manufacturing, plus just our stable overall business is servicing the local economies that we're in, it feels like we've got some great tailwinds to continue to drive demand into the future.

Operator

Your next question comes from David Rogers with Raymond James.

Dave Rodgers

You covered a lot already. Maybe go back to both Marshall and Staci, I think you both addressed bad debt at different points in time in the call, and it sounds very stable today. I mean, I guess, historically, with higher rates, are there any particular parts of the portfolio that you'd watch more closely, whether that's tenant-based or location-wise, just given the higher rate.

Staci Tyler

Sure, Dave. Yes. So you're correct that our bad debt has been very steady and in line with our historical average of around 30 to 35 basis points of revenue. So we've not seen any deterioration there. I haven't seen much of a change. The tenant watch list remains steady. Every quarter, we have a few new tenants roll on the watch list and a few tenants roll off. So no concerns, I would say, noted there. In terms of the impact of the overall economy and interest rates on certain tenant types or geographies, I mean the a couple of years ago, we did see a spike in bad debt in the state of California, specifically with 3PL in California. We've not seen that.

So we're not detecting anything going on right now with any particular segment of our tenant industries or any geography. 3PLs, as you know, can come more quickly and leave more quickly than some other tenant types they can ramp up or contract pretty quickly compared to other tenants that are stickier. We're not seeing that right now. And as long as the consumer spending and consumer consumption remains strong, then we don't anticipate issues there.

So we're not detecting any near or medium term or expecting issues other than when you have 1,700 leases, you're always going to have a tenant business that strong for one reason or another, but we're not anticipating any certain geography or tenant type to cause issues for us.

Operator

Thank you. Your next question comes from Rich Anderson with Cantor Fitzgerald.

Richard Anderson

All right. So I want to talk a little bit more on the data center side of demand, particularly given the political and social pushback so on and so forth. I mean if it's a here-to-stay long-term demand factor, I don't know what to say about the fate of humanity, but I think industrial REITs will be good. But you're saying 15% of your leasing has been tied to data centers. if in its absence, for whatever reason that slows down or plateaus, what is the industrial space fundamentally look like without this data center sort of new demand driver? Was there a plan B for this space that another form of demand would have taken it? Or could there been just a less present type of fundamental picture for industrial in the absence of this data center component.

Marshall Loeb

It's Marshall. Yes, you're right. I mean, I would say -- I'd love to say we saw this all coming, and we built buildings to accommodate this data center kind of wave of new demand. But the reality is they found us more than we found them. So, the land we acquired, we -- our intentions were our traditional users, and in large cases, they are. It's an HVAC contractor who's business has grown. It's an electrical company and their business is growing because they're serving the data centers.

So our -- kind of our plan B is really what was our plan A. So that tenant improvements in the leases don't look any different or the build is any different than the traditional EastGroup buildings. And really, thankfully, all but one of the data center leases that I can think of in Atlanta were related to ongoing service to a data center rather than construction. So if it all went away, we would go -- obviously, we get the vacancy, there are different lease expirations over time, things like that. But we'll backfill them with our traditional users or whatever the new. It seems like for us, thankfully, every few years, whether it was e-commerce and then green energy or [indiscernible] on pharmaceutical fulfillment to a little bit of a degree and now data centers and advanced manufacturing, there's a new user type that finds flexible last mile distribution buildings. So we'll [indiscernible] on whatever the next wave is.

But it's been a nice shot in the arm this year. And as long as we don't make our buildings too wonky or try to be next to a data center that might close down the road or take over humanity, as you said, I think we'll be -- our hope is we'll kind of manage our way through it. And -- and to date, it's about 1.5% of our revenue. So we aspire to have a concentration issue or a problem there, but we're monitoring it, and we're not doing anything differently than you've seen this do for the last 5 years.

R. Dunbar

Yes. Rich, and I would just add, as I mentioned, only 135,000 square feet of data center related leases this quarter. and we still had a record quarter -- would have been close to a record even without that. So our diversification in geography, product, location will service all types of uses, not just data center. And as Marshall mentioned, we haven't been specifically targeting those. They found us. So it does slow or go away. I think we still have plenty of growth drivers behind us that will provide good opportunities for the years to come.

Operator

Your next question comes from Jon Petersen with Jefferies.

Jonathan Petersen

I wanted to ask a question on same-store NOI. I realize you're starting from a very high number and you raised guidance, but it does imply a deceleration into the fourth quarter. So maybe if you could talk us through the puts and takes on stepping from 3Q to 4Q same-store NOI. And then probably maybe related same-store expenses were up a little over 4%. Just curious how much of that is onetime, and how much of that is just higher inflation in the economy showing up in that number.

Staci Tyler

Sure, John. Yes. So I'll agree with your comment. We're very pleased that our same-store has been so strong thus far this year, and we're pleased that we've been able to increase our annual cash same-store PNOI guidance by 70 basis points to 7.5%. And that's really due to continued strong outperformance each quarter of the year thus far, and we're projecting additional outperformance in fourth quarter compared to our prior projections. Our projections of -- we noted earlier in the year, when we looked at the first half of '26 versus the second half of '26 compared to occupancy in 2025. The second half of this year, the second half of '26 had very strong comps in terms of occupancy from the back half of last year. So we feel very good about our same-store occupancy in third quarter and projected for fourth we're just comparing to a very strong back half of '25. So we're not projecting a deterioration in terms of our '26 performance so much as the comps just get more difficult as the year progresses.

When we compare fourth quarter same-store occupancy projections this year, to last year. We're comparing against a 97.2% average same-store occupancy last year. So that's just a difficult comp increased our projection for same-store growth in fourth quarter by 100 basis points over our prior guidance. So we feel better about it. And all 4 quarters together, at 7.5%. It's a very strong year. And we hope we keep giving ourselves and you guys tough comps for next year because that's just part of strong performances you have to compare yourself against the following year.

But we feel good about where we are and definitely not a signal or a sign of things slowing down in fourth quarter. It's really more of just a difficult comparative period. when comparing to the quarter last year.

Operator

Your next question comes from Michael Griffin with Evercore.

Michael Griffin

I wanted to ask on the leasing pipeline and tenant demand. Curious if you've seen any change in customer decision-making time frames as the leasing pipeline may be geared toward folks that were a little bit reticent to sign leases that are finally willing to commit? Or is it more sort of organic broad-based demand? And I realize it is a little early, but as the calendar turns next year, do you expect that demand to accelerate or sort of hold steady at these healthy levels.

Brent Wood

Michael, it's Brent. I think the latter part of what you said probably hit on is the steady we did have a strong quarter where some leases that had been worked for some period of time made. We did have a strong quarter in Phoenix, 4 of our, I think, 11 development leases. In fact, were signed in Phoenix and those were a few deals where we had some spec ready spaces and the deals made rather quickly, which was nice to see because we have not been seeing much of that quicker decision making.

So we've seen that increase some in terms of decision-making. We've seen competition on a few spaces that have helped. And obviously, once you have that enter the market, we'd like to see that more pervasive, but just seeing that some has certainly helped, I think. But I think as you -- as it feels right now and heading to next year, I think your comment of steady feels more in line. As mentioned earlier on the call, the high retention that we've got in our portfolio, which has been great, hitting almost 80%. But one of the things that puts a little bit of challenge on the development lease-up side of that is that the tenants, if they're staying in place, they're not expanding as much moving into space. I think. So far this year, only about 16% to 20% of our development leasing has been from expansions. And in other years, that's been a little higher. So that could be another possible tailwind if that could pick up with some decision-making.

But I think steady is a better word. It's just been consistent. It was broad across the markets in terms of rental rate growth. It was broad across markets in terms of where the leases were executed. And talking to the teams in the field it feels like it's going to continue to be broad-based. It was probably stronger in the Eastern markets and in Phoenix and then maybe just a slightly lesser extent, maybe in Texas and in California, but we like our footprint. We like where we are. We're in high-growth markets, never hurts to have job growth and population growth, kind of underlying all of this, you look at markets like Houston, Dallas, even Atlanta, Phoenix [indiscernible] growth of those markets just in general. When you go around those markets, you can tell that they're just different than other parts of the country you go to.

So I think steady is a good term and the team is really focused and hopefully, we can continue steady momentum in the next year, and it swings more positively, we're ready to play into that as well.

Operator

Your next question comes from Ronald Kamdem with Mark & Stanley.

Ronald Kamdem

Just a quick 2-parter. Back to the data center question, I think you did a great job of addressing what would happen if it slowed. But if I can ask the other side of that question, is it possible for that to double or triple next year I'd be interested to hear your comments?

And then the second part of the question is, as you take a step back and you look at the portfolio, I think you made some comments about rent growth potentially accelerating this year. My question would be how much sort of commenced occupancy upside and potential cash leasing spreads upside could we see?

R. Dunbar

Ron, it's Reid. On the data center related question, Yes, you read the news, it feels like it could increase substantially from what people are saying. And I think from an EastGroup standpoint, we're well positioned if that occurs. Being that a lot of these areas where you're seeing the data center growth are in our markets, being Dallas and Houston, Atlanta, Phoenix, Charlotte, Carolinas area. So fingers crossed, that happens. But as we stated earlier, even if it does maintain its current pace or slows, we still feel very confident in the way our portfolio is structured and the other demand drivers that we're seeing and feeling to date and what we think could happen in the years to come as well.

And as far as the other question, I'll let Staci jump in on that one.

Staci Tyler

Sure. In terms of the rent growth projections for fourth quarter, our projections are generally in line with what we've accomplished thus far this year. So I don't -- we're not expecting as market rent growth continues to remain steady and tick up, we're not expecting a dramatic change with our re-leasing spreads. And we're not in a position to speak to next year yet in terms of specifics. But I think you are on track in thinking that if we continue to see to experience rent growth in our markets, say, if they're in the mid-single digits now. If that were to accelerate, then that would certainly impact our re-leasing spreads as well.

Marshall Loeb

And Ron, it's -- I'll follow on this question. When you say in terms of data center suppliers, what -- what makes us optimistic about this tailwind. Again, we're not building specifically for it, which is a great way to be able to catch it, but based on what's existing today, when you look at the main markets Reid mentioned, the Texas, Arizona, Atlanta, Carolinas, what's planned and permitted it's typically about 4x, if I pick the number versus what exists today. And those supplier networks are still being built out, maybe unlike, say, in Northern Virginia, which has is the largest today for data centers.

Dallas is forecast to overcome Northern Virginia and the supplier network has not been settled out. So it could be a pretty material. It is a material tailwind already at 20-plus percent more than I would have expected earlier in the year and with the potential to really drive demand for us, and we'll just try to manage it is I hope it's a problem we're dealing with managing all that demand and how we don't get over concentrated with it. But if what's planned and permitted actually happens, which it sounds like it is for what we read, there is a lot of growth within our data center suppliers.

One of the leases Brent mentioned in Arizona, the reason they picked us is because we have extra land for buildings and capacity as they plan their growth.

Operator

Your next question comes from Mike Lewis with Truist.

Michael Lewis

So I guess a lot of us are on the same page because I was going to ask if data centers slowed if that would hurt industrial. Now that you've answered that a couple of times, maybe I'll ask more broadly. This was a very positive release and outlook and conference call, all the guidance changes for occupancy NOI rate, all moving in the same positive direction. So maybe I'll ask if there are risks you considered when you raise the guidance or I know you expect rent to grow Tier 2. Any risk to keep an eye on headed into next year, whether fundamental or lagging markets or capital markets or anything besides data centers that you think could spoil the party?

Marshall Loeb

Michael, it's Marshall. I think unlike, say, the green energy kind of wave we had those were startups, and we knew there are going to be winners and losers. The good thing with the data center suppliers, they're existing companies. Again, maybe they get themselves over levered, but I feel better about these tenants than I did kind of the green energy wave and that they'd already been in business and have customers that aren't that. I would say things that keep us up at night or keep me up at night, it's always look, we've got a great team, but -- and a lot of other people know we have a great team.

So we got to keep our team. And then we say we worry much more about demand than we do supply. So does the consumer get overstretched, what does rising interest rates due to credit card debt and things like that. There'll be new supply, but especially for what we build, that's usually pretty moderate because we know how hard it is for us to find good sites and how long that takes to day to put those into production. So it's kind of the black swan economy that's where we try to have the balance sheet and the team and be as best prepared we can for the -- whatever the next inflection point is but it's really the consumer and the economy is our -- and keeping the team would be the 2 things that would worry me in '27.

Operator

Your next question comes from Vince Tibone with Green Street.

Vince Tibone

Are you able to share the cap rates on the acquisitions that both closed in 3Q and subsequent to quarter end? And then just curious if you think the stuff that closed most recently, if that pricing is reflective of the new bid for industrial post the rate move?

R. Dunbar

Yes, Vince, it's Reid. I would say for the assets that we've purchased really year-to-date because majority of it's been over those last couple of months. Our stabilized straight-line yield is going to pencil out right around 6.5%, mid-6 number. And so we feel good about that. Some of that have some vacancy in it like we mentioned, but we're adding value, the team will add value by finding some tenants to occupy that space and knowing that we're some market experts in the area, that feels like a good bet for these assets. And as far as cap rates movement, we have not been the most aggressive bidder, but we've been the better that probably has the most likelihood to close.

And so we've not -- we've seen opportunities where we weren't the highest bidder and lost the deal and then the sellers or the brokers came back to us and said, "Hey, are you -- is your number still good? Can you perform at this number?" So we like that type of environment. We've been able to exploit it and take advantage of it and buy some really high-quality assets that are accretive day 1, have additional upside. And most importantly, in these environments, we look at things on a per square foot basis and the replacement value. So being the developers that we are, we can quickly ascertain if it's a good buy or not just from a per square foot basis.

And so as all those items come in line, we're really excited about the window that's opened and we'll see how much longer it stays open. We've got the balance sheet strength and the flexibility to take advantage of it in these environments like we've seen here lately.

Operator

There are no further questions from the phone line. I will turn it back to Marshall Loeb for some closing remarks.

Marshall Loeb

Thanks, everyone, for your time this morning and your interest in EastGroup. If there's any questions -- follow-up questions or anything we didn't get a chance to speak to please feel free to reach out, and we'll see many of you in a couple of weeks in Atlanta at NAREIT. Thanks, everyone.

Operator

Ladies and gentlemen, this concludes your conference call for today. We thank you participating and ask that you please disconnect your lines. Have a great day.