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David HosterThank you. Operating results for the second quarter exceeded the midpoint of our guidance range. The increase was due primarily to achieving higher than projected property occupancies and termination fees and experiencing lower bad debt. Funds from operations were $0.71 per share as compared to $0.80 per share from the second quarter of last year, a decrease of 11.3%. The $0.09 per share decline was in part the result of our lower property occupancies and less capitalized interest in development fees during the second quarter of this year. For the six months, FFO was $1.45 per share, this compared to $1.63 per share for the first half of last year, a decrease of 11.0%. Same property net operating income for the second quarter declined 3.8% with straight-line rent adjustments and 4.7% without. These figures are approximately what we experienced in the first quarter. In the second quarter on a GAAP basis, our best major markets after the elimination of termination fees were San Francisco, which was up 13%, Houston up 3.1%, and El Paso up 2.2%. The trailing same property markets were Los Angeles down 28%, New Orleans down 23% and Tampa down 11.3%. Although, average rents are declining, the difference between quarters is still basically due to changes in property occupancies in the individual markets. EastGroup’s occupancy at June 30 was 87.2%, an increase of 100 basis points over our March 31 occupancy. This improvement exceeded our expectations and it was primarily achieved in the month of June. Looking forward, we project occupancy to continue to increase to approximately 89% by the end of the year. Please note that our occupancy statistics include our development properties that were moved to the portfolio at the earlier of 80% occupancy, a one year after shell completion. Our Texas markets were the best at 94.2% leased and 92.8% occupied at the end of the quarter. Houston, our largest market with over 4.7 million square feet, was 94.7% occupied. Our most challenging major market continues to be Phoenix at 75.8% occupied, which experienced a small improvement over the first quarter results.
Looking at second quarter leasing statistics, we renewed 66% of the 1.1 million [ph] square feet that expired in the quarter and leased another 1.1 million square feet that had either terminated or expired during the quarter or was vacant at the beginning of the quarter.In total, we signed 131 leases in the second quarter, which was the highest quarterly number of leases ever, exceeding the previous high in the first quarter of this year. Clearly, a positive sign. In addition, this was the first time since the second quarter of ’08 that our lease percentage increased. As shown by our occupancy results, leasing activity has improved. We cannot call it good yet, but at least, it is better and we expect to achieve increased occupancy over the next two quarters. There is leasing activity in all of our markets and prospects continue to expect cheap rent with significant concessions and feel a little sense of urgency since they have so many lease alternatives. As you can see in our supplemental information, GAAP rents in the second quarter decreased 16.1% and cash rents declined 18.9%, a greater decline than last quarter. Our Arizona and Florida markets continued to have the largest decreases having achieved the largest increases several years ago. We expect to experience negative rent growth until occupancy is recovered till the 93% to 94% level. This was the case coming out of the last recession. Average lease length was 4.0 years, which is about our average for the last year. Tenant improvements were $2.41 per square foot of the life of the lease or $0.60 per square foot per year of the lease, which is well above our usual averages and was the result of a renewal lease at our LA Corporate Center Office Building, Los Angeles and the modernization of a number of older spaces. Read the rest of this transcript for free on seekingalpha.com