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Operator
Good day. All sites are now on the conference line in a listen only mode. At this time, I would like to turn the call over to your moderator, President and CEO of EastGroup Properties, David Hoster. Go ahead, sir.
David Hoster - President and CEO.
Thank you. Good morning and thanks for calling in for our first quarter 2005 conference call. We appreciate your interest in EastGroup. Keith McKey, our CFO, will also be participating in the call.
Since we will be making forward-looking statements today, we ask that you listen to the following disclaimer covering these statements.
Unidentified Speaker
The discussion today involves forward-looking statements. Please refer to the Safe Harbor language included in the Company's news release announcing results for this quarter that describes certain risk factors and uncertainties that may impact the Company's future results and may cause the actual results to differ materially from those projected. Also, the content of this conference call contains time-sensitive information that, subject to the Safe Harbor statement included in the news release, is accurate only as of the date of this call.
David Hoster - President and CEO.
Thank you. The first quarter was an extremely active one for EastGroup, our property acquisitions, to development land purchases, to development starts, to a common stock offering, all of which strengthen us for future growth and earnings.
Operating results for the first quarter met the upper range of our guidance. Funds from operations were $.64 per share compared to $.60 per share for the first 3 months of last year, an increase of 6.7%.
Please note that we continue to calculate funds from operations based on NAREIT's definition of FFO, which excludes gains on depreciable real estate.
In analyzing first quarter operations, we are especially pleased with the strong growth in same property operating results. We achieved an increase in same property operations of 7% without the straight lining of rents and, with straight lining, same property quarterly results improved by 3.7%. This was the 7th consecutive quarter of positive results for both measures. Our investment and operating strategies are working.
On a GAAP basis, our best major markets for same property results in the first quarter were Memphis, which was up 61% due to a termination fee, South Florida, up 12.8%, Phoenix, 7.9%, Tampa, 6.6% and Houston, up 4%. The trailing same property markets were Dallas, down 5.8%, and the San Francisco area, down 3.4%. The differences are basically all due to changes in property occupancies in the individual markets.
For the fourth year in a row, we experienced a drop in occupancy in the first quarter following a strong fourth quarter. This was the result of a number of holiday related short-term leases, approximately 280,000 square feet, a known, '04 move outs, extending leases into early '05 before moving out, approximately 285,000 square feet.
Occupancy at quarter-end in our 4 core states of Florida, Texas, Arizona and California, was 91.8% as compared to 87.7% in our non-core markets. Of our core states, Florida continues to experience the best leasing activity for both second generation spaces and development properties.
Looking at first quarter leasing statistics, we renewed or re-leased 51% of the 1.2 million square feet that expired, and leased another 356,000 square feet of vacant space.
Combining both renewals and new leases, we experienced the following statistics. Average lease length was 3.5 years, which reflected recent quarterly results. Average lease size was 11,300 square feet, which was normal for us. The average cost of tenant improvements was $1.05 per square foot for the life of the lease, or $.30 per square foot per year of the lease, which represented a slight decrease from our recent experience. There was an average decrease in rents on a cash basis of 1.9%, consisting of a .6% increase on new leases and a 3.4% decrease on renewals. This was the lowest decrease in rents since the first quarter of '03 and represents a 5 quarter trend of improvement. On a GAAP basis, it was the third consecutive quarter of positive rent growth, which primarily reflects reduced concessions.
Over the last 6 months, leasing activity at our development properties has picked up significantly. We had previously planned to increase our level of new construction starts in 2005 to approximately $40m. Given the strong leasing activity we are experiencing, and the continued overall firming of our development markets, we now expect total development starts to exceed $50m this year.
At March 31, our development program consisted of 8 properties containing 584,000 square feet for the total projected investment of $36.1m. The 2 properties in lease-up are currently 84% leased and the 6 under construction are 10% leased.
In the first quarter, we transferred Sun Port Five in Orlando and Santan 10 in Chandler, Arizona into the portfolio. They contain a total of 128,000 square feet and are both 100% leased.
During the quarter, we began construction of 3 new developments, all of which are follow-on phases of earlier projects -- Secway (ph) 3 in Houston, Sun Port 6 in Orlando and Palm River South 2 in Tampa. When completed, these 3 will contain a total of 245,000 square feet and a projected total investment of $14m.
Also in the first quarter, we increased our development pipeline with 3 land purchases; 15.5 acres in San Antonio, as part of our Arion business park acquisition, 32 acres of expansion of our South Ridge commerce park in Orlando and 66 acres in the Oak Creek business park in Tampa. These parcels of land will accommodate a total of approximately 970,000 square feet of new development which increases our development pipeline to a total of approximately 2.8 million square feet of future development opportunities.
Over the next 3 to 4 months, we plan to begin construction of 6 new developments with a total of approximately 380,000 square feet and a projected total investment of $25m. They are in Orlando, Houston, San Antonio and Chandler, Arizona.
As we like to repeatedly state, our development program has been, and will continue to be, a major contributor to FFO by adding quality, state-of-the-art assets to our portfolio.
During the first quarter, we completed 2 operating property acquisitions and 1 sale. As previously reported in January, we purchased Arion business park in San Antonio for a price of $40m. Arion is a master plan business park containing 524,000 square feet and 14 industrial buildings and 15.5 acres of land for the future development of approximately another 170,000 square feet. The buildings were constructed between 1988 and 2000 and are currently 91.2% leased to 25 customers.
In March we acquired Interstate Distribution Center in Jacksonville for $7.9m. Built in 1990, it is a 2-building complex containing 181,000 square feet and is 100% leased to 7 customers.
In February we sold Dell Distribution Center 2 containing 102,000 square feet in Memphis. The sales price of $2.2m generated a gain of $377,000. We have recently listed 3 additional Memphis properties for sale and are currently negotiating the sale of another.
We currently do not have any potential acquisitions under contract, but are seeing a slight pick up in individual property offerings. Keith will now review a variety of financial topics.
Keith McKey - EVP, CFO, Treasurer and Secretary
Good morning. We were pleased to complete a common stock offering on March 31, 2005. We issued 800,000 shares and received net proceeds of $29.4m. Although the operating has diluted the FFO about $.01 per share per quarter, we believe we will have good opportunities to increase FFO with the proceeds over the next several quarters.
Another important capital transaction was the signing of an application for a loan on Industry Distribution Center 2. As you recall, last November we purchased 50% of Industry 2 in Los Angeles and advanced our co-owners $7.55m for the closing. The $13.3m first mortgage loan secured by Industry 2 will have a fixed interest rate of 5.31%, a 10-year term, a 25-year amortization and it is expected to close at the end of May. EastGroup will receive its 50% share of the loan proceed and the co-owner's 50% share in partial repayment of its debt to EastGroup. After receiving the loan proceeds, the co-owner will have notes due to EastGroup of approximately $1m.
Debt to total market capitalization was 32.9% at March 31st, 2005, compared to 31.7% at 12/31/04. For the quarter, the interest coverage ratio was 3.4 times and the fixed charge coverage ratio was 3.1 times, which were a little lower than the previous quarter due to financing the acquisitions in the first quarter.
Our floating rate bank debt amounted to 7.5% of total market capitalization at quarter end. We have 3 mortgage notes payable totaling $14.2m maturing in '05, and 1 of these notes is currently at $9.8m with an interest rate of 8.125% and it can be paid off 3 months early and we plan to pay this note before maturity to take advantage of lower rates.
FFO per share increased 6.7% for the quarter, compared to the same period last year. Bad debt expense was $99,000 for the first quarter in '05, compared to $53,000 in the same quarter last year. Lease termination fee income was $168,000 for the quarter, compared to $39,000 for the same quarter last year.
In March we paid our 101st consecutive quarterly dividend. This dividend represented the 13th consecutive year of dividend increases. The quarterly dividend of $.485 per share equates to an annualized dividend of $1.94 per share. Our FFO payout ratio was 76% for the quarter.
FFO guidance for 2005 was narrowed to a range of $2.59 to $2.69 per share and earnings per share is estimated to be in the range of $.95 to $1.00 per share. A few changes were made to our previous guidance. Lease termination fee income of $168,000 was recorded in the first quarter. The common stock offering of $29.4m was recorded on March 31st, 2005, and new fixed rate debt was reduced from $50m to $25m.
Now David will make some final comments.
David Hoster - President and CEO.
The first quarter was a productive 90 days that has improved an already strong position for future growth in FFO. Our development program is expanding. Our pipeline of land for future development is at an all-time high. We have acquired good assets at attractive yields. We have strengthened our balance sheet. Operationally, we have achieved 7 consecutive quarters of increases in same property operating results and as Keith said, we have increased our dividend for the 13th consecutive year.
Keith and I will now answer any questions you may have. Thank you.
Operator
(Operator Instructions) We'll take our first question from John Stewart (ph). Go ahead please.
John Stewart - Analyst
John Stewart here with John Litt (ph).
David Hoster - President and CEO.
Good morning.
John Stewart - Analyst
Good morning. David, you mentioned that you don't have any acquisitions under contract. Can you give us a bit of additional color in terms of what is in the pipeline?
David Hoster - President and CEO.
As I mentioned briefly in my prepared remarks, in the last, oh, 30 to 45 days, we're starting to see an increase in individual property offerings, which are the types of transactions that appeal to us and work best for us from a yield standpoint. Statistically, a lot of industrial property has been put on the market in the last 4 to 6 months, but a lot of it has been in very large packages of $500m and above, and it's a real mixed bag in a lot of different markets. And that doesn't work for us, in addition, because of the mixes in the package, but also the yields that seem to go with these bigger packages. In today's market there's a premium for quantity seemingly more so than for quality. So as I say, although the statistics show that a lot of properties are being offered, we went through a very quiet period with our Interstate property in Jacksonville being the only one that we had recently been able to get our arms around. But as I say, we're starting to see individual property offerings in a number of our core states, and we think that this is going to allow us to do some more acquisitions that we weren't looking at a while ago, although nothing is under contract today.
John Stewart - Analyst
Can you quantify that for us and give us a sense for what you think your share of that might be?
David Hoster - President and CEO.
It's a little too early to do that, John. We've got an offer out on 1 package now and later this week, we'll be offering on another. But it's too early to say where we're going to come out on it.
John Stewart - Analyst
Just for the dollar amounts of those offers?
David Hoster - President and CEO.
They're all below $10m.
John Stewart - Analyst
Okay.
David Hoster - President and CEO.
And what we've found, and I think you've heard me mention before, the ideal transaction for us seems to be under $10m. A mortgage that has to be assumed, as in our Jacksonville property, that chases away some of the syndicators and institutional investors and maybe even a threat of vacancy, that also scares some potential buyers in a submarket where we're comfortable with releasing the space. Like I said, the Jacksonville property fits about all those criteria.
John Stewart - Analyst
Just quickly on the Memphis portfolio, can you give us a sense for where you think the dispositions will come out relative to book on the assets that are currently being offered?
David Hoster - President and CEO.
We're pretty comfortable that the sales will generate some gains and it's a little early to throw out any numbers yet. Memphis is an interesting market. It's harder to target cap rates there. So we should have a better feel for that in the next 60 to 90 days on the first 3 properties that are going to be offered. We've signed a listing for the -- the teaser will go out to potential buyers at the end of this week and the package soon thereafter.
John Stewart - Analyst
How much do you have left in Memphis beyond those assets?
David Hoster - President and CEO.
Well, our stated goal is to exit 50% from where we were at the beginning of the year. We have the 1 small sale so far. With a little bit of luck, we will exit 2/3 and that's roughly 2/3 of our total investment there, as well as 2/3 of the square footage. So we could be down under 500,000 square feet by the end of the year.
John Stewart - Analyst
And then lastly, I didn't see World Houston 20 broken out in the supplemental. Can you give us an update on that project?
David Hoster - President and CEO.
I was hoping you'd mention that one. That was slow to lease up. We signed a lease with a customer in World Houston 14 who is looking at a large expansion and needed additional exterior storage as well. That lease was signed, I guess, about 6 weeks ago and they will be moving in, I think in the next 30 days. The TIs are under construction and we think the previous base at 14 will be a lot easier to lease because of its size and the size of what we were doing in 20.
John Stewart - Analyst
I thank you.
David Hoster - President and CEO.
Thank you.
Operator
Thank you. We'll take our next question from Mr. Ross Nussbaum. Go ahead, sir.
Kristie McElroy - Analyst
Hi. It's Kristie McElroy (ph) here with Ross. If I take a mid-point of your guidance ranges for the second quarter and for the year, you're looking for about an 8% rise in FFO from the first half to the second half. Can you kind of go through where that growth comes from?
Keith McKey - EVP, CFO, Treasurer and Secretary
The acquisitions that we did in the first quarter with Arion and the Jacksonville property are going to give most of that. We are projecting some increases in same store and that should be most of it.
David Hoster - President and CEO.
And we will be hurt a little bit by sales of Memphis, depending on when those occur. The later in the year they occur, the less effect they'll have.
Kristie McElroy - Analyst
What about on the G&A side? Do you see that coming down at all throughout the year?
David Hoster - President and CEO.
Yes we do. The first quarter, we hope, is going to be the highest quarter for the year and we are trying to get below $7m for the G&A number.
Kristie McElroy - Analyst
And can you talk a little bit about where in your core markets, or maybe outside your core markets, you might be looking to add to your land portfolio further?
David Hoster - President and CEO.
Good question. We have 2 additional parcels under contract that we're taking a look at. One, some additional land at World Houston and, as I've mentioned previously, we've been looking around the Ft. Myers area for, I guess, at least 6 months now, and we have some development land under contract there that we're just starting the due diligence on.
Kristie McElroy - Analyst
Great. Thank you.
David Hoster - President and CEO.
Thank you.
Operator
Thank you. And we'll take our next question from Mr. Tony Howard. Go ahead, sir.
Tony Howard - Analyst
Yes. Good morning, Dave and Keith.
David Hoster - President and CEO.
Good morning.
Tony Howard. A couple questions. Obviously, someone asked about Memphis already, which I'd like to ask about. But what about Tucson? I noticed that it's gone down sequentially from like 100% down to 7% occupancy.
David Hoster - President and CEO.
We had -- we have a building there right by the airport that has roughly 125,000 square feet that Wal-Mart and related entities were in for 7 or 8 years. They finally moved out in the first quarter and we've had a variety of prospects, but nobody close right now. Tucson has been a market that -- I guess you'd call it a tertiary market that we feel over time will become a secondary market. That just hasn't happened yet.
Tony Howard - Analyst
But it's not a kind of a market where it might turn into another Memphis?
David Hoster - President and CEO.
I don't think so, no. There's growth, very positive growth, in Tucson. It's affected by the cross border trade with Mexico and a lot of people view Tucson as a more attractive place than Phoenix, just because of its size.
Tony Howard - Analyst
You were talking in the prepared reports about the amount of vacant land (inaudible) . I guess it's like 100 acres that you've acquired?
David Hoster - President and CEO.
Yes. In the last -- well, in the first quarter, we've picked up land in Tampa, Orlando and San Antonio with our purchase of Arion and our goal is to have a building or two under construction at Arion in the next couple of months.
Tony Howard - Analyst
Great. And the --
David Hoster - President and CEO.
(Inaudible) the design of that right now.
Tony Howard - Analyst
And can you go through the -- on the balance sheet, what was the value of that added to the balance sheet from sequentially?
Keith McKey - EVP, CFO, Treasurer and Secretary
Just the land part?
Tony Howard - Analyst
Yes.
Keith McKey - EVP, CFO, Treasurer and Secretary
Let's see. Tony, if you'll turn to the development schedule on Page 11 of the supplemental, under the perspective development section, we've got $27.7m and that's primarily land there.
Tony Howard - Analyst
Okay. And was that at this quarter?
Keith McKey - EVP, CFO, Treasurer and Secretary
No, that was not at -- in the first quarter '05 is a column, the $10,151,000.
Tony Howard - Analyst
Okay. I got you. I got you. I got you.
Keith McKey - EVP, CFO, Treasurer and Secretary
And then there were several tracks there and we may have done some -- developed some third movement on some other tracks. As you can see, the breakdown on the --
Tony Howard - Analyst
And that relates to the balance sheet under what, the $47m?
Keith McKey - EVP, CFO, Treasurer and Secretary
That is on the balance sheet under development. Yes, the $47m, that's correct.
Tony Howard - Analyst
Okay. My last question, as far as your revised guidance, what kind of projections were you using for same property since you've basically are going up against tougher comparisons as the year progresses?
David Hoster - President and CEO.
Well, what we've put in the guidance is a 1.2 to 4.4 range and, as you know, that moves because of two things -- the rental increases or decreases and occupancy. And we haven't tried to narrow those 2 completely down as they move. But we think it will be in this range.
Tony Howard. All right. Thank you.
David Hoster - President and CEO.
Thank you.
Operator
Thank you. We'll now take our next question from Scott Sedlack (ph). Go ahead, sir.
Scott Sedlack(ph) - Analyst
Hi. David, can you maybe comment on what the average land costs are in San Antonio, especially in relation to the Arion acquisition?
David Hoster - President and CEO.
Good question, but I don't have that off the top of my head. What we did -- well, let me -- we'll get Keith to figure it here while I'm talking, is that when we bought the property, it was a fixed price and we allocated what we thought was the market value to the land and broke that down into 2 types because of the 4 potential buildings we can build there, 2 were service center buildings and 2 were business distribution buildings.
Keith McKey - EVP, CFO, Treasurer and Secretary
We'll probably have to get back to you, Scott on that (inaudible).
David Hoster - President and CEO.
It's roughly $3.10 a square foot.
Scott Sedlack(ph) - Analyst
Okay. Do you think that would roughly be in line with market or is that above market?
David Hoster - President and CEO.
No, that's market because that's how we allocated it when we did the $40m purchase. Our -- the -- I put the --
Scott Sedlack(ph) - Analyst
Why is that so high then, do you think?
David Hoster - President and CEO.
One thing is we're in very much of an infill site right next to the airport.
Scott Sedlack(ph) - Analyst
Okay.
David Hoster - President and CEO.
This is not out in like the boondocks with the tumbleweeds blowing around, as some of the San Antonio land can be.
Scott Sedlack(ph) - Analyst
Okay.
David Hoster - President and CEO.
This is another example. Land costs in Ft. Myers for industrial, which is just a growing industrial market, are higher than they are in Tampa, which is a proven industrial market. So it's all very much of where the land is located and what relative prices are.
Scott Sedlack(ph) - Analyst
Okay. I saw the other day that Toyota is looking to build a facility down in San Antonio. Is there any opportunity that you guys might be deriving from Toyota building that plant?
David Hoster - President and CEO.
It's a little too early to tell. I think you just have to assume that any large -- well, this is going to be a pickup truck assembly plant -- has to have a positive effect on the overall industrial market. We don't have the size spaces that would appeal to a tier 1 or tier 2 supplier to the automotive industry. But I just think, overall, the general demand will -- an economy will be helped with what Toyota is doing there.
Scott Sedlack(ph) - Analyst
Okay. And then, finally, Keith, can you maybe comment on any type of prepayment opportunities that you guys might have on any of the mortgage set coming due?
Keith McKey - EVP, CFO, Treasurer and Secretary
Yes. We've got one opportunity and that's on the $9.8m that's due this year and we can pay it off July 1st.
David Hoster - President and CEO.
All the other ones, right now, have penalties, the yield maintenance penalties, that exceed the benefit that we could gain by refinancing them today. That's something we look at regularly.
Scott Sedlack(ph) - Analyst
Thank you guys, very much.
David Hoster - President and CEO.
Thank you.
Operator
Thank you. We'll now take our next question from Chris Hailey. Go ahead.
Chris Hailey - Analyst
Good morning.
David Hoster - President and CEO.
Good morning, Chris.
Chris Hailey - Analyst
A question on your guidance again. Keith, you mentioned the acquisitions helping the rest of the year, but the acquisition was made in the first quarter and your equity offering was in the first quarter and you're looking for flat guidance for the second quarter. So help me understand what occurs between the second and third, and third and fourth to get us all the way up to where you're talking about in terms of mid point of guidance?
Keith McKey - EVP, CFO, Treasurer and Secretary
Well, we have leasing that's going to do better. We planned on -- we've got -- let's see, $.64 is the half of next quarter.
Chris Hailey - Analyst
Yes.
Keith McKey - EVP, CFO, Treasurer and Secretary
And then we plan on going up a little bit from there and then a little bit into the fourth quarter. We have G&A costs going down some. We have -- it's basically just doing better leasing.
Chris Hailey - Analyst
And what's driving the -- what drove the first quarter G&A up and what's going to help it come down? Or is it just what's included in first quarter?
Keith McKey - EVP, CFO, Treasurer and Secretary
First quarter G&A was some extra accounting costs to complete all the Sarbanes-Oxley information. It was the less development cost capitalized. We had kind of a slow first quarter. We expect that to pick up in the remaining quarters and then a couple of other little items.
Chris Hailey - Analyst
Okay. In your same store, if you excluded termination fees from same store, what would you -- what was your number?
Keith McKey - EVP, CFO, Treasurer and Secretary
Good question. Our crank staff is over here computing that right now.
Chris Hailey - Analyst
All right. In the meantime, let me ask a question about your development pipeline. Looking at your projects that are under construction and in lease-up, several of the projects have moved up in time, conversion date, yet the yields have not changed. What -- I'm assuming there would be less capitalized costs if you're moving projects up. Are you just remaining conservative with stabilized yields? What's -- ?
David Hoster - President and CEO.
Well, 2 things. We always try to remain conservative, but also, sometimes if you have a prospect who can move in earlier, you give them a little break in rent. It is an attractive lure to have them occupy sooner.
Chris Hailey - Analyst
Okay.
David Hoster - President and CEO.
So sometimes you do some trade-offs to still try to maintain your yield.
Chris Hailey - Analyst
Okay. And on that construction pipeline, looking at 411,000 feet in the next 6 projects, what would you say your office finish is on that 411,000 feet?
David Hoster - President and CEO.
Well, South Ridge 1 is going to be close to 100% office. So if you take that one out, because that's really a service center building at the entrance to our South Ridge development, the rest of it, I think, we're budgeting about 20%.
Chris Hailey - Analyst
Okay.
David Hoster - President and CEO.
And that, of course, swings quickly depending on who's out there ready to sign a lease.
Chris Hailey - Analyst
Okay. And then looking at the 3 projects that were added, Techway, Palm River and Sun Port, why aren't -- and those are expansions --
David Hoster - President and CEO.
Yes.
Chris Hailey - Analyst
Why aren't the yields higher, on average, than -- again, it's just 3 data points; it's not a lot, but, I would imagine the yields would be a little bit higher, consistently, on expansions than they would with ground up new projects.
David Hoster - President and CEO.
Well, we have additional capitalized costs for carrying the land until construction starts, and also, in most markets, construction costs continue to inch up and so that's just a fact of life today. I think we're looking at Palm River South 2 that the construction cost's roughly, if I recall correctly, up about 5% and the first building was up significantly from what we were doing a couple of years ago, maybe up 25%.
Chris Hailey - Analyst
So on expansion land or land that is held for future development, you are not capitalizing the costs, or at least what some folks might do is move that -- carry -- capitalize the land into existing developments, thereby suppressing earlier development yields, and therefore boosting later yields if you don't have that cost.
David Hoster - President and CEO.
We allocate -- when we buy a piece of land that's going to be more than 1 building, we've tried to get a little more sophisticated than we used to, and we allocate the cost based on what we think the various development sites will be. For example, on South Ridge, because service center land is a higher number than warehouse land, we've allocated more for South Ridge 1 and 2 than we have for the other buildings and we've allocated a little bit more for the ones that around the lake and have better visibility from the B-Line Expressway.
Chris Hailey - Analyst
So I -- so -- sorry. So as you are buying land, you are, obviously, in effect, capitalizing more cost. Were you expensing any of those costs?
David Hoster - President and CEO.
No, we're not expense -- we're capitalizing the costs on land as long as that land is part of a development process and is on schedule to be developed. And that might be 2 or 3 years out, but if we see a break in doing development because of the market, or whatever other reason, we then stop capitalizing costs and expense them. And there are about, I don't know, 3 pieces of land where we're doing that now.
Chris Hailey - Analyst
Okay. Last question, going back to Memphis, how would you characterize the assets that are remaining in that portfolio, or package, that you're trying to sell in relation to the asset that was sold at $20 a foot in the quarter versus some of the assets that have been selling to a very aggressive product investor who has been increasing their position in Memphis lately?
David Hoster - President and CEO.
We are putting in our package or in our package or Southeast Crossing, which has some service center type property in it, so it will be a higher -- over $30 a square foot, whereas, Senator 2 will be in the $20 range and LeMar 1 will be in between. So it's just related to the age and quality of the buildings and rents we're now achieving there.
Chris Hailey - Analyst
Okay.
David Hoster - President and CEO.
So it's a real mix. But the Memphis market is doing pretty well if you've got a building that's in excess of 500,000 square feet. There were 4 buildings announced early in the last couple of months there and the smallest was 500,000 square feet. It's the smaller user space that has the higher vacancy rate.
Chris Hailey - Analyst
And for how long have you held that portfolio, held the Memphis assets?
David Hoster - President and CEO.
We acquired most of those through a merger in '98, so it's been 7 years and there's been a real dip in the market during that time. But we still -- well, with depreciation, we'll still expect to report gains on it.
Chris Hailey - Analyst
Okay. Great. Thank you very much.
David Hoster - President and CEO.
Thank you.
Keith McKey - EVP, CFO, Treasurer and Secretary
Hey, Chris, Bruce Corkern informs me that the same store would be 3.1% and that's the GAAP number.
Chris Hailey - Analyst
Thank you, Bruce.
Operator
Thank you. And we'll take our next question from, and pardon me if I mispronounce this, Suri Nagrahan(ph). Go ahead, please.
Suri Nagrahan - Analyst
I think you talked at length about Memphis and your comments on the same property and only grossing 3.1%. Are you seeing some real rent strength in other non-core markets at this point?
David Hoster - President and CEO.
The rent strength seems to be more in our core markets, and it is still a mixed bag, but we seem to see more strength overall in Florida, some of which doesn't show up in the statistics we put out, but what we're experiencing on some leases that we've signed since the end of the quarter. One of the factors that really affects it is we have, over time, pushed very hard to have bumps in our leases. So many times, the bumps get you above market if there's been a pause in growth in market rents. And so that's where most of our decline comes from, other than in the San Francisco Bay area where we're working on some transactions there that will have some pretty significant rent drops just due to the fact that we want to put in some short term users to fill the buildings until rents come back.
Suri Nagrahan - Analyst
My second question has to do with cash rent growth. I think you commented on your cash rent growth and new and renewals trending steadily upwards, although it's still negative. What do you see that for the rest of 2005?
David Hoster - President and CEO.
We see it continuing to get better. It's a little early to say when it's going to turn positive. My best guess would be the fourth quarter, but I said that a year ago, too. But I think there are better odds it will be in the fourth quarter this year,subject to -- especially our Milpitas building having some big turndown, but other than that, we're seeing a strengthening in our markets. And one of the best judges of -- or ways to judge how your market is doing is, one, how many comparable spaces does a prospect have versus yours? And then, secondly, are their first choices getting leased out from under them? And that's changing to the positive in most situations. That's when landlords start to get a little bit braver and push rents.
Suri Nagrahan - Analyst
Right. Thank you. My last question has to do with renewal rents. I think you commented on the renewal rates being 48 to 50%. On average, when I look back, you've been in the 60 to 65% range. Can you give us some comments on what the current rate is about, and obviously, how long do you expect it to be before it comes back to the average rate of renewals?
David Hoster - President and CEO.
Our goal is to hit about 2/3 over the balance of the year. I think the first quarter was affected by some known move-outs that we weren't able to turn around from almost a year ago, and some of the move-outs in the third and fourth quarter of last year that got pushed into this year affected that. That was -- that's well below our average and we'd like to believe that's an aberration.
Suri Nagrahan - Analyst
All right. Thank you.
David Hoster - President and CEO.
Thank you.
Operator
Thank you. And we'll take our next question from Stephanie Krewson. Please go ahead.
Stephanie Krewson - Analyst
Hey guys, 3 quick questions. The first is what was your exit cap rate on the asset you sold?
David Hoster - President and CEO.
It was a high 9.
Stephanie Krewson - Analyst
Okay. And what is your partnership -- ?
David Hoster - President and CEO.
Can I just add it had a good bit of risk. It was a single tenant building and the tenant announced they were going to move out at the end of the remaining 3.5 years on their lease.
Stephanie Krewson - Analyst
Okay. The second question, I can't find anywhere in your press release your partner's share of NOI in your consolidated joint venture property, not the unconsolidated one -- I've got that, but the consolidated JD property, what was their share of NOI, just for real estate NEB purposes?
Keith McKey - EVP, CFO, Treasurer and Secretary
It was -- they own a 20% number and, Stephanie, we'll --
Stephanie Krewson - Analyst
Was it still around $225,000 probably?
Keith McKey - EVP, CFO, Treasurer and Secretary
Yes.
Stephanie Krewson - Analyst
Okay.
David Hoster - President and CEO.
Yes. That's our Santa Barbara University business center complex.
Stephanie Krewson - Analyst
Yep. I've got it. And then the third and final question, and bear with me on this, I'm not trying to be a turkey, but could you please explain again your decrease in occupancy for the first quarter? You said basically that it was seasonal due to some temporary leases. However, the 91.2% occupancy rate is calculated excluding month-to-month leases. Can you just please give a little more detail on --
David Hoster - President and CEO.
No, that's not right. Our month-to-month leases -- if we have a lease in place March 31, whether it's a month-to-month or a week-to-week, it shows as occupancy.
Stephanie Krewson - Analyst
Okay. I'll discuss this with you guys off --
David Hoster - President and CEO.
Okay.
Stephanie Krewson - Analyst
It's not a major deal.
David Hoster - President and CEO.
Yes.
Stephanie Krewson - Analyst
But I just want to make sure --
David Hoster - President and CEO.
Occupancy is hard enough to get. We certainly want to count every 1 we can.
Stephanie Krewson - Analyst
Right. It's just that it affects the implied market cap per square foot analysis that I do to double check my implied market cap so -- or rather my implied cap rate so I'll just -- I'll circle back to you guys off line. Thanks.
David Hoster - President and CEO.
Sounds good. Thanks.
Operator
Thank you. (Operator Instructions) We'll take our next question from Mr. Paul Puryear. Go ahead, sir.
Paul Puryear - Analyst
Well, thanks. Just one question, really. David, there's a lot of talk about this soft patch in the economy and you sort of talked around this, talking about rent strength, et cetera. Are you seeing that at all and, if in fact, well -- are you seeing it at all?
David Hoster - President and CEO.
Not yet. I guess we were so used to difficult markets over about a 3 year period that improved activity, both people looking, signing leases and a lot more of a sense of urgency from prospects. It is so pleasant compared to where we were 18 to 24 months ago. We really haven't seen a lot of slowdown that we could attribute to people worried about the future and the economy.
Paul Puryear - Analyst
If in fact we were starting to decelerate, how long would it take to roll through the leasing? Do you think you would see it instantaneously?
David Hoster - President and CEO.
I would think so because -- but what we've seen, in particular in the development property leasing, that 12 to 18 months ago, a number of prospects were attracted to a newer building, but they didn't have the go ahead from the home office or they were still looking for second generation rents for new space. In the last 6 months, 8 months, the prospects seem to have made up their minds that they're willing to pay to have quality space that meets their needs. And that's been a great change for our development leasing and I think that's a sign that a lot of companies have said, "Okay, we've got confidence in the economy. Let's go forward".
Another factor, in particular our smaller customers in the Tampa area, we used to struggle to get the mom and pop operators to go more than a year, and we've had tremendous success since the first of the year, lengthening those 1 year renewals to 3 to 5 year renewals. So far that continues, I think, to show a confidence in people's individual businesses. And so we have not seen that change yet because of potential softness in the market. If anything, it appears that people think that's a blip and that overall businesses continue to improve.
Paul Puryear - Analyst
And then one more thing in this recovery, it just seems like Dallas hasn't been the market it's been in the past. Would your data confirm that?
David Hoster - President and CEO.
Absolutely. The submarket, the closing submarket in which we operate in Dallas has traditionally outperformed the overall Dallas market at about 1/2 to 2/3 the vacancy rate. And I think Dallas is one of those markets where it seems that as soon as there is a scent of increased demand, everybody starts to build. And I think we've had maybe just some bad timing on a number of users move out at the same time. But yes, that's been surprisingly weak for us, given our history there.
Paul Puryear - Analyst
Do you think the demand has been there in Dallas?
David Hoster - President and CEO.
It seems to. In the statistics we look at and talking to our leasing agents, that seems to have slowed a bit and I don't have a reason for that. It does not -- it's not absorbing space the way Houston is today.
Paul Puryear - Analyst
Yes. Okay. Thanks.
David Hoster - President and CEO.
Thank you.
Operator
Thank you. It would appear at this time, we have no further questions. So I would like to turn the call back over to Mr. David Hoster for closing remarks.
David Hoster - President and CEO.
Thank you. As I said before, we appreciate your continued interest in EastGroup and, as always, if there wasn't anything we answered that still is on your mind, please don't hesitate to call Keith or me. Thank you.
Operator
This concludes today's teleconference. You may now disconnect.