What changed in this filing

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Item 1. Financial Statements

2022-07-27 compared with 2022-04-27 · 187 added, 94 removed, 613 unchanged (31% of the section changed)

26 unchanged sentences

70,000,000 shares authorized;

41,680,414 shares issued and outstanding at March 31, 2022 and 41,268,846 at December 31, 2021

43,566,016 shares issued and outstanding at June 30, 2022 and 41,268,846 at December 31, 2021

Excess shares;

1 unchanged sentence

30,000,000 shares authorized;

no shares issued

zero shares issued

Additional paid-in capital 2,263,072 1,886,820

10 unchanged sentences

(IN THOUSANDS, EXCEPT PER SHARE DATA)

Three Months Ended

Three Months Ended Six Months Ended

June 30, June 30,

2022 2021 2022 2021

Income from real estate operations $ 118,498 99,562 231,450 197,479

14 unchanged sentences

COMMON STOCKHOLDERS 46,139 27,558 109,719 54,897

Other comprehensive income - interest rate swaps 15,828 8,214

Other comprehensive income (loss) - interest rate swaps 6,841 ( 1,263 ) 22,669 6,951

TOTAL COMPREHENSIVE INCOME $ 52,980 26,295 132,388 61,848

12 unchanged sentences

(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)

For the three months ended March 31, 2022:

For the six months ended June 30, 2022:

Common Shares Additional

16 unchanged sentences

BALANCE, MARCH 31, 2022 4 1,956,328 ( 300,429 ) 17,130 1,356 1,674,389

For the three months ended March 31, 2021:

Net income — — 46,139 — 26 46,165

Net unrealized change in fair value of interest rate swaps — — — 6,841 — 6,841

Common dividends declared – $ 1.10 per

— — ( 48,034 ) — — ( 48,034 )

Stock-based compensation, net of forfeitures

— 3,062 — — — 3,062

Issuance of 1,868,809 shares of common

stock, net of expenses, in the purchase of real estate

— 303,682 — — — 303,682

Net distributions to noncontrolling interest — — — — ( 31 ) ( 31 )

BALANCE, JUNE 30, 2022 $ 4 2,263,072 ( 302,324 ) 23,971 1,351 1,986,074

See accompanying Notes to Consolidated Financial Statements (unaudited).

EASTGROUP PROPERTIES, INC.

AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)

For the six months ended June 30, 2021:

Common Shares Additional

16 unchanged sentences

BALANCE, MARCH 31, 2021 4 1,652,445 ( 334,000 ) ( 2,538 ) 887 1,316,798

Net income — — 27,558 — 20 27,578

Net unrealized change in fair value of interest rate swaps — — — ( 1,263 ) — ( 1,263 )

Common dividends declared – $ 0.79 per

— — ( 31,981 ) — — ( 31,981 )

Stock-based compensation, net of forfeitures

— 2,893 — — — 2,893

Issuance of 370,177 shares of common

stock, common stock offering, net of

— 59,318 — — — 59,318

Net distributions to noncontrolling interest — 5 — — ( 17 ) ( 12 )

BALANCE, JUNE 30, 2021 $ 4 1,714,661 ( 338,423 ) ( 3,801 ) 890 1,373,331

See accompanying Notes to Consolidated Financial Statements (unaudited).

3 unchanged sentences

(IN THOUSANDS)

Three Months Ended March 31,

Six Months Ended June 30,

OPERATING ACTIVITIES

7 unchanged sentences

Accounts payable, accrued expenses and prepaid rent 28,104 19,783

Other 558 714

NET CASH PROVIDED BY OPERATING ACTIVITIES 176,152 141,410

1 unchanged sentence

Development and value-add properties ( 283,451 ) ( 115,113 )

Purchases of real estate ( 2,049 ) ( 9,177 )

Real estate improvements ( 21,723 ) ( 18,094 )

13 unchanged sentences

Proceeds from common stock offerings 74,249 105,891

Common stock offering related costs ( 70 ) ( 146 )

Other ( 7,376 ) ( 4,264 )

NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES 33,206 ( 14,856 )

NET CASH PROVIDED BY FINANCING ACTIVITIES 86,148 42,679

INCREASE IN CASH AND CASH EQUIVALENTS 1,162 38,544

5 unchanged sentences

Cash paid for operating lease liabilities 962 751

Common stock issued in the purchase of real estate 303,682 —

Debt assumed in the purchase of real estate 60,000 —

NON-CASH OPERATING ACTIVITY

14 unchanged sentences

The consolidated financial statements include the accounts of EastGroup, its wholly owned subsidiaries and its investment in any joint ventures in which the Company has a controlling interest.

As of March 31, 2022 and December 31, 2021, EastGroup held a controlling interest in two joint venture arrangements.

As of June 30, 2022 and December 31, 2021, EastGroup held a controlling interest in two joint venture arrangements.

In 2019, the Company acquired 6.5 acres of land in San Diego, known by the Company as the Miramar land.

1 unchanged sentence

During the year ended December 31, 2021, EastGroup began construction of Speed Distribution Center, a 519,000 square foot building on the Otay Mesa land, which was completed and transferred to the Company’s operating portfolio during the three months ended March 31, 2022.

As of both March 31, 2022 and December 31, 2021, EastGroup had a 95 % controlling interest in the Miramar land and a 99 % controlling interest in Speed Distribution Center.

As of June 30, 2022 and December 31, 2021, EastGroup had a 95 % controlling interest in the Miramar land and a 99 % controlling interest in Speed Distribution Center.

The Company records 100 % of the assets, liabilities, revenues and expenses of the buildings and land held in joint ventures with the noncontrolling interests provided for in accordance with the joint venture agreements.

6 unchanged sentences

The Company’s primary revenue is rental income from business distribution space.

The table below presents the components of Income from real estate operations for the three months ended March 31, 2022 and 2021:

The table below presents the components of Income from real estate operations for the three and six months ended June 30, 2022 and 2021:

Three Months Ended

June 30, Six Months Ended June 30,

2022 2021 2022 2021

(In thousands)

13 unchanged sentences

future cash flows, an impairment charge is recognized for the amount by which the carrying amount of the asset exceeds the fair value of the asset.

During the three month periods ended March 31, 2022 and 2021, the Company did not identify any impairment charges which should be recorded.

During the six month periods ended June 30, 2022 and 2021, the Company did not identify any impairment charges which should be recorded.

Depreciation of buildings and other improvements is computed using the straight-line method over estimated useful lives of generally 40 years for buildings and 3 to 15 years for improvements.

1 unchanged sentence

Significant renovations and improvements that improve or extend the useful life of the assets are capitalized.

Depreciation expense was $ 29,392,000 and $ 25,147,000 for the three months ended March 31, 2022 and 2021, respectively.

The Company’s Real estate properties and Development and value-add properties at March 31, 2022 and December 31, 2021 were as follows:

Depreciation expense was $ 30,715,000 and $ 60,107,000 for the three and six months ended June 30, 2022, respectively, and $ 25,858,000 and $ 51,005,000 for the same periods in 2021.

The Company’s Real estate properties and Development and value-add properties at June 30, 2022 and December 31, 2021 were as follows:

2022 December 31,

29 unchanged sentences

if so, the set is not a business.

EastGroup determined that its real estate property acquisitions in 2021 and the first three months of 2022 are considered to be acquisitions of groups of similar identifiable assets;

therefore, the acquisitions are not considered to be acquisitions of a business.

As a result, the Company capitalized acquisition costs related to its 2021 and 2022 acquisitions.

Criteria considered in grouping similar assets include geographic location, market and operational risks and the physical characteristics of the assets.

EastGroup determined that its real estate property acquisitions in 2021 and the first six months of 2022 are considered to be acquisitions of groups of similar identifiable assets;

EASTGROUP PROPERTIES, INC.

1 unchanged sentence

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

therefore, the acquisitions are not considered to be acquisitions of a business.

As a result, the Company capitalized acquisition costs related to its 2021 and 2022 acquisitions.

The FASB Codification also provides guidance on how to properly determine the allocation of the purchase price among the individual components of both the tangible and intangible assets based on their respective fair values.

10 unchanged sentences

These intangible assets are included in Other assets on the Consolidated Balance Sheets and are amortized over the remaining term of the existing lease or the anticipated life of the customer relationship, as applicable.

Amortization expense for in-place lease intangibles was $ 2,465,000 and $ 1,431,000 for the three months ended March 31, 2022 and 2021, respectively.

Amortization of above and below market lease intangibles increased rental income by $ 845,000 and $ 229,000 for the three months ended March 31, 2022 and 2021, respectively.

During the three months ended March 31, 2022, EastGroup acquired the following properties:

REAL ESTATE PROPERTY ACQUIRED IN 2022

Amortization expense for in-place lease intangibles was $ 2,198,000 and $ 4,663,000 for the three and six months ended June 30, 2022, respectively, and $ 1,307,000 and $ 2,738,000 for the same periods in 2021.

Amortization of above and below market lease intangibles increased rental income by $ 507,000 and $ 1,352,000 for the three and six months ended June 30, 2022, respectively, and $ 245,000 and $ 474,000 for the same periods in 2021.

EASTGROUP PROPERTIES, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

During the six months ended June 30, 2022, EastGroup acquired the following properties:

REAL ESTATE PROPERTIES ACQUIRED IN 2022

Location Size Date

1 unchanged sentence

(Square feet) (In thousands)

Value-add property acquired (1)

Operating properties acquired (2)

Cebrian Distribution Center and Reed Distribution

Sacramento, CA 329,000 06/01/2022 $ 49,726

6 th Street Business Center, Benicia Distribution

Center 1-5, Ettie Business Center, Laura

Alice Business Center, Preston

Distribution Center, Sinclair Distribution

Center, Transit Distribution Center and

Whipple Business Center (3)

San Francisco, CA 1,377,000 06/01/2022 309,404

Total operating property acquisitions 1,706,000 359,130

Value-add properties acquired (4)

Cypress Preserve 1 & 2 Houston, TX 516,000 03/28/2022 54,462

Zephyr Distribution Center San Francisco, CA 82,000 04/08/2022 29,017

Mesa Gateway Commerce Center Phoenix, AZ 147,000 04/15/2022 18,315

Total value-add property acquisitions 745,000 101,794

Total acquired assets 2,451,000 $ 460,924

(1) Cost is calculated in accordance with FASB ASC 805, Business Combinations, and r epresents the sum of the purchase price, closing costs and capitalized acquisition costs.

(2) Operating properties are defined as stabilized real estate properties (land including buildings and improvements) in the Company’s operating portfolio;

included in Real estate properties on the Consolidated Balance Sheets.

(3) The Company acquired these operating properties along with two land parcels, also in Sacramento, CA and San Francisco, CA, in connection with its acquisition of Tulloch Corporation in June 2022.

Size and cost are presented on an aggregate basis for the properties located in Sacramento, CA and San Francisco, CA, respectively.

In consideration for this acquisition, the Company assumed a $ 60,000,000 loan and issued 1,868,809 shares of the Company’s common stock.

The acquisition date fair value of the loan assumed was $ 60,000,000 , and the acquisition date fair value of the common shares, which was based on the closing share price on the acquisition date, was $ 303,756,000 .

(4) Value-add properties are defined as properties that are either acquired but not stabilized or can be converted to a higher and better use.

4 unchanged sentences

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

The following table summarizes the allocation of the consideration paid for the acquired assets and assumed liabilities in connection with the acquisition identified in the table above which was acquired during the three months ended March 31, 2022.

The following table summarizes the allocation of the total consideration for the acquired assets and assumed liabilities in connection with the acquisition identified in the table above which was acquired during the six months ended June 30, 2022.

ACQUIRED ASSETS AND ASSUMED LIABILITIES IN 2022

(In thousands)

Land $ 126,067

Buildings and building improvements 315,996

8 unchanged sentences

These costs are amortized over the remaining lives of the associated leases in place at the time of acquisition.

The leases in the properties acquired during the three months ended March 31, 2022 had a weighted average remaining lease term at acquisition of approximately 4.6 years.

The leases in the properties acquired during the six months ended June 30, 2022 had a weighted average remaining lease term at acquisition of approximately 3.7 years.

Also during the six months ended June 30, 2022, the Company acquired 177.5 acres of development land in Miami, Houston, Phoenix, San Francisco, Sacramento and Atlanta for $ 54,751,000 .

The land acquisitions in San Francisco and Sacramento were acquired in connection with the Company’s acquisition of Tulloch Corporation in June 2022.

During 2021, EastGroup acquired the following properties:

16 unchanged sentences

Total acquired assets 1,806,000 $ 279,225

(1) Represents the sum of the purchase price, closing costs and capitalized acquisition costs.

(2) Operating properties are defined as stabilized real estate properties (land including buildings and improvements) in the Company’s operating portfolio;

6 unchanged sentences

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

The following table summarizes the allocation of the consideration paid for the acquired assets and assumed liabilities in connection with the acquisitions identified in the table above which were acquired during the year ended December 31, 2021.

The following table summarizes the allocation of the total consideration for the acquired assets and assumed liabilities in connection with the acquisitions identified in the table above which were acquired during the year ended December 31, 2021.

ACQUIRED ASSETS AND ASSUMED LIABILITIES IN 2021

16 unchanged sentences

The leases in the properties acquired during the year ended December 31, 2021 had a weighted average remaining lease term at acquisition of approximately 2.9 years.

Also during 2021, the Company acquired 365.8 acres of development land in Austin, Houston, Charlotte, Greenville and Atlanta for $ 41,065,000 .

The Company periodically reviews the recoverability of goodwill (at least annually) and the recoverability of other intangibles (on a quarterly basis) for possible impairment.

No impairment of goodwill or other intangibles existed during the three month periods ended March 31, 2022 and 2021.

No impairment of goodwill or other intangibles existed during the three and six month periods ended June 30, 2022 and 2021.

(8) REAL ESTATE SOLD AND HELD FOR SALE

1 unchanged sentence

Real estate properties held for sale are reported at the lower of the carrying amount or fair value less estimated costs to sell and are not depreciated while they are held for sale.

The Company did not classify any properties as held for sale as of March 31, 2022.

The Company did not classify any properties as held for sale as of June 30, 2022.

As of December 31, 2021, the Company owned one operating property that was classified as held for sale on the December 31, 2021 Consolidated Balance Sheet.

The property was sold, and a gain on the sale was recorded in the three months ended March 31, 2022.

In accordance with FASB ASU 2014-08, Presentation of Financial Statements (Topic 205) and Property, Plant, and Equipment (Topic 360), Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity, the Company would report a disposal of a component of an entity or a group of components of an entity in discontinued operations if the disposal represents a strategic shift that has (or will have) a major effect on an entity’s operations and financial results when the component or group of components meets the criteria to be classified as held for sale or when the component or group of components is disposed of by sale or other than by sale.

In accordance with ASC 360 and ASC 205, Presentation of Financial Statements , the Company would report a disposal of a component of an entity or a group of components of an entity in discontinued operations if the disposal represents a strategic shift that has (or will have) a major effect on an entity’s operations and financial results when the component or group of components meets the criteria to be classified as held for sale or when the component or group of components is disposed of by sale or other than by sale.

In addition, the Company would provide additional disclosures about both discontinued operations and the disposal of an individually significant component of an entity that does not qualify for discontinued operations presentation in the financial statements.

EastGroup performs an analysis of properties sold to determine whether the sales qualify for discontinued operations presentation.

The Company sold operating properties during the three months ended March 31, 2022, as shown in the table below.

The Company sold operating properties during the six months ended June 30, 2022, as shown in the table below.

The results of operations and gains and losses on sales for the properties sold are reported in continuing operations on the Consolidated Statements of Income and Comprehensive Income.

4 unchanged sentences

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

A summary of Gain on sales of real estate investments for the three months ended March 31, 2022 and the year ended December 31, 2021 follows:

A summary of Gain on sales of real estate investments for the six months ended June 30, 2022 and the year ended December 31, 2021 follows:

REAL ESTATE PROPERTIES SOLD Location Size Date Sold Net Sales Price Basis Recognized Gain

3 unchanged sentences

Fort Lauderdale, FL 56,000 03/31/2022 5,282 1,901 3,381

World Houston 15 East Houston, TX 42,000 05/11/2022 12,873 2,226 10,647

Total for 2022 287,000 $ 51,006 10,007 40,999

2 unchanged sentences

In conjunction with the sale of the property, the Company fully amortized the associated right-of-use asset and liability of $ 1,745,000 .

The Company had no sales during the three months ended March 31, 2021.

The Company had no sales during the six months ended June 30, 2021.

(9) OTHER ASSETS

44 unchanged sentences

The credit facility contains options for two six-month extensions (at the Company's election) and a $ 325 million accordion (with agreement by all parties).

The interest rate on each tranche is reset on a monthly basis and as of March 31, 2022, was LIBOR plus 77.5 basis points with an annual facility fee of 15 basis points.

As of March 31, 2022, the Company had $ 183,000,000 of variable rate borrowings on this unsecured bank credit facility with a weighted average interest rate of 1.168 %.

The interest rate on each tranche is reset on a monthly basis and as of June 30, 2022, was LIBOR plus 77.5 basis points with an annual facility fee of 15 basis points.

As of June 30, 2022, the Company had $ 170,000,000 of variable rate borrowings on this unsecured bank credit facility with a weighted average interest rate of 2.058 %.

The Company's $ 50 million unsecured bank credit facility has a maturity date of July 30, 2025 , or such later date as designated by the bank;

the Company also has two six-month extensions available if the extension options in the $425 million facility are exercised.

The interest rate is reset on a daily basis and as of March 31, 2022, was LIBOR plus 77.5 basis points with an annual facility fee of 15 basis points.

As of March 31, 2022, the interest rate was 1.227 % on a balance of $ 14,313,000 .

The interest rate is reset on a daily basis and as of June 30, 2022, was LIBOR plus 77.5 basis points with an annual facility fee of 15 basis points.

As of June 30, 2022, the interest rate was 2.562 % on a balance of $ 36,419,000 .

For both facilities, the margin and facility fee are subject to changes in the Company's credit ratings.

2 unchanged sentences

The facilities also include a sustainability-linked pricing component pursuant to which the applicable interest margin will be reduced by one basis point if the Company meets certain sustainability performance targets.

In January 2022, the Company and a group of lenders agreed to terms on the private placement of $ 150 million of senior unsecured notes with a fixed interest rate of 3.03 % and a 10 -year term.

The notes were issued and sold on April 20, 2022 and require interest-only payments.

The notes will not be and have not been registered under the Securities Act of 1933, as amended, and may not be offered or sold in the United States absent registration or an applicable exemption from the registration requirements.

In February 2022, EastGroup repaid a $ 75 million unsecured term loan at maturity with an effectively fixed interest rate of 3.03 %.

In March 2022, the Company closed a $ 100 million senior unsecured term loan with a 6.5 year term and interest only payments, which bears interest at an annual rate of the Secured Overnight Financing Rate (“SOFR”) plus an applicable margin ( 1.30 % as of March 31, 2022) based on the Company’s senior unsecured long-term debt rating.

The Company also entered into an interest rate swap agreement to convert the loan’s LIBOR rate component to a fixed interest rate for the entire term of the loan providing a total effectively fixed interest rate of 3.06 %.

Also during March 2022, the Company closed on the refinance of a $ 100 million senior unsecured term loan with 5 years remaining.

The amended term loan provides for interest only payments currently at an interest rate of SOFR plus 85 basis points, based on the Company’s current credit ratings and consolidated leverage ratio, which is a 60 basis point reduction in the credit spread compared to the original term loan.

The Company has an interest rate swap agreement which converts the loan’s

In March 2022, the Company closed a $ 100 million senior unsecured term loan with a 6.5 -year term and interest only payments, which bears interest at an annual rate of the Secured Overnight Financing Rate (“SOFR”) plus an applicable margin

EASTGROUP PROPERTIES, INC.

1 unchanged sentence

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

SOFR rate component to a fixed interest rate for the entire term of the loan, providing a total effectively fixed interest rate of 1.80 %.

Scheduled principal payments on long-term debt, including Unsecured debt, net of debt issuance costs and Secured debt, net of debt issuance costs (not including Unsecured bank credit facilities, net of debt issuance costs ), as of March 31, 2022, are as follows:

( 1.30 % as of June 30, 2022) based on the Company’s senior unsecured long-term debt rating.

The Company also entered into an interest rate swap agreement to convert the loan’s SOFR rate component to a fixed interest rate for the entire term of the loan providing a total effectively fixed interest rate of 3.06 %.

Also during March 2022, the Company closed on the refinance of a $ 100 million senior unsecured term loan with five years remaining.

The Company has an interest rate swap agreement which converts the loan’s SOFR rate component to a fixed interest rate for the entire term of the loan, providing a total effectively fixed interest rate of 1.80 %.

In June 2022, the Company assumed a $ 60 million loan in connection with the acquisition of Tulloch Corporation, the owner of an industrial real estate portfolio comprised of 14 operating properties and two parcels of land, which was immediately repaid with no penalty during June 2022.

Also during June 2022, the Company agreed to terms with a bank on a $ 75 million senior unsecured term loan with interest- only payments, bearing interest at the annual rate of SOFR plus an applicable margin based on the Company’s senior unsecured long-term debt rating and consolidated leverage ratio.

The loan is expected to close in the third quarter of 2022 and have a five -year term.

The Company also entered into an interest rate swap agreement to convert the loan’s SOFR rate component to a fixed interest rate for the entire term of the loan, providing a total effective fixed interest rate of 4.00 %.

Years Ending December 31, (In thousands)

2 unchanged sentences

Total $ 1,422,099

EASTGROUP PROPERTIES, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(11) ACCOUNTS PAYABLE AND ACCRUED EXPENSES

15 unchanged sentences

When the checks clear the bank, they will be funded through the Company’s working cash line of credit, which is included in the Company’s Unsecured bank credit facilities.

EASTGROUP PROPERTIES, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(12) OTHER LIABILITIES

14 unchanged sentences

$ 85,899 82,338

EASTGROUP PROPERTIES, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(13) COMPREHENSIVE INCOME

3 unchanged sentences

Three Months Ended

June 30, Six Months Ended June 30,

2022 2021 2022 2021

(In thousands)

1 unchanged sentence

Balance at beginning of period $ 17,130 ( 2,538 ) 1,302 ( 10,752 )

Other comprehensive income - interest rate swaps 15,828 8,214

Other comprehensive income (loss) - interest rate swaps 6,841 ( 1,263 ) 22,669 6,951

Balance at end of period $ 23,971 ( 3,801 ) 23,971 ( 3,801 )

7 unchanged sentences

Interest rate swaps designated as cash flow hedges involve the receipt of variable-rate amounts from a counterparty in exchange for the Company making fixed-rate payments over the life of the agreements without exchange of the underlying notional amount.

EASTGROUP PROPERTIES, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

As of March 31, 2022, the Company had five interest rate swaps outstanding, all of which are used to hedge the variable cash flows associated with unsecured loans.

As of June 30, 2022, the Company had six interest rate swaps outstanding, all of which are used to hedge the variable cash flows associated with unsecured loans.

All of the Company’s interest rate swaps convert the related loans’ LIBOR or SOFR rate components to effectively fixed interest rates, and the Company has concluded that each of the hedging relationships is highly effective.

The changes in the fair value of derivatives designated and qualifying as cash flow hedges are recorded in Other comprehensive income and are subsequently reclassified into earnings through Interest expense as interest payments are made or received on the Company’s variable-rate debt in the period that the hedged forecasted transaction affects earnings.

The Company estimates that an additional $ 2,352,000 will be reclassified from Other comprehensive income as a decrease to Interest expense over the next twelve months.

The changes in the fair value of derivatives designated and qualifying as cash flow hedges are recorded in Other comprehensive income (loss) and are subsequently reclassified into earnings through Interest expense as interest payments are made or received on the Company’s variable-rate debt in the period that the hedged forecasted transaction affects earnings.

The Company estimates that an additional $ 7,416,000 will be reclassified from Other comprehensive income (loss) as a decrease to Interest expense over the next twelve months.

The Company’s valuation methodology for over-the-counter (“OTC”) derivatives is to discount cash flows based on Overnight Index Swap (“OIS”) rates.

6 unchanged sentences

dollar LIBOR as a reference rate as soon as practicable and in any event no later than December 31, 2021.

In the U.S., the Alternative Reference Rates Committee, which was convened by the Federal Reserve Board and the Federal Reserve Bank of New York, has recommended that SOFR plus a recommended spread adjustment as its preferred alternative to USD-LIBOR.

In the U.S., the Alternative Reference Rates Committee, which was convened by the Federal Reserve Board and the Federal Reserve Bank of New York, has recommended

EASTGROUP PROPERTIES, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

that SOFR plus a recommended spread adjustment as its preferred alternative to USD-LIBOR.

There are significant differences between LIBOR and SOFR, such as LIBOR being an unsecured lending rate while SOFR is a secured rate, and SOFR is an overnight rate while LIBOR reflects term rates at different maturities.

3 unchanged sentences

The value of loans, securities or derivative instruments tied to LIBOR could also be impacted.

During the three months ended March 31, 2022, the Company entered into a new term loan and related swap which are both indexed to SOFR.

Also, during the three months ended March 31, 2022, EastGroup refinanced an existing term loan modifying the index from LIBOR to SOFR, and concurrently amended the related swap to reference SOFR rather than LIBOR.

During the six months ended June 30, 2022, the Company entered into a new term loan and two swap agreements which are indexed to SOFR.

Also, during the six months ended June 30, 2022, EastGroup refinanced an existing term loan modifying the index from LIBOR to SOFR and concurrently amended the related swap to reference SOFR rather than LIBOR.

The Company’s unsecured bank credit facilities and three of its senior unsecured term loans and interest rate swap contracts are indexed to LIBOR and include provisions for a replacement rate which we believe will be substantially equivalent to the all-in LIBOR-based interest rate in effect prior to its replacement.

13 unchanged sentences

The Company continues to evaluate the impact of the guidance and may apply other elections as applicable as additional changes in the market occur.

EASTGROUP PROPERTIES, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

As of March 31, 2022 and December 31, 2021, the Company had the following outstanding interest rate derivatives that are designated as cash flow hedges of interest rate risk:

Interest Rate Derivative Notional Amount as of March 31, 2022

As of June 30, 2022 and December 31, 2021, the Company had the following outstanding interest rate derivatives that are designated as cash flow hedges of interest rate risk:

Interest Rate Derivative Notional Amount as of June 30, 2022

Notional Amount as of December 31, 2021

6 unchanged sentences

Interest Rate Swap $ 100,000 —

The table below presents the fair value of the Company’s derivative financial instruments as well as their classification on the Consolidated Balance Sheets as of March 31, 2022 and December 31, 2021.

Interest Rate Swap $ 75,000 —

The table below presents the fair value of the Company’s derivative financial instruments as well as their classification on the Consolidated Balance Sheets as of June 30, 2022 and December 31, 2021.

See Note 17 for additional information on the fair value of the Company’s interest rate swaps.

As of March 31, 2022

As of June 30, 2022

As of December 31, 2021

4 unchanged sentences

Interest rate swap liabilities Other liabilities 941 Other liabilities 935

The table below presents the effect of the Company’s derivative financial instruments on the Consolidated Statements of Income and Comprehensive Income for the three months ended March 31, 2022 and 2021:

EASTGROUP PROPERTIES, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

The table below presents the effect of the Company’s derivative financial instruments on the Consolidated Statements of Income and Comprehensive Income for the three and six months ended June 30, 2022 and 2021:

Three Months Ended

June 30, Six Months Ended June 30,

2022 2021 2022 2021

(In thousands)

1 unchanged sentence

Interest Rate Swaps:

Amount of income recognized in Other comprehensive income on derivatives

Amount of income (loss) recognized in Other comprehensive income (loss) on derivatives

$ 6,403 ( 2,395 ) 21,355 4,768

Amount of (income) loss reclassified from Accumulated other comprehensive income (loss) into Interest expense

Amount of loss reclassified from Accumulated other comprehensive income (loss) into Interest expense

438 1,132 1,314 2,183

See Note 13 for additional information on the Company’s Accumulated other comprehensive income (loss) resulting from its interest rate swaps.

2 unchanged sentences

The Company has an agreement with its derivative counterparties containing a provision stating that the Company could be declared in default on its derivative obligations if the Company defaults on any of its indebtedness, including default where repayment of the indebtedness has not been accelerated by the lender.

If the Company breached any of these provisions it would be required to settle its obligations under the agreements at their termination value of $ 17,248,000 as of March 31, 2022.

If the Company breached any of these provisions it would be required to settle its obligations under the agreements at their termination value of $ 24,268,000 as of June 30, 2022.

(15) EARNINGS PER SHARE

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Common Stockholders by the weighted average number of common shares outstanding.

The weighted average number of common shares outstanding does not include any potentially dilutive securities or any unvested restricted shares of

EASTGROUP PROPERTIES, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

common stock.

The weighted average number of common shares outstanding does not include any potentially dilutive securities or any unvested restricted shares of common stock.

These unvested restricted shares, although classified as issued and outstanding, are considered forfeitable until the restrictions lapse and will not be included in the basic EPS calculation until the shares are vested.

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The dilutive effect of unvested restricted stock is determined using the treasury stock method.

EASTGROUP PROPERTIES, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Reconciliation of the numerators and denominators in the basic and diluted EPS computations is as follows:

Three Months Ended

June 30, Six Months Ended June 30,

2022 2021 2022 2021

(In thousands)

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The total shareholder return component is subject to bright-line tests that compare the Company’s total shareholder return to the Nareit Equity Index and to the member companies of the Nareit industrial index.

The Company begins recognizing expense for these awards based on the grant date

EASTGROUP PROPERTIES, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

fair value of the awards which is determined using a simulation pricing model developed to specifically accommodate the unique features of the award.

The Company begins recognizing expense for these awards based on the grant date fair value of the awards which is determined using a simulation pricing model developed to specifically accommodate the unique features of the award.

These market-based awards are expensed on a straight-line basis over the requisite service period ( 75 % vests at the end of the three-year performance period and 25 % vests the following year).

2 unchanged sentences

The certain Company performance measures for 2022 are:

(i) funds from operations (“FFO”) per share, (ii) cash same property net operating income change, (iii) debt-to-EBITDAre ratio, and (iv) fixed charge coverage.

EASTGROUP PROPERTIES, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

funds from operations (“FFO”) per share, (ii) cash same property net operating income change, (iii) debt-to-EBITDAre ratio, and (iv) fixed charge coverage.

The Company begins recognizing expense for its estimate of the shares that could be earned pursuant to these awards on the grant date;

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The Company has adjusted its stock-based compensation expense to accelerate the recognition of expense for retirement-eligible employees.

Stock-based compensation cost for employees was $ 2,561,000 for the three months ended March 31, 2022, of which $ 691,000 was capitalized as part of the Company’s development costs.

For the three months ended March 31, 2021, stock-based compensation cost for employees was $ 2,144,000 , of which $ 550,000 was capitalized as part of the Company’s development costs.

Stock-based compensation expense for directors was $ 33,000 for the three months ended March 31, 2022, and $ 3,000 for the same period in 2021.

Stock-based compensation cost for employees was $ 2,989,000 and $ 5,550,000 for the three and six months ended June 30, 2022, of which $ 645,000 and $ 1,336,000 were capitalized as part of the Company’s development costs.

For the three and six months ended June 30, 2021, stock-based compensation cost for employees was $ 2,189,000 and $ 4,333,000 , of which $ 479,000 and $ 1,029,000 were capitalized as part of the Company’s development costs.

Stock-based compensation expense for directors was $ 73,000 and $ 106,000 for the three and six months ended June 30, 2022, respectively, and $ 704,000 and $ 707,000 for the same periods in 2021.

EASTGROUP PROPERTIES, INC.

2 unchanged sentences

Following is a summary of the total restricted shares granted, forfeited and delivered (vested) to participants with the related weighted average grant date fair value share prices.

Of the shares that vested in the three months ended March 31, 2022, the Company withheld 34,251 shares to satisfy the tax obligations for those participants who elected this option as permitted under the applicable equity plan.

As of the grant dates, the fair value of shares that were granted during the three months ended March 31, 2022 was $ 7,013,000 .

As of the vesting dates, the aggregate fair value of shares that vested during the three months ended March 31, 2022 was $ 17,124,000 .

Of the shares that vested in the six months ended June 30, 2022, the Company withheld 34,251 shares to satisfy the tax obligations for those participants who elected this option as permitted under the applicable equity plan.

As of the grant dates, the fair value of shares that were granted during the six months ended June 30, 2022 was $ 9,560,000 .

As of the vesting dates, the aggregate fair value of shares that vested during the six months ended June 30, 2022 was $ 17,124,000 .

Award Activity:

Three Months Ended

March 31, 2022

June 30, 2022 Six Months Ended June 30, 2022

Weighted Average Grant Date Fair Value

Shares Weighted Average Grant Date Fair Value

Unvested at beginning of period 85,767 $ 129.68 106,212 $ 116.38

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The Codification requires disclosure of the level within the fair value hierarchy in which the fair value measurements fall, including measurements using quoted prices in active markets for identical assets or liabilities (Level 1), quoted prices for similar instruments in active markets or quoted prices for identical or similar instruments in markets that are not active (Level 2) and significant valuation assumptions that are not readily observable in the market (Level 3).

The following table presents the carrying amounts and estimated fair values of the Company’s financial instruments in accordance with ASC 820 at March 31, 2022 and December 31, 2021.

March 31, 2022 December 31, 2021

The following table presents the carrying amounts and estimated fair values of the Company’s financial instruments in accordance with ASC 820 at June 30, 2022 and December 31, 2021.

June 30, 2022 December 31, 2021

Carrying Amount (1)

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Should EastGroup experience a significant decline in operational performance due to the current coronavirus (“COVID-19”) pandemic or other general economic conditions, it may affect the Company’s ability to make distributions to its shareholders, service debt or meet other financial obligations.

Although COVID-19 has had an overall minimal impact on the Company in 2020, 2021 and during the first three months of 2022, EastGroup remains unable to predict any future impact that it may have on its business, financial condition, results of operations and cash flows.

Although COVID-19 has had an overall minimal impact on the Company in 2020, 2021 and during the first six months of 2022, EastGroup remains unable to predict any future impact that it may have on its business, financial condition, results of operations and cash flows.

(19) LEGAL MATTERS

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(21) SUBSEQUENT EVENTS

In January 2022, the Company and a group of lenders agreed to terms on the private placement of $ 150 million of senior unsecured notes with a fixed interest rate of 3.03 % and a 10 -year term.

The notes were issued and sold on April 20, 2022 and require interest-only payments.

Subsequent to March 31, 2022, the Company closed on the acquisition of 25.8 acres of development land in Houston, known by the Company as Cypress Preserve Land, for approximately $ 7.8 million.

Also subsequent to March 31, 2022, the Company acquired Zephyr Distribution Center, a multi-tenant distribution building in the Hayward submarket of San Francisco containing 82,000 square feet, for $ 28.5 million.

The building is currently in the lease-up phase of the development and value-add portfolio.

In April 2022, EastGroup closed on the acquisition of Mesa Gateway Commerce Park in Phoenix, Arizona for $ 18.3 million.

Subsequent to June 30, 2022, the Company closed on the acquisition of Access Point 3 in Greenville, South Carolina for approximately $ 21.1 million.

This recently constructed 299,000 square foot building is currently in the lease-up phase of the development and value-add portfolio.

Also subsequent to June 30, 2022, EastGroup closed on the acquisition of two land parcels.

One site is 17.8 acres of undeveloped land in San Antonio.

This parcel was acquired for approximately $ 4.8 million and will accommodate the future development of three buildings containing approximately 225,000 square feet.

The other site is 33.2 acres located in Greenville and was acquired for approximately $ 1.2 million.

The Company has future plans to construct a building containing approximately 200,000 square feet on this site.

In July 2022, the Company agreed to terms with a bank on a $ 50 million senior unsecured term loan with interest-only payments, bearing interest at the annual rate of SOFR plus an applicable margin based on the Company’s senior unsecured long-term debt rating and consolidated leverage ratio.

The loan is expected to close in the third quarter of 2022 and have a 2 -year term.

Also in July 2022, the Company and a group of lenders agreed to terms on the private placement of two senior unsecured notes totaling $ 150 million.

One note for $ 75 million has an 11 -year term and a fixed interest rate of 4.90 % with semi-annual interest-only payments.

The other $ 75 million note has a 12 -year term and a fixed interest rate of 4.95 % with semi-annual interest-only payments.

The notes are expected to be issued and sold in October 2022.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements