What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2022-10-26 compared with 2022-07-27 · 211 added, 189 removed, 545 unchanged (42% of the section changed)

10 unchanged sentences

• international, national, regional and local economic conditions;

• the duration and extent of the impact of the coronavirus (“COVID-19”) pandemic, including any COVID-19 variants or the efficacy or availability of COVID-19 vaccines, on our business operations or the business operations of our tenants (including their ability to timely make rent payments) and the economy generally;

• disruption in supply and delivery chains;

• construction costs could increase as a result of inflation impacting the cost to develop properties;

• construction costs could increase as a result of inflation impacting the costs to develop properties;

• increase in interest rates and ability to raise equity capital on attractive terms;

9 unchanged sentences

• natural disasters such as fires, floods, tornadoes, hurricanes and earthquakes;

• pandemics, epidemics or other public health emergencies, such as the outbreak of COVID-19;

• pandemics, epidemics or other public health emergencies, such as the coronavirus (“COVID-19”) pandemic;

• the terms of governmental regulations that affect us and interpretations of those regulations, including the costs of compliance with those regulations, changes in real estate and zoning laws and increases in real property tax rates;

5 unchanged sentences

• risks related to the failure, inadequacy or interruption of our data security systems and processes;

• the consequences of future terrorist attacks or civil unrest;

• potentially catastrophic events such as acts of war, civil unrest and terrorism;

• environmental liabilities, including costs, fines or penalties that may be incurred due to necessary remediation of contamination of properties presently owned or previously owned by us.

5 unchanged sentences

The Company’s core markets are in the states of Florida, Texas, Arizona, California and North Carolina.

The COVID-19 pandemic has not had a materially disruptive effect on EastGroup’s operations, occupancy or rent collections to date.

However, EastGroup cannot predict the severity and duration of the economic uncertainty related to the pandemic, and the pandemic’s effect on EastGroup’s customers and on the Company’s business, future financial condition and operating results cannot be predicted with certainty at this time.

We have received a limited number of, and may in the future receive additional, rent relief requests from our tenants.

As of June 30, 2022, we do not believe that these rent relief requests will have a material impact on our rental revenues.

The discussions below, including without limitation with respect to liquidity, are subject to the future effects of the COVID-19 pandemic and the related actions to curb its spread, which continue to evolve.

During the three and nine month periods ended September 30, 2022, economic uncertainty and stock market volatility have increased due to a number of factors, including the continuing COVID-19 pandemic, lingering supply chain disruptions, rising inflation, and increasing interest rates.

While these factors have not had a significant adverse impact on EastGroup to date, they may adversely impact the Company in the future.

Most of the Company’s leases include scheduled rent increases.

Additionally, most of the Company’s leases require the tenants to pay their pro rata share of operating expenses, including real estate taxes, insurance and common area maintenance, thereby reducing the Company’s exposure to increases in operating expenses resulting from inflation or other factors.

In the event inflation causes increases in the Company’s general and administrative expenses, or higher interest rates increase the Company’s cost of doing business, such increased costs would not be passed through to tenants and could adversely affect the Company’s results of operations.

The Company continues to monitor these supply chain, inflation and interest rate factors, as well as the uncertainty resulting from the overall economic environment.

EastGroup believes its current operating cash flow and unsecured bank credit facilities provide the capacity to fund the operations of the Company, and the Company also believes it can issue common and/or preferred equity and obtain debt financing on currently acceptable terms.

During the three months ended March 31, 2022, EastGroup issued 385,538 shares of common stock through its continuous common equity offering program, providing net proceeds to the Company of $74.2 million.

There were no shares issued or sold under the continuous common equity offering program during the three months ended June 30, 2022.

Also during the six months ended June 30, 2022, the Company closed a $100 million senior unsecured term loan with an effectively fixed interest rate of 3.06% and the private placement of $150 million of senior unsecured notes with a fixed interest rate of 3.03%.

During the three months ended September 30, 2022, EastGroup issued 6,368 shares of common stock through its continuous common equity offering program, providing net proceeds to the Company of $1.0 million.

During the nine months ended September 30, 2022, EastGroup issued 391,906 shares of common stock through its continuous common equity offering program, providing net proceeds to the Company of $75.2 million.

Also during the nine months ended September 30, 2022, the Company closed a $100 million senior unsecured term loan with an effectively fixed interest rate of 3.06%, the private placement of $150 million of senior unsecured notes with a fixed interest rate of 3.03%, and a $125 million senior unsecured term loan with a $75 million tranche and a $50 million tranche.

The $75 million tranche has an effectively fixed interest rate of 4.00%, and the $50 million tranche has an effectively fixed interest rate of 4.09%.

Additionally, the Company and a group of lenders agreed to terms on the private placement of two senior unsecured notes totaling $150 million during the nine months ended September 30, 2022.

One note for $75 million has a fixed interest rate of 4.90%, and the other $75 million note has a fixed interest rate of 4.95%.

The notes, dated August 16, 2022, were issued and sold on October 12, 2022.

EastGroup’s financing and equity issuances are further described in Liquidity and Capital Resources below.

The Company’s primary revenue is rental income.

During the six months ended June 30, 2022, EastGroup executed new and renewal leases on 4,968,000 square feet (10.0% of EastGroup’s total square footage of 49,881,000).

For new and renewal leases signed during the first six months of 2022, average rental rates increased by 35.2% as compared to the former leases on the same spaces.

Property Net Operating Income (“PNOI”) Excluding Income from Lease Terminations from same properties (defined as operating properties owned during the entire current and prior year reporting periods – January 1, 2021 through June 30, 2022), increased 7.6% for the six months ended June 30, 2022 as compared to the same period in 2021.

EastGroup’s operating portfolio was 99.1% leased and 98.5% occupied as of June 30, 2022, compared to 98.3% and 96.8%, respectively, at June 30, 2021.

As of July 26, 2022, the operating portfolio was 98.9% leased and 98.1% occupied.

Leases scheduled to expire for the remainder of 2022 were 5.5% of the operating portfolio on a square foot basis at June 30, 2022, and this percentage was reduced to 4.5% as of July 26, 2022.

During the nine months ended September 30, 2022, EastGroup executed new and renewal leases on 7,304,000 square feet (14.4% of the operating portfolio’s total square footage of 50,698,000).

For new and renewal leases signed during the first nine months of 2022, average rental rates increased by 36.4% as compared to the former leases on the same spaces.

Property Net Operating Income (“PNOI”) Excluding Income from Lease Terminations from same properties (defined as operating properties owned during the entire current and prior year reporting periods – January 1, 2021 through September 30, 2022), increased 7.2% for the nine months ended September 30, 2022 as compared to the same period in 2021.

EastGroup’s operating portfolio was 99.0% leased and 98.5% occupied as of September 30, 2022, compared to 98.8% and 97.6%, respectively, at September 30, 2021.

As of October 25, 2022, the operating portfolio was 99.3% leased and 98.7% occupied.

Leases scheduled to expire for the remainder of 2022 were 2.6% of the operating portfolio on a square foot basis at September 30, 2022, and this percentage was reduced to 2.2% as of October 25, 2022.

The Company generates new sources of leasing revenue through its development and acquisition programs.

The Company mitigates risks associated with development through a Board-approved maximum level of land held for development and by adjusting development start dates according to leasing activity.

During the six months ended June 30, 2022, EastGroup acquired three value-add properties located in Houston, Phoenix and San Francisco containing 745,000 square feet for $101.8 million.

EastGroup also acquired 177.5 acres of development land in Miami, Houston, Phoenix, San Francisco, Sacramento and Atlanta for $54.8 million.

During the same period, the Company

began construction of nine development projects containing 1,475,000 square feet in seven cities.

EastGroup also transferred five development and value-add properties (1,517,000 square feet) in Tampa, San Diego and Greenville from its development and value-add program to real estate properties, with costs of $240.1 million at the date of transfer.

As of June 30, 2022, EastGroup’s development and value-add program consisted of 28 projects (4,609,000 square feet) located in 15 cities.

The projected total investment for the development and value-add projects, which were collectively 52% leased as of July 26, 2022, is $557.6 million, of which $164.7 million remained to be invested as of June 30, 2022.

During the six months ended June 30, 2022, EastGroup closed the acquisition of Tulloch Corporation, the owner of an industrial real estate portfolio that included 14 operating properties located in Sacramento and San Francisco containing 1,706,000 square feet.

During the nine months ended September 30, 2022, EastGroup acquired four value-add projects located in Houston, Phoenix, San Francisco, and Greenville containing 1,044,000 square feet for $122.9 million.

EastGroup also acquired 286.0 acres of development land in nine cities for $77.6 million.

During the same period, the Company began construction of 13 development projects containing 2,317,000 square feet in 10 cities.

EastGroup also transferred 11 development and value-add projects (2,334,000 square feet) in nine cities from its development and value-add program to real estate properties, with costs of $324.1 million at the date of transfer.

As of September 30, 2022, EastGroup’s development and value-add program consisted of 27 projects (4,934,000 square feet) located in 14 cities.

The projected total investment for the development and value-add projects, which were collectively 48% leased as of October 25, 2022, is $600.8 million, of which $191.8 million remained to be invested as of September 30, 2022.

During the nine months ended September 30, 2022, EastGroup closed the acquisition of Tulloch Corporation, the owner of an industrial real estate portfolio that included 14 operating properties located in Sacramento and San Francisco containing 1,706,000 square feet.

The portfolio also included two land parcels located in Sacramento and San Francisco totaling 10.5 acres.

As consideration in connection with the acquisition, EastGroup assumed a loan with an outstanding principal balance of $60 million, which the Company immediately repaid with no penalty in June 2022, and issued 1,868,809 shares of the Company’s common stock.

During the six months ended June 30, 2022, EastGroup sold 287,000 square feet of operating properties, generating gross sales proceeds of $52.4 million.

The Company recognized $41.0 million in Gain on sales of real estate investments during the six months ended June 30, 2022.

During the nine months ended September 30, 2022, EastGroup sold 287,000 square feet of operating properties, generating gross sales proceeds of $52.4 million.

The Company recognized $41.0 million in Gain on sales of real estate investments during the nine months ended September 30, 2022.

The Company typically initially funds its development and acquisition programs through its unsecured bank credit facilities, the total capacity of which was increased in June 2021 to $475 million (as discussed in Liquidity and Capital Resources ).

21 unchanged sentences

Properties sold during the current or prior year reporting periods are also excluded.

For the three and six months ended June 30, 2022, Same Properties includes properties which were included in the operating portfolio for the entire period from January 1, 2021 through June 30, 2022.

For the three and nine months ended September 30, 2022, Same Properties includes properties which were included in the operating portfolio for the entire period from January 1, 2021 through September 30, 2022.

The Company presents Same PNOI and Same PNOI Excluding Income from Lease Terminations as a property-level supplemental measure of performance used to evaluate the performance of the Company’s investments in real estate assets and its operating results on a same property basis.

4 unchanged sentences

These non-GAAP figures should not be considered a substitute for, and should only be considered together with and as a supplement to, the Company’s financial information presented in accordance with GAAP.

The following table presents reconciliations of Net Income to PNOI, Same PNOI and Same PNOI Excluding Income from Lease Terminations for the three and six months ended June 30, 2022 and 2021.

The following table presents reconciliations of Net Income to PNOI, Same PNOI and Same PNOI Excluding Income from Lease Terminations for the three and nine months ended September 30, 2022 and 2021.

Three Months Ended

June 30, Six Months Ended June 30,

September 30, Nine Months Ended September 30,

2022 2021 2022 2021

21 unchanged sentences

SAME PNOI EXCLUDING INCOME FROM LEASE TERMINATIONS $ 75,117 70,439 221,644 206,670

PNOI was calculated as follows for the three and six months ended June 30, 2022 and 2021.

PNOI was calculated as follows for the three and nine months ended September 30, 2022 and 2021.

Three Months Ended

June 30, Six Months Ended June 30,

September 30, Nine Months Ended September 30,

2022 2021 2022 2021

8 unchanged sentences

Generally, the Company’s most significant operating expenses are property taxes and insurance.

Tenant leases may be net leases in which the total operating expenses are recoverable, modified gross leases in which some of the operating expenses

are recoverable, or gross leases in which no expenses are recoverable (gross leases represent only a small portion of the Company’s total leases).

Tenant leases may be net leases in which the total operating expenses are recoverable, modified gross leases in which some of the operating expenses are recoverable, or gross leases in which no expenses are recoverable (gross leases represent only a small portion of the Company’s total leases).

Increases in property operating expenses are fully recoverable under net leases and recoverable to a high degree under modified gross leases.

2 unchanged sentences

The following table presents reconciliations of Net Income Attributable to EastGroup Properties, Inc.

Common Stockholders to FFO Attributable to Common Stockholders for the three and six months ended June 30, 2022 and 2021.

Common Stockholders to FFO Attributable to Common Stockholders for the three and nine months ended September 30, 2022 and 2021.

Three Months Ended

June 30, Six Months Ended June 30,

September 30, Nine Months Ended September 30,

2022 2021 2022 2021

12 unchanged sentences

• The change in FFO per share represents the increase or decrease in FFO per share from the current period compared to the same period in the prior year.

For the three months ended June 30, 2022, FFO was $1.72 per share compared with $1.47 per share for the same period of 2021, an increase of 17.0%.

For the six months ended June 30, 2022, FFO was $3.41 per share compared with $2.92 per share for the same period of 2021, an increase of 16.8%.

• For the three months ended June 30, 2022, PNOI increased by $14,499,000, or 20.2%, as compared to the same period in 2021.

PNOI increased $6,229,000 from newly developed and value-add properties, $6,150,000 from same property operations and $3,106,000 from 2021 and 2022 acquisitions;

For the three months ended September 30, 2022, FFO was $1.77 per share compared with $1.55 per share for the same period of 2021, an increase of 14.2%.

For the nine months ended September 30, 2022, FFO was $5.18 per share compared with $4.47 per share for the same period of 2021, an increase of 15.9%.

• For the three months ended September 30, 2022, PNOI increased by $15,660,000, or 20.8%, as compared to the same period in 2021.

PNOI increased $7,139,000 from newly developed and value-add properties, $5,186,000 from 2021 and 2022 acquisitions and $4,349,000 from same property operations;

PNOI decreased $867,000 from operating properties sold in 2021 and 2022.

For the six months ended June 30, 2022, PNOI increased by $26,359,000, or 18.6%, as compared to the same period in 2021.

For the nine months ended September 30, 2022, PNOI increased by $42,019,000, or 19.3%, as compared to the same period in 2021.

PNOI increased $18,916,000 from newly developed and value-add properties, $15,142,000 from same property operations and $10,696,000 from 2021 and 2022 acquisitions;

PNOI decreased $2,348,000 from operating properties sold in 2021 and 2022.

• The change in Same PNOI represents the PNOI increase or decrease for the same operating properties owned during the entire current and prior year reporting periods (January 1, 2021 through June 30, 2022).

Same PNOI, excluding income from lease terminations, increased 7.7% and 7.6% for the three and six months ended June 30, 2022, as compared to the same periods in 2021.

• Same property average occupancy represents the average month-end percentage of leased square footage for which the lease term has commenced as compared to the total leasable square footage for the same operating properties owned during the entire current period and prior year reporting periods (January 1, 2021 through June 30, 2022).

Same property average occupancy was 98.2% for the three months ended June 30, 2022, compared to 97.2% for the same period of 2021.

Same property average occupancy was 98.0% for the six months ended June 30, 2022, compared to 97.1% for the same period of 2021.

Same PNOI, excluding income from lease terminations, increased 6.6% and 7.2% for the three and nine months ended September 30, 2022, as compared to the same periods in 2021.

Same property average occupancy was 98.3% for the three months ended September 30, 2022, compared to 97.8% for the same period of 2021.

Same property average occupancy was 98.1% for the nine months ended September 30, 2022, compared to 97.3% for the same period of 2021.

• Occupancy is the percentage of leased square footage for which the lease term has commenced as compared to the total leasable square footage as of the close of the reporting period.

Occupancy at June 30, 2022 was 98.5%.

Quarter-end occupancy ranged from 96.8% to 97.9% over the previous four quarters ended June 30, 2021 to March 31, 2022.

Occupancy at September 30, 2022 was 98.5%.

Quarter-end occupancy ranged from 97.4% to 98.5% over the previous four quarters ended September 30, 2021 to June 30, 2022.

• Rental rate change represents the rental rate increase or decrease on new and renewal leases compared to the prior leases on the same space.

Rental rate increases on new and renewal leases (4.8% of total square footage) averaged 37.2% for the three months ended June 30, 2022.

For the six months ended June 30, 2022, rental rate increases on new and renewal leases (10.0% of total square footage) averaged 35.2%.

Rental rate increases on new and renewal leases (4.6% of the operating portfolio’s total square footage) averaged 39.4% for the three months ended September 30, 2022.

For the nine months ended September 30, 2022, rental rate increases on new and renewal leases (14.4% of the operating portfolio’s total square footage) averaged 36.4%.

• Lease termination fee income is included in Income from real estate operations.

Lease termination fee income for the three and six months ended June 30, 2022 was $979,000 and $2,373,000, respectively, compared to $18,000 and $594,000 for the same periods of 2021.

Lease termination fee income for the three and nine months ended September 30, 2022 was $24,000 and $2,397,000, respectively, compared to $353,000 and $947,000 for the same periods of 2021.

• The Company records reserves for uncollectible rent as reductions to Income from real estate operations ;

recoveries for uncollectible rent are recorded as additions to Income from real estate operations .

The Company recorded net reserves for uncollectible rent of $36,000 and net recoveries of uncollectible rent of $70,000 for the three and six months ended June 30, 2022, respectively, compared to net recoveries of $12,000 and $90,000 for the same periods of 2021.

The Company recorded net reserves for uncollectible rent of $198,000 and $128,000 for the three and nine months ended September 30, 2022, respectively, compared to net recoveries of $256,000 and $346,000 for the same periods of 2021.

We evaluate the collectability of rents and other receivables for individual leases at each reporting period based on factors including, among others, tenant payment history, the financial condition of the tenant, business conditions and trends in the industry in which the tenant operates and economic conditions in the geographic area where the property is located.

1 unchanged sentence

If our judgment or estimation regarding probability of collection changes we may adjust or record additional rental revenue in the period such conclusion is reached.

The Company followed its normal process for recording reserves for uncollectible rent during the three and six months ended June 30, 2022.

The Company followed its normal process for recording reserves for uncollectible rent during the three and nine months ended September 30, 2022.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

15 unchanged sentences

For properties under development and value-add properties acquired in the development stage, costs associated with development (i.e., land, construction costs, interest expense, property taxes and other costs associated with development) are aggregated into the total capitalized costs of the property.

Included in these costs are management’s estimates for the portions

of internal costs (primarily personnel costs) deemed related to such development activities.

Included in these costs are management’s estimates for the portions of internal costs (primarily personnel costs) deemed related to such development activities.

The internal costs are allocated to specific development properties based on development activity.

FINANCIAL CONDITION

EastGroup’s Total Assets were $3,851,717,000 at June 30, 2022, an increase of $636,381,000 from December 31, 2021.

EastGroup’s Total Assets were $3,962,323,000 at September 30, 2022, an increase of $746,987,000 from December 31, 2021.

Total Liabilities increased $328,261,000 to $1,972,137,000, and Total Equity increased $418,726,000 to $1,990,186,000 during the same period.

1 unchanged sentence

Real Estate Properties

Real estate properties increased $608,802,000 during the six months ended June 30, 2022, primarily due to:

Real estate properties increased $704,568,000 during the nine months ended September 30, 2022, primarily due to:

(i) the acquisition of 14 operating properties;

(ii) the transfer of five projects from Development and value-add properties to Real estate properties (as detailed under Development and Value-Add Properties below);

(ii) the transfer of 11 projects from Development and value-add properties to Real estate properties (as detailed under Development and Value-Add Properties below);

(iii) capital improvements at the Company’s properties;

1 unchanged sentence

These increases were partially offset by operating property dispositions discussed below.

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

During the nine months ended September 30, 2022, EastGroup acquired the following operating properties:

OPERATING PROPERTIES ACQUIRED IN 2022

17 unchanged sentences

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.

During the six months ended June 30, 2022, the Company made capital improvements of $18,855,000 on existing properties (included in the Real Estate Improvements table under Results of Operations ).

During the nine months ended September 30, 2022, the Company made capital improvements of $29,297,000 on existing properties (included in the Real Estate Improvements table under Results of Operations ).

Also, the Company incurred costs of $9,346,000 on development and value-add properties subsequent to transfer to Real estate properties ;

the Company records these expenditures as development and value-add costs on the Consolidated Statements of Cash Flows.

During the six months ended June 30, 2022, EastGroup sold 287,000 square feet of operating properties, generating gross sales proceeds of $52,410,000.

The Company recognized $40,999,000 in Gain on sales of real estate investments during the six months ended June 30, 2022.

During the nine months ended September 30, 2022, EastGroup sold 287,000 square feet of operating properties, generating gross sales proceeds of $52,410,000.

The Company recognized $40,999,000 in Gain on sales of real estate investments during the nine months ended September 30, 2022.

Development and Value-Add Properties

EastGroup’s investment in Development and value-add properties at June 30, 2022 consisted of projects in lease-up and under construction of $392,853,000 and prospective development (primarily land) of $161,510,000.

The Company’s total investment in Development and value-add properties at June 30, 2022 was $554,363,000 compared to $504,614,000 at December 31, 2021.

Total capital invested for development during the first six months of 2022 was $283,451,000, which primarily consisted of costs of $284,600,000 and $5,292,000 as detailed in the Development and Value-Add Properties Activity table below and costs of $6,093,000 on properties subsequent to transfer to Real estate properties.

EastGroup’s investment in Development and value-add properties at September 30, 2022 consisted of projects in lease-up and under construction of $409,017,000 and prospective development (primarily land) of $169,558,000.

The Company’s total investment in Development and value-add properties at September 30, 2022 was $578,575,000 compared to $504,614,000 at December 31, 2021.

Total capital invested for development during the first nine months of 2022 was $395,313,000, which primarily consisted of costs of $368,136,000 and $29,911,000 as detailed in the Development and Value-Add Properties Activity table below and costs of $9,346,000 on properties subsequent to transfer to Real estate properties.

These costs were partially offset by development spending prepaid in prior periods and the cost of development land acquired in the acquisition of Tulloch Corporation.

The capitalized costs incurred on development and value-add properties subsequent to transfer to Real estate properties include capital improvements at the properties and do not include other capitalized costs associated with development (i.e., interest expense, property taxes and internal personnel costs).

The Company capitalized internal development costs of $2,617,000 and $5,086,000 for the three and six months ended June 30, 2022, respectively, compared to $1,591,000 and $3,280,000 for the same periods of 2021.

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

The Company capitalized internal development costs of $2,388,000 and $7,474,000 for the three and nine months ended September 30, 2022, respectively, compared to $2,031,000 and $5,311,000 for the same periods of 2021.

During the nine months ended September 30, 2022, EastGroup acquired the following value-add properties:

VALUE-ADD PROPERTIES ACQUIRED IN 2022

5 unchanged sentences

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

Access Point 3 Greenville, SC 299,000 07/12/2022 21,127

Total value-add property acquisitions 1,044,000 $ 122,921

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

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.

Also during the nine months ended September 30, 2022, the Company acquired 286.0 acres of development land in nine cities for $77,645,000.

Costs associated with these acquisitions are included in the Development and Value-Add Properties Activity table.

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

These increases were offset by the transfer of five development and value-add projects to Real estate properties during the six months ended June 30, 2022 with a total investment of $240,143,000 as of the date of transfer.

These increases were offset by the transfer of 11 development and value-add projects to Real estate properties during the nine months ended September 30, 2022 with a total investment of $324,086,000 as of the date of transfer.

Costs Incurred Anticipated Building Conversion Date

1 unchanged sentence

VALUE-ADD PROPERTIES ACTIVITY Costs Transferred in 2022 (1)

For the Six Months Ended

For the Nine Months Ended

Cumulative as of 9/30/2022

2 unchanged sentences

LEASE-UP Building Size (Square feet)

Steele Creek 8, Charlotte, NC 72,000 $ — 5,027 7,755 8,400 07/22

CreekView 9 & 10, Dallas, TX 145,000 — 4,068 15,404 17,200 09/22

Horizon West 2 & 3, Orlando, FL 210,000 — 1,517 18,707 21,400 09/22

Ridgeview 3, San Antonio, TX 88,000 — 3,302 9,106 9,700 10/22

Mesa Gateway, Phoenix, AZ (2)

147,000 $ — 18,636 18,636 22,600 11/22

Tri-County Crossing 5, San Antonio, TX 106,000 — 4,477 10,077 11,600 11/22

45 Crossing, Austin, TX 177,000 — 8,165 25,225 26,900 12/22

Basswood 1 & 2, Fort Worth, TX 237,000 — 6,959 22,188 25,100 01/23

Cypress Preserve 1 & 2, Houston, TX (2)

2 unchanged sentences

82,000 — 28,863 28,863 29,800 04/23

Access Point 3, Greenville, SC (2)

299,000 — 22,472 22,472 24,400 07/23

Grand West Crossing 1, Houston, TX 121,000 — 4,143 13,012 15,700 07/23

Tri-County Crossing 6, San Antonio, TX 124,000 — 5,922 9,704 10,600 08/23

Grand Oaks 75 4, Tampa, FL 185,000 — 9,537 15,915 17,900 09/23

McKinney 3 & 4, Dallas, TX 212,000 — 10,803 21,241 26,800 09/23

Total Lease-Up 2,206,000 — 173,998 241,354 269,200

UNDER CONSTRUCTION

Gateway 3, Miami, FL 133,000 — 4,859 18,025 20,700 08/22

Americas Ten 2, El Paso, TX 169,000 — 4,615 13,715 14,900 09/22

World Houston 47, Houston, TX 139,000 4,506 11,566 16,072 19,100 12/22

Horizon West 4, Orlando, FL 295,000 6,176 16,323 22,499 28,700 01/23

SunCoast 11, Fort Myers, FL 79,000 1,524 5,630 7,154 9,900 01/23

SunCoast 12, Fort Myers, FL 79,000 — 3,762 7,940 9,300 01/23

Tri-County Crossing 5, San Antonio, TX 105,000 — 2,728 8,328 11,600 11/22

45 Crossing, Austin, TX 177,000 — 6,663 23,723 26,200 12/22

World Houston 47, Houston, TX 139,000 4,506 7,972 12,478 19,100 12/22

Basswood 1 & 2, Fort Worth, TX 237,000 — 4,177 19,406 24,400 01/23

Grand Oaks 75 4, Tampa, FL 185,000 — 8,385 14,763 17,900 07/23

Grand West Crossing 1, Houston, TX 121,000 — 3,840 12,709 15,700 07/23

Tri-County Crossing 6, San Antonio, TX 124,000 — 4,858 8,640 10,600 07/23

McKinney 3 & 4, Dallas, TX 212,000 — 8,775 19,213 26,800 08/23

LakePort 4 & 5, Dallas, TX 177,000 — 9,373 17,311 24,000 11/23

Arlington Tech 3, Fort Worth, TX 77,000 1,980 5,055 7,035 10,300 12/23

Horizon West 4, Orlando, FL 295,000 6,176 12,245 18,421 28,700 10/23

I-20 West Business Center, Atlanta, GA 155,000 — 7,007 9,971 15,500 10/23

Hillside 1, Greenville, SC 122,000 632 5,930 6,562 11,600 12/23

Horizon West 1, Orlando, FL 97,000 3,730 452 4,182 13,200 12/23

I-20 West Business Center, Atlanta, GA 155,000 — 9,097 12,061 15,500 12/23

Gateway 2, Miami, FL 133,000 8,049 5,174 13,223 23,700 02/24

Horizon West 1, Orlando, FL 97,000 3,730 2,719 6,449 13,200 03/24

Steele Creek 11 & 12, Charlotte, NC 241,000 2,857 6,721 9,578 24,900 04/24

Springwood 1 & 2, Houston, TX 292,000 6,741 10,950 17,691 33,300 05/24

Stonefield 35 1-3, Austin, TX 274,000 10,279 2,487 12,766 35,300 06/24

SunCoast 10, Fort Myers, FL 100,000 1,624 460 2,084 13,600 06/24

McKinney 1 & 2, Dallas, TX 172,000 4,261 240 4,501 27,300 08/24

Cass White 1 & 2, Atlanta, GA 296,000 3,534 1,203 4,737 31,900 10/24

Total Under Construction 2,728,000 55,893 96,690 167,663 331,600

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Costs Transferred in 2022 (1)

For the Six Months Ended

For the Nine Months Ended

Cumulative as of 9/30/2022

29 unchanged sentences

547,000 — 595 133,283 06/22

Steele Creek 8, Charlotte, NC 72,000 — 5,142 7,870 07/22

CreekView 9 & 10, Dallas, TX 145,000 — 4,210 15,546 08/22

Gateway 3, Miami, FL 133,000 — 4,903 18,069 08/22

Ridgeview 3, San Antonio, TX 88,000 — 3,513 9,317 08/22

Americas Ten 2, El Paso, TX 169,000 — 5,254 14,354 09/22

Horizon West 2 & 3, Orlando, FL 210,000 — 1,597 18,787 09/22

Total Transferred to Real Estate Properties 2,334,000 $ — 29,911 324,086 (3)

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Accumulated Depreciation

Accumulated depreciation on real estate, development and value-add properties increased $53,539,000 during the six months ended June 30, 2022, primarily due to depreciation expense, partially offset by the sale of three operating properties totaling 287,000 square feet.

Accumulated depreciation on real estate, development and value-add properties increased $85,591,000 during the nine months ended September 30, 2022, primarily due to depreciation expense, partially offset by the sale of three operating properties totaling 287,000 square feet.

Real Estate Assets Held for Sale

Real estate assets held for sale decreased $5,695,000 during the six months ended June 30, 2022.

Real estate assets held for sale decreased $5,695,000 during the nine months ended September 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.

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

Other assets increased $35,846,000 during the six months ended June 30, 2022.

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

Other assets increased $58,943,000 during the nine months ended September 30, 2022.

A summary of Other assets follows:

September 30,

2022 December 31,

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Right of use assets — Office leases (operating) 2,015 1,984

Escrow deposits for pending acquisitions 4,450 3,050

Escrow deposits and prepaid costs for pending transactions 5,198 3,864

Prepaid insurance 3,826 7,793

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$ 241,163 182,220

Unsecured bank credit facilities, net of debt issuance costs decreased $2,493,000 during the six months ended June 30, 2022, mainly due to repayments of $504,314,000 and new debt issuance costs incurred during the period, partially offset by borrowings of $501,523,000 and the amortization of debt issuance costs during the period.

Unsecured bank credit facilities, net of debt issuance costs decreased $52,878,000 during the nine months ended September 30, 2022, mainly due to repayments of $749,053,000 and new debt issuance costs incurred during the period, partially offset by borrowings of $695,726,000 and the amortization of debt issuance costs during the period.

The Company’s credit facilities are described in greater detail under Liquidity and Capital Resources .

Unsecured debt, net of debt issuance costs increased $174,306,000 during the six months ended June 30, 2022, primarily due to the closing of a $100 million senior unsecured term loan in March, closing the private placement of $150 million senior unsecured notes in April and the amortization of debt issuance costs, partially offset by the repayment of a $75 million term loan in February and new debt issuance costs incurred during the period.

Unsecured debt, net of debt issuance costs increased $298,911,000 during the nine months ended September 30, 2022, primarily due to the closing of a $100 million senior unsecured term loan in March, closing the private placement of $150 million senior unsecured notes in April, the closing of a $125 million senior unsecured term loan in August, and the amortization of debt issuance costs, partially offset by the repayment of a $75 million term loan in February and new debt issuance costs incurred during the period.

The borrowings and repayments on Unsecured debt, net of debt issuance costs are described in greater detail under Liquidity and Capital Resources .

Secured debt, net of debt issuance costs decreased $55,000 during the six months ended June 30, 2022.

Secured debt, net of debt issuance costs decreased $83,000 during the nine months ended September 30, 2022.

The decrease resulted from regularly scheduled principal payments of $70,000 and amortization of premiums, partially offset by the amortization of debt issuance costs during the period.

Also during the six months ended June 30, 2022, the Company assumed a $60 million loan in the acquisition of operating properties and development land, which was repaid with no penalty during the same period.

Accounts payable and accrued expenses increased $46,448,000 during the six months ended June 30, 2022.

Also during the nine months ended September 30, 2022, the Company assumed a $60 million loan in the acquisition of operating properties and development land, which was repaid with no penalty during the same period.

Accounts payable and accrued expenses increased $81,190,000 during the nine months ended September 30, 2022.

A summary of the Company’s Accounts payable and accrued expenses follows:

September 30,

2022 December 31,

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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.

Other liabilities increased $3,561,000 during the six months ended June 30, 2022.

Other liabilities increased $1,121,000 during the nine months ended September 30, 2022.

A summary of the Company’s Other liabilities follows:

September 30,

2022 December 31,

12 unchanged sentences

$ 83,459 82,338

Additional paid-in capital increased $376,252,000 during the six months ended June 30, 2022, primarily due to:

Additional paid-in capital increased $380,011,000 during the nine months ended September 30, 2022, primarily due to:

(i) the issuance of 1,868,809 shares of common stock 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, in the net amount of $303,682,000;

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and (iii) activity related to stock-based compensation (as discussed in Note 16 in the Notes to Consolidated Financial Statements).

During the six months ended June 30, 2022, EastGroup issued 385,538 shares of common stock under its continuous common equity offering program with net proceeds to the Company of $74,179,000.

For the six months ended June 30, 2022, Distributions in excess of earnings decreased $15,732,000 as a result of Net Income Attributable to EastGroup Properties, Inc.

Common Stockholders of $109,719,000 exceeding dividends on common stock of $93,987,000.

Accumulated other comprehensive income increased $22,669,000 during the six months ended June 30, 2022.

During the nine months ended September 30, 2022, EastGroup issued 391,906 shares of common stock under its continuous common equity offering program with net proceeds to the Company of $75,189,000.

For the nine months ended September 30, 2022, Distributions in excess of earnings increased $1,007,000 as a result of dividends on common stock of $148,518,000 exceeding Net Income Attributable to EastGroup Properties, Inc.

Common Stockholders of $147,511,000.

Accumulated other comprehensive income increased $39,826,000 during the nine months ended September 30, 2022.

The increase resulted from the change in fair value of the Company’s interest rate swaps (cash flow hedges) which are further discussed in Notes 13 and 14 in the Notes to Consolidated Financial Statements.

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Net Income Attributable to EastGroup Properties, Inc.

Common Stockholders for the three and six months ended June 30, 2022 was $46,139,000 ($1.09 per basic and diluted share) and $109,719,000 ($2.63 per basic share and $2.62 per diluted share), respectively, compared to $27,558,000 ($0.69 per basic and diluted share) and $54,897,000 ($1.38 per basic share and $1.37 per diluted share) for the same periods in 2021.

Common Stockholders for the three and nine months ended September 30, 2022 was $37,792,000 ($0.87 per basic and diluted share) and $147,511,000 ($3.49 per basic share and $3.48 per diluted share), respectively, compared to $30,771,000 ($0.76 per basic and diluted share) and $85,668,000 ($2.14 per basic share and $2.13 per diluted share) for the same periods in 2021.

The following paragraphs provide further details with respect to these changes:

• PNOI increased by $14,499,000 ($0.34 per diluted share), or 20.2%, for the three months ended June 30, 2022, as compared to the same period in 2021.

PNOI increased $6,229,000 from newly developed and value-add properties, $6,150,000 from same property operations and $3,106,000 from 2021 and 2022 acquisitions;

• PNOI increased by $15,660,000 ($0.36 per diluted share), or 20.8%, for the three months ended September 30, 2022, as compared to the same period in 2021.

PNOI increased $7,139,000 from newly developed and value-add properties, $5,186,000 from 2021 and 2022 acquisitions and $4,349,000 from same property operations;

PNOI decreased $867,000 from operating properties sold in 2021 and 2022.

Lease termination fee income was $979,000 and $18,000 for the three month periods ended June 30, 2022 and 2021, respectively.

The Company recorded net reserves for uncollectible rent of $36,000 and net recoveries of uncollectible rent of $12,000 for the three months ended June 30, 2022 and 2021, respectively.

Straight-lining of rent increased PNOI by $1,450,000 and $2,102,000 for the three months ended June 30, 2022 and 2021, respectively.

PNOI increased by $26,359,000 ($0.63 per diluted share), or 18.6%, for the six months ended June 30, 2022, as compared to the same period in 2021.

Lease termination fee income was $24,000 and $353,000 for the three month periods ended September 30, 2022 and 2021, respectively.

The Company recorded net reserves for uncollectible rent of $198,000 and net recoveries of uncollectible rent of $256,000 for the three months ended September 30, 2022 and 2021, respectively.

Straight-lining of rent increased PNOI by $2,764,000 and $2,542,000 for the three months ended September 30, 2022 and 2021, respectively.

PNOI increased by $42,019,000 ($0.99 per diluted share), or 19.3%, for the nine months ended September 30, 2022, as compared to the same period in 2021.

PNOI increased $18,916,000 from newly developed and value-add properties, $15,142,000 from same property operations and $10,696,000 from 2021 and 2022 acquisitions;

PNOI decreased $2,348,000 from operating properties sold in 2021 and 2022.

Lease termination fee income was $2,373,000 and $594,000 for the six month periods ended June 30, 2022 and 2021, respectively.

The Company recorded net recoveries of uncollectible rent of $70,000 and $90,000 for the six months ended June 30, 2022 and 2021, respectively.

Straight-lining of rent increased PNOI by $3,890,000 and $3,969,000 for the six months ended June 30, 2022 and 2021, respectively.

• EastGroup recognized gains on sales of real estate investments of $10,647,000 ($0.25 per diluted share) and $40,999,000 ($0.98 per diluted share) during the three and six months ended June 30, 2022, respectively.

There were no sales during the three and six months ended June 30, 2021.

• Depreciation and amortization expense increased by $6,112,000 ($0.14 per diluted share) and $12,140,000 ($0.29 per diluted share) during the three and six months ended June 30, 2022, respectively, as compared to the same periods in 2021.

EastGroup entered into 36 leases with certain rent concessions on 1,306,000 square feet during the three months ended June 30, 2022, with total rent concessions of $1,754,000 over the lives of the leases.

Lease termination fee income was $2,397,000 and $947,000 for the nine month periods ended September 30, 2022 and 2021, respectively.

The Company recorded net reserves for uncollectible rent of $128,000 and net recoveries of uncollectible rent of $346,000 for the nine months ended September 30, 2022 and 2021, respectively.

Straight-lining of rent increased PNOI by $6,654,000 and $6,511,000 for the nine months ended September 30, 2022 and 2021, respectively.

• EastGroup recognized gains on sales of real estate investments of $40,999,000 ($0.97 per diluted share) during the nine months ended September 30, 2022.

There were no sales during the three months ended September 30, 2022.

There were also no sales during the three and nine months ended September 30, 2021.

• Depreciation and amortization expense increased by $7,014,000 ($0.16 per diluted share) and $19,154,000 ($0.45 per diluted share) during the three and nine months ended September 30, 2022, respectively, as compared to the same periods in 2021.

EastGroup entered into 24 leases with certain rent concessions on 1,178,000 square feet during the three months ended September 30, 2022, with total rent concessions of $2,293,000 over the lives of the leases.

During the same period of 2021, the Company entered into 41 leases with certain rent concessions on 1,163,000 square feet with total rent concessions of $1,710,000 over the lives of the leases.

EastGroup entered into 66 leases with certain rent concessions on 2,646,000 square feet during the six months ended June 30, 2022, with total rent concessions of $3,833,000 over the lives of the leases.

EastGroup entered into 90 leases with certain rent concessions on 3,824,000 square feet during the nine months ended September 30, 2022, with total rent concessions of $6,126,000 over the lives of the leases.

During the same period of 2021, the Company entered into 139 leases with certain rent concessions on 4,452,000 square feet with total rent concessions of $8,422,000 over the lives of the leases.

The Company’s percentage of leased square footage was 99.1% at June 30, 2022, compared to 98.3% at June 30, 2021.

Occupancy at June 30, 2022 was 98.5% compared to 96.8% at June 30, 2021.

Same property average occupancy represents the average month-end percentage of leased square footage for which the lease term has commenced as compared to the total leasable square footage for the same operating properties owned during the entire current period and prior year reporting periods (January 1, 2021 through June 30, 2022).

Same property average occupancy for the three and six months ended June 30, 2022, was 98.2% and 98.0%, compared to 97.2% and 97.1% for the same periods of 2021.

The same property average rental rate calculated in accordance with GAAP represents the average annual rental rates of leases in place for the same operating properties owned during the entire current period and prior year reporting periods (January 1,

2021 through June 30, 2022).

The same property average rental rate was $7.01 and $6.95 per square foot for the three and six months ended June 30, 2022, respectively, compared to $6.55 and $6.51 per square foot for the same periods of 2021.

Interest expense increased $789,000 and $623,000 for the three and six months ended June 30, 2022, compared to the same periods in 2021.

The following table presents the components of Interest expense for the three and six months ended June 30, 2022 and 2021:

The Company’s percentage of leased square footage for the operating portfolio was 99.0% at September 30, 2022, compared to 98.8% at September 30, 2021.

Occupancy for the Company’s operating portfolio at September 30, 2022 was 98.5% compared to 97.6% at September 30, 2021.

Same property average occupancy for the three and nine months ended September 30, 2022, was 98.3% and 98.1%, compared to 97.8% and 97.3% for the same periods of 2021.

The same property average rental rate was $7.12 and $7.00 per square foot for the three and nine months ended September 30, 2022, respectively, compared to $6.72 and $6.58 per square foot for the same periods of 2021.

Interest expense increased $1,355,000 and $1,978,000 for the three and nine months ended September 30, 2022, compared to the same periods in 2021.

The following table presents the components of Interest expense for the three and nine months ended September 30, 2022 and 2021:

Three Months Ended

June 30, Six Months Ended June 30,

September 30, Nine Months Ended September 30,

2022 2021 Increase

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(1) Includes interest on the Company’s unsecured debt with fixed interest rates per the debt agreements or effectively fixed interest rates due to interest rate swaps, as discussed in Note 14 in the Notes to Consolidated Financial Statements.

The Company’s variable rate interest expense increased by $470,000 and $666,000 for the three and six months ended June 30, 2022, respectively, as compared to the same periods in 2021 primarily due to increases in the Company’s average borrowings and weighted average variable interest rates on its unsecured bank credit facilities as shown in the following table:

The Company’s variable rate interest expense increased by $1,586,000 and $2,252,000 for the three and nine months ended September 30, 2022, respectively, as compared to the same periods in 2021 primarily due to increases in the Company’s average borrowings and weighted average variable interest rates on its unsecured bank credit facilities as shown in the following table:

Three Months Ended

June 30, Six Months Ended June 30,

September 30, Nine Months Ended September 30,

2022 2021 Increase

5 unchanged sentences

3.36 % 0.86 % 1.84 % 1.08 %

The Company’s fixed rate interest expense increased by $861,000 and $506,000 for the three and six months ended June 30, 2022, respectively, as compared to the same periods in 2021 as a result of the unsecured debt and secured debt activity described below.

Interest expense from fixed rate unsecured debt increased by $1,201,000 and $1,621,000 during the three and six months ended June 30, 2022, respectively, as compared to the same periods in 2021.

The Company’s fixed rate interest expense increased by $1,049,000 and $1,555,000 for the three and nine months ended September 30, 2022, respectively, as compared to the same periods in 2021 as a result of the unsecured debt and secured debt activity described below.

Interest expense from fixed rate unsecured debt increased by $1,371,000 and $2,992,000 during the three and nine months ended September 30, 2022, respectively, as compared to the same periods in 2021.

The increases resulted from the Company’s unsecured debt activity described below.

The details of the unsecured debt obtained in 2021 and 2022 are shown in the following table:

The details of the unsecured debt obtained in 2021 and 2022 as of September 30, 2022 are shown in the following table:

NEW UNSECURED DEBT IN 2021 AND 2022

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$150 Million Senior Unsecured Notes 3.03% 04/20/2022 04/20/2032 150,000

$50 Million Senior Unsecured Term Loan (3)

4.09% 08/31/2022 08/30/2024 50,000

$75 Million Senior Unsecured Term Loan (4)

4.00% 08/31/2022 08/31/2027 75,000

Weighted Average/Total Amount for 2021 and 2022

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(1) The interest rate on this unsecured term loan is comprised of LIBOR plus 100 basis points subject to a pricing grid for changes in the Company’s coverage ratings.

The Company entered into an interest rate swap to convert the loan’s LIBOR rate to a fixed interest rate, providing the Company an effectively fixed interest rate on the term loan of 1.55% as of June 30, 2022.

See Note 14 in the Notes to Consolidated Financial Statements for additional information on the interest rate swaps.

(2) The interest rate on this unsecured term loan is comprised of the Secured Overnight Financing Rate (“SOFR”) plus 130 basis points subject to a pricing grid for changes in the Company’s coverage ratings.

The Company entered into an interest rate swap to convert the loan’s SOFR rate to a fixed interest rate, providing the Company an effectively fixed interest rate on the term loan of 3.06% as of June 30, 2022.

See Note 14 in the Notes to Consolidated Financial Statements for additional information on the interest rate swaps.

(3) The interest rate on this unsecured term loan is comprised of SOFR plus 85 basis points subject to a pricing grid for changes in the Company’s coverage ratings.

See Note 14 in the Notes to Consolidated Financial Statements for additional information on the interest rate swaps.

(4) The interest rate on this unsecured term loan is comprised of SOFR plus 85 basis points subject to a pricing grid for changes in the Company’s coverage ratings.

See Note 14 in the Notes to Consolidated Financial Statements for additional information on the interest rate swaps.

The increase in interest expense from the new unsecured debt was partially offset by the refinance of a $100,000,000 senior unsecured term loan on March 25, 2022, which resulted in a 60 basis point reduction in the effectively fixed interest rate;

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The increase in interest expense from unsecured debt was offset by a decrease in secured debt interest expense.

Interest expense from secured debt decreased by $343,000 and $1,064,000 during the three and six month periods ended June 30, 2022, respectively, as compared to the same periods in 2021 as a result of regularly scheduled principal payments and the payoffs described in the table below.

Regularly scheduled principal payments on secured debt were $47,000 during the six months ended June 30, 2022.

Interest expense from secured debt decreased by $345,000 and $1,409,000 during the three and nine month periods ended September 30, 2022, respectively, as compared to the same periods in 2021 as a result of regularly scheduled principal payments and the payoffs described in the table below.

Regularly scheduled principal payments on secured debt were $70,000 during the nine months ended September 30, 2022.

During the year ended December 31, 2021, regularly scheduled principal payments on secured debt were $2,989,000.

During the six months ended June 30, 2022, the Company assumed a $60 million loan in the acquisition of operating properties and development land, which was repaid with no penalty during the same period.

During the nine months ended September 30, 2022, the Company assumed a $60 million loan in the acquisition of operating properties and development land, which was repaid with no penalty during the same period.

EastGroup did not obtain any new secured debt during 2021.

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Interest costs during the period of construction of real estate properties are capitalized and offset against interest expense.

Capitalized interest increased $542,000 and $549,000 for the three and six months ended June 30, 2022, respectively, as compared to the same periods of 2021, due to changes in development spending and borrowing rates.

Depreciation and amortization expense increased $6,112,000 and $12,140,000 for the three and six months ended June 30, 2022, respectively, as compared to the same periods in 2021, primarily due to the operating properties acquired by the

Company in 2021 and 2022 and the properties transferred from Development and value-add properties in 2021 and 2022, partially offset by operating properties sold in 2021 and 2022.

Gain on sales of real estate investments , which includes gains on the sales of operating properties, increased $10,647,000 and $40,999,000 for the three and six months ended June 30, 2022, respectively, as compared to the same periods in 2021.

Capitalized interest increased $1,280,000 and $1,829,000 for the three and nine months ended September 30, 2022, respectively, as compared to the same periods of 2021, due to changes in development spending and borrowing rates.

Depreciation and amortization expense increased $7,014,000 and $19,154,000 for the three and nine months ended September 30, 2022, respectively, as compared to the same periods in 2021, primarily due to the operating properties acquired by the Company in 2021 and 2022 and the properties transferred from Development and value-add properties in 2021 and 2022, partially offset by operating properties sold in 2021 and 2022.

Gain on sales of real estate investments , which includes gains on the sales of operating properties, increased $40,999,000 during the nine months ended September 30, 2022, as compared to the same period in 2021.

There were no sales during the three months ended September 30, 2022.

Also, there were no sales during the three and nine months ended September 30, 2021.

The Company’s 2021 and 2022 sales transactions are described below in Real Estate Sold and Held for Sale .

Real Estate Improvements

Real estate improvements for EastGroup’s operating properties for the three and six months ended June 30, 2022 and 2021 were as follows:

Real estate improvements for EastGroup’s operating properties for the three and nine months ended September 30, 2022 and 2021 were as follows:

Three Months Ended

June 30, Six Months Ended June 30,

September 30, Nine Months Ended September 30,

Estimated Useful Life 2022 2021 2022 2021

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(1) Reconciliation of Total real estate improvements to Real estate improvements on the Consolidated Statements of Cash Flows:

Six Months Ended June 30,

Nine Months Ended September 30,

(In thousands)

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The costs are amortized over the terms of the associated leases, and the amortization is included in Depreciation and amortization expense.

Capitalized leasing costs for the three and six months ended June 30, 2022 and 2021 were as follows:

Capitalized leasing costs for the three and nine months ended September 30, 2022 and 2021 were as follows:

Three Months Ended

June 30, Six Months Ended June 30,

September 30, Nine Months Ended September 30,

Estimated Useful Life 2022 2021 2022 2021

7 unchanged sentences

(1) Reconciliation of Total capitalized leasing costs to Leasing commissions on the Consolidated Statements of Cash Flows:

Six Months Ended June 30,

Nine Months Ended September 30,

(In thousands)

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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 June 30, 2022.

The Company did not classify any properties as held for sale as of September 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.

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

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

The Company sold operating properties during the nine months ended September 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.

1 unchanged sentence

The Company did not consider its sales in 2022 to be disposals of a component of an entity or a group of components of an entity representing a strategic shift that has (or will have) a major effect on the entity’s operations and financial results.

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:

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

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

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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 six months ended June 30, 2021.

The Company had no sales during the nine months ended September 30, 2021.

RECENT ACCOUNTING PRONOUNCEMENTS

3 unchanged sentences

LIQUIDITY AND CAPITAL RESOURCES

Net cash provided by operating activities was $176,152,000 for the six months ended June 30, 2022.

Net cash provided by operating activities was $276,551,000 for the nine months ended September 30, 2022.

The primary other sources of cash were borrowings on unsecured bank credit facilities and unsecured debt;

1 unchanged sentence

and net proceeds from sales of real estate investments.

The Company distributed $91,787,000 in common stock dividends during the six months ended June 30, 2022.

Other primary uses of cash were for repayments on unsecured bank credit facilities, unsecured debt and secured debt;

The Company distributed $139,597,000 in common stock dividends during the nine months ended September 30, 2022.

Other primary uses of cash were for repayments on unsecured

bank credit facilities, unsecured debt and secured debt;

the construction and development of properties;

2 unchanged sentences

and purchases of real estate.

The Company anticipates that its current cash balance, operating cash flows, borrowings under its unsecured bank credit facilities, proceeds from new debt and/or proceeds from the issuance of equity instruments will be adequate for (i) operating and administrative expenses, (ii) normal repair and maintenance expenses at its properties, (iii) debt service obligations, (iv) maintaining compliance with its debt covenants, (v) distributions to stockholders, (vi) capital improvements, (vii) purchases of properties, (viii) development, and (ix) any other normal business activities of the Company, both in the short-term and long-term, including after taking into account the effects of the COVID-19 pandemic.

The Company expects liquidity sources and needs in future years to be consistent in nature with those for the six months ended June 30, 2022.

As of June 30, 2022, the Company was contractually obligated to pay the dividend declared in May 2022, which was paid in July 2022.

An amount for dividends payable of $49,064,000 was included in Accounts payable and accrued expenses at June 30, 2022, which includes dividends payable on unvested restricted stock of $1,254,000, which are subject to continued service and will be paid upon vesting in future periods.

Total debt at June 30, 2022 and December 31, 2021 is detailed below.

The Company’s unsecured bank credit facilities and unsecured debt instruments have certain restrictive covenants, such as maintaining debt service coverage and leverage ratios and maintaining insurance coverage, and the Company was in compliance with all of its debt covenants at June 30, 2022 and December 31, 2021.

The Company expects liquidity sources and needs in the coming year to be consistent in nature with those for the nine months ended September 30, 2022.

As of September 30, 2022, the Company was contractually obligated to pay the dividend declared in August 2022, which was paid in October 2022.

An amount for dividends payable of $55,785,000 was included in Accounts payable and accrued expenses at September 30, 2022, which includes dividends payable on unvested restricted stock of $1,446,000, which are subject to continued service and will be paid upon vesting in future periods.

Total debt at September 30, 2022 and December 31, 2021 is detailed below.

September 30,

2022 December 31,

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

As of September 30, 2022, the Company had $120,000,000 of variable rate borrowings on this unsecured bank credit facility with a weighted average interest rate of 3.752%.

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 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.

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

As of September 30, 2022, the interest rate was 3.918% on a balance of $35,883,000.

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

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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.

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, 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 the annual rate of SOFR plus an applicable margin (1.30% as of June 30, 2022) based on the Company’s senior unsecured long-term debt rating.

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 the annual rate of SOFR plus an applicable margin (1.30% as of September 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%.

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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.

In July, the Company added an additional $50 million tranche with the same terms other than the maturity date.

The loan is expected to close in the third quarter of 2022 and will have a five-year term and a two-year term on the $75 million and $50 million tranches, respectively.

The Company also entered into interest rate swap agreements 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% and 4.09% on the $75 million and $50 million tranches, respectively.

In August 2022, the Company closed a $125 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 has a $75 million tranche with a five-year term and a $50 million tranche with a two-year term.

The Company also entered into interest rate swap agreements to convert the loans’ SOFR rate components to fixed interest rates for the entire term of the loans, providing total effectively fixed interest rates of 4.00% and 4.09% on the $75 million and $50 million tranches, respectively.

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.

1 unchanged sentence

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.

The notes, dated August 16, 2022, were issued and sold on October 12, 2022.

In July 2017, the Financial Conduct Authority announced it intended to stop compelling banks to submit rates for the calculation of LIBOR after 2021.

1 unchanged sentence

dollar LIBOR rates through June 30, 2023.

While this announcement extended the transition period to June 2023, the United States Federal Reserve Board and other regulatory bodies concurrently issued guidance encouraging banks and other financial market participants to cease entering into new contracts that use U.S.

While this announcement extended the transition period to June 2023, the United States Federal Reserve Board and other regulatory bodies concurrently issued guidance encouraging

banks and other financial market participants to cease entering into new contracts that use U.S.

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 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.

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

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.

During the nine months ended September 30, 2022, the Company entered into two new term loans and three swap agreements which are indexed to SOFR.

Also, during the nine months ended September 30, 2022, EastGroup refinanced two existing term loans modifying the index from LIBOR to SOFR, and concurrently amended the related swaps to reference SOFR rather than LIBOR.

The Company’s unsecured bank credit facilities and two 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.

Therefore, management believes the transition will not have a material impact on the Company’s consolidated financial statements.

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On July 28, 2021, the Company entered into a sales agreement (together with the December 2019 Sales Agreements, the “Sales Agreements”) with TD Securities (USA) LLC, which is substantially similar to the December 2019 Sales Agreements, and entered into corresponding amendments to the December 2019 Sales Agreements to include TD Securities (USA) LLC as a participating sales agent.

Pursuant to the Sales Agreements, the shares may be offered and sold in transactions that are deemed to be “at the market” offerings as defined in Rule 415 of the Securities Act of 1933, as amended.

As of July 27, 2022, the Company has sold an aggregate of 2,646,643 shares of common stock with gross proceeds of $443,147,000 under the Sales Agreements, and EastGroup may offer and sell additional shares of its common stock with an aggregate gross sales price of up to $306,853,000 through the sales agents.

During the six months ended June 30, 2022, EastGroup issued and sold 385,538 shares of common stock under its continuous common equity offering program at an average price of $194.53 per share with gross proceeds to the Company of $75,000,000.

The Company incurred offering-related costs of $821,000 during the six months, resulting in net proceeds to the Company of $74,179,000.

During the six months ended June 30, 2022, the Company issued 1,868,809 shares of common stock in the acquisition of operating properties and development land in the gross amount of $303,756,000.

Pursuant to the Sales Agreements, the shares may be offered and sold in transactions that are deemed to be “at the market” offerings as defined in Rule 415 of the Securities Act.

As of October 26, 2022, the Company has sold an aggregate of 2,653,011 shares of common stock with gross proceeds of $444,288,000 under the Sales Agreements, and EastGroup may offer and sell additional shares of its common stock with an aggregate gross sales price of up to $305,712,000 through the sales agents.

During the nine months ended September 30, 2022, EastGroup issued and sold 391,906 shares of common stock under its continuous common equity offering program at an average price of $194.28 per share with gross proceeds to the Company of $76,141,000.

The Company incurred offering-related costs of $952,000 during the nine months, resulting in net proceeds to the Company of $75,189,000.

During the nine months ended September 30, 2022, the Company issued 1,868,809 shares of common stock in the acquisition of operating properties and development land in the gross amount of $303,756,000.

The Company incurred issuance-related costs of $74,000.

EastGroup’s other material cash requirements from known contractual and other obligations, including real estate property obligations, development and value-add obligations and tenant improvements as of December 31, 2021, did not materially change during the six months ended June 30, 2022.

The Company has no material off-balance sheet arrangements that have had or are reasonably likely to have a material current or future effect on its financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.

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 2. Management’s Discussion and Analysis