What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2023-04-26 compared with 2022-10-26 · 213 added, 402 removed, 354 unchanged (63% of the section changed)

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FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q includes “forward-looking statements” (within the meaning of the federal securities laws, Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Exchange Act of 1934, as amended (the “Exchange Act”)) that reflect EastGroup’s expectations and projections about the Company’s future results, performance, prospects, plans and opportunities.

The Company has attempted to identify these forward-looking statements by the use of words such as “may,” “will,” “seek,” “expects,” “anticipates,” “believes,” “targets,” “intends,” “should,” “estimates,” “could,” “continue,” “assume,” “projects,” “goals,” “plans” or variations of such words and similar expressions.

This Quarterly Report on Form 10-Q includes “forward-looking statements” (within the meaning of the federal securities laws, Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) that reflect EastGroup’s expectations and projections about the Company’s future results, performance, prospects, plans and opportunities.

These forward-looking statements are based on information currently available to the Company and are subject to a number of known and unknown assumptions, risks, uncertainties and other factors that may cause the Company’s actual results, performance, plans or achievements to be materially different from any future results, performance or achievements expressed or implied by these forward-looking statements.

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The Company intends for all such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in Section 27A of the Securities Act and Section 21E of the Exchange Act, as applicable by law.

The Company does not undertake publicly to update or revise any forward-looking statements, whether as a result of changes in underlying assumptions or new information, future events or otherwise, except as may be required to satisfy the Company’s obligations under federal securities laws.

The Company does not undertake to publicly update or revise any forward-looking statements, whether as a result of changes in underlying assumptions or new information, future events or otherwise, except as may be required by law.

The following are some, but not all, of the risks, uncertainties and other factors that could cause the Company’s actual results to differ materially from those presented in the Company’s forward-looking statements (the Company refers to itself as “we,” “us” or “our” in the following):

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• 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;

• financing risks, including the risks that our cash flows from operations may be insufficient to meet required payments of principal and interest, and we may be unable to refinance our existing debt upon maturity or obtain new financing on attractive terms or at all;

• our ability to retain our credit agency ratings;

• our ability to comply with applicable financial covenants;

• the competitive environment in which the Company operates;

• fluctuations of occupancy or rental rates;

• potential defaults (including bankruptcies or insolvency) on or non-renewal of leases by tenants, or our ability to lease space at current or anticipated rents, particularly in light of the significant uncertainty as to the conditions under which current or potential tenants will be able to operate physical locations in the future;

• potential changes in the law or governmental regulations and interpretations of those laws and regulations, including changes in real estate laws or real estate investment trust (“REIT”) or corporate income tax laws, and potential increases in real property tax rates;

• potential changes in the law or governmental regulations and interpretations of those laws and regulations, including changes in real estate laws, real estate investment trust (“REIT”) or corporate income tax laws, potential changes in zoning laws, or increases in real property tax rates, and any related increased cost of compliance;

• our ability to maintain our qualification as a REIT;

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• 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;

• availability of financing and capital, increase in interest rates, and ability to raise equity capital on attractive terms;

• our ability to retain our credit agency ratings;

• our ability to comply with applicable financial covenants;

• credit risk in the event of non-performance by the counterparties to our interest rate swaps;

• the discontinuation of London Interbank Offered Rate (“LIBOR”);

• lack of or insufficient amounts of insurance;

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Risk Factors within the Company’s Annual Report on Form 10-K for the year ended December 31, 2022.

In addition, the Company’s current and continuing qualification as a REIT involves the application of highly technical and complex provisions of the Internal Revenue Code of 1986, as amended (the “Code”), and depends on the Company’s ability to meet the various requirements imposed by the Code through actual operating results, distribution levels and diversity of stock ownership.

EastGroup’s goal is to maximize shareholder value by being a leading provider in its markets of functional, flexible and quality business distribution space for location-sensitive customers (primarily in the 20,000 to 100,000 square foot range).

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

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.

During the three months ended March 31, 2023, economic uncertainty and stock market volatility have increased due to a number of factors, including rising inflation, increasing interest rates, and lingering supply chain disruptions.

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.

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.

Additionally, most of the Company's leases include scheduled rent increases.

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.

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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 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.

During the three months ended March 31, 2023, EastGroup issued and sold, and subsequently settled the issuance of, 652,909 shares of common stock through its continuous common equity offering program at a weighted average price of $163.55 per share, providing aggregate net proceeds to the Company of $105,321,000.

In addition, on March 30 and 31, 2023, the Company sold 168,125 shares of common stock at a weighted average price of $163.35, providing aggregate net proceeds to the Company of $27,188,000.

These shares were deemed to be issued and outstanding upon settlement in April 2023.

Also during the three months ended March 31, 2023, the Company closed a $100,000,000 senior unsecured term loan with an effectively fixed interest rate of 5.27%.

Additionally, the Company amended its unsecured bank credit facilities, effective January 2023, to expand the total capacity on its unsecured bank credit facilities from $475,000,000 to $675,000,000 and to replace LIBOR with Secured Overnight Financing Rate (“SOFR”) as the benchmark interest rate.

The maturity date remains July 30, 2025.

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 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.

During the three months ended March 31, 2023, EastGroup executed new and renewal leases on 1,659,000 square feet (3.2% of the operating portfolio’s total square footage of 52,647,000).

For new and renewal leases signed during the first three months of 2023, average rental rates increased by 48.5% as compared to the former leases on the same spaces.

On a diluted per share basis, Net Income Attributable to EastGroup Properties, Inc.

Common Stockholders was $1.02 for the three months ended March 31, 2023, compared to $1.54 for the same period of 2022, a 33.8% decrease.

See the Company’s analysis of performance trends below for further details.

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, 2022 through March 31, 2023), increased 7.6% for the three months ended March 31, 2023 as compared to the same period in 2022.

EastGroup’s operating portfolio was 98.7% leased and 97.9% occupied as of March 31, 2023, compared to 98.8% and 97.9%, respectively, at March 31, 2022.

As of April 25, 2023, the operating portfolio was 98.4% leased and 98.2% occupied.

Leases scheduled to expire for the remainder of 2023 were 6.7% of the operating portfolio on a square foot basis at March 31, 2023, and this percentage was reduced to 6.0% as of April 25, 2023.

The Company generates new sources of leasing revenue through its acquisitions and also its development and value-add program.

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 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 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 ).

During the three months ended March 31, 2023, EastGroup began construction of four development projects containing 1,033,000 square feet in four cities.

EastGroup also transferred three development and value-add projects (716,000 square feet) in two cities from its development and value-add program to real estate properties, with costs of $76,713,000 at the date of transfer.

As of March 31, 2023, EastGroup’s development and value-add program consisted of 21 projects (4,298,000 square feet) located in 13 cities.

The projected total investment for the development and value-add projects, which were collectively 38% leased as of April 25, 2023, is $553,100,000, of which $231,924,000 remained to be invested as of March 31, 2023.

During the three months ended March 31, 2023, there were no value-add or operating property acquisitions.

During the three months ended March 31, 2023, EastGroup sold a 125,000 square foot operating property and two acres of land, generating gross sales proceeds of $11,150,000.

The Company recognized $4,809,000 in Gain on sales of real estate investments and $81,000 in gains on sales of non-operating real estate (included in Other on the Consolidated Statements of Income and Comprehensive Income) during the three months ended March 31, 2023.

The Company typically initially funds its development and acquisition programs through its unsecured bank credit facilities, the total capacity of which was increased in January 2023 by $200,000,000, from $475,000,000 to $675,000,000 (as discussed in Liquidity and Capital Resources ).

As market conditions permit, EastGroup issues equity and/or employs fixed-rate debt, including variable-rate debt that has been swapped to an effectively fixed rate through the use of interest rate swaps, to replace short-term bank borrowings.

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

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.

For the three months ended March 31, 2023, Same Properties includes properties which were included in the operating portfolio for the entire period from January 1, 2022 through March 31, 2023.

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.

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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 nine months ended September 30, 2022 and 2021.

Three Months Ended

September 30, Nine Months Ended September 30,

2022 2021 2022 2021

The following table presents reconciliations of Net Income to PNOI, Same PNOI and Same PNOI Excluding Income from Lease Terminations for the three months ended March 31, 2023 and 2022.

Three Months Ended March 31,

(In thousands)

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Gain on sales of real estate investments (4,809) (30,352)

Gain on sales of non-operating real estate (81) —

Interest income (81) —

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PROPERTY NET OPERATING INCOME (“PNOI”) 98,070 82,176

PNOI from 2021 and 2022 acquisitions

(5,888) (702) (11,434) (738)

PNOI from 2022 acquisitions

PNOI from 2022 and 2023 development and value-add properties

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PNOI from 2022 and 2023 operating property dispositions

— (867) (237) (2,585)

Other PNOI 112 11

SAME PNOI 84,646 80,018

Net lease termination fee income from same properties (24) (353) (1,115) (947)

Lease termination fee income from same properties (38) (1,394)

SAME PNOI EXCLUDING INCOME FROM LEASE TERMINATIONS $ 84,608 78,624

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

Three Months Ended

September 30, Nine Months Ended September 30,

2022 2021 2022 2021

PNOI was calculated as follows for the three months ended March 31, 2023 and 2022.

Three Months Ended March 31,

(In thousands)

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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.

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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 nine months ended September 30, 2022 and 2021.

Three Months Ended

September 30, Nine Months Ended September 30,

2022 2021 2022 2021

Common Stockholders to FFO Attributable to Common Stockholders for the three months ended March 31, 2023 and 2022.

Three Months Ended March 31,

(In thousands, except per share data)

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Gain on sales of real estate investments (4,809) (30,352)

Gain on sales of non-operating real estate (81) —

FUNDS FROM OPERATIONS (“FFO”) ATTRIBUTABLE TO COMMON STOCKHOLDERS $ 80,844 69,597

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The Company analyzes the following performance trends in evaluating the revenues and expenses of the Company:

• On a diluted per share basis, Net Income Attributable to EastGroup Properties, Inc.

Common Stockholders was $1.02 for the three months ended March 31, 2023, compared to $1.54 for the same period of 2022, a 33.8% decrease.

The change is primarily due to the following:

– EastGroup recognized Gains on sales of real estate investments of $4,809,000 ($0.11 per share) during the three months ended March 31, 2023, compared to $30,352,000 ($0.73 per share) for the three months ended March 31, 2022.

– Interest expense increased by $4,915,000 ($0.11 per share) during the three months ended March 31, 2023, as compared to the same period of 2022.

– Depreciation and amortization expense increased by $4,673,000 ($0.11 per share) during the three months ended March 31, 2023, as compared to the same period of 2022.

– PNOI increased by $15,894,000 ($0.36 per share) during the three months ended March 31, 2023, compared to the same period of 2022.

• 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 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 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;

For the three months ended March 31, 2023, FFO was $1.84 per share compared with $1.68 per share for the same period of 2022, an increase of 9.5%.

FFO increased due to the increase in PNOI partially offset by the increase in interest expense.

• For the three months ended March 31, 2023, PNOI increased by $15,894,000, or 19.3%, as compared to the same period in 2022.

PNOI increased $7,695,000 from newly developed and value-add properties, $4,628,000 from same property operations and $4,039,000 from 2022 acquisitions;

PNOI decreased $367,000 from operating properties sold in 2022 and 2023.

• 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 September 30, 2022).

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 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 September 30, 2022).

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.

Same PNOI, excluding income from lease terminations, increased 7.6% for the three months ended March 31, 2023, as compared to the same period in 2022.

Same property average occupancy was 98.7% for the three months ended March 31, 2023, compared to 97.4% for the same period of 2022.

• 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 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.

Occupancy at March 31, 2023 was 97.9%.

Quarter-end occupancy ranged from 97.9% to 98.5% over the previous four quarters ended March 31, 2022 to December 31, 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 (4.6% 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%.

Rental rate increases on new and renewal leases (3.2% of the operating portfolio’s total square footage) averaged 48.5% for the three months ended March 31, 2023.

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

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.

Lease termination fee income for the three months ended March 31, 2023 was $55,000, compared to $1,394,000 for the same period of 2022.

• 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 $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.

The Company recorded net reserves for uncollectible rent of $369,000 for the three months ended March 31, 2023, compared to net recoveries of uncollectible rent of $106,000 for the same period of 2022.

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.

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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 nine months ended September 30, 2022.

The Company followed its normal process for recording reserves for uncollectible rent during the three months ended March 31, 2023.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

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The purchase price is also allocated among the following categories of intangible assets:

the above or below market component of in-place leases, the value of in-place leases and the value of customer relationships.

the above or below market component of in-place leases and the value of leases in-place at the time of acquisition.

The value allocable to the above or below market component of an acquired in-place lease is determined based upon the present value (using a discount rate reflecting the risks associated with the acquired leases) of the difference between (i) the contractual amounts to be paid pursuant to the lease over its remaining term and (ii) management’s estimate of the amounts that would be paid using current market rents over the remaining term of the lease.

The amounts allocated to above and below market lease intangibles are included in Other assets and Other liabilities , respectively, on the Consolidated Balance Sheets and are amortized to rental income over the remaining terms of the respective leases.

The total amount of intangible assets is further allocated to in-place lease values and customer relationship values based upon management’s assessment of their respective values.

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.

In-place lease intangibles are valued based upon management’s assessment of factors such as an estimate of foregone rents and avoided leasing costs during the expected lease-up periods considering current market conditions and costs to execute similar leases.

These intangible assets are included in Other assets on the Consolidated Balance Sheets and are amortized over the remaining term of the existing lease.

The significance of this accounting policy will fluctuate given the transaction activity during the period.

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FINANCIAL CONDITION

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.

EastGroup’s Total Assets were $4,080,461,000 at March 31, 2023, an increase of $44,624,000 from December 31, 2022.

Total Liabilities decreased $38,319,000 to $2,044,079,000, and Total Equity increased $82,943,000 to $2,036,382,000 during the same period.

The following paragraphs explain these changes in additional detail.

Real Estate Properties

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 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;

and (iv) costs incurred on development and value-add projects subsequent to transfer to Real estate properties discussed below.

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

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

OPERATING PROPERTIES ACQUIRED IN 2022

Location Size Date

Acquired Cost (1)

(Square feet) (In thousands)

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 (2)

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

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

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

Refer to Note 7 in the Notes to Consolidated Financial Statements.

(2) 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.

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 ).

Real estate properties increased $82,533,000 during the three months ended March 31, 2023, primarily due to:

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

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

(iii) costs incurred on development and value-add projects subsequent to transfer to Real estate properties discussed below.

The increases were partially offset by the sale of one operating property and the transfer of one property from Real estate properties to Development and value-add propertie s.

During the three months ended March 31, 2023, the Company made capital improvements of $16,887,000 on existing properties (included in the Real Estate Improvements table under Results of Operations ).

Also, the Company incurred costs of $4,116,000 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 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.

During the three months ended March 31, 2023, EastGroup sold a 125,000 square foot operating property, generating gross sales proceeds of $9,600,000.

The Company recognized $4,809,000 in Gain on sales of real estate investments during the three months ended March 31, 2023.

Development and Value-Add 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.

EastGroup’s investment in Development and value-add properties at March 31, 2023 consisted of projects in lease-up and under construction of $321,176,000 and prospective development (primarily land) of $203,753,000.

The Company’s total investment in Development and value-add properties at March 31, 2023 was $524,929,000 compared to $538,449,000 at December 31, 2022.

Total capital invested for development during the first three months of 2023 was $64,112,000, which primarily consisted of improvement costs of $59,996,000 on development and value-add properties and costs of $4,116,000 on properties subsequent to transfer to Real estate properties.

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 $2,388,000 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

Location Size Date

Acquired Cost (1)

(Square feet) (In thousands)

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

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 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 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

DEVELOPMENT AND

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

For the Nine Months Ended

Cumulative as of 9/30/2022

The Company capitalized internal development costs of $2,455,000 and $2,469,000 for the three months ended March 31, 2023 and 2022, respectively.

There were no value-add acquisitions during the three months ended March 31, 2023.

During the three months ended March 31, 2023, EastGroup sold 2.0 acres of land, generating gross sales proceeds of $1,550,000.

The Company recognized $81,000 in gains on sales of non-operating real estate (included in Other on the Consolidated Statements of Income and Comprehensive Income) during the three months ended March 31, 2023.

Also during the three months ended March 31, 2023, the Company transferred three development and value-add projects to Real estate properties with a total investment of $76,713,000 as of the date of transfer.

The Company also transferred one operating property to Development and value-add properties with a total investment of $4,553,000 as of the date of transfer.

DEVELOPMENT AND VALUE-ADD PROPERTIES ACTIVITY Actual or Estimated Building Size (Square feet) Cumulative Costs Incurred as of 3/31/2023

Projected Total Costs

(In thousands)

LEASE-UP Building Size (Square feet)

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)

516,000 — 54,021 54,021 57,800 03/23

Zephyr, San Francisco, CA (2)

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

Lease-up 1,262,000 $ 156,038 173,600

Under construction 3,036,000 165,138 379,500

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

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

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

The Development and Value-Add Properties Activity table is continued on the following page.

Costs Incurred

Costs Transferred in 2022 (1)

For the Nine Months Ended

Cumulative as of 9/30/2022

(In thousands)

PROSPECTIVE DEVELOPMENT (PRIMARILY LAND) Estimated Building Size (Square feet)

Phoenix, AZ 655,000 — 15,170 15,170

Sacramento, CA 93,000 — 3,098 3,098

San Francisco, CA 65,000 — 3,561 3,561

Fort Myers, FL 364,000 (3,148) 1,815 6,965

Miami, FL 510,000 (8,049) 17,651 23,933

Orlando, FL 886,000 (9,906) 878 17,210

Tampa, FL 32,000 — — 825

Atlanta, GA 751,000 (3,534) 6,785 8,309

Jackson, MS 28,000 — — 706

Charlotte, NC 1,146,000 (2,857) 1,319 13,566

Greenville, SC 476,000 (632) 3,994 5,098

Austin, TX 550,000 (10,279) 19,297 15,449

Dallas, TX — (4,261) 457 4,594

Fort Worth, TX 575,000 (1,980) 1,459 14,806

Houston, TX 1,536,000 (11,247) 16,667 30,253

San Antonio, TX 277,000 — 5,297 6,015

Total Prospective Development 7,944,000 (55,893) 97,448 169,558

12,878,000 $ — 368,136 578,575

DEVELOPMENT AND VALUE-ADD PROPERTIES TRANSFERRED TO REAL ESTATE PROPERTIES DURING 2022

Building Size (Square feet) Building Conversion Date

Access Point 1, Greenville, SC (2)

156,000 $ — 7 12,529 01/22

Speed Distribution Center, San Diego, CA 519,000 — 2,884 70,702 03/22

Access Point 2, Greenville, SC (2)

Total lease-up and under construction 4,298,000 321,176 553,100

Prospective development (primarily land) 8,822,000 203,753

Total Development and value-add properties as of March 31, 2023

13,120,000 $ 524,929

Grand Oaks 75 3, Tampa, FL 136,000 — 1,205 11,397 06/22

Siempre Viva 3-6, San Diego, CA (2)

Total Development and value-add properties transferred to Real estate properties

during the three months ended March 31, 2023

716,000 $ 76,713 (1)

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)

(1) Represents costs transferred from Prospective Development (primarily land) to Under Construction during the period.

Negative amounts represent land inventory costs transferred to Under Construction.

(2) Represents value-add acquisitions.

(1) Represents cumulative costs at the date of transfer.

Accumulated Depreciation

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 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 September 30, 2022.

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

Accumulated depreciation on real estate, development and value-add properties increased $28,320,000 during the three months ended March 31, 2023, primarily due to depreciation expense, partially offset by the sale of one operating property.

Other assets decreased $5,680,000 during the three months ended March 31, 2023.

A summary of Other assets follows:

September 30,

2023 December 31,

14 unchanged sentences

Escrow deposits and prepaid costs for pending transactions 2,866 2,522

Prepaid insurance 3,826 7,793

Goodwill 990 990

Receivable for tenant improvement cost reimbursements 619 7,680

Prepaid insurance 1,693 2,681

Receivable for insurance proceeds 6,098 2,828

Prepaid expenses and other assets 11,615 11,327

1 unchanged sentence

$ 239,264 244,944

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.

Unsecured bank credit facilities, net of debt issuance costs decreased $98,667,000 during the three months ended March 31, 2023, mainly due to repayments of $241,845,000 and new debt issuance costs incurred during the period, partially offset by borrowings of $143,872,000 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 $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.

Unsecured debt, net of debt issuance costs increased $34,546,000 during the three months ended March 31, 2023, primarily due to the closing of a $100,000,000 senior unsecured term loan in January and the amortization of debt issuance costs, partially offset by the repayment of a $65,000,000 term loan in March 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 $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 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.

Accounts payable and accrued expenses increased $20,656,000 during the three months ended March 31, 2023.

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

September 30,

2023 December 31,

13 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.

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

Other liabilities increased $5,174,000 during the three months ended March 31, 2023.

A summary of the Company’s Other liabilities follows:

September 30,

2023 December 31,

8 unchanged sentences

Interest rate swap liabilities 4,120 1,981

Tenant improvement cost liabilities 1,816 2,796

Other liabilities 834 1,586

1 unchanged sentence

$ 88,840 83,666

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;

(ii) the issuance of common stock under the Company’s continuous common equity offering program (as discussed in Liquidity and Capital Resources) ;

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

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.

Additional paid-in capital increased $103,955,000 during the three months ended March 31, 2023, primarily due to the issuance of common stock under the Company’s continuous common equity offering program (as discussed in Liquidity and Capital Resources) and activity related to stock-based compensation (as discussed in Note 16 in the Notes to Consolidated Financial Statements).

For the three months ended March 31, 2023, Distributions in excess of earnings increased $10,724,000 as a result of dividends on common stock of $55,414,000 exceeding Net Income Attributable to EastGroup Properties, Inc.

Common Stockholders of $44,690,000.

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.

Accumulated other comprehensive income decreased $10,262,000 during the three months ended March 31, 2023.

The decrease 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.

RESULTS OF OPERATIONS

Net Income Attributable to EastGroup Properties, Inc.

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.

Common Stockholders for the three months ended March 31, 2023 was $44,690,000 ($1.02 per basic and diluted share), compared to $63,580,000 ($1.54 per basic and diluted share) for the same period in 2022.

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

• 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 $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;

• EastGroup recognized Gains on sales of real estate investments of $4,809,000 ($0.11 per diluted share) and $30,352,000 ($0.73 per diluted share) during the three months ended March 31, 2023 and 2022, respectively.

• Interest expense increased by $4,915,000 ($0.11 per share) during the three months ended March 31, 2023, as compared to the same period of 2022.

• Depreciation and amortization expense increased by $4,673,000 ($0.11 per diluted share) during the three months ended March 31, 2023, as compared to the same period in 2022.

• PNOI increased by $15,894,000 ($0.36 per diluted share), or 19.3%, for the three months ended March 31, 2023, as compared to the same period in 2022.

PNOI increased $7,695,000 from newly developed and value-add properties, $4,628,000 from same property operations and $4,039,000 from 2022 acquisitions;

PNOI decreased $367,000 from operating properties sold in 2022 and 2023.

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 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.

Lease termination fee income was $55,000 and $1,394,000 for the three month periods ended March 31, 2023 and 2022, respectively.

The Company recorded net reserves for uncollectible rent of $369,000 and net recoveries of uncollectible rent of $106,000 for the three months ended March 31, 2023 and 2022, respectively.

Straight-lining of rent increased PNOI by $3,481,000 and $2,440,000 for the three months ended March 31, 2023 and 2022, respectively.

• During the three months ended March 31, 2023, EastGroup recognized a gain on casualties and involuntary conversion of $1,027,000 ($0.02 per diluted share).

There were no gains on casualties and involuntary conversions during the three months ended March 31, 2022.

EastGroup entered into 18 leases with certain rent concessions on 1,196,000 square feet during the three months ended March 31, 2023, with total rent concessions of $3,168,000 over the lives of the leases.

During the same period of 2022, the Company entered into 30 leases with certain rent concessions on 1,340,000 square feet with total rent concessions of $2,079,000 over the lives of the leases.

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 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 September 30, 2022).

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 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 September 30, 2022).

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:

The Company’s percentage of leased square footage for the operating portfolio was 98.7% at March 31, 2023, compared to 98.8% at March 31, 2022.

Occupancy for the Company’s operating portfolio was 97.9% at both March 31, 2023 and 2022.

Same property average occupancy for the three months ended March 31, 2023, was 98.7% compared to 97.4% for the same period of 2022.

The same property average rental rate was $7.45 per square foot for the three months ended March 31, 2023, compared to $6.90 per square foot for the same period of 2022.

Interest expense increased $4,915,000 for the three months ended March 31, 2023, compared to the same period in 2022.

The following table presents the components of Interest expense for the three months ended March 31, 2023 and 2022:

Three Months Ended

September 30, Nine Months Ended September 30,

2023 2022 Increase

(Decrease) 2022 2021 Increase

(In thousands)

12 unchanged sentences

(excluding amortization of debt issuance costs)

20 365 (345) 69 1,478 (1,409)

Amortization of debt issuance costs - unsecured debt 239 146 93

5 unchanged sentences

(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 $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

September 30, Nine Months Ended September 30,

The Company’s variable rate interest expense increased by $720,000 for the three months ended March 31, 2023, as compared to the same period in 2022 primarily due to an increase in the Company’s weighted average variable interest rates on its unsecured bank credit facilities, partially offset by a decrease in average borrowings, as shown in the following table:

Three Months Ended March 31,

2023 2022 Increase

(Decrease) 2022 2021 Increase

(In thousands, except rates of interest)

3 unchanged sentences

5.32 % 0.94 %

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 as of September 30, 2022 are shown in the following table:

The Company’s fixed rate interest expense increased by $5,686,000 for the three months ended March 31, 2023, as compared to the same period in 2022 as a result of the unsecured debt and secured debt activity described below.

Interest expense from fixed rate unsecured debt increased by $5,595,000 during the three months ended March 31, 2023, as compared to the same period in 2022.

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

The details of the unsecured debt obtained in 2022 and 2023 as of March 31, 2023 are shown in the following table:

NEW UNSECURED DEBT IN 2022 AND 2023

Effective Interest Rate Date Obtained Maturity Date Amount

Effectively Fixed Interest Rate Date Obtained Maturity Date Amount

(In thousands)

4 unchanged sentences

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

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

$75 Million Senior Unsecured Term Loan (3)

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

$75 Million Senior Unsecured Notes 4.90% 10/12/2022 10/12/2033 75,000

$75 Million Senior Unsecured Notes 4.95% 10/12/2022 10/12/2034 75,000

$100 Million Senior Unsecured Term Loan (4)

2 unchanged sentences

4.05% $ 625,000

(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 September 30, 2022.

(1) The interest rate on this unsecured term loan is comprised of Term SOFR plus 140 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 Term SOFR rate to a fixed interest rate, providing the Company an effectively fixed interest rate on the term loan of 3.06% as of March 31, 2023.

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 September 30, 2022.

(2) The interest rate on this unsecured term loan is comprised of Term SOFR plus 95 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.

(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.

(3) The interest rate on this unsecured term loan is comprised of Term SOFR plus 95 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.

(4) The interest rate on this unsecured term loan is comprised of Term SOFR plus 135 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;

and also by the repayment of the following unsecured debt during 2021 and 2022:

The increase in interest expense from the new unsecured debt was partially offset by the repayment of the following unsecured debt during 2022 and 2023:

UNSECURED DEBT REPAID IN 2022 AND 2023

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2.70% $ 140,000

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 $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 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.

The details of the secured debt repaid in 2021 are shown in the following table:

SECURED DEBT REPAID IN 2021

Interest Rate Date Repaid Payoff Amount

(In thousands)

Colorado Crossing Distribution Center, Interstate Warehouse 1-3, Rojas Commerce Park, Steele Creek Commerce Park 1 & 2, Venture Warehouses and World Houston Int’l Business Ctr 3, 4 & 6-9 4.75% 03/08/2021 $ 40,841

Arion Business Park 18, Beltway Crossing Business Park 6 & 7, Commerce Park Center 2 & 3, Concord Distribution Center, Interstate Warehouse 5-7, Lakeview Business Center, Ridge Creek Distribution Center 2, Southridge Commerce Park 4 & 5 and World Houston Int’l Business Ctr 32 4.09% 10/07/2021 33,090

Weighted Average/Total Amount for 2021

4.45% $ 73,931

Also during 2022, the Company assumed a $60,000,000 loan in the acquisition of operating properties and development land, which was repaid with no penalty during the same period.

EastGroup did not obtain or repay any other secured debt during 2022 and 2023.

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

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.

Capitalized interest increased $1,491,000 for the three months ended March 31, 2023, as compared to the same period of 2022, due to increased borrowing rates and changes in development spending.

Depreciation and amortization expense increased $4,673,000 for the three months ended March 31, 2023, as compared to the same period in 2022, primarily due to the operating properties acquired by the Company in 2022 and the properties transferred from Development and value-add properties in 2022 and 2023, partially offset by operating properties sold in 2022 and 2023.

Gain on sales of real estate investments , which includes gains on the sales of operating properties, decreased $25,543,000 for the three months ended March 31, 2023, as compared to the same period in 2022.

The Company’s 2022 and 2023 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 nine months ended September 30, 2022 and 2021 were as follows:

Three Months Ended

September 30, Nine Months Ended September 30,

Real estate improvements for EastGroup’s operating properties for the three months ended March 31, 2023 and 2022 were as follows:

Three Months Ended March 31,

Estimated Useful Life 2023 2022

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

Nine Months Ended September 30,

Three Months Ended March 31,

(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 nine months ended September 30, 2022 and 2021 were as follows:

Three Months Ended

September 30, Nine Months Ended September 30,

Capitalized leasing costs for the three months ended March 31, 2023 and 2022 were as follows:

Three Months Ended March 31,

Estimated Useful Life 2023 2022

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

Nine Months Ended September 30,

Three Months Ended March 31,

(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 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 in the first quarter of 2022, and the Company recorded a gain on the sale in the three months ended March 31, 2022.

The Company did not classify any properties as held for sale as of March 31, 2023 and December 31, 2022.

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.

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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 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.

The Company sold an operating property during the three months ended March 31, 2023, as shown in the table below.

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

The gains and losses on sales are included in Gain on sales of real estate investments .

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 nine months ended September 30, 2022 and the year ended December 31, 2021 follows:

The Company did not consider its sale in 2023 to be a disposal 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 three months ended March 31, 2023 and the year ended December 31, 2022 follows:

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

(In square feet) (In thousands)

World Houston 23 Houston, TX 125,000 03/31/2023 $ 9,327 4,518 4,809

Metro Business Park Phoenix, AZ 189,000 01/06/2022 $ 32,851 5,880 26,971

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

Jetport Commerce Park Tampa, FL 284,000 11/09/2021 $ 44,260 5,401 38,859

(1) Cypress Creek Business Park is located on a ground lease.

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 nine months ended September 30, 2021.

The table above includes sales of operating properties.

During the three months ended March 31, 2023, the Company also sold a 2.0 acre parcel of land in Forth Worth, TX, for $1,550,000 and recognized a gain on the sale of $81,000.

The gains on sales of non-operating real estate are included in Other on the Consolidated Statements of Income and Comprehensive Income.

RECENT ACCOUNTING PRONOUNCEMENTS

EastGroup has evaluated all ASUs recently released by the FASB through the date the financial statements were issued and determined that ASU 2020-04, Reference Rate Reform (Topic 848):

EastGroup has evaluated all FASB ASUs recently released by the FASB through the date the financial statements were issued and determined that the following ASUs apply to the Company.

ASU 2020-04, Reference Rate Reform (Topic 848):

Facilitation of the Effects of Reference Rate Reform on Financial Reporting , applies to the Company.

See Note 14 in the Notes to Consolidated Financial Statements for the Company’s evaluation of ASU 2020-04.

Also, in December 2022, the FASB issued ASU 2022-06, Deferral of the Sunset Date of Topic 848 (“ASU 2022-06”) which was issued to defer the sunset date of Topic 848 to December 31, 2024.

ASU 2022-06 is effective immediately for all companies.

ASU 2022-06 had no impact on the Company’s consolidated financial statements for the three months ended March 31, 2023.

See Note 14 in the Consolidated Financial Statements for further evaluation of these ASUs.

LIQUIDITY AND CAPITAL RESOURCES

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

Net cash provided by operating activities was $93,461,000 for the three months ended March 31, 2023.

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

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and net proceeds from sales of real estate investments.

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 Company distributed $55,173,000 in common stock dividends during the three months ended March 31, 2023.

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

the construction and development of properties;

capital improvements at various properties;

leasing commissions;

and purchases of real estate.

and leasing commissions.

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.

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.

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 September 30, 2022 and December 31, 2021.

September 30,

The Company expects liquidity sources and needs in the coming year to be consistent in nature with those for the three months ended March 31, 2023.

As of March 31, 2023, the Company was contractually obligated to pay the dividend declared in March 2023, which was paid in April 2023.

An amount for dividends payable of $56,193,000 was included in Accounts payable and accrued expenses at March 31, 2023, which includes dividends payable on unvested restricted stock of $983,000, which are subject to continued service and will be paid upon vesting in future periods.

Total debt at March 31, 2023 and December 31, 2022 is detailed below.

2023 December 31,

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(2) These loans have a fixed interest rate or an effectively fixed interest rate due to interest rate swaps.

Until June 29, 2021, EastGroup had $350 million and $45 million unsecured bank credit facilities with margins over LIBOR of 100 basis points, facility fees of 20 basis points and maturity dates of July 30, 2022.

The Company amended and restated these credit facilities on June 29, 2021, expanding their capacities to $425 million and $50 million, respectively, as detailed below.

The Company’s $425 million unsecured bank credit facility is with a group of nine banks and has a maturity date of July 30, 2025.

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 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 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.

Until January 10, 2023, EastGroup had $425,000,000 and $50,000,000 unsecured bank credit facilities with margins over LIBOR of 77.5 basis points, facility fees of 15 basis points and maturity dates of July 30, 2025.

The Company amended and restated these credit facilities effective January 10, 2023, expanding the total capacity on its unsecured bank credit facilities from $475,000,000 to $675,000,000 and replacing LIBOR with SOFR as the benchmark interest rate.

The Company’s $625,000,000 unsecured bank credit facility, which was increased in January 2023 by $200,000,000 from $425,000,000, is with a group of 11 banks and has a maturity date of July 30, 2025.

The credit facility contains options for two six-month extensions (at the Company's election) and an additional $125,000,000 accordion (with agreement by all parties).

The interest rate on each tranche is reset on a monthly basis and as of March 31, 2023, was SOFR plus 76.5 basis points with an annual facility fee of 15 basis points.

As of March 31, 2023, the Company had $55,000,000 of variable rate borrowings on this unsecured bank credit facility with a weighted average interest rate of 5.682%.

The Company has a standby letter of credit of $67,000 pledged on this facility, which reduces borrowing capacity under the credit facility.

The Company's $50,000,000 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 $625,000,000 facility are exercised.

The interest rate is reset on a daily basis and as of March 31, 2023, was SOFR plus 76.5 basis points with an annual facility fee of 15 basis points.

As of March 31, 2023, the interest rate was 5.745% on a balance of $17,027,000.

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

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This favorable pricing level will be retained provided that the Company’s consolidated leverage ratio, as defined in the applicable agreements, remains less than 32.5%.

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.

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

This sustainability metric is evaluated annually and was achieved for the year ended December 31, 2022, which effectively reduced the margin on the unsecured bank credit facilities during 2023 by one basis point from 77.5 to 76.5 basis points.

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The Company may also access the public debt market in the future as a means to raise capital.

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, 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 September 30, 2022) based on the Company’s senior unsecured long-term debt rating.

In January 2023, the Company closed a $100,000,000 senior unsecured term loan with a seven-year term and interest only payments, which bears interest at the annual rate of SOFR plus an applicable margin (1.35% as of March 31, 2023) 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 5.27%.

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

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.

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, 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.

In March 2021, the ICE Benchmark Administration, the administrator of LIBOR, announced its intention to cease publication of certain LIBOR settings after 2021, while continuing to publish overnight and one-, three-, six-, and twelve-month U.S.

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.

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 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.

We expect that all LIBOR settings relevant to us will cease to be published or will no longer be representative after June 30, 2023.

As a result, any of our LIBOR-based borrowings that extend beyond such date will need to be converted to a replacement rate.

Certain risks may arise in connection with transitioning contracts to SOFR or any other alternative variable rate, including any resulting value transfer that may occur.

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

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.

The Company is continuously monitoring and evaluating the related risks, which include interest on loans and amounts received and paid on derivative instruments.

These risks arise in connection with transitioning contracts to a new alternative rate, including any resulting value transfer that may occur.

The value of loans or derivative instruments indexed to LIBOR could also be impacted if LIBOR is limited or discontinued as interest rates may be adversely affected.

While we expect LIBOR to be available in substantially its current form until June 30, 2023, it is possible that LIBOR will become unavailable prior to that point.

This could result, for example, if sufficient banks decline to make submissions to the LIBOR administrator.

In that case, the risks associated with the transition to an alternative reference rate will be accelerated and magnified.

On December 20, 2019, EastGroup entered into sales agreements (the “December 2019 Sales Agreements”) with each of BNY Mellon Capital Markets, LLC;

On March 31, 2023, EastGroup repaid a $65,000,000 senior unsecured term loan with a total effectively fixed interest rate of 2.31%.

The loan, which was scheduled to mature on April 1, 2023, was repaid with no penalty.

On December 16, 2022, EastGroup entered into sales agreements with each of Robert W.

Incorporated;

BNY Mellon Capital Markets, LLC;

BofA Securities, Inc.;

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Regions Securities LLC;

and Wells Fargo Securities, LLC in connection with the establishment of a new continuous common equity offering program pursuant to which the Company may sell shares of its common stock with an aggregate gross sales price of up to $750,000,000 from time to time.

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.

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 nine months ended September 30, 2022.

Ramirez & Company, Inc.;

TD Securities (USA) LLC;

and Wells Fargo Securities, LLC in connection with the establishment of a continuous common equity offering program pursuant to which the Company may sell shares of its common stock with an aggregate gross sales price of up to $750,000,000 from time to time.

As of April 26, 2023, the Company has sold an aggregate of 821,034 shares of common stock with gross proceeds of $134,245,000 under the sales agency financing agreements, and EastGroup may offer and sell additional shares of its common stock with an aggregate gross sales price of up to $615,755,000 through the sales agents.

During the three months ended March 31, 2023, EastGroup issued and sold, and subsequently settled the issuance of, 652,909 shares of common stock under its continuous common equity offering program at a weighted average price of $163.55 per share with gross proceeds to the Company of $106,782,000.

The Company incurred offering-related costs of $1,461,000 during the three months, resulting in net proceeds to the Company of $105,321,000.

On March 30 and 31, 2023, the Company sold 168,125 shares of common stock under its continuous common equity program at a weighted average price of $163.35 per share with gross proceeds to the Company of $27,463,000.

These shares were deemed to be issued and outstanding upon settlement in April 2023.

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, 2022, did not materially change during the three months ended March 31, 2023.

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