EASTGROUP PROPERTIES INC 10-Q

ITEM 1. FINANCIAL STATEMENTS. EASTGROUP PROPERTIES, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA) (UNAUDITED) March 31, 2024 December 31, 2023 ASSETS Real estate properties $ 4,927,921 4,853,548 Development and value-add properties 670,250 639,647 5,598,171 5,493,195 Less accumulated depreciation ( 1,299,905 ) ( 1,273,723 ) 4,298,266 4,219,472 Unconsolidated investment 7,816 7,539 Cash and cash equivalents 15,625 40,263 Other assets 255,298 251,939 TOTAL ASSETS $ 4,577,005 4,519,213 LIABILITIES AND EQUITY LIABILITIES Unsecured bank credit facilities, net of debt issuance costs $ ( 1,281 ) ( 1,520 ) Unsecured debt, net of debt issuance costs 1,676,573 1,676,347 Accounts payable and accrued expenses 155,255 146,337 Other liabilities 87,099 89,415 Total Liabilities 1,917,646 1,910,579 EQUITY Stockholders’ Equity: Common shares; $ 0.0001 par value; 70,000,000 shares authorized; 48,010,613 shares issued and outstanding at March 31, 2024 and 47,700,432 at December 31, 2023 5 5 Excess shares; $ 0.0001 par value; 30,000,000 shares authorized; zero shares issued — — Additional paid-in capital 2,997,210 2,949,907 Distributions in excess of earnings ( 368,954 ) ( 366,473 ) Accumulated other comprehensive income 30,782 24,888 Total Stockholders’ Equity 2,659,043 2,608,327 Noncontrolling interest in joint ventures 316 307 Total Equity 2,659,359 2,608,634 TOTAL LIABILITIES AND EQUITY $ 4,577,005 4,519,213 See accompanying Notes to Consolidated Financial Statements (unaudited). -4- EASTGROUP PROPERTIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME (IN THOUSANDS, EXCEPT PER SHARE DATA) (UNAUDITED) Three Months Ended March 31, 2024 2023 REVENUES Income from real estate operations $ 154,074 133,964 Other revenue 150 1,061 154,224 135,025 EXPENSES Expenses from real estate operations 43,003 36,186 Depreciation and amortization 45,169 41,014 General and administrative 6,681 5,204 Indirect leasing costs 177 140 95,030 82,544 OTHER INCOME (EXPENSE) Interest expense ( 10,061 ) ( 13,025 ) Gain on sales of real estate investments 8,751 4,809 Other 774 439 NET INCOME 58,658 44,704 Net income attributable to noncontrolling interest in joint ventures ( 14 ) ( 14 ) NET INCOME ATTRIBUTABLE TO EASTGROUP PROPERTIES, INC. COMMON STOCKHOLDERS 58,644 44,690 Other comprehensive income (loss) — interest rate swaps 5,894 ( 10,262 ) TOTAL COMPREHENSIVE INCOME $ 64,538 34,428 BASIC PER COMMON SHARE DATA FOR NET INCOME ATTRIBUTABLE TO EASTGROUP PROPERTIES, INC. COMMON STOCKHOLDERS Net income attributable to common stockholders $ 1.23 1.02 Weighted average shares outstanding — Basic 47,860 43,751 DILUTED PER COMMON SHARE DATA FOR NET INCOME ATTRIBUTABLE TO EASTGROUP PROPERTIES, INC. COMMON STOCKHOLDERS Net income attributable to common stockholders $ 1.22 1.02 Weighted average shares outstanding — Diluted 47,961 43,823 See accompanying Notes to Consolidated Financial Statements (unaudited). -5- EASTGROUP PROPERTIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA) (UNAUDITED) For the three months ended March 31, 2024: Common Shares Additional Paid-In Capital Distributions in Excess of Earnings Accumulated Other Comprehensive Income Noncontrolling Interest in Joint Ventures Total BALANCE, DECEMBER 31, 2023 $ 5 2,949,907 ( 366,473 ) 24,888 307 2,608,634 Net income — — 58,644 — 14 58,658 Net unrealized change in fair value of interest rate swaps — — — 5,894 — 5,894 Common dividends declared — $ 1.27 per share — — ( 61,125 ) — — ( 61,125 ) Stock-based compensation, net of forfeitures — 4,147 — — — 4,147 Issuance of 272,342 shares of common stock, common stock offering, net of expenses — 49,294 — — — 49,294 Withheld 33,381 shares of common stock to satisfy tax withholding obligations in connection with the vesting of restricted stock — ( 6,125 ) — — — ( 6,125 ) Withheld 68 shares of common stock to satisfy tax withholding obligations in connection with the issuance of common stock — ( 13 ) — — — ( 13 ) Net distributions to noncontrolling interest — — — — ( 67 ) ( 67 ) Contributions from noncontrolling interest — — — — 62 62 BALANCE, MARCH 31, 2024 $ 5 2,997,210 ( 368,954 ) 30,782 316 2,659,359 For the three months ended March 31, 2023: Common Shares Additional Paid-In Capital Distributions in Excess of Earnings Accumulated Other Comprehensive Income Noncontrolling Interest in Joint Ventures Total BALANCE, DECEMBER 31, 2022 $ 4 2,251,521 ( 334,898 ) 36,371 441 1,953,439 Net income — — 44,690 — 14 44,704 Net unrealized change in fair value of interest rate swaps — — — ( 10,262 ) — ( 10,262 ) Common dividends declared — $ 1.25 per share — — ( 55,414 ) — — ( 55,414 ) Stock-based compensation, net of forfeitures — 3,477 — — — 3,477 Issuance of 652,909 shares of common stock, common stock offering, net of expenses — 105,321 — — — 105,321 Withheld 31,254 shares of common stock to satisfy tax withholding obligations in connection with the vesting of restricted stock — ( 4,836 ) — — — ( 4,836 ) Withheld 46 shares of common stock to satisfy tax withholding obligations in connection with the issuance of common stock — ( 7 ) — — — ( 7 ) Net distributions to noncontrolling interest — — — — ( 40 ) ( 40 ) BALANCE, MARCH 31, 2023 $ 4 2,355,476 ( 345,622 ) 26,109 415 2,036,382 See accompanying Notes to Consolidated Financial Statements (unaudited). -6- EASTGROUP PROPERTIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (IN THOUSANDS) (UNAUDITED) Three Months Ended March 31, 2024 2023 OPERATING ACTIVITIES Net income $ 58,658 44,704 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 45,169 41,014 Stock-based compensation expense 3,507 2,784 Gain on sales of real estate investments ( 8,751 ) ( 4,809 ) Gain on sales of non-operating real estate ( 222 ) ( 81 ) Gain on involuntary conversion and business interruption claims — ( 1,027 ) Changes in operating assets and liabilities: Accrued income and other assets 4,485 1,005 Accounts payable, accrued expenses and prepaid rent 13,851 9,674 Other 203 197 NET CASH PROVIDED BY OPERATING ACTIVITIES 116,900 93,461 INVESTING ACTIVITIES Development and value-add properties ( 57,771 ) ( 64,112 ) Purchases of real estate ( 54,859 ) — Real estate improvements ( 14,829 ) ( 15,777 ) Net proceeds from sales of real estate investments and non-operating real estate 17,397 10,765 Leasing commissions ( 6,295 ) ( 7,921 ) Changes in accrued development costs ( 7,204 ) 12,271 Changes in other assets and other liabilities 329 ( 49 ) NET CASH USED IN INVESTING ACTIVITIES ( 123,232 ) ( 64,823 ) FINANCING ACTIVITIES Proceeds from unsecured bank credit facilities 19,564 143,872 Repayments on unsecured bank credit facilities ( 19,564 ) ( 241,845 ) Proceeds from unsecured debt — 100,000 Repayments on unsecured debt — ( 65,000 ) Repayments on secured debt — ( 24 ) Debt issuance costs ( 15 ) ( 1,631 ) Distributions paid to stockholders (not including dividends accrued) ( 61,442 ) ( 55,173 ) Proceeds from common stock offerings 49,364 105,716 Common stock offering related costs ( 70 ) ( 395 ) Other ( 6,143 ) ( 4,824 ) NET CASH USED IN FINANCING ACTIVITIES ( 18,306 ) ( 19,304 ) INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS ( 24,638 ) 9,334 CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 40,263 56 CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 15,625 9,390 SUPPLEMENTAL CASH FLOW INFORMATION Cash paid for interest, net of amounts capitalized of $ 4,853 and $ 3,735 for 2024 and 2023, respectively $ 3,788 7,756 Cash paid for operating lease liabilities 688 569 See accompanying Notes to Consolidated Financial Statements (unaudited). -7- EASTGROUP PROPERTIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (1) BASIS OF PRESENTATION The accompanying unaudited financial statements of EastGroup Properties, Inc. (“EastGroup” or “the Company”) have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In management’s opinion, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. The financial statements should be read in conjunction with the financial statements contained in the Company’s annual report on Form 10-K for the year ended December 31, 2023 and the notes thereto. (2) PRINCIPLES OF CONSOLIDATION The consolidated financial statements include the accounts of EastGroup, its wholly owned subsidiaries and the investee of any joint ventures in which the Company has a controlling interest. As of March 31, 2024 and December 31, 2023, EastGroup had a 95 % controlling interest in a joint venture arrangement owning 6.5 acres of land in San Diego, known by the Company as Miramar Land. During the year ended December 31, 2023, a joint venture, in which EastGroup owns a 99.5 % interest, acquired 29.3 acres of land in Denver, known by the Company as Arista 36 Business Park 1-3. As of March 31, 2024 and December 31, 2023, EastGroup continued to hold a controlling interest in these two joint venture arrangements. The Company records 100% of the assets, liabilities, revenues and expenses of the buildings and land held in joint ventures with the noncontrolling interests provided for in accordance with the joint venture agreements. The equity method of accounting is used for the Company’s 50 % undivided tenant-in-common interest in Industry Distribution Center 2. All significant intercompany transactions and accounts have been eliminated in consolidation. (3) USE OF ESTIMATES The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses during the reporting period and to disclose material contingent assets and liabilities at the date of the financial statements. Actual results could differ from those estimates. (4) LEASE REVENUE The Company’s primary source of revenue is rental income from business distribution space. The table below presents the components of Income from real estate operations for the three months ended March 31, 2024 and 2023: Three Months Ended March 31, 2024 2023 (In thousands) Lease income — operating leases $ 114,200 100,696 Variable lease income (1) 39,874 33,268 Income from real estate operations $ 154,074 133,964 (1) Primarily includes tenant reimbursements for real estate taxes, insurance and common area maintenance. (5) REAL ESTATE PROPERTIES EastGroup has one reportable segment – industrial properties, consistent with the Company’s manner of internal reporting, measurement of operating results and allocation of the Company’s resources. The Company reviews long-lived assets for impairment whenever events or changes in circumstances indicate the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to future undiscounted net cash flows (including estimated future expenditures necessary to substantially complete the asset) expected to be generated by the asset. If the carrying amount of an asset exceeds its estimated future cash flows, an impairment charge is recognized for the amount by which the carrying amount of the asset exceeds the fair value of the asset. During the three month periods ended March 31, 2024 and 2023, the Company did not identify any impairment charges which should be recorded. -8- EASTGROUP PROPERTIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) Depreciation of buildings and other improvements is computed using the straight-line method over estimated useful lives of generally 40 years for buildings and 3 to 15 years for improvements. Building improvements are capitalized, while maintenance and repair expenses are charged to expense as incurred. Significant renovations and improvements that improve or extend the useful life of the assets are capitalized. Depreciation expense was $ 37,205,000 and $ 33,846,000 for the three months ended March 31, 2024 and 2023, respectively. The Company’s Real estate properties and Development and value-add properties at March 31, 2024 and December 31, 2023 were as follows: March 31, 2024 December 31, 2023 (In thousands) Real estate properties: Land $ 835,795 814,364 Buildings and building improvements 3,382,163 3,336,615 Tenant and other improvements 692,300 684,573 Right of use assets — Ground leases (operating) (1) 17,663 17,996 Development and value-add properties (2) 670,250 639,647 5,598,171 5,493,195 Less accumulated depreciation ( 1,299,905 ) ( 1,273,723 ) $ 4,298,266 4,219,472 (1) EastGroup applies the principles of Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 842, Leases, and its related Accounting Standards Updates (“ASUs”) to account for its ground leases, which are classified as operating leases. The related operating lease liabilities for ground leases are included in Other liabilities on the Consolidated Balance Sheets. (2) Value-add properties are defined in Note 6. (6) DEVELOPMENT AND VALUE-ADD PROPERTIES Development and value-add properties consists of properties in lease-up, under construction, and prospective development (primarily land). Value-add properties are defined as properties that are either acquired but not stabilized or can be converted to a higher and better use. Acquired properties meeting either of the following two conditions are considered value-add properties: (1) Less than 75% leased as of the acquisition date (or will be less than 75% occupied within one year of acquisition date based on near term lease roll), or (2) 20% or greater of the acquisition cost will be spent to redevelop the property. Costs associated with development (i.e., land, construction costs, interest expense, property taxes and other costs associated with development) are aggregated into the total capitalized costs of the property. Included in these costs are management’s estimates for the portions of internal costs (primarily personnel costs) deemed related to such development activities. The internal costs are allocated to specific development projects based on development activity. As the property becomes occupied, depreciation commences on the occupied portion of the building, and costs are capitalized only for the portion of the building that remains vacant. The Company transfers properties from Development and value-add propertie s to Real estate properties as follows: (1) for development properties, at the earlier of 90% occupancy or one year after completion of the shell construction, and (2) for value-add properties, at the earlier of 90% occupancy or one year after acquisition. Upon the earlier of 90% occupancy or one year after completion of the shell construction/value-add acquisition date, capitalization of development costs, including interest expense, property taxes and internal personnel costs, ceases and depreciation commences on the entire property (excluding the land). (7) REAL ESTATE PROPERTY ACQUISITIONS AND ACQUIRED INTANGIBLES Upon acquisition of real estate properties, EastGroup applies the principles of FASB ASC 805, Business Combinations. The FASB Codification provides a framework for determining whether transactions should be accounted for as acquisitions of assets or businesses. Under the guidance, companies are required to utilize an initial screening test to determine whether substantially all of the fair value of the gross assets acquired is concentrated in a single identifiable asset or a group of similar identifiable assets; if so, the set is not a business. Criteria considered in grouping similar assets include geographic location, market and operational risks and the physical characteristics of the assets. EastGroup determined that its real estate property acquisitions in 2023 and the first three months of 2024 are considered to be acquisitions of groups of similar identifiable assets; -9- EASTGROUP PROPERTIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) therefore, the acquisitions are not considered to be acquisitions of a business. As a result, the Company capitalized acquisition costs related to its 2023 and 2024 acquisitions. The FASB Codification also provides guidance on how to properly determine the allocation of the purchase price among the individual components of both the tangible and intangible assets based on their respective fair values. The allocation to tangible assets (land, building and improvements) is based upon management’s determination of the value of the property as if it were vacant using discounted cash flow models. Land is valued using comparable land sales specific to the applicable market, provided by a third party. The Company determines whether any financing assumed is above or below market based upon comparison to similar financing terms for similar properties. The cost of the properties acquired may be adjusted based on indebtedness assumed from the seller that is determined to be above or below market rates. The purchase price is also allocated among the following categories of intangible assets: 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. 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 terms of the existing leases. Amortization of above and below market lease intangibles, which increased rental income by $ 607,000 and $ 599,000 for the three months ended March 31, 2024 and 2023, respectively, is included in Income from real estate operations . Amortization expense for in-place lease intangibles, which was $ 1,926,000 and $ 1,962,000 for the three months ended March 31, 2024 and 2023, respectively, is included in Depreciation and amortization . During the three months ended March 31, 2024, EastGroup acquired the following property: REAL ESTATE PROPERTY ACQUIRED IN 2024 Location Size Date Acquired Cost (1) (Square feet) (In thousands) Operating property acquired (2)(3) Spanish Ridge Industrial Park Las Vegas, NV 231,000 01/23/2024 $ 54,859 (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. (2) Operating properties are defined as stabilized real estate properties (land including buildings and improvements) in the Company’s operating portfolio; included in Real estate properties on the Consolidated Balance Sheets. (3) Excludes acquired development land as discussed below. There were no value-add acquisitions during the three months ended March 31, 2024. -10- EASTGROUP PROPERTIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) The following table summarizes the allocation of the total consideration for the acquired assets and assumed liabilities in connection with the acquisition identified in the table above which was acquired during the three months ended March 31, 2024. ACQUIRED ASSETS AND ASSUMED LIABILITIES IN 2024 Cost (In thousands) Land $ 18,855 Buildings and building improvements 31,003 Tenant and other improvements 2,208 Total real estate properties acquired 52,066 In-place lease intangibles (1) 2,714 Above market lease intangibles (1) 121 Below market lease intangibles (2) ( 42 ) Total assets acquired, net of liabilities assumed $ 54,859 (1) In-place lease intangibles and above market lease intangibles are each included in Other assets on the Consolidated Balance Sheets. These costs are amortized over the remaining terms of the associated leases in place at the time of acquisition. (2) Below market lease intangibles are included in Other liabilities on the Consolidated Balance Sheets. These costs are amortized over the remaining terms of the associated leases in place at the time of acquisition. The leases in the property acquired during the three months ended March 31, 2024 had a weighted average remaining lease term at acquisition of approximately 6.2 years. Also during the three months ended March 31, 2024, EastGroup purchased 34.3 acres of development land in Atlanta for $ 3,302,000 . During 2023, EastGroup acquired the following properties: REAL ESTATE PROPERTIES ACQUIRED IN 2023 Location Size Date Acquired Cost (1) (Square feet) (In thousands) Operating properties acquired (2)(3) Craig Corporate Center Las Vegas, NV 156,000 04/18/2023 $ 34,365 Blue Diamond Business Park Las Vegas, NV 254,000 09/05/2023 52,973 McKinney Logistics Center Dallas, TX 193,000 10/02/2023 25,739 Park at Myatt Nashville, TN 171,000 11/03/2023 30,793 Pelzer Point Commerce Center 1 Greenville, SC 213,000 12/21/2023 21,246 Total operating property acquisitions 987,000 $ 165,116 (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. (2) Operating properties are defined as stabilized real estate properties (land including buildings and improvements) in the Company’s operating portfolio; included in Real estate properties on the Consolidated Balance Sheets. (3) Excludes acquired development land as discussed below. There were no value-add acquisitions during the year ended December 31, 2023. -11- EASTGROUP PROPERTIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) The following table summarizes the allocation of the total consideration for the acquired assets and assumed liabilities in connection with the acquisitions identified in the table above which were acquired during the year ended December 31, 2023. ACQUIRED ASSETS AND ASSUMED LIABILITIES IN 2023 Cost (In thousands) Land $ 44,676 Buildings and building improvements 111,082 Tenant and other improvements 4,346 Total real estate properties acquired 160,104 In-place lease intangibles (1) 7,242 Below market lease intangibles (2) ( 2,230 ) Total assets acquired, net of liabilities assumed $ 165,116 (1) In-place lease intangibles and above market lease intangibles are each included in Other assets on the Consolidated Balance Sheets. These costs are amortized over the remaining terms of the associated leases in place at the time of acquisition. (2) Below market lease intangibles are included in Other liabilities on the Consolidated Balance Sheets. These costs are amortized over the remaining terms of the associated leases in place at the time of acquisition. The leases in the properties acquired during the year ended December 31, 2023 had a weighted average remaining lease term at acquisition of approximately 8.0 years. Also during 2023, EastGroup purchased 328.3 acres of development land in seven markets for $ 70,664,000 . The Company periodically reviews the recoverability of goodwill (at least annually) and the recoverability of other intangibles (on a quarterly basis) for possible impairment. No impairment of goodwill or other intangibles existed during the three month periods ended March 31, 2024 and 2023. (8) REAL ESTATE SOLD AND HELD FOR SALE The Company considers a real estate property to be held for sale when it meets the criteria established under ASC 360, Property, Plant and Equipment, including when it is probable that the property will be sold within a year. Real estate properties held for sale are reported at the lower of the carrying amount or fair value less estimated costs to sell and are not depreciated while they are held for sale. The Company did not classify any properties as held for sale as of March 31, 2024 and December 31, 2023. In accordance with ASC 360 and ASC 205, Presentation of Financial Statements , the Company would report a disposal of a component of an entity or a group of components of an entity in discontinued operations if the disposal represents a strategic shift that has (or will have) a major effect on an entity’s operations and financial results when the component or group of components meets the criteria to be classified as held for sale or when the component or group of components is disposed of by sale or other than by sale. In addition, the Company would provide additional disclosures about both discontinued operations and the disposal of an individually significant component of an entity that does not qualify for discontinued operations presentation in the financial statements. EastGroup performs an analysis of properties sold to determine whether the sales qualify for discontinued operations presentation. Results of operations and gains and losses on sales for properties sold are reported in continuing operations on the Consolidated Statements of Income and Comprehensive Income. The gains and losses on sales of operating properties are included in Gain on sales of real estate investments. -12- EASTGROUP PROPERTIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) A summary of Gain on sales of real estate investments for the three months ended March 31, 2024 and the year ended December 31, 2023 follows: REAL ESTATE PROPERTIES SOLD Location Size Date Sold Net Sales Price Basis Recognized Gain (Square feet) (In thousands) 2024 Interchange Business Park and Metro Airport Commerce Center Jackson, MS 159,000 03/05/2024 $ 13,614 4,863 8,751 2023 World Houston 23 Houston, TX 125,000 03/31/2023 $ 9,327 4,518 4,809 Ettie Business Center San Francisco, CA 29,000 11/20/2023 11,638 8,845 2,793 Los Angeles Corporate Center Los Angeles, CA 77,000 12/29/2023 16,006 5,643 10,363 Total for 2023 231,000 $ 36,971 19,006 17,965 The table above includes sales of operating properties. During the three months ended March 31, 2024, the Company also sold 3.9 acres of land in San Francisco for $ 4,000,000 and recognized a gain on the sale of $ 222,000 . During the year ended December 31, 2023, the Company sold 11.9 acres of land in Houston and Fort Worth for $ 4,750,000 and recognized gains on the sales of $ 446,000 . The gains on sales of non-operating real estate are included in Other on the Consolidated Statements of Income and Comprehensive Income. The Company did not consider its sales in 2024 or 2023 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. (9) OTHER ASSETS A summary of the Company’s Other assets follows: March 31, 2024 December 31, 2023 (In thousands) Leasing costs (principally commissions) $ 163,486 158,741 Accumulated amortization of leasing costs ( 59,955 ) ( 57,646 ) Leasing costs (principally commissions), net of accumulated amortization 103,531 101,095 Acquired in-place lease intangibles 38,851 39,600 Accumulated amortization of acquired in-place lease intangibles ( 17,858 ) ( 19,395 ) Acquired in-place lease intangibles, net of accumulated amortization 20,993 20,205 Acquired above market lease intangibles 603 482 Accumulated amortization of acquired above market lease intangibles ( 343 ) ( 318 ) Acquired above market lease intangibles, net of accumulated amortization 260 164 Straight-line rents receivable 74,495 72,360 Accounts receivable 6,197 9,984 Interest rate swap assets 31,005 27,366 Right of use assets — Office leases (operating) 2,674 2,828 Goodwill 990 990 Escrow deposits and prepaid costs for pending transactions 1,219 745 Prepaid insurance 3,462 7,208 Receivable for insurance proceeds 1,294 1,425 Prepaid expenses and other assets 9,178 7,569 Total Other assets $ 255,298 251,939 -13- EASTGROUP PROPERTIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (10) DEBT The Company’s debt is detailed below: March 31, 2024 December 31, 2023 (In thousands) Unsecured bank credit facilities — variable rate, carrying amount $ — — Unamortized debt issuance costs ( 1,281 ) ( 1,520 ) Unsecured bank credit facilities, net of debt issuance costs ( 1,281 ) ( 1,520 ) Unsecured debt — fixed rate, carrying amount (1) 1,680,000 1,680,000 Unamortized debt issuance costs ( 3,427 ) ( 3,653 ) Unsecured debt, net of debt issuance costs 1,676,573 1,676,347 Total unsecured debt, net of debt issuance costs $ 1,675,292 1,674,827 (1) These loans have a fixed interest rate or an effectively fixed interest rate due to interest rate swaps. The Company has a $ 625,000,000 unsecured bank credit facility with a group of 11 banks; the facility 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, 2024, was Secured Overnight Financing Rate (“SOFR”) plus 76.5 basis points with an annual facility fee of 15 basis points. As of March 31, 2024, the Company had no variable rate borrowings on this unsecured bank credit facility and an interest rate of 6.194 %. The Company has two standby letters of credit totaling $ 2,655,000 pledged on this facility, which reduces borrowing capacity under the credit facility. The Company also has a $ 50,000,000 unsecured bank credit facility with 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, 2024, was SOFR plus 77.5 basis points with an annual facility fee of 15 basis points. As of March 31, 2024, the interest rate was 6.215 % with no outstanding balance. For both facilities, the margin and facility fee are subject to changes in the Company's credit ratings. Although the Company’s current credit rating is Baa2, given the strength of the Company’s key credit metrics, initial pricing for the credit facilities is based on the BBB+/Baa1 credit ratings level. 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 $ 625,000,000 facility also includes 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 years ended December 31, 2023 and 2022, which allowed for the interest rate reduction in each of the years subsequent to achieving the metric. The margin was effectively reduced on this unsecured bank credit facility by one basis point, from 77.5 to 76.5 basis points. Scheduled principal payments on long-term debt, including Unsecured debt, net of debt issuance costs (not including Unsecured bank credit facilities, net of debt issuance costs ), as of March 31, 2024, are as follows: Years Ending December 31, (In thousands) 2024 — Remainder of year $ 170,000 2025 145,000 2026 140,000 2027 175,000 2028 160,000 2029 and beyond 890,000 Total $ 1,680,000 -14- EASTGROUP PROPERTIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (11) ACCOUNTS PAYABLE AND ACCRUED EXPENSES A summary of the Company’s Accounts payable and accrued expenses follows: March 31, 2024 December 31, 2023 (In thousands) Property taxes payable $ 26,627 9,508 Development costs payable 22,623 29,487 Retainage payable 14,652 14,992 Real estate improvements and capitalized leasing costs payable 8,194 5,275 Interest payable 14,287 8,493 Dividends payable 62,076 62,393 Other payables and accrued expenses 6,796 16,189 Total Accounts payable and accrued expenses $ 155,255 146,337 (12) OTHER LIABILITIES A summary of the Company’s Other liabilities follows: March 31, 2024 December 31, 2023 (In thousands) Security deposits $ 38,877 37,102 Prepaid rent and other deferred income 19,471 20,070 Operating lease liabilities — Ground leases 18,481 18,758 Operating lease liabilities — Office leases 2,726 2,882 Acquired below market lease intangibles 10,640 11,451 Accumulated amortization of below market lease intangibles ( 4,786 ) ( 5,006 ) Acquired below market lease intangibles, net of accumulated amortization 5,854 6,445 Interest rate swap liabilities 223 2,478 Other liabilities 1,467 1,680 Total Other liabilities $ 87,099 89,415 (13) COMPREHENSIVE INCOME Total Comprehensive Income is comprised of net income plus all other changes in equity from non-owner sources and is presented on the Consolidated Statements of Income and Comprehensive Income. The components of Accumulated other comprehensive income are presented in the Company’s Consolidated Statement of Changes in Equity and are summarized below. See Note 14 for information regarding the Company’s interest rate swaps. Three Months Ended March 31, 2024 2023 (In thousands) ACCUMULATED OTHER COMPREHENSIVE INCOME: Balance at beginning of period $ 24,888 36,371 Other comprehensive income (loss) - interest rate swaps 5,894 ( 10,262 ) Balance at end of period $ 30,782 26,109 -15- EASTGROUP PROPERTIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (14) DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES The Company is exposed to certain risks arising from both its business operations and economic conditions. The Company principally manages its exposures to a wide variety of business and operational risks through management of its core business activities. The Company manages economic risk, including interest rate, liquidity and credit risk primarily by managing the amount, sources and duration of its debt funding and, to a limited extent, the use of derivative instruments. Specifically, the Company has entered into derivative instruments to manage exposures that arise from business activities that result in the payment of future known and uncertain cash amounts, the value of which are determined by interest rates. The Company’s derivative instruments, described below, are used to manage differences in the amount, timing and duration of the Company’s known or expected cash payments principally related to certain of the Company’s borrowings. The Company’s objective in using interest rate derivatives is to change variable interest rates to fixed interest rates by using interest rate swaps. Interest rate swaps designated as cash flow hedges involve the receipt of variable-rate amounts from a counterparty in exchange for the Company making fixed-rate payments over the term of the agreements without exchange of the underlying notional amount. As of March 31, 2024, the Company had seven interest rate swaps outstanding, all of which are used to hedge the variable cash flows associated with unsecured loans. All of the Company’s interest rate swaps convert the related loans’ SOFR rate components to effectively fixed interest rates, and the Company has concluded that each of the hedging relationships is highly effective. The changes in the fair value of derivatives designated and qualifying as cash flow hedges are recorded in Other comprehensive income (loss) and are subsequently reclassified into earnings through Interest expense as interest payments are made or received on the Company’s variable-rate debt in the period that the hedged forecasted transaction affects earnings. The Company estimates that an additional $ 15,649,000 will be reclassified from Other comprehensive income (loss) as a decrease to Interest expense over the next twelve months. The Company’s valuation methodology for over-the-counter (“OTC”) derivatives is to discount cash flows based on SOFR market data. Uncollateralized or partially-collateralized trades include appropriate economic adjustments for funding costs and credit risk. The Company calculates its derivative valuations using mid-market prices. As of March 31, 2024 and December 31, 2023, the Company had the following outstanding interest rate derivatives that are designated as cash flow hedges of interest rate risk: Notional Value of Interest Rate Derivatives March 31, 2024 December 31, 2023 (In thousands) Interest Rate Swap $ 100,000 100,000 Interest Rate Swap 100,000 100,000 Interest Rate Swap 50,000 50,000 Interest Rate Swap 100,000 100,000 Interest Rate Swap 75,000 75,000 Interest Rate Swap 50,000 50,000 Interest Rate Swap 100,000 100,000 -16- EASTGROUP PROPERTIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) The table below presents the fair value of the Company’s derivative financial instruments as well as their classification on the Consolidated Balance Sheets as of March 31, 2024 and December 31, 2023. See Note 18 for additional information on the fair value of the Company’s interest rate swaps. Derivatives As of March 31, 2024 Derivatives As of December 31, 2023 Balance Sheet Location Fair Value Balance Sheet Location Fair Value (In thousands) Derivatives designated as cash flow hedges: Interest rate swap assets Other assets $ 31,005 Other assets $ 27,366 Interest rate swap liabilities Other liabilities 223 Other liabilities 2,478 The table below presents the effect of the Company’s derivative financial instruments on the Consolidated Statements of Income and Comprehensive Income for the three months ended March 31, 2024 and 2023: Three Months Ended March 31, 2024 2023 (In thousands) DERIVATIVES IN CASH FLOW HEDGING RELATIONSHIPS Interest Rate Swaps: Amount of income (loss) recognized in Other comprehensive income (loss) on derivatives $ 10,640 ( 6,197 ) Amount of (income) reclassified from Accumulated other comprehensive income into Interest expense ( 4,746 ) ( 4,065 ) See Note 13 for additional information on the Company’s Accumulated other comprehensive income resulting from its interest rate swaps. Derivative financial agreements expose the Company to credit risk in the event of non-performance by the counterparties under the terms of the interest rate hedge agreements. The Company believes it minimizes the credit risk by transacting with financial institutions the Company regards as credit-worthy. The Company has an agreement with its derivative counterparties containing a provision stating that the Company could be declared in default on its derivative obligations if the Company defaults on any of its indebtedness, including default where repayment of the indebtedness has not been accelerated by the lender. As of March 31, 2024, we had not posted any collateral related to these agreements and were not in breach of any of the provisions of these agreements. If the Company had breached any of these provisions, it would be required to settle its obligations under the agreements at their termination value. (15) EARNINGS PER SHARE The Company applies ASC 260, Earnings Per Share , which requires companies to present basic and diluted earnings per share (“EPS”). Basic EPS represents the amount of earnings for the period attributable to each share of common stock outstanding during the reporting period. The Company’s basic EPS is calculated by dividing Net Income Attributable to EastGroup Properties, Inc. Common Stockholders by the weighted average number of common shares outstanding. The weighted average number of common shares outstanding does not include any potentially dilutive securities or any unvested restricted shares of common stock. These unvested restricted shares, although classified as issued and outstanding, are considered forfeitable until the restrictions lapse and will not be included in the basic EPS calculation until the shares are vested. Diluted EPS represents the amount of earnings for the period attributable to each share of common stock outstanding during the reporting period and to each share that would have been outstanding assuming the issuance of common shares for all dilutive potential common shares outstanding during the reporting period. The Company calculates diluted EPS by dividing Net Income Attributable to EastGroup Properties, Inc. Common Stockholders by the weighted average number of common shares outstanding plus the effect of any dilutive securities including shares issuable under forward equity sale agreements and unvested restricted stock using the treasury stock method. Any anti-dilutive securities are excluded from the diluted EPS calculation. -17- EASTGROUP PROPERTIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) Reconciliation of the numerators and denominators in the basic and diluted EPS computations is as follows: Three Months Ended March 31, 2024 2023 (In thousands) BASIC EPS COMPUTATION FOR NET INCOME ATTRIBUTABLE TO EASTGROUP PROPERTIES, INC. COMMON STOCKHOLDERS Numerator — net income attributable to common stockholders $ 58,644 44,690 Denominator — weighted average shares outstanding — Basic 47,860 43,751 DILUTED EPS COMPUTATION FOR NET INCOME ATTRIBUTABLE TO EASTGROUP PROPERTIES, INC. COMMON STOCKHOLDERS Numerator — net income attributable to common stockholders $ 58,644 44,690 Denominator: Weighted average shares outstanding — Basic 47,860 43,751 Effect of dilutive securities 101 72 Weighted average shares outstanding — Diluted 47,961 43,823 (16) EQUITY OFFERINGS Underwriting commissions and offering costs incurred in connection with common stock offerings and at-the-market equity offering programs have been reflected as a reduction of Additional paid-in capital . Under relevant accounting guidance, sales of common stock under forward equity sale agreements are not deemed to be liabilities, and furthermore, meet the derivatives and hedging guidance scope exception to be accounted for as equity instruments based on the following assessment: (i) none of the agreements’ exercise contingencies were based on observable markets or indices besides those related to the market for our own stock price and operations; and (ii) none of the settlement provisions precluded the agreements from being indexed to our own stock. On October 25, 2023, we established an at-the-market common stock offering program pursuant to which we are able to sell, from time to time, shares of our common stock having an aggregate gross sales price of up to $ 750,000,000 (the “Current 2023 ATM Program”). The Current 2023 ATM Program replaces our previous $ 750,000,000 ATM program, which was established on December 16, 2022, under which we had sold shares of our common stock having an aggregate gross sales price of $ 464,305,000 through October 25, 2023. In connection with the Current 2023 ATM Program, we may sell shares of our common stock directly through sales agents or through certain financial institutions acting as forward purchasers whereby, at our discretion, the forward counterparties may borrow from third parties and subsequently sell shares of our common stock. The use of a forward equity sale agreement allows us to lock in a share price on the sale of shares of our common stock but defer settling and receiving the proceeds from the sale of shares until a later date. Additionally, the forward price that we expect to receive upon settlement of an agreement will be subject to adjustment for (i) a floating interest rate factor equal to a specified daily rate less a spread, (ii) the forward purchaser’s stock borrowing costs and (iii) scheduled dividends during the term of the agreement. Direct Common Stock Issuance Activity The following table presents the common stock issuance activity sold directly through sales agents pursuant to the Company's ATM programs: Period Common Stock Issued (1) Weighted Average Price Net Proceeds (In shares) (Per share) (In thousands) Three months ended March 31, 2024 — $ — $ — Twelve months ended December 31, 2023 4,094,896 170.77 691,478 (1) Excludes shares of common stock sold on a forward basis as described in the following paragraphs. -18- EASTGROUP PROPERTIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) Forward Equity Offerings During the three months ended March 31, 2024, EastGroup entered into forward equity sale agreements with certain financial institutions acting as forward purchasers under our Current 2023 ATM Program with respect to 286,671 shares of common stock with an initial weighted average forward price of $ 181.95 per share. The Company did not receive any proceeds from the sale of common shares by the forward purchasers at the time it entered into forward equity sale agreements. During the year ended December 31, 2023, EastGroup entered into forward equity sale agreements with respect to 406,041 shares of common stock with an initial weighted average forward price of $ 183.92 per share. The Company did not receive any proceeds from the sale of common shares by the forward purchasers at the time we entered into forward equity sale agreements. During the three months ended March 31, 2024, the Company settled outstanding forward equity sale agreements that were previously entered into under our Current 2023 ATM Program by issuing 272,342 shares of common stock in exchange for net proceeds of approximately $ 49,294,000 . (17) STOCK-BASED COMPENSATION EastGroup applies the provisions of ASC 718, Compensation - Stock Compensation, to account for its stock-based compensation plans. ASC 718 requires that the compensation cost relating to share-based payment transactions be recognized in the financial statements and that the cost be measured on the fair value of the equity or liability instruments issued. The cost for market-based awards and awards that only require service are expensed on a straight-line basis over the requisite service periods. The cost for performance-based awards is determined using the graded vesting attribution method which recognizes each separate vesting portion of the award as a separate award on a straight-line basis over the requisite service period. This method accelerates the expensing of the award compared to the straight-line method. For awards with a performance condition, compensation expense is recognized when the performance condition is considered probable of achievement. The total compensation expense for service and performance based awards is based upon the fair market value of the shares on the grant date. The grant date fair value for awards that have been granted and are subject to a future market condition (total shareholder return) are determined using a Monte Carlo simulation pricing model developed to specifically accommodate the unique features of the awards. During the restricted period for awards no longer subject to contingencies, the Company accrues dividends and holds the certificates for the shares; however, the employee can vote the shares. Share certificates and dividends are delivered to the employee as they vest. Forfeitures of awards are recognized as they occur. The Compensation Committee of the Company’s Board of Directors (the “Committee”) approves long-term and annual equity compensation awards for the Company’s executive officers. The vesting periods of the Company’s restricted stock plans vary, as determined by the Committee. Restricted stock is granted to executive officers subject to both continued service and the satisfaction of certain annual performance goals and multi-year market conditions as determined by the Committee. The long-term compensation awards include components based on the Company’s total shareholder return over the upcoming three years and the employee’s continued service as of the vesting dates. The total shareholder return component is subject to bright-line tests that compare the Company’s total shareholder return to the Nareit Equity Index and to the member companies of the Nareit industrial index. The Company begins recognizing expense for these awards based on the grant date fair value of the awards which is determined using a simulation pricing model developed to specifically accommodate the unique features of the award. These market-based awards are expensed on a straight-line basis over the requisite service period (75% vests at the end of the three-year performance period and 25% vests the following year). The long-term awards subject only to continuing employment are expensed on a straight-line basis over the requisite service period (25% vests in each of the following four years). The annual equity compensation awards include components based on certain annual Company performance measures and individual annual performance goals over the upcoming year. The certain Company performance measures for 2024 are: (i) funds from operations (“FFO”) per share, (ii) cash same property net operating income change, (iii) debt-to-EBITDAre ratio, and (iv) fixed charge coverage. The Company begins recognizing expense for its estimate of the shares that could be earned pursuant to these awards on the grant date; the expense is adjusted to estimated performance levels during the performance period and to actual upon the determination of the awards. The shares are expensed using the graded vesting attribution method which recognizes each separate vesting portion of the award as a separate award on a straight-line basis over the requisite service period (34% vests at the end of the one year performance period and 33% vests in each of the following two years). Any shares issued pursuant to the individual annual performance goals are determined by the Committee in its discretion -19- EASTGROUP PROPERTIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) following the performance period. The Company begins recognizing the expense for the shares on the grant date and will expense on a straight-line basis over the remaining service period (34% vests at the end of the one year performance period and 33% vests in each of the following two years). Equity compensation is also awarded to the Company’s non-executive officers and directors, which are subject to service only conditions and expensed on a straight-line basis over the required service period. The total compensation expense is based upon the fair market value of the shares on the grant date. The Committee has adopted an Equity Award Retirement Policy (the “retirement policy”) which allows for accelerated vesting of unvested shares for retirement-eligible employees (defined as employees who meet certain age and years of service requirements). In order to qualify for accelerated vesting upon retirement, the eligible employees must provide required notification under the retirement policy and must retire from the Company. The Company has adjusted its stock-based compensation expense to accelerate the recognition of expense for retirement-eligible employees. Stock-based compensation cost for employees was $ 3,976,000 for the three months ended March 31, 2024, of which $ 640,000 was capitalized as part of the Company’s development costs. For the three months ended March 31, 2023, stock-based compensation cost for employees was $ 3,252,000 , of which $ 693,000 was capitalized as part of the Company’s development costs. Stock-based compensation expense for directors was $ 171,000 for the three months ended March 31, 2024, and $ 225,000 for the same period in 2023. Following is a summary of the total restricted shares granted, forfeited and delivered (vested) to participants with the related weighted average grant date fair value share prices. Of the shares that vested in the three months ended March 31, 2024, the Company withheld 33,381 shares to satisfy the tax obligations for those participants who elected this option as permitted under the applicable equity plan. As of the grant dates, the fair value of shares that were granted during the three months ended March 31, 2024 was $ 8,891,000 . As of the vesting dates, the aggregate fair value of shares that vested during the three months ended March 31, 2024 was $ 14,330,000 . Award Activity: Three Months Ended March 31, 2024 Shares Weighted Average Grant Date Fair Value Unvested at beginning of period 84,564 $ 153.78 Granted (1) (2) 71,088 125.07 Forfeited — — Vested ( 78,008 ) 124.15 Unvested at end of period 77,644 $ 157.27 (1) Includes shares granted in prior years for which performance conditions have been satisfied and the number of shares have been determined. (2) Does not include the restricted shares that may be earned if the performance goals established in 2022 and 2023 for long-term performance and in 2024 for annual and long-term performance are achieved. Depending on the actual level of achievement of the goals at the end of the open performance periods, the number of shares earned could range from zero to 135,501 . (18) FAIR VALUE OF FINANCIAL INSTRUMENTS ASC 820, Fair Value Measurement, defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. ASC 820 also provides guidance for using fair value to measure financial assets and liabilities. The FASB Codification requires disclosure of the level within the fair value hierarchy in which the fair value measurements fall, including measurements using quoted prices in active markets for identical assets or liabilities (Level 1), quoted prices for similar instruments in active markets or quoted prices for identical or similar instruments in markets that are not active (Level 2) and significant valuation assumptions that are not readily observable in the market (Level 3). -20- EASTGROUP PROPERTIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) The following table presents the carrying amounts and estimated fair values of the Company’s financial instruments in accordance with ASC 820 at March 31, 2024 and December 31, 2023. March 31, 2024 December 31, 2023 Carrying Amount (1) Fair Value Carrying Amount (1) Fair Value (In thousands) Financial Assets: Cash and cash equivalents $ 15,625 15,625 40,263 40,263 Interest rate swap assets 31,005 31,005 27,366 27,366 Financial Liabilities: Unsecured debt (2) 1,680,000 1,572,339 1,680,000 1,548,655 Interest rate swap liabilities 223 223 2,478 2,478 (1) Carrying amounts shown in the table are included on the Consolidated Balance Sheets under the indicated captions, except as explained below. (2) Carrying amounts and fair values shown in the table exclude debt issuance costs (see Note 10 for additional information). The following methods and assumptions were used to estimate the fair value of each class of financial instruments: • Cash and cash equivalents: The Company considers all highly liquid investments with a maturity of three months or less when purchased to be cash equivalents. The carrying amounts approximate fair value due to the short maturity of those instruments. • Interest rate swap assets (included in Other assets on the Consolidated Balance Sheets): The instruments are recorded at fair value based on models using inputs, such as interest rate yield curves, SOFR swap curves, observable for substantially the full term of the contract (Level 2 input). See Note 14 for additional information on the Company’s interest rate swaps. • Unsecured debt: The fair value of the Company’s unsecured debt is estimated by discounting expected cash flows at the rates currently offered to the Company for debt of the same remaining maturities, as advised by the Company’s bankers (Level 2 input), excluding the effects of debt issuance costs. • Interest rate swap liabilities (included in Other liabilities on the Consolidated Balance Sheets): The instruments are recorded at fair value based on models using inputs, such as interest rate yield curves, SOFR swap curves, observable for substantially the full term of the contract (Level 2 input). See Note 14 for additional information on the Company’s interest rate swaps. (19) RISKS AND UNCERTAINTIES The state of the overall economy can significantly impact the Company’s operational performance and thus impact its financial position. Should EastGroup experience a significant decline in operational performance, it may affect the Company’s ability to make distributions to its shareholders, service debt or meet other financial obligations. (20) LEGAL MATTERS The Company is not presently involved in any material litigation nor, to its knowledge, is any material litigation threatened against the Company or its properties, other than routine litigation arising in the ordinary course of business. (21) RECENT ACCOUNTING PRONOUNCEMENTS EastGroup has evaluated all ASUs recently released by the FASB through the date the financial statements were issued and determined that the following ASUs apply to the Company. In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures . The primary provision of the ASU is to require disclosure of incremental segment information, such as significant segment expenses regularly provided to the Company’s chief decision makers, the title and position of such individuals, and the manner in which the individuals use such information in assessing segment performance and the allocation of resources. EastGroup has one reportable segment – industrial properties, consistent with the Company’s manner of internal reporting, measurement of operating results and allocation of the Company’s resources. Entities with a single reportable segment are required to provide the disclosures required by the amendment and existing segment disclosure requirements in accordance with -21- EASTGROUP PROPERTIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) Topic 280. ASU 2023-07 is effective for fiscal years beginning after December 15, 2023 and interim periods within fiscal years beginning after December 15, 2024, with early adoption permitted. Amendments should be applied retrospectively to all prior periods presented in the financial statements. EastGroup does not expect the adoption to have a material impact on its financial condition, results of operations or disclosures. (22) SUBSEQUENT EVENTS Subsequent to March 31, 2024, EastGroup settled outstanding forward equity sale agreements under our Current 2023 ATM Program by issuing 133,699 shares of common stock in exchange for net proceeds of approximately $ 24,496,000 . -22-