EASTGROUP PROPERTIES INC 10-Q

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. The following discussion and analysis of results of operations and financial condition should be read in conjunction with the consolidated financial statements and notes thereto appearing elsewhere in this Quarterly Report on Form 10-Q. 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 Securities Exchange Act of 1934, as amended (the “Exchange Act”)) that reflect EastGroup Properties, Inc.’s (the “Company” or “EastGroup”) 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 or the negative of such words, although not all forward-looking statements contain such words. 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. These factors include, among other things, those discussed below. 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 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): • international, national, regional and local economic conditions and conflicts; • 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 ongoing uncertainty around interest rates, tariffs and general economic conditions; • disruption in supply and delivery chains; • increased construction and development costs, including as a result of tariffs or the recent inflationary environment; • acquisition and development risks, including failure of such acquisitions and development projects to perform in accordance with our projections or to materialize at all; • 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; • natural disasters such as fires, floods, tornadoes, hurricanes, earthquakes or other extreme weather events, which may or may not be directly caused by longer-term shifts in climate patterns, could destroy buildings and damage regional economies; • the availability of financing and capital, increases in or long-term elevated interest rates, and our 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; • credit risk in the event of non-performance by the counterparties to our interest rate swaps; • how and when pending forward equity sales may settle; • lack of or insufficient amounts of insurance; • litigation, including costs associated with prosecuting or defending claims and any adverse outcomes; • our ability to attract and retain key personnel or lack of adequate succession planning; -24- • risks related to the failure, inadequacy or interruption of our data security systems and processes, including security breaches through cyber attacks; • pandemics, epidemics or other public health emergencies, such as the coronavirus pandemic; • potentially catastrophic events such as acts of war, civil unrest and terrorism; and • environmental liabilities, including costs, fines or penalties that may be incurred due to necessary remediation of contamination of properties presently owned or previously owned by us. The risks included herein are not exhaustive, and investors should be aware that there may be other factors that could adversely affect our business and financial performance. New risk factors emerge from time to time and it is not possible for our management to predict all risk factors, nor can we assess the impact of all risk factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements. Given these risks and uncertainties, investors should not place undue reliance on forward-looking statements as a prediction of actual results. All forward-looking statements should be read in light of the risks identified in Part I, Item 1A. Risk Factors within the Company’s Annual Report on Form 10-K for the year ended December 31, 2024, as such factors may be updated from time to time in the Company’s periodic filings and current reports filed with the Securities and Exchange Commission. OVERVIEW 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). The Company develops, acquires and operates distribution facilities, the majority of which are clustered around major transportation features in supply constrained submarkets in high-growth markets. The Company’s core markets are in the states of Texas, Florida, California, Arizona and North Carolina. As of September 30, 2025, EastGroup owned 546 industrial properties in 12 states. As of that same date, the Company’s portfolio, including development projects and value-add properties in lease-up and under construction, included approximately 64,400,000 square feet consisting of 507 business distribution properties containing 58,800,000 square feet, 18 bulk distribution properties containing 4,700,000 square feet, and 21 business service properties containing 900,000 square feet. During the nine months ended September 30, 2025, economic uncertainty and stock market volatility continued due to a number of factors, including persistent inflation, interest rate uncertainty, concerns about tariffs, supply chain or trade disruptions and geopolitical conflict. While these factors did not have a significant adverse impact on EastGroup during the nine months ended September 30, 2025, they may adversely impact the Company in the future. 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. The Company continues to monitor inflation and interest rates, as well as the uncertainty resulting from the overall regulatory and economic environment. EastGroup believes its current operating cash flow and unsecured bank credit facilities provide the capacity to fund the operations of the Company, and the Company also believes it can issue common and/or preferred equity and obtain debt financing on currently acceptable terms. During the nine months ended September 30, 2025, EastGroup sold, and subsequently settled the issuance of, 33,120 shares of common stock directly through sales agents under its at-the-market (“ATM”) common stock offering program at a weighted average price of $183.15 per share, providing aggregate net proceeds to the Company of $6,005,000. During the nine months ended September 30, 2025, EastGroup entered into forward equity sale agreements with certain financial institutions acting as forward counterparties under its ATM common stock offering program with respect to 1,063,825 shares of common stock with an initial weighted average forward price of $181.89 per share. The Company did not receive any proceeds from the sale of common shares by the forward counterparties at the time we entered into forward equity sale agreements. Also during the nine months ended September 30, 2025, the Company settled outstanding forward equity sale agreements that were previously entered into by issuing 1,449,078 shares of common stock in exchange for net proceeds of approximately $258,066,000. -25- Additionally, on June 13, 2024, the Company amended its unsecured bank credit facilities to extend the maturity date by three years to July 31, 2028. EastGroup’s financing and equity issuances are further described in Liquidity and Capital Resources . The Company’s primary source of revenue is rental income. During the nine months ended September 30, 2025, EastGroup executed new and renewal leases on 6,997,000 square feet (representing 11.4% of the operating portfolio’s total square footage of 61,375,000). For new and renewal leases signed during the first nine months of 2025, average rental rates increased by 42.1%, 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 $3.60 for the nine months ended September 30, 2025, compared to $3.49 for the same period of 2024, a 3.2% increase. 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 period from January 1, 2024 through September 30, 2025), increased 6.5% for the nine months ended September 30, 2025, as compared to the same period in 2024. EastGroup’s operating portfolio was 96.7% leased and 95.9% occupied as of September 30, 2025, compared to 96.9% and 96.5%, respectively, at September 30, 2024. As of October 22, 2025, the operating portfolio was 96.7% leased and 95.9% occupied. As of September 30, 2025, leases approximating 2.4% of the operating portfolio, based on a percentage of annualized based rent, were scheduled to expire during the remainder of 2025. This percentage was reduced to 1.8% as of October 22, 2025. 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, 2025, EastGroup acquired 171.8 acres of development land in three markets for $83,793,000. The Company also began construction of a redevelopment project and three development projects containing 892,000 square feet in four markets. EastGroup also transferred 10 development projects (2,024,000 square feet) in 7 markets from Development and value-add propertie s to Real estate properties , with costs of $268,626,000 at the date of transfer. As of September 30, 2025, EastGroup’s development and value-add program consisted of 15 projects (3,011,000 square feet) located in 12 markets. The projected total investment for the development projects, which were collectively 8.5% leased as of October 22, 2025, is $436,100,000, of which $137,546,000 remained to be invested as of September 30, 2025. During the nine months ended September 30, 2025, EastGroup acquired operating properties in Dallas and Raleigh, containing 638,000 square feet for $121,965,000. There were no value-add property acquisitions during the period. During the nine months ended September 30, 2025, EastGroup sold a 12,000 square foot operating property in San Francisco, generating gross sales proceeds of $3,573,000. The Company did not recognize a gain or loss on this disposition. The Company typically funds its development and acquisition programs through its $675,000,000 unsecured bank credit facilities (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. In May 2025, Moody’s Ratings affirmed EastGroup’s issuer rating of Baa2 and changed its rating outlook from stable to positive. A security rating is not a recommendation to buy, sell or hold securities and may be subject to revision or withdrawal at any time by the assigning rating agency. Each rating should be evaluated independently of any other rating. For future debt issuances, the Company intends to issue primarily unsecured fixed-rate debt, including variable-rate debt that has been swapped to an effectively fixed rate through the use of interest rate swaps. The Company may also access the public debt or convertible bond markets in the future as a means to raise capital. Investors and industry analysts following the real estate industry primarily utilize two supplemental operating performance measures in analyzing the Company’s operating results: (1) funds from operations (“FFO”) attributable to common stockholders, and (2) property net operating income (“PNOI”). FFO is computed in accordance with standards established by the National Association of Real Estate Investment Trusts, Inc. (“Nareit”). Nareit’s guidance allows preparers an option as it pertains to whether gains or losses on sale, or impairment charges, on real estate assets incidental to a REIT’s business are excluded from the calculation of FFO. EastGroup has made the election to exclude activity related to such assets that are incidental to our business. -26- FFO is calculated as net income (loss) attributable to common stockholders computed in accordance with U.S. generally accepted accounting principles (“GAAP”), excluding gains and losses from sales of real estate property (including other assets incidental to the Company’s business) and impairment losses, adjusted for real estate related depreciation and amortization, and after adjustments for unconsolidated partnerships and joint ventures. FFO is not considered as an alternative to net income (determined in accordance with GAAP) as an indication of the Company’s financial performance, nor is it a measure of the Company’s liquidity or indicative of funds available to provide for the Company’s cash needs, including its ability to make distributions. The Company’s key drivers affecting FFO are changes in PNOI (as discussed below), interest rates, the amount of leverage the Company employs and general and administrative expenses. PNOI is defined as Income from real estate operations less Expenses from real estate operations (including market-based internal management fee expense) plus the Company’s share of income and property operating expenses from its less-than-wholly-owned real estate investments. EastGroup sometimes refers to PNOI from Same Properties as “Same PNOI”; the Company also presents Same PNOI, Excluding Income from Lease Terminations. Same Properties is defined as operating properties owned during the entire current and prior year reporting periods. Properties developed or acquired are excluded until held in the operating portfolio for both the current and prior year reporting periods. Properties sold during the current or prior year reporting periods are also excluded. For the three and nine months ended September 30, 2025, Same Properties includes properties which were included in the operating portfolio for the entire period from January 1, 2024 through September 30, 2025. 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. FFO and PNOI are supplemental industry reporting measurements used to evaluate the performance of the Company’s investments in real estate assets and its operating results. The Company believes that the exclusion of depreciation and amortization in the calculations of PNOI and FFO provides supplemental indicators of the properties’ performance since real estate values have historically risen or fallen with market conditions. PNOI and FFO as calculated by the Company may not be comparable to similarly titled but differently calculated measures for other REITs. Investors should be aware that items excluded from or added back to FFO are significant components in understanding and assessing the Company’s financial performance. 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. -27- 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, 2025 and 2024. Three Months Ended September 30, Nine Months Ended September 30, 2025 2024 2025 2024 (In thousands) NET INCOME $ 66,957 55,194 189,707 169,153 Gain on sales of real estate investments — — — (8,751) Gain on sales of non-operating real estate — — — (222) Interest income (174) (306) (683) (822) Other revenue (47) (15) (1,882) (1,922) Indirect leasing costs 199 159 633 556 Depreciation and amortization 54,131 48,917 159,663 139,749 Company’s share of depreciation from unconsolidated investment 31 32 93 94 Interest expense 7,685 9,871 23,400 29,764 General and administrative expense 5,607 5,154 18,851 16,576 Noncontrolling interest in PNOI of consolidated joint ventures (15) (16) (46) (47) PROPERTY NET OPERATING INCOME (“PNOI”) 134,374 118,990 389,736 344,128 PNOI from 2024 and 2025 acquisitions (8,116) (2,010) (22,135) (4,080) PNOI from 2024 and 2025 development and value-add properties (6,951) (4,338) (18,264) (9,987) PNOI from 2024 and 2025 operating property dispositions — (51) (40) (329) Other PNOI 215 20 928 122 SAME PNOI 119,522 112,611 350,225 329,854 Lease termination fee income from same properties (101) (1,745) (893) (1,957) SAME PNOI, EXCLUDING INCOME FROM LEASE TERMINATIONS $ 119,421 110,866 349,332 327,897 PNOI was calculated as follows for the three and nine months ended September 30, 2025 and 2024. Three Months Ended September 30, Nine Months Ended September 30, 2025 2024 2025 2024 (In thousands) Income from real estate operations $ 182,089 162,861 531,989 474,268 Expenses from real estate operations (48,004) (44,163) (143,127) (131,017) Noncontrolling interest in PNOI of consolidated joint ventures (15) (16) (46) (47) PNOI from 50% owned unconsolidated investment 304 308 920 924 PROPERTY NET OPERATING INCOME (“PNOI”) $ 134,374 118,990 389,736 344,128 Income from real estate operations is comprised of rental income, expense reimbursement pass-through income and other real estate income. Expenses from real estate operations is comprised of property taxes, insurance, utilities, repair and maintenance expenses, management fees and other operating costs. 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). Increases in property operating expenses are fully recoverable under net leases and recoverable to a high degree under modified gross leases. Modified gross leases often include base year amounts, and expense increases over these amounts are recoverable. The Company’s exposure to property operating expenses is primarily due to vacancies and leases for occupied space that limit the amount of expenses that can be recovered. -28- 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, 2025 and 2024. Three Months Ended September 30, Nine Months Ended September 30, 2025 2024 2025 2024 (In thousands, except per share data) NET INCOME ATTRIBUTABLE TO EASTGROUP PROPERTIES, INC. COMMON STOCKHOLDERS $ 66,943 55,180 189,665 169,111 Depreciation and amortization 54,131 48,917 159,663 139,749 Company’s share of depreciation from unconsolidated investment 31 32 93 94 Depreciation and amortization attributable to noncontrolling interest (2) (2) (4) (4) Gain on sales of real estate investments — — — (8,751) Gain on sales of non-operating real estate — — — (222) FFO ATTRIBUTABLE TO COMMON STOCKHOLDERS 121,103 104,127 349,417 299,977 Gain on involuntary conversion and business interruption claims — — (1,763) (1,708) FFO ATTRIBUTABLE TO COMMON STOCKHOLDERS, EXCLUDING GAIN ON INVOLUNTARY CONVERSION AND BUSINESS INTERRUPTION CLAIMS $ 121,103 104,127 347,654 298,269 Net income attributable to common stockholders per diluted share $ 1.26 1.13 3.60 3.49 FFO attributable to common stockholders per diluted share $ 2.27 2.13 6.64 6.19 FFO attributable to common stockholders per diluted share, excluding gain on involuntary conversion and business interruption claims $ 2.27 2.13 6.61 6.16 Diluted shares for earnings per share and funds from operations per share 53,264 48,999 52,624 48,435 The Company analyzes the following performance trends in evaluating the revenues and expenses of the Company: • Net Income Attributable to EastGroup Properties, Inc. Common Stockholders for the three and nine months ended September 30, 2025 was $66,943,000 ($1.26 per basic and diluted share) and $189,665,000 ($3.61 per basic and $3.60 per diluted share), respectively, compared to $55,180,000 ($1.13 per basic and diluted share) and $169,111,000 ($3.50 per basic and $3.49 per diluted share) for the same periods in 2024. See Results of Operations for further analysis. • 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, 2025, FFO was $2.27 per diluted share compared with $2.13 per diluted share for the same period of 2024, an increase of 6.6%. For the nine months ended September 30, 2025, FFO was $6.64 per diluted share compared with $6.19 per diluted share for the same period of 2024, an increase of 7.3%. FFO increased during the three and nine months ended September 30, 2025, as compared to the same periods in 2024, primarily due to the increase in PNOI and the decrease in interest expense, partially offset by an increase in general and administrative expense. • For the three months ended September 30, 2025, PNOI increased by $15,384,000, or 12.9%, as compared to the same period in 2024. PNOI increased $6,911,000 due to same property operations, $6,106,000 due to 2024 and 2025 acquisitions and $2,613,000 due to newly developed and value-add properties; PNOI decreased $51,000 due to operating properties sold in 2024 and 2025. For the nine months ended September 30, 2025, PNOI increased by $45,608,000, or 13.3%, as compared to the same period in 2024. PNOI increased $20,371,000 due to same property operations, $18,055,000 due to 2024 and 2025 acquisitions and $8,277,000 due to newly developed and value-add properties; PNOI decreased $289,000 due to operating properties sold in 2024 and 2025. • The change in Same PNOI represents the PNOI increase or decrease for the same operating properties owned during the entire period from January 1, 2024 through September 30, 2025. Same PNOI, excluding income from lease terminations, increased 7.7% and 6.5% for the three and nine months ended September 30, 2025, respectively, as compared to the same periods in 2024. -29- • 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 and prior year reporting periods (January 1, 2024 through September 30, 2025). Same property average occupancy was 96.6% for the three months ended September 30, 2025, compared to 96.9% for the same period of 2024. Same property average occupancy was 96.3% for the nine months ended September 30, 2025, compared to 97.1% for the same period of 2024. • 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 and prior year reporting periods (January 1, 2024 through September 30, 2025). The same property average rental rate was $8.91 and $8.73 per square foot for the three and nine months ended September 30, 2025, respectively, compared to $8.30 and $8.20 per square foot for the same periods of 2024. • 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, 2025 was 95.9%. Quarter-end occupancy ranged from 96.0% to 96.5% over the previous four quarters ended September 30, 2024 to June 30, 2025. • 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 (4.0% of the operating portfolio’s total square footage) averaged 35.9% for the three months ended September 30, 2025. For the nine months ended September 30, 2025, rental rate increases on new and renewal leases (11.4% of the operating portfolio’s total square footage) averaged 42.1%. FINANCIAL CONDITION EastGroup’s Total Assets were $5,354,755,000 at September 30, 2025, an increase of $277,279,000 from December 31, 2024. Total Liabilities increased $60,789,000 to $1,845,721,000, and Total Equity increased $216,490,000 to $3,509,034,000 during the same period. The following paragraphs explain these changes in additional detail. Assets Real estate properties increased $446,631,000 during the nine months ended September 30, 2025, primarily due to: (i) the transfer of projects from Development and value-add properties to Real estate properties ; (ii) the acquisition of operating properties; (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. The increases were partially offset by the sale of an operating property. During the nine months ended September 30, 2025, EastGroup acquired the following properties: REAL ESTATE PROPERTIES ACQUIRED IN 2025 Location Size Date Acquired Cost (1) (Square feet) (In thousands) Operating properties acquired LifeScience Logistics Center Raleigh, NC 251,000 07/08/2025 $ 47,150 Lumley Logistics Center Raleigh, NC 67,000 07/15/2025 14,174 McKinney Airport Trade Center Dallas, TX 320,000 09/19/2025 60,641 Total operating property acquisitions (2)(3) 638,000 $ 121,965 (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. During the nine months ended September 30, 2025, EastGroup sold a 12,000 square foot operating property in San Francisco, generating gross sales proceeds of $3,573,000. The Company did not recognize a gain or loss on this disposition. -30- During the nine months ended September 30, 2025, the Company made capital improvements of $59,276,000 on existing properties (included in the Real Estate Improvements table under Results of Operations ). Also, the Company incurred costs of $5,759,000 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. Development and value-add properties at September 30, 2025 consisted of projects in lease-up and under construction of $298,554,000 and prospective development (primarily land) of $343,653,000. The Company’s total investment in Development and value-add properties at September 30, 2025 was $642,207,000 compared to $674,472,000 at December 31, 2024. The decrease in Development and value-add properties was primarily due to the transfer of 10 development and value-add projects to Real estate properties during the nine months ended September 30, 2025 with a total investment of $268,626,000 as of the date of transfer. Total capital invested for development during the first nine months of 2025 was $242,121,000, which consisted of improvement costs of $152,569,000 on development and value-add properties, $83,793,000 for new land investments and costs of $5,759,000 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 $1,716,000 and $5,387,000 for the three and nine months ended September 30, 2025, respectively, compared to $1,903,000 and $6,158,000 for the same periods of 2024. The decrease was due to variations in timing and volume of development projects under construction. During the nine months ended September 30, 2025, the Company acquired 171.8 acres of development land in three markets for $83,793,000. Costs associated with these acquisitions are included in the Development and Value-Add Properties table. There were no value-add acquisitions during the nine months ended September 30, 2025. A summary of the Company's Development and Value-Add Properties for the nine months ended September 30, 2025 follows: Actual or Estimated Building Size Cumulative Costs Incurred as of 9/30/2025 Projected Total Costs (Square feet) (In thousands) Lease-up 957,000 $ 113,923 $ 125,000 Under construction 2,054,000 184,631 311,100 Total lease-up and under construction 3,011,000 298,554 $ 436,100 Prospective development (primarily land) 10,867,000 343,653 Total Development and value-add properties as of September 30, 2025 13,878,000 $ 642,207 Total Development and value-add properties transferred to Real estate properties during the nine months ended September 30, 2025 2,024,000 $ 268,626 (1) (1) Represents cumulative costs at the date of transfer. Accumulated depreciation on real estate, development and value-add properties increased $125,361,000 during the nine months ended September 30, 2025, primarily due to depreciation expense of $129,329,000 partially offset by write-offs of assets. Cash and cash equivalents decreased $14,548,000 during the nine months ended September 30, 2025. Refer to the Consolidated Statements of Cash Flows and Liquidity and Capital Resources for further details. Other assets, net increased $3,320,000 during the nine months ended September 30, 2025. See Note 9 in the Notes to Consolidated Financial Statements for further details. Liabilities Unsecured bank credit facilities, net of debt issuance costs increased $45,754,000 during the nine months ended September 30, 2025, mainly due to borrowings of $136,191,000, offset by repayments of $91,191,000, and debt issuance cost activity during the period. The Company’s credit facilities are described in greater detail in Liquidity and Capital Resources . Unsecured debt, net of debt issuance costs decreased $69,497,000 during the nine months ended September 30, 2025, primarily due to the repayment of a $50,000,000 term loan, principal repayments of $20,000,000 on the Company’s senior unsecured -31- notes, and debt issuance cost activity 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 . Accounts payable and accrued expenses increased $82,828,000 during the nine months ended September 30, 2025. Refer to Note 11 in the Notes to Consolidated Financial Statements for further details. Other liabilities increased $1,704,000 during the nine months ended September 30, 2025. Refer to Note 12 in the Notes to Consolidated Financial Statements for further details. Equity Additional paid-in capital increased $270,307,000 during the nine months ended September 30, 2025, primarily due to the issuance of common stock under the Company’s ATM program (as discussed in Note 16 in the Notes to Consolidated Financial Statements) and activity related to stock-based compensation (as discussed in Note 17 in the Notes to Consolidated Financial Statements). Distributions in excess of earnings increased $40,582,000 during the nine months ended September 30, 2025, as a result of dividends on common stock of $230,247,000 exceeding Net Income Attributable to EastGroup Properties, Inc. Common Stockholders of $189,665,000. Accumulated other comprehensive income decreased $13,202,000 during the nine months ended September 30, 2025. 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, 2025 was $66,943,000 ($1.26 per basic and diluted share) and $189,665,000 ($3.61 per basic and $3.60 per diluted share), respectively, compared to $55,180,000 ($1.13 per basic and diluted share) and $169,111,000 ($3.50 per basic and $3.49 per diluted share) for the same periods in 2024. The following paragraphs provide further details with respect to these changes: • PNOI was $134,374,000 ($2.52 per diluted share) for the three months ended September 30, 2025, compared to $118,990,000 ($2.43 per diluted share) during the same period of 2024, which was an increase of $0.09 per diluted share. PNOI increased $6,911,000 due to same property operations, $6,106,000 due to 2024 and 2025 acquisitions and $2,613,000 due to newly developed and value-add properties; PNOI decreased $51,000 due to operating properties sold in 2024 and 2025. Income recognized from straight-lining of rent increased by $1,690,000 for the three months ended September 30, 2025, as compared to the same period of 2024. PNOI was $389,736,000 ($7.41 per diluted share) for the nine months ended September 30, 2025, compared to $344,128,000 ($7.10 per diluted share) during the same period of 2024, which was an increase of $0.31 per diluted share. PNOI increased $20,371,000 due to same property operations, $18,055,000 due to 2024 and 2025 acquisitions and $8,277,000 due to newly developed and value-add properties; PNOI decreased $289,000 due to operating properties sold in 2024 and 2025. Income recognized from straight-lining of rent increased by $4,562,000 for the nine months ended September 30, 2025, as compared to the same period of 2024. • EastGroup did not recognize any gains or losses on operating property dispositions during the three and nine months ended September 30, 2025. The Company had no operating property sales during the three months ended September 30, 2024. The Company recognized Gains on sales of real estate investments of $8,751,000 ($0.18 per diluted share) during the nine months ended September 30, 2024. The Company’s 2024 and 2025 sales transactions are described in Note 8 of the Notes to Consolidated Financial Statements. • Depreciation and amortization expense was $54,131,000 ($1.02 per diluted share) and $48,917,000 ($1.00 per diluted share) during the three months ended September 30, 2025 and 2024, respectively, which was an increase of $0.02 per diluted share. Depreciation and amortization expense was $159,663,000 ($3.03 per diluted share) and $139,749,000 ($2.89 per diluted share) during the nine months ended September 30, 2025 and 2024, respectively, which was an increase of $0.14 per diluted share. The increase is primarily due to the operating properties acquired by the Company in 2024 and 2025 and the properties transferred from Development and value-add properties in 2024 and 2025, partially offset by operating properties sold in 2024 and 2025. -32- • Interest expense recognized was $7,685,000 ($0.14 per diluted share) and $9,871,000 ($0.20 per diluted share) during the three months ended September 30, 2025 and 2024, respectively, which was a decrease of $0.06 per share. Interest expense recognized was $23,400,000 ($0.44 per diluted share) and $29,764,000 ($0.61 per diluted share) during the nine months ended September 30, 2025 and 2024, respectively, which was a decrease of $0.17 per diluted share. Refer to the table below for additional details. • EastGroup recognized gains on involuntary conversion and business interruption claims of $1,763,000 ($0.03 per diluted share) and $1,708,000 ($0.04 per diluted share) during the nine months ended September 30, 2025 and 2024, respectively, which was a decrease of $0.01 per diluted share. There were no gains on involuntary conversion and business interruption claims during the three months ended September 30, 2025 or 2024. Gains on involuntary conversion and business interruption claims are included in Other revenue on the Consolidated Statements of Income and Comprehensive Income. • Weighted average shares outstanding increased by 4,265,000 shares on a diluted basis for the three months ended September 30, 2025, as compared to the same period of 2024. Weighted average shares outstanding increased by 4,189,000 shares on a diluted basis for the nine months ended September 30, 2025, as compared to the same period of 2024. The increase is primarily due to issuance of shares through common stock offerings, as discussed in Liquidity and Capital Resources . EastGroup entered into 36 leases with certain rent concessions on 901,000 square feet during the three months ended September 30, 2025, with total rent concessions of $1,805,000 over the terms of the leases. During the same period of 2024, the Company entered into 33 leases with certain rent concessions on 1,108,000 square feet with total rent concessions of $2,664,000 over the terms of the leases. EastGroup entered into 110 leases with certain rent concessions on 2,988,000 square feet during the nine months ended September 30, 2025, with total rent concessions of $6,601,000 over the terms of the leases. During the same period of 2024, the Company entered into 97 leases with certain rent concessions on 3,762,000 square feet with total rent concessions of $8,462,000 over the terms of the leases. The Company’s percentage of leased square footage for the operating portfolio was 96.7% at September 30, 2025, compared to 96.9% at September 30, 2024. Occupancy for the Company’s operating portfolio at September 30, 2025 was 95.9% compared to 96.5% at September 30, 2024. -33- The following table presents the components of Interest expense for the three and nine months ended September 30, 2025 and 2024: Three Months Ended September 30, Nine Months Ended September 30, 2025 2024 Increase (Decrease) 2025 2024 Increase (Decrease) (In thousands) VARIABLE RATE INTEREST EXPENSE Unsecured bank credit facilities interest — variable rate (excluding amortization of facility fees and debt issuance costs) $ 93 35 58 116 101 15 Amortization of facility fees — Unsecured bank credit facilities 239 254 (15) 720 758 (38) Amortization of debt issuance costs — Unsecured bank credit facilities 264 265 (1) 794 771 23 Total variable rate interest expense 596 554 42 1,630 1,630 — FIXED RATE INTEREST EXPENSE Unsecured debt interest (excluding amortization of debt issuance costs) (1) 12,290 14,006 (1,716) 37,081 42,261 (5,180) Amortization of debt issuance costs — Unsecured debt 188 218 (30) 578 670 (92) Total fixed rate interest expense 12,478 14,224 (1,746) 37,659 42,931 (5,272) Total interest 13,074 14,778 (1,704) 39,289 44,561 (5,272) Less capitalized interest (5,389) (4,907) (482) (15,889) (14,797) (1,092) TOTAL INTEREST EXPENSE $ 7,685 9,871 (2,186) 23,400 29,764 (6,364) (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 $42,000 for the three months ended September 30, 2025, as compared to the same period in 2024. The increase was primarily due to an increase in average borrowings, partially offset by a decrease in the Company’s weighted average variable interest rates, as shown below. The variable rate interest expense was approximately the same for the nine months ended September 30,2025, as compared to the same period in 2024. The following table presents the components of variable rate interest expense for the three and nine months ended September 30, 2025 and 2024: Three Months Ended September 30, Nine Months Ended September 30, 2025 2024 Increase (Decrease) 2025 2024 Increase (Decrease) (In thousands, except rates of interest) Average borrowings on unsecured bank credit facilities — Variable rate $ 7,169 2,175 4,994 2,998 2,133 865 Weighted average variable interest rates (excluding amortization of facility fees and debt issuance costs) 5.17 % 6.32 % 5.19 % 6.30 % The Company’s fixed rate interest expense decreased by $1,746,000 and $5,272,000 for the three and nine months ended September 30, 2025, respectively, as compared to the same periods in 2024, primarily as a result of the unsecured debt activity described below. -34- The following table presents the details of unsecured debt repayments during the nine months ended September 30, 2025 and the year ended December 31, 2024: UNSECURED DEBT REPAID IN 2024 AND 2025 Interest Rate Date Repaid Payoff Amount (In thousands) $50 Million Senior Unsecured Term Loan 4.08% 08/30/2024 $ 50,000 $60 Million Senior Unsecured Notes 3.46% 12/13/2024 60,000 $60 Million Senior Unsecured Notes 3.48% 12/15/2024 60,000 $50 Million Senior Unsecured Term Loan 1.58% 03/18/2025 50,000 $20 Million Senior Unsecured Notes 3.80% 08/28/2025 20,000 Weighted Average Effectively Fixed Interest Rate and Total Payoff Amount for 2024 and 2025 3.23% $ 240,000 In January 2025, the Company refinanced a $100,000,000 senior unsecured term loan, reducing the credit spread by 30 basis points to a total effectively fixed interest rate of 4.97%. The loan, which previously had five years remaining, now has a three-year maturity with two one-year extension options, at the Company's election. EastGroup did not obtain any unsecured debt during 2024 or during the first nine months of 2025. EastGroup’s financing and debt maturities are further described in Liquidity and Capital Resources . Interest costs during the period of construction of real estate properties are capitalized and offset against interest expense. Capitalized interest increased $482,000 and $1,092,000 during the three and nine months ended September 30, 2025, respectively, as compared to the same periods of 2024, due to changes in development activity and spending. Real Estate Improvements Real estate improvements for EastGroup’s operating properties for the three and nine months ended September 30, 2025 and 2024 were as follows: Three Months Ended September 30, Nine Months Ended September 30, Estimated Useful Life 2025 2024 2025 2024 (In thousands) Upgrade on acquisitions 40 years $ 14 1,134 76 1,416 Tenant improvements: New tenants Lease term 6,792 5,952 18,340 14,152 Renewal tenants Lease term 1,054 1,181 3,523 2,411 Building improvements 5-40 years 4,278 2,646 13,509 10,664 Roofs 5-15 years 7,190 4,112 17,211 11,581 Parking lots 3-5 years 525 1,064 3,040 3,312 Other 5 years 723 1,460 3,577 3,647 Total real estate improvements (1) $ 20,576 17,549 59,276 47,183 (1) Reconciliation of Total real estate improvements to Real estate improvements on the Consolidated Statements of Cash Flows: Nine Months Ended September 30, 2025 2024 (In thousands) Total real estate improvements $ 59,276 47,183 Change in real estate property payables (697) 660 Change in construction in progress 4,069 1,444 Real estate improvements on the Consolidated Statements of Cash Flows $ 62,648 49,287 -35- Capitalized Leasing Costs The Company’s leasing costs (principally commissions) are capitalized and included in Other assets, net . 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, 2025 and 2024 were as follows: Three Months Ended September 30, Nine Months Ended September 30, Estimated Useful Life 2025 2024 2025 2024 (In thousands) Development and value-add Lease term $ 1,263 2,271 4,632 6,692 New tenants Lease term 2,306 2,849 9,596 10,652 Renewal tenants Lease term 4,494 3,118 10,721 8,384 Total capitalized leasing costs (1) $ 8,063 8,238 24,949 25,728 Amortization of leasing costs $ 7,055 6,862 20,901 19,024 (1) Reconciliation of Total capitalized leasing costs to Leasing commissions on the Consolidated Statements of Cash Flows: Nine Months Ended September 30, 2025 2024 (In thousands) Total capitalized leasing costs $ 24,949 25,728 Change in leasing commissions payables 1,029 (980) Leasing commissions on the Consolidated Statements of Cash Flows $ 25,978 24,748 LIQUIDITY AND CAPITAL RESOURCES 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, 2025. 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 the short-term bank borrowings. The Company believes its current operating cash flow and unsecured bank credit facilities provide the capacity to fund the operations of the Company. The Company also believes it can obtain debt financing and issue common and/or preferred equity. For future debt issuances, the Company intends to issue primarily unsecured fixed-rate debt, including variable-rate debt that has been swapped to an effectively fixed rate through the use of interest rate swaps. The Company may also access the public debt or convertible bond markets in the future as a means to raise capital. As of September 30, 2025, EastGroup had total immediate liquidity of approximately $630,393,000 comprised of $2,981,000 of cash and cash equivalents and $627,412,000 of availability on unsecured credit facilities. See further details discussed below. Net cash provided by operating activities was $415,986,000 for the nine months ended September 30, 2025. The primary other sources of cash were proceeds from common stock offerings and borrowings on unsecured bank credit facilities. The Company distributed $219,955,000 in common stock dividends during the nine months ended September 30, 2025. Other primary uses of cash were for the construction and development of properties; repayments on unsecured debt and unsecured bank credit facilities; purchases of real estate properties; and capital improvements at various properties. As of September 30, 2025, the Company was contractually obligated to pay the dividend declared in August 2025, which was paid in October 2025. An amount for dividends payable of $84,341,000 was included in Accounts payable and accrued -36- expenses at September 30, 2025, which includes dividends payable on unvested restricted stock of $1,788,000, which are subject to continued service and will be paid upon vesting in future periods. 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 September 30, 2025, are as follows: MATURITY DATES Weighted Average Interest Rate (1) Principal Payments Maturing (In thousands) October 1, 2025 3.97% $ 25,000 October 7, 2025 3.99% 50,000 October 10, 2026 2.08% 100,000 December 15, 2026 3.75% 40,000 Year 2027 2.74% 175,000 Year 2028 3.10% 160,000 Year 2029 3.88% 155,000 Year 2030 and beyond 3.57% 735,000 Total Unsecured Debt 3.37% $ 1,440,000 (1) These loans have a fixed interest rate or an effectively fixed interest rate due to interest rate swaps. In January 2025, EastGroup refinanced a $100,000,000 senior unsecured term loan, reducing the credit spread by 30 basis points to a total effectively fixed interest rate of 4.97%. The loan, which previously had five years remaining, now has a three-year maturity with two one-year extension options, at the Company's election. In March 2025, EastGroup repaid a $50,000,000 senior unsecured term loan at maturity with an effectively fixed interest rate of 1.58%. In August 2025, EastGroup repaid senior unsecured notes at maturity. The notes had a principal balance of $20,000,000 and a fixed interest rate of 3.80%. The Company has a $625,000,000 unsecured bank credit facility with a group of 10 banks, which has a maturity date of July 31, 2028. The credit facility contains options for two six-month extensions (at the Company's election) and an additional $625,000,000 accordion (with agreement by all parties). The interest rate on each tranche is reset on a monthly basis and as of September 30, 2025, was SOFR plus 73.5 basis points with an annual facility fee of 14 basis points. As of September 30, 2025, the Company had $45,000,000 of variable rate borrowings on this unsecured bank credit facility and an interest rate of 4.998%. The Company has a $2,588,000 standby letter of credit 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 31, 2028, 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 September 30, 2025, was SOFR plus 77.5 basis points with an annual facility fee of 15 basis points. As of September 30, 2025, the interest rate was 5.035% with no outstanding balance. For both facilities, the margin and facility fee are subject to changes in the Company's credit ratings. In May 2025, Moody’s Ratings affirmed EastGroup’s issuer rating of Baa2 and changed its rating outlook from stable to positive. 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 rate margin is adjusted if the Company meets a certain sustainability performance target. This sustainability metric is evaluated annually and was achieved for the year ended December 31, 2024, which allowed for an interest rate reduction during the three and nine months ended September 30, 2025. The margin was effectively reduced on this unsecured bank credit facility by four basis points, from 77.5 to 73.5 basis points, and the facility fee was reduced from 15 to 14 basis points during the three and nine months ended September 30, 2025. -37- The Company’s unsecured bank credit facilities have certain restrictive covenants, such as maintaining minimum debt service coverage and leverage ratios and maintaining insurance coverage, and the Company was in compliance with all of its financial debt covenants at September 30, 2025. On October 25, 2024, we established an ATM 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 $1,000,000,000 (the “Current ATM Program”). The Current ATM Program replaced our previous $750,000,000 ATM program (the “Prior ATM Program”), which was established on October 25, 2023, under which we had sold shares of our common stock having an aggregate gross sales price of $746,153,000 through October 25, 2024. In connection with the Current ATM Program, we may sell shares of our common stock through sales agents or through certain financial institutions acting as forward counterparties whereby, at our discretion, the forward counterparties, or their agents or affiliates, 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. During the nine months ended September 30, 2025, EastGroup sold, and subsequently settled the issuance of, 33,120 shares of common stock directly through sales agents under its ATM program at a weighted average price of $183.15 per share, providing aggregate net proceeds to the Company of $6,005,000. During the nine months ended September 30, 2025, EastGroup entered into forward equity sale agreements with certain financial institutions acting as forward counterparties under the Current ATM Program with respect to 1,063,825 shares of common stock with an initial weighted average forward price of $181.89 per share. The Company did not receive any proceeds from the sale of common shares by the forward counterparties at the time it entered into forward equity sale agreements. Also during the nine months ended September 30, 2025, the Company settled outstanding forward equity sale agreements that were previously entered into under its ATM programs by issuing 1,449,078 shares of common stock in exchange for net proceeds of approximately $258,066,000. As of October 22, 2025, the Company had no outstanding forward shares available for settlement. As of October 22, 2025, approximately $520,101,000 of common stock remains available to be sold. Future sales, if any, will depend on a variety of factors, including among others, market conditions, the trading price of our common stock, determinations by us of the appropriate sources of funding for us and potential uses of funding available to us. 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, 2024, did not materially change during the nine months ended September 30, 2025. 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. CRITICAL ACCOUNTING POLICIES AND ESTIMATES The Company’s management considers the following accounting policies and estimates to be critical to the reported operations of the Company. Acquisition and Development of Real Estate Properties The FASB Codification 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. Factors considered by management in allocating the cost of the properties acquired include an estimate of carrying costs during the expected lease-up periods considering current market conditions and costs to execute similar leases. 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. -38- 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, net 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 forgone 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, net 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. For properties included in Development and value-add properties , 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 properties based on development activity. RECENT ACCOUNTING PRONOUNCEMENTS See Note 21 in the Notes to Consolidated Financial Statements.