EGP · Read the filing

ITEM 7. 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 Annual Report on Form 10-K.

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 15,000 to 70,000 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 major Sunbelt regions. The Company’s core markets are in the states of Florida, Texas, Arizona, California and North Carolina.

Impact of the COVID-19 Pandemic

On March 11, 2020, the World Health Organization characterized the COVID-19 outbreak as a pandemic. Global, national and local economies continue to be impacted by the pandemic and the mitigation efforts to combat the spread of COVID-19.

During the course of the COVID-19 pandemic, the United States has experienced, and may continue to experience, significant health, social and economic impacts from COVID-19. EastGroup’s operations, occupancy and rent collections have remained substantially stable during this period. As of February 16, 2021, the Company has received rent relief requests, primarily in the form of payment deferral requests, from approximately 28% of its customers based on rental revenue. These requests have largely ended; for comparison, this is only a slight increase from 26% at the end of April 2020 during the beginning of the pandemic. To date, approximately 18% of these requests have been granted some form of relief, which represents approximately 5% of the Company’s customers on a square foot basis. The Company has executed rent deferral agreements totaling $1.7 million, which represents approximately 0.4% of the Company’s 2020 revenue. The deferrals all relate to 2020 rental income with no future period deferred rents. The terms differ for each deferral agreement, and all deferred rent payments that were due through December 31, 2020 have been collected with the exception of $27,000. As of February 16, 2021, 59% of total deferred rent has been collected. Under modified COVID-19-related guidance provided by the Financial Accounting Standards Board (“FASB”), rental income for the majority of these deferral agreements ($1.4 million of the $1.7 million) qualifies to be recognized as rental income in the periods in which it was charged under the original terms of the leases. When requests were made, they were handled on a case-by-case basis, and the Company’s responses were dependent on its understanding of the financial strength of the customer, the operational and earnings impacts being experienced by the customer, and the customer’s ability or inability to obtain capital through debt or equity issuances, government assistance programs or by other means. As of February 16, 2021, rent payment deferrals representing approximately 0.4% of the Company's 2020 revenue have not been significant; the Company is continuing to actively monitor the evolving COVID-19 situation and its impact on the Company’s cash flows and operations.

As of February 16, 2021, the Company’s rent collection and rent payment deferral status was as follows:

Quarterly

Monthly

(1) Customer payments are received daily. The collection information presented is current through February 16, 2021, and the Company anticipates continuing to receive payments which will increase the % of Rent Collected.

(2) Represents the period of February 1, 2021 through February 16, 2021 and assumes collections from government-related tenants. For comparison, as of February 16, 2021, February rental receipts are slightly higher than the January rental receipts were as of January 16, 2021.

We believe EastGroup’s financial condition and balance sheet remain strong. As of December 31, 2020, the outstanding balance on the Company’s $395 million unsecured revolving credit facilities was $125 million, providing $270 million of available capacity. During 2020, EastGroup has only drawn amounts on its unsecured revolving credit facilities for general corporate purposes in the ordinary course of business. The Company is in compliance with its debt covenants at December 31, 2020 and anticipates remaining in compliance for the foreseeable future. The Company’s recent debt and equity activity is further described under Liquidity and Capital Resources.

The Company has been continuing construction on already-active development and value-add projects. During the second and third quarters of 2020, EastGroup did not begin construction on any new development projects. During the fourth quarter of 2020, the Company started construction on three new development projects. Management will continue to monitor the economic conditions of the Company’s markets to determine whether to begin construction on additional future development projects.

The future impacts of COVID-19 on the Company are largely dependent on the severity and duration of the economic uncertainty and its effect on EastGroup’s customers and cannot be predicted with certainty at this time.

General

The Company 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. During 2020, EastGroup issued 709,924 shares of common stock through its continuous common equity offering program, providing net proceeds to the Company of $92.7 million. Also during 2020, the Company closed on a private placement of $175 million of senior unsecured notes with a weighted average fixed interest rate of 2.65% and a $100 million senior unsecured term loan with an effective fixed interest rate of 2.39%. EastGroup's financing and equity issuances are further described in Liquidity and Capital Resources.

The Company’s primary revenue is rental income. During 2020, EastGroup executed leases on 8,118,000 square feet (18.5% of EastGroup’s total square footage of 43,854,000 as of December 31, 2020). For new and renewal leases signed during 2020, average rental rates increased by 21.7% as compared to the former leases on the same spaces.

Property Net Operating Income (“PNOI”) Excluding Income from Lease Terminations from same properties (defined as operating properties owned during the entire current and prior year reporting periods – January 1, 2019 through December 31, 2020), increased 2.1% for 2020 compared to 2019.

EastGroup’s portfolio was 98.0% leased at December 31, 2020 compared to 97.6% at December 31, 2019. As of February 16, 2021, the portfolio was 97.9% leased and 96.7% occupied. Leases scheduled to expire in 2021 were 14.9% of the portfolio on a square foot basis at December 31, 2020, and this percentage was reduced to 12.2% as of February 16, 2021.

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

During 2020, EastGroup acquired 509,000 square feet of operating and value-add properties in Atlanta, Dallas, Austin and Los Angeles and 232.6 acres of land in Orlando, Fort Myers, Atlanta, Dallas and El Paso for a total of $122.2 million. The Company began construction of 5 development projects containing 851,000 square feet in Miami, Fort Myers, Charlotte, Dallas and Phoenix. Also in 2020, the Company transferred 18 development and value-add properties (2,360,000 square feet) in Tampa, Miami, Orlando, Fort Myers, Charlotte, Dallas, Austin, Houston, San Antonio, Las Vegas and San Diego from its development and value-add program to real estate properties with costs of $249.4 million at the date of transfer. As of December 31, 2020, EastGroup's development and value-add program consisted of 16 projects (2,741,000 square feet) located in 10 cities. The projected total cost for the development and value-add projects, which were collectively 35% leased as of February 16, 2021, is $291.5 million, of which $65.5 million remained to be invested as of December 31, 2020.

During 2020, EastGroup sold 126,000 square feet of operating properties, generating gross sales proceeds of $21.0 million. The Company recognized $13.1 million in Gain on sales of real estate investments during 2020.

The Company typically initially funds its development and acquisition programs through its $395 million unsecured bank credit facilities (as discussed below under 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 June 2019, Moody's Investors Service affirmed the Company's issuer rating of Baa2 with a stable outlook. 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 market in the future as a means to raise capital.

EastGroup has one reportable segment – industrial properties. The Company's properties, primarily located in major Sunbelt regions of the United States, have similar economic characteristics and as a result, have been aggregated into one reportable segment.

The Company’s chief decision makers use two primary measures of operating results in making decisions: (1) funds from operations attributable to common stockholders (“FFO”), 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”). In December 2018, Nareit issued the “Nareit Funds from Operations White Paper - 2018 Restatement” (the “2018 White Paper”), which reaffirmed, and in some cases refined, Nareit's prior determinations concerning FFO. The guidance in the 2018 White Paper 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. In 2019, the Company revised prior periods to reflect this guidance.

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 period and prior year reporting period. 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 year ended December 31, 2020, Same Properties includes properties which were included in the operating portfolio for the entire period from January 1, 2019 through December 31, 2020. 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. It is calculated on a lease-by-lease basis by averaging the customers’ rent payments over the life of each individual lease.

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 industry’s 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 real estate investment trusts (“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.

PNOI was calculated as follows for the three fiscal years ended December 31, 2020, 2019 and 2018.

Years Ended December 31,

(In thousands)

Noncontrolling interest in PNOI of consolidated joint ventures (171) (199) (314)

PNOI from 50% owned unconsolidated investment 978 976 869

Income from real estate operations is comprised of rental income net of reserves for uncollectible rent, expense reimbursement pass-through income and other real estate income including lease termination fees. 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.

The following table presents reconciliations of Net Income to PNOI, Same PNOI and Same PNOI Excluding Income from Lease Terminations for the three fiscal years ended December 31, 2020, 2019 and 2018.

Years Ended December 31,

(In thousands)

Gain on sales of non-operating real estate — (83) (86)

Gain on sales of other assets — — (427)

Indirect leasing costs 661 411 —

Company's share of depreciation from unconsolidated investment 137 141 128

Noncontrolling interest in PNOI of consolidated joint ventures (171) (199) (314)

Net lease termination fee income from same properties (709) (1,258) *

SAME PNOI EXCLUDING INCOME FROM LEASE TERMINATIONS $ 226,091 221,480 *

* Same property metrics are not applicable to the year ended December 31, 2018, as the same property metrics for 2020 and 2019 are based on operating properties owned during the entire current and prior year reporting periods (January 1, 2019 through December 31, 2020).

The following table presents reconciliations of Net Income Attributable to EastGroup Properties, Inc. Common Stockholders to FFO Attributable to Common Stockholders for the three fiscal years ended December 31, 2020, 2019 and 2018.

Years Ended December 31,

(In thousands, except per share data)

Company's share of depreciation from unconsolidated investment 137 141 128

Depreciation and amortization from noncontrolling interest (142) (186) (182)

Gain on sales of non-operating real estate — (83) (86)

Gain on sales of other assets — — (427)

(1)The Company initially reported FFO of $4.67 per share during the year ended December 31, 2018. In connection with the Company's adoption of the Nareit Funds from Operations White Paper - 2018 Restatement, the Company now excludes from FFO the gains and losses on sales of non-operating real estate and assets incidental to the Company’s business.

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

•The change in FFO per share represents the increase or decrease in FFO per share from the current year compared to the prior year. For 2020, FFO was $5.38 per share compared with $4.98 per share for 2019, an increase of 8.0%.

•For the year ended December 31, 2020, PNOI increased by $21,792,000, or 9.1%, compared to 2019. PNOI increased $15,941,000 from newly developed and value-add properties, $5,505,000 from 2019 and 2020 acquisitions and $4,062,000 from same property operations; PNOI decreased $3,706,000 from operating properties sold in 2019 and 2020.

•The change in Same PNOI represents the PNOI increase or decrease for the same operating properties owned during the entire current and prior year reporting periods (January 1, 2019 through December 31, 2020). Same PNOI, excluding income from lease terminations, increased 2.1% for the year ended December 31, 2020, compared to 2019.

•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, 2019 through December 31, 2020). Same property average occupancy was 97.0% for each of the years ended December 31, 2020 and 2019.

•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 December 31, 2020 was 97.3%. Quarter-end occupancy ranged from 96.4% to 97.1% over the previous four quarters ended December 31, 2019 to September 30, 2020.

•Rental rate change represents the rental rate increase or decrease on new and renewal leases compared to the prior leases on the same space. For the year 2020, rental rate increases on new and renewal leases (18.5% of total square footage) averaged 21.7%.

•Lease termination fee income is included in Income from real estate operations. For the year 2020, lease termination fee income was $709,000 compared to $1,336,000 for 2019.

•The Company records reserves for uncollectible rent as reductions to Income from real estate operations. The Company recorded reserves for uncollectible rent of $2,763,000 in 2020 compared to $448,000 in 2019. Individual leases are evaluated for collectibility at each reporting period. We evaluate the collectibility of rents and other receivables at each reporting period based on factors including, among others, tenant's payment history, the financial condition of the tenant, business conditions and trends in the industry in which the tenant operates and economic conditions in the geographic area where the property is located. If evaluation of these factors or others indicates it is not probable we will collect substantially all rent we recognize an adjustment to rental revenue. If our judgment or estimation regarding probability of collection changes we may adjust or record additional rental revenue in the period such conclusion is reached. The Company followed its normal process for recording reserves for uncollectible rent during the year ended December 31, 2020 and also evaluated all deferred rent related to the COVID-19 pandemic for collectibility.

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 relative fair values. Goodwill for business combinations is recorded when the purchase price exceeds the fair value of the assets and liabilities acquired. 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.

The purchase price is also allocated among the following categories of intangible assets: the above or below market component of in-place leases, the value of in-place leases, and the value of customer relationships. The 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 leases are included in Other assets and Other liabilities, respectively, on the Consolidated Balance Sheets and are amortized to rental income over the remaining terms of the respective leases. The total amount of intangible assets is further allocated to in-place lease values and customer relationship values based upon management’s assessment of their respective values. These intangible assets are included in Other assets on the Consolidated Balance Sheets and are amortized over the remaining term of the existing lease, or the anticipated life of the customer relationship, as applicable.

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

For properties under development and value-add properties acquired in the development stage, costs associated with development (i.e., land, construction costs, interest expense, property taxes and other costs associated with development) are aggregated into the total capitalized costs of the property. Included in these costs are management’s estimates for the portions of internal costs (primarily personnel costs) deemed related to such development activities. The internal costs are allocated to specific development projects based on development activity.

FINANCIAL CONDITION

EastGroup’s Total Assets were $2,720,803,000 at December 31, 2020, an increase of $174,725,000 from December 31, 2019. Total Liabilities increased $106,536,000 to $1,450,285,000, and Total Equity increased $68,189,000 to $1,270,518,000 during the same period. The following paragraphs explain these changes in detail.

Assets

Real Estate Properties

Real estate properties increased $314,930,000 during the year ended December 31, 2020. The increase was primarily due to: (i) the transfer of 18 properties from Development and value-add properties to Real estate properties (as detailed under Development and Value-Add Properties below); (ii) operating property acquisitions; and (iii) capital improvements at the Company's properties. These increases were partially offset by the operating property sales discussed below.

During 2020, EastGroup acquired the following operating properties:

REAL ESTATE PROPERTIES ACQUIRED IN 2020 Location Size DateAcquired Cost (1)

(Square feet) (In thousands)

Total Real Estate Property Acquisitions 347,000 $ 46,240

(1)Total cost of the operating properties acquired was $48,656,000, of which $46,240,000 was allocated to Real estate properties as indicated above. The Company allocated $7,385,000 of the total purchase price to land using third party land valuations for the Atlanta, Austin and Dallas markets. The market values are considered to be Level 3 inputs as defined by FASB Accounting Standards Codification (“ASC”) 820, Fair Value Measurement (see Note 18 in the Notes to Consolidated Financial Statements for additional information on ASC 820). Intangibles associated with the purchases of real estate were allocated as follows: $2,624,000 to in-place lease intangibles and $104,000 to above market leases (both included in Other assets on the Consolidated Balance Sheets), and $312,000 to below market leases (included in Other liabilities on the Consolidated Balance Sheets).

During the year ended December 31, 2020, the Company made capital improvements of $30,255,000 on existing and acquired properties (included in the Capital Expenditures table under Results of Operations). Also, the Company incurred costs of $5,743,000 on development and value-add projects 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.

EastGroup sold the following operating properties during 2020: University Business Center 120 in Santa Barbara and Central Green in Houston. The properties (126,000 square feet combined) were sold for $21 million and the Company recognized gains on the sales of $13.1 million.

Development and Value-Add Properties

EastGroup’s investment in Development and value-add properties at December 31, 2020 consisted of properties in lease-up and under construction of $225,964,000 and prospective development (primarily land) of $133,624,000. The Company’s total investment in Development and value-add properties at December 31, 2020 was $359,588,000 compared to $419,999,000 at December 31, 2019. Total capital invested for development and value-add properties during 2020 was $195,446,000, which primarily consisted of costs of $170,418,000 as detailed in the Development and Value-Add Properties Activity table below, $18,550,000 as detailed in the Development and Value-Add Properties Transferred to the Real Estate Properties Portfolio During 2020 table below and costs of $5,743,000 on projects subsequent to transfer to Real estate properties. The capitalized costs incurred on development and value-add projects 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).

EastGroup capitalized internal development costs of $6,689,000 during the year ended December 31, 2020, compared to $6,918,000 during 2019.

During 2020, EastGroup acquired one value-add property, Rancho Distribution Center in Los Angeles. The total cost of the property acquired was $27,862,000, of which $27,320,000 was allocated to Development and value-add properties. The

Company allocated $16,180,000 of the total purchase price to land using third party land valuations for the Los Angeles market. The market values are considered to be Level 3 inputs as defined by ASC 820, Fair Value Measurement (see Note 18 in the Notes to Consolidated Financial Statements for additional information on ASC 820). Intangibles associated with the purchase were allocated as follows: $633,000 to in-place lease intangibles (included in Other assets on the Consolidated Balance Sheets) and $91,000 to below market leases (included in Other liabilities on the Consolidated Balance Sheets). These costs are amortized over the remaining lives of the associated leases in place at the time of acquisition. Costs associated with the value-add property acquisition, except for the amounts allocated to the acquired lease intangibles, are included in the Development and Value-Add Properties Activity table below.

Also during 2020, EastGroup purchased 232.6 acres of development land in Orlando, Fort Myers, Atlanta, Dallas and El Paso for $45,687,000. Costs associated with these acquisitions are included in the Development and Value-Add Properties Activity table. These increases were offset by the transfer of 18 development projects to Real estate properties during 2020 with a total investment of $249,379,000 as of the date of transfer.

DEVELOPMENT AND VALUE-ADD PROPERTIES ACTIVITY Costs Incurred

(In thousands)

LEASE-UP Building Size (Square feet)

UNDER CONSTRUCTION

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

Building Size (Square feet) (In thousands) Building Conversion Date

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

(2)Included in these costs are development obligations of $33.0 million and tenant improvement obligations of $4.9 million on properties under development.

(3)Represents value-add projects acquired by EastGroup.

(4)Negative amount represents land inventory transferred to Real Estate Properties for trailer storage expansion.

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

Accumulated Depreciation

Accumulated depreciation on real estate, development and value-add properties increased $84,189,000 during 2020 due primarily to depreciation expense of $96,290,000, offset by the sale of 126,000 square feet of operating properties during 2020.

Other Assets

Other assets increased $4,957,000 during 2020. A summary of Other assets follows:

December 31,

(In thousands)

Leasing costs (principally commissions) $ 95,914 89,191

Accumulated amortization of leasing costs (38,371) (34,963)

Acquired above market lease intangibles 1,825 1,721

Acquired above market lease intangibles, net of accumulated amortization 594 714

Mortgage loans receivable — 1,679

Interest rate swap assets — 3,485

Right of use assets – Office leases (operating) 2,131 2,115

Receivable for common stock offerings 1,942 —

Liabilities

Unsecured bank credit facilities increased $12,800,000 during 2020, mainly due to borrowings of $625,387,000 and the amortization of debt issuance costs during the period, partially offset by repayments of $613,097,000 and new debt issuance costs incurred during the period. The Company’s credit facilities are described in greater detail below under Liquidity and Capital Resources.

Unsecured debt increased $169,593,000 during 2020, primarily due to the closing of a $100 million senior unsecured term loan in March, closing the private placement of $175 million of senior unsecured notes in October and the amortization of debt issuance costs. These increases were offset by a $30 million principal repayment on $100 million of senior unsecured notes in August, the repayment of a $75 million senior unsecured term loan in December and new debt issuance costs incurred during the period. The borrowings and repayments on Unsecured debt are described in greater detail below under Liquidity and Capital Resources.

Secured debt decreased $54,100,000 during the year ended December 31, 2020. The decrease resulted from the repayment of a mortgage loan with a principal balance of $45,871,000 in October, regularly scheduled principal payments of $8,436,000 and amortization of premiums on Secured debt, offset by the amortization of debt issuance costs during the period.

Accounts payable and accrued expenses decreased $22,451,000 during 2020. A summary of the Company’s Accounts payable and accrued expenses follows:

December 31,

(In thousands)

Real estate improvements and capitalized leasing costs payable 5,692 4,636

Other payables and accrued expenses 9,540 10,071

Total Accounts payable and accrued expenses $ 69,573 92,024

(1)Represents checks written before the end of the period which have not cleared the bank; therefore, the bank has not yet advanced cash to the Company. When the checks clear the bank, they will be funded through the Company's working cash line of credit. See Note 1(p) in the Notes to Consolidated Financial Statements.

Other liabilities increased $694,000 during 2020. A summary of the Company’s Other liabilities follows:

December 31,

(In thousands)

Prepaid rent and other deferred income 14,694 13,855

Operating lease liabilities — Ground leases 11,199 12,048

Operating lease liabilities — Office leases 2,167 2,141

Acquired below-market lease intangibles 9,019 8,616

Interest rate swap liabilities 10,752 678

Prepaid tenant improvement reimbursements 364 56

Equity

Additional paid-in capital increased $95,998,000 during 2020 primarily due to the issuance of common stock under the Company's continuous common equity offering program (as discussed below under Liquidity and Capital Resources) and stock-based compensation (as discussed in Note 11 in the Notes to Consolidated Financial Statements). EastGroup issued 709,924 shares of common stock under its continuous common equity offering program with net proceeds to the Company of $92,663,000.

During 2020, Distributions in excess of earnings increased $13,365,000 as a result of dividends on common stock of $121,728,000 exceeding Net Income Attributable to EastGroup Properties, Inc. Common Stockholders of $108,363,000.

Accumulated other comprehensive income (loss) decreased $13,559,000 during 2020. 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 12 and 13 in the Notes to Consolidated Financial Statements.

RESULTS OF OPERATIONS

2020 Compared to 2019

Net Income Attributable to EastGroup Properties, Inc. Common Stockholders for 2020 was $108,363,000 ($2.77 per basic and $2.76 per diluted share) compared to $121,662,000 ($3.25 per basic and $3.24 per diluted share) for 2019. The following paragraphs explain the change:

•PNOI increased by $21,792,000 ($0.55 per diluted share) for 2020 as compared to 2019. PNOI increased $15,941,000 from newly developed and value-add properties, $5,505,000 from 2019 and 2020 acquisitions and $4,062,000 from same property operations; PNOI decreased $3,706,000 from operating properties sold in 2019 and 2020. For the year 2020, lease termination fee income was $709,000 compared to $1,336,000 for 2019. The Company recorded reserves for uncollectible rent of $2,763,000 in 2020 and $448,000 in 2019. Straight-lining of rent increased PNOI by $4,888,000 and $4,985,000 in 2020 and 2019, respectively.

•EastGroup recognized gains on sales of real estate investments of $13,145,000 ($0.33 per diluted share) compared to $41,068,000 ($1.09 per diluted share) during 2019.

•Depreciation and amortization expense increased by $11,635,000 ($0.30 per diluted share) during 2020 compared to 2019.

EastGroup entered into 179 leases with certain free rent concessions on 4,965,000 square feet during 2020 with total free rent concessions of $7,548,000 over the lives of the leases, compared to 160 leases with free rent concessions on 4,281,000 square feet with total free rent concessions of $6,114,000 over the lives of the leases in 2019.

The Company’s percentage of leased square footage was 98.0% at December 31, 2020, compared to 97.6% at December 31, 2019. Occupancy at the end of 2020 was 97.3% compared to 97.1% at December 31, 2019.

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, 2019 through December 31, 2020). Same property average occupancy for the year ended December 31, 2020, was 97.0% compared to 97.0% for 2019.

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, 2019 through December 31, 2020). The same property average rental rate was $6.09 per square foot for the year ended December 31, 2020, compared to $5.95 per square foot for 2019.

Interest Expense decreased $536,000 for the year ended December 31, 2020 compared to 2019. The following table presents the components of Interest Expense for 2020 and 2019:

Years Ended December 31,

(In thousands)

VARIABLE RATE INTEREST EXPENSE

Amortization of facility fees - unsecured bank credit facilities 790 790 —

Amortization of debt issuance costs - unsecured bank credit facilities 561 556 5

FIXED RATE INTEREST EXPENSE

Amortization of debt issuance costs - unsecured debt 624 539 85

Amortization of debt issuance costs - secured debt 233 249 (16)

(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 13 in the Notes to Consolidated Financial Statements.

EastGroup's variable rate interest expense decreased by $4,131,000 for 2020 as compared to 2019 primarily due to decreases in the Company's weighted average interest rate and average borrowings on its unsecured bank credit facilities as shown in the following table:

Years Ended December 31,

(In thousands, except rates of interest)

The Company's fixed rate interest expense increased by $4,793,000 for 2020 as compared to 2019 as a result of the unsecured debt and secured debt described below.

Interest expense from fixed rate unsecured debt increased by $6,497,000 during 2020 as compared to 2019 as a result of the Company's unsecured debt activity described below. The details of the unsecured debt obtained in 2019 and 2020 are shown in the following table:

(In thousands)

(1)The interest rate on this unsecured term loan is comprised of LIBOR plus 150 basis points subject to a pricing grid for changes in the Company's coverage ratings. The Company entered into an interest rate swap to convert the loan's LIBOR rate to a fixed interest rate, providing the Company a weighted average effective interest rate on the term loan of 2.75% as of December 31, 2020. See Note 13 in the Notes to Consolidated Financial Statements for additional information on the interest rate swaps.

(2)The interest rate on this unsecured term loan is comprised of LIBOR plus 145 basis points subject to a pricing grid for changes in the Company's coverage ratings. The Company entered into an interest rate swap to convert the loan's LIBOR rate to a fixed interest rate, providing the Company a weighted average effective interest rate on the term loan of 2.39% as of December 31, 2020. See Note 13 in the Notes to Consolidated Financial Statements for additional information on the interest rate swaps.

The increase in interest expense from the new unsecured debt was partially offset by the repayment of the following unsecured loans during 2019 and 2020:

UNSECURED DEBT REPAID IN 2019 AND 2020 Interest Rate Date Repaid Payoff Amount

(In thousands)

The increase in interest expense from unsecured debt was partially offset by a decease in secured debt interest expense, which decreased by $1,773,000 in 2020 as compared to 2019 as a result of regularly scheduled principal payments and debt repayments. Regularly scheduled principal payments on secured debt were $8,436,000 during 2020 and $9,821,000 in 2019. The details of the secured debt repaid in 2019 and 2020 are shown in the following table:

SECURED DEBT REPAID IN 2019 and 2020 Interest Rate Date Repaid Payoff Amount

(In thousands)

EastGroup did not obtain any new secured debt during 2019 or 2020.

Interest costs during the period of construction of real estate properties are capitalized and offset against interest expense. Capitalized interest increased by $1,198,000 for 2020 as compared to 2019. The increase is due to changes in development spending and borrowing rates.

Depreciation and amortization expense increased $11,635,000 for 2020 compared to 2019 primarily due to the operating properties acquired by the Company during 2019 and 2020 and the properties transferred from Development and value-add properties in 2019 and 2020, partially offset by operating properties sold in 2019 and 2020.

Gain on sales of real estate investments, which includes gains on the sales of operating properties, decreased $27,923,000 for 2020 as compared to 2019. The Company's 2019 and 2020 sales transactions are described below in Real Estate Sold and Held for Sale/Discontinued Operations.

Real Estate Improvements

Real estate improvements for EastGroup’s operating properties for the years ended December 31, 2020 and 2019 were as follows:

EstimatedUseful Life Years Ended December 31,

(In thousands)

Tenant Improvements:

Other:

(1)Reconciliation of Total Real Estate Improvements to Real Estate Improvements on the Consolidated Statements of Cash Flows:

Years Ended December 31,

(In thousands)

Change in Real Estate Property Payables (373) (876)

Change in Construction in Progress 3,249 (5)

Capitalized Leasing Costs

The Company’s leasing costs (principally commissions) are capitalized and included in Other assets. 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 years ended December 31, 2020 and 2019 were as follows:

EstimatedUseful Life Years Ended December 31,

(In thousands)

Development and Value-Add Lease Life $ 5,223 8,065

Real Estate Sold and Held for Sale/Discontinued Operations

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 December 31, 2020 and 2019.

In accordance with FASB Accounting Standards Update (“ASU”) 2014-08, Presentation of Financial Statements (Topic 205) and Property, Plant, and Equipment (Topic 360), Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity, the Company would report a disposal of a component of an entity or a group of components of an entity in discontinued operations if the disposal represents a strategic shift that has (or will have) a major effect on an entity's operations and financial results when the component or group of components meets the criteria to be classified as held for sale or when the component or group of components is disposed of by sale or other than by sale. In addition, the Company would provide additional disclosures about both discontinued operations and the disposal of an individually significant component of an entity that does not qualify for discontinued operations presentation in the financial statements. EastGroup performs an analysis of properties sold to determine whether the sales qualify for discontinued operations presentation.

The Company does not consider its sales in 2019 and 2020 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.

EastGroup sold the following operating properties during 2020: University Business Center 120 in Santa Barbara and Central Green in Houston. The properties (126,000 square feet combined) were sold for $21.0 million and the Company recognized gains on the sales of $13.1 million.

In 2019, EastGroup sold the following operating properties: World Houston 5 in Houston, Altamonte Commerce Center in Orlando, Southpointe Distribution Center in Tucson and three of its four University Business Center buildings in Santa Barbara, California. The properties (617,000 square feet combined) were sold for $68.5 million and the Company recognized gains on the sales of $41.1 million. The Company also sold (through eminent domain procedures) a small parcel of land (0.2 acres) adjacent to its Siempre Viva Distribution Center 1 in San Diego for $185,000 and the Company recognized a gain on the sale of $83,000.

The gains and losses on the sales of land are included in Other on the Consolidated Statements of Income and Comprehensive Income, and the gains and losses on the sales of operating properties are included in Gain on sales of real estate investments. See Notes 1(f) and 2 in the Notes to Consolidated Financial Statements for more information related to discontinued operations and gains and losses on sales of real estate investments.

2019 Compared to 2018

A discussion of changes in the Company's results of operations between 2019 and 2018 has been omitted from this Form 10-K and can be found in “Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations” under “2019 Compared to 2018” of the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2019.

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 June 2016, the FASB issued ASU 2016-13, Financial Instruments — Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, and subsequently issued ASU 2018-19, Codification Improvements to Topic 326, Financial Instruments — Credit Losses in November 2018. The ASUs amend guidance on reporting credit losses for assets held at amortized cost basis and available for sale debt securities. For assets held at amortized cost, Topic 326 eliminates the probable initial recognition threshold in current GAAP and, instead, requires an entity to reflect its current estimate of all expected credit losses. For available for sale debt securities (EastGroup does not currently hold any and does not intend to hold any in the future), credit losses should be measured in a similar manner to current GAAP; however, Topic 326 requires that credit losses be presented as an allowance rather than a write-down. The ASUs affect entities holding financial assets and are effective for annual periods beginning after December 15, 2019, and interim periods within those fiscal years. The Company adopted ASU

2016-13 and ASU 2018-19 on January 1, 2020, and the adoption did not have a material impact on its financial condition, results of operations or disclosures.

In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement. The ASU is intended to improve the effectiveness of fair value measurement disclosures. ASU 2018-13 is effective for all entities for annual periods beginning after December 15, 2019, and interim periods within those fiscal years. The Company adopted ASU 2018-13 on January 1, 2020, and the adoption did not have a material impact on its financial condition, results of operations or disclosures.

In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting. ASU 2020-04 contains practical expedients for reference rate reform related activities that impact debt, leases, derivatives and other contracts. The guidance in ASU 2020-04 is optional and may be elected over time as reference rate reform activities occur. During the three months ended March 31, 2020, the Company elected to apply the hedge accounting expedients related to probability and the assessments of effectiveness for future LIBOR-indexed cash flows to assume that the index upon which future hedged transactions will be based matches the index on the corresponding derivatives. Application of these expedients preserves the presentation of derivatives consistent with past presentation. The Company continues to evaluate the impact of the guidance and may apply other elections as applicable as additional changes in the market occur.

LIQUIDITY AND CAPITAL RESOURCES

Net cash provided by operating activities was $196,285,000 for the year ended December 31, 2020. The primary other sources of cash were from borrowings on unsecured bank credit facilities; proceeds from unsecured debt; proceeds from common stock offerings; and net proceeds from sales of real estate investments. The Company distributed $119,765,000 in common stock dividends during 2020. Other primary uses of cash were for repayments on unsecured bank credit facilities, unsecured debt and secured debt; the construction and development of properties; purchases of real estate; and capital improvements at various properties.

Total debt at December 31, 2020 and 2019 is detailed below. The Company’s unsecured bank credit facilities and unsecured debt instruments have certain restrictive covenants, such as maintaining debt service coverage and leverage ratios and maintaining insurance coverage, and the Company was in compliance with all of its debt covenants at December 31, 2020 and 2019.

December 31,

(In thousands)

Unamortized debt issuance costs (806) (1,316)

Unamortized debt issuance costs (2,292) (1,885)

Secured debt - fixed rate, carrying amount (1) 79,096 133,422

Unamortized debt issuance costs (103) (329)

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

The Company has a $350 million unsecured bank credit facility with a group of nine banks; the facility has a maturity date of July 30, 2022. The credit facility contains options for two six-month extensions (at the Company's election) and a $150 million accordion (with agreement by all parties). The interest rate on each tranche is usually reset on a monthly basis and as of

December 31, 2020, was LIBOR plus 100 basis points with an annual facility fee of 20 basis points. The margin and facility fee are subject to changes in the Company's credit ratings. As of December 31, 2020, the Company had $125,000,000 of variable rate borrowings outstanding on this unsecured bank credit facility with a weighted average interest rate of 1.152%. The Company has a standby letter of credit of $674,000 pledged on this facility.

The Company also has a $45 million unsecured bank credit facility with a maturity date of July 30, 2022, or such later date as designated by the bank; the Company also has two six-month extensions available if the extension options in the $350 million facility are exercised. The interest rate is reset on a daily basis and as of December 31, 2020, was LIBOR plus 100 basis points with an annual facility fee of 20 basis points. The margin and facility fee are subject to changes in the Company's credit ratings. As of December 31, 2020, the interest rate was 1.144% with no outstanding balance.

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 market in the future as a means to raise capital.

In March 2020, the Company closed a $100 million senior unsecured term loan with a seven-year term and interest only payments. It bears interest at the annual rate of LIBOR plus an applicable margin (1.45% as of December 31, 2020) based on the Company’s senior unsecured long-term debt rating. The Company also entered into an interest rate swap agreement to convert the loan’s LIBOR rate component to a fixed interest rate for the entire term of the loan providing a total effective fixed interest rate of 2.39%.

In July 2020, the Company and a group of lenders agreed to terms on the private placement of $175 million of senior unsecured notes with a weighted average fixed interest rate of 2.65%. The $100 million note has a 10-year term and a fixed interest rate of 2.61%, and the $75 million note has a 12-year term and a fixed interest rate of 2.71%. These maturity dates complement the Company's existing debt maturity schedule. The notes dated August 17, 2020, were issued and sold on October 14, 2020 and require interest-only payments. The notes will not be and have not been registered under the Securities Act of 1933, as amended, and may not be offered or sold in the United States absent registration or an applicable exemption from the registration requirements.

In August 2020, the Company made a required $30 million principal repayment on $100 million of senior unsecured notes with a fixed interest rate of 3.80%.

In October 2020, EastGroup repaid (with no penalty) a mortgage loan with a balance of $45.9 million, an interest rate of 4.39% and an original maturity date of January 5, 2021.

In December 2020, the Company repaid a $75 million unsecured term loan at maturity with an effectively fixed interest rate of 3.45%.

In July 2017, the Financial Conduct Authority (“FCA”) that regulates LIBOR announced it intends to stop compelling banks to submit rates for the calculation of LIBOR after 2021. As a result, the Federal Reserve Board and the Federal Reserve Bank of New York organized the Alternative Reference Rates Committee (“ARRC”) which identified the Secured Overnight Financing Rate (“SOFR”) as its preferred alternative to USD-LIBOR in derivatives and other financial contracts that are currently indexed to USD-LIBOR. ARRC has proposed a paced market transition plan to SOFR from USD-LIBOR and organizations are currently working on industry wide and company specific transition plans as it relates to derivatives and cash markets exposed to USD-LIBOR. In November 2020, the Intercontinental Exchange (“ICE”) Benchmark Administration Limited (“IBA”), the administrator of LIBOR, announced that it would consult on its intention to cease the publication of the one-week and two-month USD LIBOR settings immediately following December 31, 2021, and the remaining USD LIBOR settings immediately following the LIBOR publication on June 30, 2023.

The Company is not able to predict when LIBOR will cease to be available or when there will be sufficient liquidity in the SOFR markets. Any changes adopted by the FCA or other governing bodies in the method used for determining LIBOR may result in a sudden or prolonged increase or decrease in reported LIBOR. If that were to occur, our interest payments could change. In addition, uncertainty about the extent and manner of future changes may result in interest rates and/or payments that are higher or lower than if LIBOR were to remain available in its current form.

The Company’s unsecured bank credit facilities, senior unsecured term loans and interest rate swap contracts are indexed to LIBOR. The Company is continuously monitoring and evaluating the related risks, which include interest on loans and amounts received and paid on derivative instruments. These risks arise in connection with transitioning contracts to a new alternative rate, including any resulting value transfer that may occur. The value of loans or derivative instruments tied to LIBOR could also be impacted if LIBOR is limited or discontinued as interest rates may be adversely affected. While we expect LIBOR to be available in substantially its current form until the end of 2021, it is possible that LIBOR will become unavailable prior to that point. This could result, for example, if sufficient banks decline to make submissions to the LIBOR administrator. In that case, the risks associated with the transition to an alternative reference rate will be accelerated and magnified.

Each of the Company’s contracts, which are indexed to LIBOR, include provisions for a replacement rate which will be substantially equivalent to the all-in LIBOR-based interest rate in effect prior to its replacement. Therefore, the Company believes the transition will not have a material impact on our consolidated financial statements.

On December 20, 2019, EastGroup entered into sales agreements with each of BNY Mellon Capital Markets, LLC; BofA Securities, Inc.; BTIG, LLC; Jefferies LLC; Raymond James & Associates, Inc.; Regions Securities LLC; and Wells Fargo Securities, LLC in connection with the establishment of a continuous common equity offering program pursuant to which the Company may sell shares of its common stock with an aggregate gross sales price of up to $750,000,000 from time to time in transactions that are deemed to be "at the market" offerings as defined in Rule 415 of the Securities Act of 1933, as amended, or certain other transactions (the “ATM Program”). As of February 17, 2021, the Company sold an aggregate of 709,924 shares of common stock with gross proceeds of $93,938,000 under the ATM Program; therefore, under the ATM Program, EastGroup may offer and sell shares of its common stock having an aggregate offering price of up to $656,062,000 through the sales agents.

During the year ended December 31, 2020, EastGroup issued and sold 709,924 shares of common stock under its ATM Program at an average price of $132.32 per share with gross proceeds to the Company of $93,938,000. The Company incurred offering-related costs of $1,275,000 during the year, resulting in net proceeds to the Company of $92,663,000.

Contractual Obligations

EastGroup’s fixed, non-cancelable obligations as of December 31, 2020 were as follows:

Payments Due by Period

Total Less Than1 Year 1-3 Years 3-5 Years More Than5 Years

(In thousands)

Interest on Unsecured Bank Credit Facilities (3) 3,577 2,230 1,347 — —

Operating Lease Obligations:

Real Estate Property Obligations (5) 5,992 5,992 — — —

Development and Value-Add Obligations (6) 33,026 33,026 — — —

(1)These amounts are included on the Consolidated Balance Sheets net of unamortized debt issuance costs.

(2)The Company’s balances under its unsecured bank credit facilities change depending on the Company’s cash needs and, as such, both the principal amounts and the interest rates are subject to variability. At December 31, 2020, the weighted average interest rate was 1.152% on the $125,000,000 of variable rate debt that matures in July 2022. The $350 million unsecured credit facility has options for two six-month extensions (at the Company's election) and a $150 million accordion (with agreement by all parties). The $45 million unsecured credit facility automatically extends for two six-month terms if the extension options in the $350 million revolving facility are exercised. As of December 31, 2020, the interest rate on the $350 million facility was LIBOR plus 100 basis points (weighted average interest rate of 1.152%) with an annual facility fee of 20 basis points, and the interest rate on the $45 million facility, which resets on a daily basis, was LIBOR plus 100 basis points (1.144%) with an annual facility fee of 20 basis points. The margin and facility fee are subject to changes in the Company's credit ratings.

(3)Represents an estimate of interest due on the Company's unsecured bank credit facilities based on the outstanding unsecured credit facilities as of December 31, 2020 and interest rates and maturity dates on the facilities as of December 31, 2020 as discussed in note 2 above.

(4)Represents dividends declared during December 2020, which were paid in January 2021. Dividends Payable excludes dividends payable on unvested restricted stock of $1,433,000, which are subject to continued service and will be paid upon vesting in future periods.

(5)Represents commitments on real estate properties, except for tenant improvement obligations.

(6)Represents commitments on properties in the Company's development and value-add program, except for tenant improvement obligations.

(7)Represents tenant improvement allowance obligations.

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

Off-Balance Sheet Arrangements

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.

INFLATION AND OTHER ECONOMIC CONSIDERATIONS

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

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

EastGroup's financial results are affected by general economic conditions in the markets in which the Company's properties are located. The state of the economy, or other adverse changes in general or local economic conditions resulting from the ongoing COVID-19 pandemic or general economic conditions, could result in the inability of some of the Company's existing tenants to make lease payments and may therefore increase the reserves for uncollectible rent. It may also impact the Company’s ability to (i) renew leases or re-lease space as leases expire, or (ii) lease development space. In addition, an economic downturn or recession, including but not limited to the ongoing COVID-19 pandemic, could also lead to an increase in overall vacancy rates or a decline in rents the Company can charge to re-lease properties upon expiration of current leases. In all of these cases, EastGroup’s cash flows would be adversely affected.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

The Company is exposed to interest rate changes primarily as a result of its unsecured bank credit facilities and long-term debt maturities. This debt is used to maintain liquidity and fund capital expenditures and expansion of the Company’s real estate investment portfolio and operations. The Company’s objective for interest rate risk management is to limit the impact of interest rate changes on earnings and cash flows and to lower its overall borrowing costs. The Company has two variable rate unsecured bank credit facilities as discussed under the heading Liquidity and Capital Resources in Part II, Item 7 of this Annual Report on Form 10-K. 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's interest rate swaps are discussed in Note 13 in the Notes to Consolidated Financial Statements. The table below presents the principal payments due and weighted average interest rates, which include the impact of interest rate swaps, for both the fixed rate and variable rate debt as of December 31, 2020.

Weighted average interest rate — 1.15% (3) — — — — 1.15%

(1)The variable rate unsecured bank credit facilities mature in July 2022 and as of December 31, 2020, have balances of $125,000,000 on the $350 million unsecured bank credit facility and $0 on the $45 million unsecured bank credit facility.

(2)The fair value of the Company’s variable rate debt is estimated by discounting expected cash flows at current market rates, excluding the effects of debt issuance costs.

(3)Represents the weighted average interest rate for the Company's variable rate unsecured bank credit facilities as of December 31, 2020.

(4)The fair value of the Company’s fixed rate debt, including variable rate debt that has been swapped to an effectively fixed rate through the use of interest rate swaps, 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, excluding the effects of debt issuance costs.

As the table above incorporates only those exposures that existed as of December 31, 2020, it does not consider those exposures or positions that could arise after that date. If the weighted average interest rate on the variable rate unsecured bank credit facilities, as shown above, changes by 10%, or approximately 12 basis points, interest expense and cash flows would increase or decrease by approximately $144,000 annually. This does not include variable rate debt that has been effectively fixed through the use of interest rate swaps.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

The information required by this Item 8 is hereby incorporated by reference to the Company’s Consolidated Financial Statements beginning on page 42 of this Annual Report on Form 10-K.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.

None.

ITEM 9A. CONTROLS AND PROCEDURES.

(i)Disclosure Controls and Procedures.

The Company carried out an evaluation, under the supervision and with the participation of the Company’s management, including the Company’s Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures pursuant to Exchange Act Rule 13a-15. Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that, as of December 31, 2020, the Company’s disclosure controls and procedures were effective in timely alerting them to material information relating to the Company (including its consolidated subsidiaries) required to be included in the Company’s periodic SEC filings.

(ii)Internal Control Over Financial Reporting.

(a) Management's annual report on internal control over financial reporting.

Management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rule 13a-15(f). EastGroup’s Management Report on Internal Control Over Financial Reporting is set forth in Part IV, Item 15 of this Form 10-K on page 47 and is incorporated herein by reference.

(b)Report of the independent registered public accounting firm.

The report of KPMG LLP, the Company's independent registered public accounting firm, on the Company's internal control over financial reporting is set forth in Part IV, Item 15 of this Form 10-K on page 48 and is incorporated herein by reference.

(c)Changes in internal control over financial reporting.

There was no change in the Company's internal control over financial reporting during the Company's fourth fiscal quarter ended December 31, 2020 that has materially affected, or is reasonably likely to materially affect, the Company's internal control over financial reporting.

ITEM 9B. OTHER INFORMATION.

Not applicable.

PART III

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE.

The information required by Item 10 will be included in the Company’s definitive proxy statement to be filed with the SEC relating to the Company’s 2021 Annual Meeting of Stockholders and is incorporated herein by reference.

ITEM 11. EXECUTIVE COMPENSATION.

The information required by Item 11 will be included in the Company’s definitive proxy statement to be filed with the SEC relating to the Company’s 2021 Annual Meeting of Stockholders and is incorporated herein by reference.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS.

The information required by Item 12 will be included in the Company’s definitive proxy statement to be filed with the SEC relating to the Company’s 2021 Annual Meeting of Stockholders and is incorporated herein by reference.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE.

The information required by Item 13 will be included in the Company’s definitive proxy statement to be filed with the SEC relating to the Company’s 2021 Annual Meeting of Stockholders and is incorporated herein by reference.

ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES.

The information required by Item 14 will be included in the Company’s definitive proxy statement to be filed with the SEC relating to the Company’s 2021 Annual Meeting of Stockholders and is incorporated herein by reference.

PART IV

ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.

Financial Statements Page

The following documents are filed as part of this Annual Report on Form 10-K:

Report of Independent Registered Public Accounting Firm 45

Management Report on Internal Control Over Financial Reporting 47

Report of Independent Registered Public Accounting Firm 48

Notes to Consolidated Financial Statements 53

Financial Statement Schedules Page

The following documents are filed as part of this Annual Report on Form 10-K:

Schedule III – Real Estate Properties and Accumulated Depreciation 82

Exhibits

Exhibit Number Description

21.1 Subsidiaries of the Company (filed herewith).

23.1 Consent of KPMG LLP (filed herewith).

24.1 Powers of attorney (included on signature page hereto).

Exhibit Number Description

101.SCH Inline XBRL Taxonomy Extension Schema Document (filed herewith)

101.LAB Inline XBRL Taxonomy Extension Label Linkbase Document (filed herewith)

* Indicates a management contract or any compensatory plan, contract or arrangement.

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

TO THE STOCKHOLDERS AND BOARD OF DIRECTORS

EASTGROUP PROPERTIES, INC.:

Opinion on the Consolidated Financial Statements

We have audited the accompanying consolidated balance sheets of EastGroup Properties, Inc. and subsidiaries (the Company) as of December 31, 2020 and 2019, the related consolidated statements of income and comprehensive income, changes in equity, and cash flows for each of the years in the three-year period ended December 31, 2020, and the related notes and financial statement schedule III (collectively, the consolidated financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2020 and 2019, and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, 2020, in conformity with U.S. generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2020, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission, and our report dated February 17, 2021 expressed an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting.

Basis for Opinion

These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of a critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Evaluation of the estimated fair value assigned to land in an asset acquisition

As discussed in Note 1(j) to the consolidated financial statements, the Company acquired $76,518,000 of real estate properties and development and value-add properties during 2020 that were accounted for as asset acquisitions, of which $23,565,000 of the total purchase price was allocated to land. The purchase price in an asset acquisition is allocated among the individual components of both the tangible and intangible assets and liabilities acquired based on their relative fair values.

We identified the evaluation of the estimated fair value of land as a critical audit matter. Specifically, evaluating the relevance of comparable land sales used in the Company’s determination of the estimated fair value involved subjective auditor judgment. Professionals with specialized skills and knowledge were required to evaluate the relevance of the comparable land sales.

The following are the primary procedures we performed to address this critical audit matter. We evaluated the design and tested the operating effectiveness over the Company's control to identify and select publicly available comparable land sales within the Company’s process to estimate fair value of land in an asset acquisition. We involved valuation professionals with specialized skills and knowledge who assisted in evaluating the Company’s estimate of fair value of land by comparing to our independently established ranges of comparable land sales developed using publicly available market data.

/s/ KPMG LLP

We have served as the Company's auditor since 1970.

Jackson, Mississippi

MANAGEMENT REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING

EastGroup’s management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rule 13a-15(f). Under the supervision and with the participation of management, including the Chief Executive Officer and Chief Financial Officer, EastGroup conducted an evaluation of the effectiveness of internal control over financial reporting based on the framework in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. The design of any system of internal control over financial reporting is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Based on EastGroup’s evaluation under the framework in Internal Control – Integrated Framework (2013), management concluded that our internal control over financial reporting was effective as of December 31, 2020.

/s/ EASTGROUP PROPERTIES, INC.

Ridgeland, Mississippi

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

TO THE STOCKHOLDERS AND BOARD OF DIRECTORS

EASTGROUP PROPERTIES, INC.:

Opinion on Internal Control Over Financial Reporting

We have audited EastGroup Properties, Inc. and subsidiaries’ (the Company) internal control over financial reporting as of December 31, 2020, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2020, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of December 31, 2020 and 2019, the related consolidated statements of income and comprehensive income, changes in equity, and cash flows for each of the years in the three-year period ended December 31, 2020, and the related notes and financial statement schedule III (collectively, the consolidated financial statements), and our report dated February 17, 2021 expressed an unqualified opinion on those consolidated financial statements.

Basis for Opinion

The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

Definition and Limitations of Internal Control Over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/ KPMG LLP

Jackson, Mississippi

EASTGROUP PROPERTIES, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

December 31,

(In thousands, except share and per share data)

ASSETS

LIABILITIES AND EQUITY

LIABILITIES

Accounts payable and accrued expenses 69,573 92,024

EQUITY

Stockholders’ Equity:

Accumulated other comprehensive income (loss) (10,752) 2,807

Noncontrolling interest in joint ventures 880 1,765

See accompanying Notes to Consolidated Financial Statements.

EASTGROUP PROPERTIES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME

Years Ended December 31,

(In thousands, except per share data)

REVENUES

EXPENSES

Indirect leasing costs 661 411 —

OTHER INCOME (EXPENSE)

Other comprehensive income (loss) – cash flow hedges (13,559) (3,894) 1,353

Net income attributable to common stockholders $ 2.77 3.25 2.50

Net income attributable to common stockholders $ 2.76 3.24 2.49

See accompanying Notes to Consolidated Financial Statements.

EASTGROUP PROPERTIES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

(In thousands, except share and per share data)

Net unrealized change in fair value of cash flow hedges — — — 1,353 — 1,353

Common dividends declared – $2.72 per share — — (97,667) — — (97,667)

Stock-based compensation, net of forfeitures — 6,103 — — — 6,103

Purchase of noncontrolling interest in joint venture — (136) — — — (136)

Contributions from noncontrolling interest — — — — 50 50

Distributions to noncontrolling interest — — — — (194) (194)

Net unrealized change in fair value of cash flow hedges — — — (3,894) — (3,894)

Stock-based compensation, net of forfeitures — 9,374 — — — 9,374

Contributions from noncontrolling interest — — — — 821 821

Distributions to noncontrolling interest — — — — (2,378) (2,378)

Stock-based compensation, net of forfeitures — 8,502 — — — 8,502

Contributions from noncontrolling interest — — — — 20 20

Distributions to noncontrolling interest — — — — (115) (115)

Sale of noncontrolling interest in joint venture — (228) — — (818) (1,046)

See accompanying Notes to Consolidated Financial Statements.

EASTGROUP PROPERTIES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

Years Ended December 31,

(In thousands)

OPERATING ACTIVITIES

Changes in operating assets and liabilities:

Accounts payable, accrued expenses and prepaid rent (18,851) 6,514 (2,682)

INVESTING ACTIVITIES

Changes in other assets and other liabilities (28,627) (9,293) (12,955)

FINANCING ACTIVITIES

Proceeds from dividend reinvestment plan — 212 221

INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (203) (150) 358

CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 224 374 16

CASH AND CASH EQUIVALENTS AT END OF YEAR $ 21 224 374

SUPPLEMENTAL CASH FLOW INFORMATION

Cash paid for operating lease liabilities 1,476 1,314 —

NON-CASH OPERATING ACTIVITY

See accompanying Notes to Consolidated Financial Statements.

EASTGROUP PROPERTIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2020, 2019 and 2018

(1)SIGNIFICANT ACCOUNTING POLICIES

(a)Principles of Consolidation

The consolidated financial statements include the accounts of EastGroup Properties, Inc. (“EastGroup” or “the Company”), its wholly owned subsidiaries and its investment in any joint ventures in which the Company has a controlling interest.

As of December 31, 2018, EastGroup had an 80% controlling interest in University Business Center 120 and 130 through a joint venture partnership. During the fourth quarter of 2019, the Company, along with the noncontrolling interest partner, sold University Business Center 130 and as of December 31, 2019, EastGroup had an 80% controlling interest in University Business Center 120. During the fourth quarter of 2020, the Company sold its 80% controlling interest in University Business Center 120 and the joint venture partnership was dissolved.

Also during 2019, EastGroup entered into two joint venture arrangements. On May 31, 2019, the Company acquired 6.5 acres of land in San Diego, known by the Company as the Miramar Land. In the second quarter of 2019, a joint venture was formed through which EastGroup owns a 95% controlling interest in this property. Also, on December 31, 2019, the Company acquired 41.6 acres of land in San Diego, known by the Company as the Otay Mesa Land, with the same noncontrolling interest partner with EastGroup owning a 99% controlling interest in the property.

As of December 31, 2020 and 2019, EastGroup had a 95% controlling interest in the Miramar Land and a 99% controlling interest in the Otay Mesa Land.

The Company records 100% of the assets, liabilities, revenues and expenses of the properties 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 II. All significant intercompany transactions and accounts have been eliminated in consolidation.

(b)Income Taxes

EastGroup, a Maryland corporation, has qualified as a real estate investment trust (“REIT”) under Sections 856-860 of the Internal Revenue Code and intends to continue to qualify as such. To maintain its status as a REIT, the Company is required to, among other things, distribute at least 90% of its ordinary taxable income to its stockholders. If the Company has a capital gain, it has the option of (i) deferring recognition of the capital gain through a tax-deferred exchange, (ii) declaring and paying a capital gain dividend on any recognized net capital gain resulting in no corporate level tax, or (iii) retaining and paying corporate income tax on its net long-term capital gain, with the shareholders reporting their proportional share of the undistributed long-term capital gain and receiving a credit or refund of their share of the tax paid by the Company. The Company distributed all of its 2020, 2019 and 2018 taxable income to its stockholders. Accordingly, no significant provisions for income taxes were necessary. The following table summarizes the federal income tax treatment for all distributions by the Company for the years ended 2020, 2019 and 2018.

Federal Income Tax Treatment of Share Distributions

Years Ended December 31,

Common Share Distributions: (Per share)

Nondividend distributions — — —

Unrecaptured Section 1250 capital gain — — —

Other capital gain — — —

EastGroup applies the principles of Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 740, Income Taxes, when evaluating and accounting for uncertainty in income taxes. With few exceptions, the Company’s 2016 and earlier tax years are closed for examination by U.S. federal, state and local tax authorities. In accordance with the provisions of ASC 740, the Company had no significant uncertain tax positions as of December 31, 2020 and 2019.

EASTGROUP PROPERTIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The Company’s income may differ for tax and financial reporting purposes principally because of (i) the timing of the deduction for the provision for possible losses and losses on investments, (ii) the timing of the recognition of gains or losses from the sale of investments, (iii) different income recognition methods for rental income, (iv) different depreciation methods and lives, (v) real estate properties having a different basis for tax and financial reporting purposes, (vi) mortgage loans having a different basis for tax and financial reporting purposes, thereby producing different gains upon collection of these loans, and (vii) differences in book and tax allowances and timing for stock-based compensation expense.

(c)Income Recognition

The Company’s primary revenue is rental income from business distribution space. Minimum rental income from real estate operations is recognized on a straight-line basis. The straight-line rent calculation on leases includes the effects of rent concessions and scheduled rent increases, and the calculated straight-line rent income is recognized over the lives of the individual leases. The Company maintains allowances for doubtful accounts receivable, including straight-line rents receivable, based upon estimates determined by management. Management specifically analyzes aged receivables, customer credit-worthiness and current economic trends when evaluating the adequacy of the allowance for doubtful accounts. Revenue is recognized on payments received from tenants for early terminations after all criteria have been met in accordance with ASC 840, Leases, prior to January 1, 2019, and in accordance with ASC 842, Leases, subsequently.

In February 2016, the FASB issued Accounting Standards Update (“ASU”) 2016-02, Leases (Topic 842), and in subsequent periods, issued ASU 2018-10, 2018-11, and 2018-20, all of which relate to the new lease accounting guidance. The Company adopted the new lease accounting guidance effective January 1, 2019, and has applied its provisions on a prospective basis. Lessor accounting is largely unchanged under ASU 2016-02. The Company’s primary revenue is rental income; as such, the Company is a lessor on a significant number of leases. The Company is continuing to account for its leases in substantially the same manner. The most significant changes for the Company related to lessor accounting include: (i) the new standard’s narrow definition of initial direct costs for leases, and (ii) the guidance applicable to recording uncollectible rents, as discussed in the following paragraphs.

The new standard’s narrow definition of initial direct costs for leases — The new definition of initial direct costs results in certain costs (primarily legal costs related to lease negotiations) being expensed rather than capitalized upon adoption of the new standard. EastGroup recorded Indirect leasing costs of $661,000 and $411,000 on the Consolidated Statements of Income and Comprehensive Income during the years ended December 31, 2020 and 2019, respectively.

The guidance applicable to recording uncollectible rents — Upon adoption of the lease accounting guidance, reserves for uncollectible accounts are recorded as a reduction to revenue. Prior to adoption, reserves for uncollectible accounts were recorded as bad debt expenses. The standard also provides guidance related to calculating the reserves; however, those changes did not impact the Company.

EastGroup elected the practical expedient permitting lessors to make an accounting policy election by class of underlying asset to not separate non-lease components (such as common area maintenance) of a contract from the lease component to which they relate when specific criteria are met. The Company believes its leases meet the criteria.

The Company has applied the provisions of the new lease accounting standard and provided the required disclosures in the notes to the consolidated financial statements.

The table below presents the components of Income from real estate operations for the years ended December 31, 2020 and 2019:

Years Ended December 31,

(In thousands)

(1)Primarily includes tenant reimbursements for real estate taxes, insurance and common area maintenance.

In April 2020, the FASB issued FASB Staff Question-and-Answer (“Q&A”)-Topic 842 and Topic 840: Accounting for Lease Concessions Related to the Effects of the COVID-19 Pandemic to clarify whether lease concessions related to the effects of the COVID-19 pandemic require the application of lease modification guidance under FASB ASC 842, Leases. Under ASC 842,

EASTGROUP PROPERTIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

an entity must determine, on a lease by lease basis, if a lease concession was the result of a new arrangement reached with the tenant, which would be accounted for under the lease modification framework, or if the lease concession was under the enforceable rights and obligations that existed in the original lease, which would be accounted for outside the lease modification framework. The Q&A provides a practical expedient for entities to make an election to account for certain lease concessions consistent with how those concessions would be accounted for outside of the lease modification framework. This election is available for concessions related to the effects of the COVID-19 pandemic that do not result in a substantial increase in the rights of the lessor or the obligations of the lessee. The FASB staff provided two possible methods to account for deferral of payments with no substantive changes to the consideration in the original contract: (a) account for the concessions as if no changes to the lease contract were made and, (b) account for the deferred payments as variable lease payments. The Company has elected the practical expedient provided by the FASB staff and is accounting for lease concessions meeting the criterion as if no changes to the lease contract were made. For the year ended December 31, 2020, the Company recognized approximately $1,483,000 in Income from real estate operations from lease concessions under this election.

Future Minimum Rental Receipts Under Non-Cancelable Leases

The Company’s leases with its customers may include various provisions such as scheduled rent increases, renewal options and termination options. The majority of the Company’s leases include defined rent increases rather than variable payments based on an index or unknown rate. In calculating the disclosures presented below, the Company included the fixed, non-cancelable terms of the leases. The following schedule indicates approximate future minimum rental receipts under non-cancelable leases for real estate properties by year as of December 31, 2020:

Years Ending December 31, (In thousands)

The Company recognizes gains on sales of real estate in accordance with the principles set forth in the Codification. For each transaction, the Company evaluates whether the guidance in ASC 606, Revenue from Contracts with Customers, or ASC 610, Other Income - Gains and Losses from the Derecognition of Nonfinancial Assets, is applicable. Upon closing of real estate transactions, the provisions of the Codification require consideration of whether the seller has a controlling financial interest in the entity that holds the nonfinancial asset after the transaction. In addition, the seller evaluates whether a contract exists under ASC 606 and whether the counterparty obtained control of each nonfinancial asset that is sold. If a contract exists and the counterparty obtained control of each nonfinancial asset, the seller derecognizes the assets at the close of the transaction with resulting gains or losses reflected on the Consolidated Statements of Income and Comprehensive Income.

The Company recognizes interest income on mortgage loans on the accrual method unless a significant uncertainty of collection exists. If a significant uncertainty exists, interest income is recognized as collected. If applicable, discounts on mortgage loans receivable are amortized over the lives of the loans using a method that does not differ materially from the interest method. The Company evaluates the collectibility of both interest and principal on each of its loans to determine whether the loans are impaired. A loan is considered to be impaired when, based on current information and events, it is probable that the Company will be unable to collect all amounts due according to the existing contractual terms. When a loan is considered to be impaired, the amount of loss is calculated by comparing the recorded investment to the value determined by discounting the expected future cash flows at the loan’s effective interest rate or to the fair value of the underlying collateral (if the loan is collateralized) less costs to sell. During the years ended December 31, 2020 and 2019, there was no significant uncertainty of collection; therefore, interest income was recognized. As of December 31, 2019, the Company determined that no allowance for collectibility of the mortgage loans receivable was necessary. The Company's mortgage loans receivable was fully collected during the year ended December 31, 2020.

(d)Real Estate Properties

EastGroup has one reportable segment–industrial properties. These properties are primarily located in major Sunbelt regions of the United States. The Company's properties have similar economic characteristics and as a result, have been aggregated into one reportable segment.

EASTGROUP PROPERTIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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 years ended December 31, 2020 and 2019, the Company did not identify any impairment charges which should be recorded.

Depreciation of buildings and other improvements is computed using the straight-line method over estimated useful lives of generally 40 years for buildings and 3 to 15 years for improvements. 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 $96,290,000, $86,590,000 and $76,007,000 for 2020, 2019 and 2018, respectively.

(e)Development and Value-Add Properties

For properties under development and value-add properties (defined in Note 2) acquired in the development stage, costs associated with development (i.e., land, construction costs, interest expense, property taxes and other direct and indirect 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 the development and value-add program to Real estate properties as follows: (i) for development properties, at the earlier of 90% occupancy or one year after completion of the shell construction, and (ii) 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, capitalization of development costs, including interest expense, property taxes and internal personnel costs, ceases and depreciation commences on the entire property (excluding the land).

(f)Real Estate Held for Sale

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

(g)Derivative Instruments and Hedging Activities

EastGroup applies ASC 815, Derivatives and Hedging, which requires all entities with derivative instruments to disclose information regarding how and why the entity uses derivative instruments and how derivative instruments and related hedged items affect the entity’s financial position, financial performance and cash flows. See Note 13 for a discussion of the Company's derivative instruments and hedging activities.

(h)Cash Equivalents

The Company considers all highly liquid investments with a maturity of three months or less when purchased to be cash equivalents.

(i)Amortization

Debt origination costs are deferred and amortized over the term of each loan using the effective interest method. Amortization of debt issuance costs was $1,418,000, $1,344,000 and $1,352,000 for 2020, 2019 and 2018, respectively. Amortization of facility fees was $790,000, $790,000 and $736,000 for 2020, 2019 and 2018, respectively.

EASTGROUP PROPERTIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Leasing costs are deferred and amortized using the straight-line method over the term of the lease. Leasing costs paid during the period are included in Changes in other assets and other liabilities in the Investing Activities section on the Consolidated Statements of Cash Flows. Leasing costs amortization expense was $14,449,000, $13,167,000 and $11,493,000 for 2020, 2019 and 2018, respectively.

Amortization expense for in-place lease intangibles is disclosed below in Real Estate Property Acquisitions and Acquired Intangibles.

(j)Real Estate Property Acquisitions and Acquired Intangibles

Upon acquisition of real estate properties, EastGroup applies the principles of ASC 805, Business Combinations. The FASB Codification provides a framework for determining whether transactions should be accounted for as acquisitions (or disposals) 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 (or disposed of) is concentrated in a single identifiable asset or a group of similar identifiable assets; if so, the set is not a business. EastGroup determined that its real estate property acquisitions in 2020, 2019 and 2018 are considered to be acquisitions of groups of similar identifiable assets; therefore, the acquisitions are not considered to be acquisitions of a business. As a result, the Company has capitalized acquisition costs related to its 2020, 2019 and 2018 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 relative fair values. If applicable, goodwill for business combinations is recorded when the purchase price exceeds the fair value of the assets and liabilities acquired. 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.

Amortization of above and below market leases increased rental income by $1,451,000, $1,229,000 and $667,000 in 2020, 2019 and 2018, respectively. Amortization expense for in-place lease intangibles was $5,620,000, $4,967,000 and $4,204,000 for 2020, 2019 and 2018, respectively.

Projected amortization of in-place lease intangibles for the next five years as of December 31, 2020 is as follows:

Years Ending December 31, (In thousands)

During 2020, the Company acquired the following operating properties: Wells Point One in Austin; Cherokee 75 Business Center 1 in Atlanta; and The Rock in Dallas. The Company also acquired one value-add property, Rancho Distribution Center in Los Angeles. At the time of acquisition, Rancho Distribution Center was classified in the lease-up phase. The total cost for

EASTGROUP PROPERTIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

the properties acquired by the Company was $76,518,000, of which $46,240,000 was allocated to Real estate properties and $27,320,000 was allocated to Development and value-add properties. EastGroup allocated $23,565,000 of the total purchase price to land using third party land valuations for the Atlanta, Austin, Dallas and Los Angeles markets. The market values are considered to be Level 3 inputs as defined by ASC 820, Fair Value Measurement (see Note 18 for additional information on ASC 820). Intangibles associated with the purchase of real estate were allocated as follows: $3,257,000 to in-place lease intangibles and $104,000 to above market leases (both included in Other assets on the Consolidated Balance Sheets) and $403,000 to below market leases (included in Other liabilities on the Consolidated Balance Sheets). These costs are amortized over the remaining lives of the associated leases in place at the time of acquisition.

During 2019, the Company acquired the following operating properties: Airways Business Center in Denver; 385 Business Park in Greenville; Grand Oaks 75 Business Center 1 in Tampa; and Siempre Viva Distribution Center 2 and Rocky Point Distribution Center 1 in San Diego. The Company also acquired the following value-add properties: Logistics Center 6 & 7 and Arlington Tech Centre 1 & 2 in Dallas; Grand Oaks 75 Business Center 2 in Tampa; Interstate Commons Distribution Center 2 in Phoenix; Southwest Commerce Center in Las Vegas; and Rocky Point Distribution Center 2 in San Diego. At the time of acquisition, these value-add properties were classified in the lease-up or under construction phase. The total cost for the properties acquired by the Company was $205,841,000, of which $105,301,000 was allocated to Real estate properties and $92,268,000 was allocated to Development and value-add properties. EastGroup allocated $46,778,000 of the total purchase price to land using third party land valuations for the Denver, Greenville, Tampa, Dallas, Phoenix, Las Vegas and San Diego markets. Logistics Center 6 & 7 is located on land under a ground lease; therefore, no value was allocated to land for this transaction. The market values are considered to be Level 3 inputs as defined by ASC 820, Fair Value Measurement (see Note 18 for additional information on ASC 820). Intangibles associated with the purchase of real estate were allocated as follows: $10,020,000 to in-place lease intangibles and $344,000 to above market leases and $2,092,000 to below market leases. These costs are amortized over the remaining lives of the associated leases in place at the time of acquisition.

Also during 2019, EastGroup acquired 6.5 acres of operating land in San Diego for $13,386,000. In connection with the acquisition, the Company allocated value to land and below market leases. EastGroup recorded land of $13,979,000 based on third party land valuations for the San Diego market. The market values are considered to be Level 3 inputs as defined by ASC 820, Fair Value Measurement. This land, which is included in Real estate properties on the Consolidated Balance Sheets, is currently leased to a tenant that operates a parking lot on the site. The Company recorded $593,000 to below market leases in connection with this land acquisition. These costs are amortized over the remaining life of the associated lease in place at the time of acquisition.

EastGroup also acquired 41.6 acres of operating land in San Diego for $15,282,000. This land is included in Real estate properties on the Consolidated Balance Sheets. During 2019 and 2020, this land parcel was leased (on a month-to-month basis) to various tenants operating outdoor storage on the site.

During 2019, EastGroup also acquired a small parcel of land (0.5 acres) adjacent to its Yosemite Distribution Center in Milpitas (San Francisco), California, for $472,000. This land is included in Real estate properties on the Consolidated Balance Sheets.

During 2018, the Company acquired the following operating properties: Gwinnett 316 in Atlanta; Eucalyptus Distribution Center in Chino (Los Angeles); Allen Station I & II in Dallas; and Greenhill Distribution Center in Austin. The Company also acquired one value-add property, Siempre Viva Distribution Center in San Diego. At the time of acquisition, Siempre Viva was classified in the lease-up phase. The total cost for the properties acquired by the Company was $71,086,000, of which $54,537,000 was allocated to Real estate properties and $13,934,000was allocated to Development and value-add properties. EastGroup allocated $23,263,000 of the total purchase price to land using third party land valuations for the Atlanta, Dallas, Austin, San Diego and Chino (Los Angeles) markets. The market values are considered to be Level 3 inputs as defined by ASC 820, Fair Value Measurement (see Note 18 for additional information on ASC 820). Intangibles associated with the purchase of real estate were allocated as follows: $4,350,000 to in-place lease intangibles, $21,000 to above market leases and $1,756,000 to below market leases. These costs are amortized over the remaining lives of the associated leases in place at the time of acquisition.

The Company periodically reviews the recoverability of goodwill (at least annually) and the recoverability of other intangibles (on a quarterly basis) for possible impairment. In management’s opinion, no impairment of goodwill and other intangibles existed at December 31, 2020 and 2019.

(k)Stock-Based Compensation

In May 2004, the stockholders of the Company approved the EastGroup Properties, Inc. 2004 Equity Incentive Plan (“the 2004 Plan”), which was further amended by the Board of Directors in September 2005 and December 2006. This plan authorized the

EASTGROUP PROPERTIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

issuance of common stock to employees in the form of options, stock appreciation rights, restricted stock, deferred stock units, performance shares, bonus stock or stock in lieu of cash compensation.

In April 2013, the Board of Directors adopted the EastGroup Properties, Inc. 2013 Equity Incentive Plan (the “2013 Equity Plan”) upon the recommendation of the Compensation Committee; the 2013 Equity Plan was approved by the Company's stockholders and became effective May 29, 2013. The 2013 Equity Plan was further amended by the Board of Directors in March 2017. The 2013 Equity Plan replaced the 2004 Plan. Typically, the Company issues new shares to fulfill stock grants or upon the exercise of stock options.

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.

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 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.

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

(m)Use of Estimates

The preparation of financial statements in conformity with U.S. generally accepted accounting principles (“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.

(n)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 due to the current coronavirus (“COVID-19”) pandemic, as discussed below, or other general economic conditions, it may affect the Company’s ability to make distributions to its shareholders, service debt, or meet other financial obligations.

On March 11, 2020, the World Health Organization characterized COVID-19 as a pandemic. The United States, which is where EastGroup’s properties are located, has experienced widespread infection, and there is uncertainty regarding how long the pandemic will impact the United States and the rest of the world. Unprecedented, extraordinary actions have been taken by federal, state and local governmental authorities to combat the spread of COVID-19, including issuance of “stay-at-home” directives and similar mandates for many individuals to substantially restrict daily activities and for many businesses to curtail

EASTGROUP PROPERTIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

or cease normal operations. These measures, while intended to protect human life, have led to, and may continue to lead to, reduced economic activity in certain sectors and an increase in unemployment throughout the United States, including some markets where the Company’s properties are located. As a result, there has been, and may continue to be, a period of economic slowdown, the severity of which is uncertain. Such economic slowdown, among other disruptions caused by the COVID-19 pandemic may adversely impact EastGroup’s financial condition and results of operations and the financial condition and results of operations of the Company’s tenants.

EastGroup’s ability to lease its properties and collect rental revenues and expense reimbursements is dependent upon national, regional and local economic conditions. The potential inability to renew leases, lease vacant space or re-lease space as leases expire on favorable terms, or at all, could cause a decline in the Company’s receipt of rental payments. The Company has been in communication with a portion of its customer base regarding rent relief requests and has executed rent deferral agreements totaling $1.7 million, all of which were applicable to periods through December 31, 2020. The majority of these deferral agreements ($1.4 million of the $1.7 million) qualify under modified COVID-19-related guidance provided by the FASB for rental income to be recognized in the periods in which they were charged under the original terms of the leases. When requests were made, they were handled on a case-by-case basis, and the Company’s responses were largely dependent on its understanding of the financial strength of the customer, the operational and earnings impacts being experienced by the customer, and the customer’s ability or inability to obtain capital through debt or equity issuances, government assistance programs or by other means.

Some of the Company’s customers are experiencing a deterioration in their financial position, results of operations and cash flows; as a result, they may not be able to pay their rent and expense reimbursements, which could adversely affect EastGroup’s financial condition, results of operations and cash flows.

Federal, state and local government restrictions associated with the mitigation efforts to prevent the spread of COVID-19 could prevent EastGroup’s customers from accessing their leased space and operating their businesses; such restrictions could also impact the Company’s ability to operate its business, which may cause the business and operating results to decline or impact the Company’s ability to comply with regulatory obligations leading to reputational harm and regulatory issues or fines. Such restrictions could also inhibit the Company’s ability to lease vacant space in its operating portfolio and its development and value-add program. In addition, government restrictions could prevent construction of tenant improvements and development projects, which could delay construction completion and lease commencement dates. In each case, EastGroup may experience an adverse impact on its financial condition and results of operations.

The economic uncertainty surrounding the COVID-19 pandemic has caused and may continue to cause disruption and instability in the financial markets and may impact EastGroup’s ability to raise capital from debt and equity markets on favorable terms or at all.

The health and well-being of EastGroup’s customers, employees, directors and other stakeholders is of great importance to the Company. The Company is striving to accommodate flexible working arrangements for its employees to ensure the health and safety of its team, while employees are continuing to perform job duties and provide services to the Company’s customers and other stakeholders. There are risks associated with remote working arrangements, including, but not limited to, risks related to cyber-security. EastGroup is continuing to monitor and adhere to federal, state and local government guidelines regarding its work arrangements with the goal of preventing the spread of COVID-19 to the Company’s workforce, customers and communities. There are risks and uncertainties related to the health of the Company’s employees and directors; any potential deterioration of the health of key personnel could impact EastGroup’s business operations.

The ongoing COVID-19 pandemic and the current economic, financial and capital markets environment present material risks and uncertainties for the Company. However, the rapid development and fluidity of the situation precludes any prediction as to the ultimate impact COVID-19 will have on EastGroup’s business, financial condition, results of operations and cash flows, which will depend largely on future developments directly or indirectly relating to the duration and scope of the COVID-19 pandemic in the United States.

(o)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.

EASTGROUP PROPERTIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

initial recognition threshold in current GAAP and, instead, requires an entity to reflect its current estimate of all expected credit losses. For available for sale debt securities (EastGroup does not currently hold any and does not intend to hold any in the future), credit losses should be measured in a similar manner to current GAAP; however, Topic 326 requires that credit losses be presented as an allowance rather than a write-down. The ASUs affect entities holding financial assets and are effective for annual periods beginning after December 15, 2019, and interim periods within those fiscal years. The Company adopted ASU 2016-13 and ASU 2018-19 on January 1, 2020, and the adoption did not have a material impact on its financial condition, results of operations or disclosures.

(p)Classification of Book Overdraft on Consolidated Statements of Cash Flows

The Company classifies changes in book overdraft in which the bank has not advanced cash to the Company to cover outstanding checks as an operating activity. Such amounts are included in Accounts payable, accrued expenses and prepaid rent in the Operating Activities section on the Consolidated Statements of Cash Flows.

(2)REAL ESTATE PROPERTIES AND DEVELOPMENT AND VALUE-ADD PROPERTIES

The Company’s Real estate properties and Development and value-add properties at December 31, 2020 and 2019 were as follows:

December 31,

(In thousands)

Real estate properties:

Right of use assets — Ground leases (operating) (1) 11,073 11,997

(1)See Ground Leases discussion below for information regarding the Company's right of use assets for ground leases.

(2)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% occupied 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.

EastGroup acquired operating properties during 2020, 2019 and 2018 as discussed in Note 1(j).

The Company sold operating properties during 2020, 2019 and 2018 as shown in the table below. The results of operations and gains and losses on sales for the properties sold during the periods presented are reported in continuing operations on the

EASTGROUP PROPERTIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Consolidated Statements of Income and Comprehensive Income. The gains and losses on sales are included in Gain on sales of real estate investments.

The Company did not classify any properties as held for sale as of December 31, 2020 and 2019.

Sales of Real Estate

A summary of Gain on sales of real estate investments for the years ended December 31, 2020, 2019 and 2018 follows:

(In thousands)

(1)EastGroup owned 80% of University Business Center 120 through a joint venture partnership. EastGroup sold its 80% share of the joint venture, and the partnership was dissolved. The information shown for this transaction represents EastGroup's 80% ownership.

(2)EastGroup owned 80% of University Business Center 130 through a joint venture partnership. The information shown for this transaction also includes the 20% attributable to the Company's noncontrolling interest partner.

The table above includes sales of operating properties. During 2020, there were no land sales; however, the Company sold parcels of land during 2019 and 2018. During the year ended December 31, 2019, the Company sold (through eminent domain procedures) a small parcel of land (0.2 acres) in San Diego for $185,000 and recognized a gain on the sale of $83,000. During the year ended December 31, 2018, EastGroup sold a parcel of land in Houston for $2,577,000 and recognized a gain on the sale of $86,000. The net gains on sales of land are included in Other on the Consolidated Statements of Income and Comprehensive Income.

Development and Value-Add Properties

The Company’s development and value-add program as of December 31, 2020, was comprised of the properties detailed in the table below. Costs incurred include capitalization of interest costs during the period of construction. The interest costs capitalized on development projects for 2020 were $9,651,000 compared to $8,453,000 for 2019 and $6,334,000 for 2018. In addition, EastGroup capitalized internal development costs of $6,689,000 during the year ended December 31, 2020, compared to $6,918,000 during 2019 and $4,696,000 in 2018.

Total capital invested for development and value-add properties during 2020 was $195,446,000, which primarily consisted of costs of $170,418,000 as detailed in the Development and Value-Add Properties Activity table below, $18,550,000 as detailed in the Development and Value-Add Properties Transferred to the Real Estate Properties Portfolio During 2020 table below and costs of $5,743,000 on projects subsequent to transfer to Real estate properties. The capitalized costs incurred on development projects 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).

EASTGROUP PROPERTIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In thousands)

(Unaudited) (Unaudited) (Unaudited)

LEASE-UP Building Size (Square feet)

UNDER CONSTRUCTION

EGP US Equity

EGP · 10-K · period ended 2020-12-31

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.

ITEM 9A. CONTROLS AND PROCEDURES.

ITEM 9B. OTHER INFORMATION.

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE.

ITEM 11. EXECUTIVE COMPENSATION.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE.

ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES.

ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.

EGP US Equity☆

EGP · 10-K · period ended 2020-12-31

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.

ITEM 9A. CONTROLS AND PROCEDURES.

ITEM 9B. OTHER INFORMATION.

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE.

ITEM 11. EXECUTIVE COMPENSATION.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE.

ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES.

ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.

EGP US Equity