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.

The COVID-19 pandemic has not had a materially disruptive effect on EastGroup’s operations, occupancy or rent collections to date. However, EastGroup cannot predict the severity and duration of the economic uncertainty related to the pandemic, and the pandemic’s effect on EastGroup’s customers and on the Company’s business, future financial condition and operating results cannot be predicted with certainty at this time. We have received a limited number of, and may in the future receive additional, rent relief requests from our tenants. As of December 31, 2021, we do not believe that these rent relief requests will have a material impact on our rental revenues. The discussions below, including without limitation with respect to liquidity, are subject to the future effects of the COVID-19 pandemic and the related actions to curb its spread, which continue to evolve.

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 on currently acceptable terms. During 2021, EastGroup issued 1,551,181 shares of common stock through its continuous common equity offering program, providing net proceeds to the Company of $271.2 million. Also during 2021, the Company closed a $50 million senior unsecured term loan with an effective fixed interest rate of 1.55% and the private placement of $125 million of senior unsecured notes with a fixed interest rate of 2.74%. The Company amended and restated its two unsecured bank credit facilities on June 29, 2021, expanding the capacity from $350 million and $45 million to $425 million and $50 million, respectively, and extending the maturity dates from July 30, 2022 to July 30, 2025. EastGroup’s financing and equity issuances are further described in Liquidity and Capital Resources below.

The Company’s primary revenue is rental income. During 2021, EastGroup executed leases on 9,789,000 square feet of operating properties (20.8% of EastGroup’s total square footage of 47,019,000 as of December 31, 2021). For new and renewal leases signed during 2021, average rental rates increased by 31.2% as compared to the former leases on the same spaces.

Property Net Operating Income (“PNOI”) Excluding Income from Lease Terminations from same properties (defined as operating properties owned during the entire current and prior year reporting periods – January 1, 2020 through December 31, 2021), increased 6.8% for 2021 compared to 2020.

EastGroup’s operating portfolio was 98.7% leased at December 31, 2021 compared to 98.0% at December 31, 2020. As of February 15, 2022, the operating portfolio was 98.1% leased and 97.1% occupied. Leases scheduled to expire in 2022 were 13.1% of the operating portfolio on a square foot basis at December 31, 2021, and this percentage was reduced to 10.7% as of February 15, 2022.

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

During 2021, EastGroup acquired 1,806,000 square feet of operating and value-add properties in Dallas, Austin, Phoenix, San Diego, Greenville and Atlanta and 365.8 acres of land in Austin, Houston, Charlotte, Greenville and Atlanta for a total of $320.3 million. The Company began construction of 17 development projects containing 2,806,000 square feet in 12 cities. Also in 2021, the Company transferred 17 development and value-add properties (2,688,000 square feet) in 10 cities from its development and value-add program to real estate properties with costs of $272.3 million at the date of transfer. As of December 31, 2021, EastGroup’s development and value-add program consisted of 21 projects (3,905,000 square feet) located in 14 cities. The projected total cost for the development and value-add projects, which were collectively 49% leased as of February 15, 2022, is $524.7 million, of which $148.1 million remained to be invested as of December 31, 2021.

During 2021, EastGroup sold an operating property containing 284,000 square feet, generating gross sales proceeds of $45.1 million. The Company recognized $38.9 million in Gain on sales of real estate investments during 2021.

The Company typically initially funds its development and acquisition programs through its unsecured bank credit facilities, the total capacity of which was increased in June 2021 to $475 million (as discussed below in Liquidity and Capital Resources). As market conditions permit, EastGroup issues equity and/or employs fixed rate debt, including variable rate debt that has been swapped to an effectively fixed rate through the use of interest rate swaps, to replace short-term bank borrowings. Moody's Investors Service has assigned 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, consistent with the Company’s manner of internal reporting, measurement of operating results and allocation of the Company’s resources. 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”). Nareit’s guidance allows preparers an option as it pertains to whether gains or losses on sale, or impairment charges, on real estate assets incidental to a REIT’s business are excluded from the calculation of FFO. EastGroup has made the election to exclude activity related to such assets that are incidental to our business.

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, 2021, Same Properties includes properties which were included in the operating portfolio for the entire period from January 1, 2020 through December 31, 2021. The Company presents Same PNOI and Same PNOI Excluding Income from Lease Terminations as a property-level supplemental measure of performance used to evaluate the performance of the Company’s investments in real estate assets and its operating results on a same property basis.

FFO and PNOI are supplemental industry reporting measurements used to evaluate the performance of the Company’s investments in real estate assets and its operating results. The Company believes that the exclusion of depreciation and amortization in the calculations of PNOI and FFO provides supplemental indicators of the properties’ performance since real estate values have historically risen or fallen with market conditions. PNOI and FFO as calculated by the Company may not be comparable to similarly titled but differently calculated measures for other 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. These non-GAAP figures should not be considered a substitute for, and should only be considered together with and as a supplement to, the Company’s financial information presented in accordance with GAAP.

The following table presents reconciliations of Net Income to PNOI, Same PNOI and Same PNOI Excluding Income from Lease Terminations for the three fiscal years ended December 31, 2021, 2020 and 2019.

Years Ended December 31,

(In thousands)

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

Net loss on other — — 884

Company’s share of depreciation from unconsolidated investment 136 137 141

Noncontrolling interest in PNOI of consolidated joint ventures (61) (171) (199)

Net lease termination fee income from same properties (1,411) (709) *

SAME PNOI EXCLUDING INCOME FROM LEASE TERMINATIONS $ 260,456 243,920 *

* Same property metrics are not applicable to the year ended December 31, 2019, as the same property metrics for 2021 and 2020 are based on operating properties owned during the entire current and prior year reporting periods (January 1, 2020 through December 31, 2021).

PNOI was calculated as follows for the three fiscal years ended December 31, 2021, 2020 and 2019.

Years Ended December 31,

(In thousands)

Noncontrolling interest in PNOI of consolidated joint ventures (61) (171) (199)

PNOI from 50% owned unconsolidated investment 960 978 976

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 Attributable to EastGroup Properties, Inc. Common Stockholders to FFO Attributable to Common Stockholders for the three fiscal years ended December 31, 2021, 2020 and 2019.

Years Ended December 31,

(In thousands, except per share data)

Company’s share of depreciation from unconsolidated investment 136 137 141

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

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

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 2021, FFO was $6.09 per share compared with $5.38 per share for 2020, an increase of 13.2%.

•For the year ended December 31, 2021, PNOI increased by $35,125,000, or 13.5%, compared to 2020. PNOI increased $17,238,000 from same property operations, $14,418,000 from newly developed and value-add properties and $4,619,000 from 2020 and 2021 acquisitions; PNOI decreased $1,173,000 from operating properties sold in 2020 and 2021.

•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, 2020 through December 31, 2021). Same PNOI, excluding income from lease terminations, increased 6.8% for the year ended December 31, 2021, compared to 2020.

•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, 2020 through December 31, 2021). Same property average occupancy for the year ended December 31, 2021 was 97.6% compared to 97.0% for 2020.

•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, 2021 was 97.4%. Quarter-end occupancy ranged from 96.8% to 97.6% over the previous four quarters ended December 31, 2020 to September 30, 2021.

•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 2021, rental rate increases on new and renewal leases (20.8% of total square footage) averaged 31.2%.

•Lease termination fee income is included in Income from real estate operations. For the year 2021, lease termination fee income was $1,411,000 compared to $709,000 for 2020.

•The Company records reserves for uncollectible rent as reductions to Income from real estate operations; recoveries for uncollectible rent are recorded as additions to Income from real estate operations. The Company recorded net recoveries for uncollectible rent of $475,000 in 2021 compared to net reserves for uncollectible rent of $2,763,000 in 2020. We evaluate the collectability of rents and other receivables for individual leases 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, 2021 and also evaluated all deferred rent related to the COVID-19 pandemic for collectability.

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 Financial Accounting Standards Board (“FASB”) Codification provides guidance on how to properly determine the allocation of the purchase price among the individual components of both the tangible and intangible assets based on their respective fair values. Factors considered by management in allocating the cost of the properties acquired include an estimate of carrying costs during the expected lease-up periods considering current market conditions and costs to execute similar leases. The allocation to tangible assets (land, building and improvements) is based upon management’s determination of the value of the property as if it were vacant using discounted cash flow models. Land is valued using comparable land sales specific to the applicable market, provided by a third party. The Company determines whether any financing assumed is above or below market based upon comparison to similar financing terms for similar properties. The cost of the properties acquired may be adjusted based on indebtedness assumed from the seller that is determined to be above or below market rates.

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 lease intangibles are included in Other assets and Other liabilities, respectively, on the Consolidated Balance Sheets and are amortized to rental income over the remaining terms of the respective leases. The total amount of intangible assets is further allocated to in-place lease values and customer relationship values based upon management’s assessment of their respective values. These intangible assets are included in Other assets on the Consolidated Balance Sheets and are amortized over the remaining term of the existing lease, or the anticipated life of the customer relationship, as applicable.

The significance 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 $3,215,336,000 at December 31, 2021, an increase of $494,533,000 from December 31, 2020. Total Liabilities increased $193,591,000 to $1,643,876,000, and Total Equity increased $300,942,000 to $1,571,460,000 during the same period. The following paragraphs explain these changes in greater detail.

Assets

Real Estate Properties

Real estate properties increased $387,214,000 during the year ended December 31, 2021. The increase was primarily due to: (i) the transfer of 17 properties from Development and value-add properties to Real estate properties (as detailed under Development and Value-Add Properties below); (ii) operating property acquisitions; (iii) capital improvements at the Company’s properties; (iv) costs incurred on development and value-add projects subsequent to transfer to Real estate properties discussed below; and (v) right of use assets for the Company’s ground leases. These increases were partially offset

by the transfer of costs from Real estate properties to Development and value-add properties and Real estate assets held for sale andan operating property sale discussed below.

During 2021, EastGroup acquired the following operating properties:

REAL ESTATE PROPERTIES ACQUIRED IN 2021 Location Size DateAcquired Cost

(Square feet) (In thousands)

During the year ended December 31, 2021, the Company made capital improvements of $37,895,000 on existing and acquired properties (included in the Capital Expenditures table under Results of Operations). Also, the Company incurred costs of $13,236,000 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.

Also, during the year ended December 31, 2021, EastGroup sold Jetport Commerce Park, an operating property in Tampa totaling 284,000 square feet. The property was sold for $45.1 million and the Company recognized a gain on the sale of $38.9 million.

Development and Value-Add Properties

EastGroup’s investment in Development and value-add properties at December 31, 2021 consisted of properties in lease-up and under construction of $376,611,000 and prospective development (primarily land) of $128,003,000. The Company’s total investment in Development and value-add properties at December 31, 2021 was $504,614,000 compared to $359,588,000 at December 31, 2020. Total capital invested for development and value-add properties during 2021 was $418,855,000, which primarily consisted of costs of $348,478,000 as detailed in the Development and Value-Add Properties Activity table below, $51,082,000 as detailed in the Development and Value-Add Properties Transferred to the Real Estate Properties Portfolio During 2021 table below and costs of $13,236,000 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 $7,713,000 during the year ended December 31, 2021, compared to $6,689,000 during 2020.

During 2021, EastGroup acquired the following value-add properties:

VALUE-ADD PROPERTIES ACQUIRED IN 2021 Location Size DateAcquired Cost

(Square feet) (In thousands)

Also during 2021, EastGroup purchased 365.8 acres of development land in Austin, Houston, Charlotte, Greenville and Atlanta for $41,065,000. Costs associated with these acquisitions are included in the Development and Value-Add Properties Activity table. These increases were offset by the transfer of 17 development projects to Real estate properties during 2021 with a total investment of $272,292,000 as of the date of transfer.

(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 $88.7 million and tenant improvement obligations of $10.3 million on properties under development.

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

(4)Represents costs transferred from Real estate properties during the year.

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

Accumulated Depreciation

Accumulated depreciation on real estate, development and value-add properties increased $80,289,000 during 2021 due primarily to depreciation expense of $104,910,000, offset by the reclassification of one operating property to Real estate assets held for sale and the sale of one operating property totaling 284,000 square feet during 2021.

Real Estate Assets Held for Sale

Real estate assets held for sale increased $5,695,000 during 2021. As of December 31, 2021, the Company owned one operating property, Metro Business Park, that was classified as held for sale on the December 31, 2021 Consolidated Balance Sheet. The property was sold in the first quarter of 2022, and the Company expects to record a gain on the sale in the three months ended March 31, 2022. The Company did not classify any properties as held for sale as of December 31, 2020.

Other Assets

Other assets increased $32,641,000 during 2021. A summary of Other assets follows:

December 31,

(In thousands)

Leasing costs (principally commissions) $ 116,772 95,914

Accumulated amortization of leasing costs (42,193) (38,371)

Acquired above market lease intangibles 885 1,825

Acquired above market lease intangibles, net of accumulated amortization 377 594

Interest rate swap assets 2,237 —

Right of use assets – Office leases (operating) 1,984 2,131

Receivable for common stock offerings — 1,942

Receivable for tenant improvement cost reimbursements 7,680 192

Liabilities

Unsecured bank credit facilities, net of debt issuance costs increased $82,872,000 during the year ended December 31, 2021, mainly due to borrowings of $625,520,000 and the amortization of debt issuance costs during the period, partially offset by repayments of $541,310,000 and new debt issuance costs incurred during the year. The Company’s credit facilities are described in greater detail below under Liquidity and Capital Resources.

Unsecured debt, net of debt issuance costs increased $134,862,000 during the year ended December 31, 2021, primarily due to the closing of a $50 million senior unsecured term loan in March, closing the private placement of $125 million of senior unsecured notes in June and the amortization of debt issuance costs, partially offset by the repayment of a $40 million term loan in July and new debt issuance costs incurred during the year. The borrowings and repayments on Unsecured debt, net of debt issuance costs are described in greater detail under Liquidity and Capital Resources.

Secured debt, net of debt issuance costs decreased $76,851,000 during the year ended December 31, 2021. The decrease resulted from the repayments of two mortgage loans with principal balances of $40,841,000 and $33,090,000, respectively, regularly scheduled principal payments of $2,989,000 and amortization of premiums on Secured debt, partially offset by the amortization of debt issuance costs during the year.

Accounts payable and accrued expenses increased $40,187,000 during 2021. A summary of the Company’s Accounts payable and accrued expenses follows:

December 31,

(In thousands)

Real estate improvements and capitalized leasing costs payable 5,798 5,692

Other payables and accrued expenses 13,107 9,540

Total Accounts payable and accrued expenses $ 109,760 69,573

(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, which is included in the Company’s Unsecured bank credit facilities. See Note 1(p) in the Notes to Consolidated Financial Statements.

Other liabilities increased $12,521,000 during 2021. A summary of the Company’s Other liabilities follows:

December 31,

(In thousands)

Prepaid rent and other deferred income 16,401 14,694

Operating lease liabilities — Ground leases 22,898 11,199

Operating lease liabilities — Office leases 2,032 2,167

Acquired below market lease intangibles 8,124 6,472

Interest rate swap liabilities 935 10,752

Tenant improvement cost liabilities 2,796 364

Equity

Additional paid-in capital increased $276,767,000 during the year ended December 31, 2021 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 10 in the Notes to Consolidated Financial Statements). EastGroup issued 1,551,181 shares of common stock under its continuous common equity offering program with net proceeds to the Company of $271,155,000.

During 2021, Distributions in excess of earnings decreased $11,611,000 as a result of Net Income Attributable to EastGroup Properties, Inc. Common Stockholders of $157,557,000 exceeding dividends on common stock of $145,946,000.

Accumulated other comprehensive income (loss) increased $12,054,000 during 2021. The increase resulted from the change in fair value of the Company’s interest rate swaps (cash flow hedges) which are further discussed in Notes 11 and 12 in the Notes to Consolidated Financial Statements.

RESULTS OF OPERATIONS

2021 Compared to 2020

Net Income Attributable to EastGroup Properties, Inc. Common Stockholders for the year ended December 31, 2021 was $157,557,000 ($3.91 per basic and $3.90 per diluted share) compared to $108,363,000 ($2.77 per basic and $2.76 per diluted share) for the year ended December 31, 2020. The following paragraphs explain the change:

•PNOI increased by $35,125,000 ($0.87 per diluted share) for 2021 as compared to 2020. PNOI increased $17,238,000 from same property operations, $14,418,000 from newly developed and value-add properties and $4,619,000 from 2020 and 2021 acquisitions; PNOI decreased $1,173,000 from operating properties sold in 2020 and 2021. For the year 2021, lease termination fee income was $1,411,000 compared to $709,000 for 2020. The Company recorded net recoveries for uncollectible rent of $475,000 in 2021 and net reserves for uncollectible rent of $2,763,000 in 2020. Straight-lining of rent increased PNOI by $8,698,000 and $4,888,000 in 2021 and 2020, respectively.

•EastGroup recognized gains on sales of real estate investments of $38,859,000 ($0.96 per diluted share) during 2021 compared to $13,145,000 ($0.33 per diluted share) during 2020.

•Depreciation and amortization expense increased by $10,740,000 ($0.27 per diluted share) during 2021 compared to 2020.

EastGroup entered into 174 leases with certain rent concessions on 5,677,000 square feet during 2021 with total rent concessions of $11,007,000 over the lives of the leases, compared to 179 leases with rent concessions on 4,965,000 square feet with total rent concessions of $7,548,000 over the lives of the leases in 2020.

The Company’s percentage of leased square footage for the operating portfolio was 98.7% at December 31, 2021, compared to 98.0% at December 31, 2020. Occupancy at the end of 2021 for the operating portfolio was 97.4% compared to 97.3% at December 31, 2020.

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, 2020 through December 31, 2021). Same property average occupancy for the year ended December 31, 2021, was 97.6% compared to 97.0% for the year ended December 31, 2020.

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, 2020 through December 31, 2021). The same property average rental rate was $6.55 per square foot for the year ended December 31, 2021, compared to $6.17 per square foot for the year ended December 31, 2020.

Interest Expense decreased $982,000 for the year ended December 31, 2021 compared to the year ended December 31, 2020. The following table presents the components of Interest Expense for 2021 and 2020:

Years Ended December 31,

(In thousands)

VARIABLE RATE INTEREST EXPENSE

Amortization of facility fees - unsecured bank credit facilities 751 790 (39)

FIXED RATE INTEREST EXPENSE

Amortization of debt issuance costs - unsecured debt 589 624 (35)

Amortization of debt issuance costs - secured debt 101 233 (132)

(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 12 in the Notes to Consolidated Financial Statements.

EastGroup’s variable rate interest expense decreased by $652,000 for 2021 as compared to 2020 primarily due to a decrease in the Company’s weighted average variable interest rate 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 decreased by $953,000 for 2021 as compared to 2020 as a result of the unsecured debt and secured debt described below.

Interest expense from fixed rate unsecured debt increased by $2,907,000 during 2021 as compared to 2020 as a result of the Company’s unsecured debt activity described below. The details of the unsecured debt obtained in 2020 and 2021 are shown in the following table:

(In thousands)

(1) 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, 2021. See Note 12 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 100 basis points subject to a pricing grid for changes in the Company’s coverage ratings. The Company entered into an interest rate swap to convert the loan’s LIBOR rate to a fixed interest rate, providing the Company a weighted average effective interest rate on the term loan of 1.55% as of December 31, 2021. See Note 12 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 2020 and 2021:

UNSECURED DEBT REPAID IN 2020 AND 2021 Interest Rate Date Repaid Payoff Amount

(In thousands)

The increase in interest expense from unsecured debt was offset by a decrease in secured debt interest expense, which decreased by $3,693,000 in 2021 as compared to 2020 as a result of regularly scheduled principal payments and the payoffs described in the table below. Regularly scheduled principal payments on secured debt were $2,989,000 during 2021 and $8,436,000 in 2020. The details of the secured debt repaid in 2020 and 2021 are shown in the following table:

SECURED DEBT REPAID IN 2020 AND 2021 Interest Rate Date Repaid Payoff Amount

(In thousands)

EastGroup did not obtain any new secured debt during 2020 or 2021.

Interest costs during the period of construction of real estate properties are capitalized and offset against interest expense. Capitalized interest decreased by $623,000 for 2021 as compared to 2020. The decrease is due to changes in development spending and borrowing rates.

Depreciation and amortization expense increased $10,740,000 for 2021 compared to 2020 primarily due to the operating properties acquired by the Company during 2020 and 2021 and the properties transferred from Development and value-add properties in 2020 and 2021, partially offset by operating properties sold in 2020 and 2021.

Gain on sales of real estate investments, which includes gains on the sales of operating properties, increased $25,714,000 for 2021 as compared to 2020. The Company’s 2020 and 2021 sales transactions are described below in Real Estate Sold and Held for Sale.

Real Estate Improvements

Real estate improvements for EastGroup’s operating properties for the years ended December 31, 2021 and 2020 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 (26) (373)

Change in Construction in Progress (1,204) 3,249

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, 2021 and 2020 were as follows:

EstimatedUseful Life Years Ended December 31,

(In thousands)

Development and Value-Add Lease Life $ 12,280 5,223

(1) Reconciliation of Total Capitalized Leasing Costs to Leasing commissions on the Consolidated Statements of Cash Flows:

Years Ended December 31,

(In thousands)

Change in Leasing Commissions Payables (80) (683)

Leasing Commissions on the Consolidated Statements of Cash Flows $ 33,301 17,516

Real Estate Sold and Held for Sale

The Company considers a real estate property to be held for sale when it meets the criteria established under Accounting Standards Codification (“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. As of December 31, 2021, the Company owned one operating property, Metro Business Park, that was classified as held for sale on the December 31, 2021 Consolidated Balance Sheet. The property was sold in the first quarter of 2022, and the Company expects to record a gain on the sale in the three months ended March 31, 2022. The Company did not classify any properties as held for sale as of December 31, 2020.

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 2020 and 2021, or the property classified as held for sale as of December 31, 2021, 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.

In 2021, EastGroup sold Jetport Commerce Park, an operating property in Tampa with 284,000 square feet. The property was sold for $45.1 million and the Company recognized a gain on the sale of $38.9 million.

In 2020, EastGroup sold the following operating properties: 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.

The Company did not sell any land during the years ended December 31, 2021 and 2020.

Gains and losses on the sales of operating properties are included in Gain on sales of real estate investments on the Consolidated Statements of Income and Comprehensive Income. 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.

2020 Compared to 2019

A discussion of changes in the Company’s results of operations between 2020 and 2019 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 “2020 Compared to 2019” of the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2020.

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 ASU applies to the Company.

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 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 $256,492,000 for the year ended December 31, 2021. 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 $131,759,000 in common stock dividends during 2021. 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; capital improvements at various properties; and leasing commissions.

The Company anticipates that its current cash balance, operating cash flows, borrowings under its unsecured bank credit facilities, proceeds from new debt and/or proceeds from the issuance of equity instruments will be adequate for (i) operating and administrative expenses, (ii) normal repair and maintenance expenses at its properties, (iii) debt service obligations, (iv) maintaining compliance with its debt covenants, (v) distributions to stockholders, (vi) capital improvements, (vii) purchases of properties, (viii) development, and (ix) any other normal business activities of the Company, both in the short-term and long-term, including after taking into account the effects of the COVID-19 pandemic. The Company expects liquidity sources and needs in future years to be consistent in nature with those for the year ended December 31, 2021.

As of December 31, 2021, the Company was contractually obligated to pay the dividend declared in December 2021, which was paid in January 2022. An amount for dividends payable of $46,864,000 was included in Accounts payable and accrued expenses at December 31, 2021, which includes dividends payable on unvested restricted stock of $1,585,000, which are subject to continued service and will be paid upon vesting in future periods.

Total debt at December 31, 2021 and 2020 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, 2021 and 2020.

December 31,

(In thousands)

Unamortized debt issuance costs (2,144) (806)

Unsecured bank credit facilities, net of debt issuance costs 207,066 124,194

Unamortized debt issuance costs (2,430) (2,292)

Secured debt - fixed rate, carrying amount (2) (4) 2,156 79,096

Unamortized debt issuance costs (14) (103)

Secured debt, net of debt issuance costs 2,142 78,993

(1) 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.

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

(3) As of December 31, 2021, obligations due in less than one year include maturing principal balances of $75,000,000 and interest of $36,776,000; remaining principal balances maturing in greater than one year include $1,170,000,000 and interest of $179,019,000.

(4) As of December 31, 2021, obligations due in less than one year include principal amortization of $115,000 and interest of $81,000; remaining principal maturing in greater than one year includes $2,041,000 and interest of $278,000.

Until June 29, 2021, EastGroup had $350 million and $45 million unsecured bank credit facilities with margins over LIBOR of 100 basis points, facility fees of 20 basis points and maturity dates of July 30, 2022. The Company amended and restated these credit facilities on June 29, 2021, expanding their capacities to $425 million and $50 million, respectively, as detailed below.

The Company’s $425 million unsecured bank credit facility is with a group of nine banks and has a maturity date of July 30, 2025. The credit facility contains options for two six-month extensions (at the Company’s election) and a $325 million accordion (with agreement by all parties). The interest rate on each tranche is usually reset on a monthly basis and as of December 31, 2021, was LIBOR plus 77.5 basis points with an annual facility fee of 15 basis points. As of December 31, 2021, the Company had $183,000,000 of variable rate borrowings on this unsecured bank credit facility with a weighted average interest rate of 0.875%. The Company has a standby letter of credit of $674,000 pledged on this facility.

The Company’s $50 million unsecured bank credit facility has a maturity date of July 30, 2025, or such later date as designated by the bank; the Company also has two six-month extensions available if the extension options in the $425 million facility are exercised. The interest rate is reset on a daily basis and as of December 31, 2021, was LIBOR plus 77.5 basis points with an annual facility fee of 15 basis points. As of December 31, 2021, the interest rate was 0.876% on a balance of $26,210,000.

For both facilities, the margin and facility fee are subject to changes in the Company’s credit ratings. Although the Company’s current credit rating is Baa2, given the strength of the Company’s key credit metrics, initial pricing for the credit facilities is based on the BBB+/Baa1 credit ratings level. This favorable pricing level will be retained provided that the Company’s consolidated leverage ratio, as defined in the applicable agreements, remains less than 32.5%. The facilities also include a sustainability-linked pricing component pursuant to which the applicable interest margin will be reduced by one basis point if the Company meets certain sustainability performance targets.

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 2021, the Company closed a $50 million senior unsecured term loan with a four-year term and interest only payments, which bears interest at the annual rate of LIBOR plus an applicable margin (1.00% as of each of December 31, 2021 and February 15, 2022) based on the Company’s senior unsecured long-term debt rating. The Company also entered into an interest rate swap agreement to convert the loan’s LIBOR rate component to a fixed interest rate for the entire term of the loan providing a total effective fixed interest rate of 1.55%.

Also in March 2021, EastGroup repaid (with no penalty) a mortgage loan with a balance of $40.8 million, an interest rate of 4.75% and an original maturity date of June 5, 2021.

In June 2021, the Company closed on the private placement of $125 million of senior unsecured notes with a fixed interest rate of 2.74% and a 10-year term. The notes, dated April 8, 2021, were issued and sold on June 10, 2021 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 July 2021, the Company repaid a maturing $40 million senior unsecured term loan with an effective interest rate of 2.34%.

In September 2021, the Company closed on the refinance of a $100 million senior unsecured term loan with five years remaining. The amended term loan provides for interest only payments currently at an interest rate of LIBOR plus 85 basis points, based on the Company’s current credit ratings and consolidated leverage ratio, which is a 65 basis point reduction in the credit spread compared to the original term loan. The Company has an interest rate swap agreement which converts the loan’s LIBOR rate component to a fixed interest rate for the entire term of the loan, providing a total effective fixed interest rate of 2.10%. The term loan also includes a sustainability-linked pricing component pursuant to which, if the Company meets certain sustainability performance targets, the applicable interest margin will be reduced by one basis point.

In October 2021, the Company repaid (with no penalty) a mortgage loan with a balance of $33.1 million, an interest rate of 4.09% and an original maturity date of January 5, 2022.

In July 2017, the Financial Conduct Authority (“FCA”) announced it intended to stop compelling banks to submit rates for the calculation of LIBOR after 2021. In March 2021, the ICE Benchmark Administration, the administrator of LIBOR, announced its intention to cease publication of certain LIBOR settings after 2021, while continuing to publish overnight and one-, three-, six-, and twelve-month U.S. dollar LIBOR rates through June 30, 2023. While this announcement extended the transition period to June 2023, the United States Federal Reserve Board and other regulatory bodies concurrently issued guidance encouraging banks and other financial market participants to cease entering into new contracts that use U.S. dollar LIBOR as a reference rate as soon as practicable and in any event no later than December 31, 2021. In the U.S., the AARC, which was convened by the Federal Reserve Board and the Federal Reserve Bank of New York, has recommended that SOFR plus a recommended spread adjustment as its preferred alternative to USD-LIBOR. There are significant differences between LIBOR and SOFR, such as LIBOR being an unsecured lending rate while SOFR is a secured rate, and SOFR is an overnight rate while LIBOR reflects term rates at different maturities.

We expect that all LIBOR settings relevant to us will cease to be published or will no longer be representative after June 30, 2023. As a result, any of our LIBOR-based borrowings that extend beyond such date will need to be converted to a replacement rate. Certain risks may arise in connection with transitioning contracts to SOFR or any other alternative variable rate, including any resulting value transfer that may occur. The value of loans, securities, or derivative instruments tied to LIBOR could also be impacted. The Company’s unsecured bank credit facilities, senior unsecured term loans and interest rate swap contracts are indexed to LIBOR and include provisions for a replacement rate which we believe will be substantially equivalent to the all-in LIBOR-based interest rate in effect prior to its replacement. Therefore, the Company believes the transition will not have a material impact on our consolidated financial statements. The Company is continuously monitoring and evaluating the related risks, which include interest on loans and amounts received and paid on derivative instruments. These risks arise in connection with transitioning contracts to a new alternative rate, including any resulting value transfer that may occur. The value of loans or derivative instruments 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 June 30, 2023, it is possible that LIBOR will become unavailable prior to that point. This could result, for example, if sufficient banks decline to make submissions to the LIBOR administrator. In that case, the risks associated with the transition to an alternative reference rate will be accelerated and magnified.

On December 20, 2019, EastGroup entered into sales agreements (the “December 2019 Sales Agreements”) with each of BNY Mellon Capital Markets, LLC; 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 new continuous common equity offering program pursuant to which the Company may sell shares of its common stock with an aggregate gross sales price of up to $750,000,000 from time to time. On July 28, 2021, the Company entered into a sales agreement (together with the December 2019 Sales Agreements, the “Sales Agreements”) with TD Securities (USA) LLC, which is substantially similar to the December 2019 Sales Agreements, and entered into corresponding amendments to the December 2019 Sales Agreements to include TD Securities (USA) LLC as a participating sales agent. Pursuant to the Sales Agreements, the shares may be offered and sold in transactions that are deemed to be “at the market” offerings as defined in Rule 415 of the Securities Act of 1933, as amended. As of February 16, 2022, the Company has sold an aggregate of 2,261,105 shares of common stock with gross proceeds of $368,147,000 under the Sales Agreements, and EastGroup may offer and sell additional shares of its common stock with an aggregate gross sales price of up to $381,853,000 through the sales agents.

During the year ended December 31, 2021, EastGroup issued and sold 1,551,181 shares of common stock under its continuous common equity offering program at an average price of $176.77 per share with gross proceeds to the Company of $274,209,000. The Company incurred offering-related costs of $3,054,000 during the year, resulting in net proceeds to the Company of $271,155,000.

EastGroup’s other material cash requirements from known contractual and other obligations as of December 31, 2021 were as follows:

Cash Requirements (1)

Real estate property obligations (2) $ 10,520

Development and value-add obligations (3) 88,686

(1)Cash requirement due in less than one year; there were no related long-term cash requirements.

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

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

(4)Represents tenant improvement allowance obligations.

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.

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 12 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, 2021.

Weighted average interest rate — — — 0.88% (3) — — 0.88%

(1)The variable rate unsecured bank credit facilities mature in July 2025 and as of December 31, 2021, have balances of $183,000,000 on the $425 million unsecured bank credit facility and $26,210,000 on the $50 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, 2021.

(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, 2021, it does not consider those exposures or positions that could arise after that date. Based on the weighted average balance for the twelve months ended December 31, 2021, if the weighted average interest rate on the variable rate unsecured bank credit facilities changes by 10%, or approximately 9 basis points, interest expense and cash flows would increase or decrease by approximately $184,000 annually. This does not include variable rate debt that has been effectively fixed through the use of interest rate swaps.

The Company’s unsecured bank credit facilities unsecured term loans, and related interest rate swaps are indexed to LIBOR. For a discussion of the risks associated with the discontinuation of LIBOR, see “Risk Factors—Financing Risks—The discontinuation of LIBOR and the replacement of LIBOR with an alternative reference rate may adversely affect our borrowing costs and could impact our business and results of operations” in Part I, Item 1A of this Annual Report on Form 10-K.

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 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 40 of this Annual Report on Form 10-K. There were no material retrospective changes to the Consolidated Statements of Income and Comprehensive Income in any quarters in the two most recent fiscal years that would require disclosure of supplementary financial data.

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, 2021, 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 45 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 46 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, 2021 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.

ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS.

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 2022 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 2022 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 2022 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 2022 Annual Meeting of Stockholders and is incorporated herein by reference.

ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES.

Our independent registered public accounting firm is KPMG LLP, Jackson, MS, Auditor Firm ID: 185.

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 2022 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 43

Management Report on Internal Control Over Financial Reporting 45

Report of Independent Registered Public Accounting Firm 46

Notes to Consolidated Financial Statements 51

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 78

Exhibits

Exhibit Number Description

4.1 Description of Securities (filed herewith).

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 THE 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, 2021 and 2020, 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, 2021, 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, 2021 and 2020, and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, 2021, 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, 2021, 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 16, 2022 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 $279,225,000 of real estate properties and development and value-add properties during 2021 that were accounted for as asset acquisitions, of which $42,554,000 of the total purchase price was allocated to land. The purchase price in an asset acquisition is allocated among the individual components of both 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 review identified publicly available comparable land sales used 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, 2021.

/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, 2021, 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, 2021, 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, 2021 and 2020, 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, 2021, and the related notes and financial statement schedule III (collectively, the consolidated financial statements), and our report dated February 16, 2022 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

Real estate assets held for sale 5,695 —

LIABILITIES AND EQUITY

LIABILITIES

Unsecured bank credit facilities, net of debt issuance costs $ 207,066 124,194

Secured debt, net of debt issuance costs 2,142 78,993

EQUITY

Stockholders’ Equity:

Accumulated other comprehensive income (loss) 1,302 (10,752)

Noncontrolling interest in joint ventures 1,390 880

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

OTHER INCOME (EXPENSE)

Other comprehensive income (loss) – interest rate swaps 12,054 (13,559) (3,894)

Net income attributable to common stockholders $ 3.91 2.77 3.25

Net income attributable to common stockholders $ 3.90 2.76 3.24

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)

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

Contributions from noncontrolling interest — — — — 821 821

Net distributions to noncontrolling interest — — — — (2,378) (2,378)

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

Contributions from noncontrolling interest — — — — 20 20

Net distributions to noncontrolling interest — — — — (115) (115)

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

Net unrealized change in fair value of interest rate swaps — — — 12,054 — 12,054

Stock-based compensation, net of forfeitures — 9,847 — — — 9,847

Contributions from noncontrolling interest — — — — 584 584

Net distributions to noncontrolling interest — 5 — — (155) (150)

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 13,298 (18,851) 6,514

INVESTING ACTIVITIES

Repayments on mortgage loans receivable — 1,679 915

Changes in other assets and other liabilities 1,769 (11,111) 9,901

FINANCING ACTIVITIES

Proceeds from dividend reinvestment plan — — 212

INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 4,372 (203) (150)

CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 21 224 374

CASH AND CASH EQUIVALENTS AT END OF YEAR $ 4,393 21 224

SUPPLEMENTAL CASH FLOW INFORMATION

NON-CASH OPERATING ACTIVITY

See accompanying Notes to Consolidated Financial Statements.

EASTGROUP PROPERTIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2021, 2020 and 2019

(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, 2021 and 2020, EastGroup held a controlling interest in two joint venture arrangements. In 2019, the Company acquired 6.5 acres of land in San Diego, known by the Company as the Miramar land. Also in 2019, the Company acquired 41.6 acres of land in San Diego, known by the Company as the Otay Mesa land. During the year ended December 31, 2021, EastGroup began construction of a 519,000 square foot building on the Otay Mesa land, known by the Company as Speed Distribution Center. As of both December 31, 2021 and 2020, EastGroup had a 95% controlling interest in the Miramar land and a 99% controlling interest in Speed Distribution Center.

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 2021, 2020 and 2019 taxable income to its stockholders. Accordingly, no significant provisions for income taxes were necessary. The Company’s income tax treatment of share distributions is based on its taxable income, calculated in accordance with the Internal Revenue Code, which differs from U.S. generally accepted accounting principles (“GAAP”). The following table summarizes the federal income tax treatment for all distributions by the Company for the years ended 2021, 2020 and 2019.

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 2017 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, 2021 and 2020.

(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-

EASTGROUP PROPERTIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

worthiness and current economic trends when evaluating the adequacy of the allowance for doubtful accounts. Reserves for uncollectible accounts are recorded as a reduction to revenue. Revenue is recognized on payments received from tenants for early terminations after all criteria have been met in accordance with ASC 842, Leases.

The Company’s primary revenue is rental income; as such, the Company is a lessor on a significant number of leases. Effective January 1, 2019, the Company adopted ASC 842, Leases, and applied its provisions on a prospective basis. The Company continued 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.

Initial direct costs (primarily legal costs related to lease negotiations) are expensed rather than capitalized. EastGroup recorded Indirect leasing costs of $700,000, $661,000 and $411,000 on the Consolidated Statements of Income and Comprehensive Income during the years ended December 31, 2021, 2020 and 2019, respectively.

As permitted by ASC 842, Leases, EastGroup made 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 table below presents the components of Income from real estate operations for the years ended December 31, 2021, 2020 and 2019:

Years Ended December 31,

(In thousands)

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

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, 2021:

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.

EASTGROUP PROPERTIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(d)Real Estate Properties

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, 2021, 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 $104,910,000, $96,290,000 and $86,590,000 for 2021, 2020 and 2019, respectively.

(e)Development and Value-Add Properties

For properties under development and value-add properties (defined in Note 1(j)) 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

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. As of December 31, 2021, the Company owned one operating property, Metro Business Park, that was classified as held for sale on the December 31, 2021 Consolidated Balance Sheet. As discussed in Note 17, the property was sold in the first quarter of 2022, and the Company expects to record a gain on the sale in the three months ended March 31, 2022. The Company did not classify any properties as held for sale as of December 31, 2020.

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 12 for a discussion of the Company’s derivative instruments and hedging activities.

EASTGROUP PROPERTIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(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 $1,296,000, $1,418,000 and $1,344,000 for 2021, 2020 and 2019, respectively. Amortization of facility fees was $751,000, $790,000 and $790,000 for 2021, 2020 and 2019, respectively.

Leasing costs are deferred and amortized using the straight-line method over the term of the lease. Leasing costs amortization expense was $16,209,000, $14,449,000 and $13,167,000 for 2021, 2020 and 2019, 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 of assets or businesses. Under the guidance, companies are required to utilize an initial screening test to determine whether substantially all of the fair value of the gross assets acquired is concentrated in a single identifiable asset or a group of similar identifiable assets; if so, the set is not a business. EastGroup determined that its real estate property acquisitions in 2021, 2020 and 2019 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 2021, 2020 and 2019 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. 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 lease intangibles are included in Other assets and Other liabilities, respectively, on the Consolidated Balance Sheets and are amortized to rental income over the remaining terms of the respective leases. The total amount of intangible assets is further allocated to in-place lease values and customer relationship values based upon management’s assessment of their respective values. Factors considered by management in the allocation include an estimate of foregone rents and avoided leasing costs during the expected lease-up periods considering current market conditions and costs to execute similar leases. These intangible assets are included in Other assets on the Consolidated Balance Sheets and are amortized over the remaining term of the existing lease, or the anticipated life of the customer relationship, as applicable.

Amortization of above and below market lease intangibles increased rental income by $1,048,000, $1,451,000 and $1,229,000 in 2021, 2020 and 2019, respectively. Amortization expense for in-place lease intangibles was $5,980,000, $5,620,000 and $4,967,000 for 2021, 2020 and 2019, respectively.

EASTGROUP PROPERTIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Projected amortization of in-place lease intangibles for the next five years as of December 31, 2021 is as follows:

Years Ending December 31, (In thousands)

EastGroup acquired real estate properties during 2021, 2020 and 2019 as discussed in Note 2.

The following table summarizes the allocation of the consideration paid for the acquired assets and assumed liabilities in connection with the real estate property acquisitions during the years ended December 31, 2021, 2020 and 2019.

Costs Incurred During the Years Ended December 31,

(In thousands)

Right of use assets — Ground leases (operating) 12,708 — 2,679

Above market lease intangibles (1) 6 104 344

Operating lease liabilities — Ground leases (3) (12,708) — (2,679)

(1)In-place lease intangibles and above market lease intangibles are each included in Other assets on the Consolidated Balance Sheets. These costs are amortized over the remaining lives of the associated leases in place at the time of acquisition.

(2)Below market lease intangibles are included in Other liabilities on the Consolidated Balance Sheets. These costs are amortized over the remaining lives of the associated leases in place at the time of acquisition.

(3)Operating lease liabilities - Ground leases are included in Other liabilities on the Consolidated Balance Sheets.

The leases in the properties acquired during 2021, 2020, and 2019 had a weighted average remaining lease term at acquisition of approximately 2.9 years years, 3.9 years, and 6.0 years, respectively.

The Company periodically reviews the recoverability of goodwill (at least annually) and the recoverability of other intangibles (on a quarterly basis) for possible impairment. No impairment of goodwill and other intangibles existed during the years ended December 31, 2021, 2020 and 2019.

(k)Stock-Based Compensation

EastGroup applies the provisions of ASC 718, Compensation – Stock Compensation, to account for its stock-based compensation plans. ASC 718 requires that the compensation cost relating to share-based payment transactions be recognized in the financial statements and that the cost be measured on the fair value of the equity or liability instruments issued. The cost for market-based awards and awards that only require service are expensed on a straight-line basis over the requisite service periods. The cost for performance-based awards is determined using the graded vesting attribution method which recognizes each separate vesting portion of the award as a separate award on a straight-line basis over the requisite service period. This method accelerates the expensing of the award compared to the straight-line method. For awards with a performance condition, compensation expense is recognized when the performance condition is considered probable of achievement.

The total compensation expense for service and performance based awards is based upon the fair market value of the shares on the grant date. The grant date fair value for awards that have been granted and are subject to a future market condition (total shareholder return) are determined using a Monte Carlo simulation pricing model developed to specifically accommodate the unique features of the awards.

EASTGROUP PROPERTIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

During the restricted period for awards no longer subject to contingencies, the Company accrues dividends and holds the certificates for the shares; however, the employee can vote the shares. Share certificates and dividends are delivered to the employee as they vest. Forfeitures of awards are recognized as they occur.

(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 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 coronavirus (“COVID-19”) pandemic 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. Although COVID-19 has had an overall minimal impact on the Company in 2020 and 2021, EastGroup remains unable to predict any future impact that it may have on its business, financial condition, results of operations and cash flows.

(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 ASU applies to the Company.

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 2020, the Company elected to apply the hedge accounting expedients related to probability and the assessments of effectiveness for future cash flows indexed by London Interbank Offered Rate (“LIBOR”) 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.

(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.

(q)Reclassifications

Certain reclassifications have been made in the 2020 and 2019 consolidated financial statements to conform to the 2021 presentation.

EASTGROUP PROPERTIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(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, 2021 and 2020 were as follows:

December 31,

(In thousands)

Real estate properties:

Right of use assets — Ground leases (operating) (1) 22,635 11,073

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

EASTGROUP PROPERTIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

A summary of real estate properties acquired for the years ended December 31, 2021, 2020 and 2019 follows:

REAL ESTATE PROPERTIES ACQUIRED Location Size DateAcquired Cost

(In square feet or acres) (In thousands)

OPERATING PROPERTIES ACQUIRED (1)

VALUE-ADD PROPERTIES ACQUIRED (2)

OPERATING PROPERTIES ACQUIRED (1)

VALUE-ADD PROPERTIES ACQUIRED (2)

OPERATING PROPERTIES ACQUIRED (1)

VALUE-ADD PROPERTIES ACQUIRED (2)

(1)Operating properties are defined as stabilized real estate properties (land including buildings and improvements) in the Company’s operating portfolio; included in Real estate properties on the Consolidated Balance Sheets.

(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.

(3)Excludes development land as detailed below.

(4)Land which was leased at the time of acquisition and including in the operating portfolio.

EASTGROUP PROPERTIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Also during 2021, EastGroup purchased 365.8 acres of development land in Austin, Houston, Charlotte, Greenville and Atlanta for $41,065,000.

The Company sold operating properties during 2021, 2020 and 2019 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 Consolidated Statements of Income and Comprehensive Income. The gains and losses on sales are included in Gain on sales of real estate investments.

Sales of Real Estate

A summary of Gain on sales of real estate investments for the years ended December 31, 2021, 2020 and 2019 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 2021 and 2020, there were no land sales; however, during 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. 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, 2021, 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 2021 were $9,028,000 compared to $9,651,000 for 2020 and $8,453,000 for 2019. In addition, EastGroup capitalized internal development costs of $7,713,000 during the year ended December 31, 2021, compared to $6,689,000 during 2020 and $6,918,000 in 2019.

Total capital invested for development and value-add properties during 2021 was $418,855,000, which primarily consisted of costs of $348,478,000 as detailed in the Development and Value-Add Properties Activity table below, $51,082,000 as detailed in the Development and Value-Add Properties Transferred to the Real Estate Properties Portfolio During 2021 table below and costs of $13,236,000 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

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

EASTGROUP PROPERTIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited) (In thousands) (Unaudited)

Building Size (Square feet) Building Conversion Date

(2)Included in these costs are development obligations of $88.7 million and tenant improvement obligations of $10.3 million on properties under development.

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

(4)Represents costs transferred from Real estate properties during the year.

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

Ground Leases

As of December 31, 2021 and 2020, the Company operated two properties in Florida, four properties in Texas and one property in Arizona that are subject to ground leases. These leases have terms of 40 to 50 years, expiration dates of August 2031 to October 2058, and renewal options of 15 to 35 years, except for the one lease in Arizona which is automatically and perpetually renewed annually. The Company has included renewal options in the lease terms for calculating the ground lease assets and liabilities as the Company is reasonably certain it will exercise these options. Total ground lease expenditures for the years ended December 31, 2021, 2020 and 2019 were $1,354,000, $1,051,000 and $966,000, respectively. Payments are subject to increases at 3 to 10 year intervals based upon the agreed or appraised fair market value of the leased premises on the adjustment date or the Consumer Price Index percentage increase since the base rent date. These future changes in payments will be considered variable payments and will not impact the assessment of the asset or liability unless there is a significant event that triggers reassessment, such as amendment with a change in the terms of the lease. The weighted-average remaining lease term as of December 31, 2021, for the ground leases is 38 years.

EastGroup applies ASC 842, Leases, for its ground leases, which are classified as operating leases. In August 2021, the Company acquired DFW Global Logistics Centre in Dallas, which is located on land under a ground lease. The Company recorded a right of use asset of $12,708,000 in connection with this acquisition. There were no new ground leases in 2020. As of December 31, 2021 and 2020, the unamortized balances of the Company’s right of use assets for its ground leases were $22,635,000 and $11,073,000, respectively. The right of use assets for ground leases are included in Real estate properties on the Consolidated Balance Sheets.

EASTGROUP PROPERTIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The following schedule indicates approximate future minimum ground lease payments for these properties by year as of December 31, 2021:

Future Minimum Ground Lease Payments as of December 31, 2021

Years Ending December 31, (In thousands)

Total minimum payments 68,785

EGP US Equity

EGP · 10-K · period ended 2021-12-31

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 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS.

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 2021-12-31

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 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS.

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