EASTGROUP PROPERTIES ANNUAL REPORT
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24
I’m pleased to share that 2024 was another record year for funds from operations (“FFO”)
per diluted share (up 7.9% excluding gains on involuntary conversions in each year), with net
effective releasing spreads exceeding 50% for the second consecutive year. It was also a year
that allowed us to continue improving our balance sheet leaving us in our strongest, most
flexible financial position in our Company’s history.
I’m proud that the team was able to achieve these results in spite of an uncertain market,
increased tenant bankruptcies, and a rash of new supply. It is during these periods of uncertainty
that we rely on our straightforward, market-cycle tested strategy. We develop, acquire and
operate multi-tenant business distribution centers for customers who are location-sensitive.
Whether we develop properties or acquire occupied or vacant properties varies based on
where we are in the cycle and the risk/returns each alternative offers. Our geographic focus
is on the historically high-growth metropolitan markets, our customers primarily lease space
in the 20,000–100,000 square foot range, and our properties are infill, close to our tenants’
customers, or ‘last mile’ submarkets.
Our customers primarily distribute to the metropolitan area where they lease space instead of
distributing more regionally or nationally. The economic vibrancy and growth within these metro
areas are major determinants of our customers’ success and, in turn, our financial results. We
focus on and fine tune our capital allocation within fast growing markets that benefit from
strong migration trends and customers with increasing levels of disposable income.
We maintain geographic and tenant diversity with the goal of stabilizing our future earnings
regardless of the economic environment. Today, we have approximately 1,600 leases in place
and the most diversified rent roll in our sector. Our top 10 tenants represent approximately 7.2%
of EastGroup’s rents at year-end, down 70 basis points from a year ago.
I am optimistic as we move into 2025. Our portfolio is benefitting from several long-term
positive secular trends such as population migration, nearshoring and onshoring, and continued
e-commerce growth. So while our demand has strong roots, the industry-wide development
pipeline is at an eight-year low, positioning us well for near-term supply and demand.
Despite 2024’s economic uncertainties, we maintained high occupancy levels with strong rent
growth while successfully bringing new investments online, all while improving an already
strong balance sheet. We believe we are prepared to weather economic uncertainties and to
move quickly when opportunities arise.
In closing, with our experienced team, consistently improving portfolio, and strong balance
sheet, I believe we are well positioned to continue our positive momentum and create
shareholder value now and in the years to come.
MARSHALL A. LOEB | Chief Executive Officer, President and Director
Fellow
Shareholders
Company Overview
EastGroup Properties, Inc. (NYSE: EGP) is a
self-administered equity real estate investment trust
focused on the development, acquisition and operation
of industrial properties in high-growth markets
throughout the United States with an emphasis in Texas,
Florida, California, Arizona and North Carolina.
Portfolio of 63.1M+ SF
Shallow bay buildings — Average size 96K SF
Multi-tenant — Average tenant size 35K SF
High-growth, infill locations
Clustered assets in park settings
Typically, rear load buildings
2024 Leasing Statistics
97.1%
Leased as of 12/31
96.1%
Occupied as of 12/31
35.6%
Year-to-date Rental Change
Cash Basis
53.0%
Year-to-date Rental Change
Straight-Line Basis
7.9%
FFO per Share Growth
excluding gain on involuntary
conversion and business
interruption claims
5.6%
Same PNOI Growth:
Cash Basis
$9.8B
Total Market Capitalization
as of 12/31
2024 Financial Statistics
Cash Dividends and FFO
32 consecutive years of increasing or maintaining
cash dividends, 29 years of increases
Dividend per Share FFO per Share
$8.35
2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024
$5.34
Improved Balance Sheet
Debt-to-EBITDAre Ratio
for the year ended 12/31
2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024
3.36
6.39
San Francisco
Sacramento
Los Angeles
San Diego
Fresno
Phoenix
Tucson
Denver
El Paso
Dallas/
Ft. Worth
Las
Vegas
Houston
Charlotte
Raleigh
Greenville
Nashville
Atlanta
Jackson
New Orleans
Jacksonville
Ft. Lauderdale
Miami
Orlando
Tampa
San Antonio
Austin
Ft. Myers
Property Locations Properties Corporate Headquarters Regional Offices
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Securities registered pursuant to Section 12(g) of the Act: None
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Act. Yes ☐ No ☒
Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to
file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the Registrant has submitted electronically every Interactive Data File required to be submitted
pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was
required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller
reporting company, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller
reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large Accelerated Filer
☒
Accelerated Filer
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Non-accelerated Filer
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Smaller Reporting Company
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Emerging Growth Company
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If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period
for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
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effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C.
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Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-
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§240.10D-1(b). ☐
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State the aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to
the price at which the common equity was last sold, or the average bid and asked price of such common equity, as of June 28,
2024, the last business day of the Registrant’s most recently completed second fiscal quarter: $8,194,355,215.
The number of shares of common stock, $0.0001 par value, outstanding as of February 11, 2025 was 52,024,019.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrant’s Proxy Statement relating to its 2025 Annual Meeting of Stockholders are incorporated by reference
into Part III. The Registrant intends to file such Proxy Statement with the Securities and Exchange Commission not later than
120 days after the end of the fiscal year ended December 31, 2024.
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PART I
FORWARD-LOOKING STATEMENTS
This Annual Report on Form 10-K includes “forward-looking statements” (within the meaning of the federal securities laws,
Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act
of 1934, as amended (the “Exchange Act”)) that reflect EastGroup Properties, Inc.’s (the “Company” or “EastGroup”)
expectations and projections about the Company’s future results, performance, prospects, plans and opportunities. The
Company has attempted to identify these forward-looking statements by the use of words such as “may,” “will,” “seek,”
“expects,” “anticipates,” “believes,” “targets,” “intends,” “should,” “estimates,” “could,” “continue,” “assume,” “projects,”
“goals,” “plans” or variations of such words and similar expressions or the negative of such words, although not all forward-
looking statements contain such words. These forward-looking statements are based on information currently available to the
Company and are subject to a number of known and unknown assumptions, risks, uncertainties and other factors that may cause
the Company’s actual results, performance, plans or achievements to be materially different from any future results,
performance or achievements expressed or implied by these forward-looking statements. These factors include, among other
things, those discussed below. The Company intends for all such forward-looking statements to be covered by the safe harbor
provisions for forward-looking statements contained in Section 27A of the Securities Act and Section 21E of the Exchange Act,
as applicable by law. The Company does not undertake to publicly update or revise any forward-looking statements, whether as
a result of changes in underlying assumptions or new information, future events or otherwise, except as may be required by law.
The following are some, but not all, of the risks, uncertainties and other factors that could cause the Company’s actual results to
differ materially from those presented in the Company’s forward-looking statements (the Company refers to itself as “we,” “us”
or “our” in the following):
•
international, national, regional and local economic conditions;
•
the competitive environment in which the Company operates;
•
fluctuations of occupancy or rental rates;
•
potential defaults (including bankruptcies or insolvency) on or non-renewal of leases by tenants, or our ability to
lease space at current or anticipated rents, particularly in light of ongoing interest rate uncertainty;
•
disruption in supply and delivery chains;
•
increased construction and development costs, including as a result of the recent inflationary environment;
•
acquisition and development risks, including failure of such acquisitions and development projects to perform in
accordance with our projections or to materialize at all;
•
potential changes in the law or governmental regulations and interpretations of those laws and regulations,
including changes in real estate laws, real estate investment trust (“REIT”) or corporate income tax laws, potential
changes in zoning laws, or increases in real property tax rates, and any related increased cost of compliance;
•
our ability to maintain our qualification as a REIT;
•
natural disasters such as fires, floods, tornadoes, hurricanes, earthquakes or other extreme weather events, which
may or may not be directly caused by longer-term shifts in climate patterns, could destroy buildings and damage
regional economies;
•
the availability of financing and capital, increases in or long-term elevated interest rates, and our ability to raise
equity capital on attractive terms;
•
financing risks, including the risks that our cash flows from operations may be insufficient to meet required
payments of principal and interest, and we may be unable to refinance our existing debt upon maturity or obtain
new financing on attractive terms or at all;
•
our ability to retain our credit agency ratings;
•
our ability to comply with applicable financial covenants;
•
credit risk in the event of non-performance by the counterparties to our interest rate swaps;
•
how and when pending forward equity sales may settle;
•
lack of or insufficient amounts of insurance;
•
litigation, including costs associated with prosecuting or defending claims and any adverse outcomes;
•
our ability to attract and retain key personnel or lack of adequate succession planning;
•
risks related to the failure, inadequacy or interruption of our data security systems and processes, including
security breaches through cyber attacks;
•
pandemics, epidemics or other public health emergencies, such as the coronavirus pandemic;
•
potentially catastrophic events such as acts of war, civil unrest and terrorism; and
4
•
environmental liabilities, including costs, fines or penalties that may be incurred due to necessary remediation of
contamination of properties presently owned or previously owned by us.
All forward-looking statements should be read in light of the risks identified in Part I, Item 1A. Risk Factors within this Annual
Report on Form 10-K for the year ended December 31, 2024.
ITEM 1. BUSINESS.
The Company
EastGroup Properties, Inc., which we refer to in this Annual Report as the “Company,” “EastGroup,” “we,” “us” or “our,” is an
internally-managed equity REIT first organized in 1969. EastGroup is focused on the development, acquisition and operation
of industrial properties in major Sunbelt markets throughout the United States, primarily in the states of Texas, Florida,
California, Arizona and North Carolina. EastGroup’s strategy for growth is based on ownership of premier distribution
facilities generally clustered near major transportation features in supply-constrained submarkets. EastGroup is a Maryland
corporation, and its common stock is publicly traded on the New York Stock Exchange (“NYSE”) under the symbol
“EGP.” The Company has elected to be taxed and intends to continue to qualify as a REIT under the Internal Revenue Code of
1986, as amended (the “Internal Revenue Code”).
Available Information
The Company maintains a website at www.eastgroup.net. The Company posts to its website all of the reports it files or
furnishes with the Securities and Exchange Commission (the “SEC”) pursuant to the Exchange Act, including its annual reports
on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and the exhibits and amendments to those reports,
as soon as reasonably practicable after it electronically files or furnishes such materials to the SEC. In addition, the Company’s
website includes items related to corporate governance matters, including, among other things, the Company’s corporate
governance guidelines, charters of various committees of the Board of Directors, the Company's whistleblower program and the
Company’s code of ethics and business conduct applicable to all employees, officers and directors. The Company intends to
disclose on its website any amendment to, or waiver of, any provision of this code of business conduct and ethics applicable to
the Company’s directors and executive officers that would otherwise be required to be disclosed under the rules of the SEC or
the New York Stock Exchange. Copies of these reports and corporate governance documents may be obtained, free of charge,
from the Company’s website. We are providing our website address solely for the information of investors, and the information
on our website is not a part of or incorporated by reference into this annual report on Form 10-K or our other filings with the
SEC.
You may also access any materials we file with the SEC through the EDGAR database on the SEC’s website at www.sec.gov.
Administration
EastGroup maintains its principal executive office and headquarters in Ridgeland, Mississippi. The Company also has regional
offices in Dallas, Los Angeles and Atlanta and asset management offices in Houston, Orlando, Tampa and
Phoenix. EastGroup's property management teams are located in San Antonio, Austin, Miami, Jacksonville, San Francisco,
Charlotte, Las Vegas and Greenville. These locations allow the Company to provide property management services to 87% of
the Company’s operating portfolio on a square foot basis. In addition, the Company currently provides property administration
(accounting of operations) for its entire portfolio. The regional offices in Texas, California and Georgia provide oversight of
the Company’s development and value-add program (as described in Note 1(e) in the Notes to Consolidated Financial
Statements). As of December 31, 2024, EastGroup had 101 full-time employees.
Business Overview
EastGroup’s goal is to maximize shareholder value by being a leading provider in its markets of functional, flexible and quality
business distribution space for location-sensitive customers (primarily in the 20,000 to 100,000 square foot range). The
Company develops, acquires and operates distribution facilities, the majority of which are clustered around major transportation
features in supply-constrained submarkets in major Sunbelt regions. The Company’s core markets are in the states of Texas,
Florida, California, Arizona and North Carolina.
As of December 31, 2024, EastGroup owned 536 industrial properties in 12 states. As of that same date, the Company’s
portfolio, including development projects and value-add properties in lease-up and under construction, included approximately
63.1 million square feet consisting of 497 business distribution properties containing 57.8 million square feet, 17 bulk
distribution properties containing 4.4 million square feet, and 22 business service properties containing 900,000 square feet. As
of December 31, 2024, EastGroup’s operating portfolio was 97.1% leased to tenants in approximately 1,600 leases, with no
single tenant accounting for more than approximately 1.6% of the Company’s annualized based rent (as defined in Item 2.
5
Properties) for the year ended December 31, 2024. The properties in the Company's development and value-add program were
21.8% leased as of December 31, 2024.
During 2024, EastGroup increased its holdings in real estate properties through its acquisition and development programs. The
Company acquired 2,474,000 square feet of operating properties and 61.1 acres of land for a total of $403,773,000. Also during
2024, the Company began construction of 10 development projects containing 1,585,000 square feet and transferred seven
projects, which contain 1,519,000 square feet and had costs of $199,971,000 at the date of transfer, from its development and
value-add program to real estate properties.
During 2024, EastGroup sold a group of operating properties in the Jackson, Mississippi market, containing 159,000 square feet
and disposed of 5.4 acres of land in two markets, generating gross sales proceeds of $18,311,000.
In the near term, the Company funds its development and acquisition programs through its $675,000,000 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 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 EastGroup an 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 plans to hold its properties as long-term investments but may determine to sell certain properties that no longer meet
its investment criteria. The Company may provide financing to a prospective purchaser in connection with such sales of
property if market conditions require. In addition, the Company may provide financing to a partner or co-owner in connection
with an acquisition of real estate in certain situations.
Subject to the requirements necessary to maintain EastGroup’s qualifications as a REIT, the Company may acquire securities of
entities engaged in real estate activities or securities of other issuers, including for the purpose of exercising control over those
entities.
The strategies and policies set forth above were determined and are subject to review by EastGroup’s Board of Directors, which
may change such strategies or policies based upon its evaluation of the state of the real estate market, the performance of
EastGroup’s assets, capital and credit market conditions, and other relevant factors.
Competition
The market for the leasing of industrial real estate is competitive. We experience competition for tenants from existing
properties in proximity to our buildings as well as from new development. Institutional investors, other REITs and local real
estate operators generally own such properties; however, no single competitor or small group of competitors is dominant in our
current markets. Even so, as a result of competition, we may have to provide concessions, incur charges for tenant
improvements or offer other inducements, all of which may have an adverse impact on our results of operations. The market
for the acquisition of industrial real estate is also competitive. We compete for real property investments with other REITs and
institutional investors such as pension funds and their advisors, private real estate investment funds, insurance company
investment accounts, private investment companies, individuals and other entities engaged in real estate investment activities.
Regulations
Compliance with various governmental regulations has an impact on EastGroup’s business, including EastGroup’s capital
expenditures, earnings and competitive position, which can be material. EastGroup incurs costs to monitor and take actions to
comply with governmental regulations that are applicable to its business, which include, among others, federal securities laws
and regulations, applicable stock exchange requirements, REIT and other tax laws and regulations, environmental and health
and safety laws and regulations, local zoning, usage and other regulations relating to real property, and the Americans with
Disabilities Act of 1990 (“ADA”).
Under various federal, state and local laws, ordinances and regulations, an owner of real estate may be liable for the costs of
removal or remediation of certain hazardous or toxic substances on or in such property. Many such laws impose liability
without regard to whether the owner knows of, or was responsible for, the presence of such hazardous or toxic substances. The
presence of such substances, or the failure to properly remediate such substances, may adversely affect the owner’s ability to
sell or rent such property or to use such property as collateral in its borrowings. EastGroup’s properties have generally been
subject to Phase I Environmental Site Assessments (“ESAs”) by independent environmental consultants and, as necessary, have
6
been subjected to Phase II ESAs. These reports have not revealed any potential significant environmental liability. Our
management is not aware of any environmental liability that would have a material adverse effect on EastGroup’s business,
assets, financial position or results of operations.
See “Item 1A. Risk Factors” in this Annual Report for a discussion of material risks to EastGroup, including related to
governmental regulations and environmental matters.
Corporate Responsibility Matters
EastGroup’s commitment to corporate responsibility initiatives is evidenced by its building standards, corporate policies and
procedures and company culture. At EastGroup, protecting the environment is important to the Company’s employees,
customers and communities. The Company strives to support sustainability through its commitment to build high performance
and environmentally responsible properties. Through EastGroup’s continued efforts, numerous properties have been certified
through the U.S. Green Building Council's Leadership in Energy and Environmental Design (“LEED®”) green building
program, ENERGY STAR® and the BOMA 360 Performance Program® of the Building Owners and Managers Association
(“BOMA”) International®. While formal certification is not always pursued, the Company prioritizes the use of energy and
water efficient fixtures during development and consistently invests in efficiency improvements for existing properties, such as
LED lighting, white reflective roofing, electric vehicle charging stations and smart sensor irrigation systems. The Company
believes that its continued commitment to these practices creates positive impacts on the environment and long-term value for
the Company and its stakeholders.
The Company has an unsecured revolving credit facility subject to a sustainability-linked pricing component, pursuant to which
the applicable interest margin and facility fee may be adjusted annually based on a sustainability performance metric as
calculated for the preceding year. This metric is based on the number of newly-constructed buildings with qualifying electric
vehicle charging stations as a percentage of total qualifying buildings for each fiscal year. The impact to interest rates on the
credit facility is further described in Note 5 in the Notes to Consolidated Financial Statements.
During 2024, EastGroup continued to work with a sustainability consulting firm to track and benchmark the Company's
environmental data and further expand its corporate responsibility policies, practices and voluntary disclosures. Using the data
obtained from these efforts, EastGroup completed its second annual GRESB® Real Estate Assessment, which provided the
Company with additional insight into its environmental, social and governance management and performance as compared to
its industry peers.
The Company also adopted its Corporate Responsibility Policy during 2024, formalizing EastGroup's commitments, goals and
targets related to topics such as environmental sustainability, climate resilience, social responsibility, stakeholder engagement
and corporate governance. EastGroup assesses climate-related risks using information obtained through third-party risk and
resilience assessments and seeks to engage with tenants on climate risk and other environmental matters, including through
newsletters, recycling initiatives, Earth Day celebrations, and other tenant appreciation events at many of its properties.
In addition, EastGroup and its employees are committed to social responsibility and are active participants in the communities
where they live and work. EastGroup’s employees volunteer with numerous charitable organizations, and the Company
coordinates volunteer opportunities for its employees and provides paid time off for volunteering in order to encourage
participation and increase social engagement in all of the communities in which it operates.
EastGroup operates on the premise that good corporate governance is fundamental to the Company’s business and core values,
and the Company believes its corporate governance policies and practices are well aligned with the interests of stakeholders.
The honesty and integrity of the Company’s management and Board of Directors are critical assets in maintaining the trust of
the Company’s investors, employees, customers, vendors and the communities in which the Company operates.
Readers are encouraged to visit the “Priorities” page of the Company’s website and review its latest corporate responsibility
reports and policies for more detail regarding EastGroup’s corporate responsibility programs and initiatives. Nothing on the
Company’s website or in the referenced reports or policies shall be deemed to be incorporated by reference into this Annual
Report on Form 10-K.
Human Capital Matters
We believe our employees are a critical component of the success and sustainability of our Company, and we are committed to
providing a diverse and inclusive work environment that encourages collaboration and teamwork.
•
Workforce Diversity: As of December 31, 2024, we employed 101 team members, across 15 locations in Texas,
Florida, California, Arizona, North Carolina, Nevada, Georgia, Mississippi and South Carolina. As of such date,
7
100% of these employees were full-time and none were members of a union or subject to a collective bargaining
agreement. Our team is comprised of the following types of personnel:
•
asset, construction and property managers;
•
accounting, administrative, human resources, investor relations and information technology professionals; and
•
our corporate leadership team.
As of December 31, 2024, our employee base is gender diverse, comprised of 72% women and 28% men. Also, of the
employees hired during the year ended December 31, 2024, 67% are women. The officer group is comprised of 49%
women and 51% men. As of December 31, 2024, 14% of our employees self-identified as members of a racial or
ethnic minority group. Our Board of Directors is 29% comprised of women, and one of the seven Board members is a
member of a racial or ethnic minority group. With 101 employees and seven directors, each team member plays a vital
role in the success of the Company.
•
Employee Tenure: We believe our culture supports our employees and creates a positive, professional environment
that encourages longevity for our team members. We seek to develop leaders and promote from within the
organization when opportunities arise. As of December 31, 2024, the average tenure of our workforce was 10 years,
and 12 years for our officers; 76% of our employees at the manager level and above were promoted from within the
Company. Our voluntary turnover rate was 4%, and our involuntary turnover rate was 1% during the year ended
December 31, 2024.
•
Compensation, Benefits, Health and Safety: We offer a competitive pay structure along with a comprehensive
employee benefits program and what we believe are socially-responsible policies and practices in order to support the
overall well-being of our employees and create a safe, professional and inclusive work environment. Some of the
benefits we offer include a robust 401(k) matching program with additional discretionary profit-sharing contributions,
a company-wide equity compensation award program, generous personal leave, paid parental leave, flexible work
schedules, paid time off for volunteering and annual health and wellness checkups, employer-paid health insurance for
all full-time employees, access to mental healthcare, tobacco cessation program and athletic club and tuition
reimbursement programs. All of our employees are eligible for performance based annual bonuses based on a
percentage of salary.
•
Training and Development: We have a formal, certificate-based learning program for all employees; learning
objectives include topics such as ethics and anti-corruption, cybersecurity, anti-discrimination, diversity, equity and
inclusion, unconscious bias, anti-harassment, and workplace violence and bullying. Additional trainings covering
numerous environmental sustainability topics and trends are available to employees through our third-party
sustainability consultant. All of our employees participate in annual performance reviews and feedback sessions. Our
employees are provided with training and peer mentoring programs to further develop their professional skill set, along
with reimbursements for professional designations and continuing education, enhancing the level of service provided
to our customers and the quality of information disclosed to our stakeholders. We also offer a Director Education
Program, providing educational resources to our Board of Directors.
•
Policies: We have various policies and practices in place, including a Code of Ethics and Business Conduct, Ethics
Line, Standards of Conduct, Equal Opportunity & Commitment to Diversity, ADA & Reasonable Accommodation,
Family Medical Leave, Parental Leave, Community Service, Workplace Violence Prevention, Cybersecurity,
Corporate Responsibility Policy, Human Rights Statement, Vendor Code of Conduct, Commitment to Safety & Health
and Safety Policy, Healthy, Wealthy, Wise Benefits Summary and an Environmental Management System.
•
Company and Board Engagement: We value our employees, and our focus on human capital management and other
corporate responsibility initiatives is at the forefront of discussions and decisions with both management and the Board
of Directors. On a regular basis, Company management holds corporate responsibility discussions with the Board of
Directors; in 2024, our management and the Board of Directors formally met to discuss these topics four times. The
Nominating and Corporate Governance Committee of the Board of Directors has direct oversight of our corporate
responsibility program and initiatives, and in 2024, met for two formal discussions on these topics and also received
periodic updates from Company management.
Supplemental U.S. Federal Income Tax Considerations
The following discussion supplements and updates the disclosures under “Certain United States Federal Income Tax
Considerations” in the prospectus dated December 16, 2022, contained in our Registration Statement on Form S-3 filed with the
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SEC on December 16, 2022. Capitalized terms herein that are not otherwise defined shall have the same meaning as when used
in such disclosures (as supplemented).
On December 29, 2022, the IRS promulgated final Treasury Regulations under Sections 897, 1441, 1445, and 1446 of the Code
that were, in part, intended to coordinate various withholding regimes for non-U.S. stockholders. The new Treasury Regulations
provide that:
(i)
The withholding rules applicable to ordinary REIT dividends paid to a non-U.S. stockholder (generally, a 30%
rate of withholding on gross amounts unless otherwise reduced by treaty or effectively connected with such non-
U.S. stockholder’s trade or business within the U.S. and proper certifications are provided) will apply to (a) that
portion of any distribution paid by us that is not designated as a capital gain dividend, a return of basis or a
distribution in excess of the non-U.S. stockholder’s adjusted basis in its stock that is treated as gain from the
disposition of such stock and (b) any portion of a capital gain dividend paid by us that is not treated as gain
attributable to the sale or exchange of a U.S. real property interest by reason of the recipient not owning more than
10% of a class of our stock that is regularly traded on an established securities market during the one-year period
ending on the date of the capital gain dividend.
(ii) The withholding rules under FIRPTA will apply to a distribution paid by us in excess of a non-U.S. stockholder’s
adjusted basis in our stock, unless the interest in our stock is not a U.S. real property interest (for example,
because we are a domestically controlled qualified investment entity) or the distribution is paid to a “withholding
qualified holder.” A “withholding qualified holder” means a qualified holder (as defined below) and a foreign
partnership all of the interests of which are held by qualified holders, including through one or more partnerships.
(iii) The withholding rules under FIRPTA will apply to any portion of a capital gain dividend paid to a non-U.S.
stockholder that is attributable to the sale or exchange of a U.S. real property interest, unless it is paid to a
withholding qualified holder.
In the case of FIRPTA withholding under clause (ii) above, the applicable withholding rate is currently 15%, and in the case of
FIRPTA withholding under clause (iii) above the withholding rate is currently 21%. For purposes of FIRPTA withholding
under clause (iii), whether a capital gain dividend is attributable to the sale or exchange of a U.S. real property interest is
determined taking into account the general exception from FIRPTA distribution treatment for distributions paid to certain non-
U.S. stockholders under which any distribution by us to a non-U.S. stockholder with respect to any class of stock which is
regularly traded on an established securities market located in the United States is not treated as gain recognized from the sale
or exchange of a U.S. real property interest if such non-U.S. stockholder did not own more than 10% of such class of stock at
any time during the one-year period ending on the date of such distribution. To the extent inconsistent, these Treasury
Regulations supersede the discussion on withholding contained in the above-referenced disclosures (as supplemented) under the
heading “Taxation of Non-U.S. Shareholders.” However, if, notwithstanding these Treasury Regulations, we encounter
difficulties in properly characterizing a distribution for purposes of the withholding rules, we may decide to withhold on such
distribution at the highest possible U.S. federal withholding rate that we determine could apply.
Treasury Regulations also provide new guidance regarding qualified foreign pension funds. Accordingly, the discussion
contained in the paragraph under “Certain United States Federal Income Tax Considerations – Taxation of Non-U.S.
Shareholders – Qualified Foreign Pension Funds” is hereby deleted and replaced with the following:
Qualified Foreign Pension Funds. In general, for FIRPTA purposes, and subject to the discussion below regarding
“qualified holders,” neither a “qualified foreign pension fund” (as defined below) nor any entity all of the interests of
which are held by a qualified foreign pension fund is treated as a foreign person, thereby exempting such entities from
tax under FIRPTA. A “qualified foreign pension fund” is an organization or arrangement (i) created or organized in a
foreign country, (ii) established by a foreign country (or one or more political subdivisions thereof) or one or more
employers to provide retirement or pension benefits to current or former employees (including self-employed
individuals) or their designees as a result of, or in consideration for, services rendered, (iii) which does not have a
single participant or beneficiary that has a right to more than 5% of its assets or income, (iv) which is subject to
government regulation and with respect to which annual information about its beneficiaries is provided, or is otherwise
available, to relevant local tax authorities and (v) with respect to which, under its local laws, (A) contributions that
would otherwise be subject to tax are deductible or excluded from its gross income or taxed at a reduced rate, or (B)
taxation of its investment income is deferred, or such income is excluded from its gross income or taxed at a reduced
rate. Under Treasury Regulations, subject to the discussion below regarding “qualified holders,” a “qualified controlled
entity” also is not generally treated as a foreign person for purposes of FIRPTA. A qualified controlled entity generally
includes a trust or corporation organized under the laws of a foreign country all of the interests of which are held by
one or more qualified foreign pension funds either directly or indirectly through one or more qualified controlled
entities.
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Treasury Regulations further require that a qualified foreign pension fund or qualified controlled entity will not be
exempt from FIRPTA with respect to dispositions of U.S. real property interests or REIT distributions attributable to
the same unless the qualified foreign pension fund or qualified controlled entity is a “qualified holder.” To be a
qualified holder, a qualified foreign pension fund or qualified controlled entity must satisfy one of two alternative tests
at the time of the disposition of the U.S. real property interest or the REIT distribution. Under the first test, a qualified
foreign pension fund or qualified controlled entity is a qualified holder if it owned no U.S. real property interests as of
the earliest date during an uninterrupted period ending on the date of the disposition or distribution during which it
qualified as a qualified foreign pension fund or qualified controlled entity. Alternatively, if a qualified foreign pension
fund or qualified controlled entity held U.S. real property interests as of the earliest date during the period described in
the preceding sentence, it can be a qualified holder only if it satisfies certain testing period requirements.
Treasury Regulations also provide that a foreign partnership all of the interests of which are held by qualified holders,
including through one or more partnerships, may certify its status as such and will not be treated as a foreign person
for purposes of withholding under Section 1445 of the Code (and Section 1446 of the Code, as applicable).
ITEM 1A. RISK FACTORS.
In addition to the other information contained or incorporated by reference in this document, readers should carefully consider
the following risk factors. Any of these risks or the occurrence of any one or more of the uncertainties described below could
have a material adverse effect on the Company’s financial condition and the performance of its business. Additional risks and
uncertainties not presently known to the Company or that the Company currently deems immaterial also may impair its
business operations.
Real Estate Industry Risks
We face risks associated with local real estate conditions in areas where we own properties. We may be adversely affected by
general economic conditions and local real estate conditions. For example, an oversupply of industrial properties in a local area
or a decline in the attractiveness of our properties to tenants would have a negative effect on us. Other factors that may affect
general economic conditions or local real estate conditions include:
•
population and demographic trends;
•
employment and personal income trends;
•
income and other tax laws;
•
changes in interest rates and availability and costs of financing;
•
increased operating costs, including insurance premiums, utilities and real estate taxes, due to inflation and other
factors which may not necessarily be offset by increased rents;
•
changes in the price of oil;
•
construction costs; and
•
weather-related and climate-related events.
We may be unable to compete for properties and tenants. The real estate business is highly competitive. We compete for
interests in properties with other real estate investors and purchasers, some of whom have greater financial resources, revenues
and geographical diversity than we have. Furthermore, we compete for tenants with other property owners. All of our
industrial properties are subject to significant local competition. We also compete with a wide variety of institutions and other
investors for capital funds necessary to support our investment activities and asset growth.
We are subject to significant regulation that constrains our activities. Local zoning and land use laws, environmental statutes
and other governmental requirements restrict our expansion, rehabilitation and reconstruction activities. These regulations may
prevent us from taking advantage of economic opportunities. Legislation such as the ADA may require us to modify our
properties, and noncompliance could result in the imposition of fines or an award of damages to private litigants. Future
legislation may impose additional requirements. We cannot predict what requirements may be enacted or what changes may be
implemented to existing legislation.
Risks Associated with Our Properties
We may be unable to lease space on favorable terms or at all. When a lease expires, a tenant may elect not to renew it. We
may not be able to re-lease the property on favorable terms, if we are able to re-lease the property at all. The terms of renewal
or re-lease (including the cost of required renovations and/or concessions to tenants) may be less favorable to us than the prior
lease. We also routinely develop properties with no pre-leasing. If we are unable to lease all or a substantial portion of our
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properties, or if the rental rates upon such leasing are significantly lower than expected rates, our cash generated before debt
repayments and capital expenditures and our ability to make expected distributions to stockholders may be adversely affected.
We may be affected negatively by tenant bankruptcies and leasing delays. At any time, a tenant may experience a downturn in
its business that may weaken its financial condition. Similarly, a general decline in the economy may result in a decline in the
demand for space at our industrial properties. As a result, our tenants may delay lease commencement, fail to make rental
payments when due, or declare bankruptcy. Any such event could result in the termination of that tenant’s lease and losses to
us, and funds available for distribution to investors may decrease. We receive a substantial portion of our income as rents under
mid-term and long-term leases. If tenants are unable to comply with the terms of their leases for any reason, including because
of rising costs or falling sales, we may deem it advisable to modify lease terms to allow tenants to pay a lower rent or a smaller
share of taxes, insurance and other operating costs. If a tenant becomes insolvent or bankrupt, we cannot be sure that we could
recover the premises from the tenant promptly or from a trustee or debtor-in-possession in any bankruptcy proceeding relating
to the tenant. We also cannot be sure that we would receive rent in the proceeding sufficient to cover our expenses with respect
to the premises. If a tenant becomes bankrupt, the federal bankruptcy code will apply and, in some instances, may restrict the
amount and recoverability of our claims against the tenant. A tenant’s default on its obligations to us could adversely affect our
financial condition and the cash we have available for distribution.
We face risks associated with our property development. We intend to continue to develop properties where we believe market
conditions warrant such investment. Once made, our investments may not produce results in accordance with our
expectations. Risks associated with our current and future development and construction activities include:
•
the availability of favorable financing alternatives;
•
the risk that we may not be able to obtain land on which to develop or that due to the increased cost of land, our
activities may not be as profitable;
•
construction costs exceeding original estimates due to tariffs or elevated interest rates and increases in the costs of
materials and labor;
•
disruption in supply and delivery chains;
•
construction and lease-up delays resulting in increased debt service, fixed expenses and construction costs;
•
expenditure of funds and devotion of management’s time to projects that we do not complete;
•
fluctuations of occupancy and rental rates at newly completed properties, which depend on a number of factors,
including market and economic conditions, resulting in lower than projected rental rates and a corresponding lower
return on our investment; and
•
complications (including building moratoriums and anti-growth legislation) in obtaining necessary zoning,
occupancy and other governmental permits.
We face risks associated with property acquisitions. We acquire individual properties and portfolios of properties and intend to
continue to do so. Our acquisition activities and their success are subject to the following risks:
•
when we are able to locate a desired property, competition from other real estate investors may significantly increase
the purchase price;
•
acquired properties may fail to perform as we project;
•
the actual costs of repositioning or redeveloping acquired properties may be higher than our estimates;
•
acquired properties may be located in new markets where we face risks associated with an incomplete knowledge or
understanding of the local market, a limited number of established business relationships in the area and a relative
unfamiliarity with local governmental and permitting procedures;
•
we may be unable to quickly and efficiently integrate new acquisitions, particularly acquisitions of portfolios of
properties, into our existing operations, and as a result, our results of operations and financial condition could be
adversely affected; and
•
we may acquire properties subject to liabilities and without any recourse, or with only limited recourse, to the
transferor with respect to unknown liabilities. As a result, if a claim were asserted against us based upon ownership
of those properties, we might have to pay substantial sums to settle it, which could adversely affect our cash flow.
Coverage under our existing insurance policies may be inadequate to cover losses, or we may not be able to obtain adequate
insurance at certain properties in the future. We generally maintain insurance policies related to our business, including
casualty, general liability and other policies, covering our business operations, employees and assets as appropriate for the
markets where our properties and business operations are located. However, we would be required to bear all losses that are not
adequately covered by insurance. In addition, there may be certain losses that are not generally insured against or that are not
generally fully insured against because it is not deemed economically feasible or prudent to do so, or insurance coverage may
not be available, including losses due to fire, floods, wind, earthquakes, acts of war, acts of terrorism or riots. If an uninsured
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loss or a loss in excess of insured limits occurs with respect to one or more of our properties, then we could lose the capital we
invested in the properties, as well as the anticipated future revenue from the properties. In addition, if the damaged properties
are subject to recourse indebtedness, we would continue to be liable for the indebtedness, even if these properties were
irreparably damaged.
We face risks due to lack of geographic and real estate sector diversity. Substantially all of our properties are located in the
Sunbelt region of the United States with an emphasis in the states of Texas, Florida, California, Arizona and North Carolina.
As of December 31, 2024, our largest markets were Houston and Dallas. We owned operating properties totaling 7,108,000
square feet in Houston and 6,108,000 square feet in Dallas, which represent 10.0% and 10.8%, respectively, of the Company’s
total Real estate properties based on percentage of total annualized base rent (as defined in Item 2. Properties). A downturn in
general economic conditions and local real estate conditions in these geographic regions, as a result of oversupply of or reduced
demand for industrial properties, local business climate, business layoffs and changing demographics, would have a particularly
strong adverse effect on us. In addition, our investments in real estate assets are concentrated in the industrial distribution
sector. This concentration may expose us to the risk of economic downturns in this sector to a greater extent than if our
business activities included other sectors of the real estate industry.
We face risks due to the illiquidity of real estate which may limit our ability to vary our portfolio. Real estate investments are
relatively illiquid. Our ability to vary our portfolio in response to changes in economic and other conditions will therefore be
limited. In addition, because of our status as a REIT, the Internal Revenue Code limits our ability to sell our properties. If we
must sell an investment, we cannot ensure that we will be able to dispose of the investment on terms favorable to the Company.
We are subject to environmental laws and regulations. Current and previous real estate owners and operators may be required
under various federal, state and local laws, ordinances and regulations to investigate and clean up hazardous substances released
at the properties they own or operate. They may also be liable to the government or to third parties for substantial property or
natural resource damage, investigation costs and cleanup costs. Such laws often impose liability without regard to whether the
owner or operator knew of, or was responsible for, the release or presence of such hazardous substances. In addition, some
environmental laws create a lien on the contaminated site in favor of the government for damages and costs the government
incurs in connection with the contamination. Contamination may adversely affect the owner’s ability to use, sell or lease real
estate or to borrow using the real estate as collateral. We have no way of determining at this time the magnitude of any
potential liability to which we may be subject arising out of environmental conditions or violations with respect to the
properties we currently or formerly owned. Environmental laws today can impose liability on a previous owner or operator of a
property that owned or operated the property at a time when hazardous or toxic substances were disposed of, released from, or
present at the property. A conveyance of the property, therefore, may not relieve the owner or operator from liability. Although
ESAs have been conducted at our properties to identify potential sources of contamination at the properties, such ESAs do not
reveal all environmental liabilities or compliance concerns that could arise from the properties. Moreover, material
environmental liabilities or compliance concerns may exist, of which we are currently unaware, that in the future may have a
material adverse effect on our business, assets or results of operations.
Climate change and its effects, including compliance with new laws or regulations such as “green” building codes, may
require us to make improvements to our existing properties or result in unanticipated losses that could affect our business and
financial condition. To the extent that climate change causes an increase in catastrophic weather events, such as severe storms,
fires or floods, our properties may be susceptible to an increase in weather-related damage. Even in the absence of direct
physical damage to our properties, the occurrence of any natural disasters or a changing climate in the area of any of our
properties could have a material adverse effect on business, supply chains and the economy generally. Climate change could
cause an increase in property and casualty insurance premiums or negatively impact our ability to obtain insurance. The
potential impacts of future climate change on our properties could adversely affect our ability to lease, develop or sell our
properties or to borrow using our properties as collateral. In addition, any proposed legislation enacted to address climate
change could increase the costs of energy, utilities and overall development. The resulting costs of any proposed legislation
may adversely affect our or our tenants' financial position, results of operations and cash flows.
Financing Risks
We face risks associated with the use of debt to fund acquisitions and developments, including refinancing risk. We are subject
to the risks normally associated with debt financing, including the risk that our cash flow will be insufficient to meet required
payments of principal and interest. In addition, certain of our debt will have significant outstanding principal balances on their
maturity dates, commonly known as “balloon payments.” Therefore, we will likely need to refinance at least a portion of our
outstanding debt as it matures. There is a risk that we may not be able to refinance existing debt or that the terms of any
refinancing will not be as favorable as the terms of the existing debt.
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We face risks associated with our dependence on external sources of capital. In order to qualify as a REIT, we are required
each year to distribute to our stockholders at least 90% of our ordinary taxable income, and we are subject to tax on our income
to the extent it is not distributed. Because of this distribution requirement, we may not be able to fund all future capital needs
from cash retained from operations. As a result, to fund capital needs, we rely on third-party sources of capital, which we may
not be able to obtain on favorable terms, if at all. Our access to third-party sources of capital depends upon a number of factors,
including (i) general market conditions; (ii) the market’s perception of our growth potential; (iii) our current and potential future
earnings and cash distributions; and (iv) the market price of our capital stock. Additional debt financing may negatively impact
our financial ratios, such as our debt-to-total market capitalization ratio, our debt-to-EBITDAre ratio and our fixed charge
coverage ratio.
Covenants in our credit agreements could limit our flexibility and adversely affect our financial condition. The terms of our
various credit agreements and other indebtedness require us to comply with a number of customary financial and other
covenants, such as maintaining minimum debt service coverage and leverage ratios and maintaining insurance coverage. These
covenants may limit our flexibility in our operations, and breaches of these covenants could result in defaults under the
instruments governing the applicable indebtedness even if we had satisfied our payment obligations. If we are unable to
refinance our indebtedness at maturity or meet our payment obligations, the amount of our distributable cash flow and our
financial condition would be adversely affected.
Adverse changes in our credit ratings could impair our ability to obtain additional debt and equity financing on favorable
terms, if at all. Our credit ratings are based on our operating performance, liquidity and leverage ratios, overall financial
position and other factors employed by the credit rating agencies in their rating analysis of us. Our credit ratings can affect the
amount and type of capital we can access, as well as the terms of any financings we may obtain. There can be no assurance that
we will be able to maintain our current credit ratings. In the event our current credit ratings deteriorate, it may be more difficult
or expensive to obtain additional financing or refinance existing obligations and commitments. Also, a downgrade in our credit
ratings would trigger additional costs or other potentially negative consequences under our current and future credit facilities
and debt instruments.
Increases in interest rates would increase our interest expense. At December 31, 2024, we had no variable rate debt
outstanding not protected by interest rate hedge contracts. We may incur variable rate debt in the future. If interest rates
increase, then so would the interest expense on our unhedged variable rate debt, which would adversely affect our financial
condition and results of operations. From time to time, we manage our exposure to interest rate risk with interest rate hedge
contracts that effectively fix or cap a portion of our variable rate debt. In addition, we refinance fixed rate debt at times when
we believe rates and terms are appropriate. Our efforts to manage these exposures may not be successful. Our use of interest
rate hedge contracts to manage risk associated with interest rate volatility may expose us to additional risks, including a risk that
a counterparty to a hedge contract may fail to honor its obligations. Developing an effective interest rate risk strategy is
complex and no strategy can completely insulate us from risks associated with interest rate fluctuations. There can be no
assurance that our hedging activities will have the desired beneficial impact on our results of operations or financial condition.
Termination of interest rate hedge contracts typically involves costs, such as transaction fees or breakage costs.
The number of shares of our common stock available for future sale and future offerings of debt or equity securities may be
dilutive to existing stockholders and adversely affect the market price of our common stock. Our ability to execute our business
strategy depends on our access to an appropriate blend of equity and debt financing, including common and preferred stock,
lines of credit and other forms of secured and unsecured debt. We have filed a registration statement with the SEC allowing us
to offer, from time to time, an indefinite amount of equity securities on an as-needed basis, including shares under our Current
ATM Program (as defined in Liquidity and Capital Resources in Part II, Item 7 of this Annual Report on Form 10-K). Sales of
a substantial number of shares of our common stock (or the perception that such sales might occur), the issuance of common
stock in connection with acquisitions and other equity issuances may dilute the holdings of our existing stockholders or reduce
the market prices of our securities, or both. Holders of our common stock are not entitled to preemptive rights or other
protections against dilution. Because our decision to issue securities in any future offering will depend on market conditions
and other factors beyond our control, we cannot predict or estimate the amount, timing or nature of our future offerings. Thus,
our stockholders bear the risk of future offerings reducing the market prices of our securities and diluting their proportionate
ownership.
The lack of certain limitations on our debt could result in our becoming more highly leveraged. Our governing documents do
not limit the amount of indebtedness we may incur. Accordingly, we may incur additional debt and would do so, for example,
if it were necessary to maintain our status as a REIT. We might become more highly leveraged as a result, and our financial
condition and cash available for distribution to stockholders might be negatively affected and the risk of default on our
indebtedness could increase.
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General Risk Factors
Inflation and related volatility in the economy could negatively impact our tenants, our results of operations and the value of
our publicly-traded equity securities. Inflation and its related impacts, including increased prices for services and goods and
higher interest rates and wages, and any fiscal or other policy interventions by the U.S. government in reaction to such events,
could negatively impact our tenants’ businesses or our results of operations. Most of our leases require the tenants to pay their
pro rata share of operating expenses, including real estate taxes, insurance and common area maintenance, although a limited
number of tenants have capped the amount of these operating expenses they are responsible for under their lease. As a result,
we believe that most of our leases mitigate our exposure to increases in costs and operating expenses resulting from inflation.
However, there can be no assurance that our tenants would be able to absorb these expense increases and be able to continue to
pay us their portion of operating expenses, capital expenditures and rent. In addition, while most of our leases provide for
scheduled rent increases, high levels of inflation could outpace these increases. As a result, our business, financial condition,
results of operations, cash flows, liquidity and ability to satisfy our minimum debt service obligations and to pay dividends and
distributions to shareholders could be adversely affected over time. There is no guarantee that we will be able to mitigate the
effects of inflation and related impacts, and the duration and extent of any prolonged periods of inflation, and any related
adverse effects on our results of operations and financial condition, remain unknown at this time.
Additionally, inflationary pricing may have a negative effect on the construction costs necessary to complete our development
projects, including, but not limited to, costs of construction materials, labor and services from third-party contractors and
suppliers. Higher construction costs could adversely impact our investments in real estate assets and our expected yields on
development and value-add projects. Although the Company has an obligation to complete development projects currently
under construction, the Company does not have any obligation to start new development projects in the future. EastGroup
evaluates new development projects on a case-by-case basis including many factors such as construction costs, potential yields,
and tenant demand, and no assurance can be given that inflationary pricing will not have a material adverse impact on our
development pipeline and future results.
The market value of our common stock could decrease based on our performance and market perception and conditions. The
market value of our common stock may be affected by the market’s perception of our operating results, growth potential, and
current and future cash dividends and may also be affected by the real estate market value of our underlying assets and by
equity markets in general. The market price of our common stock may also be influenced by the dividend on our common
stock relative to market interest rates. Rising interest rates may lead potential buyers of our common stock to expect a higher
dividend rate, which would adversely affect the market price of our common stock. In addition, rising interest rates would
result in increased expense, thereby adversely affecting cash flow and our ability to service our indebtedness and pay dividends.
The state of the economy, geopolitical conflict or adverse changes in general or local economic conditions may adversely affect
our operating results and financial condition. Turmoil in the global financial markets may have an adverse impact on the
availability of credit to businesses generally and could lead to a further weakening of the U.S. and global economies. Currently
these conditions have not impaired our ability to access capital markets and finance our operations. However, our ability to
access the capital markets may be restricted at a time when we would like, or need, to raise financing, which could have an
impact on our flexibility to react to changing economic and business conditions. Furthermore, deteriorating economic
conditions including business layoffs, downsizing, industry slowdowns and other similar factors that affect our customers could
negatively impact commercial real estate fundamentals and result in lower occupancy, lower rental rates and declining values in
our real estate portfolio and in the collateral securing any loan investments we may make. Additionally, an adverse economic
situation could have an impact on our lenders or customers, causing them to fail to meet their obligations to us. No assurances
can be given that the effects of an adverse economic situation will not have a material adverse effect on our business, financial
condition and results of operations.
Deficiencies in internal control over financial reporting could adversely affect our business. The design and effectiveness of
our procedures for internal control over financial reporting may not prevent all misstatements, errors or misrepresentations.
While our management will continue to review the effectiveness of our disclosure controls and procedures and internal control
over financial reporting, there can be no assurance that our internal control over financial reporting will be effective in
achieving all control objectives without fail. Deficiencies could result in restatements of our financial statements or otherwise
materially adversely affect our business.
We may fail to qualify as a REIT. If we fail to qualify as a REIT, we will not be allowed to deduct dividends to stockholders in
computing our taxable income and will be subject to federal income tax at regular corporate rates. In addition, we may be
barred from qualification as a REIT for the four years following disqualification. The additional tax incurred at regular
corporate rates would significantly reduce the cash flow available for distribution to stockholders and for debt service.
Furthermore, we would no longer be required by the Internal Revenue Code to make any dividends to our stockholders as a
condition of REIT qualification. If we were to fail to qualify as a REIT, subject to certain limitations in the Internal Revenue
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Code, corporate stockholders may be eligible for the dividends received deduction, and individual, trust and estate stockholders
may be eligible to treat the dividends received from us as qualified dividend income taxable as net capital gains under the
provisions of Section 1(h)(11) of the Internal Revenue Code. However, non-corporate stockholders (including individuals) will
not be able to deduct 20% of certain dividends they receive from us in accordance with Section 199A of the Internal Revenue
Code. The REIT qualification requirements are extremely complex, and interpretation of the U.S. federal income tax laws
governing REIT qualification is limited. Although we believe we have operated and intend to operate in a manner that will
continue to qualify us as a REIT, we cannot be certain that we have been or will be successful in continuing to be taxed as a
REIT. In addition, facts and circumstances that may be beyond our control may affect our ability to qualify as a REIT. We
cannot assure you that new legislation, regulations, administrative interpretations or court decisions will not change the tax laws
significantly with respect to our qualification as a REIT or with respect to the federal income tax consequences of
qualification.
Legislative or regulatory action with respect to tax laws and regulations could adversely affect the Company and our
stockholders. We are subject to state and local tax laws and regulations. Changes in state and local tax laws or regulations may
result in an increase in our tax liability. A shortfall in tax revenues for states and municipalities in which we operate may lead to
an increase in the frequency and size of such changes. If such changes occur, we may be required to pay additional taxes on our
assets or income. These increased tax costs could adversely affect our financial condition, results of operations and the amount
of cash available for the payment of dividends. In addition, in recent years, numerous legislative, judicial and administrative
changes have been made to the federal income tax laws applicable to investments in REITs and similar entities. Additional
changes to tax laws are likely to continue to occur in the future, and we cannot assure our stockholders that any such changes
will not adversely affect the taxation of a stockholder. We cannot assure you that future changes to tax laws and regulations will
not have an adverse effect on an investment in our stock.
To maintain our status as a REIT, we limit the amount of shares any one stockholder can own. The Internal Revenue Code
imposes certain limitations on the ownership of the stock of a REIT. For example, not more than 50% in value of our
outstanding shares of capital stock may be owned, directly or indirectly, by five or fewer individuals (as defined in the Internal
Revenue Code) during the last half of any taxable year. To protect our REIT status, our charter prohibits any holder from
acquiring more than 9.8% (in value or in number, whichever is more restrictive) of our outstanding equity stock (defined as all
of our classes of capital stock, except our excess stock (of which there is none outstanding)) unless our Board of Directors
grants a waiver. The ownership limit may limit the opportunity for stockholders to receive a premium for their shares of
common stock that might otherwise exist if an investor were attempting to assemble a block of shares in excess of 9.8% of the
outstanding shares of equity stock or otherwise effect a change in control.
Certain tax and anti-takeover provisions of our charter and bylaws may inhibit a change of our control. Certain provisions
contained in our charter and bylaws and the Maryland General Corporation Law may discourage a third party from making a
tender offer or acquisition proposal to us. If this were to happen, it could delay, deter or prevent a change in control or the
removal of existing management. These provisions also may delay or prevent our stockholders from receiving a premium for
their common shares over then-prevailing market prices. These provisions include:
•
the REIT ownership limit described above;
•
special meetings of our stockholders may be called only by the chairman of the board, the chief executive officer,
the president, a majority of the board or by stockholders possessing a majority of all the votes entitled to be cast at
the meeting;
•
our Board of Directors may authorize and issue securities without stockholder approval; and
•
advance-notice requirements for proposals to be presented at stockholder meetings.
In addition, Maryland law provides protection for Maryland corporations against unsolicited takeovers by limiting, among other
things, the duties of the directors in unsolicited takeover situations and certain “business combinations” and “control share
acquisitions.” Our bylaws contain provisions exempting us from the Maryland Control Share Acquisition Act and the
Maryland Business Combination Act. Our bylaws prohibit the repeal, amendment or alteration of our Maryland Control Share
Acquisition opt out without the approval by the Company’s stockholders; however, there can be no assurance that this provision
will not be amended or eliminated at some time in the future.
The Company faces risks in attracting and retaining key personnel. Many of our senior executives have strong industry
reputations, which aid us in identifying acquisition and development opportunities and negotiating with tenants and sellers of
properties. The loss of the services of these key personnel could affect our operations because of diminished relationships with
existing and prospective tenants, property sellers and industry personnel. Unanticipated turnover or inadequate succession
planning could have a material adverse impact on the Company's business plans and opportunities. In addition, attracting new
or replacement personnel may be difficult in a competitive market.
15
We have severance and change in control agreements with certain of our officers that may deter changes in control of the
Company. If, within a certain time period (as set in the officer’s agreement) following a change in control, we terminate any
such officer’s employment other than for cause, or if any such officer elects to terminate his or her employment with us for
reasons specified in the agreement, we will make a severance payment equal to the officer’s average annual compensation times
an amount specified in the officer’s agreement, together with the officer’s base salary and vacation pay that have accrued but
are unpaid through the date of termination. These agreements may deter a change in control because of the increased cost for a
third party to acquire control of the Company.
We rely on information technology in our operations, and any material failure, inadequacy, interruption or cyber-attack of that
technology could harm our business. We rely on information technology networks and systems, including the internet and
third-party cloud-based service providers, to process, transmit and store electronic information, and to manage or support a
variety of business processes, including financial transactions and records, and to maintain personal identifying information and
customer and lease data. We purchase some of our information technology from vendors, on whom our systems depend. We
rely on commercially available systems, software, tools and monitoring to provide security for processing, transmission and
storage of data relating to our business operations (including our financial transactions and records) and confidential customer
data (including individually identifiable information relating to financial accounts). Although we have taken steps to protect the
security of our information systems and the data maintained in those systems, it is possible that our safety and security
measures will not prevent the systems’ improper functioning or damage, or the improper access or disclosure of our business
operations or personally identifiable information such as in the event of cybersecurity incidents. Security breaches, including
physical or electronic break-ins, computer viruses, phishing or spoofing attacks by hackers and similar breaches, can create
system disruptions, shutdowns, misappropriation of assets or unauthorized disclosure of confidential information. In some
cases, it may be difficult to anticipate or immediately detect such incidents and the damage they cause. Techniques used to
obtain unauthorized access to, disable or sabotage information technology systems are increasingly diverse and sophisticated,
including as a result of emerging technologies, such as artificial intelligence and machine learning. Any failure to maintain
proper function, security and availability of our information systems could interrupt our operations, damage our reputation,
subject us to liability claims or regulatory penalties and could have a materially adverse effect on our business, financial
condition and results of operations. Additionally, any cybersecurity incident may be costly, notwithstanding any cyber liability
insurance we may carry. See “Item 1C. Cybersecurity” for further discussion.
We may be impacted by changes in U.S. social, political, regulatory and economic conditions or laws and policies. Any
changes to U.S. tax laws, duties, tariffs, changes to bilateral or regional trade agreements, manufacturing, and development and
investment in the territories and countries where we and our customers operate could adversely affect our operating results and
our business.
ITEM 1B. UNRESOLVED STAFF COMMENTS.
None.
ITEM 1C. CYBERSECURITY.
Cyber Risk Management and Strategy
Cybersecurity risk management policies and processes are integrated into EastGroup’s enterprise risk management program.
These policies and processes include incident response, identity and access management, employee training on cybersecurity
matters, device management, patch management and vulnerability assessment. The Company also maintains processes
regarding third-party vendor risk management, including, as appropriate, conducting a review of security ratings of and System
and Organization Controls (“SOC”) reports provided by potential vendors. Additionally, EastGroup works with cybersecurity
consulting firms to help manage the Company’s cybersecurity risks. The cyber consulting firms currently conduct testing of
EastGroup’s controls and environment, including network penetration testing, to identify and remediate cybersecurity risks.
They also currently provide EastGroup with advice on technology, infrastructure, management, and productivity in relation to
its information technology capabilities, including training for all employees. This training supports information security
awareness and adherence to Company policies and guidance through regular, mandatory training and random simulated
phishing tests.
Additionally, EastGroup has information technology general controls in place in support of internal control over financial
reporting. These controls are tested by the Company’s internal audit function and control deficiencies, if any, would be reported
to senior management and the Audit Committee of the Board of Directors.
16
As of the date of this report, the Company has not identified breaches from any cybersecurity threats, including as a result of
any prior cybersecurity incidents, that have materially affected or are reasonably likely to affect operations, business strategy or
financial condition. For additional information regarding our cybersecurity risks, see “Item 1A. Risk Factors - We rely on
information technology in our operations, and any material failure, inadequacy, interruption or cyber-attack of that technology
could harm our business.”
Governance Related to Cybersecurity Risks
EastGroup’s cybersecurity risk management process is assessed and managed by a cyber risk committee (“Cyber Risk
Committee”), which includes the Company’s Chief Financial Officer (“CFO”), Chief Information Officer (“CIO”) and
members of management within the information technology, finance and accounting, legal and internal audit functions. The
CIO is a Certified Public Accountant (“CPA”), a Certified Information Technology Professional with the American Institute of
CPAs and has over 20 years of experience in the areas of cybersecurity and information technology. Collectively, other
members of the Cyber Risk Committee have technical expertise and experience in accounting, financial reporting and auditing,
and law and compliance.
The Company’s Board of Directors oversees EastGroup’s risk management process. Specifically, the Board of Directors has
delegated to the Audit Committee, as reflected in the charter of the Audit Committee, responsibility for periodic review and
oversight of the Company’s cybersecurity and other information technology risks, controls and procedures, including the
Company’s plans to mitigate cybersecurity risks and to respond to data breaches. The Audit Committee receives periodic
updates from the Cyber Risk Committee regarding these topics. Both senior management, including members of the Cyber
Risk Committee, and the Audit Committee Chairperson report periodically on cybersecurity risk management to the full Board
of Directors. Additionally, management conducts comprehensive risk surveys annually and presents the results of these surveys
to the Board of Directors for discussion.
ITEM 2. PROPERTIES.
EastGroup owned 536 industrial properties as of December 31, 2024. These properties are located primarily in the Sunbelt
states of Texas, Florida, California, Arizona and North Carolina, and the majority are clustered around major transportation
features in supply constrained submarkets. As of February 11, 2025, EastGroup’s operating portfolio was 96.5% leased and
95.7% occupied by tenants in approximately 1,600 leases, with no single tenant accounting for more than approximately 1.6%
of the Company’s annualized based rent, as defined in the table below. The Company has developed approximately 49% of its
total portfolio (on a square foot basis), which includes real estate properties and development and value-add properties in lease-
up and under construction. The Company’s focus is the ownership of business distribution space (92% of the total portfolio)
with the remainder in bulk distribution space (7%) and business service space (1%). Business distribution space properties are
typically multi-tenant buildings with a building depth of 200 feet or less, clear height of 24-32 feet, office finish of 10-25% and
truck courts with a depth of 100-120 feet. See Consolidated Financial Statement Schedule III – Real Estate Properties and
Accumulated Depreciation for a detailed listing of the Company’s properties.
At December 31, 2024, EastGroup did not own any single property with a book value that was 10% or more of total book value
or with gross revenues that were 10% or more of total gross revenues.
17
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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 20,000 to 100,000 square foot range). The
Company develops, acquires and operates distribution facilities, the majority of which are clustered around major transportation
features in supply-constrained submarkets in major Sunbelt regions. The Company’s core markets are in the states of Texas,
Florida, California, Arizona and North Carolina.
During 2024, economic uncertainty and stock market volatility continued due to a number of factors, including persistent
inflation, interest rate uncertainty, concerns about supply chain or trade disruptions, particularly between the United States,
Mexico and Canada and geopolitical conflict. While these factors did not have a significant adverse impact on EastGroup’s
operations during 2024, they may adversely impact the Company in the future. Most of the Company’s leases require the
tenants to pay their pro rata share of operating expenses, including real estate taxes, insurance and common area maintenance,
thereby reducing the Company’s exposure to increases in operating expenses resulting from inflation or other factors.
Additionally, most of the Company’s leases include scheduled rent increases. In the event inflation causes increases in the
Company’s general and administrative expenses, or higher interest rates increase the Company’s cost of doing business, such
increased costs would not be passed through to tenants and could adversely affect the Company’s results of operations. The
Company continues to monitor inflation and interest rates, as well as the uncertainty resulting from the overall regulatory and
economic environment.
EastGroup believes its current operating cash flow and unsecured bank credit facilities provide the capacity to fund the
operations of the Company, and the Company also believes it can issue common and/or preferred equity and obtain debt
financing on currently acceptable terms.
During 2024, EastGroup sold, and subsequently settled the issuance of, 1,373,459 shares of common stock directly through
sales agents under its at-the-market (“ATM”) common stock offering programs at a weighted average price of $174.30 per
share, providing aggregate net proceeds to the Company of $236,996,000.
During 2024, EastGroup entered into forward equity sale agreements with certain financial institutions acting as forward
counterparties under its ATM programs with respect to 2,677,289 shares of common stock with an initial weighted average
forward price of $178.32 per share. The Company did not receive any proceeds from the sale of common shares by the forward
counterparties at the time it entered into forward equity sale agreements. Also during 2024, the Company settled outstanding
forward equity sale agreements that were previously entered into under its ATM programs by issuing 2,698,077 shares of
common stock in exchange for net proceeds of approximately $480,663,000.
Additionally, on June 13, 2024, the Company amended its unsecured bank credit facilities to extend the maturity date by three
years to July 31, 2028. EastGroup’s financing and equity issuances are further described in Liquidity and Capital Resources.
The Company’s primary source of revenue is rental income. During 2024, EastGroup executed leases on 9,384,000 square feet
of operating properties (15.9% of EastGroup’s total square footage of 58,987,000 as of December 31, 2024). For new and
renewal leases signed during 2024, average rental rates increased by 53.0% as compared to the former leases on the same
spaces.
On a diluted per share basis, Net Income Attributable to EastGroup Properties, Inc. Common Stockholders was $4.66 for the
year ended December 31, 2024, compared to $4.42 for 2023, a 5.4% increase. See the Company’s analysis of performance
trends below for further details.
Property Net Operating Income (“PNOI”) Excluding Income from Lease Terminations from same properties (defined as
operating properties owned during the entire current and prior year reporting periods – January 1, 2023 through December 31,
2024), increased 4.8% for 2024 compared to 2023.
21
EastGroup’s operating portfolio was 97.1% leased at December 31, 2024 compared to 98.7% at December 31, 2023.
Occupancy at the end of 2024 for the operating portfolio was 96.1% compared to 98.2% at December 31, 2023. As of
February 11, 2025, the operating portfolio was 96.5% leased and 95.7% occupied. As of December 31, 2024, leases
approximating 10.1% of the operating portfolio, based on a percentage of annualized based rent, were scheduled to expire in
2025. This percentage was reduced to 8.2% as of February 11, 2025.
The Company generates new sources of leasing revenue through its acquisitions and also its development and value-add
program. The Company mitigates risks associated with development through a Board-approved maximum level of land held
for development and by adjusting development start dates according to leasing activity.
During the year ended December 31, 2024, EastGroup purchased 61.1 acres of land in two markets for a total of $13,762,000.
The Company began construction of 10 development projects containing 1,585,000 square feet in seven markets. Also in 2024,
the Company transferred seven development and value-add projects (1,519,000 square feet) in six markets from its
development and value-add program to real estate properties, with costs of $199,971,000 at the date of transfer. As of
December 31, 2024, EastGroup’s development and value-add program consisted of 21 projects (4,143,000 square feet) located
in 14 markets. The projected total cost for the development and value-add projects, which were collectively 22.5% leased as of
February 11, 2025, is $608,700,000, of which $184,632,000 remained to be invested as of December 31, 2024.
During the year ended December 31, 2024, EastGroup acquired 2,474,000 square feet of operating properties in six markets for
a total of $390,011,000. There were no value-add property acquisitions during the period.
During the year ended December 31, 2024, EastGroup sold a group of operating properties in the Jackson, Mississippi market,
containing 159,000 square feet and disposed of 5.4 acres of land in two markets, generating gross sales proceeds of
$18,311,000. The Company recognized $8,751,000 in Gain on sales of real estate investments and $362,000 in gains on sales
of non-operating real estate (included in Other on the Consolidated Statements of Income and Comprehensive Income) during
the year ended December 31, 2024.
In the near term, the Company funds its development and acquisition programs through its $675,000,000 unsecured bank credit
facilities (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.
Investors and industry analysts following the real estate industry primarily utilize two supplemental operating performance
measures in analyzing the Company's operating results: (1) funds from operations 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.
22
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increase in PNOI and the decrease in interest expense, partially offset by an increase in general and administrative
expense.
•
For the year ended December 31, 2024, PNOI increased by $51,674,000, or 12.5%, compared to 2023. PNOI
increased $20,089,000 from same property operations, $18,354,000 from newly developed and value-add properties
and $15,915,000 from 2023 and 2024 acquisitions; PNOI decreased $2,642,000 from operating properties sold in 2023
and 2024.
•
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, 2023 through December 31, 2024). Same PNOI,
excluding income from lease terminations, increased 4.8% for the year ended December 31, 2024, compared to 2023.
•
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, 2023 through December 31, 2024). Same
property average occupancy for the year ended December 31, 2024 was 96.7% compared to 98.2% for 2023.
•
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, 2023 through December 31, 2024). The same property average rental rate was $8.22 per square foot for
the year ended December 31, 2024, compared to $7.76 per square foot for the year ended December 31, 2023.
•
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, 2024 was
96.1%. Quarter-end occupancy ranged from 96.5% to 98.2% over the previous four quarters ended December 31,
2023 to September 30, 2024.
•
Rental rate change represents the rental rate increase or decrease on new and renewal leases compared to the prior
leases on the same space. Rental rate increases on new and renewal leases (15.9% of total square footage) averaged
53.0% for the year ended December 31, 2024.
FINANCIAL CONDITION
EastGroup’s Total Assets were $5,077,476,000 at December 31, 2024, an increase of $558,263,000 from December 31,
2023. Total Liabilities decreased $125,647,000 to $1,784,932,000, and Total Equity increased $683,910,000 to $3,292,544,000
during the same period. The following paragraphs explain these changes in greater detail.
Assets
Real Estate Properties
Real estate properties increased $649,896,000 during the year ended December 31, 2024. The increase was primarily due to:
(i) the acquisition of operating properties; (ii) the transfer of properties from Development and value-add properties to Real
estate properties; (iii) capital improvements at the Company’s properties; (iv) right of use assets for the Company’s ground
leases; and (v) costs incurred on development and value-add projects subsequent to transfer to Real estate properties discussed
below. These increases were partially offset by the sale of operating properties.
25
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RESULTS OF OPERATIONS
2024 Compared to 2023
Net Income Attributable to EastGroup Properties, Inc. Common Stockholders for the year ended December 31, 2024 was
$227,751,000 ($4.67 per basic and $4.66 per diluted share) compared to $200,491,000 ($4.43 per basic and $4.42 per diluted
share) for the year ended December 31, 2023. The following paragraphs provide further details with respect to these changes:
•
PNOI was $464,995,000 ($9.51 per diluted share) for the year ended December 31, 2024, compared to $413,321,000
($9.12 per diluted share) for the year ended December 31, 2023. PNOI increased $20,089,000 from same property
operations, $18,354,000 from newly developed and value-add properties and $15,915,000 from 2023 and 2024
acquisitions; PNOI decreased $2,642,000 from operating properties sold in 2023 and 2024. Straight-lining of rent
increased Income from real estate operations by $11,450,000 and $11,289,000 in 2024 and 2023, respectively.
•
EastGroup recognized Gains on sales of real estate investments of $8,751,000 ($0.18 per diluted share) during 2024,
compared to $17,965,000 ($0.40 per diluted share) during 2023. The Company’s sales transactions are described in
Note 2 of the Notes to Consolidated Financial Statements.
•
Depreciation and amortization was $189,411,000 ($3.87 per diluted share) for the year ended December 31, 2024,
compared to $171,078,000 ($3.77 per diluted share) for the year ended December 31, 2023. The increase is primarily
due to the operating properties acquired by the Company in 2023 and 2024 and the properties transferred from
Development and value-add properties in 2023 and 2024. These increases are partially offset by operating properties
sold in 2023 and 2024.
•
Interest expense recognized was $38,956,000 ($0.80 per diluted share) during 2024, compared to $47,996,000 ($1.06
per diluted share) during 2023. See the table below for details.
•
EastGroup recognized gains on involuntary conversion and business interruption claims of $1,708,000 ($0.03 per
diluted share) during 2024, compared to $4,187,000 ($0.09 per diluted share) during 2023. Gains on involuntary
conversion and business interruption claims are included in Other revenue on the Consolidated Statements of Income
and Comprehensive Income.
•
Weighted average shares outstanding increased by 3,580,000, on a diluted basis, during 2024 compared to 2023. The
increase is primarily due to issuance of shares through the Company's offering programs, as discussed in Liquidity and
Capital Resources.
EastGroup entered into 136 leases with certain rent concessions on 5,201,000 square feet during 2024 with total rent
concessions of $13,135,000 over the terms of the leases, compared to 91 leases with rent concessions on 3,282,000 square feet
with total rent concessions of $7,543,000 over the terms of the leases in 2023.
The Company’s percentage of leased square footage for the operating portfolio was 97.1% at December 31, 2024, compared to
98.7% at December 31, 2023. Occupancy at the end of 2024 for the operating portfolio was 96.1% compared to 98.2% at
December 31, 2023.
28
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For both facilities, the margin and facility fee are subject to changes in the Company’s credit ratings. Although the Company’s
current credit rating is Baa2, given the strength of the Company’s key credit metrics, initial pricing for the credit facilities is
based on the BBB+/Baa1 credit ratings level. This favorable pricing level will be retained provided that the Company’s
consolidated leverage ratio, as defined in the applicable agreements, remains less than 32.5%.
The $625,000,000 facility is also subject to a sustainability-linked pricing component, pursuant to which the applicable interest
rate margin is adjusted if the Company meets a certain sustainability performance target. This sustainability metric is evaluated
annually and was achieved for the years ended December 31, 2024, 2023 and 2022, which allowed for the interest rate
reduction in each of the years subsequent to achieving the metric. The margin was effectively reduced on this unsecured bank
credit facility for the years ended December 31, 2024 and 2023, by one basis point, from 77.5 to 76.5 basis points.
The Company’s unsecured bank credit facilities have certain restrictive covenants, such as maintaining minimum debt service
coverage and leverage ratios and maintaining insurance coverage, and the Company was in compliance with all of its financial
debt covenants at December 31, 2024.
On October 25, 2024, we established an ATM common stock offering program pursuant to which we are able to sell from time
to time shares of our common stock having an aggregate gross sales price of up to $1,000,000,000 (the “Current ATM
Program”). The Current ATM Program replaced our previous $750,000,000 ATM program (the “Prior ATM Program”), which
was established on October 25, 2023, under which we had sold shares of our common stock having an aggregate gross sales
price of $746,153,000 through October 25, 2024.
In connection with the Current ATM program, we may sell shares of our common stock through sales agents or through certain
financial institutions acting as forward purchasers whereby, at our discretion, the forward counterparties may borrow from third
parties and subsequently sell shares of our common stock. The use of a forward equity sale agreement allows us to lock in a
share price on the sale of shares of our common stock but defer settling and receiving the proceeds from the sale of shares until
a later date. Additionally, the forward price that we expect to receive upon settlement of an agreement will be subject to
adjustment for (i) a floating interest rate factor equal to a specified daily rate less a spread, (ii) the forward purchaser’s stock
borrowing costs and (iii) scheduled dividends during the term of the agreement.
During the year ended December 31, 2024, EastGroup sold, and subsequently settled the issuance of, 1,373,459 shares of
common stock directly through sales agents under its ATM programs at a weighted average price of $174.30 per share,
providing aggregate net proceeds to the Company of $236,996,000.
During the year ended December 31, 2024, EastGroup entered into forward equity sale agreements with certain financial
institutions acting as forward counterparties under its ATM programs with respect to 2,677,289 shares of common stock with an
initial weighted average forward price of $178.32 per share. The Company did not receive any proceeds from the sale of
common shares by the forward counterparties at the time it entered into forward equity sale agreements. Also during the year
ended December 31, 2024, the Company settled outstanding forward equity sale agreements that were previously entered into
under its ATM programs by issuing 2,698,077 shares of common stock in exchange for net proceeds of approximately
$480,663,000.
Subsequent to December 31, 2024, EastGroup settled outstanding forward equity sale agreements that were previously entered
into under the Current ATM Program by issuing 214,138 shares of common stock in exchange for net proceeds of
approximately $37,005,000. As of February 12, 2025, the date of this Annual Report on Form 10-K, the Company had 171,115
shares of common stock, or approximately $29,688,000 of net proceeds, based on a weighted average forward price of $173.50
per share, available for settlement before the applicable settlement period expires in November 2025.
As of February 12, 2025, approximately $719,665,000 of common stock remains available to be sold under the Current ATM
Program. Future sales, if any, will depend on a variety of factors, including among others, market conditions, the trading price
of our common stock, determinations by us of the appropriate sources of funding for us and potential uses of funding available
to us.
33
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leases expire, or (ii) lease development space. In addition, an economic downturn or recession, 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 38 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, 2024, 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 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 43 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 44 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, 2024 that has materially affected, or is reasonably likely to materially affect, the Company’s internal
control over financial reporting.
ITEM 9B. OTHER INFORMATION.
During the three months ended December 31, 2024, none of the Company’s directors or officers (as defined in Rule 16a-1(f) of
the Exchange Act) adopted, terminated or modified a Rule 10b5-1 trading arrangement or non-Rule 10b5-1 trading arrangement
(as such terms are defined in Item 408 of Regulation S-K).
ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS.
Not applicable.
36
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 2025 Annual Meeting of Stockholders and is incorporated herein by reference.
We have adopted an insider trading policy governing the purchase, sale and other dispositions of our securities by our directors,
officers and employees that we believe is reasonably designed to promote compliance with insider trading laws, rules and
regulations, and any applicable listing standards. A copy of our insider trading policy is filed as Exhibit 19.1 to this Annual
Report on Form 10-K. In addition, with regard to the Company's trading in its own securities, it is the Company's policy to
comply with the federal securities laws and the applicable exchange listing requirements.
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 2025 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 2025 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 2025 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, Chicago, IL, 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 2025 Annual Meeting of Stockholders and is incorporated herein by reference.
37
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Exhibits
The following exhibits are included in this Annual Report on Form 10-K for the fiscal year ended December 31, 2024:
Exhibit Number
Description
3.1
Articles of Amendment and Restatement of EastGroup Properties, Inc. (incorporated by reference to
Exhibit 3.1 of the Company’s Current Report on Form 8-K filed May 28, 2021).
3.2
Second Amended and Restated Bylaws of EastGroup Properties, Inc. (incorporated by reference to
Exhibit 3.1 to the Company’s Current Report on Form 8-K filed on August 28, 2024).
4.1
Description of Securities (incorporated by reference to exhibit 4.1 to the Company’s Annual Report on
Form 10-K filed February 16, 2022).
10.1*
EastGroup Properties, Inc. 2023 Equity Incentive Plan (incorporated by reference to Exhibit 10.1 to the
Company’s Form 8-K filed May 26, 2023).
10.2*
EastGroup Properties, Inc. Director Compensation Program Including the Independent Director
Compensation Policy, as amended and restated as of May 23, 2024, pursuant to the EastGroup Properties,
Inc. 2023 Equity Incentive Plan (incorporated by reference to Exhibit 10.1 to the Company’s Quarterly
Report on Form 10-Q filed July 24, 2024).
10.3*
Form of Severance and Change in Control Agreement entered into by and between the Company and each
of Marshall A. Loeb, Brent W. Wood and John F. Coleman (incorporated by reference to Exhibit 10.1 to
the Company’s Current Report on Form 8-K filed May 18, 2016).
10.4*
Form of Severance and Change in Control Agreement by and between the Company and each of Ryan M.
Collins and R. Reid Dunbar (incorporated by reference to Exhibit 10.2 to the Company’s Current Report
on Form 8-K filed May 18, 2016).
10.5*
Form of First Amendment to the Severance and Change in Control Agreement, entered into by and
between the Company and each of R. Reid Dunbar and Ryan M. Collins (incorporated by reference to
Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q filed October 28, 2020).
10.6*
Form of Second Amendment to the Severance and Change in Control Agreement, entered into by and
between the Company and each of R. Reid Dunbar and Ryan M. Collins (filed herewith).
10.7*
Form of Severance and Change in Control Agreement, entered into by and between the Company and
Staci H. Tyler (incorporated by reference to Exhibit 10.3 to the Company’s Quarterly Report on Form 10-
Q filed October 28, 2020).
10.8*
Form of First Amendment to the Severance and Change in Control Agreement, entered into by and
between the Company and Staci H. Tyler (filed herewith).
10.9*
Form of Indemnification Agreement entered into by and between the Company and each of its directors
and executive officers (incorporated by reference to Exhibit 10.1 to the Company’s Quarterly Report on
Form 10-Q filed October 28, 2020).
10.10
Note Purchase Agreement, dated as of August 28, 2013, by and among EastGroup Properties, L.P., the
Company and each of the Purchasers of the Notes party thereto (incorporated by reference to Exhibit 10.1
to the Company’s Current Report on Form 8-K filed August 30, 2013).
10.11
Note Purchase Agreement, dated as of August 17, 2020, among EastGroup Properties, L.P., the Company
and the purchasers of the notes party thereto (including the form of the 2.61% Series A Senior Notes due
October 14, 2030 and the 2.71% Series B Senior Notes due October 14, 2032) (incorporated by reference
to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed August 21, 2020).
10.12
Note Purchase Agreement, dated as of February 3, 2022, among EastGroup Properties, L.P., the Company
and the purchasers of the notes party thereto (including the form of the 3.03% Senior Notes due April 20,
2032) (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed
February 8, 2022).
10.13
Note Purchase Agreement, dated as of August 16, 2022, among EastGroup Properties, L.P., the Company
and the purchasers of the notes party thereto (including the forms of the 4.90% Series A Senior Notes due
2033 and the 4.95% Series B Senior Notes due 2034) (incorporated by reference to Exhibit 10.1 of the
Company’s Current Report on Form 8-K filed August 19, 2022).
10.14
Sixth Amended and Restated Credit Agreement, dated June 13, 2024, among EastGroup Properties, L.P.;
EastGroup Properties, Inc.; PNC Bank, National Association, as Agent; Regions Bank, as Syndication
Agent; Bank of America, N.A., U.S. Bank National Association, TD Bank, N.A., and JPMorgan Chase
Bank, N.A., as Co-Documentation Agents; PNC Capital Markets LLC, as Sustainability Agent; PNC
Capital Markets LLC, Regions Capital Markets, and BOFA Securities, Inc., as Joint Lead Arrangers; PNC
Capital Markets LLC and Regions Capital Markets, as Joint Bookrunners; and the Lenders party thereto
(incorporated by reference to Exhibit 10.1 to the Company’s Form 8-K filed June 13, 2024).
19.1
EastGroup Properties, Inc. Insider Trading Policy (filed herewith).
21.1
Subsidiaries of the Company (filed herewith).
39
Exhibit Number
Description
23.1
Consent of KPMG LLP (filed herewith).
24.1
Powers of attorney (included on signature page hereto).
31.1
Rule 13a-14(a)/15d-14(a) Certifications (pursuant to Section 302 of the Sarbanes-Oxley Act of 2002) of
Marshall A. Loeb, Chief Executive Officer (filed herewith).
31.2
Rule 13a-14(a)/15d-14(a) Certifications (pursuant to Section 302 of the Sarbanes-Oxley Act of 2002) of
Brent W. Wood, Chief Financial Officer (filed herewith).
32.1
Section 1350 Certifications (pursuant to Section 906 of the Sarbanes-Oxley Act of 2002) of Marshall A.
Loeb, Chief Executive Officer (furnished herewith).
32.2
Section 1350 Certifications (pursuant to Section 906 of the Sarbanes-Oxley Act of 2002) of Brent W.
Wood, Chief Financial Officer (furnished herewith).
97.1*
EastGroup Properties, Inc. Compensation Recovery Policy (incorporated by reference to Exhibit 97.1 to
the Company’s Form 10-K filed February 14, 2024).
101.SCH
Inline XBRL Taxonomy Extension Schema Document (filed herewith).
101.CAL
Inline XBRL Taxonomy Extension Calculation Linkbase Document (filed herewith).
101.DEF
Inline XBRL Taxonomy Extension Definition Linkbase Document (filed herewith).
101.LAB
Inline XBRL Taxonomy Extension Label Linkbase Document (filed herewith).
101.PRE
Inline XBRL Taxonomy Extension Presentation Linkbase Document (filed herewith).
104
Cover Page Interactive Data File (formatted as inline XBRL with applicable taxonomy extension
information contained in Exhibits 101.*) (filed herewith).
*
Indicates a management contract or any compensatory plan, contract or arrangement.
40
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, 2024 and 2023, 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, 2024, 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, 2024 and 2023, and
the results of its operations and its cash flows for each of the years in the three-year period ended December 31, 2024, 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, 2024, 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 12, 2025 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.
Estimated relative fair value assigned to land in an asset acquisition
As discussed in Note 1(j) to the consolidated financial statements, the Company acquired $390,011,000 of assets, net of
liabilities assumed, related to real estate property acquisitions during 2024 that were accounted for as asset acquisitions, of
which $41,815,000 of the acquisition cost was allocated to land. The acquisition cost 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 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 utilized to evaluate the relevance of a selection 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 evaluated the Company’s estimate of fair value of land by comparing to
41
our independently established ranges of comparable land sales developed using publicly available market data and involved
valuation professionals with specialized skills and knowledge who assisted in this evaluation for a selection of acquisitions.
/s/ KPMG LLP
We have served as the Company’s auditor since 1970.
Chicago, Illinois
February 12, 2025
42
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, 2024.
/s/ EASTGROUP PROPERTIES, INC.
Ridgeland, Mississippi
February 12, 2025
43
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, 2024, 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, 2024, 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, 2024 and 2023, 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, 2024, and the related notes and financial statement schedule III (collectively, the consolidated
financial statements), and our report dated February 12, 2025 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
Chicago, Illinois
February 12, 2025
44
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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.
(d) Real Estate Properties
EastGroup has one reportable segment – industrial properties, consistent with the Company’s manner of internal reporting,
measurement of operating results and allocation of the Company’s resources. The Company's properties are primarily in the
20,000 to 100,000 square foot range. The majority of the Company’s leases are triple net leases, in which the tenant is
responsible for their pro rata share of operating expenses during the lease term, including real estate taxes, insurance and
common area maintenance. The Company’s chief operating decision maker (“CODM”) is the Chief Executive Officer, who
uses Net income as the primary measure of operating results in making decisions. Net income is computed in accordance with
U.S. generally accepted accounting principles (“GAAP”). Net income is used to evaluate the performance of the Company’s
investments in real estate assets and its operating results and to allocate resources in acquiring or developing industrial
properties. The following income and significant expense categories are regularly provided to the Company’s CODM as
components of Net income, which are presented on the Consolidated Statements of Income and Comprehensive Income:
Income from real estate operations, Expenses from real estate operations, General and administrative and Interest expense.
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, 2024, 2023 and 2022, 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 $155,240,000, $141,003,000 and $125,199,000
for 2024, 2023 and 2022, respectively.
(e) Development and Value-Add Properties
Development and value-add properties consists of properties in lease-up and under construction and prospective development
(primarily land). Value-add properties are defined as properties that are either acquired but not stabilized or can be converted to
a higher and better use. Properties meeting either of the following two conditions are considered value-add properties: (1) Less
than 75% leased as of the acquisition date (or will be less than 75% occupied within one year of acquisition date based on near
term lease roll), or (2) 20% or greater of the gross carrying amount of the property will be spent to redevelop the property.
Costs associated with development (i.e., land, construction costs, interest expense, property taxes and other costs associated
with development) are aggregated into the total capitalized costs of the property. Included in these costs are management’s
estimates for the portions of internal costs (primarily personnel costs) deemed related to such development activities. The
internal costs are allocated to specific development projects based on development activity. As the property becomes occupied,
depreciation commences on the occupied portion of the building, and costs are capitalized only for the portion of the building
that remains vacant. The Company transfers properties from Development and value-add properties 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/value-add acquisition date 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 Sold and Held for Sale
The Company considers a real estate property to be held for sale when it meets the criteria established under ASC 360,
Property, Plant and Equipment, including when it is probable that the property will be sold within a year. Real estate properties
held for sale are reported at the lower of the carrying amount or fair value less estimated costs to sell and are not depreciated
while they are held for sale. The Company did not classify any properties as held for sale as of December 31, 2024 or 2023.
In accordance with ASC 360 and ASC 205, Presentation of Financial Statements, the Company would report a disposal of a
component of an entity or a group of components of an entity in discontinued operations if the disposal represents a strategic
shift that has (or will have) a major effect on an entity’s operations and financial results when the component or group of
components meets the criteria to be classified as held for sale or when the component or group of components is disposed of by
EASTGROUP PROPERTIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
51
sale or other than by sale. In addition, the Company would provide additional disclosures about both discontinued operations
and the disposal of an individually significant component of an entity that does not qualify for discontinued operations
presentation in the financial statements. EastGroup performs an analysis of properties sold to determine whether the sales
qualify for discontinued operations presentation.
Results of operations and gains and losses on sales for properties sold are reported in continuing operations on the Consolidated
Statements of Income and Comprehensive Income. The gains and losses on sales of operating properties are included in Gain
on sales of real estate investments.
The Company did not consider its sales in 2024, 2023, or 2022 to be disposals of a component of an entity or a group of
components of an entity representing a strategic shift that has (or will have) a major effect on the entity’s operations and
financial results.
(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.
(h) Cash Equivalents
The Company considers all highly liquid investments with a maturity of three months or less when purchased to be cash
equivalents. The carrying amounts approximate fair value due to the short maturity of those instruments.
(i)
Amortization
Debt origination costs are deferred and amortized over the term of each loan using the effective interest method, and the
amortization is included in Interest Expense. Amortization of debt issuance costs was $1,914,000, $1,943,000 and $1,357,000
for 2024, 2023 and 2022, respectively. Amortization of facility fees was $1,012,000, $1,005,000 and $713,000 for 2024, 2023
and 2022, respectively.
Leasing costs are deferred and amortized using the straight-line method over the term of the lease. The related amortization
expense is included in Depreciation and amortization. Leasing costs amortization expense was $25,522,000, $22,133,000 and
$18,950,000 for 2024, 2023 and 2022, 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. Criteria considered in grouping similar assets include geographic location, market and
operational risks and the physical characteristics of the assets. EastGroup determined that its real estate property acquisitions in
2024, 2023 and 2022 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 2024, 2023
and 2022 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 and the value of in-place leases at the time of the acquisition. The value allocable to the above or below
market component of an acquired in-place lease is determined based upon the present value (using a discount rate reflecting the
risks associated with the acquired leases) of the difference between (i) the contractual amounts to be paid pursuant to the lease
EASTGROUP PROPERTIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
52
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(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.
The Company accrues dividends on shares granted and unvested and holds the certificates for the shares, and the employee can
vote the shares once performance based or market based conditions are met. Share certificates and dividends are delivered to
the employee as they vest. Forfeitures of awards are recognized as they occur.
(l)
Equity Offerings
Underwriting commissions and offering costs incurred in connection with common stock offerings and at-the-market equity
offering programs have been reflected as a reduction of Additional paid-in capital.
Under relevant accounting guidance, sales of common stock under forward equity sale agreements (as discussed in Note 9
Common Stock Activity) are not deemed to be liabilities, and furthermore, meet the derivatives and hedging guidance scope
exception to be accounted for as equity instruments based on the following assessment: (i) none of the agreements’ exercise
contingencies were based on observable markets or indices besides those related to the market for our own stock price and
operations; and (ii) none of the settlement provisions precluded the agreements from being indexed to our own stock.
(m) 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. Outstanding forward equity sale agreements are potentially dilutive securities excluded from the basic EPS
calculation until the agreements are settled, shares issued and proceeds received. Although unvested restricted shares are
classified as issued and outstanding, they are considered forfeitable until the restrictions lapse and will not be included in the
basic EPS calculation until the shares are vested.
Diluted EPS represents the amount of earnings for the period attributable to each share of common stock outstanding during the
reporting period and to each share that would have been outstanding assuming the issuance of common shares for all dilutive
potential common shares outstanding during the reporting period. The Company calculates diluted EPS by dividing Net Income
Attributable to EastGroup Properties, Inc. Common Stockholders by the weighted average number of common shares
outstanding plus the effect of any dilutive securities including shares issuable under forward equity sale agreements and
unvested restricted stock using the treasury stock method. Any anti-dilutive securities are excluded from the diluted EPS
calculation. See Note 13 for details.
(n) 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.
(o) Risks and Uncertainties
The state of the overall economy can significantly impact the Company’s operational performance and thus impact its financial
position. Should EastGroup experience a significant decline in operational performance, it may affect the Company’s ability to
make distributions to its shareholders, service debt or meet other financial obligations.
EASTGROUP PROPERTIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
54
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ITEM 16. FORM 10-K SUMMARY.
None.
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[This page intentionally left blank]
[This page intentionally left blank]
[This page intentionally left blank]
D. Pike Aloian
Managing Director of Neuberger Berman
H. Eric Bolton, Jr.
Executive Chairman and
Former Chief Executive Officer of
Mid-America Apartment Communities, Inc.
Donald F. Colleran
Chairman of the Board
Former President and Chief Executive Officer
of FedEx Express
David M. Fields
Senior Advisor and Former Executive Vice President,
Chief Administrative Officer and General Counsel
of Sunset Development Company
Marshall A. Loeb
Chief Executive Officer, President
and Director
Mary E. McCormick
Former Executive Director of the Center
for Real Estate at The Ohio State University
Katherine M. Sandstrom
Former Senior Managing Director
at Heitman LLC
Marshall A. Loeb
Chief Executive Officer, President
and Director
Brent W. Wood
Executive Vice President,
Chief Financial Officer and Treasurer
John F. Coleman
Executive Vice President
Ryan M. Collins
Executive Vice President
R. Reid Dunbar
Executive Vice President
Staci H. Tyler
Executive Vice President,
Chief Accounting Officer and
Chief Administrative Officer
EastGroup Properties’ cover photos:
Front: Riverside 1 & 2, Atlanta, GA
Back, top: MCO Logistics Center, Orlando, FL
Back, bottom: Springwood Business Park, Houston, TX
Board of
Directors
Executive
Officers
Front row: Shelby Trusty, Vice President; Michelle Rayner, Vice President; David Hicks, Senior Vice President; Farrah Kennedy, Vice President; Reid Dunbar, Executive
Vice President; Marshall Loeb, Chief Executive Officer; Staci Tyler, Chief Accounting and Administrative Officer; Brent Wood, Chief Financial Officer; John Coleman,
Executive Vice President; Ryan Collins, Executive Vice President; Stephanie Shaw, Vice President; Whitney Denham, Vice President; Ceejaye Peters, Vice President.
Back row: Mike Sacco, Senior Vice President; John Travis, Senior Vice President; Brian Laird, Chief Information Officer; John Ratliff, Vice President; Barry Anderson,
Vice President; Todd Johnson, Senior Vice President; Kevin Sager, Senior Vice President.
CORPORATE HEADQUARTERS
400 West Parkway Place
Suite 100
Ridgeland, MS 39157
601.354.3555
Regional Offices
6565 N. MacArthur Boulevard
Suite 255
Irving, TX 75039
972.386.8700
10250 Constellation Boulevard
Suite 2300
Los Angeles, CA 90067
323.457.0648
3495 Piedmont Road, NE, Building 11
Suite 350
Atlanta, GA 30305
404.301.2670
www.eastgroup.net