8-K
EASTGROUP PROPERTIES INC (EGP)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
__________________________
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (date of earliest event reported): July 26, 2022
EASTGROUP PROPERTIES, INC.
(Exact Name of Registrant as Specified in its Charter)
| Maryland | 1-07094 | 13-2711135 |
|---|---|---|
| (State or Other Jurisdiction<br>of Incorporation) | (Commission File Number) | (IRS Employer<br>Identification No.) |
400 W. Parkway Place, Suite 100, Ridgeland, MS 39157
(Address of Principal Executive Offices, including zip code)
(601) 354-3555
(Registrant’s telephone number, including area code)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
| ☐ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
|---|---|
| ☐ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
| ☐ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
| ☐ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading symbol(s) | Name of each exchange on which registered |
|---|---|---|
| Common stock, $0.0001 par value per share | EGP | New York Stock Exchange |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
| Emerging growth company | ☐ |
|---|
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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ITEM 2.02 Results of Operations and Financial Condition
On July 26, 2022, EastGroup Properties, Inc. (the "Company") furnished the following documents: (i) a press release relating to its results of operations for the quarter ended June 30, 2022 and related matters; and (ii) quarterly supplemental financial information for the fiscal quarter ended June 30, 2022. A copy of the press release as well as a copy of the supplemental financial information are made available on the Company's website and are attached hereto as Exhibits 99.1 and 99.2, respectively, and are incorporated by reference herein.
The information furnished in this Item 2.02 and in the attached Exhibits 99.1 and 99.2 is deemed to be "furnished" and shall not be deemed to be "filed" for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), or otherwise subject to the liabilities of that Section and shall not be deemed incorporated by reference into any filing under the Exchange Act or the Securities Act of 1933, as amended, regardless of any general incorporation language in such filing.
ITEM 9.01 Financial Statements and Exhibits
(d) Exhibits.
| Exhibit No. | Description |
|---|---|
| 99.1 | Press Release dated July 26, 2022. |
| 99.2 | Quarterly Supplemental Information for the Quarter Ended June 30, 2022. |
| 104 | Cover Page Interactive Data File (embedded within the Inline XBRL document). |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
Date: July 26, 2022
| EASTGROUP PROPERTIES, INC. |
|---|
| By: /s/ BRENT W. WOOD |
| Brent W. Wood<br>Executive Vice President, Chief Financial Officer and Treasurer |
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Document
| Exhibit 99.1 | ||
|---|---|---|
| Contact: | ||
| --- | --- | --- |
| Marshall Loeb, President and CEO | ||
| Brent Wood, CFO | ||
| EastGroup Properties Announces | (601) 354-3555 | |
| Second Quarter 2022 Results |
Second Quarter 2022 Results
•Net Income Attributable to Common Stockholders of $1.09 Per Diluted Share for Second Quarter 2022 Compared to $0.69 Per Diluted Share for Second Quarter 2021 (Gains on Sales of Real Estate Investments Were $11 Million, or $0.25 Per Diluted Share, for Second Quarter 2022; There Were No Sales in Second Quarter 2021)
•Funds from Operations of $1.72 Per Share for Second Quarter 2022 Compared to $1.47 Per Share for Second Quarter 2021, an Increase of 17.0%
•Same Property Net Operating Income for the Same Property Pool Excluding Income From Lease Terminations Increased 9.5% on a Cash Basis and 7.7% on a Straight-Line Basis for Second Quarter 2022 Compared to the Same Period in 2021
•The Operating Portfolio was 99.1% Leased and 98.5% Occupied as of June 30, 2022; Average Occupancy of the Operating Portfolio was 98.1% for Second Quarter 2022
•Rental Rates on New and Renewal Leases Increased an Average of 37.2% on a Straight-Line Basis
•Acquired Tulloch Corporation, the Owner of an Industrial Real Estate Portfolio Located within the San Francisco and Sacramento Markets, Comprised of 14 Properties Totaling Approximately 1.7 Million Square Feet and Two Land Parcels Totaling 10.5 Acres
•Acquired 229,000 Square Feet of Value-Add Properties for $47 Million
•Acquired 116.8 Acres of Development Land (In Addition to the Land Owned by Tulloch Corporation) for $35 Million
•Started Construction of Three Development Projects Containing 522,000 Square Feet with Projected Total Costs of $70 Million
•Transferred Three Development and Value-Add Projects Totaling 842,000 Square Feet to the Operating Portfolio, Which Are Collectively 99% Leased
•Development and Value-Add Program Consisted of 28 Projects in 15 Cities (4.6 Million Square Feet) at June 30, 2022 with a Projected Total Investment of $558 Million
•Sold One Operating Property in Houston Containing 42,000 Square Feet for $13 Million (Gain of $11 Million Not Included in FFO)
•Declared 170th Consecutive Quarterly Cash Dividend: $1.10 Per Share
•Issued and Funded $150 Million of Unsecured Debt During the Quarter with a 10-Year Term and a Fixed Interest Rate of 3.03%
JACKSON, MISSISSIPPI, July 26, 2022 - EastGroup Properties, Inc. (NYSE: EGP) (the “Company”, “we”, “us” or “EastGroup”) announced today the results of its operations for the three and six months ended June 30, 2022.
Commenting on EastGroup’s performance, Marshall Loeb, CEO, stated, “Our team achieved a strong 17% growth in FFO per share during second quarter as a result of record highs in our leasing, occupancy and same store net operating income. Market conditions remain buoyant with strong tenant demand and rising rents. Even with the positive operating environment, however, we are mindful of unease in the global economy and the impact of rising interest rates on capital markets. As such, we are listening carefully to our tenants and prospects for any signs of a
400 W. Parkway Place, Suite 100, Ridgeland, MS 39157 | TEL: 601-354-3555 | FAX: 601-352-1441 | EastGroup.net
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potential slowdown. In the near term, we are taking advantage of our strong balance sheet to selectively pursue development and value add opportunities where we have a high degree of confidence. Longer term, I remain bullish on the continued growth prospects for our shallow bay, last mile, Sunbelt market portfolio. My confidence stems from two facts. First, our team and our portfolio have performed well through several up and down economic cycles over the years. Secondly, there are a number of long-term secular trends, such as supply chain logistics, e-commerce adoption, Sunbelt population migration, etc. that I believe will continue to incrementally fuel our growth.”
EARNINGS PER SHARE
Three Months Ended June 30, 2022
On a diluted per share basis, earnings per common share (“EPS”) were $1.09 for the three months ended June 30, 2022, compared to $0.69 for the same period of 2021. The Company’s property net operating income (“PNOI”) increased by $14,499,000 ($0.34 per share) for the three months ended June 30, 2022, as compared to the same period of 2021. EastGroup recognized gains on sales of real estate investments of $10,647,000 ($0.25 per share) during the three months ended June 30, 2022; there were no sales during the same period of 2021. In addition, depreciation and amortization expense increased by $6,112,000 ($0.14 per share) during the three months ended June 30, 2022, as compared to the same period of 2021.
Six Months Ended June 30, 2022
Diluted EPS for the six months ended June 30, 2022 were $2.62 compared to $1.37 for the same period of 2021. PNOI increased by $26,359,000 ($0.63 per share) for the six months ended June 30, 2022, as compared to the same period of 2021. EastGroup recognized gains on sales of real estate investments of $40,999,000 ($0.98 per share) during the six months ended June 30, 2022; there were no sales during the same period of 2021. Depreciation and amortization expense increased by $12,140,000 ($0.29 per share) during the six months ended June 30, 2022, as compared to the same period of 2021.
FUNDS FROM OPERATIONS AND PROPERTY NET OPERATING INCOME
Three Months Ended June 30, 2022
For the three months ended June 30, 2022, funds from operations attributable to common stockholders (“FFO”) were $1.72 per share compared to $1.47 per share during the same period of 2021, an increase of 17.0%.
PNOI increased by $14,499,000, or 20.2%, during the three months ended June 30, 2022, compared to the same period of 2021. PNOI increased $6,229,000 from newly developed and value-add properties, $6,150,000 from same property operations (based on the same property pool), and $3,106,000 from 2021 and 2022 acquisitions; PNOI decreased $811,000 from operating properties sold in 2021 and 2022.
The same property pool PNOI Excluding Income from Lease Terminations increased 7.7% on a straight-line basis for the three months ended June 30, 2022, compared to the same period of 2021; on a cash basis (excluding straight-line rent adjustments and amortization of above/below market rent intangibles), Same PNOI increased 9.5%.
On a straight-line basis, rental rates on new and renewal leases (4.8% of total square footage) increased an average of 37.2% during the three months ended June 30, 2022.
Six Months Ended June 30, 2022
FFO for the six months ended June 30, 2022, was $3.41 per share compared to $2.92 per share during the same period of 2021, an increase of 16.8%.
PNOI increased by $26,359,000, or 18.6%, during the six months ended June 30, 2022, compared to the same period of 2021. PNOI increased $11,776,000 from newly developed and value-add properties, $10,793,000 from same property operations (based on the same property pool), and $5,510,000 from 2021 and 2022 acquisitions; PNOI decreased $1,481,000 from operating properties sold in 2021 and 2022.
400 W. Parkway Place, Suite 100, Ridgeland, MS 39157 | TEL: 601-354-3555 | FAX: 601-352-1441 | EastGroup.net
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The same property pool PNOI Excluding Income from Lease Terminations increased 7.6% on a straight-line basis for the six months ended June 30, 2022, compared to the same period of 2021; on a cash basis (excluding straight-line rent adjustments and amortization of above/below market rent intangibles), Same PNOI increased 9.0%.
On a straight-line basis, rental rates on new and renewal leases (10.0% of total square footage) increased an average of 35.2% during the six months ended June 30, 2022.
The same property pool for the three and six months ended June 30, 2022 includes properties which were included in the operating portfolio for the entire period from January 1, 2021 through June 30, 2022; this pool is comprised of properties containing 43,349,000 square feet.
FFO, PNOI and Same PNOI are non-GAAP financial measures, which are defined under Definitions later in this release. Reconciliations of Net Income to PNOI and Same PNOI, and Net Income Attributable to EastGroup Properties, Inc. Common Stockholders to FFO are presented in the attached schedule “Reconciliations of GAAP to Non-GAAP Measures.”
ACQUISITIONS AND DISPOSITIONS
In April 2022, the Company acquired Zephyr Distribution Center in the Hayward submarket within the San Francisco Bay area, near 13 other EastGroup owned properties totaling 943,000 square feet, which are currently 100% leased. The 82,000 square foot distribution building was acquired for $29,017,000, is currently 42% leased, and is in the lease-up phase of the development and value-add portfolio.
Also in April 2022, EastGroup closed on the acquisition of Mesa Gateway Commerce Center, located near the entrance to the Mesa Gateway Airport, for $18,315,000. This recently constructed 147,000 square foot building reached 100% leased post closing, and is currently in the lease-up phase of the development and value-add portfolio. The property will be transferred to the operating portfolio once occupied, which is anticipated in November 2022.
In addition to the Zephyr Distribution Center acquisition in California, in June 2022, EastGroup closed the acquisition of Tulloch Corporation, the owner of an industrial real estate portfolio located within the San Francisco and Sacramento markets. The portfolio consists of 14 properties totaling approximately 1.7 million square feet and two land parcels totaling 10.5 acres. The properties are currently 100% leased to 37 tenants with an average remaining lease term of approximately 3 years. The two land parcels will allow for the future development of approximately 215,000 square feet. EastGroup acquired Tulloch Corporation for consideration consisting of 1,868,809 newly issued shares of EastGroup common stock, at a negotiated price of $190 per share, and the assumption of a $60,000,000 loan, which EastGroup repaid in early June with no penalty. The Company’s California portfolio now includes approximately 7.6 million square feet, which had average rent growth on new and renewal leases of 54.1% on a straight-line basis for the six months ended June 30, 2022. The California portfolio represents 21% of the Company’s total annualized base rent and is 99.7% leased as of June 30, 2022.
During the second quarter, the Company acquired 45.7 acres of development land in Houston, known as Cypress Preserve Land, for $14,724,000. The Company has future plans to construct six buildings totaling approximately 670,000 square feet over time on this site. This land is located in the same master planned industrial business park as Cypress Preserve 1 & 2, which EastGroup acquired as a 50% leased value-add opportunity in March 2022.
In April 2022, EastGroup purchased 28.1 acres, known as Homestead Commerce Park Land, for $15,790,000. The site is located in Miami, and there are future plans to construct four buildings totaling approximately 400,000 square feet.
In June 2022, the Company acquired 43.0 acres of undeveloped land in Atlanta for $4,048,000. The site, known as Braselton 1 & 2 Land, will accommodate the future development of two buildings containing approximately 350,000 square feet.
400 W. Parkway Place, Suite 100, Ridgeland, MS 39157 | TEL: 601-354-3555 | FAX: 601-352-1441 | EastGroup.net
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Subsequent to quarter-end in July, the Company acquired Access Point 3, a recently constructed 299,000 square foot building, for approximately $21,100,000. The property is located in the I-385 South submarket in Greenville, South Carolina, adjacent to the Company’s Access Point 1 and 2 properties, which are 100% leased. Access Point 3 is 50% leased as of July 25, 2022, and is currently in the lease-up phase of the development and value-add portfolio.
Also subsequent to quarter-end in July, EastGroup closed on the acquisition of two land parcels. One site is 17.8 acres of undeveloped land in San Antonio. This parcel was acquired for approximately $4,800,000 and will accommodate the future development of three buildings containing approximately 225,000 square feet. The other site is 33.2 acres located in Greenville and was acquired for approximately $1,200,000. The Company has future plans to construct a building containing approximately 200,000 square feet on this site.
In May 2022, EastGroup sold a 42,000 square foot service center building in Houston for approximately $13,300,000. The sale generated a gain of $10,647,000, which is included in Gain on sales of real estate investments; this gain is excluded from FFO.
DEVELOPMENT AND VALUE-ADD PROPERTIES
During the second quarter of 2022, EastGroup began construction of three new development projects in Miami, Orlando and Houston. The buildings will contain a total of 522,000 square feet and have projected total costs of $70,200,000.
The development projects started during the first six months of 2022 are detailed in the table below:
| Development Projects Started in 2022 | Location | Size | Anticipated Conversion Date | Projected Total Costs | |
|---|---|---|---|---|---|
| (Square feet) | (In thousands) | ||||
| SunCoast 11 | Fort Myers, FL | 79,000 | 11/2022 | $ | 9,900 |
| World Houston 47 | Houston, TX | 139,000 | 12/2022 | 19,100 | |
| Arlington Tech 3 | Fort Worth, TX | 77,000 | 10/2023 | 10,300 | |
| Horizon West 4 | Orlando, FL | 295,000 | 10/2023 | 28,700 | |
| Hillside 1 | Greenville, SC | 122,000 | 12/2023 | 11,600 | |
| Horizon West 1 | Orlando, FL | 97,000 | 12/2023 | 13,200 | |
| Gateway 2 | Miami, FL | 133,000 | 02/2024 | 23,700 | |
| Steele Creek 11 & 12 | Charlotte, NC | 241,000 | 02/2024 | 24,900 | |
| Springwood 1 & 2 | Houston, TX | 292,000 | 05/2024 | 33,300 | |
| Total Development Projects Started | 1,475,000 | $ | 174,700 |
At June 30, 2022, EastGroup’s development and value-add program consisted of 28 projects (4,609,000 square feet) in 15 cities. The projects, which were collectively 52% leased as of July 25, 2022, have a projected total cost of $557,600,000, of which $164,747,000 remained to be funded as of June 30, 2022.
During the second quarter of 2022, EastGroup transferred three projects to the operating portfolio (at the earlier of 90% occupancy or one year after completion/value-add acquisition date). The projects, which are located in Greenville, Tampa and San Diego, contain 842,000 square feet and were collectively 99% leased as of July 25, 2022.
400 W. Parkway Place, Suite 100, Ridgeland, MS 39157 | TEL: 601-354-3555 | FAX: 601-352-1441 | EastGroup.net
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The development and value-add properties transferred to the operating portfolio during the first six months of 2022 are detailed in the table below:
| Development and Value-Add Properties Transferred to the Operating Portfolio in 2022 | Location | Size | Conversion Date | Cumulative Cost as of 6/30/22 | Percent Leased as of 7/25/22 | |
|---|---|---|---|---|---|---|
| (Square feet) | (In thousands) | |||||
| Access Point 1 (1) | Greenville, SC | 156,000 | 01/2022 | $ | 12,917 | 100% |
| Speed Distribution Center | San Diego, CA | 519,000 | 03/2022 | 72,460 | 100% | |
| Access Point 2 (1) | Greenville, SC | 159,000 | 05/2022 | 12,305 | 100% | |
| Grand Oaks 75 3 | Tampa, FL | 136,000 | 06/2022 | 11,516 | 100% | |
| Siempre Viva 3-6 (1) | San Diego, CA | 547,000 | 06/2022 | 133,415 | 99% | |
| Total Projects Transferred | 1,517,000 | $ | 242,613 | 100% | ||
| Projected Stabilized Yield (2) | 6.2% |
(1) This value-add project was acquired by EastGroup.
(2) Weighted average yield based on estimated annual property net operating income on a straight-line basis at 100% occupancy divided by
projected total costs.
Subsequent to quarter-end, EastGroup began construction of Cass White 1 & 2 in Atlanta, which will contain 296,000 square feet with a projected total cost of $31,900,000.
DIVIDENDS
EastGroup declared a cash dividend of $1.10 per share in the second quarter of 2022. The second quarter dividend, which was paid on July 15, 2022, was the Company’s 170th consecutive quarterly cash distribution to shareholders. The Company has increased or maintained its dividend for 29 consecutive years and has increased it 26 years over that period, including increases in each of the last 10 years. The annualized dividend rate of $4.40 per share yielded 2.7% on the closing stock price of $164.87 on July 25, 2022.
FINANCIAL STRENGTH AND FLEXIBILITY
EastGroup continues to maintain a strong and flexible balance sheet. Debt-to-total market capitalization was 19.5% at June 30, 2022. The Company’s interest and fixed charge coverage ratio was 9.14x and 9.35x for the three and six months ended June 30, 2022, respectively. The Company’s ratio of debt to earnings before interest, taxes, depreciation and amortization for real estate (“EBITDAre”) was 4.95x and 5.08x for the three and six months ended June 30, 2022, respectively. EBITDAre is a non-GAAP financial measure defined under Definitions later in this release. A reconciliation of Net Income to EBITDAre is presented in the attached schedule “Reconciliations of GAAP to Non-GAAP Measures.”
During the three months ended March 31, 2022, EastGroup issued and sold 385,538 shares of common stock under its continuous common equity offering program at an average price of $194.53 per share, providing aggregate net proceeds to the Company of approximately $74,179,000. There were no shares issued or sold under the continuous common equity offering program during the three months ended June 30, 2022.
In January 2022, the Company and a group of lenders agreed to terms on the private placement of $150,000,000 of senior unsecured notes with a fixed interest rate of 3.03% and a 10-year term. The notes, dated February 3, 2022, were issued and sold on April 20, 2022 and require interest-only payments. The notes will not be and have not been registered under the Securities Act of 1933, as amended, and may not be offered or sold in the United States absent registration or an applicable exemption from the registration requirements.
In June 2022, the Company agreed to terms with a bank on a $75,000,000 senior unsecured term loan with interest- only payments, bearing interest at the annual rate of SOFR plus an applicable margin based on the Company’s
400 W. Parkway Place, Suite 100, Ridgeland, MS 39157 | TEL: 601-354-3555 | FAX: 601-352-1441 | EastGroup.net
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senior unsecured long-term debt rating and consolidated leverage ratio. In July, the Company added an additional $50,000,000 tranche with the same terms other than the maturity date. The loan is expected to close in the third quarter of 2022 and will have a five-year term and a two-year term on the $75,000,000 and $50,000,000 tranches, respectively. The Company also entered into interest rate swap agreements to convert the loan’s SOFR rate component to a fixed interest rate for the entire term of the loan, providing a total effective fixed interest rate of 4.00% and 4.09% on the $75,000,000 and $50,000,000 tranches, respectively.
Subsequent to quarter-end, the Company and a group of lenders agreed to terms on the private placement of two senior unsecured notes totaling $150,000,000. One note for $75,000,000 has an 11-year term and an interest rate of 4.90% with semi-annual interest-only payments. The other $75,000,000 note has a 12-year term and an interest rate of 4.95% with semi-annual interest-only payments. The notes are expected to be issued and sold in October 2022. The notes will not be and have not been registered under the Securities Act of 1933, as amended, and may not be offered or sold in the United States absent registration or an applicable exemption from the registration requirements.
OUTLOOK FOR 2022
We now estimate that EastGroup’s EPS for 2022 will be in the range of $4.03 to $4.15. Our estimated FFO per share attributable to common stockholders for 2022 is now estimated to be in the range of $6.84 to $6.96. The table below reconciles projected net income attributable to common stockholders to projected FFO. The Company is providing a projection of estimated net income attributable to common stockholders solely to satisfy the disclosure requirements of the U.S. Securities and Exchange Commission.
EastGroup’s projections are based on management’s current beliefs and assumptions about our business, the industry and the markets in which we operate; there are known and unknown risks and uncertainties associated with these projections. We assume no obligation to update publicly any forward-looking statements, including our outlook for 2022, whether as a result of new information, future events or otherwise. Please refer to the “Forward-Looking Statements” disclosures included in this earnings release and “Risk Factors” disclosed in our annual and quarterly reports filed with the Securities and Exchange Commission for more information.
| Low Range | High Range | ||||
|---|---|---|---|---|---|
| Q3 2022 | Y/E 2022 | Q3 2022 | Y/E 2022 | ||
| (In thousands, except per share data) | |||||
| Net income attributable to common stockholders | $ | 31,416 | 171,888 | 34,030 | 177,012 |
| Depreciation and amortization | 43,053 | 161,103 | 43,053 | 161,103 | |
| Gain on sales of real estate investments | — | (40,999) | — | (40,999) | |
| Funds from operations attributable to common stockholders | $ | 74,469 | 291,992 | 77,083 | 297,116 |
| Diluted shares | 43,569 | 42,703 | 43,569 | 42,703 | |
| Per share data (diluted): | |||||
| Net income attributable to common stockholders | $ | 0.72 | 4.03 | 0.78 | 4.15 |
| Funds from operations attributable to common stockholders | 1.71 | 6.84 | 1.77 | 6.96 |
400 W. Parkway Place, Suite 100, Ridgeland, MS 39157 | TEL: 601-354-3555 | FAX: 601-352-1441 | EastGroup.net
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The following assumptions were used for the mid-point:
| Metrics | Revised Guidance for Year 2022 | April Earnings Release Guidance for Year 2022 | Actual for Year 2021 |
|---|---|---|---|
| FFO per share | $6.84 - $6.96 | $6.69 - $6.81 | $6.09 |
| FFO per share increase over prior year | 13.3% | 10.8% | 13.2% |
| Same PNOI growth: cash basis(1) | 8.0% -9.0%(2) | 6.9% - 7.9%(2) | 5.7% |
| Average month-end occupancy - operating portfolio | 97.3% - 98.3% | 97.0% - 98.0% | 97.1% |
| Lease termination fee income | $2.5 million | $1.5 million | $1.4 million |
| Recoveries (reserves) of uncollectible rent<br><br>(No identified bad debts for Q3-Q4) | ($675,000) | ($1.0 million) | $475,000 |
| Development starts: | |||
| Square feet | 3.2 million | 3.0 million | 2.8 million |
| Projected total investment | $350 million | $300 million | $341 million |
| Value-add property acquisitions (Projected total investment) | $125 million | $125 million | $178 million |
| Operating property acquisitions | $360 million | $30 million | $108 million |
| Operating property dispositions<br><br>(Potential gains on dispositions are not included in the projections) | $70 million | $70 million | $45 million |
| Unsecured debt closing in period | $525 million at 3.82% weighted<br>average interest rate | $400 million at 3.59% weighted<br>average interest rate | $175 million at 2.40% weighted<br>average interest rate |
| Common stock issuances | $75 million | $250 million | $274 million |
| General and administrative expense | $16.9 million | $17.2 million | $15.7 million |
(1) Excludes straight-line rent adjustments, amortization of market rent intangibles for acquired leases and income from lease terminations.
(2) Includes properties which have been in the operating portfolio since 1/1/21 and are projected to be in the operating portfolio through 12/31/22; includes 43,273,000 square feet.
DEFINITIONS
The Company’s chief decision makers use two primary measures of operating results in making decisions: (1) funds from operations attributable to common stockholders (“FFO”) and (2) property net operating income (“PNOI”), as defined below.
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 real estate investment trust’s (“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.
PNOI is defined as Income from real estate operations less Expenses from real estate operations (including market-based internal management fee expense) plus the Company’s share of income and property operating expenses from its less-than-wholly-owned real estate investments. EastGroup sometimes refers to PNOI from Same Properties as “Same PNOI” in this press release and the accompanying reconciliation; the Company also presents Same PNOI
400 W. Parkway Place, Suite 100, Ridgeland, MS 39157 | TEL: 601-354-3555 | FAX: 601-352-1441 | EastGroup.net
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Excluding Income from Lease Terminations. The Company presents Same PNOI and Same PNOI Excluding Income from Lease Terminations as a property-level supplemental measure of performance used to evaluate the performance of the Company’s investments in real estate assets and its operating results on a same property basis. The Company believes it is useful to evaluate Same PNOI Excluding Income from Lease Terminations on both a straight-line and cash basis. The straight-line basis is calculated by averaging the customers’ rent payments over the lives of the leases; GAAP requires the recognition of rental income on a straight-line basis. The cash basis excludes adjustments for straight-line rent and amortization of market rent intangibles for acquired leases; cash basis is an indicator of the rents charged to customers by the Company during the periods presented and is useful in analyzing the embedded rent growth in the Company’s portfolio. “Same Properties” is defined as operating properties owned during the entire current period and prior year reporting period. Operating properties are stabilized real estate properties (land including building and improvements) that make up the Company’s operating portfolio. Properties developed or acquired are excluded from the same property pool until held in the operating portfolio for both the current and prior year reporting periods. Properties sold during the current or prior year reporting periods are also excluded.
FFO and PNOI are supplemental industry reporting measurements used to evaluate the performance of the Company’s investments in real estate assets and its operating results. The Company believes that the exclusion of depreciation and amortization in the industry’s calculations of PNOI and FFO provides supplemental indicators of the properties’ performance since real estate values have historically risen or fallen with market conditions. PNOI and FFO as calculated by the Company may not be comparable to similarly titled but differently calculated measures for other REITs. Investors should be aware that items excluded from or added back to FFO are significant components in understanding and assessing the Company’s financial performance.
The Company’s chief decision makers also use Earnings Before Interest, Taxes, Depreciation and Amortization for Real Estate (“EBITDAre”) in making decisions. EBITDAre is computed in accordance with standards established by Nareit and defined as Net Income, adjusted for gains and losses from sales of real estate investments, non-operating real estate and other assets incidental to the Company’s business, interest expense, income tax expense, depreciation and amortization. EBITDAre is a non-GAAP financial measure used to measure the Company’s operating performance and its ability to meet interest payment obligations and pay quarterly stock dividends on an unleveraged basis.
EastGroup’s chief decision makers also use its Debt-to-EBITDAre ratio, a non-GAAP financial measure calculated by dividing the Company’s debt by its EBITDAre, in analyzing the financial condition and operating performance of the Company relative to its leverage.
The Company’s interest and fixed charge coverage ratio is a non-GAAP financial measure calculated by dividing the Company’s EBITDAre by its interest expense. This ratio provides a basis for analysis of the Company’s leverage, operating performance and its ability to service the interest payments due on its debt.
CONFERENCE CALL
EastGroup will host a conference call and webcast to discuss the results of its second quarter, review the Company’s current operations, and present its updated earnings outlook for 2022 on Wednesday, July 27, 2022, at 11:00 a.m. Eastern Time. A live broadcast of the conference call is available by dialing 1-888-346-0688 (conference ID: EastGroup) or by webcast through a link on the Company’s website at www.eastgroup.net. If you are unable to listen to the live conference call, a telephone and webcast replay will be available until Wednesday, August 3, 2022. The telephone replay can be accessed by dialing 1-877-344-7529 (access code 6120146), and the webcast replay can be accessed through a link on the Company’s website at www.eastgroup.net.
SUPPLEMENTAL INFORMATION
Supplemental financial information is available under Quarterly Results in the Investor Relations section of the Company’s website at www.eastgroup.net or upon request by calling the Company at 601-354-3555.
400 W. Parkway Place, Suite 100, Ridgeland, MS 39157 | TEL: 601-354-3555 | FAX: 601-352-1441 | EastGroup.net
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COMPANY INFORMATION
EastGroup Properties, Inc. (NYSE: EGP), a member of the S&P Mid-Cap 400 and Russell 1000 Indexes, is a self-administered equity real estate investment trust focused on the development, acquisition and operation of industrial properties in major Sunbelt markets throughout the United States with an emphasis in the states of Florida, Texas, Arizona, California and North Carolina. The Company’s goal is to maximize shareholder value by being a leading provider in its markets of functional, flexible and quality business distribution space for location sensitive customers (primarily in the 15,000 to 70,000 square foot range). The Company’s strategy for growth is based on ownership of premier distribution facilities generally clustered near major transportation features in supply-constrained submarkets. The Company’s portfolio, including development projects and value-add acquisitions in lease-up and under construction, currently includes approximately 55.1 million square feet. EastGroup Properties, Inc. press releases are available on the Company’s website at www.eastgroup.net.
FORWARD-LOOKING STATEMENTS
The statements and certain other information contained in this press release, which can be identified by the use of forward-looking terminology such as “may,” “will,” “seek,” “expects,” “anticipates,” “believes,” “targets,” “intends,” “should,” “estimates,” “could,” “continue,” “assume,” “projects,” “goals,” or “plans” and variations of such words or similar expressions or the negative of such words, constitute “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, and are subject to the safe harbors created thereby. These forward-looking statements reflect the Company’s current views about its plans, intentions, expectations, strategies and prospects, which are based on the information currently available to the Company and on assumptions it has made. Although the Company believes that its plans, intentions, expectations, strategies and prospects as reflected in or suggested by those forward-looking statements are reasonable, the Company can give no assurance that such plans, intentions, expectations or strategies will be attained or achieved. Furthermore, these forward-looking statements should be considered as subject to the many risks and uncertainties that exist in the Company’s operations and business environment. Such risks and uncertainties could cause actual results to differ materially from those projected. These uncertainties include, but are not limited to:
•international, national, regional and local economic conditions;
•the duration and extent of the impact of the coronavirus (“COVID-19”) pandemic, including any COVID-19 variants or the efficacy or availability of COVID-19 vaccines, on our business operations or the business operations of our tenants (including their ability to timely make rent payments) and the economy generally;
•disruption in supply and delivery chains;
•construction costs could increase as a result of inflation impacting the costs to develop properties;
•increase in interest rates and 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;
•the competitive environment in which the Company operates;
•fluctuations of occupancy or rental rates;
•potential defaults (including bankruptcies or insolvency) on or non-renewal of leases by tenants, or our ability to lease space at current or anticipated rents, particularly in light of the significant uncertainty as to the conditions under which current or potential tenants will be able to operate physical locations in the future;
•potential changes in the law or governmental regulations and interpretations of those laws and regulations, including changes in real estate laws or REIT or corporate income tax laws, and potential increases in real property tax rates;
400 W. Parkway Place, Suite 100, Ridgeland, MS 39157 | TEL: 601-354-3555 | FAX: 601-352-1441 | EastGroup.net
Page 9
•our ability to maintain our qualification as a REIT;
•acquisition and development risks, including failure of such acquisitions and development projects to perform in accordance with projections;
•natural disasters such as fires, floods, tornadoes, hurricanes and earthquakes;
•pandemics, epidemics or other public health emergencies, such as the outbreak of COVID-19;
•the terms of governmental regulations that affect us and interpretations of those regulations, including the costs of compliance with those regulations, changes in real estate and zoning laws and increases in real property tax rates;
•credit risk in the event of non-performance by the counterparties to our interest rate swaps;
•the discontinuation of London Interbank Offered Rate;
•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;
•risks related to the failure, inadequacy or interruption of our data security systems and processes;
•the consequences of future terrorist attacks or civil unrest; and
•environmental liabilities, including costs, fines or penalties that may be incurred due to necessary remediation of contamination of properties presently owned or previously owned by us.
All forward-looking statements should be read in light of the risks identified in Part I, Item 1A. Risk Factors within the Company’s most recent Annual Report on Form 10-K and in its subsequent Quarterly Reports on Form 10-Q.
The Company assumes no obligation to update publicly any forward-looking statements, whether as a result of new information, future events or otherwise.
400 W. Parkway Place, Suite 100, Ridgeland, MS 39157 | TEL: 601-354-3555 | FAX: 601-352-1441 | EastGroup.net
Page 10
| EASTGROUP PROPERTIES, INC. AND SUBSIDIARIES | |||||
|---|---|---|---|---|---|
| CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME | |||||
| (IN THOUSANDS, EXCEPT PER SHARE DATA) | |||||
| (UNAUDITED) | |||||
| Three Months Ended | Six Months Ended | ||||
| June 30, | June 30, | ||||
| 2022 | 2021 | 2022 | 2021 | ||
| REVENUES | |||||
| Income from real estate operations | $ | 118,498 | 99,562 | 231,450 | 197,479 |
| Other revenue | 55 | 13 | 77 | 27 | |
| 118,553 | 99,575 | 231,527 | 197,506 | ||
| EXPENSES | |||||
| Expenses from real estate operations | 32,546 | 28,057 | 63,610 | 55,877 | |
| Depreciation and amortization | 37,461 | 31,349 | 73,802 | 61,662 | |
| General and administrative | 4,226 | 4,486 | 8,536 | 8,522 | |
| Indirect leasing costs | 116 | 134 | 291 | 464 | |
| 74,349 | 64,026 | 146,239 | 126,525 | ||
| OTHER INCOME (EXPENSE) | |||||
| Interest expense | (8,970) | (8,181) | (17,080) | (16,457) | |
| Gain on sales of real estate investments | 10,647 | — | 40,999 | — | |
| Other | 284 | 210 | 562 | 411 | |
| NET INCOME | 46,165 | 27,578 | 109,769 | 54,935 | |
| Net income attributable to noncontrolling interest in joint ventures | (26) | (20) | (50) | (38) | |
| NET INCOME ATTRIBUTABLE TO EASTGROUP PROPERTIES, INC. COMMON STOCKHOLDERS | 46,139 | 27,558 | 109,719 | 54,897 | |
| Other comprehensive income (loss) - interest rate swaps | 6,841 | (1,263) | 22,669 | 6,951 | |
| TOTAL COMPREHENSIVE INCOME | $ | 52,980 | 26,295 | 132,388 | 61,848 |
| BASIC PER COMMON SHARE DATA FOR NET INCOME ATTRIBUTABLE TO EASTGROUP PROPERTIES, INC. COMMON STOCKHOLDERS | |||||
| Net income attributable to common stockholders | $ | 1.09 | 0.69 | 2.63 | 1.38 |
| Weighted average shares outstanding | 42,211 | 40,068 | 41,729 | 39,871 | |
| DILUTED PER COMMON SHARE DATA FOR NET INCOME ATTRIBUTABLE TO EASTGROUP PROPERTIES, INC. COMMON STOCKHOLDERS | |||||
| Net income attributable to common stockholders | $ | 1.09 | 0.69 | 2.62 | 1.37 |
| Weighted average shares outstanding | 42,316 | 40,165 | 41,838 | 39,965 | |
| EASTGROUP PROPERTIES, INC. AND SUBSIDIARIES | |||||
| --- | --- | --- | --- | --- | |
| RECONCILIATIONS OF GAAP TO NON-GAAP MEASURES | |||||
| (IN THOUSANDS, EXCEPT PER SHARE DATA) | |||||
| (UNAUDITED) | |||||
| Six Months Ended | |||||
| June 30, | |||||
| 2021 | 2022 | 2021 | |||
| NET INCOME ATTRIBUTABLE TO EASTGROUP PROPERTIES, INC. COMMON STOCKHOLDERS | 46,139 | 27,558 | 109,719 | 54,897 | |
| Depreciation and amortization | 31,349 | 73,802 | 61,662 | ||
| Company’s share of depreciation from unconsolidated investment | 34 | 62 | 68 | ||
| Depreciation and amortization from noncontrolling interest | — | (9) | — | ||
| Gain on sales of real estate investments | — | (40,999) | — | ||
| FUNDS FROM OPERATIONS (“FFO”) ATTRIBUTABLE TO COMMON STOCKHOLDERS | 72,978 | 58,941 | 142,575 | 116,627 | |
| NET INCOME | 46,165 | 27,578 | 109,769 | 54,935 | |
| Interest expense (1) | 8,181 | 17,080 | 16,457 | ||
| Depreciation and amortization | 31,349 | 73,802 | 61,662 | ||
| Company’s share of depreciation from unconsolidated investment | 34 | 62 | 68 | ||
| EARNINGS BEFORE INTEREST, TAXES, DEPRECIATION AND AMORTIZATION (“EBITDA”) | 67,142 | 200,713 | 133,122 | ||
| Gain on sales of real estate investments | — | (40,999) | — | ||
| EBITDA FOR REAL ESTATE (“EBITDAre”) | 81,980 | 67,142 | 159,714 | 133,122 | |
| Debt | 1,623,536 | 1,316,129 | 1,623,536 | 1,316,129 | |
| Debt-to-EBITDAre ratio | 4.90 | 5.08 | 4.94 | ||
| DILUTED PER COMMON SHARE DATA FOR NET INCOME ATTRIBUTABLE TO EASTGROUP PROPERTIES, INC. COMMON STOCKHOLDERS | |||||
| Net income attributable to common stockholders | 1.09 | 0.69 | 2.62 | 1.37 | |
| FFO attributable to common stockholders | 1.72 | 1.47 | 3.41 | 2.92 | |
| Weighted average shares outstanding for EPS and FFO purposes | 40,165 | 41,838 | 39,965 | ||
| (1) Net of capitalized interest of 2,699 and 2,157 for the three months ended June 30, 2022 and 2021, respectively; and 4,943 and 4,394 for the six months ended June 30, 2022 and 2021, respectively. |
All values are in US Dollars.
| EASTGROUP PROPERTIES, INC. AND SUBSIDIARIES | ||||
|---|---|---|---|---|
| RECONCILIATIONS OF GAAP TO NON-GAAP MEASURES (Continued) | ||||
| (IN THOUSANDS) | ||||
| (UNAUDITED) | ||||
| Six Months Ended | ||||
| June 30, | ||||
| 2021 | 2022 | 2021 | ||
| NET INCOME | 46,165 | 27,578 | 109,769 | 54,935 |
| Gain on sales of real estate investments | — | (40,999) | — | |
| Interest income | (3) | (6) | (4) | |
| Other revenue | (13) | (77) | (27) | |
| Indirect leasing costs | 134 | 291 | 464 | |
| Depreciation and amortization | 31,349 | 73,802 | 61,662 | |
| Company’s share of depreciation from unconsolidated investment | 34 | 62 | 68 | |
| Interest expense (1) | 8,181 | 17,080 | 16,457 | |
| General and administrative expense (2) | 4,486 | 8,536 | 8,522 | |
| Noncontrolling interest in PNOI of consolidated joint ventures | (16) | (53) | (31) | |
| PROPERTY NET OPERATING INCOME (“PNOI”) | 71,730 | 168,405 | 142,046 | |
| PNOI from 2021 and 2022 acquisitions | (36) | (5,546) | (36) | |
| PNOI from 2021 and 2022 development and value-add properties | (2,008) | (15,116) | (3,340) | |
| PNOI from 2021 and 2022 operating property dispositions | (881) | (237) | (1,718) | |
| Other PNOI | (73) | 112 | (127) | |
| SAME PNOI (Straight-Line Basis) | 68,732 | 147,618 | 136,825 | |
| Net lease termination fee income from same properties | (18) | (1,091) | (594) | |
| SAME PNOI EXCLUDING INCOME FROM LEASE TERMINATIONS (Straight-Line Basis) | 68,714 | 146,527 | 136,231 | |
| Straight-line rent adjustments for same properties | (1,128) | (1,045) | (2,589) | |
| Acquired leases - market rent adjustment amortization for same properties | (245) | (228) | (438) | |
| SAME PNOI EXCLUDING INCOME FROM LEASE TERMINATIONS (Cash Basis) | 73,767 | 67,341 | 145,254 | 133,204 |
| (1) Net of capitalized interest of 2,699 and 2,157 for the three months ended June 30, 2022 and 2021, respectively; and 4,943 and 4,394 for the six months ended June 30, 2022 and 2021, respectively. | ||||
| (2) Net of capitalized development costs of 2,617 and 1,591 for the three months ended June 30, 2022 and 2021, respectively; and 5,086 and 3,280 for the six months ended June 30, 2022 and 2021, respectively. |
All values are in US Dollars.
supplementalinformation_
2022 SECOND QUARTER Conference Call 888-346-0688 | ID – EastGroup July 27, 2022 11:00 a.m. Eastern Time webcast available at EastGroup.net Supplemental Information 400 W. Parkway Place, Suite 100, Ridgeland, MS 39157 | TEL: 601-354-3555 | FAX: 601-352-1441 | EastGroup.net June 30, 2022
Page 2 of 24 Table of Contents Financial Information: Consolidated Balance Sheets ................................................................................ 3 Consolidated Statements of Income and Comprehensive Income ......................... 4 Reconciliations of GAAP to Non-GAAP Measures ................................................. 5 Consolidated Statements of Cash Flows ................................................................ 7 Same Property Portfolio Analysis ........................................................................... 8 Additional Financial Information ............................................................................. 9 Financial Statistics ................................................................................................. 10 Capital Deployment: Development and Value-Add Properties Summary ................................................ 11 Development and Value-Add Properties Transferred to Real Estate Properties ..... 12 Acquisitions and Dispositions ................................................................................. 13 Real Estate Improvements and Leasing Costs ....................................................... 14 Property Information: Leasing Statistics and Occupancy Summary ......................................................... 15 Core Market Operating Statistics ........................................................................... 16 Lease Expiration Summary .................................................................................... 17 Top 10 Customers by Annualized Base Rent ......................................................... 18 Capitalization: Debt and Equity Market Capitalization ................................................................... 19 Continuous Common Equity Program .................................................................... 20 Debt-to-EBITDAre Ratios ....................................................................................... 21 Other Information: Outlook for 2022 .................................................................................................... 22 Glossary of REIT Terms ........................................................................................ 23 FORWARD-LOOKING STATEMENTS The statements and certain other information contained herein, which can be identified by the use of forward-looking terminology such as “may,” “will,” “seek,” “expects,” “anticipates,” “believes,” “targets,” “intends,” “should,” “estimates,” “could,” “continue,” “assume,” “projects,” “goals” or “plans” and variations of such words or similar expressions or the negative of such words, constitute “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, and are subject to the safe harbors created thereby. These forward-looking statements reflect the current views of EastGroup Properties, Inc. (the “Company” or “EastGroup”) about its plans, intentions, expectations, strategies and prospects, which are based on the information currently available to the Company and on assumptions it has made. Although the Company believes that its plans, intentions, expectations, strategies and prospects as reflected in or suggested by those forward-looking statements are reasonable, the Company can give no assurance that such plans, intentions, expectations or strategies will be attained or achieved. Furthermore, these forward-looking statements should be considered as subject to the many risks and uncertainties that exist in the Company’s operations and business environment. Such risks and uncertainties could cause actual results to differ materially from those projected. These uncertainties include, but are not limited to: international, national, regional and local economic conditions; the duration and extent of the impact of the coronavirus (“COVID-19”) pandemic, including any COVID-19 variants or the efficacy or availability of COVID-19 vaccines, on our business operations or the business operations of our tenants (including their ability to timely make rent payments) and the economy generally; disruption in supply and delivery chains; construction costs could increase as a result of inflation impacting the cost to develop properties; increase in interest rates and 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; the competitive environment in which the Company operates; fluctuations of occupancy or rental rates; potential defaults (including bankruptcies or insolvency) on or non-renewal of leases by tenants, or our ability to lease space at current or anticipated rents, particularly in light of the significant uncertainty as to the conditions under which current or potential tenants will be able to operate physical locations in the future; potential changes in the law or governmental regulations and interpretations of those laws and regulations, including changes in real estate laws or REIT or corporate income tax laws, and potential increases in real property tax rates; our ability to maintain our qualification as a REIT; acquisition and development risks, including failure of such acquisitions and development projects to perform in accordance with projections; natural disasters such as fires, floods, tornadoes, hurricanes and earthquakes; pandemics, epidemics or other public health emergencies, such as the outbreak of COVID-19; the terms of governmental regulations that affect us and interpretations of those regulations, including the costs of compliance with those regulations, changes in real estate and zoning laws and increases in real property tax rates; credit risk in the event of non-performance by the counterparties to our interest rate swaps; the discontinuation of London Interbank Offered Rate; 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; risks related to the failure, inadequacy or interruption of our data security systems and processes; the consequences of future terrorist attacks or civil unrest; and environmental liabilities, including costs, fines or penalties that may be incurred due to necessary remediation of contamination of properties presently owned or previously owned by us. All forward-looking statements should be read in light of the risks identified in Part I, Item 1A. Risk Factors within the Company’s Annual Report on Form 10-K for the year ended December 31, 2021, and in its subsequent Quarterly Reports on Form 10-Q. The Company assumes no obligation to update publicly any forward-looking statements, including its Outlook for 2022, whether as a result of new information, future events or otherwise.
Page 3 of 24 Consolidated Balance Sheets (In thousands, except share and per share data) (Unaudited) June 30, 2022 December 31, 2021 ASSETS Real estate properties 4,155,513$ 3,546,711 Development and value-add properties 554,363 504,614 4,709,876 4,051,325 Less accumulated depreciation (1,089,156) (1,035,617) 3,620,720 3,015,708 Real estate assets held for sale - 5,695 Unconsolidated investment 7,376 7,320 Cash 5,555 4,393 Other assets 218,066 182,220 TOTAL ASSETS 3,851,717$ 3,215,336 LIABILITIES AND EQUITY LIABILITIES Unsecured bank credit facilities, net of debt issuance costs 204,573$ 207,066 Unsecured debt, net of debt issuance costs 1,416,876 1,242,570 Secured debt, net of debt issuance costs 2,087 2,142 Accounts payable and accrued expenses 156,208 109,760 Other liabilities 85,899 82,338 Total Liabilities 1,865,643 1,643,876 EQUITY Stockholders' Equity: Common shares; $0.0001 par value; 70,000,000 shares authorized; 43,566,016 shares issued and outstanding at June 30, 2022 and 41,268,846 at December 31, 2021 4 4 Excess shares; $0.0001 par value; 30,000,000 shares authorized; zero shares issued - - Additional paid-in capital 2,263,072 1,886,820 Distributions in excess of earnings (302,324) (318,056) Accumulated other comprehensive income 23,971 1,302 Total Stockholders' Equity 1,984,723 1,570,070 Noncontrolling interest in joint ventures 1,351 1,390 Total Equity 1,986,074 1,571,460 TOTAL LIABILITIES AND EQUITY 3,851,717$ 3,215,336
Page 4 of 24 Consolidated Statements of Income and Comprehensive Income (In thousands, except per share data) (Unaudited) 2022 2021 2022 2021 REVENUES Income from real estate operations 118,498$ 99,562 231,450 197,479 Other revenue 55 13 77 27 118,553 99,575 231,527 197,506 EXPENSES Expenses from real estate operations 32,546 28,057 63,610 55,877 Depreciation and amortization 37,461 31,349 73,802 61,662 General and administrative 4,226 4,486 8,536 8,522 Indirect leasing costs 116 134 291 464 74,349 64,026 146,239 126,525 OTHER INCOME (EXPENSE) Interest expense (8,970) (8,181) (17,080) (16,457) Gain on sales of real estate investments 10,647 - 40,999 - Other 284 210 562 411 NET INCOME 46,165 27,578 109,769 54,935 Net income attributable to noncontrolling interest in joint ventures (26) (20) (50) (38) NET INCOME ATTRIBUTABLE TO EASTGROUP PROPERTIES, INC. COMMON STOCKHOLDERS 46,139 27,558 109,719 54,897 Other comprehensive income (loss) - interest rate swaps 6,841 (1,263) 22,669 6,951 TOTAL COMPREHENSIVE INCOME 52,980$ 26,295 132,388 61,848 BASIC PER COMMON SHARE DATA FOR NET INCOME ATTRIBUTABLE TO EASTGROUP PROPERTIES, INC. COMMON STOCKHOLDERS Net income attributable to common stockholders 1.09$ 0.69 2.63 1.38 Weighted average shares outstanding 42,211 40,068 41,729 39,871 DILUTED PER COMMON SHARE DATA FOR NET INCOME ATTRIBUTABLE TO EASTGROUP PROPERTIES, INC. COMMON STOCKHOLDERS Net income attributable to common stockholders 1.09$ 0.69 2.62 1.37 Weighted average shares outstanding 42,316 40,165 41,838 39,965 Six Months Ended June 30,June 30, Three Months Ended
Page 5 of 24 Reconciliations of GAAP to Non-GAAP Measures (In thousands, except per share data) (Unaudited) 2022 2021 2022 2021 NET INCOME ATTRIBUTABLE TO EASTGROUP PROPERTIES, INC. COMMON STOCKHOLDERS 46,139$ 27,558 109,719 54,897 Depreciation and amortization 37,461 31,349 73,802 61,662 Company's share of depreciation from unconsolidated investment 31 34 62 68 Depreciation and amortization from noncontrolling interest (6) - (9) - Gain on sales of real estate investments (10,647) - (40,999) - FUNDS FROM OPERATIONS ("FFO") ATTRIBUTABLE TO COMMON STOCKHOLDERS 72,978$ 58,941 142,575 116,627 NET INCOME 46,165$ 27,578 109,769 54,935 Interest expense (1) 8,970 8,181 17,080 16,457 Depreciation and amortization 37,461 31,349 73,802 61,662 Company's share of depreciation from unconsolidated investment 31 34 62 68 EARNINGS BEFORE INTEREST, TAXES, DEPRECIATION AND AMORTIZATION ("EBITDA") 92,627 67,142 200,713 133,122 Gain on sales of real estate investments (10,647) - (40,999) - EBITDA FOR REAL ESTATE ("EBITDAre") 81,980$ 67,142 159,714 133,122 DILUTED PER COMMON SHARE DATA FOR NET INCOME ATTRIBUTABLE TO EASTGROUP PROPERTIES, INC. COMMON STOCKHOLDERS Net income attributable to common stockholders 1.09$ 0.69 2.62 1.37 FFO attributable to common stockholders 1.72$ 1.47 3.41 2.92 Weighted average shares outstanding for EPS and FFO purposes 42,316 40,165 41,838 39,965 June 30, (1) Net of capitalized interest of $2,699 and $2,157 for the three months ended June 30, 2022 and 2021, respectively; and $4,943 and $4,394 for the six months ended June 30, 2022 and 2021, respectively. Three Months Ended June 30, Six Months Ended
Page 6 of 24 Reconciliations of GAAP to Non-GAAP Measures (Continued) (In thousands) (Unaudited) 2022 2021 2022 2021 NET INCOME 46,165$ 27,578 109,769 54,935 Gain on sales of real estate investments (10,647) - (40,999) - Interest income (6) (3) (6) (4) Other revenue (55) (13) (77) (27) Indirect leasing costs 116 134 291 464 Depreciation and amortization 37,461 31,349 73,802 61,662 Company's share of depreciation from unconsolidated investment 31 34 62 68 Interest expense (1) 8,970 8,181 17,080 16,457 General and administrative expense (2) 4,226 4,486 8,536 8,522 Noncontrolling interest in PNOI of consolidated joint ventures (32) (16) (53) (31) PROPERTY NET OPERATING INCOME ("PNOI") 86,229 71,730 168,405 142,046 PNOI from 2021 and 2022 acquisitions (3,142) (36) (5,546) (36) PNOI from 2021 and 2022 development and value-add properties (8,237) (2,008) (15,116) (3,340) PNOI from 2021 and 2022 operating property dispositions (70) (881) (237) (1,718) Other PNOI 102 (73) 112 (127) SAME PNOI (Straight-Line Basis) 74,882 68,732 147,618 136,825 Net lease termination fee income from same properties (864) (18) (1,091) (594) SAME PNOI EXCLUDING INCOME FROM LEASE TERMINATIONS (Straight-Line Basis) 74,018 68,714 146,527 136,231 Straight-line rent adjustments for same properties (143) (1,128) (1,045) (2,589) Acquired leases — market rent adjustment amortization for same properties (108) (245) (228) (438) SAME PNOI EXCLUDING INCOME FROM LEASE TERMINATIONS (Cash Basis) 73,767$ 67,341 145,254 133,204 Six Months Ended June 30, June 30, (1) Net of capitalized interest of $2,699 and $2,157 for the three months ended June 30, 2022 and 2021, respectively; and $4,943 and $4,394 for the six months ended June 30, 2022 and 2021, respectively. (2) Net of capitalized development costs of $2,617 and $1,591 for the three months ended June 30, 2022 and 2021, respectively; and $5,086 and $3,280 for the six months ended June 30, 2022 and 2021, respectively. Three Months Ended
Page 7 of 24 Consolidated Statements of Cash Flows (In thousands) (Unaudited) 2022 2021 OPERATING ACTIVITIES Net income 109,769$ 54,935 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 73,802 61,662 Stock-based compensation expense 4,320 4,011 Gain on sales of real estate investments (40,999) - Changes in operating assets and liabilities: Accrued income and other assets 598 305 Accounts payable, accrued expenses and prepaid rent 28,104 19,783 Other 558 714 NET CASH PROVIDED BY OPERATING ACTIVITIES 176,152 141,410 INVESTING ACTIVITIES Development and value-add properties (283,451) (115,113) Purchases of real estate (2,049) (9,177) Real estate improvements (21,723) (18,094) Net proceeds from sales of real estate investments 51,006 - Leasing commissions (18,362) (16,813) Changes in accrued development costs 16,062 13,126 Changes in other assets and other liabilities (2,621) 526 NET CASH USED IN INVESTING ACTIVITIES (261,138) (145,545) FINANCING ACTIVITIES Proceeds from unsecured bank credit facilities 501,523 195,137 Repayments on unsecured bank credit facilities (504,314) (320,137) Proceeds from unsecured debt 250,000 175,000 Repayments on unsecured debt (75,000) - Repayments on secured debt (60,047) (42,924) Debt issuance costs (1,030) (2,475) Distributions paid to stockholders (not including dividends accrued) (91,787) (63,403) Proceeds from common stock offerings 74,249 105,891 Common stock offering related costs (70) (146) Other (7,376) (4,264) NET CASH PROVIDED BY FINANCING ACTIVITIES 86,148 42,679 INCREASE IN CASH AND CASH EQUIVALENTS 1,162 38,544 CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 4,393 21 CASH AND CASH EQUIVALENTS AT END OF PERIOD 5,555$ 38,565 SUPPLEMENTAL CASH FLOW INFORMATION Cash paid for interest, net of amounts capitalized of $4,943 and $4,394 for 2022 and 2021, respectively 15,382$ 15,760 Cash paid for operating lease liabilities 962 751 Common stock issued in the purchase of real estate 303,682 - Debt assumed in the purchase of real estate 60,000 - NON-CASH OPERATING ACTIVITY Operating lease liabilities arising from obtaining right of use assets 398$ 348 Six Months Ended June 30,
Page 8 of 24 Same Property Portfolio Analysis (In thousands) (Unaudited) 2022 2021 % Change 2022 2021 % Change Same Property Portfolio (1) Square feet as of period end 43,349 43,349 43,349 43,349 Average occupancy 98.2% 97.2% 1.0% 98.0% 97.1% 0.9% Occupancy as of period end 98.6% 97.4% 1.2% 98.6% 97.4% 1.2% Same Property Portfolio Analysis (Cash Basis) (1) Income from real estate operations 103,133$ 94,176 9.5% 202,959$ 187,594 8.2% Less cash received for lease terminations (864) (18) (1,091) (691) Income excluding lease termination income 102,269 94,158 8.6% 201,868 186,903 8.0% Expenses from real estate operations (28,502) (26,817) 6.3% (56,614) (53,699) 5.4% PNOI excluding income from lease terminations 73,767$ 67,341 9.5% 145,254$ 133,204 9.0% Same Property Portfolio Analysis (Straight-Line Basis) (1) Income from real estate operations 103,384$ 95,549 8.2% 204,232$ 190,524 7.2% Less cash received for lease terminations (864) (18) (1,091) (691) Add straight-line rent write-offs for lease terminations - - - 97 Income excluding lease termination income 102,520 95,531 7.3% 203,141 189,930 7.0% Expenses from real estate operations (28,502) (26,817) 6.3% (56,614) (53,699) 5.4% PNOI excluding income from lease terminations 74,018$ 68,714 7.7% 146,527$ 136,231 7.6% (1) Includes properties which were included in the operating portfolio for the entire period of 1/1/21 through 6/30/22. June 30, June 30, Three Months Ended Six Months Ended
Page 9 of 24 Additional Financial Information (In thousands) (Unaudited) 2022 2021 2022 2021 Straight-line rent income adjustment 1,450$ 2,102 3,890 3,969 Recoveries of uncollectible straight-line rent 6 62 35 262 Net straight-line rent adjustment 1,456 2,164 3,925 4,231 Cash received for lease terminations 979 18 2,373 691 Less straight-line rent write-offs - - - (97) Net lease termination fee income 979 18 2,373 594 Recoveries (reserves) of uncollectible cash rent (42) (50) 35 (172) Stock-based compensation expense (2,417) (2,414) (4,320) (4,011) Debt issuance costs amortization (326) (301) (636) (642) Indirect leasing costs (116) (134) (291) (464) Acquired leases - market rent adjustment amortization 507 245 1,352 474 2022 2021 2022 2021 WEIGHTED AVERAGE COMMON SHARES Weighted average common shares 42,211 40,068 41,729 39,871 BASIC SHARES FOR EARNINGS PER SHARE ("EPS") 42,211 40,068 41,729 39,871 Potential common shares: Unvested restricted stock 105 97 109 94 DILUTED SHARES FOR EPS AND FFO 42,316 40,165 41,838 39,965 (Items below represent increases or (decreases) in FFO) June 30, Three Months Ended Three Months Ended June 30, Six Months Ended June 30, Six Months Ended June 30, SELECTED INCOME STATEMENT INFORMATION
Page 10 of 24 Financial Statistics ($ in thousands, except per share data) (Unaudited) Quarter Ended 6/30/2022 2021 2020 2019 2018 ASSETS/MARKET CAPITALIZATION Assets 3,851,717$ 3,215,336 2,720,803 2,546,078 2,131,705 Equity Market Capitalization 6,723,543 9,403,107 5,477,783 5,164,306 3,348,269 Total Market Capitalization (Debt and Equity) (1) 8,352,061 10,859,473 6,791,879 6,350,438 4,458,037 Shares Outstanding - Common 43,566,016 41,268,846 39,676,828 38,925,953 36,501,356 Price per share 154.33$ 227.85 138.06 132.67 91.73 FFO CHANGE FFO per diluted share (2) 1.72$ 6.09 5.38 4.98 4.66 Change compared to same period prior year 17.0% 13.2% 8.0% 6.9% 9.6% COMMON DIVIDEND PAYOUT RATIO Dividend distribution 1.10$ 3.58 3.08 2.94 2.72 FFO per diluted share (2) 1.72 6.09 5.38 4.98 4.66 Dividend payout ratio 64% 59% 57% 59% 58% COMMON DIVIDEND YIELD Dividend distribution 1.10$ 3.58 3.08 2.94 2.72 Price per share 154.33 227.85 138.06 132.67 91.73 Dividend yield 2.85% 1.57% 2.23% 2.22% 2.97% FFO MULTIPLE FFO per diluted share (2) 1.72$ 6.09 5.38 4.98 4.66 Price per share 154.33 227.85 138.06 132.67 91.73 Multiple 22.43 37.41 25.66 26.64 19.68 INTEREST & FIXED CHARGE COVERAGE RATIO EBITDAre 81,980$ 278,959 245,669 221,517 200,788 Interest expense 8,970 32,945 33,927 34,463 35,106 Interest and fixed charge coverage ratio 9.14 8.47 7.24 6.43 5.72 DEBT-TO-EBITDAre RATIO Debt 1,623,536$ 1,451,778 1,310,895 1,182,602 1,105,787 EBITDAre 81,980 278,959 245,669 221,517 200,788 Debt-to-EBITDAre ratio 4.95 5.20 5.34 5.34 5.51 Adjusted debt-to-pro forma EBITDAre ratio 3.65 3.83 4.43 3.92 4.73 DEBT-TO-TOTAL MARKET CAPITALIZATION (1) 19.5% 13.4% 19.3% 18.7% 24.9% ISSUER RATINGS (3) Issuer Rating Outlook Moody's Investors Service Baa2 Stable (1) Before deducting unamortized debt issuance costs. (3) 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. (2) In connection with the Company's adoption of the Nareit Funds from Operations White Paper - 2018 Restatement, the Company now excludes from FFO the gains and losses on sales of non-operating real estate and assets incidental to the Company's business and therefore, adjusted the prior years' results to conform to the updated definition of FFO. Years Ended
Page 11 of 24 Development and Value-Add Properties Summary ($ in thousands) (Unaudited) Anticipated 2nd Qtr Cumulative Projected Conversion % Leased Square Feet (SF) 2022 at 6/30/22 Total Costs Date (1) 7/25/22 Lease-up Steele Creek 8 Charlotte, NC 72,000 1,858$ 7,755 8,400 07/22 100% CreekView 9 & 10 Dallas, TX 145,000 2,187 15,404 17,200 09/22 100% Horizon West 2 & 3 Orlando, FL 210,000 483 18,707 21,400 09/22 76% Ridgeview 3 San Antonio, TX 88,000 1,948 9,106 9,700 10/22 100% Mesa Gateway (2) Phoenix, AZ 147,000 18,484 18,484 22,600 11/22 100% Cypress Preserve 1 & 2 (2) Houston, TX 516,000 502 53,911 57,800 03/23 50% Zephyr (2) San Francisco, CA 82,000 28,798 28,798 29,800 04/23 42% Total Lease-up 1,260,000 54,260 152,165 166,900 72% Wgt Avg % Lease-Up: Projected Stabilized Yield (3) 5.9% Under Construction Gateway 3 Miami, FL 133,000 2,091 18,025 20,700 08/22 100% Americas Ten 2 El Paso, TX 169,000 1,249 13,715 14,900 09/22 100% SunCoast 11 Fort Myers, FL 79,000 3,327 5,985 9,900 11/22 100% SunCoast 12 Fort Myers, FL 79,000 1,641 7,138 9,300 11/22 100% Tri-County Crossing 5 San Antonio, TX 105,000 797 8,328 11,600 11/22 100% 45 Crossing Austin, TX 177,000 2,852 23,723 26,200 12/22 100% World Houston 47 Houston, TX 139,000 6,577 12,478 19,100 12/22 100% Basswood 1 & 2 Fort Worth, TX 237,000 1,597 19,406 24,400 01/23 100% Grand Oaks 75 4 Tampa, FL 185,000 2,978 14,763 17,900 07/23 0% Grand West Crossing 1 Houston, TX 121,000 474 12,709 15,700 07/23 0% Tri-County Crossing 6 San Antonio, TX 124,000 2,044 8,640 10,600 07/23 72% McKinney 3 & 4 Dallas, TX 212,000 3,584 19,213 26,800 08/23 29% LakePort 4 & 5 Dallas, TX 177,000 5,092 15,525 22,400 09/23 54% Arlington Tech 3 Fort Worth, TX 77,000 2,507 5,446 10,300 10/23 0% Horizon West 4 Orlando, FL 295,000 7,822 18,421 28,700 10/23 0% I-20 West Business Center Atlanta, GA 155,000 5,578 9,971 15,500 10/23 0% Hillside 1 Greenville, SC 122,000 1,069 1,884 11,600 12/23 0% Horizon West 1 Orlando, FL 97,000 4,182 4,182 13,200 12/23 0% Gateway 2 Miami, FL 133,000 9,277 9,277 23,700 02/24 36% Steele Creek 11 & 12 Charlotte, NC 241,000 1,071 4,212 24,900 02/24 26% Springwood 1 & 2 Houston, TX 292,000 7,647 7,647 33,300 05/24 0% Total Under Construction 3,349,000 73,456 240,688 390,700 44% Wgt Avg % Under Construction: Projected Stabilized Yield (3) 6.7% 52% Wgt Avg % Development: Projected Stabilized Yield (3) 6.8% Value-Add: Projected Stabilized Yield (3) 5.0% Prospective Development Acres Projected SF Phoenix, AZ 50 655,000 539 15,050 Sacramento, CA 7 93,000 3,051 3,051 San Francisco, CA 4 65,000 3,561 3,561 Fort Myers, FL 36 464,000 643 8,240 Miami, FL 36 510,000 8,165 23,498 Orlando, FL (4) 75 886,000 (3,314) 17,001 Tampa, FL 2 32,000 - 825 Atlanta, GA 107 934,000 4,623 9,938 Jackson, MS 3 28,000 - 706 Charlotte, NC 158 1,146,000 602 13,142 Greenville, SC 38 278,000 1,518 2,706 Austin, TX 22 274,000 2,941 10,279 Dallas, TX 26 172,000 207 8,713 Fort Worth, TX 44 575,000 952 14,519 Houston, TX 107 1,536,000 8,527 29,539 San Antonio, TX 6 55,000 11 742 Total Prospective Development 721 7,703,000 32,026 161,510 Total Development and Value-Add Properties 721 12,312,000 159,742$ 554,363 (1) Development properties will transfer to the operating portfolio at the earlier of 90% occupancy or one year after shell completion. Value-add properties will transfer at the earlier of 90% occupancy or one year after acquisition. (2) Represents value-add acquisitions. (3) Weighted average yield based on estimated annual property net operating income on a straight-line basis at 100% occupancy divided by projected total costs. (4) Negative amount represents land inventory costs transferred to Under Construction. Costs Incurred
Page 12 of 24 Development and Value-Add Properties Transferred to Real Estate Properties ($ in thousands) (Unaudited) 2nd Qtr Cumulative Conversion % Leased Square Feet (SF) 2022 at 6/30/22 Date 7/25/22 1st Quarter Access Point 1 (1) Greenville, SC 156,000 40$ 12,917 01/22 100% Speed Distribution Center San Diego, CA 519,000 (488) 72,460 03/22 100% 675,000 (448) 85,377 2nd Quarter Access Point 2 (1) Greenville, SC 159,000 611 12,305 05/22 100% Grand Oaks 75 3 Tampa, FL 136,000 961 11,516 06/22 100% Siempre Viva 3-6 (1) San Diego, CA 547,000 701 133,415 06/22 99% 842,000 2,273 157,236 Total Transferred to Real Estate Properties 1,517,000 1,825$ 242,613 Projected Stabilized Yield (2) 6.2% 100% Wgt Avg % (1) Represents value-add acquisitions. (2) Weighted average yield based on estimated annual property net operating income on a straight-line basis at 100% occupancy divided by projected total costs. Costs Incurred
Page 13 of 24 Acquisitions and Dispositions Through June 30, 2022 ($ in thousands) (Unaudited) Date Property Name Location Size Purchase Price (1) 1st Quarter 02/14/22 Gateway Interchange Land Phoenix, AZ 50.2 Acres 13,588$ 03/28/22 Cypress Preserve 1 & 2 Houston, TX 516,000 SF 54,462 (2) 2nd Quarter Various (3) Cypress Preserve Land Houston, TX 45.7 Acres 14,724 04/08/22 Zephyr Distribution Center San Francisco, CA 82,000 SF 29,017 (2) 04/15/22 Mesa Gateway Commerce Center Phoenix, AZ 147,000 SF 18,315 (2) 04/29/22 Homestead Commerce Park Land Miami, FL 28.1 Acres 15,790 Cebrian Distribution Center and Reed (4) Distribution Center 6th Street Business Center, Benicia Distribution Center 1-5, (4) Ettie Business Center, Laura Alice Business Center, Preston Distribution Center, Sinclair Distribution Center, Transit Distribution Center and Whipple Business Center 06/01/22 Reed Land Sacramento, CA 6.6 Acres 3,040 (4) 06/01/22 Hercules Land San Francisco, CA 3.9 Acres 3,561 (4) 06/30/22 Braselton 1 & 2 Land Atlanta, GA 43.0 Acres 4,048 2,451,000 SF Total Acquisitions 177.5 Acres 515,675$ Date Property Name Location Size Gross Sales Price 1st Quarter 01/06/22 Metro Business Park Phoenix, AZ 189,000 SF 33,510$ 26,971 (5) 03/31/22 Cypress Creek Business Park Fort Lauderdale, FL 56,000 SF 5,600 3,381 (5) 2nd Quarter 05/11/22 World Houston 15 East Houston, TX 42,000 SF 13,300 10,647 (5) Total Dispositions 287,000 SF 52,410$ 40,999 (3) The Cypress Preserve Land was acquired in three separate transactions on various dates in second quarter 2022. (2) Value-add property acquisition; included in Development and value-add properties on the Consolidated Balance Sheets. (1) Represents acquisition price plus closing costs. Realized Gain DISPOSITIONS ACQUISITIONS (5) Included in Gain on sales of real estate investments on the Consolidated Statements of Income and Comprehensive Income; not included in FFO. 06/01/22 Sacramento, CA 329,000 SF 49,726 06/01/22 San Francisco, CA 1,377,000 SF 309,404 (4) The Company acquired these properties in connection with its acquisition of Tulloch Corporation on June 1, 2022.
Page 14 of 24 Real Estate Improvements and Leasing Costs (In thousands) (Unaudited) REAL ESTATE IMPROVEMENTS 2022 2021 2022 2021 Upgrade on acquisitions 54$ 109 332 154 Tenant improvements: New tenants 2,882 2,525 6,338 5,167 Renewal tenants 1,161 1,507 1,871 2,184 Other: Building improvements 2,848 1,621 5,417 3,404 Roofs 1,781 3,047 2,932 6,062 Parking lots 989 169 1,225 431 Other 414 532 740 693 TOTAL REAL ESTATE IMPROVEMENTS (1) 10,129$ 9,510 18,855 18,095 CAPITALIZED LEASING COSTS (Principally Commissions) Development and value-add 2,482$ 4,731 6,768 7,559 New tenants 2,554 2,808 6,140 7,155 Renewal tenants 3,497 1,586 6,898 3,540 TOTAL CAPITALIZED LEASING COSTS (2)(3) 8,533$ 9,125 19,806 18,254 (1) Reconciliation of Total Real Estate Improvements to Real Estate Improvements on the Consolidated Statements of Cash Flows: 2022 2021 Total Real Estate Improvements 18,855$ 18,095 Change in real estate property payables (387) 735 Change in construction in progress 3,255 (736) 21,723$ 18,094 (2) Included in Other Assets on the Consolidated Balance Sheets. (3) Reconciliation of Total Capitalized Leasing Costs to Leasing Commissions on the Consolidated Statements of Cash Flows: 2022 2021 Total Capitalized Leasing Costs 19,806$ 18,254 Change in leasing commissions payables (1,444) (1,441) 18,362$ 16,813 Six Months Ended June 30, Leasing Commissions on the Consolidated Statements of Cash Flows June 30, Real Estate Improvements on the Consolidated Statements of Cash Flows Six Months Ended June 30, Six Months EndedThree Months Ended June 30,
Page 15 of 24 Leasing Statistics and Occupancy Summary (Unaudited) Three Months Ended Number of Square Feet Weighted Rental Change Rental Change PSF Tenant PSF Leasing PSF Total June 30, 2022 Leases Signed Signed Average Term Straight-Line Basis Cash Basis Improvement (1) Commission (1) Leasing Cost (1) (In Thousands) (In Years) New Leases (2) 36 691 5.3 35.8% 21.5% 3.20$ 3.55$ 6.75$ Renewal Leases 72 1,724 4.6 37.8% 22.8% 0.58 1.77 2.35 Total/Weighted Average 108 2,415 4.8 37.2% 22.4% 1.33$ 2.28$ 3.61$ Per Year 0.28$ 0.47$ 0.75$ Weighted Average Retention (3) 76.0% Six Months Ended Number of Square Feet Weighted Rental Change Rental Change PSF Tenant PSF Leasing PSF Total June 30, 2022 Leases Signed Signed Average Term Straight-Line Basis Cash Basis Improvement (1) Commission (1) Leasing Cost (1) (In Thousands) (In Years) New Leases (2) 82 1,790 5.4 36.3% 24.9% 3.80$ 3.38$ 7.18$ Renewal Leases 132 3,178 4.7 34.5% 19.8% 0.73 2.02 2.75 Total/Weighted Average 214 4,968 5.0 35.2% 21.7% 1.83$ 2.51$ 4.34$ Per Year 0.37$ 0.50$ 0.87$ Weighted Average Retention (3) 70.5% 06/30/22 03/31/22 12/31/21 09/30/21 06/30/21 Percentage Leased 99.1% 98.8% 98.7% 98.8% 98.3% Percentage Occupied 98.5% 97.9% 97.4% 97.6% 96.8% (1) Per square foot (PSF) amounts represent total amounts for the life of the lease, except as noted for the Per Year amounts. (2) Does not include leases with terms less than 12 months and leases for first generation space. (3) Calculated as square feet of renewal leases signed during the quarter / square feet of leases expiring during the quarter (not including early terminations or bankruptcies).
Page 16 of 24 Core Market Operating Statistics June 30, 2022 (Unaudited) Total % of Total Square Feet Annualized % % Straight-Line Cash Straight-Line Cash Straight-Line Cash Straight-Line Cash of Properties Base Rent (1) Leased Occupied 2022 (2) 2023 Basis Basis (4) Basis Basis (4) Basis Basis (4) Basis Basis (4) Florida Tampa 4,348,000 7.7% 98.1% 97.7% 185,000 605,000 4.8% 3.9% 3.2% 3.3% 61.0% 38.1% 54.7% 32.7% Orlando 3,685,000 7.3% 97.2% 97.2% 301,000 513,000 4.2% 6.8% 4.5% 6.5% 16.6% 5.5% 28.2% 13.1% Jacksonville 2,273,000 3.5% 99.5% 99.3% 422,000 414,000 1.7% 2.3% 5.4% 4.6% 35.3% 20.3% 33.7% 19.1% Miami/Fort Lauderdale 1,601,000 3.8% 100.0% 99.3% 33,000 233,000 6.3% 8.5% 7.1% 9.1% 60.0% 36.0% 54.4% 39.4% Fort Myers 626,000 1.5% 100.0% 100.0% 54,000 105,000 -0.1% 1.8% -0.5% 1.3% 18.5% 10.6% 18.4% 7.7% 12,533,000 23.8% 98.4% 98.2% 995,000 1,870,000 4.1% 5.1% 4.3% 5.2% 40.0% 22.9% 39.6% 22.2% Texas Houston 6,092,000 10.8% 96.9% 95.7% 444,000 772,000 3.9% 4.4% 0.5% -0.1% 24.0% 9.2% 23.8% 7.5% Dallas 4,717,000 9.0% 100.0% 100.0% 110,000 589,000 3.3% 9.0% 5.3% 9.9% 60.7% 46.2% 29.2% 37.1% San Antonio 4,093,000 8.2% 99.8% 98.8% 230,000 609,000 5.6% 5.9% 4.5% 4.6% 18.3% 8.1% 20.2% 10.2% Austin 1,146,000 2.8% 100.0% 99.0% 49,000 143,000 0.3% 3.0% 0.9% 2.4% 28.3% 15.4% 43.5% 27.5% El Paso 957,000 1.4% 100.0% 100.0% 49,000 144,000 4.9% 6.2% 4.4% 5.4% 59.3% 42.0% 56.7% 39.6% Fort Worth 794,000 1.5% 100.0% 100.0% 8,000 129,000 25.9% 39.2% 27.2% 41.8% 55.5% 30.7% 55.5% 30.7% 17,799,000 33.7% 98.9% 98.2% 890,000 2,386,000 4.8% 7.1% 3.9% 5.3% 31.4% 17.3% 28.7% 18.9% California Los Angeles (5) 2,484,000 7.5% 100.0% 100.0% 46,000 149,000 26.1% 33.6% 22.9% 29.2% 44.6% 30.5% 31.3% 18.7% San Francisco 2,421,000 6.8% 100.0% 100.0% 167,000 149,000 20.0% 7.8% 21.1% 22.1% 195.5% 142.1% 96.9% 64.8% San Diego (5) 1,933,000 5.7% 99.8% 99.8% - 123,000 32.3% 68.4% 45.1% 53.9% 27.3% 21.6% 27.3% 21.6% Fresno 398,000 0.5% 94.8% 92.3% 92,000 44,000 14.4% 15.0% 16.4% 15.5% 20.8% 14.3% 20.8% 14.3% Sacramento 329,000 0.7% 100.0% 100.0% - - N/A N/A N/A N/A N/A N/A N/A N/A 7,565,000 21.2% 99.7% 99.5% 305,000 465,000 25.4% 31.5% 26.3% 31.0% 53.5% 40.7% 54.1% 36.5% Arizona Phoenix 2,852,000 5.7% 100.0% 100.0% 41,000 410,000 10.3% 9.8% 8.2% 8.1% 40.6% 25.9% 29.3% 17.1% Tucson 848,000 1.5% 100.0% 100.0% - 83,000 0.4% 2.1% 3.3% 12.8% N/A N/A 18.7% 11.6% 3,700,000 7.2% 100.0% 100.0% 41,000 493,000 7.7% 7.8% 6.9% 9.2% 40.6% 25.9% 29.0% 17.0% Other Core Charlotte 3,569,000 5.5% 100.0% 100.0% 309,000 693,000 4.2% 1.4% 3.5% 0.9% 27.1% 15.4% 24.9% 9.5% Atlanta 1,312,000 2.2% 100.0% 100.0% 13,000 30,000 3.9% 6.8% 5.3% 16.0% 46.1% 42.4% 31.4% 25.4% Denver 886,000 2.1% 99.1% 99.1% 119,000 59,000 8.9% 10.8% 6.9% 7.7% 31.5% 12.4% 24.3% 10.0% Las Vegas 754,000 1.9% 100.0% 100.0% 12,000 182,000 14.5% 24.7% 19.6% 23.3% 57.4% 45.1% 66.3% 45.6% 6,521,000 11.7% 99.9% 99.9% 453,000 964,000 6.7% 7.4% 6.9% 7.6% 36.1% 23.9% 34.6% 19.6% Total Core Markets 48,118,000 97.6% 99.1% 98.8% 2,684,000 6,178,000 8.0% 9.8% 7.8% 9.3% 37.6% 22.7% 35.4% 21.8% Total Other Markets 1,763,000 2.4% 98.6% 92.8% 39,000 179,000 -2.5% -1.1% -0.9% 0.9% 24.0% 12.2% 24.2% 13.3% Total Operating Properties 49,881,000 100.0% 99.1% 98.5% 2,723,000 6,357,000 7.7% 9.5% 7.6% 9.0% 37.2% 22.4% 35.2% 21.7% (1) Based on the Annualized Base Rent as of the reporting period for occupied square feet (without S/L Rent). (2) Square Feet expiring during the remainder of the year, including month-to-month leases. (3) Does not include leases with terms less than 12 months and leases for first generation space. (4) Excludes straight-line rent adjustments and amortization of above/below market rent intangibles. (5) Includes the Company's share of its less-than-wholly-owned real estate investments. YTD Same Property PNOI Change Rental Change (excluding income from lease terminations) New and Renewal Leases (3) in Square Feet Lease Expirations QTR YTD QTR
Page 17 of 24 Lease Expiration Summary - Total Square Feet of Operating Properties Based on Leases Signed Through June 30, 2022 ($ in thousands) (Unaudited) Annualized Current % of Total Base Rent of Base Rent of Square Footage of % of Leases Expiring Leases Expiring LEASE EXPIRATION Leases Expiring Total SF (without S/L Rent) (without S/L Rent) Vacancy 454,000 0.9% -$ 0.0% 2022 - remainder of year (1) 2,723,000 5.5% 18,446 5.2% 2023 6,357,000 12.7% 43,184 12.2% 2024 7,750,000 15.5% 53,784 15.2% 2025 7,488,000 15.0% 55,610 15.7% 2026 8,803,000 17.7% 66,741 18.8% 2027 6,784,000 13.6% 49,582 14.0% 2028 2,912,000 5.8% 20,296 5.7% 2029 2,457,000 4.9% 15,620 4.4% 2030 773,000 1.6% 6,195 1.7% 2031 and beyond 3,380,000 6.8% 25,311 7.1% TOTAL 49,881,000 100.0% 354,769$ 100.0% (1) Includes month-to-month leases.
Page 18 of 24 Top 10 Customers by Annualized Base Rent As of June 30, 2022 (Unaudited) % of Total # of % of Total Annualized Customer Leases Location Portfolio Base Rent (1) 1 Amazon 2 San Diego, CA 710,000 1 San Antonio, TX 57,000 1 Tucson, AZ 10,000 1.6% 2.2% 2 REPET, Inc. 1 Los Angeles, CA 300,000 0.6% 0.9% 3 Starship Logistics LLC 1 Los Angeles, CA 262,000 0.5% 0.9% 4 FedEx Corp. 1 Dallas, TX 157,000 1 Fort Myers, FL 63,000 1 San Diego, CA 51,000 1 Fort Lauderdale, FL 50,000 1 Jackson, MS 6,000 0.6% 0.8% 5 The Chamberlain Group 2 Tucson, AZ 350,000 1 Charlotte, NC 11,000 0.7% 0.8% 6 Consolidated Electrical Distributors 2 San Antonio, TX 97,000 1 San Francisco, CA 84,000 2 Orlando, FL 78,000 1 Charlotte, NC 28,000 0.6% 0.7% 7 Novolex Holdings, LLC 1 Los Angeles, CA 286,000 0.6% 0.7% 8 Essendant Co. 1 Orlando, FL 404,000 0.8% 0.6% 9 Kuehne & Nagel, Inc. 2 Houston, TX 172,000 1 Charlotte, NC 71,000 1 San Diego, CA 42,000 0.6% 0.6% 10 Lowes Home Centers LLC 1 Miami, FL 97,000 1 Tampa, FL 75,000 1 Orlando, FL 70,000 1 Phoenix, AZ 59,000 0.6% 0.6% 30 3,590,000 7.2% 8.8% (1) Calculation: Customer Annualized Base Rent as of 6/30/22 (without S/L Rent) / Total Annualized Base Rent (without S/L Rent). Leased Total SF
Page 19 of 24 Debt and Equity Market Capitalization June 30, 2022 ($ in thousands, except per share data) (Unaudited) Remainder of 2022 2023 2024 2025 2026 2027 and Beyond Total Average Years to Maturity Unsecured debt (fixed rate) (1) -$ 115,000 120,000 145,000 140,000 900,000 1,420,000 6.0 Weighted average interest rate - 2.96% 3.47% 3.12% 2.57% 3.01% 3.01% Secured debt (fixed rate) 58 119 122 128 1,672 - 2,099 3.8 Weighted average interest rate 3.85% 3.85% 3.85% 3.85% 3.85% - 3.85% Total unsecured debt and secured debt 58$ 115,119 120,122 145,128 141,672 900,000 1,422,099 6.0 Weighted average interest rate 3.85% 2.96% 3.47% 3.12% 2.58% 3.01% 3.01% Unsecured debt and secured debt (fixed rate) 1,422,099$ Unsecured bank credit facilities (variable rate) $50MM Line - 2.562% - matures 7/30/2025 36,419 $425MM Line - 2.058% - matures 7/30/2025 170,000 Total carrying amount of debt 1,628,518$ Total unamortized debt issuance costs (4,982) Total debt, net of unamortized debt issuance costs 1,623,536$ Equity market capitalization Shares outstanding - common 43,566,016 Price per share at quarter end 154.33$ Total equity market capitalization 6,723,543$ Total market capitalization (debt and equity) (2) 8,352,061$ Total debt / total market capitalization (2) 19.5% (1) These loans have a fixed interest rate or an effectively fixed interest rate due to interest rate swaps. (2) Before deducting unamortized debt issuance costs.
Page 20 of 24 Continuous Common Equity Program Through June 30, 2022 ($ in thousands, except per share data) (Unaudited) Shares Issued and Sold (1) Average Sales Price (Per Share) Gross Proceeds Offering-Related Fees and Expenses Net Proceeds 1st Quarter 385,538 194.53$ 75,000$ (821)$ 74,179$ 2nd Quarter - - - - - TOTAL 2022 385,538 194.53$ 75,000$ (821)$ 74,179$ (1) As of July 26, 2022, the Company had common shares with an aggregate gross sales price of $306.9 million authorized and remaining for issuance under its continuous common equity program.
Page 21 of 24 Debt-to-EBITDAre Ratios ($ in thousands) (Unaudited) Quarter Ended Years Ended December 31, June 30, 2022 2021 2020 2019 2018 EBITDAre 81,980$ 278,959$ 245,669 221,517 200,788 Debt 1,623,536 1,451,778 1,310,895 1,182,602 1,105,787 DEBT-TO-EBITDAre RATIO 4.95 5.20 5.34 5.34 5.51 EBITDAre 81,980$ 278,959$ 245,669 221,517 200,788 Adjust for acquisitions as if owned for entire period 2,898 4,213 1,906 5,590 1,909 Adjust for development and value-add properties in lease-up or under construction (497) (700) (1,327) (2,072) (304) Adjust for properties sold during the period (70) (1,517) (1,081) (3,812) (474) Pro Forma EBITDAre 84,311$ 280,955$ 245,167 221,223 201,919 Debt 1,623,536$ 1,451,778$ 1,310,895 1,182,602 1,105,787 Subtract development and value-add properties in lease-up or under construction (392,853) (376,611) (225,964) (315,794) (149,860) Adjusted Debt 1,230,683$ 1,075,167$ 1,084,931 866,808 955,927 ADJUSTED DEBT-TO-PRO FORMA EBITDAre RATIO 3.65 3.83 4.43 3.92 4.73
Page 22 of 24 Outlook for 2022 (Unaudited) Q3 2022 Y/E 2022 Q3 2022 Y/E 2022 Net income attributable to common stockholders 31,416$ 171,888 34,030 177,012 Depreciation and amortization 43,053 161,103 43,053 161,103 Gain on sales of real estate investments - (40,999) - (40,999) Funds from operations attributable to common stockholders 74,469$ 291,992 77,083 297,116 Diluted shares 43,569 42,703 43,569 42,703 Per share data (diluted): Net income attributable to common stockholders 0.72$ 4.03 0.78 4.15 Funds from operations attributable to common stockholders 1.71 6.84 1.77 6.96 The following assumptions were used for the mid-point: Metrics FFO per share $6.84 - $6.96 $6.69 - $6.81 $6.09 FFO per share increase over prior year 13.3% 10.8% 13.2% Same PNOI growth: cash basis (1) 8.0% - 9.0%(2) 6.9% - 7.9%(2) 5.7% Average month-end occupancy - operating portfolio 97.3% - 98.3% 97.0% - 98.0% 97.1% Lease termination fee income $2.5 million $1.5 million $1.4 million Recoveries (reserves) of uncollectible rent (No identified bad debts for Q3-Q4) ($675,000) ($1.0 million) $475,000 Development starts: Square feet 3.2 million 3.0 million 2.8 million Projected total investment $350 million $300 million $341 million Value-add property acquisitions (Projected total investment) $125 million $125 million $178 million Operating property acquisitions $360 million $30 million $108 million Operating property dispositions (Potential gains on dispositions are not included in the projections) $70 million $70 million $45 million Unsecured debt closing in period $525 million at 3.82% weighted average interest rate $400 million at 3.59% weighted average interest rate $175 million at 2.40% weighted average interest rate Common stock issuances $75 million $250 million $274 million General and administrative expense $16.9 million $17.2 million $15.7 million Low Range High Range (In thousands, except per share data) Revised Guidance for Year 2022 April Earnings Release Guidance for Year 2022 Actual for Year 2021 (2) Includes properties which have been in the operating portfolio since 1/1/21 and are projected to be in the operating portfolio through 12/31/22; includes 43,273,000 square feet. (1) Excludes straight-line rent adjustments, amortization of market rent intangibles for acquired leases, and income from lease terminations.
Page 23 of 24 Glossary of REIT Terms Listed below are definitions of commonly used real estate investment trust (“REIT”) industry terms. For additional information on REITs, please see the National Association of Real Estate Investment Trusts (“Nareit”) web site at www.reit.com. Adjusted Debt-to-Pro Forma EBITDAre Ratio: A ratio calculated by dividing a company’s adjusted debt by its pro forma EBITDAre. Debt is adjusted by subtracting the cost of development and value-add properties in lease-up or under construction. EBITDAre is further adjusted by adding an estimate of NOI for significant acquisitions as if the acquired properties were owned for the entire period, and by subtracting NOI from development and value-add properties in lease- up or under construction and from properties sold during the period. The Adjusted Debt-to-Pro Forma EBITDAre Ratio is a non-GAAP financial measure used to analyze the Company’s financial condition and operating performance relative to its leverage, on an adjusted basis, so as to normalize and annualize property changes during the period. Cash Basis: The Company adjusts its GAAP reporting to exclude straight-line rent adjustments and amortization of market rent intangibles for acquired leases. The cash basis is an indicator of the rents charged to customers by the Company during the periods presented and is useful in analyzing the embedded rent growth in the Company’s portfolio. Debt-to-EBITDAre Ratio: A ratio calculated by dividing a company’s debt by its EBITDAre; this non-GAAP measure is used to analyze the Company’s financial condition and operating performance relative to its leverage. Debt-to-Total Market Capitalization Ratio: A ratio calculated by dividing a company’s debt by the total amount of a company’s equity (at market value) and debt. Earnings Before Interest Taxes Depreciation and Amortization for Real Estate (“EBITDAre”): In accordance with standards established by Nareit, EBITDAre is computed as Earnings, defined as Net Income, excluding gains or losses from sales of real estate investments and non-operating real estate, plus interest, taxes, depreciation and amortization. EBITDAre is a non-GAAP financial measure used to measure the Company’s operating performance and its ability to meet interest payment obligations and pay quarterly stock dividends on an unleveraged basis. Funds From Operations (“FFO”): FFO is the most commonly accepted reporting measure of a REIT’s operating performance, and the Company computes FFO in accordance with standards established by Nareit in the Nareit Funds from Operations White Paper — 2018 Restatement. It is equal to a REIT’s net income (loss) attributable to common stockholders computed in accordance with 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 a non-GAAP financial measure used to evaluate the performance of the Company’s investments in real estate assets and its operating results. FFO Excluding Gain on Casualties and Involuntary Conversion: A reporting measure calculated as FFO (as defined above), adjusted to exclude gain on casualties and involuntary conversion. The Company believes that the exclusion of gain on casualties and involuntary conversion presents a more meaningful comparison of operating performance. Industrial Properties: Generally consisting of four concrete walls tilted up on a slab of concrete. An internal office component is then added. Business uses include warehousing, distribution, light manufacturing and assembly, research and development, showroom, office, or a combination of some or all of the aforementioned. Leases Expiring and Renewal Leases Signed of Expiring Square Feet: Includes renewals during the period with terms commencing during the period and after the end of the period. Operating Land: Land with no buildings or improvements that generates income from leases with tenants; included in Real estate properties on the Consolidated Balance Sheets. Operating Properties: Stabilized real estate properties (land including buildings and improvements) in the Company’s operating portfolio; included in Real estate properties on the Consolidated Balance Sheets. Percentage Leased: The percentage of total leasable square footage for which there is a signed lease, including month- to-month leases, as of the close of the reporting period. Space is considered leased upon execution of the lease.
Page 24 of 24 Glossary of REIT Terms (Continued) Percentage Occupied: The percentage of total leasable square footage for which the lease term has commenced as of the close of the reporting period. Property Net Operating Income (“PNOI”): 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. PNOI is a non-GAAP, property-level supplemental measure of performance used to evaluate the performance of the Company’s investments in real estate assets and its operating results. Real Estate Investment Trust (“REIT”): A company that owns and, in most cases, operates income-producing real estate such as apartments, shopping centers, offices, hotels and warehouses. Some REITs also engage in financing real estate. The shares of most REITs are freely traded, usually on a major stock exchange. To qualify as a REIT, a company must distribute at least 90 percent of its taxable income to its stockholders annually. A company that qualifies as a REIT is permitted to deduct dividends paid to its stockholders from its corporate taxable income. As a result, most REITs remit at least 100 percent of their taxable income to their stockholders and therefore owe no corporate federal income tax. Taxes are paid by stockholders on the dividends received. Most states honor this federal treatment and also do not require REITs to pay state income tax. Rental changes on new and renewal leases: Rental changes are calculated as the difference, weighted by square feet, of the annualized base rent due the first month of the new lease’s term and the annualized base rent of the rent due the last month of the former lease’s term. If free rent is given, then the first positive full rent value is used. Rental amounts exclude base stop amounts, holdover rent, and premium or discounted rent amounts. This calculation excludes leases with terms less than 12 months and leases for first generation space on properties acquired or developed by EastGroup. Same Properties: Operating properties owned during the entire current and prior year reporting periods. Properties developed or acquired are excluded until held in the operating portfolio for both the current and prior year reporting periods. Properties sold during the current or prior year reporting periods are excluded. The Same Property Pool includes properties which were included in the operating portfolio for the entire period from January 1, 2021 through June 30, 2022. Same Property Net Operating Income (“Same PNOI”): 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, for the same properties owned by the Company during the entire current and prior year reporting periods. Same PNOI is a non-GAAP, property-level supplemental measure of performance used to evaluate the performance of the Company’s investments in real estate assets and its operating results on a same property basis. Same PNOI Excluding Income from Lease Terminations: Same PNOI (as defined above), adjusted to exclude income from lease terminations. The Company believes it is useful to evaluate Same PNOI Excluding Income from Lease Terminations on both a straight-line and cash basis. The straight-line basis is calculated by averaging the customers’ rent payments over the lives of the leases; GAAP requires the recognition of rental income on the straight-line basis. The cash basis excludes adjustments for straight-line rent and amortization of market rent intangibles for acquired leases; the cash basis is an indicator of the rents charged to customers by the Company during the periods presented and is useful in analyzing the embedded rent growth in the Company’s portfolio. Straight-Lining: The process of averaging the customer’s rent payments over the life of the lease. GAAP requires real estate companies to “straight-line” rents. Total Return: A stock’s dividend income plus capital appreciation/depreciation over a specified period as a percentage of the stock price at the beginning of the period. Value-Add Properties: Properties that are either acquired but not stabilized or can be converted to a higher and better use. Acquired properties meeting either of the following two conditions are considered value-add properties: (1) Less than 75% occupied as of the acquisition date (or will be less than 75% occupied within one year of acquisition date based on near term lease roll), or (2) 20% or greater of the acquisition cost will be spent to redevelop the property.