Toggle SGML Header (+)


Section 1: 10-Q (10-Q)

Document
false--12-31Q120190000049600YesfalseLarge Accelerated FilerEastGroup Properties Incfalse1003000000030000000000.00010.0001110.802023824289550.640.720.00010.00017000000070000000365013563675226036501356367522600.5016020002036000667571179501232205 0000049600 2019-01-01 2019-03-31 0000049600 2018-01-01 2018-12-31 0000049600 2019-04-23 0000049600 2019-03-31 0000049600 2018-12-31 0000049600 2018-01-01 2018-03-31 0000049600 2018-03-31 0000049600 2017-12-31 0000049600 us-gaap:NoncontrollingInterestMember 2018-01-01 2018-03-31 0000049600 us-gaap:CommonStockMember 2018-01-01 2018-03-31 0000049600 us-gaap:AdditionalPaidInCapitalMember 2018-03-31 0000049600 us-gaap:AccumulatedDistributionsInExcessOfNetIncomeMember 2018-01-01 2018-03-31 0000049600 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2018-01-01 2018-03-31 0000049600 us-gaap:CommonStockMember 2017-12-31 0000049600 us-gaap:AdditionalPaidInCapitalMember 2018-01-01 2018-03-31 0000049600 us-gaap:AdditionalPaidInCapitalMember 2017-12-31 0000049600 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2018-03-31 0000049600 us-gaap:NoncontrollingInterestMember 2017-12-31 0000049600 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2017-12-31 0000049600 us-gaap:AccumulatedDistributionsInExcessOfNetIncomeMember 2018-03-31 0000049600 us-gaap:CommonStockMember 2018-03-31 0000049600 us-gaap:NoncontrollingInterestMember 2018-03-31 0000049600 us-gaap:AccumulatedDistributionsInExcessOfNetIncomeMember 2017-12-31 0000049600 us-gaap:NoncontrollingInterestMember 2019-01-01 2019-03-31 0000049600 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2019-01-01 2019-03-31 0000049600 us-gaap:AdditionalPaidInCapitalMember 2019-01-01 2019-03-31 0000049600 us-gaap:AccumulatedDistributionsInExcessOfNetIncomeMember 2019-01-01 2019-03-31 0000049600 us-gaap:AccumulatedDistributionsInExcessOfNetIncomeMember 2019-03-31 0000049600 us-gaap:CommonStockMember 2019-01-01 2019-03-31 0000049600 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2019-03-31 0000049600 us-gaap:CommonStockMember 2019-03-31 0000049600 us-gaap:CommonStockMember 2018-12-31 0000049600 us-gaap:NoncontrollingInterestMember 2018-12-31 0000049600 us-gaap:AdditionalPaidInCapitalMember 2018-12-31 0000049600 us-gaap:AccumulatedDistributionsInExcessOfNetIncomeMember 2018-12-31 0000049600 us-gaap:AdditionalPaidInCapitalMember 2019-03-31 0000049600 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2018-12-31 0000049600 us-gaap:NoncontrollingInterestMember 2019-03-31 0000049600 egp:UniversityBusinessCenter120and130Member 2018-12-31 0000049600 egp:IndustryDistributionCenterIiUndividedTenantMember 2019-03-31 0000049600 egp:UniversityBusinessCenter120and130Member 2019-03-31 0000049600 egp:IndustryDistributionCenterIiUndividedTenantMember 2018-12-31 0000049600 us-gaap:BuildingMember 2019-01-01 2019-03-31 0000049600 srt:MinimumMember egp:ImprovementsAndPersonalPropertyMember 2019-01-01 2019-03-31 0000049600 us-gaap:AccountingStandardsUpdate201602Member 2019-01-01 0000049600 stpr:AZ 2019-03-31 0000049600 stpr:FL 2019-03-31 0000049600 2019-01-01 0000049600 stpr:TX 2019-03-31 0000049600 srt:MaximumMember egp:ImprovementsAndPersonalPropertyMember 2019-01-01 2019-03-31 0000049600 egp:A2018AcquisitionsMember us-gaap:LeasesAcquiredInPlaceMember 2018-12-31 0000049600 egp:A2018AcquisitionsMember egp:BelowmarketleaseMember 2018-12-31 0000049600 egp:A2018AcquisitionsMember us-gaap:AboveMarketLeasesMember 2018-12-31 0000049600 us-gaap:RealEstatePropertiesDomain egp:A2018AcquisitionsMember 2018-12-31 0000049600 egp:A2018AcquisitionsMember 2018-01-01 2018-12-31 0000049600 egp:IndustrialDevelopmentMember egp:A2018AcquisitionsMember 2018-12-31 0000049600 egp:A2018AcquisitionsMember 2018-12-31 0000049600 egp:A2019OperatingPropertySalesMemberDomain 2019-03-31 0000049600 us-gaap:LandMember 2018-01-01 2018-03-31 0000049600 egp:A2018OperatingPropertySalesMember 2018-01-01 2018-12-31 0000049600 egp:A2019OperatingPropertySalesMemberDomain 2019-01-01 2019-03-31 0000049600 egp:A2018OperatingPropertySalesMember 2018-12-31 0000049600 us-gaap:UnsecuredDebtMember 2018-12-31 0000049600 us-gaap:NotesPayableToBanksMember 2018-12-31 0000049600 us-gaap:SecuredDebtMember 2019-03-31 0000049600 us-gaap:SecuredDebtMember 2018-12-31 0000049600 us-gaap:UnsecuredDebtMember 2019-03-31 0000049600 us-gaap:NotesPayableToBanksMember 2019-03-31 0000049600 egp:NineBankGroupUnsecuredRevolvingCreditFacilityMember egp:Bankcreditfacilityobtainedin2018350millionMember 2019-01-01 2019-03-31 0000049600 egp:PncNaUnsecuredRevolvingCreditFacilityMember egp:Creditfacilityobtainedin201845millionMember 2019-01-01 2019-03-31 0000049600 egp:NineBankGroupUnsecuredRevolvingCreditFacilityMember egp:Formerfacility300millionMember 2018-01-01 2018-12-31 0000049600 egp:NineBankGroupUnsecuredRevolvingCreditFacilityMember egp:Bankcreditfacilityobtainedin2018350millionMember 2019-03-31 0000049600 egp:PncNaUnsecuredRevolvingCreditFacilityMember egp:Creditfacilityobtainedin201845millionMember 2019-03-31 0000049600 egp:NineBankGroupUnsecuredRevolvingCreditFacilityMember egp:A80millioninterestrateswapMember 2018-12-31 0000049600 egp:PncNaUnsecuredRevolvingCreditFacilityMember egp:Formercreditfacility35millionMember 2018-12-31 0000049600 egp:NineBankGroupUnsecuredRevolvingCreditFacilityMember egp:A80millioninterestrateswapMember 2018-01-01 2018-12-31 0000049600 egp:NineBankGroupUnsecuredRevolvingCreditFacilityMember egp:Formerfacility300millionMember 2018-12-31 0000049600 egp:A80millionseniorunsecuredprivateplacementnotes2019Member 2019-03-31 0000049600 egp:A80millionseniorunsecuredprivateplacementnotes2019Member 2019-01-01 2019-03-31 0000049600 egp:SecuredandunsecureddebtMember 2019-03-31 0000049600 egp:PncNaUnsecuredRevolvingCreditFacilityMember egp:Formercreditfacility35millionMember 2019-01-01 2019-03-31 0000049600 us-gaap:InterestRateSwapMember us-gaap:DesignatedAsHedgingInstrumentMember 2019-03-31 0000049600 us-gaap:InterestRateSwapMember us-gaap:DesignatedAsHedgingInstrumentMember 2019-01-01 2019-03-31 0000049600 us-gaap:InterestRateSwapMember us-gaap:DesignatedAsHedgingInstrumentMember 2018-01-01 2018-03-31 0000049600 us-gaap:OtherAssetsMember us-gaap:InterestRateSwapMember us-gaap:DesignatedAsHedgingInstrumentMember 2019-03-31 0000049600 us-gaap:OtherLiabilitiesMember us-gaap:InterestRateSwapMember us-gaap:DesignatedAsHedgingInstrumentMember 2019-03-31 0000049600 us-gaap:OtherAssetsMember us-gaap:InterestRateSwapMember us-gaap:DesignatedAsHedgingInstrumentMember 2018-12-31 0000049600 us-gaap:OtherLiabilitiesMember us-gaap:InterestRateSwapMember us-gaap:DesignatedAsHedgingInstrumentMember 2018-12-31 0000049600 egp:A75millioninterestrateswapexecutedin2015Member us-gaap:InterestRateSwapMember us-gaap:DesignatedAsHedgingInstrumentMember 2018-12-31 0000049600 egp:A15millioninterestrateswapMember us-gaap:InterestRateSwapMember us-gaap:DesignatedAsHedgingInstrumentMember 2019-03-31 0000049600 egp:A65millioninterestrateswapexecutedin2016Member us-gaap:InterestRateSwapMember us-gaap:DesignatedAsHedgingInstrumentMember 2018-12-31 0000049600 egp:A75millioninterestrateswapexecutedin2014Member us-gaap:InterestRateSwapMember us-gaap:DesignatedAsHedgingInstrumentMember 2019-03-31 0000049600 egp:A75millioninterestrateswapexecutedin2014Member us-gaap:InterestRateSwapMember us-gaap:DesignatedAsHedgingInstrumentMember 2018-12-31 0000049600 egp:A40millioninterestrateswap2016Member us-gaap:InterestRateSwapMember us-gaap:DesignatedAsHedgingInstrumentMember 2019-03-31 0000049600 egp:A60millioninterestrateswapMember us-gaap:InterestRateSwapMember us-gaap:DesignatedAsHedgingInstrumentMember 2019-03-31 0000049600 egp:A40millioninterestrateswap2016Member us-gaap:InterestRateSwapMember us-gaap:DesignatedAsHedgingInstrumentMember 2018-12-31 0000049600 egp:A75millioninterestrateswapexecutedin2015Member us-gaap:InterestRateSwapMember us-gaap:DesignatedAsHedgingInstrumentMember 2019-03-31 0000049600 egp:A60millioninterestrateswapMember us-gaap:InterestRateSwapMember us-gaap:DesignatedAsHedgingInstrumentMember 2018-12-31 0000049600 egp:A15millioninterestrateswapMember us-gaap:InterestRateSwapMember us-gaap:DesignatedAsHedgingInstrumentMember 2018-12-31 0000049600 egp:A65millioninterestrateswapexecutedin2016Member us-gaap:InterestRateSwapMember us-gaap:DesignatedAsHedgingInstrumentMember 2019-03-31 0000049600 egp:CompanyPerformanceAwardsPartAMember us-gaap:ExecutiveOfficerMember us-gaap:RestrictedStockMember egp:A2019AwardsMember egp:EquityIncentivePlan2013Member 2019-01-01 2019-03-31 0000049600 us-gaap:ExecutiveOfficerMember us-gaap:RestrictedStockMember egp:EquityIncentivePlan2013Member 2019-01-01 2019-03-31 0000049600 egp:AwardRecipientTypeEmployeeMember us-gaap:RestrictedStockMember 2019-01-01 2019-03-31 0000049600 egp:ShareholderReturnAwardsMember egp:TwoyearperiodMember us-gaap:ExecutiveOfficerMember us-gaap:RestrictedStockMember egp:A2017AwardsMember egp:EquityIncentivePlan2013Member 2019-01-01 2019-03-31 0000049600 egp:IndividualperformanceawardsMember us-gaap:ExecutiveOfficerMember us-gaap:RestrictedStockMember egp:A2019AwardsMember egp:EquityIncentivePlan2013Member 2019-01-01 2019-03-31 0000049600 egp:ShareholderReturnAwardsMember us-gaap:ExecutiveOfficerMember us-gaap:RestrictedStockMember egp:A2019AwardsMember egp:EquityIncentivePlan2013Member 2019-01-01 2019-03-31 0000049600 egp:ShareholderReturnAwardsMember us-gaap:ExecutiveOfficerMember us-gaap:RestrictedStockMember egp:A2017AwardsMember egp:EquityIncentivePlan2013Member 2019-01-01 2019-03-31 0000049600 egp:ServiceConditionOnlyAwardsMember us-gaap:ExecutiveOfficerMember us-gaap:RestrictedStockMember egp:A2017AwardsMember egp:EquityIncentivePlan2013Member 2019-01-01 2019-03-31 0000049600 egp:ShareholderReturnAwardsMember egp:ThreeyearperiodMember us-gaap:ExecutiveOfficerMember us-gaap:RestrictedStockMember egp:A2019AwardsMember egp:EquityIncentivePlan2013Member 2019-01-01 2019-03-31 0000049600 egp:ShareholderReturnAwardsMember egp:ThreeyearperiodMember us-gaap:ExecutiveOfficerMember us-gaap:RestrictedStockMember egp:A2018AwardsMember egp:EquityIncentivePlan2013Member 2019-01-01 2019-03-31 0000049600 egp:ShareholderReturnAwardsMember egp:ThreeyearperiodMember us-gaap:ExecutiveOfficerMember us-gaap:RestrictedStockMember egp:A2017AwardsMember egp:EquityIncentivePlan2013Member 2019-01-01 2019-03-31 0000049600 egp:ShareholderReturnAwardsMember us-gaap:ExecutiveOfficerMember us-gaap:RestrictedStockMember egp:A2018AwardsMember egp:EquityIncentivePlan2013Member 2019-01-01 2019-03-31 0000049600 egp:ServiceConditionOnlyAwardsMember us-gaap:ExecutiveOfficerMember us-gaap:RestrictedStockMember egp:A2019AwardsMember egp:EquityIncentivePlan2013Member 2019-01-01 2019-03-31 0000049600 egp:AwardRecipientTypeEmployeeMember egp:IndividualperformanceawardsMember us-gaap:ExecutiveOfficerMember us-gaap:RestrictedStockMember egp:A2018AwardsMember egp:EquityIncentivePlan2013Member 2019-01-01 2019-03-31 0000049600 egp:AwardRecipientTypeDirectorMember 2019-01-01 2019-03-31 0000049600 egp:ServiceConditionOnlyAwardsMember us-gaap:ExecutiveOfficerMember us-gaap:RestrictedStockMember egp:A2018AwardsMember egp:EquityIncentivePlan2013Member 2019-01-01 2019-03-31 0000049600 egp:AwardRecipientTypeEmployeeMember us-gaap:RestrictedStockMember 2018-01-01 2018-03-31 0000049600 egp:AwardRecipientTypeEmployeeMember egp:CompanyPerformanceAwardsMember us-gaap:ExecutiveOfficerMember us-gaap:RestrictedStockMember egp:A2018AwardsMember egp:EquityIncentivePlan2013Member 2019-01-01 2019-03-31 0000049600 egp:CompanyPerformanceAwardsPartBMember us-gaap:ExecutiveOfficerMember us-gaap:RestrictedStockMember egp:A2019AwardsMember egp:EquityIncentivePlan2013Member 2019-01-01 2019-03-31 0000049600 egp:AnnualequityplanMember us-gaap:ExecutiveOfficerMember us-gaap:RestrictedStockMember egp:A2019AwardsMember egp:EquityIncentivePlan2013Member 2019-01-01 2019-03-31 0000049600 egp:AwardRecipientTypeDirectorMember 2018-01-01 2018-03-31 0000049600 egp:AwardRecipientTypeEmployeesandDirectorsMember us-gaap:RestrictedStockMember 2018-12-31 0000049600 egp:AwardRecipientTypeEmployeesandDirectorsMember us-gaap:RestrictedStockMember 2019-03-31 0000049600 egp:AwardRecipientTypeEmployeesandDirectorsMember us-gaap:RestrictedStockMember 2019-01-01 2019-03-31 0000049600 us-gaap:CarryingReportedAmountFairValueDisclosureMember 2019-03-31 0000049600 us-gaap:EstimateOfFairValueFairValueDisclosureMember 2018-12-31 0000049600 us-gaap:EstimateOfFairValueFairValueDisclosureMember 2019-03-31 0000049600 us-gaap:CarryingReportedAmountFairValueDisclosureMember 2018-12-31 0000049600 us-gaap:AccountingStandardsUpdate201602Member 2019-01-01 2019-03-31 0000049600 egp:DevelopmentlandMember us-gaap:SubsequentEventMember 2019-04-01 2019-04-23 0000049600 egp:LogisticsCenter67Member us-gaap:SubsequentEventMember 2019-04-01 2019-04-23 0000049600 us-gaap:SubsequentEventMember 2019-04-05 0000049600 egp:DevelopmentlandMember us-gaap:SubsequentEventMember 2019-04-23 0000049600 egp:InterstateCommonsDistributionCenterIandIIMember us-gaap:SubsequentEventMember 2019-04-01 2019-04-23 0000049600 us-gaap:SubsequentEventMember 2019-04-01 2019-04-23 0000049600 egp:LogisticsCenter67Member us-gaap:SubsequentEventMember 2019-04-23 xbrli:pure iso4217:USD xbrli:shares egp:properties egp:Integer xbrli:shares iso4217:USD utreg:sqft utreg:acre


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C.  20549

FORM 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934

FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2019                           COMMISSION FILE NUMBER 1-07094


397635318_egplogonewa01a02a01a02a01a18.jpg

EASTGROUP PROPERTIES, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

MARYLAND
13-2711135
(State or other jurisdiction
(I.R.S. Employer
of incorporation or organization)
Identification No.)
 
 
400 W PARKWAY PLACE
 
SUITE 100
 
RIDGELAND, MISSISSIPPI
39157
(Address of principal executive offices)
(Zip code)
 
 
Registrant’s telephone number:  (601) 354-3555
 

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  YES x NO o

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    YES x  NO o

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company.  See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.   
Large Accelerated Filer x
 
Accelerated Filer o
 
Non-accelerated Filer o
 
 
 
 
 
Smaller Reporting Company o
 
Emerging Growth Company o
 
 
                   
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. o

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
YES o NO x

The number of shares of common stock, $0.0001 par value, outstanding as of April 23, 2019 was 36,752,739.

-1-



EASTGROUP PROPERTIES, INC. AND SUBSIDIARIES

FORM 10-Q

TABLE OF CONTENTS
FOR THE QUARTER ENDED MARCH 31, 2019 


 
 
Page
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 



-2-



PART I.  FINANCIAL INFORMATION.


EASTGROUP PROPERTIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
(UNAUDITED)

 
March 31,
2019
 
December 31,
2018
ASSETS
 
 
 
Real estate properties
$
2,609,914

 
2,553,481

Development and value-add properties
264,526

 
263,664

 
2,874,440

 
2,817,145

Less accumulated depreciation
(832,925
)
 
(814,915
)
 
2,041,515

 
2,002,230

Unconsolidated investment
7,879

 
7,870

Cash
1,831

 
374

Other assets
120,421

 
121,231

TOTAL ASSETS
$
2,171,646

 
2,131,705

 
 
 
 
LIABILITIES AND EQUITY
 

 
 

 
 
 
 
LIABILITIES
 

 
 

Unsecured bank credit facilities
$
131,189

 
193,926

Unsecured debt
803,397

 
723,400

Secured debt
185,606

 
188,461

Accounts payable and accrued expenses
83,364

 
86,563

Other liabilities
46,616

 
34,652

Total Liabilities
1,250,172

 
1,227,002

 
 
 
 
EQUITY
 

 
 

Stockholders’ Equity:
 

 
 

Common shares; $0.0001 par value; 70,000,000 shares authorized; 36,752,260 shares issued and outstanding at March 31, 2019 and 36,501,356 at December 31, 2018
4

 
4

Excess shares; $0.0001 par value; 30,000,000 shares authorized; no shares issued

 

Additional paid-in capital
1,245,660

 
1,222,547

Distributions in excess of earnings
(330,184
)
 
(326,193
)
Accumulated other comprehensive income
4,388

 
6,701

Total Stockholders’ Equity
919,868

 
903,059

Noncontrolling interest in joint ventures
1,606

 
1,644

Total Equity
921,474

 
904,703

TOTAL LIABILITIES AND EQUITY
$
2,171,646

 
2,131,705

 
See accompanying Notes to Consolidated Financial Statements (unaudited).



-3-



EASTGROUP PROPERTIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
 
Three Months Ended
 
March 31,
 
2019
 
2018
REVENUES
 
 
 
Income from real estate operations
$
78,637

 
72,120

Other revenue
161

 
83

 
78,798

 
72,203

EXPENSES
 
 
 
Expenses from real estate operations
22,302

 
20,676

Depreciation and amortization
23,746

 
21,685

General and administrative
3,844

 
3,463

Indirect leasing costs
93

 

 
49,985

 
45,824

OTHER INCOME (EXPENSE)
 
 
 
Interest expense
(8,846
)
 
(8,607
)
Gain on sales of real estate investments
2,325

 
10,222

Other
242

 
754

NET INCOME
22,534

 
28,748

Net income attributable to noncontrolling interest in joint ventures
(5
)
 
(35
)
NET INCOME ATTRIBUTABLE TO EASTGROUP PROPERTIES, INC. COMMON STOCKHOLDERS
22,529

 
28,713

Other comprehensive income (loss) - cash flow hedges
(2,313
)
 
3,606

TOTAL COMPREHENSIVE INCOME
$
20,216

 
32,319

BASIC PER COMMON SHARE DATA FOR NET INCOME ATTRIBUTABLE TO EASTGROUP PROPERTIES, INC. COMMON STOCKHOLDERS
 
 
 
Net income attributable to common stockholders
$
0.62

 
0.83

Weighted average shares outstanding
36,465

 
34,689

DILUTED PER COMMON SHARE DATA FOR NET INCOME ATTRIBUTABLE TO EASTGROUP PROPERTIES, INC. COMMON STOCKHOLDERS
 
 
 
Net income attributable to common stockholders
$
0.62

 
0.83

Weighted average shares outstanding
36,526

 
34,736


See accompanying Notes to Consolidated Financial Statements (unaudited).

-4-




EASTGROUP PROPERTIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
(UNAUDITED)


 
Common Stock
 
Additional
Paid-In Capital
 
Distributions in Excess of Earnings
 
Accumulated Other Comprehensive Income
 
Noncontrolling Interest in Joint Ventures
 
Total
BALANCE, DECEMBER 31, 2018
$
4

 
1,222,547

 
(326,193
)
 
6,701

 
1,644

 
904,703

Net income

 

 
22,529

 

 
5

 
22,534

Net unrealized change in fair value of cash flow hedges

 

 

 
(2,313
)
 

 
(2,313
)
Common dividends declared – $0.72 per share

 

 
(26,520
)
 

 

 
(26,520
)
Stock-based compensation, net of forfeitures

 
1,447

 

 

 

 
1,447

Issuance of 232,205 shares of common stock, common stock offering, net of expenses

 
24,400

 

 

 

 
24,400

Issuance of 571 shares of common stock, dividend reinvestment plan

 
54

 

 

 

 
54

Withheld 28,955 shares of common stock to satisfy tax withholding obligations in connection with the vesting of restricted stock

 
(2,788
)
 

 

 

 
(2,788
)
Distributions to noncontrolling interest

 

 

 

 
(43
)
 
(43
)
BALANCE, MARCH 31, 2019
$
4

 
1,245,660

 
(330,184
)
 
4,388

 
1,606

 
921,474



 
Common Stock
 
Additional
Paid-In Capital
 
Distributions in Excess of Earnings
 
Accumulated Other Comprehensive Income
 
Noncontrolling Interest in Joint Ventures
 
Total
BALANCE, DECEMBER 31, 2017
$
3

 
1,061,153

 
(317,032
)
 
5,348

 
1,658

 
751,130

Net income

 

 
28,713

 

 
35

 
28,748

Net unrealized change in fair value of cash flow hedges

 

 

 
3,606

 

 
3,606

Common dividends declared – $0.64 per share

 

 
(22,388
)
 

 

 
(22,388
)
Stock-based compensation, net of forfeitures

 
1,044

 

 

 

 
1,044

Issuance of 179,501 shares of common stock, common stock offering, net of expenses

 
14,602

 

 

 

 
14,602

Issuance of 667 shares of common stock, dividend reinvestment plan

 
54

 

 

 

 
54

Withheld 23,824 shares of common stock to satisfy tax withholding obligations in connection with the vesting of restricted stock

 
(2,055
)
 

 

 

 
(2,055
)
Distributions to noncontrolling interest

 

 

 

 
(65
)
 
(65
)
BALANCE, MARCH 31, 2018
$
3

 
1,074,798

 
(310,707
)
 
8,954

 
1,628

 
774,676


See accompanying Notes to Consolidated Financial Statements (unaudited).

-5-



EASTGROUP PROPERTIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
 
Three Months Ended March 31,
 
2019
 
2018
OPERATING ACTIVITIES
 
 
 
Net income                                                                                                       
$
22,534

 
28,748

Adjustments to reconcile net income to net cash provided by operating activities:
 

 
 

Depreciation and amortization                                                                                                       
23,746

 
21,685

Stock-based compensation expense                                                                                                       
1,065

 
1,184

Net gain on sales of real estate investments and non-operating real estate
(2,325
)
 
(10,308
)
Gain on casualties and involuntary conversion
(100
)
 

Changes in operating assets and liabilities:
 

 
 

Accrued income and other assets                                                                                                       
2,153

 
2,239

Accounts payable, accrued expenses and prepaid rent                                                                                                       
(5,919
)
 
(22,310
)
Other                                                                                                       
328

 
476

NET CASH PROVIDED BY OPERATING ACTIVITIES                                                                                                       
41,482

 
21,714

INVESTING ACTIVITIES
 

 
 

Development and value-add properties                                                                                                       
(42,846
)
 
(31,212
)
Real estate improvements                                                                                                       
(5,610
)
 
(5,158
)
Net proceeds from sales of real estate investments and non-operating real estate                                                                                                       
3,679

 
16,826

Repayments on mortgage loans receivable                                                                                                       
3

 
1,958

Changes in accrued development costs                                                                                                       
701

 
8,713

Changes in other assets and other liabilities                                                                                                       
(4,857
)
 
(2,344
)
NET CASH USED IN INVESTING ACTIVITIES                                                                                                       
(48,930
)
 
(11,217
)
FINANCING ACTIVITIES
 

 
 

Proceeds from unsecured bank credit facilities                                                                                          
144,635

 
91,387

Repayments on unsecured bank credit facilities                                                                                                      
(207,497
)
 
(85,634
)
Proceeds from unsecured debt
80,000

 

Repayments on secured debt
(2,916
)
 
(2,767
)
Debt issuance costs                                                                                                       
(153
)
 
(88
)
Distributions paid to stockholders (not including dividends accrued)                                                                                                     
(26,787
)
 
(22,736
)
Proceeds from common stock offerings                                                                                                       
24,400

 
14,466

Proceeds from dividend reinvestment plan                                                                                                       
54

 
57

Other                                                                                                       
(2,831
)
 
(5,161
)
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES
8,905

 
(10,476
)
INCREASE IN CASH AND CASH EQUIVALENTS
1,457

 
21

CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD
374

 
16

CASH AND CASH EQUIVALENTS AT END OF PERIOD
$
1,831

 
37

SUPPLEMENTAL CASH FLOW INFORMATION
 

 
 

    Cash paid for interest, net of amounts capitalized of $2,036 and $1,602
       for 2019 and 2018, respectively                                                                                                       
$
6,646

 
7,141

    Cash paid for operating lease liabilities                                                                                              
281

 

NON-CASH OPERATING ACTIVITY
 
 
 
    Operating lease liabilities arising from obtaining right of use assets                                                                                             
$
12,417

 


See accompanying Notes to Consolidated Financial Statements (unaudited).

-6-

EASTGROUP PROPERTIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)



(1)
BASIS OF PRESENTATION
 
The accompanying unaudited financial statements of EastGroup Properties, Inc. (“EastGroup” or “the Company”) have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X.  Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements.  In management’s opinion, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included.  The financial statements should be read in conjunction with the financial statements contained in the 2018 annual report on Form 10-K and the notes thereto.

(2)
PRINCIPLES OF CONSOLIDATION
 
The consolidated financial statements include the accounts of EastGroup, its wholly owned subsidiaries and its investment in any joint ventures in which the Company has a controlling interest. As of March 31, 2019 and December 31, 2018, EastGroup had an 80% controlling interest in University Business Center 120 and 130.

The Company records 100% of the assets, liabilities, revenues and expenses of the buildings held in joint ventures with the noncontrolling interests provided for in accordance with the joint venture agreements. 

The equity method of accounting is used for the Company’s 50% undivided tenant-in-common interest in Industry Distribution Center II.  All significant intercompany transactions and accounts have been eliminated in consolidation.

(3)
USE OF ESTIMATES
 
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses during the reporting period and to disclose material contingent assets and liabilities at the date of the financial statements.  Actual results could differ from those estimates.

(4)
LEASE REVENUE
 
The Company’s primary revenue is rental income from business distribution space.

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

The new standard’s narrow definition of initial direct costs for leases — The new definition of initial direct costs results in certain costs (primarily legal costs related to lease negotiations) being expensed rather than capitalized upon adoption of the new standard. EastGroup recorded Indirect leasing costs of $93,000 on the Consolidated Statements of Income and Comprehensive Income during the three months ended March 31, 2019.

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

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

The Company has applied the provisions of the new lease accounting standard and provided the required disclosures in this Quarterly Report on Form 10-Q.

The table below presents the components of Income from real estate operations for the three months ended March 31, 2019:


-7-

EASTGROUP PROPERTIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

 
Three Months Ended
March 31, 2019
 
(In thousands)
 
 
Lease income — operating leases
$
58,892

Variable lease income (1)
19,745

Income from real estate operations
$
78,637


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

Future Minimum Rental Receipts Under Non-Cancelable Leases
The Company’s leases with its customers may include various provisions such as scheduled rent increases, renewal options and termination options. The majority of the Company’s leases include defined rent increases rather than variable payments based on an index or unknown rate. In calculating the disclosures presented below, the Company included the fixed, non-cancelable terms of the leases. The following schedule indicates approximate future minimum rental receipts under non-cancelable leases for real estate properties by year as of March 31, 2019:        
Years Ending December 31,
 
(In thousands)
2019 - Remainder of year
 
$
175,737

2020
 
208,760

2021
 
165,837

2022
 
124,182

2023
 
93,321

Thereafter                                                  
 
182,876

   Total minimum receipts                                                  
 
$
950,713



As noted above, the Company adopted the new lease accounting guidance effective January 1, 2019.  Since the Company has applied the provisions on a prospective basis, the following represents approximate future minimum rental receipts under non-cancelable leases for real estate properties by year as of December 31, 2018, as applicable under ASC 840, Leases, prior to the adoption of ASC 842.  
Years Ending December 31,
 
(In thousands)
2019
 
$
226,330

2020
 
195,850

2021
 
151,564

2022
 
112,007

2023
 
82,262

Thereafter                                                  
 
163,499

   Total minimum receipts                                                  
 
$
931,512



(5)
REAL ESTATE PROPERTIES
 
EastGroup has one reportable segment – industrial properties.  These properties are primarily located in major Sunbelt regions of the United States. The Company’s properties have similar economic characteristics and as a result, have been aggregated into one reportable segment.

The Company reviews long-lived assets for impairment whenever events or changes in circumstances indicate the carrying amount of an asset may not be recoverable.  Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to future undiscounted net cash flows (including estimated future expenditures necessary to substantially complete the asset) expected to be generated by the asset.  If the carrying amount of an asset exceeds its estimated future cash flows, an impairment charge is recognized for the amount by which the carrying amount of the asset exceeds the fair value of the asset.  During the periods ended March 31, 2019 and March 31, 2018, the Company did not identify any impairment charges which should be recorded.


-8-

EASTGROUP PROPERTIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Depreciation of buildings and other improvements is computed using the straight-line method over estimated useful lives of generally 40 years for buildings and 3 to 15 years for improvements.  Building improvements are capitalized, while maintenance and repair expenses are charged to expense as incurred.  Significant renovations and improvements that improve or extend the useful life of the assets are capitalized.  Depreciation expense was $19,747,000 and $17,927,000 for the three months ended March 31, 2019 and 2018, respectively.

The Company’s Real estate properties and Development and value-add properties at March 31, 2019 and December 31, 2018 were as follows:
 
March 31,
2019
 
December 31,
2018
 
(In thousands)
Real estate properties:
 
 
 
   Land                                                                  
$
388,788

 
380,684

   Buildings and building improvements                                          
1,762,694

 
1,732,592

   Tenant and other improvements                                                                  
448,391

 
440,205

   Right of use assets — Ground leases (operating) (1)
10,041

 

Development and value-add properties (2)                                                                 
264,526

 
263,664

 
2,874,440

 
2,817,145

   Less accumulated depreciation                                                                  
(832,925
)
 
(814,915
)
 
$
2,041,515

 
2,002,230



(1)
See below and in Note 20 for information regarding the Company’s right of use assets for ground leases.
(2)
Value-add properties are defined as properties that are either acquired but not stabilized or can be converted to a higher and better use.  Acquired properties meeting either of the following two conditions are considered value-add properties:  (1) Less than 75% occupied as of the acquisition date (or will be less than 75% occupied within one year of acquisition date based on near term lease roll), or (2) 20% or greater of the acquisition cost will be spent to redevelop the property. 

Ground Leases
On January 1, 2019, EastGroup adopted the principles of FASB Accounting Standards Codification (“ASC”) 842, Leases, as further discussed in Note 20. In connection with the adoption, the Company recorded right of use assets for its ground leases, which are classified as operating leases, using the effective date transition option; under this option, prior years are not restated. As of January 1, 2019, the Company recorded right of use assets for its ground leases of $10,226,000. As of March 31, 2019, the unamortized balance of the Company’s right of use assets for its ground leases was $10,041,000. The right of use assets for ground leases are included in Real estate properties on the Consolidated Balance Sheets.

As of March 31, 2019, the Company operated two properties in Florida, two properties in Texas and one property in Arizona that are subject to ground leases.  These leases have terms of 40 to 50 years, expiration dates of August 2031 to November 2037, and renewal options of 15 to 35 years, except for the one lease in Arizona which is automatically and perpetually renewed annually. The Company has included renewal options in the lease terms for calculating the ground lease assets and liabilities as the Company is reasonably certain it will exercise these options. Total ground lease expenditures for the three months ended March 31, 2019 and 2018 were $198,000 and $195,000, respectively. Payments are subject to increases at 3 to 10 year intervals based upon the agreed or appraised fair market value of the leased premises on the adjustment date or the Consumer Price Index percentage increase since the base rent date. These future changes in payments will be considered variable payments and will not impact the assessment of the asset or liability unless there is a significant event that triggers reassessment, such as amendment with a change in the terms of the lease. The weighted-average remaining lease term as of March 31, 2019, for the ground leases is 45 years. The following schedule indicates approximate future minimum ground lease payments for these properties by year as of March 31, 2019:











-9-

EASTGROUP PROPERTIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Future Minimum Ground Lease Payments
Years Ending December 31,
 
(In thousands)
2019 - Remainder of year
 
$
593

2020
 
791

2021
 
791

2022
 
791

2023
 
791

Thereafter                                                  
 
30,751

   Total minimum payments                                                  
 
34,508

Imputed interest (1)
 
(24,283
)
Amortization
 
(184
)
   Total ground leases                                                  
 
$
10,041


(1)
As the Company’s leases do not provide an implicit rate, in order to calculate the present value of the remaining ground lease payments, the Company used its incremental borrowing rate as of January 1, 2019, adjusted for a number of factors, including the long-term nature of the ground leases, the Company’s estimated borrowing costs, and the estimated fair value of the underlying land. The Company elected to use the portfolio approach as all of its ground leases have similar characteristics and determined 7.3% as the appropriate rate as of January 1, 2019.

As noted above, the Company adopted the new lease accounting guidance effective January 1, 2019Since the Company has applied the provisions on a prospective basis, the following represents approximate future minimum ground lease payments by year as of December 31, 2018, as applicable under ASC 840, Leases, prior to the adoption of ASC 842.

Future Minimum Ground Lease Payments
Years Ending December 31,
 
(In thousands)
2019
 
$
791

2020
 
791

2021
 
791

2022
 
791

2023
 
791

Thereafter                                                  
 
30,751

 
 
$
34,706



At December 31, 2018, the Company had the same ground leases in place as mentioned above and recorded ground lease expenditures of $783,000 for the year.

(6)
DEVELOPMENT
 
For properties under development and value-add properties acquired in the development stage, costs associated with development (i.e., land, construction costs, interest expense, property taxes and other costs associated with development) are aggregated into the total capitalized costs of the property.  Included in these costs are management’s estimates for the portions of internal costs (primarily personnel costs) deemed related to such development activities. The internal costs are allocated to specific development projects based on development activity. As the property becomes occupied, depreciation commences on the occupied portion of the building, and costs are capitalized only for the portion of the building that remains vacant. The Company transfers properties from the development program to Real estate properties at the earlier of 90% occupancy or one year after completion of the shell construction. Upon transfer, capitalization of development costs, including interest expense, property taxes and internal personnel costs, ceases and depreciation commences on the entire property (excluding the land).

(7)
REAL ESTATE PROPERTY ACQUISITIONS AND ACQUIRED INTANGIBLES
 
Upon acquisition of real estate properties, EastGroup applies the principles of FASB ASC 805, Business Combinations.

The FASB Codification provides a framework for determining whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. Under the guidance, companies are required to utilize an initial screening test to determine whether substantially all of the fair value of the gross assets acquired (or disposed of) is concentrated in a single identifiable asset

-10-

EASTGROUP PROPERTIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

or a group of similar identifiable assets; if so, the set is not a business. EastGroup determined that its real estate property acquisitions in 2018 are considered to be acquisitions of groups of similar identifiable assets; therefore, the acquisitions are not considered to be acquisitions of a business. As a result, the Company capitalized acquisition costs related to its 2018 acquisitions. The Company did not acquire any properties during the three months ended March 31, 2019.

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

The purchase price is also allocated among the following categories of intangible assets:  the above or below market component of in-place leases, the value of in-place leases, and the value of customer relationships.  The value allocable to the above or below market component of an acquired in-place lease is determined based upon the present value (using a discount rate reflecting the risks associated with the acquired leases) of the difference between (i) the contractual amounts to be paid pursuant to the lease over its remaining term, and (ii) management’s estimate of the amounts that would be paid using fair market rates over the remaining term of the lease.  The amounts allocated to above and below market leases are included in Other assets and Other liabilities, respectively, on the Consolidated Balance Sheets and are amortized to rental income over the remaining terms of the respective leases. The total amount of intangible assets is further allocated to in-place lease values and customer relationship values based upon management’s assessment of their respective values.  These intangible assets are included in Other assets on the Consolidated Balance Sheets and are amortized over the remaining term of the existing lease, or the anticipated life of the customer relationship, as applicable.

Amortization expense for in-place lease intangibles was $991,000 and $1,012,000 for the three months ended March 31, 2019 and 2018, respectively. Amortization of above and below market leases increased rental income by $192,000 and $118,000 for the three months ended March 31, 2019 and 2018, respectively.

The Company did not acquire any operating properties during the three months ended March 31, 2019. During the year ended December 31, 2018, the Company acquired the following operating properties: Gwinnett 316 in Atlanta; Eucalyptus Distribution Center in Chino (Los Angeles); Allen Station I & II in Dallas; and Greenhill Distribution Center in Austin. The Company also acquired one value-add property, Siempre Viva Distribution Center in San Diego. At the time of acquisition, Siempre Viva was classified in the lease-up phase. The total cost for the properties acquired by the Company was $71,086,000, of which $54,537,000 was allocated to Real estate properties and $13,934,000 was allocated to Development and value-add properties. EastGroup allocated $23,263,000 of the total purchase price to land using third party land valuations for the Atlanta, Dallas, Austin, San Diego and Chino (Los Angeles) markets. The market values are considered to be Level 3 inputs as defined by ASC 820, Fair Value Measurement (see Note 17 for additional information on ASC 820). Intangibles associated with the purchase of real estate were allocated as follows: $4,350,000 to in-place lease intangibles and $21,000 to above market leases (both included in Other assets on the Consolidated Balance Sheets) and $1,756,000 to below market leases (included in Other liabilities on the Consolidated Balance Sheets). These costs are amortized over the remaining lives of the associated leases in place at the time of acquisition.

The Company periodically reviews the recoverability of goodwill (at least annually) and the recoverability of other intangibles (on a quarterly basis) for possible impairment.  No impairment of goodwill or other intangibles existed during the periods ended March 31, 2019 and March 31, 2018.

(8)
REAL ESTATE SOLD AND HELD FOR SALE/DISCONTINUED OPERATIONS
 
The Company considers a real estate property to be held for sale when it meets the criteria established under ASC 360, Property, Plant and Equipment, including when it is probable that the property will be sold within a year.  Real estate properties held for sale are reported at the lower of the carrying amount or fair value less estimated costs to sell and are not depreciated while they are held for sale.  The Company did not classify any properties as held for sale as of March 31, 2019 and December 31, 2018.

In accordance with FASB ASU 2014-08, Presentation of Financial Statements (Topic 205) and Property, Plant, and Equipment (Topic 360), Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity, the Company would report a disposal of a component of an entity or a group of components of an entity in discontinued operations if the disposal represents a strategic shift that has (or will have) a major effect on an entity’s operations and financial results when the component

-11-

EASTGROUP PROPERTIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

or group of components meets the criteria to be classified as held for sale or when the component or group of components is disposed of by sale or other than by sale. In addition, the Company would provide additional disclosures about both discontinued operations and the disposal of an individually significant component of an entity that does not qualify for discontinued operations presentation in the financial statements. EastGroup performs an analysis of properties sold to determine whether the sales qualify for discontinued operations presentation.

The Company does not consider its sales in 2018 and the three months ended March 31, 2019 to be disposals of a component of an entity or a group of components of an entity representing a strategic shift that has (or will have) a major effect on the entity’s operations and financial results.

During the three months ended March 31, 2019, EastGroup sold World Houston 5. The 51,000 square foot property was sold for $3.8 million and the Company recognized a gain on the sale of $2.3 million.

During the year 2018, EastGroup sold three operating properties: World Houston 18 in Houston; 56 Commerce Park in Tampa; and 35th Avenue Distribution Center in Phoenix. The properties contain a combined 339,000 square feet and were sold for $22.9 million. EastGroup recognized gains on the sales of $14.3 million. The Company also sold 11 acres of land in Houston for $2.6 million and recognized a gain of $86,000 in the first quarter of 2018.

The results of operations and gains on sales for the properties sold during the periods presented are reported in continuing operations on the Consolidated Statements of Income and Comprehensive Income. The gains on the sales of operating properties are included in Gain on sales of real estate investments, and the gains on the sales of land are included in Other.

(9)
OTHER ASSETS
 
A summary of the Company’s Other assets follows:
 
March 31,
2019
 
December 31,
2018
 
(In thousands)
Leasing costs (principally commissions)
                                                                                 
$
81,051

 
78,985

Accumulated amortization of leasing costs                                                       
(31,534
)
 
(30,185
)
Leasing costs (principally commissions), net of accumulated amortization
49,517

 
48,800

 
 
 
 
Acquired in-place lease intangibles                                                                                  
21,425

 
21,696

Accumulated amortization of acquired in-place lease intangibles
(10,553
)
 
(9,833
)
Acquired in-place lease intangibles, net of accumulated amortization
10,872

 
11,863

 
 
 
 
Acquired above market lease intangibles                                                                                  
1,454

 
1,465

Accumulated amortization of acquired above market lease intangibles
(941
)
 
(902
)
Acquired above market lease intangibles, net of accumulated amortization
513

 
563

 
 
 
 
Straight-line rents receivable
36,725

 
36,022

Accounts receivable
3,959

 
5,433

Mortgage loans receivable                                                                                  
2,591

 
2,594

Interest rate swap assets
4,497

 
6,701

Right of use assets — Office leases (operating) (1)
2,376

 

Goodwill                                                                                  
990

 
990

Prepaid expenses and other assets                                                                                  
8,381

 
8,265

Total Other assets
$
120,421

 
121,231



(1)
See Note 20 for information regarding the Company’s January 1, 2019, implementation of FASB ASC 842, Leases, and the Company’s right of use assets for office leases.

-12-

EASTGROUP PROPERTIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(10)
DEBT

The Company’s debt is detailed below. EastGroup presents debt issuance costs as reductions of Unsecured bank credit facilities, Unsecured debt and Secured debt on the Consolidated Balance Sheets.
 
March 31,
2019
 
December 31,
2018
 
(In thousands)
Unsecured bank credit facilities - variable rate, carrying amount
$
132,868

 
195,730

Unamortized debt issuance costs
(1,679
)
 
(1,804
)
Unsecured bank credit facilities
131,189

 
193,926

 
 
 
 
Unsecured debt - fixed rate, carrying amount (1)
805,000

 
725,000

Unamortized debt issuance costs
(1,603
)
 
(1,600
)
Unsecured debt
803,397

 
723,400

 
 
 
 
Secured debt - fixed rate, carrying amount (1)
186,116

 
189,038

Unamortized debt issuance costs
(510
)
 
(577
)
Secured debt
185,606

 
188,461

 
 
 
 
Total debt
$
1,120,192

 
1,105,787



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

Until June 14, 2018, EastGroup had $300 million and $35 million unsecured bank credit facilities with margins over LIBOR of 100 basis points, facility fees of 20 basis points and maturity dates of July 30, 2019. The Company amended and restated these credit facilities on June 14, 2018, expanding the capacity to $350 million and $45 million, as detailed below.

The $350 million unsecured bank credit facility is with a group of nine banks and has a maturity date of July 30, 2022. The credit facility contains options for two six-month extensions (at the Company’s election) and a $150 million accordion (with agreement by all parties). The interest rate on each tranche is usually reset on a monthly basis and as of March 31, 2019, was LIBOR plus 100 basis points with an annual facility fee of 20 basis points. The margin and facility fee are subject to changes in the Company’s credit ratings. The Company had designated an interest rate swap to an $80 million unsecured bank credit facility draw that effectively fixed the interest rate on the $80 million draw to 2.020% through the interest rate swap’s maturity date. This swap matured on August 15, 2018, and the $80 million draw has reverted to the variable interest rate associated with the Company’s unsecured bank credit facilities.  As of March 31, 2019, the Company had $130,000,000 of variable rate borrowings on this unsecured  bank credit facility with a weighted average interest rate of 3.491%. The Company has three standby letters of credit totaling $704,740 pledged on this facility.

The Company’s $45 million unsecured bank credit facility has a maturity date of July 30, 2022, or such later date as designated by the bank; the Company also has two six-month extensions available if the extension options in the $350 million facility are exercised. The interest rate is reset on a daily basis and as of March 31, 2019, was LIBOR plus 100 basis points with an annual facility fee of 20 basis points. The margin and facility fee are subject to changes in the Company’s credit ratings. As of March 31, 2019, the interest rate was 3.495% on a balance of $2,868,000.

In March 2019, the Company closed $80 million of senior unsecured private placement notes with an insurance company. The notes have a 10-year term and a fixed interest rate of 4.27% with semi-annual interest 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.

Scheduled principal payments on long-term debt, including Unsecured debt and Secured debt (not including Unsecured bank credit facilities), as of March 31, 2019, are as follows: 

-13-

EASTGROUP PROPERTIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Years Ending December 31,
 
(In thousands)
Remainder of 2019
 
$
127,647

2020
 
114,096

2021
 
129,562

2022
 
107,769

2023
 
115,119

2024 and beyond
 
396,923

       Total
 
$
991,116



(11)
ACCOUNTS PAYABLE AND ACCRUED EXPENSES
 
A summary of the Company’s Accounts payable and accrued expenses follows:
 
March 31,
2019
 
December 31,
2018
 
(In thousands)
Property taxes payable                                                                                  
$
12,173

 
10,718

Development costs payable                                                                                  
16,111

 
15,410

Real estate improvements and capitalized leasing costs payable
5,658

 
3,911

Interest payable                                                                                  
5,931

 
4,067

Dividends payable                                                        
27,471

 
27,738

Book overdraft (1)
10,602

 
15,048

Other payables and accrued expenses                                                                                  
5,418

 
9,671

 Total Accounts payable and accrued expenses
$
83,364

 
86,563



(1)
Represents checks written before the end of the period which have not cleared the bank; therefore, the bank has not yet advanced cash to the Company. When the checks clear the bank, they will be funded through the Company’s working cash line of credit.

(12)
OTHER LIABILITIES
 
A summary of the Company’s Other liabilities follows:
 
March 31,
2019
 
December 31,
2018
 
(In thousands)
Security deposits                                                                                  
$
19,103

 
18,432

Prepaid rent and other deferred income                                                     
11,951

 
12,728

Operating lease liabilities — Ground leases (1)
10,041

 

Operating lease liabilities — Office leases (1)
2,376

 

 
 
 
 
Acquired below-market lease intangibles
5,891

 
5,891

     Accumulated amortization of below-market lease intangibles
(3,270
)
 
(3,028
)
Acquired below-market lease intangibles, net of accumulated amortization
2,621

 
2,863

 
 
 
 
Interest rate swap liabilities
109

 

Prepaid tenant improvement reimbursements
400

 
614

Other liabilities                                                                                  
15

 
15

 Total Other liabilities
$
46,616

 
34,652



(1)
See Note 20 for information regarding the Company’s January 1, 2019, implementation of FASB ASC 842, Leases, and the Company’s right of use assets and related liabilities for ground leases and office leases.


-14-

EASTGROUP PROPERTIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(13)
COMPREHENSIVE INCOME
 
Total Comprehensive Income is comprised of net income plus all other changes in equity from non-owner sources and is presented on the Consolidated Statements of Income and Comprehensive Income. The components of Accumulated other comprehensive income are presented in the Company’s Consolidated Statement of Changes in Equity and are summarized below. See Note 14 for information regarding the Company’s interest rate swaps.
 
Three Months Ended
March 31,
 
2019
 
2018
 
(In thousands)
ACCUMULATED OTHER COMPREHENSIVE INCOME:
 
Balance at beginning of period
$
6,701

 
5,348

    Change in fair value of interest rate swaps - cash flow hedges
(2,313
)
 
3,606

Balance at end of period
$
4,388

 
8,954



(14)
DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES
 
The Company is exposed to certain risks arising from both its business operations and economic conditions. The Company principally manages its exposures to a wide variety of business and operational risks through management of its core business activities. The Company manages economic risk, including interest rate, liquidity and credit risk primarily by managing the amount, sources and duration of its debt funding and, to a limited extent, the use of derivative instruments.

Specifically, the Company has entered into derivative instruments to manage exposures that arise from business activities that result in the payment of future known and uncertain cash amounts, the value of which are determined by interest rates. The Company’s derivative instruments, described below, are used to manage differences in the amount, timing and duration of the Company’s known or expected cash payments principally related to certain of the Company’s borrowings.

The Company’s objective in using interest rate derivatives is to change variable interest rates to fixed interest rates by using interest rate swaps. Interest rate swaps designated as cash flow hedges involve the receipt of variable-rate amounts from a counterparty in exchange for the Company making fixed-rate payments over the life of the agreements without exchange of the underlying notional amount. 

As of March 31, 2019, the Company had six interest rate swaps outstanding, all of which are used to hedge the variable cash flows associated with unsecured loans. All of the Company’s interest rate swaps convert the related loans’ LIBOR rate components to effectively fixed interest rates, and the Company has concluded that each of the hedging relationships is highly effective.

The changes in the fair value of derivatives designated and qualifying as cash flow hedges is recorded in Other comprehensive income and is subsequently reclassified into earnings through interest expense as interest payments are made in the period that the hedged forecasted transaction affects earnings.

Amounts reported in Other comprehensive income (loss) related to derivatives will be reclassified to Interest expense as interest payments are made or received on the Company’s variable-rate debt. The Company estimates the swap interest receipts will be $1,981,000 over the next twelve months. These receipts approximate the expected cash interest receipts due from counterparties for the swaps. Since the interest payments and receipts on the swaps in combination with the associated debt have been effectively fixed, this estimate is not in addition to the Company’s total expected combined interest payments or expense for the next twelve months.

The Company’s valuation methodology for over-the-counter (“OTC”) derivatives is to discount cash flows based on Overnight Index Swap (“OIS”) rates.  Uncollateralized or partially-collateralized trades are discounted at OIS rates, but include appropriate economic adjustments for funding costs (i.e., a LIBOR-OIS basis adjustment to approximate uncollateralized cost of funds) and credit risk.  The Company calculates its derivative valuations using mid-market prices.

In July 2017, the Financial Conduct Authority (the authority that regulates LIBOR) announced it intends to stop compelling banks to submit rates for the calculation of LIBOR after 2021. The Alternative Reference Rates Committee (“ARRC”) has proposed that the Secured Overnight Financing Rate (“SOFR”) is the rate that represents best practice as the alternative to USD-LIBOR for use in derivatives and other financial contracts that are currently indexed to USD-LIBOR. ARRC has proposed a paced market transition plan to SOFR from USD-LIBOR and organizations are currently working on industry wide and company specific transition plans

-15-

EASTGROUP PROPERTIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

as it relates to derivatives and cash markets exposed to USD-LIBOR. The Company has material contracts that are indexed to USD-LIBOR and is monitoring this activity and evaluating the related risks.

As of March 31, 2019 and December 31, 2018, the Company had the following outstanding interest rate derivatives that are designated as cash flow hedges of interest rate risk:
Interest Rate Derivative
 
Notional Amount as of March 31, 2019
 
Notional Amount as of December 31, 2018
 
 
(In thousands)
Interest Rate Swap
 
$75,000
 
$75,000
Interest Rate Swap
 
$75,000
 
$75,000
Interest Rate Swap
 
$65,000
 
$65,000
Interest Rate Swap
 
$60,000
 
$60,000
Interest Rate Swap
 
$40,000
 
$40,000
Interest Rate Swap
 
$15,000
 
$15,000


The table below presents the fair value of the Company’s derivative financial instruments as well as their classification on the Consolidated Balance Sheets as of March 31, 2019 and December 31, 2018. See Note 17 for additional information on the fair value of the Company’s interest rate swaps.
 
Derivatives
As of March 31, 2019
 
Derivatives
As of December 31, 2018
 
Balance Sheet Location
 
Fair Value
 
Balance Sheet Location
 
Fair Value
 
(In thousands)
Derivatives designated as cash flow hedges:
 
 
 
 
 
 
 
    Interest rate swap assets
Other assets
 
$
4,497

 
Other assets
 
$
6,701

    Interest rate swap liabilities
Other liabilities
 
109

 
Other liabilities
 



The table below presents the effect of the Company’s derivative financial instruments on the Consolidated Statements of Income and Comprehensive Income for the three months ended March 31, 2019 and 2018:
 
Three Months Ended
March 31,
 
2019
 
2018
 
(In thousands)
DERIVATIVES IN CASH FLOW HEDGING RELATIONSHIPS
 
 
 
Interest Rate Swaps:
 
 
 
  Amount of income (loss) recognized in Other comprehensive income on derivatives                                                                                                     
$
(1,644
)
 
3,662

  Amount of (income) loss reclassified from Accumulated other comprehensive income into Interest expense                                                                                               
(669
)
 
(56
)


See Note 13 for additional information on the Company’s Accumulated other comprehensive income resulting from its interest rate swaps.

Derivative financial agreements expose the Company to credit risk in the event of non-performance by the counterparties under the terms of the interest rate hedge agreements. The Company believes it minimizes the credit risk by transacting with financial institutions the Company regards as credit-worthy.

The Company has an agreement with its derivative counterparties containing a provision stating that the Company could be declared in default on its derivative obligations if the Company defaults on any of its indebtedness, including default where repayment of the indebtedness has not been accelerated by the lender. As of March 31, 2019, the fair value of derivatives in a net liability position related to these agreements was $109,000.


-16-

EASTGROUP PROPERTIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(15)
EARNINGS PER SHARE
 
The Company applies ASC 260, Earnings Per Share, which requires companies to present basic and diluted earnings per share (“EPS”).  Basic EPS represents the amount of earnings for the period attributable to each share of common stock outstanding during the reporting period.  The Company’s basic EPS is calculated by dividing Net Income Attributable to EastGroup Properties, Inc. Common Stockholders by the weighted average number of common shares outstanding. The weighted average number of common shares outstanding does not include any potentially dilutive securities or any unvested restricted shares of common stock. These unvested restricted shares, although classified as issued and outstanding, are considered forfeitable until the restrictions lapse and will not be included in the basic EPS calculation until the shares are vested.

Diluted EPS represents the amount of earnings for the period attributable to each share of common stock outstanding during the reporting period and to each share that would have been outstanding assuming the issuance of common shares for all dilutive potential common shares outstanding during the reporting period.  The Company calculates diluted EPS by dividing Net Income Attributable to EastGroup Properties, Inc. Common Stockholders by the weighted average number of common shares outstanding plus the dilutive effect of unvested restricted stock.  The dilutive effect of unvested restricted stock is determined using the treasury stock method.

Reconciliation of the numerators and denominators in the basic and diluted EPS computations is as follows:
 
Three Months Ended
 
March 31,
 
2019
 
2018
 
(In thousands)
BASIC EPS COMPUTATION FOR NET INCOME ATTRIBUTABLE TO EASTGROUP PROPERTIES, INC. COMMON STOCKHOLDERS
 
 
 
  Numerator – net income attributable to common stockholders                                                                                                     
$
22,529

 
28,713

  Denominator – weighted average shares outstanding                                                                                                     
36,465

 
34,689

DILUTED EPS COMPUTATION FOR NET INCOME ATTRIBUTABLE TO EASTGROUP PROPERTIES, INC. COMMON STOCKHOLDERS
 
 
 
  Numerator – net income attributable to common stockholders                                                                                                     
$
22,529

 
28,713

Denominator:
 
 
 
    Weighted average shares outstanding                                                                                                     
36,465

 
34,689

    Unvested restricted stock                                                                                                     
61

 
47

      Total Shares                                                                                                     
36,526

 
34,736



(16)
STOCK-BASED COMPENSATION
 
EastGroup applies the provisions of ASC 718, Compensation - Stock Compensation, to account for its stock-based compensation plans. ASC 718 requires that the compensation cost relating to share-based payment transactions be recognized in the financial statements and that the cost be measured on the fair value of the equity or liability instruments issued.

Stock-based compensation cost for employees was $1,444,000 for the three months ended March 31, 2019, of which $381,000 was capitalized as part of the Company’s development costs. For the three months ended March 31, 2018, stock-based compensation cost for employees was $1,043,000, of which $214,000 was capitalized as part of the Company’s development costs.

Stock-based compensation expense for directors was $2,000 for the three months ended March 31, 2019, and $355,000 for the same period of 2018.

In the second quarter of 2017, the Compensation Committee of the Company’s Board of Directors (the “Committee”) approved a long-term equity compensation plan for certain of its executive officers that included three components based on total shareholder return and one component based only on continued service as of the vesting dates.

The three long-term equity compensation plan components based on total shareholder return are subject to bright-line tests that compare the Company’s total shareholder return to the Nareit Equity Index and to the member companies of the Nareit industrial index. The first plan measured the bright-line tests over the one-year period ended December 31, 2017; these shares were awarded during the first quarter of 2018.


-17-

EASTGROUP PROPERTIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

The second plan measured the bright-line tests over the two-year period ended December 31, 2018. During the first quarter of 2019, the Committee measured the Company’s performance for the two-year period against bright-line tests established by the Committee on the grant date of May 10, 2017.  The number of shares determined on the measurement date was 9,460.  These shares vested 100% on February 14, 2019, the date the earned shares were determined. On the grant date of May 10, 2017, the Company began recognizing expense for this plan based on the grant date fair value of the awards which was determined using a simulation pricing model developed to specifically accommodate the unique features of the award.

The third plan will measure the bright-line tests over the three-year period ending December 31, 2019. During the first quarter of 2020, the Committee will measure the Company’s performance for the three-year period against bright-line tests established by the Committee on the grant date of May 10, 2017.  The number of shares to be earned on the measurement date could range from zero to 18,917.  These shares would vest 75% on the date the earned shares are determined in the first quarter of 2020 and 25% on January 1, 2021. On the grant date of May 10, 2017, the Company began recognizing expense for this plan based on the grant date fair value of the awards which was determined using a simulation pricing model developed to specifically accommodate the unique features of the award.

The component of the long-term equity compensation plan based only on continued service as of the vesting dates was awarded on May 10, 2017. On that date, 5,406 shares were granted to certain executive officers subject only to continued service as of the vesting dates. These shares, which have a grant date fair value of $78.18 per share, vested 25% in the first quarter of each of 2018 and 2019 and will vest 25% on January 1 in years 2020 and 2021. The shares are being expensed on a straight-line basis over the remaining service period.

In the second quarter of 2018, the Committee approved an equity compensation plan for the Company’s executive officers based upon certain annual performance measures for 2018, including funds from operations (“FFO”) per share, same property net operating income change, general and administrative costs, and fixed charge coverage. On February 14, 2019, the Committee measured the Company’s performance for 2018 against bright-line tests established by the Committee on the grant date of June 1, 2018 and determined that 24,690 shares were earned. These shares, which have a grant date fair value of $95.19, vested 20% on the date shares were determined and will vest 20% per year on January 1 in years 2020, 2021, 2022 and 2023. On the grant date of June 1, 2018, the Company began recognizing expense for its estimate of the shares that may be earned pursuant to these awards; the shares are being expensed using the graded vesting attribution method which recognizes each separate vesting portion of the award as a separate award on a straight-line basis over the requisite service period.

Also in the second quarter of 2018, the Committee approved an equity compensation plan for EastGroup’s executive officers based upon the achievement of individual goals for each of the officers included in the plan. On February 14, 2019, the Committee evaluated the performance of the officers and, in its discretion, awarded 5,671 shares with a grant date fair value of $107.37. These shares vested 20% on the date shares were determined and awarded and will vest 20% per year on January 1 in years 2020, 2021, 2022 and 2023. The Company began recognizing the expense for the shares awarded on the grant date of February 14, 2019, and the shares will be expensed on a straight-line basis over the remaining service period. 

Also in the second quarter of 2018, the Committee approved a long-term equity compensation plan for the Company’s executive officers that includes one component based on total shareholder return and one component based only on continued service as of the vesting dates.

The component of the long-term equity compensation plan based on total shareholder return is subject to bright-line tests that will compare the Company’s total shareholder return to the Nareit Equity Index and to the member companies of the Nareit industrial index. The plan will measure the bright-line tests over the three-year period ending December 31, 2020. During the first quarter of 2021, the Committee will measure the Company’s performance for the three-year period against bright-line tests established by the Committee on the grant date of June 1, 2018.  The number of shares to be earned on the measurement date could range from zero to 27,596.  These shares would vest 75% on the date the earned shares are determined in the first quarter of 2021 and 25% on January 1, 2022. On the grant date of June 1, 2018, the Company began recognizing expense for this plan based on the grant date fair value of the awards which was determined using a simulation pricing model developed to specifically accommodate the unique features of the award.

The component of the long-term equity compensation plan based only on continued service as of the vesting dates was awarded on June 1, 2018. On that date, 7,884 shares were granted to the Company’s executive officers subject only to continued service as of the vesting dates. These shares, which have a grant date fair value of $95.19, vested 25% in the first quarter of 2019 and will vest 25% on January 1 in years 2020, 2021 and 2022. The shares are being expensed on a straight-line basis over the remaining service period.


-18-

EASTGROUP PROPERTIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

In the first quarter of 2019, the Committee approved an equity compensation plan (the “2019 Annual Plan”) for the Company’s executive officers based upon certain annual performance measures for 2019; the plan is comprised of three components. The first component of the 2019 Annual Plan is based upon the following Company performance measures for 2019: (i) same property net operating income change, (ii) debt-to EBITDAre ratio, and (iii) fixed charge coverage. During the first quarter of 2020, the Committee will measure the Company’s performance for 2019 against bright-line tests established by the Committee on the grant date of March 7, 2019. The number of shares that may be earned for the achievement of the annual performance measures could range from zero to 9,594. These shares, which have a grant date fair value of $105.97, would vest 20% on the date shares are determined and 20% per year on each January 1 for the subsequent four years. On the grant date of March 7, 2019, the Company began recognizing expense for its estimate of the shares that may be earned pursuant to these awards; the shares are being expensed using the graded vesting attribution method which recognizes each separate vesting portion of the award as a separate award on a straight-line basis over the requisite service period.

The second component of the 2019 Annual Plan is based upon the Company’s FFO per share for 2019. Any shares issued pursuant to the FFO per share goals in this compensation plan will be determined by the Committee in its discretion, which is expected to occur in the first quarter of 2020. The number of shares to be issued on the grant date for the achievement of the performance goals could range from zero to 15,988. These shares would vest 20% on the date shares are determined and awarded and 20% per year on each January 1 for the subsequent four years. The Company will begin recognizing the expense for any shares awarded on the grant date, which is expected to be in the first quarter of 2020, and the shares will be expensed on a straight-line basis over the remaining service period. 

The third component of the 2019 Annual Plan is based upon the achievement of individual goals for each of the officers included in the plan. Any shares issued pursuant to the individual goals in this compensation plan will be determined by the Committee in its discretion and issued in the first quarter of 2020. The number of shares to be issued on the grant date for the achievement of individual goals could range from zero to 6,394. These shares would vest 20% on the date shares are determined and awarded and 20% per year on each January 1 for the subsequent four years. The Company will begin recognizing the expense for any shares awarded on the grant date in the first quarter of 2020, and the shares will be expensed on a straight-line basis over the remaining service period. 

Also in the first quarter of 2019, the Committee approved a long-term equity compensation plan for the Company’s executive officers that includes one component based on total shareholder return and one component based only on continued service as of the vesting dates.

The component of the long-term equity compensation plan based on total shareholder return is subject to bright-line tests that will compare the Company’s total shareholder return to the Nareit Equity Index and to the member companies of the Nareit industrial index. The plan will measure the bright-line tests over the three-year period ending December 31, 2021. During the first quarter of 2022, the Committee will measure the Company’s performance for the three-year period against bright-line tests established by the Committee on the grant date of March 7, 2019.  The number of shares to be earned on the measurement date could range from zero to 34,812.  These shares would vest 75% on the date the earned shares are determined in the first quarter of 2022 and 25% on January 1, 2023. On the grant date of March 7, 2019, the Company began recognizing expense for this plan based on the grant date fair value of the awards which was determined using a simulation pricing model developed to specifically accommodate the unique features of the award.

The component of the long-term equity compensation plan based only on continued service as of the vesting dates was awarded on March 7, 2019. On that date, 9,947 shares were granted to the Company’s executive officers subject only to continued service as of the vesting dates. These shares, which have a grant date fair value of $105.97, will vest 25% in the first quarter of 2020 and 25% on January 1 in years 2021, 2022 and 2023. The shares are being expensed on a straight-line basis over the remaining service period.

Following is a summary of the total restricted shares granted, forfeited and delivered (vested) to participants with the related weighted average grant date fair value share prices.  Of the shares that vested in the three months ended March 31, 2019, the Company withheld 28,955 shares to satisfy the tax obligations for those participants who elected this option as permitted under the applicable equity plan.  As of the vesting dates, the aggregate fair value of shares that vested during the three months ended March 31, 2019, was $6,662,000.

-19-

EASTGROUP PROPERTIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

 
Three Months Ended
 
Award Activity:
March 31, 2019
 
 
 
 
Shares
 
Weighted Average Grant Date Fair Value
 
Unvested at beginning of period
143,525

 
$
70.29

 
Granted (1) (2)
49,768

 
91.03

 
Forfeited 
(2,685
)
 
83.05

 
Vested 
(69,363
)
 
66.99

 
Unvested at end of period 
121,245

 
$
80.41

 


(1) Includes shares granted in prior years for which performance conditions have been satisfied and the number of shares have been
determined.
(2) Does not include the restricted shares that may be earned if the performance goals established in 2017 and 2018 for long-term
performance and in 2019 for annual and long-term performance are achieved. Depending on the actual level of achievement of the
goals at the end of the open performance periods, the number of shares earned could range from zero to 113,301.

(17)
FAIR VALUE OF FINANCIAL INSTRUMENTS
 
ASC 820, Fair Value Measurement, defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.  ASC 820 also provides guidance for using fair value to measure financial assets and liabilities.  The Codification requires disclosure of the level within the fair value hierarchy in which the fair value measurements fall, including measurements using quoted prices in active markets for identical assets or liabilities (Level 1), quoted prices for similar instruments in active markets or quoted prices for identical or similar instruments in markets that are not active (Level 2), and significant valuation assumptions that are not readily observable in the market (Level 3).

The following table presents the carrying amounts and estimated fair values of the Company’s financial instruments in accordance with ASC 820 at March 31, 2019 and December 31, 2018.
 
March 31, 2019
 
December 31, 2018
 
Carrying Amount (1)
 
Fair Value
 
Carrying Amount (1)
 
Fair Value
 
(In thousands)
Financial Assets:
 
 
 
 
 
 
 
Cash and cash equivalents
$
1,831

 
1,831

 
374

 
374

   Mortgage loans receivable