10-Q 1 egp-20210930.htm 10-Q egp-20210930
EastGroup Properties 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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 September 30, 2021

                    
Commission File Number: 1-07094

egp-20210930_g1.jpg

EASTGROUP PROPERTIES, INC.
(Exact Name of Registrant as Specified in its Charter)
Maryland13-2711135
(State or other jurisdiction of incorporation or organization)(I.R.S. Employer Identification No.)
  
400 W Parkway Place 
Suite 100 
Ridgeland,Mississippi39157
(Address of principal executive offices)(Zip code)

Registrant’s telephone number: (601) 354-3555

Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading symbol(s)Name of each exchange on which registered
Common stock, $0.0001 par value per shareEGPNew York Stock Exchange

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

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§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   No






-1-


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

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

The number of shares of common stock, $0.0001 par value, outstanding as of October 26, 2021 was 40,684,273.
-2-


EASTGROUP PROPERTIES, INC. AND SUBSIDIARIES

FORM 10-Q

TABLE OF CONTENTS
FOR THE QUARTER ENDED SEPTEMBER 30, 2021 

  Page
 
   
 
   
 
   
 
   
 
   
 
  
 
   
   
   
   
 
   
   
  
   
 


-3-


PART I.  FINANCIAL INFORMATION.


EASTGROUP PROPERTIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
(UNAUDITED)
 September 30,
2021
December 31,
2020
ASSETS  
Real estate properties$3,484,743 3,159,497 
Development and value-add properties352,344 359,588 
 3,837,087 3,519,085 
Less accumulated depreciation(1,031,027)(955,328)
 2,806,060 2,563,757 
Unconsolidated investment7,111 7,446 
Cash247 21 
Other assets171,592 149,579 
TOTAL ASSETS$2,985,010 2,720,803 
LIABILITIES AND EQUITY  
LIABILITIES  
Unsecured bank credit facilities, net of debt issuance costs$58,719 124,194 
Unsecured debt, net of debt issuance costs1,242,430 1,107,708 
Secured debt, net of debt issuance costs35,466 78,993 
Accounts payable and accrued expenses149,979 69,573 
Other liabilities78,676 69,817 
Total Liabilities1,565,270 1,450,285 
EQUITY  
Stockholders’ Equity:  
Common shares; $0.0001 par value; 70,000,000 shares authorized; 40,684,273 shares issued and outstanding at September 30, 2021 and 39,676,828 at December 31, 2020
4 4 
Excess shares; $0.0001 par value; 30,000,000 shares authorized; no shares issued
  
Additional paid-in capital1,765,748 1,610,053 
Distributions in excess of earnings(344,378)(329,667)
Accumulated other comprehensive loss(2,476)(10,752)
Total Stockholders’ Equity1,418,898 1,269,638 
Noncontrolling interest in joint ventures842 880 
Total Equity1,419,740 1,270,518 
TOTAL LIABILITIES AND EQUITY$2,985,010 2,720,803 
 
See accompanying Notes to Consolidated Financial Statements (unaudited).


-4-


EASTGROUP PROPERTIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
Three Months EndedNine Months Ended
 September 30,September 30,
 2021202020212020
REVENUES  
Income from real estate operations$104,584 92,000 302,063 270,077 
Other revenue13 12 40 278 
 104,597 92,012 302,103 270,355 
EXPENSES  
Expenses from real estate operations29,644 26,325 85,521 77,505 
Depreciation and amortization32,263 29,211 93,925 85,673 
General and administrative3,559 3,714 12,081 11,020 
Indirect leasing costs133 248 597 522 
 65,599 59,498 192,124 174,720 
OTHER INCOME (EXPENSE)  
Interest expense(8,416)(8,347)(24,873)(25,150)
Other210 244 621 711 
NET INCOME30,792 24,411 85,727 71,196 
Net income attributable to noncontrolling interest in joint ventures(21)(10)(59)(14)
NET INCOME ATTRIBUTABLE TO EASTGROUP PROPERTIES, INC. COMMON STOCKHOLDERS30,771 24,401 85,668 71,182 
Other comprehensive income (loss) - interest rate swaps1,325 1,362 8,276 (16,252)
TOTAL COMPREHENSIVE INCOME$32,096 25,763 93,944 54,930 
BASIC PER COMMON SHARE DATA FOR NET INCOME ATTRIBUTABLE TO EASTGROUP PROPERTIES, INC. COMMON STOCKHOLDERS  
Net income attributable to common stockholders$0.76 0.62 2.14 1.82 
Weighted average shares outstanding40,434 39,338 40,058 39,077 
DILUTED PER COMMON SHARE DATA FOR NET INCOME ATTRIBUTABLE TO EASTGROUP PROPERTIES, INC. COMMON STOCKHOLDERS  
Net income attributable to common stockholders$0.76 0.62 2.13 1.82 
Weighted average shares outstanding40,567 39,450 40,165 39,168 

See accompanying Notes to Consolidated Financial Statements (unaudited).
-5-


EASTGROUP PROPERTIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
(UNAUDITED)
For the nine months ended September 30, 2021:
Common SharesAdditional
Paid-In Capital
Distributions in Excess of EarningsAccumulated Other Comprehensive LossNoncontrolling Interest in Joint VenturesTotal
BALANCE, DECEMBER 31, 2020$4 1,610,053 (329,667)(10,752)880 1,270,518 
Net income  27,339  18 27,357 
Net unrealized change in fair value of interest rate swaps   8,214  8,214 
Common dividends declared – $0.79 per
   share
  (31,672)  (31,672)
Stock-based compensation, net of
   forfeitures
 2,147    2,147 
Issuance of 317,538 shares of common
   stock, common stock offering, net of
   expenses
 44,485    44,485 
Withheld 30,252 shares of common stock to
   satisfy tax withholding obligations in
   connection with the vesting of restricted
   stock
 (4,240)   (4,240)
Net distributions to noncontrolling interest    (11)(11)
BALANCE, MARCH 31, 20214 1,652,445 (334,000)(2,538)887 1,316,798 
Net income  27,558  20 27,578 
Net unrealized change in fair value of interest rate swaps   (1,263) (1,263)
Common dividends declared – $0.79 per
   share
  (31,981)  (31,981)
Stock-based compensation, net of
   forfeitures
 2,893    2,893 
Issuance of 370,177 shares of common
   stock, common stock offering, net of
   expenses
 59,318    59,318 
Net distributions to noncontrolling interest 5   (17)(12)
BALANCE, JUNE 30, 20214 1,714,661 (338,423)(3,801)890 1,373,331 
Net income  30,771  21 30,792 
Net unrealized change in fair value of interest rate swaps   1,325  1,325 
Common dividends declared – $0.90 per
   share
  (36,726)  (36,726)
Stock-based compensation, net of
   forfeitures
 2,461    2,461 
Issuance of 278,893 shares of common
   stock, common stock offering, net of
   expenses
 48,626    48,626 
Net distributions to noncontrolling interest    (69)(69)
BALANCE, SEPTEMBER 30, 2021$4 1,765,748 (344,378)(2,476)842 1,419,740 
See accompanying Notes to Consolidated Financial Statements (unaudited).


-6-


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

For the nine months ended September 30, 2020:
Common SharesAdditional
Paid-In Capital
Distributions in Excess of EarningsAccumulated Other Comprehensive Income (Loss)Noncontrolling Interest in Joint VenturesTotal
BALANCE, DECEMBER 31, 2019$4 1,514,055 (316,302)2,807 1,765 1,202,329 
Net income  23,297  1 23,298 
Net unrealized change in fair value of interest rate swaps   (15,790) (15,790)
Common dividends declared – $0.75 per
   share
  (29,366)  (29,366)
Stock-based compensation, net of
   forfeitures
 1,781    1,781 
Issuance of 105,837 shares of common
   stock, common stock offering, net of
   expenses
 14,734    14,734 
Withheld 33,963 shares of common stock to
   satisfy tax withholding obligations in
   connection with the vesting of restricted
   stock
 (4,589)   (4,589)
Net distributions to noncontrolling interest    (34)(34)
BALANCE, MARCH 31, 20204 1,525,981 (322,371)(12,983)1,732 1,192,363 
Net income  23,484  3 23,487 
Net unrealized change in fair value of interest rate swaps   (1,824) (1,824)
Common dividends declared – $0.75 per
   share
  (29,551)  (29,551)
Stock-based compensation, net of
   forfeitures
 2,694    2,694 
Issuance of 243,621 shares of common
   stock, common stock offering, net of
   expenses
 29,647    29,647 
Net distributions to noncontrolling interest    (19)(19)
BALANCE, JUNE 30, 20204 1,558,322 (328,438)(14,807)1,716 1,216,797 
Net income  24,401  10 24,411 
Net unrealized change in fair value of interest rate swaps   1,362  1,362 
Common dividends declared –$0.79 per
   share
  (31,322)  (31,322)
Stock-based compensation, net of
   forfeitures
 2,036    2,036 
Issuance of 238,086 shares of common
   stock, common stock offering, net of
   expenses
 31,362    31,362 
Net distributions to noncontrolling interest    (28)(28)
BALANCE, SEPTEMBER 30, 2020$4 1,591,720 (335,359)(13,445)1,698 1,244,618 

See accompanying Notes to Consolidated Financial Statements (unaudited).
-7-


EASTGROUP PROPERTIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
 Nine Months Ended September 30,
 20212020
OPERATING ACTIVITIES  
Net income                                                                                                       $85,727 71,196 
Adjustments to reconcile net income to net cash provided by operating activities:  
Depreciation and amortization                                                                                                       93,925 85,673 
Stock-based compensation expense5,840 5,033 
Gain on casualties and involuntary conversion on real estate assets (161)
Changes in operating assets and liabilities:  
Accrued income and other assets(2,688)944 
Accounts payable, accrued expenses and prepaid rent57,099 15,642 
Other                                                                                                       1,263 1,280 
NET CASH PROVIDED BY OPERATING ACTIVITIES241,166 179,607 
INVESTING ACTIVITIES  
Development and value-add properties(189,955)(129,997)
Purchases of real estate(104,006)(6,231)
Real estate improvements(26,749)(25,536)
Leasing commissions(22,791)(12,741)
Proceeds from casualties and involuntary conversion on real estate assets 242 
Repayments on mortgage loans receivable 21 
Changes in accrued development costs22,130 (1,901)
Changes in other assets and other liabilities856 (13,539)
NET CASH USED IN INVESTING ACTIVITIES(320,515)(189,682)
FINANCING ACTIVITIES  
Proceeds from unsecured bank credit facilities 316,893 423,270 
Repayments on unsecured bank credit facilities(380,877)(458,506)
Proceeds from unsecured debt175,000 100,000 
Repayments on unsecured debt(40,000)(30,000)
Repayments on secured debt(43,591)(6,733)
Debt issuance costs(2,647)(596)
Distributions paid to stockholders (not including dividends accrued)(95,240)(88,558)
Proceeds from common stock offerings154,371 75,743 
Other(4,334)(4,750)
NET CASH PROVIDED BY FINANCING ACTIVITIES79,575 9,870 
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS226 (205)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD21 224 
CASH AND CASH EQUIVALENTS AT END OF PERIOD$247 19 
SUPPLEMENTAL CASH FLOW INFORMATION  
Cash paid for interest, net of amounts capitalized of $6,686 and $7,562 for 2021 and 2020,
   respectively
$21,599 24,220 
Cash paid for operating lease liabilities1,133 1,099 
NON-CASH OPERATING ACTIVITY
  Operating lease liabilities arising from obtaining right of use assets$13,056 495 

See accompanying Notes to Consolidated Financial Statements (unaudited).
-8-

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 Company’s annual report on Form 10-K for the year ended December 31, 2020 and the notes thereto. Certain reclassifications have been made in the 2020 consolidated financial statements to conform to the 2021 presentation.

(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 September 30, 2021 and December 31, 2020, EastGroup held a controlling interest in two joint venture arrangements. In 2019, the Company acquired 6.5 acres of land in San Diego, known by the Company as the Miramar land. Also in 2019, the Company acquired 41.6 acres of land in San Diego, known by the Company as the Otay Mesa land. During the nine months ended September 30, 2021, EastGroup began construction of a 519,000 square foot building on the Otay Mesa land, known by the Company as Speed Distribution Center. As of both September 30, 2021 and December 31, 2020, EastGroup had a 95% controlling interest in the Miramar land and a 99% controlling interest in Speed Distribution Center.

The Company records 100% of the assets, liabilities, revenues and expenses of the buildings and land 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. The table below presents the components of Income from real estate operations for the three and nine months ended September 30, 2021 and 2020:
Three Months Ended
September 30,
Nine Months Ended
September 30,
2021202020212020
(In thousands)
Lease income — operating leases$78,040 68,528 225,780 201,284 
Variable lease income (1)
26,544 23,472 76,283 68,793 
Income from real estate operations$104,584 92,000 302,063 270,077 

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

(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
-9-

EASTGROUP PROPERTIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
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 nine month periods ended September 30, 2021 and 2020, the Company did not identify any impairment charges which should be recorded.

Depreciation of buildings and other improvements is computed using the straight-line method over estimated useful lives of generally 40 years for buildings and 3 to 15 years for improvements.  Building improvements are capitalized, while maintenance and repair expenses are charged to expense as incurred.  Significant renovations and improvements that improve or extend the useful life of the assets are capitalized.  Depreciation expense was $26,599,000 and $77,604,000 for the three and nine months ended September 30, 2021, respectively, and $24,087,000 and $70,989,000 for the same periods in 2020.

The Company’s Real estate properties and Development and value-add properties at September 30, 2021 and December 31, 2020 were as follows:
 September 30,
2021
December 31,
2020
 (In thousands)
Real estate properties:  
   Land$533,792 502,739 
   Buildings and building improvements2,365,115 2,120,731 
   Tenant and other improvements562,785 524,954 
   Right of use assets — Ground leases (operating) (1)
23,051 11,073 
Development and value-add properties (2)
352,344 359,588 
 3,837,087 3,519,085 
   Less accumulated depreciation(1,031,027)(955,328)
 $2,806,060 2,563,757 

(1)EastGroup applies the principles of Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 842, Leases, and its related Accounting Standards Updates (“ASUs”) to account for its ground leases, which are classified as operating leases. The related operating lease liabilities for ground leases are included in Other liabilities on the Consolidated Balance Sheets.
(2)Value-add properties are defined as properties that are either acquired but not stabilized or can be converted to a higher and better use.  Acquired properties meeting either of the following two conditions are considered value-add properties:  (1) Less than 75% occupied as of the acquisition date (or will be less than 75% occupied within one year of acquisition date based on near term lease roll), or (2) 20% or greater of the acquisition cost will be spent to redevelop the property.

(6)DEVELOPMENT AND VALUE-ADD PROPERTIES
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 and value-add program to Real estate properties as follows: (i) for development properties, at the earlier of 90% occupancy or one year after completion of the shell construction, and (ii) for value-add properties, at the earlier of 90% occupancy or one year after acquisition. Upon the earlier of 90% occupancy or one year after completion of the shell construction, capitalization of development costs, including interest expense, property taxes and internal personnel costs, ceases and depreciation commences on the entire property (excluding the land).

(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 of assets or businesses. Under the guidance, companies are required to utilize an initial screening test to determine whether substantially all of the fair value of the gross assets acquired is concentrated in a single identifiable asset or a group of similar identifiable assets; if so, the set is not a business. EastGroup determined that its real estate property acquisitions in 2020 and the first nine months of 2021 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 2020 and 2021 acquisitions.
-10-

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

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.  The allocation to tangible assets (land, building and improvements) is based upon management’s determination of the value of the property as if it were vacant using discounted cash flow models. Land is valued using comparable land sales specific to the applicable market, provided by a third party. The Company determines whether any financing assumed is above or below market based upon comparison to similar financing terms for similar properties.  The cost of the properties acquired may be adjusted based on indebtedness assumed from the seller that is determined to be above or below market rates.  

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

Amortization expense for in-place lease intangibles was $1,647,000 and $4,385,000 for the three and nine months ended September 30, 2021, respectively, and $1,342,000 and $4,048,000 for the same periods in 2020. Amortization of above and below market lease intangibles increased rental income by $230,000 and $704,000 for the three and nine months ended September 30, 2021, respectively, and $332,000 and $1,078,000 for the same periods in 2020.

During the nine months ended September 30, 2021, EastGroup acquired the following properties:
REAL ESTATE PROPERTIES ACQUIRED IN 2021
LocationSizeDate
Acquired
Cost
  (Square feet) (In thousands)
Operating properties acquired (1)
Southpark Distribution Center 2Phoenix, AZ79,000 06/10/2021$9,177 
DFW Global Logistics CentreDallas, TX611,000 08/26/202189,829 
Progress Center 3Atlanta, GA50,000 09/23/20215,000 
Total operating property acquisitions740,000 104,006 
Value-add properties acquired (2)
Access Point 1Greenville, SC156,000 01/15/202110,501 
Northpoint 200Atlanta, GA79,000 01/21/20216,516 
Access Point 2Greenville, SC159,000 05/19/202110,743 
Cherokee 75 Business Center 2Atlanta, GA105,000 06/17/20218,837 
Total value-add property acquisitions499,000 36,597 
Total acquired assets1,239,000 $140,603 
(1)Operating properties are defined as stabilized real estate properties (land including buildings and improvements) in the Company’s operating portfolio; included in Real estate properties on the Consolidated Balance Sheets.
(2)Value-add properties are defined as properties that are either acquired but not stabilized or can be converted to a higher and better use.  Acquired properties meeting either of the following two conditions are considered value-add properties:  (1) Less than 75% occupied as of the acquisition date (or will be less than 75% occupied within one year of acquisition date based on near term lease roll), or (2) 20% or greater of the acquisition cost will be spent to redevelop the property.


-11-

EASTGROUP PROPERTIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
The following table summarizes the allocation of the consideration paid for the acquired assets and assumed liabilities in connection with the acquisitions identified in the table above which were acquired during the nine months ended September 30, 2021.
ACQUIRED ASSETS AND ASSUMED LIABILITIES IN 2021
Cost
 (In thousands)
Land $6,596 
Buildings and building improvements127,709 
Tenant and other improvements1,969 
Right of use assets — Ground leases (operating) 12,708 
Total real estate properties acquired148,982 
In-place lease intangibles (1)
5,763 
Above market lease intangibles (1)
5 
Below market lease intangibles (2)
(1,439)
Operating lease liabilities — Ground leases (3)
(12,708)
Total assets acquired, net of liabilities assumed$140,603 
(1)In-place lease intangibles and above market lease intangibles are each included in Other assets on the Consolidated Balance Sheets. These costs are amortized over the remaining lives of the associated leases in place at the time of acquisition.
(2)Below market lease intangibles are included in Other liabilities on the Consolidated Balance Sheets. These costs are amortized over the remaining lives of the associated leases in place at the time of acquisition.  
(3)Operating lease liabilities - Ground leases are included in Other liabilities on the Consolidated Balance Sheets.

The leases in the properties acquired during the nine months ended September 30, 2021 had a weighted average remaining lease term at acquisition of approximately 2.8 years.

During 2020, EastGroup acquired the following properties:
REAL ESTATE PROPERTIES ACQUIRED IN 2020
LocationSizeDate
Acquired
Cost
  (Square feet) (In thousands)
Operating properties acquired (1)
Wells Point OneAustin, TX50,000 02/28/2020$6,231 
Cherokee 75 Business Center 1Atlanta, GA85,000 12/15/20208,323 
The RockDallas, TX212,000 12/17/202034,102 
Total operating property acquisitions 347,000  48,656 
Value-add properties acquired (2)
Rancho Distribution CenterLos Angeles, CA162,000 10/15/202027,862 
Total acquired assets509,000 $76,518 
(1)Operating properties are defined as stabilized real estate properties (land including buildings and improvements) in the Company’s operating portfolio; included in Real estate properties on the Consolidated Balance Sheets.
(2)Value-add properties are defined as properties that are either acquired but not stabilized or can be converted to a higher and better use.  Acquired properties meeting either of the following two conditions are considered value-add properties:  (1) Less than 75% occupied as of the acquisition date (or will be less than 75% occupied within one year of acquisition date based on near term lease roll), or (2) 20% or greater of the acquisition cost will be spent to redevelop the property.

-12-

EASTGROUP PROPERTIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
The following table summarizes the allocation of the consideration paid for the acquired assets and assumed liabilities in connection with the acquisitions identified in the table above which were acquired during the year ended December 31, 2020.
ACQUIRED ASSETS AND ASSUMED LIABILITIES IN 2020
Cost
 (In thousands)
Land $23,565 
Buildings and building improvements42,024 
Tenant and other improvements7,971 
Total real estate properties acquired73,560 
In-place lease intangibles (1)
3,257 
Above market lease intangibles (1)
104 
Below market lease intangibles (2)
(403)
Total assets acquired, net of liabilities assumed$76,518 
(1)In-place lease intangibles and above market lease intangibles are each included in Other assets on the Consolidated Balance Sheets. These costs are amortized over the remaining lives of the associated leases in place at the time of acquisition.
(2)Below market lease intangibles are included in Other liabilities on the Consolidated Balance Sheets. These costs are amortized over the remaining lives of the associated leases in place at the time of acquisition.

The leases in the properties acquired during the year ended December 31, 2020 had a weighted average remaining lease term at acquisition of approximately 3.9 years.

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 three and nine month periods ended September 30, 2021 and 2020.

(8)REAL ESTATE SOLD AND HELD FOR SALE
The Company considers a real estate property to be held for sale when it meets the criteria established under ASC 360, Property, Plant and Equipment, including when it is probable that the property will be sold within a year.  Real estate properties held for sale are reported at the lower of the carrying amount or fair value less estimated costs to sell and are not depreciated while they are held for sale. The Company did not classify any properties as held for sale as of September 30, 2021 and December 31, 2020.

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 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 had no sales during the nine months ended September 30, 2021 or 2020.

-13-

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

(9)OTHER ASSETS
A summary of the Company’s Other assets follows:
 September 30,
2021
December 31,
2020
 (In thousands)
Leasing costs (principally commissions)$110,986 95,914 
Accumulated amortization of leasing costs                                                       (40,713)(38,371)
Leasing costs (principally commissions), net of accumulated amortization70,273 57,543 
Acquired in-place lease intangibles                                                                                  29,606 28,107 
Accumulated amortization of acquired in-place lease intangibles(13,674)(13,554)
Acquired in-place lease intangibles, net of accumulated amortization15,932 14,553 
Acquired above market lease intangibles                                                                                  1,815 1,825 
Accumulated amortization of acquired above market lease intangibles(1,399)(1,231)
Acquired above market lease intangibles, net of accumulated amortization