10-Q 1 egp-20230930.htm 10-Q egp-20230930
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
__________________________

FORM 10-Q

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

For the quarterly period ended September 30, 2023
or

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

For the transition period from _____ to _____
                    
Commission File Number: 1-07094


EG Logo_rgb.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, including area code: (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 ☐

-1-

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 ☐

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 Company☐Emerging Growth Company☐
                   
If an emerging growth company, indicate by check mark if the Registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

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 24, 2023 was 46,330,421.
-2-

EASTGROUP PROPERTIES, INC. AND SUBSIDIARIES

FORM 10-Q

TABLE OF CONTENTS
FOR THE QUARTER ENDED SEPTEMBER 30, 2023 
  Page
 
   
 
   
 
   
 
   
 
   
 
  
 
   
   
   
   
 
   
   
  
   
 

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PART I.      FINANCIAL INFORMATION.

ITEM 1.      FINANCIAL STATEMENTS.

EASTGROUP PROPERTIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
(UNAUDITED)
 September 30,
2023		December 31,
2022
ASSETS  
Real estate properties$4,776,355 4,395,972 
Development and value-add properties552,461 538,449 
 5,328,816 4,934,421 
Less accumulated depreciation(1,246,312)(1,150,814)
 4,082,504 3,783,607 
Unconsolidated investment7,261 7,230 
Cash and cash equivalents374 56 
Other assets264,715 244,944 
TOTAL ASSETS$4,354,854 4,035,837 
LIABILITIES AND EQUITY  
LIABILITIES  
Unsecured bank credit facilities, net of debt issuance costs$(1,760)168,454 
Unsecured debt, net of debt issuance costs1,676,131 1,691,259 
Secured debt, net of debt issuance costs— 2,031 
Accounts payable and accrued expenses218,119 136,988 
Other liabilities83,099 83,666 
Total Liabilities1,975,589 2,082,398 
EQUITY  
Stockholders’ Equity:  
Common shares; $0.0001 par value; 70,000,000 shares authorized; 46,277,057 shares issued and outstanding at September 30, 2023 and 43,575,539 at December 31, 2022
4 4 
Excess shares; $0.0001 par value; 30,000,000 shares authorized; zero shares issued
— — 
Additional paid-in capital2,706,064 2,251,521 
Distributions in excess of earnings(369,192)(334,898)
Accumulated other comprehensive income42,088 36,371 
Total Stockholders’ Equity2,378,964 1,952,998 
Noncontrolling interest in joint ventures301 441 
Total Equity2,379,265 1,953,439 
TOTAL LIABILITIES AND EQUITY$4,354,854 4,035,837 
 
See accompanying Notes to Consolidated Financial Statements (unaudited).


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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,
 2023202220232022
REVENUES  
Income from real estate operations$144,378 125,570 417,153 357,020 
Other revenue2,152 88 4,289 165 
 146,530 125,658 421,442 357,185 
EXPENSES  
Expenses from real estate operations40,709 35,033 114,662 98,643 
Depreciation and amortization42,521 39,277 125,830 113,079 
General and administrative3,429 3,967 13,017 12,503 
Indirect leasing costs147 119 436 410 
 86,806 78,396 253,945 224,635 
OTHER INCOME (EXPENSE)  
Interest expense(11,288)(9,771)(36,888)(26,851)
Gain on sales of real estate investments— — 4,809 40,999 
Other474 326 1,661 888 
NET INCOME48,910 37,817 137,079 147,586 
Net income attributable to noncontrolling interest in joint ventures(14)(25)(43)(75)
NET INCOME ATTRIBUTABLE TO EASTGROUP PROPERTIES, INC. COMMON STOCKHOLDERS48,896 37,792 137,036 147,511 
Other comprehensive income - interest rate swaps5,777 17,157 5,717 39,826 
TOTAL COMPREHENSIVE INCOME$54,673 54,949 142,753 187,337 
BASIC PER COMMON SHARE DATA FOR NET INCOME ATTRIBUTABLE TO EASTGROUP PROPERTIES, INC. COMMON STOCKHOLDERS  
Net income attributable to common stockholders$1.07 0.87 3.07 3.49 
Weighted average shares outstanding - Basic45,658 43,467 44,688 42,308 
DILUTED PER COMMON SHARE DATA FOR NET INCOME ATTRIBUTABLE TO EASTGROUP PROPERTIES, INC. COMMON STOCKHOLDERS  
Net income attributable to common stockholders$1.07 0.87 3.06 3.48 
Weighted average shares outstanding - Diluted45,788 43,581 44,782 42,419 

See accompanying Notes to Consolidated Financial Statements (unaudited).
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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, 2023:
Common SharesAdditional
Paid-In Capital		Distributions in Excess of EarningsAccumulated Other Comprehensive IncomeNoncontrolling Interest in Joint VenturesTotal
BALANCE, DECEMBER 31, 2022$4 2,251,521 (334,898)36,371 441 1,953,439 
Net income— — 44,690 — 14 44,704 
Net unrealized change in fair value of interest rate swaps— — — (10,262)— (10,262)
Common dividends declared – $1.25 per
   share
— — (55,414)— — (55,414)
Stock-based compensation, net of
   forfeitures
— 3,477 — — — 3,477 
Issuance of 652,909 shares of common
   stock, common stock offering, net of
   expenses
— 105,321 — — — 105,321 
Withheld 31,254 shares of common stock to
   satisfy tax withholding obligations in
   connection with the vesting of restricted
   stock
— (4,836)— — — (4,836)
Withheld 46 shares of common stock to satisfy tax withholding obligations in connection with the issuance of common stock
— (7)— — — (7)
Net distributions to noncontrolling interest— — — — (40)(40)
BALANCE, MARCH 31, 20234 2,355,476 (345,622)26,109 415 2,036,382 
Net income— — 43,450 — 15 43,465 
Net unrealized change in fair value of interest rate swaps— — — 10,202 — 10,202 
Common dividends declared – $1.25 per
   share
— — (56,762)— — (56,762)
Stock-based compensation, net of
   forfeitures
— 2,771 — — — 2,771 
Issuance of 1,065,678 shares of common
   stock, common stock offering, net of expenses
— 177,749 — — — 177,749 
Net distributions to noncontrolling interest— — — — (86)(86)
BALANCE, JUNE 30, 20234 2,535,996 (358,934)36,311 344 2,213,721 
Net income— — 48,896 — 14 48,910 
Net unrealized change in fair value of interest rate swaps— — — 5,777 — 5,777 
Common dividends declared – $1.27 per
   share
— — (59,154)— — (59,154)
Stock-based compensation, net of
   forfeitures
— 2,766 — — — 2,766 
Issuance of 953,070 shares of common
   stock, common stock offering, net of
   expenses
— 167,315 — — — 167,315 
Withheld 74 shares of common stock to satisfy tax withholding obligations in connection with the issuance of common stock
— (13)— — — (13)
Net distributions to noncontrolling interest— — — — (57)(57)
BALANCE, SEPTEMBER 30, 2023$4 2,706,064 (369,192)42,088 301 2,379,265 

See accompanying Notes to Consolidated Financial Statements (unaudited).

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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, 2022:
Common SharesAdditional
Paid-In Capital		Distributions in Excess of EarningsAccumulated Other Comprehensive IncomeNoncontrolling Interest in Joint VenturesTotal
BALANCE, DECEMBER 31, 2021$4 1,886,820 (318,056)1,302 1,390 1,571,460 
Net income— — 63,580 — 24 63,604 
Net unrealized change in fair value of interest rate swaps— — — 15,828 — 15,828 
Common dividends declared – $1.10 per
   share
— — (45,953)— — (45,953)
Stock-based compensation, net of
   forfeitures
— 2,594 — — — 2,594 
Issuance of 385,538 shares of common
   stock, common stock offering, net of
   expenses
— 74,179 — — — 74,179 
Withheld 34,251 shares of common stock to
   satisfy tax withholding obligations in
   connection with the vesting of restricted
   stock
— (7,265)— — — (7,265)
Net distributions to noncontrolling interest— — — — (58)(58)
BALANCE, MARCH 31, 20224 1,956,328 (300,429)17,130 1,356 1,674,389 
Net income— — 46,139 — 26 46,165 
Net unrealized change in fair value of interest rate swaps— — — 6,841 — 6,841 
Common dividends declared – $1.10 per
   share
— — (48,034)— — (48,034)
Stock-based compensation, net of
   forfeitures
— 3,062 — — — 3,062 
Issuance of 1,868,809 shares of common
   stock, net of expenses, in the purchase of real estate
— 303,682 — — — 303,682 
Net distributions to noncontrolling interest— — — — (31)(31)
BALANCE, JUNE 30, 20224 2,263,072 (302,324)23,971 1,351 1,986,074 
Net income— — 37,792 — 25 37,817 
Net unrealized change in fair value of interest rate swaps— — — 17,157 — 17,157 
Common dividends declared –$1.25 per
   share
— — (54,531)— — (54,531)
Stock-based compensation, net of
   forfeitures
— 2,855 — — — 2,855 
Issuance of 6,368 shares of common
   stock, common stock offering, net of
   expenses
— 1,010 — — — 1,010 
Withheld 733 shares of common stock to satisfy tax withholding obligations in connection with the issuance of common stock
— (106)— — — (106)
Net distributions to noncontrolling interest— — — — (90)(90)
BALANCE, SEPTEMBER 30, 2022$4 2,266,831 (319,063)41,128 1,286 1,990,186 

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,
 20232022
OPERATING ACTIVITIES  
Net income                                                                                                       $137,079 147,586 
Adjustments to reconcile net income to net cash provided by operating activities:  
Depreciation and amortization125,830 113,079 
Stock-based compensation expense6,835 6,530 
Gain on sales of real estate investments(4,809)(40,999)
Gain on sales of non-operating real estate(446)— 
Gain on involuntary conversion and business interruption claims(4,187)— 
Changes in operating assets and liabilities:  
Accrued income and other assets(11,986)(2,743)
Accounts payable, accrued expenses and prepaid rent50,434 52,496 
Other                                                                                                       1,349 602 
NET CASH PROVIDED BY OPERATING ACTIVITIES300,099 276,551 
INVESTING ACTIVITIES  
Development and value-add properties(286,256)(395,313)
Purchases of real estate(87,338)(2,049)
Real estate improvements(42,097)(31,043)
Net proceeds from sales of real estate investments and non-operating real estate13,821 51,006 
Leasing commissions(22,712)(26,968)
Proceeds from involuntary conversion on real estate assets1,339 — 
Changes in accrued development costs26,724 22,141 
Changes in other assets and other liabilities7,060 (3,328)
NET CASH USED IN INVESTING ACTIVITIES(389,459)(385,554)
FINANCING ACTIVITIES  
Proceeds from unsecured bank credit facilities 334,230 695,726 
Repayments on unsecured bank credit facilities(504,230)(749,053)
Proceeds from unsecured debt100,000 375,000 
Repayments on unsecured debt(115,000)(75,000)
Repayments on secured debt(1,970)(60,070)
Debt issuance costs(1,796)(1,617)
Distributions paid to stockholders (not including dividends accrued)(166,960)(139,597)
Proceeds from common stock offerings450,869 75,379 
Common stock offering related costs(484)(190)
Other(4,981)(11,120)
NET CASH PROVIDED BY FINANCING ACTIVITIES89,678 109,458 
INCREASE IN CASH AND CASH EQUIVALENTS318 455 
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD56 4,393 
CASH AND CASH EQUIVALENTS AT END OF PERIOD$374 4,848 
SUPPLEMENTAL CASH FLOW INFORMATION  
Cash paid for interest, net of amounts capitalized of $11,864 and $8,515 for 2023 and 2022,
   respectively
$30,888 21,550 
Cash paid for operating lease liabilities1,620 1,445 
Common stock issued in the purchase of real estate— 303,682 
Debt assumed in the purchase of real estate— 60,000 
NON-CASH OPERATING ACTIVITY
  Operating lease liabilities arising from obtaining right of use assets$— 398 

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, 2022 and the notes thereto. Certain reclassifications have been made in the 2022 consolidated financial statements to conform to the 2023 presentation.

(2)PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of EastGroup, its wholly owned subsidiaries and the investee of any joint ventures in which the Company has a controlling interest.

As of December 31, 2022 and September 30, 2023, EastGroup had a 95% controlling interest in a joint venture arrangement which owns 6.5 acres of land in San Diego, known by the Company as the Miramar land. During the three months ended September 30, 2023, EastGroup acquired 29.3 acres of land in Denver, known by the Company as Arista 36 Business Park Land. A joint venture was formed through which EastGroup owns a 99.5% controlling interest in the property. As of September 30, 2023, EastGroup continued to hold a controlling interest in two joint venture arrangements.

During the year ended December 31, 2022, EastGroup acquired the 1% noncontrolling interest in Speed Distribution Center, a 519,000 square foot building in San Diego, in which the Company held a 99% controlling interest. The Company continues to control and own 100% of the property.

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, 2023 and 2022:
Three Months Ended
September 30,		Nine Months Ended September 30,
2023202220232022
(In thousands)
Lease income — operating leases$106,683 93,548 311,529 267,423 
Variable lease income (1)
37,695 32,022 105,624 89,597 
Income from real estate operations$144,378 125,570 417,153 357,020 

(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, consistent with the Company’s manner of internal reporting, measurement of operating results and allocation of the Company’s resources.

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
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EASTGROUP PROPERTIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
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 nine month periods ended September 30, 2023 and 2022, the Company did not identify any impairment charges which should be recorded.

Depreciation of buildings and other improvements is computed using the straight-line method over estimated useful lives of generally 40 years for buildings and 3 to 15 years for improvements.  Building improvements are capitalized, while maintenance and repair expenses are charged to expense as incurred.  Significant renovations and improvements that improve or extend the useful life of the assets are capitalized.  Depreciation expense was $35,031,000 and $103,567,000 for the three and nine months ended September 30, 2023, respectively, and $32,052,000 and $92,159,000 for the same periods in 2022.

The Company’s Real estate properties and Development and value-add properties at September 30, 2023 and December 31, 2022 were as follows:
 September 30,
2023		December 31,
2022
 (In thousands)
Real estate properties:  
   Land$808,077 730,445 
   Buildings and building improvements3,271,579 3,012,319 
   Tenant and other improvements678,359 633,817 
   Right of use assets — Ground leases (operating) (1)
18,340 19,391 
Development and value-add properties (2)
552,461 538,449 
 5,328,816 4,934,421 
   Less accumulated depreciation(1,246,312)(1,150,814)
 $4,082,504 3,783,607 

(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 the acquisition date based on near term lease termination), 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. Criteria considered in grouping similar assets include geographic location, market and operational risks and the physical characteristics of the assets. EastGroup determined that its real estate property
-10-
EASTGROUP PROPERTIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
acquisitions in 2022 and the first nine months of 2023 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 2022 and 2023 acquisitions.

The FASB Codification also provides guidance on how to properly determine the allocation of the purchase price among the individual components of both the tangible and intangible assets based on their 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 and the value of leases in-place at the time of acquisition.  The value allocable to the above or below market component of an acquired in-place lease is determined based upon the present value (using a discount rate reflecting the risks associated with the acquired leases) of the difference between (i) the contractual amounts to be paid pursuant to the lease 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. In-place lease intangibles are valued based upon management’s assessment of factors such as an estimate of foregone rents and avoided leasing costs during the expected lease-up periods considering current market conditions and costs to execute similar leases.  These intangible assets are included in Other assets on the Consolidated Balance Sheets and are amortized over the remaining term of the existing lease.

Amortization expense for in-place lease intangibles was $1,895,000 and $6,031,000 for the three and nine months ended September 30, 2023, respectively, and $2,541,000 and $7,204,000 for the same periods in 2022. Amortization of above and below market lease intangibles increased rental income by $560,000 and $1,855,000 for the three and nine months ended September 30, 2023, respectively, and $605,000 and $1,957,000 for the same periods in 2022.

During nine months ended September 30, 2023, EastGroup acquired the following properties:
REAL ESTATE PROPERTIES ACQUIRED IN 2023
LocationSizeDate
Acquired
Cost (1)
  (Square feet) (In thousands)
Operating properties acquired (2)
Craig Corporate Center
Las Vegas, NV156,000 04/18/2023$34,365 
Blue Diamond Business ParkLas Vegas, NV254,000 09/05/202352,973 
Total operating property acquisitions410,000 $87,338 
(1)Cost is calculated in accordance with FASB ASC 805, Business Combinations, and represents the sum of the purchase price, closing costs and capitalized acquisition costs.
(2)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.

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

The following table summarizes the allocation of the total consideration 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, 2023.
ACQUIRED ASSETS AND ASSUMED LIABILITIES IN 2023
Cost
 (In thousands)
Land $34,006 
Buildings and building improvements48,792 
Tenant and other improvements1,175 
Total real estate properties acquired83,973 
In-place lease intangibles (1)
4,294 
Below market lease intangibles (2)
(929)
Total assets acquired, net of liabilities assumed$87,338 
(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 nine months ended September 30, 2023 had a weighted average remaining lease term at acquisition of approximately 9.0 years.

Also during the nine months ended September 30, 2023, EastGroup purchased 210.1 acres of development land in five markets for $44,468,000.

-12-
EASTGROUP PROPERTIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

During 2022, EastGroup acquired the following properties:
REAL ESTATE PROPERTIES ACQUIRED IN 2022
LocationSizeDate
Acquired
Cost (1)
  (Square feet) (In thousands)
Operating properties acquired (2)
Cebrian Distribution Center and Reed Distribution
Center (3)
Sacramento, CA329,000 06/01/2022$49,726 
6th Street Business Center, Benicia Distribution
Center 1-5, Ettie Business Center, Laura
Alice Business Center, Preston
Distribution Center, Sinclair Distribution
Center, Transit Distribution Center and
Whipple Business Center (3)
San Francisco, CA1,377,000 06/01/2022309,404 
Total operating property acquisitions1,706,000 359,130 
Value-add properties acquired (4)
Cypress Preserve 1 & 2Houston, TX516,000 03/28/202254,462 
Zephyr Distribution CenterSan Francisco, CA82,000 04/08/202229,017 
Mesa Gateway Commerce CenterPhoenix, AZ147,000 04/15/202218,315 
Access Point 3Greenville, SC299,000 07/12/202221,127 
Total value-add property acquisitions1,044,000 122,921 
Total acquired assets2,750,000 $482,051 
(1)Cost is calculated in accordance with FASB ASC 805, Business Combinations, and represents the sum of the purchase price, closing costs and capitalized acquisition costs.
(2)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.
(3)The Company acquired these operating properties along with two land parcels, also in Sacramento, CA and San Francisco, CA, in connection with its acquisition of Tulloch Corporation in June 2022. Size and cost are presented on an aggregate basis for the properties located in Sacramento, CA and San Francisco, CA, respectively. In consideration for this acquisition, the Company assumed a $60,000,000 loan and issued 1,868,809 shares of the Company’s common stock. The acquisition date fair value of the loan assumed was $60,000,000, and the acquisition date fair value of the common shares, which was based on the closing share price on the acquisition date, was $303,756,000.
(4)Value-add properties are defined in Note 5.

The following table summarizes the allocation of the total consideration 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, 2022.
ACQUIRED ASSETS AND ASSUMED LIABILITIES IN 2022
Cost
 (In thousands)
Land $127,402 
Buildings and building improvements335,335 
Tenant and other improvements11,502 
Total real estate properties acquired474,239 
In-place lease intangibles (1)
11,871 
Below market lease intangibles (2)
(4,059)
Total assets acquired, net of liabilities assumed$482,051 
(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.  

-13-
EASTGROUP PROPERTIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
The leases in the properties acquired during the year ended December 31, 2022 had a weighted average remaining lease term at acquisition of approximately 3.9 years.

Also during 2022, EastGroup purchased 456.3 acres of development land in 10 markets for $123,717,000. The land acquisitions in San Francisco and Sacramento were acquired in connection with the Company’s acquisition of Tulloch Corporation in June 2022.

Also during the year ended December 31, 2022, the Company acquired the 1% noncontrolling partnership interest in Speed Distribution Center in San Diego for $18,599,000. EastGroup continues to control and own 100% of the property.

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, 2023 and 2022.

(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, 2023 and December 31, 2022.

In accordance with ASC 360 and ASC 205, Presentation of Financial Statements, the Company would report a disposal of a component of an entity or a group of components of an entity in discontinued operations if the disposal represents a strategic shift that has (or will have) a major effect on an entity’s operations and financial results when the component or group of components meets the criteria to be classified as held for sale or when the component or group of components is disposed of by 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 sold one operating property during the nine months ended September 30, 2023 and three operating properties during the year ended December 31, 2022, as shown in the table below. The results of operations and gains and losses on sales for the properties sold are reported in continuing operations on the Consolidated Statements of Income and Comprehensive Income. The gains and losses on sales are included in Gain on sales of real estate investments. The Company did not consider its sales in 2022 or 2023 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.

A summary of Gain on sales of real estate investments for the nine months ended September 30, 2023 and the year ended December 31, 2022 follows:
REAL ESTATE PROPERTIES SOLDLocationSizeDate SoldNet Sales PriceBasisRecognized Gain
  (In square feet) (In thousands)
2023
World Houston 23Houston, TX125,00003/31/2023$9,327 4,518 4,809 
2022
Metro Business ParkPhoenix, AZ189,00001/06/2022$32,851 5,880 26,971 
Cypress Creek Business Park (1)
Fort Lauderdale, FL56,00003/31/20225,282 1,901 3,381 
World Houston 15 EastHouston, TX42,00005/11/202212,873 2,226 10,647 
Total for 2022287,000 $51,006 10,007 40,999 
(1)    Cypress Creek Business Park is located on a ground lease. In conjunction with the sale of the property, the Company fully amortized the associated right-of-use asset and liability of $1,745,000.

The table above includes sales of operating properties. During the nine months ended September 30, 2023, the Company also sold 11.9 acres of land in Houston and Fort Worth, for $4,750,000 and recognized gains on the sales of $446,000. The Company did not sell any land during the year ended December 31, 2022. The gains on sales of non-operating real estate are included in Other on the Consolidated Statements of Income and Comprehensive Income.
-14-
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,
2023		December 31,
2022
 (In thousands)
Leasing costs (principally commissions)$154,485 140,273 
Accumulated amortization of leasing costs                                                       (54,841)(48,249)
Leasing costs (principally commissions), net of accumulated amortization99,644 92,024 
Acquired in-place lease intangibles                                                                                  38,136 37,181 
Accumulated amortization of acquired in-place lease intangibles(18,967)(16,276)
Acquired in-place lease intangibles, net of accumulated amortization19,169 20,905 
Acquired above market lease intangibles                                                                                  481 496 
Accumulated amortization of acquired above market lease intangibles(298)(251)
Acquired above market lease intangibles, net of accumulated amortization183 245 
Straight-line rents receivable69,480 61,452 
Accounts receivable7,141 9,568 
Interest rate swap assets42,088 38,352 
Right of use assets — Office leases (operating)1,682 2,050 
Escrow deposits and prepaid costs for pending transactions                                        1,981 2,522 
Goodwill990 990 
Prepaid insurance11,331 2,681 
Receivable for insurance proceeds4,433 2,828 
Prepaid expenses and other assets                                                                                  6,593 11,327 
Total Other assets
$264,715 244,944 


(10) DEBT

The Company’s debt is detailed below:
 September 30,
2023		December 31,
2022
 (In thousands)
Unsecured bank credit facilities - variable rate, carrying amount$— 170,000 
Unamortized debt issuance costs(1,760)(1,546)
Unsecured bank credit facilities, net of debt issuance costs(1,760)168,454 
Unsecured debt - fixed rate, carrying amount (1)
1,680,000 1,695,000 
Unamortized debt issuance costs(3,869)(3,741)
Unsecured debt, net of debt issuance costs1,676,131 1,691,259 
Secured debt - fixed rate, carrying amount (1)
— 2,041 
Unamortized debt issuance costs— (10)
Secured debt, net of debt issuance costs— 2,031 
Total debt, net of debt issuance costs$1,674,371 1,861,744 

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

-15-
EASTGROUP PROPERTIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Until January 10, 2023, EastGroup had $425,000,000 and $50,000,000 unsecured bank credit facilities with margins over London Interbank Offered Rate (“LIBOR”) of 77.5 basis points, facility fees of 15 basis points and maturity dates of July 30, 2025. The Company amended and restated these credit facilities effective January 10, 2023, expanding the total capacity on its unsecured bank credit facilities from $475,000,000 to $675,000,000 and replacing LIBOR with SOFR as the benchmark interest rate.

The Company’s $625,000,000 unsecured bank credit facility, which was increased in January 2023 by $200,000,000 from $425,000,000, is with a group of 11 banks and has a maturity date of July 30, 2025. The credit facility contains options for two six-month extensions (at the Company's election) and an additional $125,000,000 accordion (with agreement by all parties). The interest rate on each tranche is reset on a monthly basis and as of September 30, 2023, was SOFR plus 76.5 basis points with an annual facility fee of 15 basis points. As of September 30, 2023, the Company had no variable rate borrowings on this unsecured bank credit facility and an interest rate of 6.094%. The Company has two standby letters of credit totaling $2,655,000 pledged on this facility, which reduces borrowing capacity under the credit facility.

The Company's $50,000,000 unsecured bank credit facility has a maturity date of July 30, 2025, or such later date as designated by the bank; the Company also has two six-month extensions available if the extension options in the $625,000,000 facility are exercised. The interest rate is reset on a daily basis and as of September 30, 2023, was SOFR plus 77.5 basis points with an annual facility fee of 15 basis points. As of September 30, 2023, the interest rate was 6.185% with no outstanding balance.

For both facilities, the margin and facility fee are subject to changes in the Company's credit ratings. Although the Company’s current credit rating is Baa2, given the strength of the Company’s key credit metrics, initial pricing for the credit facilities is based on the BBB+/Baa1 credit ratings level. This favorable pricing level will be retained provided that the Company’s consolidated leverage ratio, as defined in the applicable agreements, remains less than 32.5%. The $625,000,000 facility also includes a sustainability-linked pricing component pursuant to which the applicable interest margin is reduced by one basis point if the Company meets a certain sustainability performance target. This sustainability metric is evaluated annually and was achieved for the year ended December 31, 2022, which effectively reduced the margin on this unsecured bank credit facility during 2023 by one basis point from 77.5 to 76.5 basis points.

In January 2023, the Company closed a $100,000,000 senior unsecured term loan with a term of seven years and interest only payments, which bears interest at the annual rate of SOFR plus an applicable margin (1.35% as of September 30, 2023) based on the Company’s senior unsecured long-term debt rating. The Company also entered into an interest rate swap agreement to convert the loan’s SOFR rate component to a fixed interest rate for the entire term of the loan providing a total effectively fixed interest rate of 5.27%.

On March 31, 2023, EastGroup repaid a $65,000,000 senior unsecured term loan with a total effectively fixed interest rate of 2.31%. The loan, which was scheduled to mature on April 1, 2023, was repaid with no penalty.

In August 2023, the Company made a scheduled $50,000,000 principal repayment on its senior unsecured notes with a fixed interest rate of 3.80%.

In September 2023, EastGroup repaid a mortgage loan with a balance of $1,905,000, an interest rate of 3.85% and an original maturity date of November 30, 2026.

Also in September 2023, the Company closed on the refinance of a $100,000,000 senior unsecured term loan with five years remaining. The amended term loan provides for interest only payments currently at an interest rate of SOFR plus 95 basis points, based on the Company’s current credit ratings and consolidated leverage ratio, which is a 45 basis point reduction in the credit spread compared to the original term loan. The Company has an interest rate swap agreement which converts the loan’s SOFR rate component to a fixed interest rate for the entire term of the loan, providing a total effectively fixed interest rate of 2.61%.

-16-
EASTGROUP PROPERTIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Scheduled principal payments on long-term debt, including Unsecured debt, net of debt issuance costs (not including Unsecured bank credit facilities, net of debt issuance costs), as of September 30, 2023, are as follows: 
Years Ending December 31,(In thousands)
2023 - Remainder of year$— 
2024170,000 
2025145,000 
2026140,000 
2027175,000 
2028 and beyond1,050,000 
       Total$1,680,000 

(11) ACCOUNTS PAYABLE AND ACCRUED EXPENSES
A summary of the Company’s Accounts payable and accrued expenses follows:
 September 30,
2023		December 31,
2022
 (In thousands)
Property taxes payable                                                                                  $63,956 6,823 
Development costs payable                                                                                  44,156 21,305 
Retainage payable14,884 11,011 
Real estate improvements and capitalized leasing costs payable6,504 5,182 
Interest payable                                                                                  14,205 9,597 
Dividends payable                                                        60,322 55,952 
Book overdraft (1)
3,419 13,370 
Other payables and accrued expenses                                                                                  10,673 13,748 
 Total Accounts payable and accrued expenses
$218,119 136,988 

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

(12) OTHER LIABILITIES
A summary of the Company’s Other liabilities follows:
 September 30,
2023		December 31,
2022
 (In thousands)
Security deposits                                                                                  $36,404 34,272 
Prepaid rent and other deferred income                                                     19,202 17,004 
Operating lease liabilities — Ground leases 19,044 19,906 
Operating lease liabilities — Office leases1,766 2,139 
Acquired below market lease intangibles10,800 10,735 
     Accumulated amortization of below market lease intangibles(5,009)(3,957)
Acquired below market lease intangibles, net of accumulated amortization5,791 6,778 
Interest rate swap liabilities— 1,981 
Other liabilities                                                                                  892 1,586 
 Total Other liabilities
$83,099 83,666 

-17-
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
September 30,		Nine Months Ended September 30,
2023202220232022
(In thousands)
ACCUMULATED OTHER COMPREHENSIVE INCOME:
Balance at beginning of period$36,311 23,971 36,371 1,302 
    Other comprehensive income - interest rate swaps5,777 17,157 5,717 39,826 
Balance at end of period$42,088 41,128 42,088 41,128 

(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 September 30, 2023, the Company had seven 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’ SOFR 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 are recorded in Other comprehensive income (loss) and are subsequently reclassified into earnings through Interest expense as interest payments are made or received on the Company’s variable-rate debt in the period that the hedged forecasted transaction affects earnings. The Company estimates that an additional $18,229,000 will be reclassified from Other comprehensive income (loss) as a decrease to Interest expense over the next twelve months.

The Company’s valuation methodology for over-the-counter (“OTC”) derivatives is to discount cash flows based on SOFR market data. Uncollateralized or partially-collateralized trades include appropriate economic adjustments for funding costs and credit risk. The Company calculates its derivative valuations using mid-market prices.

On June 30, 2023, LIBOR’s administrator, ICE Benchmark Administration (IBA) ceased publication of the different tenors of USD LIBOR. This cessation follows an announcement by the IBA’s regulator, the Financial Conduct Authority, in March 2021 that LIBOR would no longer be a representative rate beyond this date. In the U.S., the Alternative Reference Rates Committee, which was convened by the Federal Reserve Board and the Federal Reserve Bank of New York, recommended SOFR plus a recommended spread adjustment as its preferred alternative to USD-LIBOR. As a result, all of the Company’s remaining borrowings which were LIBOR-based have been amended to modify the index from LIBOR to SOFR. Concurrently, the related swaps were amended to reference SOFR rather than LIBOR. The transition did not have a material impact on the Company’s consolidated financial statements.

-18-
EASTGROUP PROPERTIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting. ASU 2020-04 contains practical expedients for reference rate reform related activities that impact debt, leases, derivatives and other contracts. The guidance in ASU 2020-04 is optional and may be elected over time as reference rate reform activities occur. The Company elected to apply the hedge accounting expedients related to probability and the assessments of effectiveness for future LIBOR-indexed cash flows to assume that the index upon which future hedged transactions will be based matches the index on the corresponding derivatives. Application of these expedients preserved the presentation of derivatives consistent with past presentation. In December 2022, the FASB issued ASU 2022-06, Deferral of the Sunset Date of Topic 848, which was issued to defer the sunset date of Topic 848 to December 31, 2024. ASU 2022-06 is effective immediately for all companies. ASU 2022-06 had no impact on the Company’s consolidated financial statements for the three and nine months ended September 30, 2023.

As of September 30, 2023 and December 31, 2022, 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 September 30, 2023
Notional Amount as of December 31, 2022
(In thousands)
Interest Rate Swap—$65,000
Interest Rate Swap$100,000$100,000
Interest Rate Swap$100,000$100,000
Interest Rate Swap$50,000$50,000
Interest Rate Swap$100,000$100,000
Interest Rate Swap$75,000$75,000
Interest Rate Swap$50,000$50,000
Interest Rate Swap$100,000$100,000

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 September 30, 2023 and December 31, 2022. See Note 17 for additional information on the fair value of the Company’s interest rate swaps.
Derivatives
As of September 30, 2023
Derivatives
As of December 31, 2022
Balance Sheet LocationFair ValueBalance Sheet LocationFair Value
(In thousands)
Derivatives designated as cash flow hedges:
    Interest rate swap assetsOther assets$42,088 Other assets$38,352 
    Interest rate swap liabilitiesOther liabilities— Other liabilities1,981 

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 and nine months ended September 30, 2023 and 2022:
Three Months Ended
September 30,		Nine Months Ended September 30,
 2023202220232022
 (In thousands)
DERIVATIVES IN CASH FLOW HEDGING RELATIONSHIPS  
Interest Rate Swaps:
Amount of income recognized in Other comprehensive income on derivatives
$10,463 18,162 18,719 39,517 
Amount of (income) loss reclassified from Accumulated other comprehensive income into Interest expense
(4,686)(1,005)(13,002)309 

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

-19-
EASTGROUP PROPERTIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
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 September 30, 2023, we had not posted any collateral related to these agreements and were not in breach of any of the provisions of these agreements. If the Company had breached any of these provisions, it would be required to settle its obligations under the agreements at their termination value.

(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
September 30,		Nine Months Ended September 30,
 2023202220232022
 (In thousands)
BASIC EPS COMPUTATION FOR NET INCOME ATTRIBUTABLE TO EASTGROUP PROPERTIES, INC. COMMON STOCKHOLDERS  
  Numerator – net income attributable to common stockholders$48,896 37,792 137,036 147,511 
  Denominator – weighted average shares outstanding - Basic45,658 43,467 44,688 42,308 
DILUTED EPS COMPUTATION FOR NET INCOME ATTRIBUTABLE TO EASTGROUP PROPERTIES, INC. COMMON STOCKHOLDERS
  Numerator – net income attributable to common stockholders$48,896 37,792 137,036 147,511 
Denominator:
    Weighted average shares outstanding - Basic45,658 43,467 44,688 42,308 
    Unvested restricted stock130 114 94 111 
Weighted average shares outstanding - Diluted45,788 43,581 44,782 42,419 

(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. The cost for market-based awards and awards that only require service are expensed on a straight-line basis over the requisite service periods. The cost for performance-based awards is determined using the graded vesting attribution method which recognizes each separate vesting portion of the award as a separate award on a straight-line basis over the requisite service period. This method accelerates the expensing of the award compared to the straight-line method. For awards with a performance condition, compensation expense is recognized when the performance condition is considered probable of achievement.

-20-
EASTGROUP PROPERTIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
The total compensation expense for service and performance based awards is based upon the fair market value of the shares on the grant date. The grant date fair value for awards that have been granted and are subject to a future market condition (total shareholder return) are determined using a Monte Carlo simulation pricing model developed to specifically accommodate the unique features of the awards.

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

The Compensation Committee of the Company’s Board of Directors (the “Committee”) approves long-term and annual equity compensation awards for the Company’s executive officers. The vesting periods of the Company’s restricted stock plans vary, as determined by the Committee. Restricted stock is granted to executive officers subject to both continued service and the satisfaction of certain annual performance goals and multi-year market conditions as determined by the Committee.

The long-term compensation awards include components based on the Company’s total shareholder return over the upcoming three years and the employee’s continued service as of the vesting dates. The total shareholder return component is 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 Company begins recognizing expense for these awards based on the grant date fair value of the awards which is determined using a simulation pricing model developed to specifically accommodate the unique features of the award. These market-based awards are expensed on a straight-line basis over the requisite service period (75% vests at the end of the three-year performance period and 25% vests the following year). The long-term awards subject only to continuing employment are expensed on a straight-line basis over the requisite service period (25% vests in each of the following four years).

The annual equity compensation awards include components based on certain annual Company performance measures and individual annual performance goals over the upcoming year. The certain Company performance measures for 2023 are: (i) funds from operations (“FFO”) per share, (ii) cash same property net operating income change, (iii) debt-to-EBITDAre ratio, and (iv) fixed charge coverage. The Company begins recognizing expense for its estimate of the shares that could be earned pursuant to these awards on the grant date; the expense is adjusted to estimated performance levels during the performance period and to actual upon the determination of the awards. The shares are 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 (34% vests at the end of the one year performance period and 33% vests in each of the following two years). Any shares issued pursuant to the individual annual performance goals are determined by the Committee in its discretion following the performance period. The Company begins recognizing the expense for the shares on the grant date and will expense on a straight-line basis over the remaining service period (34% vests at the end of the one year performance period and 33% vests in each of the following two years).

Equity compensation is also awarded to the Company’s non-executive officers and directors, which are subject to service only conditions and expensed on a straight-line basis over the required service period. The total compensation expense is based upon the fair market value of the shares on the grant date.

The Committee has adopted an Equity Award Retirement Policy (the “retirement policy”) which allows for accelerated vesting of unvested shares for retirement-eligible employees (defined as employees who meet certain age and years of service requirements). In order to qualify for accelerated vesting upon retirement, the eligible employees must provide required notification under the retirement policy and must retire from the Company. The Company has adjusted its stock-based compensation expense to accelerate the recognition of expense for retirement-eligible employees.

Stock-based compensation cost for employees was $2,593,000 and $8,424,000 for the three and nine months ended September 30, 2023, respectively, of which $886,000 and $2,180,000 were capitalized as part of the Company’s development costs. For the three and nine months ended September 30, 2022, stock-based compensation cost for employees was $2,625,000 and $8,175,000, respectively, of which $645,000 and $1,981,000 were capitalized as part of the Company’s development costs.

Stock-based compensation expense for directors was $174,000 and $591,000 for the three and nine months ended September 30, 2023, respectively, and $230,000 and $336,000 for the same periods in 2022.

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 nine months ended September 30, 2023, the Company withheld 31,254 shares to satisfy the tax obligations for those participants who elected this option as permitted under the applicable equity plan.  As of the grant dates, the fair value of shares that were granted during the nine months ended
-21-
EASTGROUP PROPERTIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
September 30, 2023 was $9,222,000. As of the vesting dates, the aggregate fair value of shares that vested during the nine months ended September 30, 2023 was $12,208,000.
Award Activity:Three Months Ended
September 30, 2023		Nine Months Ended September 30, 2023
 
 
 
Shares
Weighted Average Grant Date Fair Value 
 
Shares		Weighted Average Grant Date Fair Value
Unvested at beginning of period84,616 $153.76 102,508 $133.29 
Granted (1) (2)
— — 61,875 149.05 
Forfeited