U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
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FORM 10-Q/A
AMENDMENT TO FORM 10-Q
Filed Pursuant to
THE SECURITIES EXCHANGE ACT OF 1934
EASTGROUP PROPERTIES
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(Exact name of registrant as specified in its charter)
AMENDMENT NO. 2
The undersigned registrant hereby amends the following
items, financial statements, exhibits or other portions of its
Form 10-Q for the quarter ended March 31, 1995 as set forth in
the pages attached hereto:
Item 1. Financial Statements
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations
Pursuant to the requirements of the Securities Exchange Act
of 1934, the registrant has duly caused this amendment to be
signed on its behalf by the undersigned, thereunto duly
authorized.
Date: February 21, 1996 EASTGROUP PROPERTIES
By: \s\ N. Keith McKey
-------------------------
N. Keith McKey
Executive Vice President,
Chief Financial Officer
and Secretary
<PAGE>
EASTGROUP PROPERTIES
FORM 10-Q/A
TABLE OF CONTENTS
FOR THE QUARTER ENDED MARCH 31, 1995
- -----------------------------------------------------------------
Pages
Part I. Financial Information
Item 1. Consolidated financial statements
Consolidated balance sheets, March 31, 1995 3
and December 31, 1994
Consolidated statements of income for the
three months ended March 31, 1995 and 1994 4
Consolidated statements of cash flow for the
three months ended March 31, 1995 and 1994 5
Consolidated statements of changes in
shareholders' equity for the three months 7
ended March 31, 1995 and 1994
Notes to consolidated financial statements 8
Item 2. Management's discussion and analysis of
financial condition and results of operations 10
<PAGE>
CONSOLIDATED BALANCE SHEETS
(In thousands, except per
share data) March 31, December 31,
1995 1994
------------ ------------
(Unaudited)
Assets
Real estate properties
Industrial $ 69,430 $ 69,214
Apartments 51,271 51,076
Office Buildings 35,602 35,500
------------ ------------
156,303 155,790
Less accumulated depreciation (17,150) (15,888)
------------ ------------
139,153 139,902
Mortgage loans 8,791 8,817
Land and land purchase-leasebacks 1,872 2,320
Investment in real estate
investment trust 864 954
Cash and cash equivalents 285 301
Other assets 2,333 2,566
------------ ------------
$ 153,298 $ 154,860
============ ============
Liabilities and Shareholders' Equity
Liabilities
Mortgage notes payable $ 39,329 $ 39,558
Notes payable to banks 27,752 28,671
Accounts payable and accrued expenses 1,164 1,167
Minority interests in joint ventures 2,885 2,848
Other liabilities 390 440
------------ ------------
71,520 72,684
------------ ------------
Shareholders' Equity
Shares of beneficial interest, par
value $1.00 per share; authorized
10,000,000 shares; issued 4,221,656
shares in 1995 and 4,221,669 in 1994 4,222 4,222
Additional paid-in-capital 68,210 68,210
Unrealized gain on securities 21 21
Undistributed earnings 9,325 9,723
------------ ------------
81,778 82,176
------------ ------------
$ 153,298 $ 154,860
============ ============
See accompanying notes to consolidated financial statements
<PAGE>
CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
(In thousands, except per share data)
Three Months Ended
March 31,
--------------------------
1995 1994
----------- ----------
Revenues
Income from real estate operations $ 6,895 $ 4,810
Land rents 80 163
Equity in earnings of real estate
investment trust 9 118
Interest:
Mortgage loans 276 263
Other interest - 11
Other 23 30
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7,283 5,395
----------- ----------
Expenses
Operating expenses from
real estate operations 2,750 2,098
Interest expense 1,451 731
Depreciation and amortization 1,393 934
Minority interests in joint ventures 73 20
General and administrative expense 526 459
Stock appreciation rights
(recovery) expense - (141)
----------- ----------
6,193 4,101
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Income from operations 1,090 1,294
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Gain on investments
Real estate 412 -
----------- ----------
Net Income $ 1,502 $ 1,294
=========== ==========
Per share of beneficial interest
Net Income $ .36 $ .34
=========== ==========
Weighted average shares outstanding 4,222 3,803
=========== ==========
See accompanying notes to consolidated financial statements
<PAGE>
CONSOLIDATED STATEMENTS OF CASH FLOW (Unaudited)
(In thousands)
Three Months Ended
March 31,
--------------------------
1995 1994
----------- ----------
Operating Activities
Net income $ 1,502 $ 1,294
Adjustments to reconcile
net income to net cash provided
by operating activities:
Depreciation and amortization 1,393 934
Stock appreciation rights - (141)
Gain on investments, net (412) -
Real estate investment trust:
Equity in earnings (9) (118)
Dividends received from operations 12 18
Other (29) (8)
Changes in operating assets
and liabilities:
Accred income and other assets 548 16
Accrued payable, accrued expenses
and prepaid rent 120 388
----------- ----------
Net cash provided by
operating activities 3,125 2,383
----------- ----------
Investing Activities
Payments on mortgage loans
receivable 26 15
Sale of real estate investments 862 -
Purchase of real estate - (10,416)
Purchases of real estate improvements (515) (1,478)
Return of capital dividends 87 -
Change in other assets and
other liabilities (553) (398)
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Net cash used in
investing activities (93) (12,277)
----------- ----------
Financing Activities
Proceeds from bank borrowings 4,592 2,310
Principal payments on bank borrowings (5,511) (19,303)
Principal payments on mortgage notes
payable and improvement bonds (229) (5,612)
Distributions paid to shareholders (1,900) (1,811)
Proceeds from issuance of stock - 32,169
----------- ----------
Net cash provided by (used in)
financing activities (3,048) 7,753
----------- ----------
Decrease in cash and
cash equivalents (16) (2,141)
Cash and cash equivalents at
beginning of period 301 2,690
----------- ----------
Cash and cash equivalent at
end of period $ 285 $ 549
=========== ==========
Supplemental Cash Flow Information:
Cash paid for interest 1,467 861
See accompanying notes to consolidated financial statements
<PAGE>
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
(Unaudited)
(In thousands, except for per share data)
Three Months Ended
March 31,
-------------------------
1995 1994
---------- ----------
Shares of beneficial interest,
$1.00 par value
Balance at beginning $ 4,222 $ 2,461
Issuance of shares - 1,750
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Balance at end of period 4,222 4,211
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Additional paid-in-capital
Balance at beginning 68,210 38,257
Issuance of shares - 30,419
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Balance at end of period 68,210 68,676
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Undistributed earnings
Balance at beginning of period 9,723 8,083
Net income 1,502 1,294
Cash dividends declared:
$.45 per share in 1995 (1,900) -
----------- ----------
Balance at end of period 9,325 9,377
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Unrealized gain on securities
Balance at beginning of period 21 -
Change in unrealized gain - 28
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Balance at end of period 21 28
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Total shareholders' equity $ 81,778 $ 82,292
=========== ==========
See accompanying notes to consolidated financial statements
<PAGE>
Notes to Consolidated Financial Statements (Unaudited)
(1) Basis of Presentation
The accompanying unaudited financial statements have been
prepared in accordance with generally accepted accounting
principles 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 generally accepted accounting principles
for complete financial statements. In the opinion of management,
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
annual report and the notes thereto.
(2) Reclassifications
Certain reclassifications have been made in the fiscal 1994
financial statements to conform to the fiscal 1995
classifications.
(3) Subsequent Events
On April 3, 1995, the Trust purchased 383,775 shares
(17.4%) of LNH REIT, Inc. ("LNH") and the other 50% of LNH REIT
Managers, a partnership which provides management services to
LNH. These purchases were made from Walker Investments, L.P.,
and related entities for a total of $3,070,200. After this
purchase, the Trust owns 515,200 shares (23.4%) of LNH. The
Trust borrowed $3,000,000 from a bank to finance the acquisition.
The loan which matures April 5, 1996, bears interest at the prime
rate and is secured by the shares of LNH.
On April 17, 1995, the Trust purchased 187,000 shares
(5.22%) of Copley Properties, Inc., ("Copley"), a real estate
investment trust, for $1,870,000.
In April 1995, the Trust increased its revolving line of
credit from $5,000,000 to $7,000,000 with interest at the prime
rate and a maturity date of April 30, 1996.
In April 1995, the Trust accepted a deed in lieu of
foreclosure on the 108 unit EastGate Apartments leasehold
improvements in Wichita, Kansas, after the owners defaulted on
payments to the Trust. The mortgage loan had a face value of
$2,000,000 and a carrying value of $1,009,000, and the land
purchase-leaseback had a carrying value of $225,000. The Trust
obtained legal title to the property in April 1995. No gain or
loss will be recorded for financial reporting purposes relating
to the foreclosure. The Trust expects to spend approximately
$200,000 during 1995 in capital improvements to the property.
The Trust has a contract for the sale of its Iroquois land
purchase-leaseback investment with a carrying value of $320,000
for cash of $1,195,000 which is scheduled to close no later than
June 30, 1995.
EASTGROUP PROPERTIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FINANCIAL CONDITION
(Comments are for the balance sheet dated March 31, 1995,
compared to December 31, 1994.)
Real estate properties increased $513,000 during the first
quarter of 1995 as a result of capital improvements on existing
Trust properties. Accumulated depreciation increased $1,262,000
due to recent purchases of real estate properties.
Mortgage loans receivable decreased $26,000 during the first
quarter of 1995. This decrease in mortgage loans receivable was
the result of scheduled principal payments received of $54,000,
offset by amortization of loan discounts of $28,000.
Land and land purchase-leaseback investments decreased
$448,000 during the first quarter of 1995, primarily as a result
of the sale of the Winchester Ranch ("Winchester") land purchase-
leaseback investment. In February 1995, the Trust sold its
Winchester land purchase-leaseback investment in Dallas, Texas
for $862,000 and recognized a gain of $412,000.
Investments in real estate investment trusts decreased from
$954,000 at December 31, 1994 to $864,000 at March 31, 1995.
During the first quarter of 1995, the Trust recognized $9,000 of
equity in earnings of LNH offset by dividends received of
$99,000. In April 1995, the Trust increased its ownership in
Investments in real estate investment trusts as described under
"Liquidity and Capital Resources".
Other assets decreased $233,000 during the first quarter of
1995, primarily as a result of capitalized leasing commissions of
$245,000, offset by amortization of $129,000. Also, the Trust
incurred $120,000 in development costs for the construction of a
36,400 square foot distribution building at the Phillips
Distribution Center in southeastern Jacksonville. These costs
will be transferred to real estate properties upon completion of
the building. These increases were offset by the receipt of
$422,000 from a bankruptcy settlement related to the motel loans
that was accrued at December 31, 1994.
Mortgage notes payable decreased $229,000 during the first
three months of 1995 as a result of scheduled principal
repayments.
Notes payable to banks decreased from $28,671,000 at
December 31, 1994 to $27,752,000 at March 31, 1995. On January
9, 1995, $1,280,000 was borrowed on the acquisition line and the
proceeds reduced the working capital line. As of March 31, 1995,
the acquisition line had a balance of $25,327,000 and the working
capital line had a balance of $2,425,000.
Undistributed earnings decreased from $9,723,000 at December
31, 1994 to $9,325,000 at March 31, 1995 as a result of dividends
declared of $1,900,000 exceeding net income for financial
reporting purposes of $1,502,000.
RESULTS OF OPERATIONS
(Comments are for the three months ended March 31, 1995, compared
to the three months ended March 31, 1994.)
Property net operating income (PNOI) from real estate
properties, defined as income from real estate operations less
property operating expenses (before interest expense and
depreciation) increased by $1,433,000 or 53% for the three months
ended March 31,1995 compared to the three months ended March 31,
1994.
Property net operating income (loss) and percentage leased
by property type were as follows:
PNOI Percentage Leased
March 31 March 31
------------------ ------------------
1995 1994 1995 1994
------- ------- ------- -------
(In thousands)
Industrial $ 1,815 $ 963 97% 92%
Apartments 1,438 928 97 97
Office Buildings 900 829 92 91
Other (8) (8) - -
------- -------
Total PNOI $ 4,145 $ 2,712
======= =======
PNOI from industrial properties increased $852,000 for the
three months ended March 31, 1995, compared to March 31, 1994.
This is primarily the result of the acquisition of Exchange
Distribution Center ("Exchange") in May 1994, Jetport 516
Commerce Park ("JetPort 516") in May 1994, Phillips Distribution
Center ("Phillips") in July 1994, Northwest Point Business Park
("Northwest") in September 1994, Westport Commerce Center
("WestPort") in October 1994 and Baxter Warehouse ("Baxter") in
December 1994. Industrial properties held throughout the three
months ended March 31, 1995 and 1994 showed an increase in PNOI
of 27% for 1995. Also contributing to the increase in PNOI from
industrial properties was improved operations at Rampart
Distribution Center ("Rampart"), Jetport Commerce Park
("Jetport"), 56th Street Commerce Park ("56th Street") and Lake
Pointe Business Park ("Lake Pointe"). The Trust's apartment
properties increase in PNOI of $510,000 for the three months
ended March 31, 1995 compared to March 31, 1994 is attributable
primarily to the acquisition of Plantations at Killearn
("Plantations") in April 1994, Hampton House Apartments
("Hampton") in August 1994 and Grande Pointe Apartments ("Grande
Pointe") in September 1994. PNOI from the Trust's office
buildings increased $71,000 as a result of the acquisition of
Santa Fe in February 1994, offset by reduced occupancy at
Leesburg Pike.
Land rents decreased $83,000 primarily as a result of the
sale of the Parklane on Peachtree and Winchester Ranch land
purchase-leaseback investments.
Equity in earnings from LNH of $9,000 was recorded during
the three months ended March 31, 1995, compared to $118,000 in
1994.
Interest income on mortgage loans increased $13,000 for the
three months ended March 31, 1995 compared to 1994, as a result
of interest income from mortgage loans made by the Trust to the
co-owner of WestPort and Exchange, offset by interest which was
not accrued on the EastGate mortgage note receivable, which was
foreclosed on in April 1995. The Trust is negotiating a
restructuring of the four past due motel mortgage loans with the
borrower. Although the Trust may restructure certain of these
loans, the Trust does not believe, based on the value of its
collateral, that any additional allowances will be required.
Interest expense to banks increased as a result of higher
average bank borrowings on the Trust's revolving line of credit
and the acquisition line of credit and an increase in the prime
rate by approximately 2.5% during the year.
At the Trust's annual meeting on December 16, 1994, the
shareholders voted to implement a new incentive compensation plan
which eliminated stock appreciation rights and incentive
compensation units. Stock appreciation rights expense (recovery),
which was adjusted quarterly based on fluctuations in the Trust's
quoted share price, was ($141,000) for the three months ended
March 31, 1994.
General and administrative expenses increased $67,000 for
the three months ended March 31, 1995 compared to 1994 as a
result of the increase in total assets from the 1994
acquisitions.
In February 1995, the Trust sold its Winchester Ranch land
purchase-leaseback investment for $862,000. For financial
reporting purposes, the Trust recognized a gain of $412,000 on
the sale.
The Trust expenses apartment unit turnover cost such as
carpet, painting and small appliances. Capital expenditures in
the three months ended March 31, 1995 by category are as follows:
Upgrades on acquisitions $ 224,000
Major Renovation 16,000
Tenant improvements:
New tenants 171,000
Renewal tenants 23,000
Other 81,000
---------
$ 515,000
=========
For the three months ended March 31, 1995, the Trust
capitalized $206,000 of leasing costs, which included $204,000
related to new tenants and $2,000 related to renewal tenants, and
$39,000 of financing costs and included these amounts in other
assets. The Trust amortized $74,000 related to capitalized
leasing costs and $56,000 related to financing costs and included
these amounts in depreciation and amortization expense. Leasing
costs are amortized over the life of the lease and financing
costs are amortized over the life of the loan.
Rental income included straight-line rent of $28,000 for the
three months ended March 31, 1995.
LIQUIDITY AND CAPITAL RESOURCES
Cash provided by operating activities was $3,125,000 for the
three months ended March 31, 1995. The Trust distributed
$1,900,000 of this amount in dividends which left $1,225,000 for
other purposes. Other sources of cash were collections on
mortgage loan receivables, sale of real estate investments, bank
borrowings on the $5,000,000 working capital line and the
$45,000,000 acquisition line. Primary uses of cash were for
capital improvements at the various properties, bank debt
payments and mortgage note payments. Total debt at March 31,
1995 is as follows:
(In thousands)
Mortgage notes payable - fixed rate $ 37,052
Mortgage notes payable - floating rate 2,277
Bank notes payable - floating rate 27,752
--------
Total debt $ 67,081
========
A one percent increase in the prime interest rate increases
interest expense $300,000 on an annual basis. The Trust is
currently in the process of obtaining approximately $24,000,000
in nonrecourse fixed rate financing with 10 year terms. Interest
rates of 8.688% on $5,950,000 and 8.125% on $11,000,000 have
been fixed and the Trust expects the remaining amounts to have
favorable rates based on presently prevailing interest rates.
The Trust is also contemplating selling properties that do not
meet its continuing strategy, and using the proceeds to reduce
floating rate debt. The Trust does not anticipate a return to
the capital markets until its stock price improves.
In April 1995, the Trust increased its revolving line of
credit from $5,000,000 to $7,000,000 with interest at prime and a
maturity date of April 30, 1996. The increase in the line
provided funds for the acquisition of 187,000 shares of Copley
Properties, Inc. in April 1995 for $1,870,000. Borrowings on this
line were $2,425,000 at March 31, 1995. The Trust also has a
$45,000,000 acquisition line, which bears interest at the prime
rate plus .125% and matures on April 30, 1997. Borrowings on
this line were $25,327,000 at March 31, 1995. The acquisition
note's principal balance must be reduced to $1,000 by May 31,
1996 or the Trust cannot request additional advances under the
line and the total outstanding balance of the line must be
reduced to $30,000,000 by December 1, 1996.
In April 1995, the Trust borrowed $3,000,000 from a bank to
finance the acquisition of 383,775 shares of LNH. The loan
matures April 5, 1996 with interest at the prime rate secured by
the shares of LNH.
Budgeted capital expenditures for the year ending December
31, 1995 are as follows:
(In thousands)
-------------
Upgrades on acquisitions $ 765
New development costs 957
Tenant Improvements:
New Tenants 764
Renewal Tenants 308
Other 619
-------------
$ 3,413
=============
The Trust anticipates that its current cash balance,
operating cash flow and borrowings (including borrowings under
the revolving line of credit) will be adequate to pay the Trust's
(i) operating and administrative expenses, (ii) debt service
obligations, (iii) distributions to shareholders, (iv) capital
improvements, and (v) normal repair and maintenance expenses at
its properties both in the short and long term.
