<PAGE> 1
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1995 COMMISSION FILE NUMBER 1-7094
EASTGROUP PROPERTIES
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
MARYLAND 13-2711135
---------------------------------------- ------------------
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization Identification No.)
300 ONE JACKSON PLACE
188 EAST CAPITOL STREET
JACKSON, MISSISSIPPI 39201
---------------------------------------- ------------
(Address of principal executive offices) (Zip code)
Registrant's telephone number: (601) 354-3555
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
SHARES OF BENEFICIAL INTEREST, $1.00 PAR VALUE,
NEW YORK STOCK EXCHANGE
SECURITIES REGISTERED UNDER TO SECTION 12(g) OF THE ACT:
NONE
Indicate by check mark whether the Registrant (1) has filed all
reports required to be filed by section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
YES x NO
-----
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K (Section 229.405 of this Chapter) is not contained
herein, and will be contained, to the best of registrant's knowledge, in
definitive proxy or information statements incorporated by reference in Part
III of this form 10-K or any amendment to this Form 10-K (X)
The aggregate market value of the voting stock held by non-affiliates
of the Registrant as of March 14, 1996 was $91,189,000.
The number of shares of beneficial interest, $1.00 par value,
outstanding as of March 14, 1996 was 4,245,083.
DOCUMENTS INCORPORATED BY REFERENCE
PORTIONS OF THE PROXY STATEMENT FOR THE 1996 ANNUAL MEETING OF SHAREHOLDERS
ARE INCORPORATED BY REFERENCE INTO PART III.
<PAGE> 2
PART I
ITEM 1. BUSINESS.
ORIGINAL ORGANIZATION
EastGroup Properties (the "Trust", the "Registrant" or "EastGroup") is an
equity oriented real estate investment trust ("REIT") established under the
laws of the State of Maryland on July 16, 1969. The Registrant commenced its
operations in December 1969 under the name Third ICM Realty. On December 30,
1971, the Registrant had its initial public offering. The name of the Trust
was changed in 1971 to ICM Realty, and it was consolidated with two other REITs
which had the same management and investment philosophy. At the Annual Meeting
held in 1983, the shareholders approved the change of name to EastGroup
Properties.
The Registrant has elected to be taxed as a real estate investment trust
under Sections 856-860 of the Internal Revenue Code, as amended, and intends to
continue to qualify to be so taxed. If in any taxable year the Registrant
should not qualify as a real estate investment trust, the Registrant would be
taxed as a corporation and distributions to its shareholders would not be
deductible by the Trust in computing its federal taxable income.
ADMINISTRATION
Through December 31, 1994, the Trust was the largest of six real estate
companies that comprised the Eastover Group. The administrative offices of all
member companies of the Eastover Group were maintained in Jackson, Mississippi,
and the officers of the Trust also served as officers of the other member
companies of the Eastover Group. Member companies shared the costs of common
officers and shared facilities and activities. The expense-sharing arrangement
gave the Trust the benefits of a much larger real estate organization,
including access to a much more extensive pool of management and staff
expertise, than would normally be associated with a real estate investment
trust of the Trust's then size.
Effective December 31, 1994, the Trust terminated the expense sharing
agreement and began to maintain its own employees and offices in Jackson. The
Trust has grown substantially over the past two years, and now has the
resources to maintain its own officers and employees. As of March 13, 1996,
EastGroup had 23 full time and five part-time employees. Leland R. Speed
continues to serve as the Chief Executive Officer of the Trust and The Parkway
Company, another former member of the Eastover Group.
CURRENT OPERATIONS
The Registrant's investments consist of real estate, principally in the
form of direct ownership of real estate. Other real estate assets include
mortgage loans, land purchase-leaseback investments and ownership of real
estate indirectly through shares of other REITs. The direct ownership in real
estate has been acquired either through acquisitions, exchanges, or upon
<PAGE> 3
ITEM 1. BUSINESS. (CONTINUED)
CURRENT OPERATIONS (CONTINUED)
defaults of land tenants or mortgagors. In seeking new investments, the
Registrant must compete with various types of investors, including other real
estate investment trusts, insurance companies, real estate syndicators,
partnerships and individuals.
At December 31, 1995, the Registrant's real estate portfolio consisted
of 33 operating properties, 9 mortgage loans, 4 land purchase-leaseback
investments, and 2 tracts of land. These real estate investments are located
in 16 states and have a carrying value before depreciation of $162,939,000.
The Registrant also owns shares in other REITs. Income is derived primarily as
a result of rental income from the ownership of operating properties. This
rental income is in addition to interest earned on mortgage loans and land
rents. In addition, gains and losses are realized from disposition of real
estate and other investments.
The Registrant intends to continue to qualify as a real estate investment
trust under the Internal Revenue Code, as amended. Ordinary taxable income
will continue to be paid to the shareholders. The Registrant has the option of
paying out capital gains to the shareholders with no tax to the Registrant or
paying a capital gains tax and retaining the gains on sales. The book value of
the property sold and the retained portion of capital gains, if any, are
generally reinvested by the Registrant, which considers many factors in making
these investments, such as type of property, location, current yield, potential
for appreciation and others.
EastGroup is an equity real estate investment trust which owns a
portfolio of income producing real estate. EastGroup's primary emphasis is in
industrial properties along with selected office buildings and garden apartment
complexes. Geographically, EastGroup's investments are concentrated in the
major sunbelt market areas of the southeastern and southwestern United States
with a special emphasis in the states of Florida and Texas. EastGroup seeks to
purchase well located, undermanaged and undervalued properties at attractive
initial yields; and to improve the operation and cash performance of such
properties through the implementation of aggressive, hands on management
techniques, operating efficiencies and, where appropriate, renovation and
expansion. EastGroup will pursue selected development opportunities in markets
where it already owns income producing properties. EastGroup also may seek to
acquire real estate portfolios through mergers or other business combination
transactions with public or private real estate investment entities; in
connection with such activities, it may acquire shares of other publicly traded
real estate investment trusts with a view toward engaging in a merger or
business combination with such company.
EastGroup incurs short-term floating rate debt in connection with the
acquisition of real estate, and attempts to replace floating rate debt with
fixed rate term loans secured by real property as market conditions permit.
EastGroup also may, in appropriate circumstances, acquire one or more
properties in exchange for EastGroup's equity securities. EastGroup holds its
properties as long term investments but may determine to sell certain
properties that no longer meet its investment criteria; EastGroup may provide
financing in connection with such sales of property if market conditions so
require, but it does not presently intend to make other loans.
<PAGE> 4
ITEM 1. BUSINESS. (CONTINUED)
CURRENT OPERATIONS (CONTINUED)
EastGroup has no present intention of underwriting securities of other issuers
or repurchasing or reacquiring its shares. The strategies and policies set
forth above were determined, and are subject to review by, EastGroup's Board of
Trustees which may change such strategies or policies based upon their
evaluation of the state of the real estate market, the performance of
EastGroup's assets, capital and credit market conditions, and other relevant
factors. EastGroup provides annual reports to its securityholders which
contain financial statements certified by EastGroup's independent public
accountants.
ITEM 2. PROPERTIES.
The operations of the Registrant are conducted from approximately 12,000
square feet of rented office space located at 300 One Jackson Place, 188 East
Capitol Street, Jackson, Mississippi. The Trust shares this office space with
another company. The Registrant does not own or lease properties other than
those carried as part of its real estate investment portfolio shown on
Financial Statement Schedule III. The Trust does not have any single properties
that are 10% or more of book value or 10% or more of gross revenues as required
by item 14 and 15 of Form S-11.
ITEM 3. LEGAL PROCEEDINGS.
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None.
<PAGE> 5
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
SHARES OF BENEFICIAL INTEREST MARKET PRICES AND DIVIDENDS
The Trust's shares of beneficial interest are presently listed for
trading on the New York Stock Exchange under the symbol "EGP". Until May 1994,
the Trust's shares were listed on the American Stock Exchange. The following
table shows the high and low share prices for each quarter as reported in the
applicable stock exchange during the past two years and per share distributions
paid for each quarter.
<TABLE>
<CAPTION>
Calendar 1995 Calendar 1994
------------------------------------- --------------------------------------
Quarter High Low Distributions High Low Distributions
------- ------ ------------- -------- ------ -------------
<S> <C> <C> <C> <C> <C> <C>
First $19 5/8 17 1/4 $ .45 $21 1/8 19 $ .43
Second 20 18 3/8 .45 20 7/8 18 1/4 .43
Third 20 3/4 19 .47 19 7/8 18 3/8 .43
Fourth 22 3/8 20 1/4 .47 19 3/4 16 1/2 .45
------ ------
$ 1.84 $ 1.74
====== ======
</TABLE>
As of March 14, 1996, there were 788 holders of record of the Trust's
shares of beneficial interest. Approximately 83% of the Trust's outstanding
shares are held by CEDE & Co., which is accounted for as a single shareholder
of record for multiple beneficial owners. In 1995 and 1994, the distributions
paid per share of $1.84 and $1.74 were all taxable as ordinary income for
federal income tax purposes, and none of such distributions represented a
return of capital.
<PAGE> 6
ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA.
The following table sets forth selected consolidated financial data
for the Trust and should be read in conjunction with the consolidated financial
statements and notes thereto included elsewhere in this report.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------------------------
1995 1994 1993 1992 1991
-----------------------------------------------------------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
OPERATING DATA:
Revenues
Income from real estate operations $28,386 23,194 13,771 11,079 9,877
Land rents 217 398 856 979 1,271
Interest 1,036 1,054 1,174 1,305 1,946
Other 625 249 287 332 36
------- ------- ------- ------ -------
30,264 24,895 16,088 13,695 13,130
------- ------- ------- ------ -------
Expenses
Operating expenses from real estate
operations 11,575 9,741 6,159 5,271 4,643
Interest expense 6,287 3,905 3,415 2,832 3,040
Depreciation and amortization 5,613 4,323 2,874 2,338 1,998
Minority interests in joint ventures 220 163 78 - -
General and administrative expenses 2,180 2,046 1,531 1,297 1,307
Stock appreciation rights and incentive
compensation expense - (129) 320 357 64
Provision for (recovery of) possible losses - - (144) 1,675 -
------- ------- ------- ------ -------
25,875 20,049 14,233 13,770 11,052
------- ------- ------- ------ -------
Income (loss) before gains (losses) on
investments 4,389 4,846 1,855 (75) 2,078
------- ------- ------- ------- -------
Gains (losses) on investments
Real estate 3,322 2,322 3,408 (3,598) 4,367
Real estate investment trust securities - - 1,152 - (745)
------- ------- ------- ------ -------
Net income (loss) $ 7,711 7,168 6,415 (3,673) 5,700
======= ======= ======= ======= =======
PER SHARE DATA:
Net income (loss) $ 1.82 1.74 2.61 (1.49) 2.28
Book value (at end of period) 19.59 19.46 19.83 19.14 22.09
Cash distributions declared 1.84 1.31 1.60 1.52 1.88
Cash distributions paid 1.84 1.74 1.55 1.52 2.00
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING 4,226 4,114 2,460 2,459 2,503
OTHER DATA:
Funds from operations (1) $10,159 9,071 5,131 4,241 4,158
Cash flows provided by (used in):
Operating activities 9,746 8,448 5,276 4,381 4,599
Investing activities (5,721) (46,715) (19,073) (9,226) 5,772
Financing activities (4,300) 35,878 16,324 1,887 (7,689)
</TABLE>
<PAGE> 7
ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA (CONTINUED).
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------------------------
1995 1994 1993 1992 1991
-----------------------------------------------------------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA (AT END OF PERIOD):
Real estate investments, at cost $162,939 166,927 116,102 94,713 90,196
Real estate investments, net of
accumulated depreciation and allowance
for losses 143,733 151,039 101,621 81,908 81,394
Total assets 157,955 154,860 107,508 85,529 86,514
Mortgage, bond and bank loans payable 71,562 68,229 53,203 35,643 30,006
Total liabilities 75,055 72,684 58,707 38,496 31,730
Total shareholders' equity 82,900 82,176 48,801 47,033 54,784
</TABLE>
(1) The Trust generally considers funds from operations (FFO) to be an
appropriate supplemental measure of the performance of an equity REIT because
it is predicated on a cash flow analysis, as opposed to a measure predicated on
generally accepted accounting principles, which gives effect to non-cash items
such as depreciation. FFO, as defined by the National Association of Real
Estate Investment Trusts and as followed by the Trust, represents net income
(computed in accordance with generally accepted accounting principles),
excluding gains (or losses) from debt restructuring and sales of property, plus
depreciation and amortization, and after adjustments for unconsolidated
partnerships and joint ventures. Adjustments for unconsolidated partnerships
and joint ventures will be calculated to reflect FFO on the same basis. Since
the definition of FFO is a guideline, computation of FFO may vary from one REIT
to another. FFO does not represent cash generated from operating activities in
accordance with generally accepted accounting principles and should not be
considered as an alternative to net income as an indicator of the Trust's
operating performance or as an alternative to cash flow as a measure of
liquidity. In addition, FFO is not necessarily indicative of cash available to
fund cash needs. The National Association of Real Estate Investment Trusts
('NAREIT") recommended changes in the computation of funds from operations for
fiscal periods beginning in 1996 ("new definition"). The only adjustment to
EastGroup's computation would be for amortization of deferred financing costs
which include mortgage broker fees, legal fees, title insurance, engineering
and environmental reports and other costs. There were no costs involved in
reducing interest rates. The effect on 1995 as if EastGroup reported on the
new definitions follows:
<TABLE>
<CAPTION>
Funds From Operations
------------------------------------------------------------
(In thousands)
<S> <C> <C> <C>
Year Ended Financing Cost New
December 31, As Reported Adjustment Definition
------------ ----------- ---------- ----------
1995 $ 10,159 311 9,848
1994 9,071 158 8,913
1993 5,131 303 4,828
1992 4,241 83 4,158
1991 4,158 71 4,087
</TABLE>
<PAGE> 8
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
FINANCIAL CONDITION
(Comments are for the balance sheet dated December 31, 1995, compared to
December 31, 1994.)
Real estate properties decreased $186,000 during 1995. Increases were
from capital improvements on existing Trust properties of $3,313,000,
development costs for the construction of a 34,600 square foot distribution
building at the Phillips Distribution Center ("Phillips") in southeastern
Jacksonville of $1,071,000, the acquisition of a 75% ownership interest in a
40,200 square multi-tenant building at the JetPort Commerce Park for $806,000,
and the acquisition by foreclosure of the leasehold improvements at the 108
unit EastGate Apartments for $1,227,000. In April 1995, the Trust accepted a
deed in lieu of foreclosure on the EastGate Apartments leasehold improvements
in Wichita, Kansas after the owners defaulted on payments to the Trust. These
increases were offset by the writedown of the Cascade VII office building in
Columbus, Ohio of $136,000 to its net realizable value and the sales of that
building with a cost of $2,057,000, the Sunchase Apartments in Corpus Christi,
Texas with a cost of $3,760,000 and the 2100 Exchange Warehouse in Dallas,
Texas with a cost of $650,000.
Capital improvements during 1995 and 1994 over $200,000 on a
particular property are listed separately below. The aggregate cost of
improvements on properties where improvements are $200,000 or less are included
with "other".
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
--------------
1995 1994
(In thousands)
<S> <C> <C>
8150 Leesburg Pike Office Building . . . . . . . . . . . $ 622 1,640
EastGate Apartments . . . . . . . . . . . . . . . . . . 169 -
LaVista Crossing Apartments . . . . . . . . . . . . . . 344 -
Grande Pointe Apartments . . . . . . . . . . . . . . . . 236 -
Lake Pointe Business Park . . . . . . . . . . . . . . . 402 396
Exchange Distribution Center . . . . . . . . . . . . . . 261 -
Phillips Distribution Center . . . . . . . . . . . . . . 1,263 -
Venture Distribution Center . . . . . . . . . . . . . . - 319
JetPort Commerce Park . . . . . . . . . . . . . . . . . 223 385
Other . . . . . . . . . . . . . . . . . . . . . . . . 866 1,662
------- ------
$ 4,386 4,402
======= ======
</TABLE>
Accumulated depreciation increased $5,235,000 due to recent purchases
of real estate properties, offset by the sales of the Cascade VII office
building with accumulated depreciation of $571,000, the Sunchase Apartments
with accumulated depreciation of $1,245,000 and the 2100 Exchange Warehouse
with accumulated depreciation of $101,000.
<PAGE> 9
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (CONTINUED).
Financial Condition (continued)
Mortgage loans receivable decreased $2,809,000 during 1995. This
decrease in mortgage loans receivable was the result of scheduled principal
payments received of $131,000 and the acceptance of a deed in lieu of
foreclosure on the EastGate Apartments mortgage loan with a carrying value of
$1,009,000. Also contributing to this decrease was the repayment of $591,000
on loans made to the Trust's joint venture partner on the Exchange Distribution
Center warehouse ("Exchange"), the repayment of $360,000 on a loan made to the
Trust's joint venture partner on the JetPort Commerce Park ("JetPort") and the
repayment of $1,006,000 on a loan made to the Trust's joint venture partner on
the WestPort Commerce Center ("WestPort"). These decreases were offset by
amortization of loan discounts of $138,000 and the $150,000 mortgage loan which
was part of the sale of the Cascade VII office building. The terms of this
loan provide for a 10% interest rate, monthly principal and interest payments
of $3,804 which began October 1, 1995 and a final maturity on September 1,
1999.
Land and land purchase-leaseback investments decreased $993,000 during
1995, as a result of the sales of the Winchester Ranch Apartments
("Winchester") land purchase-leaseback investment, the sale of the Iroquois
Apartments ("Iroquois") land purchase-leaseback investment and the acceptance
of a deed in lieu of foreclosure on the EastGate Apartments leasehold
improvements (described above). In February 1995, the Trust sold its
Winchester land purchase-leaseback investment in Dallas, Texas for $862,000 and
recognized a gain for financial reporting purposes of $412,000. In June 1995,
the Trust sold its Iroquois land purchase-leaseback investment in Nashville,
Tennessee for $1,495,000 and recognized a gain for financial reporting purposes
of $1,175,000.
Investment in real estate investment trusts increased $9,833,000 from
$954,000 at December 31, 1994 to $10,787,000 at December 31, 1995. In April
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 provided management
services to LNH. These purchases were from Walker Investments, L.P., and
related entities for a total of $3,070,000. As a result of this purchase, the
Trust owns 515,200 shares (23.42%) of LNH at December 31, 1995. Also, the
Trust purchased 529,000 shares (14.76%) of Copley Properties, Inc., ("Copley"),
a real estate investment trust for $6,193,000. During 1995, the Trust
recognized $203,000 of equity in earnings of LNH, $28,000 of unrealized gains
of LNH, offset by $269,000 of LNH dividends received. The Trust also
recognized an unrealized gain of $618,000 recorded on the Trust's
available-for-sale securities (Copley) in accordance with Statement of Financial
Accounting Standards No. 115, "Accounting for Certain Investments in Debt and
Equity Securities".
Other assets increased $843,000 during 1995. Major items recorded in
other assets during 1995 were deferred leasing costs of $762,000 and deferred
financing costs of $777,000. These increases were offset by $689,000 in
amortization and the receipt of $422,000 from a bankruptcy settlement related
to the motel loans that was accrued at December 31, 1994.
<PAGE> 10
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (CONTINUED).
FINANCIAL CONDITION (CONTINUED)
Mortgage notes payable increased $27,645,000 during 1995, primarily as
a result of the following new mortgages:
<TABLE>
<CAPTION>
MATURITY AMOUNT OF
DATE OF LOAN PROPERTY INTEREST RATE DATE MORTGAGE
------------ ----------------------------------- ------------- ----------- ---------------
<S> <C> <C> <C> <C>
6-27-95 Exchange Distribution Center 8.375% 8-1-05 $ 2,500,000
7-27-95 WestPort Commerce Center 8.000% 8-1-05 3,350,000
8-01-95 LaVista Crossing Apartments 8.688% 9-1-05 5,950,000
9-12-95 JetPort Commerce Park 8.125% 10-1-05 4,000,000
9-29-95 LakePointe Business Park 8.125% 10-1-05 11,000,000
12-15-95 Plantations Apartments 7.625% 12-1-05 5,300,000
-----------
$32,100,000
===========
</TABLE>
These increases were offset by principal repayments of $1,623,000 and
the repayment of the underlying first mortgage on the Country Club Apartments
wrap mortgage payable of $2,267,000 and the Exchange Drive Warehouse mortgage
payable of $565,000.
Notes payable to banks decreased from $28,671,000 at December 31, 1994
to $4,359,000 at December 31, 1995. The Trust's total working capital line
was increased to $7,000,000 to acquire the additional shares of Copley. The
working capital line matures April 30, 1996 and was reduced from the prime
rate of interest (8.75% at July 12, 1995) to LIBOR plus 2% (7.9375% at
December 31, 1995). The line had a $2,365,000 net reduction in the year
ended December 31, 1995 and has a balance of $2,259,000 at December
31, 1995. The acquisition line decreased $21,947,000 during the year
ended December 31, 1995 to a balance of $2,100,000 at December
31, 1995. The interest rate was reduced from the prime rate plus 1/8% to
LIBOR plus 2.0% on July 12, 1995.
Unrealized gain (loss) on securities increased as a result of
$618,000 unrealized gain recorded on the Trust's investment in Copley in accord-
ance with Statement of Financial Accounting Standards No. 115 "Accounting
for Certain Investments in Debt and Equity Securities". Also, the Trust
recorded $28,000 in unrealized gains through equity in earnings of LNH.
Undistributed earnings decreased from $9,723,000 at December 31, 1994
to $9,657,000 at December 31, 1995 as a result of dividends declared of
$7,777,000 exceeding net income for financial reporting purposes of $7,711,000.
<PAGE> 11
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (CONTINUED).
RESULTS OF OPERATIONS
1995 COMPARED TO 1994
Net income for 1995 was $7,711,000 ($1.82 per share) compared to net
income in 1994 of $7,168,000 ($1.74 per share). Income before gains on
investments was $4,389,000 in 1995 compared to $4,846,000 in 1994. Gains on
investments were $3,322,000 in 1995 compared to $2,322,000 in 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 $3,358,000 or 25% for
1995 compared to 1994. Property net operating income (loss) and percentage
leased by property type were as follows:
<TABLE>
<CAPTION>
PNOI
YEAR ENDED PERCENT
DECEMBER 31, LEASED
---------------------------- ----------------
1995 1994 12-31-95
----------------------------------------------
(In thousands)
<S> <C> <C> <C>
Industrial $ 7,606 5,038 98%
Apartments 5,656 4,663 95%
Office Buildings 3,563 3,776 96%
Other (14) (24) -
------ ------
Total PNOI $ 16,811 13,453
====== ======
</TABLE>
PNOI from industrial properties increased $2,568,000 for 1995, compared to
1994. This increase 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 in July 1994, Northwest Point Business
Park ("Northwest") in September 1994, Westport in October 1994 and Baxter
Warehouse ("Baxter") in December 1994. Industrial properties held throughout
the year ended December 31, 1995 and 1994, showed an increase in PNOI of 18.1%
for 1995 compared to 1994. Contributing to this increase in PNOI from
industrial properties was improved operations at Rampart Distribution Center
("Rampart"), Sunbelt Distribution Center ("Sunbelt") and Lake Pointe Business
Park ("Lake Pointe"). PNOI for the Trust's apartment properties increased
$993,000 for 1995 compared to 1994. This increase is primarily attributable to
the acquisition of Plantations at Killearn ("Plantations") in April 1994,
Hampton House Apartments ("Hampton") in August 1994, Grande Pointe Apartments
("Grande Pointe") in September 1994 and the deed in lieu of foreclosure on the
EastGate Apartments in April 1995. PNOI from the Trust's office buildings
decreased $213,000 for 1995 compared 1994. This decrease is primarily the
result of reduced occupancy at 8150 Leesburg Pike ("Leesburg Pike"), offset
by the acquisition of the Santa Fe Energy Building ("Santa Fe") in February
1994.
<PAGE> 12
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (CONTINUED).
RESULTS OF OPERATIONS (CONTINUED)
Land rents decreased $181,000 for the twelve months ended December 31,
1995 compared to December 31, 1994, primarily as a result of the sales of the
Parklane on Peachtree, Iroquois, and Winchester Ranch land purchase-leaseback
investments and the deed in lieu of foreclosure on the EastGate Apartments land
purchase-leaseback investment. These decreases were offset by the acquisition
in 1994 of two small parcels at a foreclosure sale. The Trust held mortgages
on two commercial parcels which were additional collateral for the Madison
Square land purchase-leaseback investment written off in 1992.
Equity in earnings from LNH of $203,000 was recorded during 1995, compared
to $123,000 for 1994.
Interest income on mortgage loans decreased $5,000 for 1995 compared
to 1994. The following is a breakdown of interest income for the year ended
December 31, 1995 compared to 1994:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
----------------------
1995 1994
----------- ---------
(In thousands)
<S> <C> <C>
Interest income from:
25% joint venture mortgage loans $ 149 $ 117
Motel mortgage loans 340 211
Wrap mortgage loans 537 709
Other mortgage loans 10 4
------- ------
$ 1,036 $1,041
======= ======
</TABLE>
Interest income from the 25% joint venture mortgage loans increased for the
year ended December 31, 1995 as a result of income from additional mortgage
loans made by the Trust to the co-owner of WestPort and Exchange in October
1994 and May 1994. On July 28, 1995, the Trust received a payment of $813,000
on the WestPort mortgage loan, on September 14, 1995 the Trust received a
payment of $360,000 on the JetPort mortgage loan and on September 30, 1995, the
Trust received a payment of $591,000 on the Exchange mortgage loans. Interest
income from the motel mortgage loans is recorded as received, and the notes
have been written down to their net realizable value. Interest income from the
wrap mortgage loans decreased as a result of the foreclosure in April 1995 of
the EastGate mortgage.
Interest expense increased $2,382,000 from 1994 to 1995. Average bank
borrowings were $22,874,000 in 1995 compared to $11,086,000 in 1994 with
average interest rates of 8.8% in 1995 compared to 7.9% in 1994. Bank interest
rates at year end were 7.94% for 1995 and 8.5% for 1994. Interest expense on
real estate properties increased as a result of the acquisition
<PAGE> 13
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (CONTINUED).
RESULTS OF OPERATIONS (CONTINUED)
of Northwest in September 1994, with a mortgage of $4,321,000 which was
assumed, and the acquisition of JetPort 516 in May 1994 with a mortgage of
$657,000 which was assumed. Also contributing to this increase were the new
mortgages of $6,000,000 on Sutton House Apartments ("Sutton House") on May 25,
1994, $2,400,000 on 56th Street on July 21, 1994, and new mortgages of
$32,100,000 as discussed previously in financial condition. These increases
were offset by the repayment of the Exchange Drive warehouse mortgage payable
of $565,000 and the JetPort mortgage payable of $636,000. The Trust repaid the
underlying first mortgage on the Country Club wrap mortgage note of $2,267,000
on August 3, 1995. The Trust used the proceeds from the new LaVista mortgage
plus borrowings on the bank line for this repayment.
Depreciation and amortization increased $1,290,000 for 1995 compared
to 1994, primarily as a result of the acquisitions in 1994.
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 $0 for 1995 and ($129,000) for 1994.
As discussed above, the Trust sold its Winchester Ranch land
purchase-leaseback investment in February 1995 and its Iroquois land
purchase-leaseback investment in June 1995 and recognized gains of $1,587,000.
Also, the Trust wrote down its investment in the Cascade VII office building in
Columbus, Ohio by $136,000 to its estimated net realizable value and sold this
investment in September 1995 for cash of $1,450,000 and a mortgage note
receivable of $150,000. No additional gain or loss was recognized on this
transaction. In October 1995, the Trust sold the Sunchase Apartments in Corpus
Christi, Texas for $4,580,000 and, for financial reporting purposes, the Trust
recognized a gain of $1,881,000 on the sale. Also, the Trust sold one of the
Exchange Drive Warehouses in Dallas, Texas for $570,000 and, for financial
reporting purposes, the Trust recognized a loss of $10,000 on the sale. In
April 1994, the Trust sold its Parklane on Peachtree land purchase-leaseback
investment for $3,500,000 and used the proceeds to acquire the Plantations at
Killearn Apartments through a tax deferred exchange. For financial reporting
purposes, the Trust recognized a gain of $2,494,000 on the sale.
The real estate investment trust industry has recommended supplemental
disclosures concerning capital expenditures, leasing costs, financing costs and
straight-line rents.
<PAGE> 14
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (CONTINUED).
RESULTS OF OPERATIONS (CONTINUED)
The Trust expenses apartment unit turnover cost such as carpet, painting
and small appliances. Capital expenditures for the years ended December 31,
1995 and 1994 by category are as follows:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31
----------------------------
1995 1994
----------- -----------
(In thousands)
<S> <C> <C>
Upgrades on acquisitions $ 981 965
New development costs 1,071 -
Major renovation 428 1,420
Tenant improvements:
New tenants 1,367 540
Renewal tenants 221 588
Other 318 889
------ ------
$4,386 4,402
====== ======
</TABLE>
For the years ended December 31, 1995 and 1994, the Trust capitalized
$762,000 and $787,000 of leasing costs, which included $ 493,000 and $ 338,000
related to new tenants and $269,000 and $ 449,000 related to renewal tenants,
and $777,000 of financing costs and included these amounts in other assets.
For the year ended December 31, 1995, the Trust amortized $378,000 related to
capitalized leasing costs and included these amounts in depreciation and
amortization expense and capitalized $311,000 related to financing costs and
included these amounts in interest 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 $17,000 and $138,000 for
the year ended December 31, 1995 and 1994. This resulted from income recorded
on the straight line method as compared to when cash was actually received.
RESULTS OF OPERATIONS
1994 COMPARED TO 1993
Net income for 1994 was $7,168,000 ($1.74 per share) compared to net
income in 1993 of $6,415,000 ($2.61 per share). Income before gains on
investments was $4,846,000 in 1994 compared to $1,855,000 in 1993. Gains on
investments was $2,322,000 in 1994 compared to $4,560,000 in 1993.
<PAGE> 15
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (CONTINUED).
RESULTS OF OPERATIONS (CONTINUED)
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 $5,866,000
or 77% for 1994 compared to 1993.
Property net operating income (loss) by property type was as follows:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
-----------------------
1994 1993
----------- -----------
(IN THOUSANDS)
<S> <C> <C>
Industrial $ 5,038 2,385
Apartments 4,663 2,870
Office Buildings 3,776 2,312
Other (24) 20
------- -------
Total PNOI $ 13,453 7,587
======== =======
</TABLE>
PNOI from industrial properties increased in 1994, as a result of the
acquisition of 56th Street Commerce Park ("56th Street") JetPort in September
1993, Lake Pointe in October 1993, the 1994 acquisitions mentioned earlier and
improved operations at Rampart, Venture Distribution and Sunbelt Distribution
Center ("Sunbelt"). Industrial properties held throughout 1994 and 1993 showed
an increase in PNOI of 23% for 1994. The Trust's apartment properties increase
in PNOI in 1994 is attributable primarily to Sutton House, which was acquired
in October 1993, the 1994 acquisitions mentioned earlier and improved
operations at LaVista Crossing Apartments ("LaVista") and Garden Villa
Apartments ("Garden Villa"). PNOI from the Trust's office buildings increased
for 1994 as a result of the acquisition of Santa Fe in February 1994 and higher
occupancy at Leesburg Pike. Rental income included straight line rent of
$138,000 in 1994 and $44,000 in 1993 resulting from income recorded from leases
on the straight line method as compared to when cash was actually received.
Most of the straight line rent in 1994 ($174,000) was recorded on the Santa Fe
Energy lease in the Santa Fe Energy Building. The lease calls for annual
rental rates of $13.00 per square foot through July 31, 1994, with contractual
step-ups of $1.00 per square foot in each subsequent year through July 31,
1999. The Trust is recording rent at a straight line rate of $15.00 per square
foot which will amortize to the lease rate in September 1997. The Trust will
then record the contractual amount. The Trust is recording the $15.00
straight line rate because of the probability of renegotiating the lease for a
longer term and lower contractual rates.
Equity in earnings from LNH of $123,000 was recorded during 1994,
compared to $67,000 for 1993.
Interest income on mortgage loans decreased $115,000 for 1994 as a
result of interest income which was not accrued on four past due motel mortgage
loans during 1994 and the
<PAGE> 16
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (CONTINUED).
RESULTS OF OPERATIONS (CONTINUED)
repayment of $956,000 in mortgage loans at September 30, 1993. This decrease
was partially offset by interest on mortgage loans made by the Trust to the
co-owner of 56th Street, JetPort, Exchange and WestPort. The Trust was
negotiating a restructuring of the four past due motel mortgage loans with the
borrower in 1994. The Trust restructured certain of these loans and 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 (an average daily balance of
$11,086,000 during 1994 and $4,554,000 during 1993) and an increase in the
prime rate by 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 ($251,000) in 1994 compared to $320,000
in 1993 and the cost to terminate the incentive compensation unit plan was
$122,000 in 1994. These amounts are shown in the category of stock
appreciation rights and incentive compensation expense on the statement of
operations and are not included in the computation of funds from operations.
General and administrative expenses increased $473,000 in 1994 as a
result of listing fees from changing from the American Stock Exchange to the
New York Stock Exchange of $93,000 and increases in other general and
administrative expenses relative to the increase in assets and the number of
shareholders after the public offering and the recent property acquisitions.
The Trust originally recorded a provision for possible loss of
$175,000 on the Madison Square land purchase-leaseback investment in 1992. The
judicial foreclosure sale of this asset was held on March 22, 1993. The Trust
successfully recovered $144,000 of its investment (net of legal expenses
incurred) in May 1993, and recorded the amount as a recovery of a provision for
possible loss.
In April 1994, the Trust sold its Parklane on Peachtree land
purchase-leaseback investment for $3,491,000 and used the proceeds to acquire
the Plantations at Killearn Apartments through a tax deferred exchange. For
financial reporting purposes, the Trust recognized a gain of $2,494,000 on the
sale. The Trust sold the five remaining lots in North Shore for the
non-recourse debt on the property. A gain on the final disposition of the
property of $257,000 was recorded. These gains were offset by the writedown of
$429,000 on the Bellevue land purchase-leaseback investment. In September
1993, the Trust sold its Kings Gate West Apartments land purchase-leaseback
investment for $4,300,000 and used the proceeds, along with cash on hand, to
purchase the 56th Street and JetPort properties through a tax deferred exchange
transaction. For financial reporting purposes, the Trust recognized a gain of
$3,408,000 on the sale. Also, in 1993, the Trust sold its investment in other
real estate investment trust securities for $1,966,000 and recognized a gain of
$1,152,000.
<PAGE> 17
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (CONTINUED).
LIQUIDITY AND CAPITAL RESOURCES
Net cash provided by operating activities was $9,746,000 for the year
ended December 31, 1995. The Trust distributed $7,777,000 of this amount in
dividends which left $1,969,000 for other purposes. Other sources of cash were
collections on mortgage loan receivables, sales of real estate investments,
mortgage borrowings, and bank borrowings. Primary uses of cash were for
capital improvements at the various properties, bank debt payments, mortgage
note payments and purchases of real estate investment trust shares. Total debt
at December 31, 1995 and 1994 was as follows:
<TABLE>
<CAPTION>
DECEMBER 31
-------------------------
1995 1994
----------- ----------
(In thousands)
<S> <C> <C>
Mortgage notes payable - fixed rate $ 67,203 37,272
Mortgage notes payable - floating rate - 2,286
Bank notes payable - floating rate 4,359 28,671
-------- --------
Total debt $ 71,562 68,229
======== ========
</TABLE>
Effective July 12, 1995 the interest rates on the bank notes payable
were changed from the prime rate to LIBOR plus 2.0%. At December 31, 1995, the
LIBOR rate plus 2% was 7.9375%. There is also a .25% fee on the unused amount
of the $7 million credit line and the acquisition credit line. The acquisition
credit line available was reduced from $45 million to $27 million effective
July 12, 1995 and reduced to $15 million effective September 1, 1995. The
Trust owes $2,100,000 on the acquisition line and $2,259,000 on the credit line
as of December 31, 1995.
On January 31, 1996, the Trust sold its 146 unit Garden Villa
Apartments in Seattle, Washington for a cash price of $4,400,000 including the
assumption of debt of $3,132,000. The Trust will record a gain of
approximately $1,427,000 ($.34 per share) in the first quarter of 1996.
Budgeted capital expenditures for the year ending December 31, 1996 are as
follows (in thousands):
<TABLE>
<S> <C>
Upgrades on acquisitions $ 90
New development costs 1,391
Tenant improvements:
New tenants 841
Renewal tenants 255
Other 959
--------
$ 3,536
========
</TABLE>
<PAGE> 18
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (CONTINUED).
LIQUIDITY AND CAPITAL RESOURCES (CONTINUED)
The Trust anticipates that its current cash balance, operating cash
flow, proceeds from dispositions of properties 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.
On February 13, 1996, the Trust and Copley Properties, Inc., both of
which are real estate investment trusts, jointly announced that they entered
into an Agreement and Plan of Merger under which Copley will be merged into
EastGroup. In the merger, each share of Copley's common stock will be
converted into EastGroup shares of beneficial interest with a value of $15.60.
The value of EastGroup shares for purposes of calculating the ratio at which
Copley shares will be converted into EastGroup shares in the merger will be the
average of the closing price of EastGroup shares on the New York Stock Exchange
on the 20 trading days immediately preceding the fifth trading day prior to the
effective date of the merger (the "EastGroup Stock Price"); however, the
EastGroup Stock Price will be deemed to equal $20.25 if the average price of
EastGroup shares calculated above is less than or equal to $20.25, and $23.00
if the average price of EastGroup shares is greater than or equal to $23.00.
Copley has the right, waivable by it, to terminate the merger agreement without
liability if the average closing price of EastGroup shares on the New York
Stock Exchange on the 20 trading days immediately preceding the fifth trading
day prior to (i) the date on which the Securities and Exchange Commission
declares EastGroup's Registration Statement with respect to the merger
effective or (ii) the date on which Copley's stockholders' meeting with respect
to the merger is held is equal to or less than $18.25. The merger is subject to
several conditions including approval by the shareholders of both Copley and
EastGroup and registration of the EastGroup shares to be issued in the merger
with the Securities and Exchange Commission. EastGroup presently owns 14.76% of
Copley's outstanding shares.
On September 6, 1995 (as amended on December 6, 1995), EastGroup
Properties and LNH REIT, Inc. announced that Special Committees of their Boards
agreed in principle to a merger between LNH REIT, Inc. ("LNH") and EastGroup
Properties or a wholly-owned subsidiary of EastGroup. The Merger Agreement was
signed on December 22, 1995. LNH shareholders would receive shares of the Trust
with a value of $8.10 for each LNH share. The number of the Trust shares that
LNH shareholders receive will be determined by dividing the value $8.10 by the
average trading price of the Trust shares during the 10 trading days
immediately preceding the fifth trading day prior to the effective date of the
merger. The Trust presently owns 23.4% of LNH. The merger is subject to
several conditions, including LNH shareholder approval, receipt of satisfactory
fairness opinions by LNH and the Trust, and registration of the Trust shares to
be issued in the merger with the Securities and Exchange Commission.
<PAGE> 19
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The Registrant's Consolidated Balance Sheets as of December 31, 1995
and 1994, and its Consolidated Statements of Operations, Changes in
Shareholders' Equity and Cash Flows and Notes to Consolidated Financial
Statements for the years ended December 31, 1995, 1994 and 1993 and the
independent auditors' report thereon are included under Item 14 of this report
and are incorporated herein by reference. Unaudited quarterly results of
operations included in the notes to the consolidated financial statements are
also incorporated herein by reference.
ITEM 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
The Registrant's definitive proxy statement which will be filed with
the Securities and Exchange Commission (the "Commission") pursuant to
Regulation 14A within 120 days of the end of Registrant's calendar year is
incorporated herein by reference.
ITEM 11. EXECUTIVE COMPENSATION.
The Registrant's definitive proxy statement which will be filed with
the Commission pursuant to Regulation 14A within 120 days of the end of
Registrant's calendar year is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT.
The Registrant's definitive proxy statement which will be filed with
the Commission pursuant to Regulation 14A within 120 days of the end of
Registrant's calendar year is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
The Registrant's definitive proxy statement which will be filed with
the Commission pursuant to Regulation 14A within 120 days of the end of
Registrant's calendar year is incorporated herein by reference.
<PAGE> 20
PART IV
<TABLE>
<CAPTION>
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.
PAGE
----
<S> <C> <C>
(a)(1) Consolidated financial statements
Independent Auditors' Report 23
Consolidated Balance Sheets - December 31, 1995 and 1994 24
Consolidated Statements of Operations - Years ended December
31, 1995, 1994 and 1993 25
Consolidated Statements of Changes in Shareholders' Equity
Years ended December 31, 1995, 1994 and 1993 26
Consolidated Statements of Cash Flows - Years ended December
31, 1995, 1994 and 1993 27
Notes to Consolidated Financial Statements 29
(2)(a) Consolidated financial statement schedules
Schedule III - Real estate properties and accumulated
depreciation 48
Schedule IV - Mortgage loans on real estate 53
</TABLE>
All other schedules for which provision is made in the applicable
accounting regulations of the Securities and Exchange Commission are not
required under the related instructions or are inapplicable, and therefore have
been omitted, or the required information is included in the notes to the
financial statements.
(3) Form 10-K exhibits:
(3) (a)Restated Declaration of Trust (incorporated by
reference to Exhibit 1 to Amendment No. 1 to the Registrant's Registration
Statement on Form S-4 (No. 33-65337) filed February 27, 1996)
(b)Trustees Regulations of the Registrant (incorporated by reference to
Exhibit 3 of the Registrant's 1980 Annual Report on Form 10-K).
(c)Amendment to the Registrant's Trustees Regulations (incorporated by
reference to Exhibit 3 of the Registrant's 1980 Annual Report on Form
10-K)
(d)Amendment to Registrant's Trustees Regulations (incorporated by
reference to Exhibit 3(d) of the Registrant's 1983 Annual Report on
Form 10-K).
(10)(a)Amendment and Restatement of the Expense-Sharing Agreement among the
Registrant, Eastover Corporation, The Parkway Company and Congress Street
Properties, Inc. dated as of September 1, 1990, *(incorporated by
reference to Exhibit 10(a) of the Registrant's 1991 Annual Report on Form
10-K).
<PAGE> 21
<TABLE>
<S> <C>
(b) First Amendment to Amendment and Restatement of Expense-Sharing Agreement among EastGroup Properties, Eastover Corporation,
The Parkway Company and Congress Street Properties, Inc. dated as of October 1, 1993 (incorporated by reference to Exhibit
10B of the Registrant's Registration Statement on Form S-2 (No. 33-70574) filed October 19, 1993).
(c) EastGroup Properties 1994 Management Incentive Plan (incorporated by reference to Exhibit A of the Registrant's proxy
statement dated November 11, 1994).*
(d) EastGroup Properties 1991 Trustees Stock Option Plan, As Amended (incorporated by reference to Exhibit B of the
Registrant's proxy statement dated April 26, 1994).*
(e) Agreement and Plan of Merger among EastGroup Properties, EastGroup-LNH Corporation and LNH REIT, Inc. (incorporated by
reference to Appendix A of the Registrant's Registration Statement on Form S-4 (No. 33-65337) filed December 22, 1995).
(f) Agreement and Plan of Merger between Copley Properties, Inc. and EastGroup Properties (incorporated by reference to
Exhibit IX to Amendment No. 9 to the Registrant's Statement on Schedule 13D dated February 12, 1996).
(24) Powers of attorney (filed herein)
(27) Financial Data Schedule (filed herewith)
(28) Agreement of Registrant to furnish the Commission with copies of instruments defining the rights of holders of long-term debt
(incorporated by reference to Exhibit 28(e) of the Registrant's 1986 Annual Report on Form 10-K)
</TABLE>
*Indicates management or compensatory agreement.
<PAGE> 22
<TABLE>
<CAPTION>
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
PAGE
----
<S> <C>
Independent Auditors' Report 23
Consolidated Balance Sheets as of December 31, 1995 and 1994 24
Consolidated Statements of Operations for the years ended December 31, 1995,
1994 and 1993 25
Consolidated Statements of Changes in Shareholders' Equity for the years ended
December 31, 1995, 1994 and 1993 26
Consolidated Statements of Cash Flows for the years ended December 31, 1995,
1994 and 1993 27
Notes to Consolidated Financial Statements 29
</TABLE>
<PAGE> 23
INDEPENDENT AUDITORS' REPORT
THE TRUSTEES AND SHAREHOLDERS
EASTGROUP PROPERTIES:
We have audited the consolidated financial statements of EastGroup Properties
and subsidiaries, a Maryland real estate investment trust, as listed in the
accompanying index. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of EastGroup
Properties and subsidiaries at December 31, 1995 and 1994, and the results of
their operations and their cash flows for each of the years in the three-year
period ended December 31, 1995 in conformity with generally accepted accounting
principles.
Jackson, Mississippi KPMG Peat Marwick LLP
March 14, 1996
<PAGE> 24
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31
-----------------------------
1995 1994
----------- -----------
(IN THOUSANDS, EXCEPT SHARE DATA)
<S> <C> <C>
ASSETS
Real estate properties:
Industrial . . . . . . . . . . . . . . . . . . . . . . . . . $ 71,870 69,214
Apartments . . . . . . . . . . . . . . . . . . . . . . . . . 49,658 51,076
Office Buildings . . . . . . . . . . . . . . . . . . . . . . 34,076 35,500
-------- --------
155,604 155,790
Less accumulated depreciation . . . . . . . . . . . . . . . . (19,206) (15,888)
-------- --------
136,398 139,902
Mortgage loans . . . . . . . . . . . . . . . . . . . . . . . . . 6,008 8,817
Land and land purchase-leasebacks . . . . . . . . . . . . . . . . 1,327 2,320
Investment in real estate investment trusts . . . . . . . . . . . 10,787 954
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . 26 301
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . 3,409 2,566
-------- --------
$157,955 154,860
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities
Mortgage notes payable . . . . . . . . . . . . . . . . . . . . . $ 67,203 39,558
Notes payable to banks . . . . . . . . . . . . . . . . . . . . . 4,359 28,671
Accounts payable and accrued expenses . . . . . . . . . . . . . . 2,096 1,167
Minority interests in joint ventures . . . . . . . . . . . . . . 909 2,848
Other liabilities . . . . . . . . . . . . . . . . . . . . . . . . 488 440
-------- --------
75,055 72,684
-------- --------
Shareholders' Equity
Shares of beneficial interest, par value $1.00 per share;
authorized 10,000,000 shares; issued 4,231,656 shares
in 1995 and 4,221,656 shares in 1994 . . . . . . . . . . . . 4,232 4,222
Additional paid-in capital . . . . . . . . . . . . . . . . . . . 68,344 68,210
Undistributed earnings . . . . . . . . . . . . . . . . . . . . . 9,657 9,723
Unrealized gain on securities . . . . . . . . . . . . . . . . . . 667 21
-------- --------
82,900 82,176
-------- --------
$157,955 154,860
======== ========
</TABLE>
See accompanying notes to consolidated financial statements
<PAGE> 25
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31
-----------------------------------
1995 1994 1993
-------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C>
Revenues
Income from real estate operations . . . . . . . . . . $28,386 23,194 13,771
Land rents . . . . . . . . . . . . . . . . . . . . . . 217 398 856
Equity in earnings of real estate investment trust . . 203 123 67
Interest:
Mortgage loans . . . . . . . . . . . . . . . . . . . 1,036 1,041 1,156
Other . . . . . . . . . . . . . . . . . . . . . . . . - 13 18
Other . . . . . . . . . . . . . . . . . . . . . . . . 422 126 220
------- -------- -------
30,264 24,895 16,088
------- -------- -------
Expenses
Operating expenses from real estate operations . . . . 11,575 9,741 6,159
Interest expense . . . . . . . . . . . . . . . . . . . 6,287 3,905 3,415
Depreciation and amortization . . . . . . . . . . . . . 5,613 4,323 2,874
Minority interests in joint ventures . . . . . . . . . 220 163 78
General and administrative expenses . . . . . . . . . . 2,180 2,046 1,531
Stock appreciation rights and incentive
compensation expense (recovery) . . . . . . . . . . . - (129) 320
Recovery of possible losses . . . . . . . . . . . . . . - - (144)
------- -------- -------
25,875 20,049 14,233
------- -------- -------
Income before gains on investments . . . . . . . 4,389 4,846 1,855
------- -------- -------
Gains on investments
Real estate . . . . . . . . . . . . . . . . . . . . . . 3,322 2,322 3,408
Real estate investment trust securities . . . . . . . . - - 1,152
------- -------- -------
3,322 2,322 4,560
------- -------- -------
Net income . . . . . . . . . . . . . . . . . . . $ 7,711 7,168 6,415
======= ======== =======
Net income per share of beneficial interest . . . . . . . $ 1.82 1.74 2.61
======= ======== =======
Weighted average shares outstanding . . . . . . . . . . . 4,226 4,114 2,460
======= ======== =======
</TABLE>
See accompanying notes to consolidated financial statements
<PAGE> 26
CONSOLIDATED STATEMENTS OF CHANGES
IN SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
SHARES OF ADDITIONAL UNREALIZED
BENEFICIAL PAID-IN UNDISTRIBUTED TREASURY GAIN ON
INTEREST CAPITAL EARNINGS SHARES SECURITIES TOTAL
-------- ------- -------- ------ ---------- -----
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C>
BALANCE, DECEMBER 31, 1992 . . . . $ 3,011 51,945 6,426 (14,349) - 47,033
Net income . . . . . . . . . . . - - 6,415 - - 6,415
Cash dividends declared,
$1.60 per share . . . . . . . . - - (4,690) - - (4,690)
Exercise of 5,000 options . . . . - - (68) 129 - 61
Purchase of 1,000 treasury
shares . . . . . . . . . . . . - - - (18) - (18)
Retire 550,354 treasury shares . (550) (13,688) - 14,238 - -
------- ------ ------ ------- ----- -------
BALANCE, DECEMBER 31, 1993 . . . . 2,461 38,257 8,083 - - 48,801
Net income . . . . . . . . . . . - - 7,168 - - 7,168
Cash dividends declared,
$1.31 per share . . . . . . . . - - (5,528) - - (5,528)
Exercise of 78,000 options . . . 78 887 - - - 965
Purchase and retirement
of 46,666 shares . . . . . . . (46) (778) - - - (824)
Issuance of 11,397 shares,
incentive compensation . . . . 11 181 - - - 192
Issuance of 1,750,000 shares in
public offering . . . . . . . . 1,750 30,414 - - - 32,164
Issuance of 696,088 shares in
Eastover Corporation merger . . 696 10,993 - - - 11,689
Retire 728,178 shares in
Eastover Corporation merger . . (728) (11,744) - - - (12,472)
Change in unrealized gain
on securities . . . . . . . . . - - - - 21 21
------- ------ ------ ------- ----- -------
BALANCE, DECEMBER 31, 1994 . . . . 4,222 68,210 9,723 - 21 82,176
Net income . . . . . . . . . . . - - 7,711 - - 7,711
Cash dividends declared,
$1.84 per share . . . . . . . . - - (7,777) - - (7,777)
Exercise of 15,000 options . . . 15 225 - - - 240
Purchase and retirement
of 5,000 shares . . . . . . . . (5) (91) - - - (96)
Change in unrealized gain
on securities . . . . . . . . . - - - - 646 646
------- ------ ------ ------- ----- -------
BALANCE, DECEMBER 31, 1995 . . . . $ 4,232 68,344 9,657 - 667 82,900
======= ====== ====== ======= ===== =======
</TABLE>
See accompanying notes to consolidated financial statements
<PAGE> 27
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31
--------------------------------------
1995 1994 1993
-------- -------- -------
(IN THOUSANDS)
<S> <C> <C> <C>
OPERATING ACTIVITIES:
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . $ 7,711 7,168 6,415
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization of deferred leasing costs . . 5,613 4,323 2,874
Stock appreciation rights and incentive
compensation expense (recovery) . . . . . . . . . . . . . . - (129) 320
Gains on investments, net . . . . . . . . . . . . . . . . . . (3,322) (2,322) (4,560)
Recovery of possible losses . . . . . . . . . . . . . . . . . - - (144)
Real estate investment trust:
Equity in earnings . . . . . . . . . . . . . . . . . . . . (203) (123) (67)
Dividends received . . . . . . . . . . . . . . . . . . . . 182 60 75
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . (134) (64) (18)
Changes in operating assets and liabilities:
Accrued income and other assets . . . . . . . . . . . . . . 834 251 268
Accounts payable, accrued expenses and prepaid
rent . . . . . . . . . . . . . . . . . . . . . . . . . (935) (716) 113
-------- -------- -------
NET CASH PROVIDED BY OPERATING ACTIVITIES . . . . . . . . . . . 9,746 8,448 5,276
-------- -------- -------
INVESTING ACTIVITIES:
Advances on mortgage loans receivable . . . . . . . . . . . . . (150) (1,862) (1,150)
Payments on mortgage loans receivable . . . . . . . . . . . . . 1,950 581 1,845
Sales of real estate investments . . . . . . . . . . . . . . . 8,778 3,491 4,351
Sales of real estate investment trust securities . . . . . . . - - 1,966
Real estate improvements . . . . . . . . . . . . . . . . . . . (4,386) (4,241) (1,802)
Purchases of real estate . . . . . . . . . . . . . . . . . . . (806) (44,584) (23,193)
Purchases of real estate investment trusts shares . . . . . . . (9,263) - (117)
Return of capital dividends . . . . . . . . . . . . . . . . . . 87 197 261
Change in other assets and other liabilities . . . . . . . . . (1,931) (297) (1,234)
-------- -------- -------
NET CASH USED IN INVESTING ACTIVITIES . . . . . . . . . . . . . (5,721) (46,715) (19,073)
-------- -------- -------
FINANCING ACTIVITIES:
Proceeds from bank borrowings . . . . . . . . . . . . . . . . . 30,272 44,620 29,712
Proceeds from mortgage notes payable . . . . . . . . . . . . . 32,100 7,800 9,585
Principal payments on bank borrowings . . . . . . . . . . . . . (54,584) (35,152) (13,472)
Principal payments on mortgage notes payable and
improvement bonds . . . . . . . . . . . . . . . . . . . . . . (4,455) (6,240) (5,701)
Distributions paid to shareholders . . . . . . . . . . . . . . (7,777) (7,339) (3,813)
Purchases of shares of beneficial interest . . . . . . . . . . (96) (824) (18)
Proceeds on exercise of stock options . . . . . . . . . . . . . 240 965 31
Net proceeds from issuance of shares of beneficial interest . . - 32,164 -
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . - (116) -
-------- -------- -------
NET CASH PROVIDED (USED) BY FINANCING ACTIVITIES . . . . . . . (4,300) 35,878 16,324
-------- -------- -------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS . . . . . . . . (275) (2,389) 2,527
Cash and cash equivalents at beginning of year . . . . . . . . . 301 2,690 163
-------- -------- -------
Cash and cash equivalents at end of year . . . . . . . . . . . . $ 26 301 2,690
========= ======== ======
</TABLE>
<PAGE> 28
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31
----------------------------------------
1995 1994 1993
----------- --------- ---------
(IN THOUSANDS)
<S> <C> <C> <C>
Supplemental Cash Flow Information:
Mortgage loans received on sales of real estate . . . . . . . . $ - - 490
Debt assumed by buyer of real estate . . . . . . . . . . . . . - 2,211 2,564
Cash paid for interest . . . . . . . . . . . . . . . . . . . . 5,926 3,958 3,101
Debt assumed by the Trust in purchase of real
estate . . . . . . . . . . . . . . . . . . . . . . . . . . . - 4,813 704
Net liabilities assumed in Eastover merger . . . . . . . . . . - 638 -
</TABLE>
See accompanying notes to consolidated financial statements
<PAGE> 29
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995, 1994 AND 1993
(1) SIGNIFICANT ACCOUNTING POLICIES
(a) PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of EastGroup
Properties ("the Trust"), its wholly-owned subsidiaries and its investment in
six joint ventures in which the Trust has a 75% ownership interest. At December
31, 1995, the six properties included in the joint ventures are 56th Street
Commerce Park, JetPort Commerce Park, Exchange Distribution Center, Jetport 516
Commerce Park, WestPort Commerce Center and JetPort 515 Commerce Park. The
joint venture's assets, liabilities, revenues and expenses are recorded by the
Trust with minority interests provided for the 25% not owned. All significant
intercompany transactions and accounts have been eliminated in consolidation.
(b) FEDERAL INCOME TAXES
EastGroup Properties, a Maryland real estate investment trust, has
qualified as a real estate investment trust under Sections 856-860 of the
Internal Revenue Code, and it intends to continue to qualify as such. The
Trust distributed to its shareholders all of its 1995, 1994 and 1993 taxable
income. Accordingly, no provision for federal income taxes was necessary.
Distributions paid per share for federal income tax purposes follow:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31
-------------------------------
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Ordinary income $ 1.84 1.74 1.55
======== ======= ======
</TABLE>
The Trust's income differs for tax and financial reporting purposes
principally because of (1) the timing of the deduction for the provision for
possible losses and losses on investments, (2) the timing of the recognition of
gains or losses from the sale of investments, (3) different depreciation
methods and lives, and (4) mortgage loans having a different basis for tax and
financial reporting purposes, producing different gains upon collection of
these receivables.
(c) INCOME RECOGNITION
Rental income from real estate operations is recognized on a
straight-line basis over the terms of the operating leases.
Interest income on mortage loans is recognized on the accrual method,
unless there is a significant uncertainty of collection. If a significant
uncertainty exists, interest income is recognized as collected.
Income from land purchase-leaseback investments, including fixed and
percentage rents, is recorded under the operating method, as earned.
The Trust recognizes gains on sales of real estate in accordance with
the principles set forth in Statement of Financial Accounting Standards No. 66
("SFAS 66"), "Accounting for Sales of Real Estate". The provisions of SFAS 66
require upon closing, consideration of the transfer of rights of ownership to
the purchaser, receipt from the purchaser of an adequate cash down payment and
adequate continuing investment by the purchaser. If the requirements for
recognizing gains
<PAGE> 30
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(1) SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
have not been met, the sale and related costs are recorded, but the gain is
deferred and recognized on the installment method as collections are received.
(d) LAND PURCHASE-LEASEBACKS
Land purchase-leasebacks are investments in which the Trust owns the
land underlying income producing buildings and other improvements and leases it
to the owner of the improvements. Generally, the terms of a land lease provide
for a fixed minimum rental and an additional contingent rental equal to a
percentage of the gross income of the property in excess of a base amount. In
addition, the Trust generally shares in the net proceeds of any refinancing of
mortgage indebtedness of the property, except to the extent that the proceeds
are reinvested in the property. Upon the termination of a land lease, the
improvements become the property of the Trust.
(e) REAL ESTATE PROPERTIES
Real estate properties are carried at cost less accumulated
depreciation. Cost includes the carrying amount of the Trust's investment plus
any additional consideration paid, liabilities assumed, costs of securing title
(not to exceed fair market value in the aggregate) and improvements made
subsequent to acquisition. Depreciation of buildings and other improvements,
including personal property, is computed using the straight-line method over
estimated useful lives of 25 to 40 years for buildings and 5 to 10 years for
other improvements and personal property. Maintenance and repair expenses are
charged to expense as incurred, while building improvements are capitalized.
Apartment turnover costs such as carpet, painting and small appliances are
expensed. Geographically, the Trust's investments are concentrated in the
major sunbelt market areas of the southeastern and southwestern United States,
with a special emphasis in the states of Florida and Texas.
(f) MARKETABLE EQUITY SECURITIES
On January 1, 1994, the Trust adopted Statement of Financial Accounting
Standards No. 115, "Accounting for Certain Investments in Debt and Equity
Securities (SFAS 115)." Accordingly, as of December 31, 1995 and 1994, certain
marketable securities, including those held by equity method investees, are
carried at fair value with the unrealized gains of $667,000 and $21,000,
respectively, presented as a separate component of shareholders' equity.
(g) INVESTMENTS IN REAL ESTATE INVESTMENT TRUSTS
The equity method of accounting is used to account for the investment
in LNH REIT, Inc. ("LNH"). The Trust does not have voting control over this
company, but does have the ability to exercise significant influence on
operating and financial policies. Under the equity method, the Trust has
accrued its share of LNH's unrealized security gains in accordance with SFAS
115, "Accounting for Certain Investments in Debt and Equity Securities."
(h) ALLOWANCE FOR POSSIBLE LOSSES
The Trust provides an allowance for possible losses on real estate and
mortgage loan investments for financial reporting purposes which, in the
opinion of the Trustees, is adequate to absorb possible losses determined in
accordance with generally accepted accounting principles. The
<PAGE> 31
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(1) SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
adequacy of the allowance or the need for an allowance is evaluated by the
Trustees quarterly based on a review of investments and properties on an
individual basis.
If the estimated net realizable value of an underlying property or
mortgage loan is less than the carrying amount of the Trust's investments, the
difference is included in the allowance. Although the assumptions and
projections upon which estimates of net realizable value or fair market value
are based reflect the Trustees' best judgment, there can be no assurance that
the projected events will actually occur. Therefore, adjustments to the
allowance for possible losses may be required in subsequent periods.
(i) AMORTIZATION
Debt origination costs are deferred and amortized using the
straight-line method over the term of the loan. Leasing commissions are
deferred and amortized using the straight-line method over the term of the
respective lease.
(j) CASH EQUIVALENTS
The Company considers all highly liquid investments with a maturity of
three months or less when purchased to be cash equivalents.
(k) RECLASSIFICATIONS
Certain reclassifications have been made in the 1994 and 1993
financial statements to conform to the 1995 presentation.
(l) ACCOUNTING CHANGES
The Financial Accounting Standards Board issued Statement (SFAS) No.
114, "Accounting by Creditors for Impairment of a Loan" and (SFAS) No. 118,
"Accounting by Creditors for Impairment of a Loan-Income Recognition and
Disclosure".
SFAS No. 114 requires a creditor to measure impaired and restructured
loans at the present value of expected future cash flows, discounted at the
loan's effective interest rate or, as a practical expedient, at the loans
observable market price or the fair value of collateral if the loan is
collateral dependent. For purposes of this Statement, a loan is considered
impaired when it is probable that a creditor will be unable to collect all
amounts due according to the contractual terms of the loan agreement. SFAS No.
118 addresses how interest income is recognized on impaired loans. SFAS No. 114
and SFAS No. 118 were effective for fiscal years beginning after December 15,
1994. Adoption of these statements did not have a material impact on the
consolidated financial statements.
<PAGE> 32
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(1) SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(m) USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
(2) REAL ESTATE OWNED
A summary of gains (losses) on real estate investments for the years
ended December 31, 1995, 1994 and 1993 follows:
<TABLE>
<CAPTION>
DISCOUNTED RECOGNIZED
NET GAIN
BASIS SALES PRICE (LOSS)
------------------ ---------------------- -----------------
(IN THOUSANDS)
<S> <C> <C> <C>
1995
-----------------------
Real estate properties:
Cascade Office Building $ 1,486 1,486 -
Sunchase Apartments 2,515 4,396 1,881
2100 Exchange Warehouse 549 539 (10)
Cascade Office Building - writedown 136 - (136)
Land purchase leasebacks:
Winchester 450 862 412
Iroquois 320 1,495 1,175
-------- --------- ---------
$ 5,456 8,778 3,322
======== ========= =========
1994
-----------------------
Real estate properties:
North Shore - 5 lots $ 2,053 2,310 257
Land purchase - leasebacks:
Parklane on Peachtree
Apartments 997 3,491 2,494
Bellevue Plaza writedown 429 - (429)
-------- --------- ---------
$ 3,479 5,801 2,322
======== ========= =========
1993
------------------------
Real estate properties:
North Shore - 7 lots $ 2,953 2,953 -
Land purchase - leaseback:
Kings Gate West 500 3,908 3,408
-------- --------- ---------
$ 3,453 6,861 3,408
======== ========= =========
</TABLE>
<PAGE> 33
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(2) REAL ESTATE OWNED (CONTINUED)
The following is a schedule by year of approximate future minimum
rental receipts under noncancelable leases for the real estate properties as of
December 31, 1995 (in thousands):
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31,
------------------------
<S> <C>
1996 $ 14,820
1997 12,717
1998 11,175
1999 6,044
2000 2,610
Later Years 3,818
---------
TOTAL MINIMUM RECEIPTS $ 51,184
=========
</TABLE>
(3) LAND AND LAND PURCHASE-LEASEBACKS
Land purchase-leasebacks are investments in which the Trust owns the
land underlying income producing buildings and other improvements and leases it
to the owner of the improvements. Generally, the terms of a land lease provide
for a fixed minimum rental and an additional contingent rental equal to a
percentage of the gross income of the property in excess of a base amount. In
addition, the Trust generally shares in the net proceeds of any refinancing of
mortgage indebtedness of the property, except to the extent that the proceeds
are reinvested in the property. Upon the termination of a land lease, the
improvements become the property of the Trust.
In February 1995, the Trust sold the Winchester land
purchase-leaseback investment in Dallas, Texas for $862,000 and recognized a
gain for financial reporting purposes of $412,000. In June 1995, the Trust
sold its Iroquois land purchase-leaseback investment in Nashville, Tennessee
for $1,495,000 and recognized a gain for financial reporting purposes of
$1,175,000. Also, the Trust accepted a deed in lieu of foreclosure on the
EastGate Apartments leasehold improvements in Wichita, Kansas after the owners
defaulted on payments to the Trust.
Fixed land rentals required to be paid to the Trust in each of the
next five years and in the aggregate thereafter in connection with the Trust's
land purchase-leaseback investments held as of December 31, 1995 are $142,000
in 1996, $144,000 in 1997, $146,000 in 1998, $133,000 in 1999, $136,000 in 2000
and $5,848,000 in the aggregate thereafter.
In the case of one land purchase-leaseback investment carried at an
aggregate amount of $500,000 as of December 31, 1995, the land tenant has an
option to purchase the land on a formula basis set forth in the respective
leases, but in no event would the purchase price be less than the cost of the
land to the Trust.
The Trust held a first mortgage loan of $2,553,000 as of December 31,
1995 on a property in which the Trust had a land purchase-leaseback investment.
<PAGE> 34
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(3) LAND AND LAND PURCHASE-LEASEBACKS (CONTINUED)
The Trust's land purchase-leaseback investments are subordinate to
senior mortgage loans encumbering the properties. A loss of $429,000 was
recorded in 1994 on the Bellevue Plaza land purchase-leaseback, as a result of
the relocation of the largest tenant at the property which resulted in an
occupancy level of 27%.
(4) MORTGAGE LOANS AND ALLOWANCE FOR POSSIBLE LOSSES
A summary of mortgage loans follows:
<TABLE>
<CAPTION>
DECEMBER 31
------------
1995 1994
---- ----
(IN THOUSANDS)
<S> <C> <C>
First mortgage loans:
Industrial (1 loan) $ 181 2,238
Apartment (1 loan) 2,553 -
Motels (4 loans) 3,073 3,091
Other (3 loans) 201 64
--------- --------
6,008 5,393
--------- --------
Wrap mortgage loans:
Apartments - 3,424
--------- --------
$ 6,008 8,817
========= ========
</TABLE>
In 1994, the Trust charged off $500,000 of the motel loans against the
allowance for possible losses. The net carrying value of the motel loans was
further decreased by an additional $422,000 during 1994. This decrease
represented a bankruptcy settlement accrued in 1994 and was related to the
property collateralizing the motel loans. That property was owned by the Trust
and the bankruptcy settlement was recorded as deferred income because of the
collection difficulties with the motel loans and because all gains on the sale
of the properties collateralizing the motel loans were deferred when the loans
were made because the gain recognition criteria of SFAS 66 were not met when
the properties were sold and have not been met since. In 1995, two of the
motel mortgages were restructured and no loss was recorded. At December 31,
1995, the carrying value of three impaired motel mortgage loans was
$2,217,000. Interest income recorded on the motel mortgages was $240,000 for
1995, $138,000 for 1994 and $205,000 for 1993.
In March 1995, the land tenant on the EastGate Apartment land
purchase-leaseback investment gave the Trust a deed in lieu of foreclosure
because of its inability to meet all of the obligations of the property. The
land purchase-leaseback had a carrying value of $225,000 and the mortgage loan
had a carrying value of $1,009,000, and no loss is anticipated on the
disposition of this property.
<PAGE> 35
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(4) MORTGAGE LOANS AND ALLOWANCE FOR POSSIBLE LOSSES (CONTINUED)
A summary of activity in the allowance for possible losses follows:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31
-----------------------
1995 1994 1993
---- ---- ----
(IN THOUSANDS)
<S> <C> <C> <C>
Balance at beginning of period $ - 500 1,675
Amounts charged-off - (500) (1,175)
---------- ----- ------
Balance at end of period $ - - 500
========== ====== ======
</TABLE>
On September 30, 1993, the Trust sold a portfolio of mortgage loans to
Parkway. Parkway paid the Trust $956,251 in cash for the mortgage loans, which
represented the Trust's book value of these loans on September 30, 1993. The
Trust had no gain or loss on the sale of these mortgage loans.
(5) INVESTMENT IN REAL ESTATE INVESTMENT TRUSTS
The investment in real estate investment trusts ("REIT") consists of
the following:
<TABLE>
<CAPTION>
OWNERSHIP
PERCENTAGE DECEMBER 31, 1995 DECEMBER 31, 1994
DECEMBER 31 ----------------- -----------------
----------- CARRYING FAIR CARRYING FAIR
1995 1994 VALUE VALUE VALUE VALUE
---- ---- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C>
Equity method investee:
LNH REIT, Inc. 23.42% 5.97% $ 3,976 3,928 954 805
------- ------- -------- -------
Non-equity method investee:
Copley Properties, Inc. 14.76% - 6,811 6,811 - -
-------- -------- ---------- ---------
$ 10,787 10,739 954 805
======== ======= ======== =======
</TABLE>
In 1993 the Trust sold all of its then existing investments in real
estate investment trust securities, except LNH REIT, Inc. These
sales of $1,966,000 were made at the market price on the date of sale. A total
gain of $1,152,000 was recorded on the above sales, including $1,022,000 on the
sale of real estate investment trust securities to the Parkway Company, an
affiliated entity.
<PAGE> 36
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(5) INVESTMENT IN REAL ESTATE INVESTMENT TRUSTS (CONTINUED)
Effective January 1, 1995, the Trust, through an affiliated
partnership, provides certain management and administrative services for LNH
REIT, Inc. for an annual fee of $125,000.
The investment in LNH, which is accounted for by the equity method, has
been purchased at amounts less than the Trust's pro rata share of the
investees' book value. This difference of $1,515,000 has been assigned to the
investees' principal assets and is principally being recognized in operations as
the underlying assets are sold.
(6) NOTES PAYABLE TO BANKS
The Trust has a line of credit from a commercial bank in the amount of
$7,000,000 which is secured by the outstanding stock of the Trust's
wholly-owned subsidiary, EastGroup Virginia, Inc. and shares of Copley.
Borrowings under the credit line at December 31, 1995 were $2,259,000 and bear
interest at the LIBOR plus 2.0% (7.9375% at December 31, 1995). The line of
credit expires April 30, 1996. Total loan commitment fees of $35,000 and
$25,000 were paid in 1995 and 1994 for this line of credit.
At December 31, 1995, the Trust had $2,100,000 outstanding under a
$15,000,000 acquisition line of credit from a commercial bank. The acquisition
line has an interest rate of LIBOR plus 2.0% and matures on April 30, 1997. The
line is collateralized by three properties of the Trust with an aggregate
carrying value of $13,995,000 at December 31, 1995. Total loan commitment fees
of $66,000 and $169,000 were paid in 1995 and 1994 for this line of credit.
Average bank borrowings were $22,874,000 in 1995, compared to
$11,086,000 in 1994 with average interest rates of 8.8% in 1995 compared to
7.9% in 1994.
(7) MORTGAGE NOTES PAYABLE
A summary of mortgage notes payable follows:
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------
1995 1994
----- ----
(IN THOUSANDS)
<S> <C> <C>
Garden Villa Apartments mortgage, interest at 8.25%,
principal and interest due $24,041 monthly,
maturing July 1, 2003, secured by real estate
with a carrying amount of $2,726,000 at December
31, 1995 $ 3,135 3,163
2020/2040 and 2100 Exchange Drive Warehouse mortgage,
interest at 9.625%, repaid September 1995 - 576
Interstate DC #1 Warehouse mortgage, interest at 9.25%,
principal and interest due $10,827 monthly, maturing
June 1, 2009, secured by real estate with a carrying
amount of $2,789,000 at December 31, 1995 914 957
</TABLE>
<PAGE> 37
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
<TABLE>
<CAPTION>
(7) MORTGAGE NOTES PAYABLE (CONTINUED)
<S> <C> <C>
Interstate DC #2 Warehouse mortgage, interest at 9.25%,
principal and interest due $12,844 monthly, maturing
June 1, 2009, secured by real estate with a carrying
amount of $3,230,000 at December 31, 1995 1,139 1,185
8150 Leesburg Pike Office Building mortgage, interest at
8.5%, principal and interest due $52,304 monthly,
maturing June 15, 2005, secured by real estate with
a carrying amount of $13,341,000 at December 31,
1995 4,068 4,338
Sunbelt Center Warehouse mortgage, interest at 10.00%,
principal and interest due $39,958 monthly,
maturing September 1, 1997, secured by real
estate with a carrying amount of $5,705,000 at
December 31, 1995 4,204 4,260
Deerwood Warehouse mortgage, interest at 8.375%,
principal and interest due $16,339 monthly,
maturing July 1, 2003, secured by real
estate with a carrying amount of $2,817,000 at
December 31, 1995 1,798 1,841
Doral Club Apartment mortgage, interest at 8.625%,
principal and interest due $36,494 monthly,
maturing October 31, 2003, secured by real
estate with a carrying amount of $6,229,000 at
December 31, 1995 4,359 4,418
Nobel Center Office Building mortgage, interest at
7.5%, principal and interest due $27,476 monthly,
maturing on January 15, 1997, secured by real estate
with a carrying amount of $3,070,000 at
December 31, 1995 2,667 2,788
North Shore Improvement Bonds, interest rates range
from 6.3% to 7.75% and mature serially in various
amounts through September 2, 2016, secured by
land underlying Nobel Center with a carrying
amount of $3,070,000 at December 31, 1995 441 451
</TABLE>
<PAGE> 38
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
<TABLE>
<CAPTION>
(7) MORTGAGE NOTES PAYABLE (CONTINUED)
<S> <C> <C>
Country Club Apartments wrap mortgage, interest at
prime plus 1.0%, repaid August 1995 - 2,286
Sutton House Apartments mortgage, interest at 8.0%,
principal and interest due $45,257 monthly,
maturing October 31, 2003, secured by real
estate with a carrying amount of $8,113,000 at
December 31, 1995 5,894 5,962
JetPort 516 Warehouse mortgage, interest at 8.5%,
principal and interest due $5,857 monthly,
maturing January 1, 2003, repaid September 1995 - 648
Northwest Point Warehouse mortgage interest at
7.75%, principal and interest due $32,857
monthly, maturing March 1, 2001, secured by
real estate with a carrying amount of $6,769,000
at December 31, 1995 4,238 4,301
56th Street Warehouse mortgage, interest at
8.88%, principal and interest due $21,816
monthly, maturing August 1, 2004, secured
by real estate with a carrying amount of
$2,723,000 at December 31, 1995 2,331 2,384
Exchange Distribution Warehouse mortgage,
interest at 8.375%, principal and interest
due $21,498 monthly, maturing August 1, 2005,
secured by real estate with a carrying amount
of $3,179,000 at December 31, 1995 2,484 -
LaVista Apartments mortgage, interest at 8.688%,
principal and interest due $48,667 monthly,
maturing September 1, 2005, secured by real
estate with a carrying amount of $4,801,000 at
December 31, 1995 5,933 -
Westport Commerce Center mortgage, interest at
8.0%, principal and interest due $28,021 monthly,
maturing August 1, 2005, secured by real estate with a
carrying amount of $4,747,000 at December 31, 1995 3,327 -
</TABLE>
<PAGE> 39
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
<TABLE>
<CAPTION>
(7) MORTGAGE NOTES PAYABLE (CONTINUED)
<S> <C> <C>
LakePointe Business Park mortgage, interest at 8.125%,
principal and interest due $81,675 monthly, maturing
October 1, 2005, secured by real estate with a
carrying amount of $10,086,000 at December 31, 1995 10,985 -
JetPort, JetPort 515 & 516 mortgage, interest at 8.125%,
principal and interest due $33,769 monthly, maturing
October 1, 2005, secured by real estate with a carrying
amount of $4,860,000 at December 31, 1995 3,986 -
Plantations mortgage, interest at 7.625%, principal and
interest due $39,599 monthly, maturing December 1, 2005,
secured by real estate with a carrying amount of
$7,005,000 as of December 31, 1995 5,300 -
--------- ---------
$ 67,203 39,558
========= =========
</TABLE>
Approximate principal payments due during the next five years are as
follows: 1996, $6,747,000; 1997, $10,033,000; 1998, $1,367,000; 1999,
$1,486,000; and 2000, $1,615,000.
(8) TRUST ADMINISTRATION
On March 1, 1983, the Trust approved an agreement, which was amended
on March 1, 1984, and again on September 1, 1990, whereby the day-to-day
management was transferred from its former adviser to officers of the Trust,
who were also officers of Eastover Corporation and certain other affiliates.
Certain administrative expenses were allocated monthly among Eastover
Corporation, Congress Street Properties, Inc., Parkway and the Trust based on
the shared expense agreement. Effective December 31, 1994, the Trust terminated
the expense sharing agreement and now maintains its own officers and employees.
(9) REVERSE REPURCHASE AGREEMENTS
The Trust does not in the ordinary course of business take possession
of the securities which collateralize its reverse repurchase agreements (assets
purchased under agreements to resell). The Trust has the right to demand
additional collateral or return of the invested funds at any time the
collateral value is less than the invested funds plus any accrued earnings
thereon. The Trust does, however, conduct these transactions on a short term
basis with financial institutions with which it has normal business
relationships. At December 31, 1995 and 1994, the Trust did not hold reverse
repurchase agreements with any individual counterparty or group of
counterparties in excess of 10% of shareholders' equity.
<PAGE> 40
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(10) SHAREHOLDERS' EQUITY
In 1994, the Trust terminated the previous incentive plans for
officers and adopted the 1994 Management Incentive Plan. The previous plan
included stock options, stock appreciation rights, incentive compensation units
and a bonus plan.
Under the plan existing prior to September 1994, officers exercised
78,000 stock options and stock appreciation rights ("SARs"). The stock option
exercise price was $12.375 per share for a total option price of $965,250.
Compensation was accrued by the Trust for SARs expense based on the excess of
the market price over the exercise price, $12.375 per share, of the SARs.
Compensation expense (recovery) for the SARs was ($251,000) in 1994 and
$320,000 in 1993. Compensation expense for the incentive compensation units
was accrued by the Trust based on the dividends paid by the Trust and in
accordance with a vesting schedule. Compensation expense for the units was
$89,000 in 1994 and $69,000 in 1993. Amounts due in 1995 and 1996 were
estimated and paid in Trust's shares in 1994. The Trust issued 11,397 shares
and recorded an expense of $122,000 which is included with stock appreciation
rights and incentive compensation expense on the 1994 statement of operations.
Compensation for the bonus plan amounted to $122,000 in 1994 and $33,000 in
1993.
The 1994 Management Incentive Plan includes stock options (50% vested
after one year and the other 50% after two years) and an annual incentive
award.
Stock option activity for the 1994 plan for the two years ended
December 31, 1995 follows:
<TABLE>
<CAPTION>
Number Option Price Total Option
of Shares Per Share Price
------------------- ----------------------- ---------------
<S> <C> <C> <C>
BALANCE AT DECEMBER 31, 1993 - - -
Granted 175,250 $18.00 to $19.00 $3,274,500
Relinquished - - -
-------- ----------
BALANCE AT DECEMBER 31, 1994 175,250 3,274,500
Granted 10,000 $18.25 to $20.125 191,875
Relinquished (11,000) $18.00 to $18.25 (199,250)
-------- -----------
BALANCE AT DECEMBER 31, 1995 174,250 $3,267,125
======== ===========
</TABLE>
The annual incentive award program began in 1995 and the Compensation
Committee determined awards based on actual funds from operations per share
("FFO") compared to goals set for the year. The 1995 award of $382,000 is
payable two-thirds in cash and one-third in Shares of the Trust. At
December 31, 1995, 87,125 options were exercisable, and there were
25,750 shares of beneficial interest available for grant under the plan.
The Trust has a Trustees Stock Option Plan, as amended in 1994, under
which an aggregate of 100,000 shares of beneficial interest are reserved for
issuance upon exercise of any options granted. Under the Trustees plan, each
Non-Employee Trustee is granted an initial 5,000 options and 1,500 additional
options on the date of any Annual Meeting at which the Trustee is reelected to
the Board.
<PAGE> 41
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(10) SHAREHOLDERS' EQUITY (CONTINUED)
Stock option activity for the Trustee plan for the two years ended
December 31, 1995 follows:
<TABLE>
<CAPTION>
Number Option Price Total Option
of Shares Per Share Price
----------------- ----------------------- ---------------
<S> <C> <C> <C>
BALANCE AT DECEMBER 31, 1993 35,000 $16.00 to $17.50 $567,500
Granted 16,000 $16.875 to $17.00 270,625
---------- -------------
BALANCE AT DECEMBER 31, 1994 51,000 838,125
Granted 7,500 $19.00 142,500
Exercised (15,000) $16.00 (240,000)
-------- ---------
BALANCE AT DECEMBER 31, 1995 43,500 $ 740,625
======== =========
</TABLE>
All options outstanding at December 31, 1995 were exercisable and there were
41,500 shares of beneficial interest available for grant under the Trustee
Plan.
In calculating net income per share of beneficial interest, the
dilutive effect of the various benefit plans, if any, was not significant.
In January 1994, the Trust completed the public offering of 1,750,000
shares of beneficial interest at $20 per share and received net proceeds of
$32,164,000.
(11) FUTURE ACCOUNTING CHANGES
In March 1995, the Financial Accounting Standards Board (FASB) issued
SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to Be Disposed Of." SFAS No. 121 requires that long-lived
assets and certain identifiable intangibles to be held and used by the Trust be
reviewed for impairment whenever events or changes in circumstances indicate
that the carrying amount of an asset may not be recoverable. Measurement of an
impairment loss for long-lived assets and identifiable intangibles that an
entity expects to hold and use is based on the fair value of the asset. This
statement requires that the majority of long-lived assets and certain
identifiable intangibles to be disposed of be reported at the lower of carrying
amount or fair value less cost to sell.
SFAS No. 121 is effective for fiscal years beginning after December
15, 1995. The adoption of this statement is not expected to have a material
impact on the 1996 consolidated financial statements.
In October 1995, the FASB issued SFAS No. 123, "Accounting for
Stock-Based Compensation." This Statement provides accounting and reporting
standards for stock-based employee compensation plans and also applies to
transactions in which the Trust acquires goods and services from nonemployees
in exchange for the Trust's equity instruments. SFAS No. 123 defines
<PAGE> 42
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(11) FUTURE ACCOUNTING CHANGES (CONTINUED)
a fair value based method of accounting for an employee stock option or similar
equity instrument and encourages all entities to adopt that method of
accounting for all employee stock compensation plans.
Entities electing to remain with the accounting treatment outlined in
APB Opinion No. 25, "Accounting for Stock Issued to Employees" are required to
make pro forma disclosures of net income and net income per share, as if the
fair value based method had been adopted. The accounting and disclosure
requirements of this Statement are effective for transactions entered into in
fiscal years beginning after December 31, 1995. The adoption of this statement
will not have a material impact on the consolidated financial statements
because the Trust will continue to follow the accounting treatment outlined in
APB Opinion No. 25 in preparing its consolidated financial statements.
(12) EASTOVER CORPORATION MERGER
Effective December 22, 1994, the merger of Eastover Corporation
("Eastover") with Eastover Acquisition Corporation ("EAC"), a wholly-owned
subsidiary of the Trust, was completed. EAC was immediately liquidated and
distributed its assets and liabilities to EastGroup. The shareholders of
Eastover received six-tenths of one (.6) share of beneficial interest of
EastGroup for each share of beneficial interest of Eastover held by them.
The merger was accounted for using the purchase method of accounting.
The following balance sheet items were recorded on December 22, 1994:
<TABLE>
<CAPTION>
ASSETS
<S> <C>
Mortgage loans $ 39,000
Cash 28,000
Other assets 81,000
------------
Total Assets $ 148,000
============
LIABILITIES
Notes payable to banks $ 638,000
Other liabilities 148,000
------------
Total 786,000
------------
SHAREHOLDERS' EQUITY
Shares issued, 696,088 shares 11,834,000
Shares retired, 728,178 shares (12,472,000)
(Trust shares owned by
Eastover Corporation)
------------
Net shares retired, 32,090 shares (638,000)
------------
TOTAL LIABILITIES AND SHAREHOLDERS'
EQUITY $ 148,000
============
</TABLE>
<PAGE> 43
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(12) EASTOVER CORPORATION MERGER (CONTINUED)
The operations of Eastover subsequent to December 22, 1994, have been
included in the accompanying consolidated statements of operations. The
unaudited pro-forma effects of the Trust's acquisition of Eastover as if it had
occurred on January 1, 1993, would be to increase revenues by approximately
$18,000 in 1994 and $1,296,000 in 1993 and decrease net income by $412,000 in
1994 and $314,000 in 1993 and net income per share by $.08 in 1994 and $.10 in
1993.
(13) QUARTERLY RESULTS OF OPERATIONS - UNAUDITED
<TABLE>
<CAPTION>
CALENDAR 1995 CALENDAR 1994
QUARTER ENDED QUARTER ENDED
----------------------------------- -----------------------------------
MAR. 31 JUNE 30 SEPT. 30 DEC. 31 MAR. 31 JUNE 30 SEPT. 30 DEC. 31
------- ------- -------- ------- ------- ------- -------- -------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues $ 7,283 7,780 7,732 7,469 5,395 5,965 6,373 7,162
Expenses (6,193) (6,569) (6,668) (6,445) (4,101) (4,634) (5,173) (6,141)
-------- ------- ------- ------- ------- ------- ------- -------
Income before gains (losses)
on investments 1,090 1,211 1,064 1,024 1,294 1,331 1,200 1,021
Gains (losses) on investments 412 1,039 - 1,871 - 2,494 - (172)
-------- ------- ------- ------- ------- ------- ------- -------
Net income $ 1,502 2,250 1,064 2,895 1,294 3,825 1,200 849
======== ======= ======= ======= ======= ======= ======= =======
Net income per share of
beneficial interest $ .36 .53 .25 .68 .34 .91 .28 .20
======== ======= ======= ======= ======= ======= ======= =======
Weighted average shares
outstanding 4,222 4,225 4,227 4,229 3,803 4,211 4,211 4,224
======== ======= ======= ======= ======= ======= ======= =======
</TABLE>
<PAGE> 44
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(14) FAIR VALUE OF FINANCIAL INSTRUMENTS
The following table presents the carrying amounts and estimated fair
values of the Trust's financial instruments at December 31, 1995 and 1994. FASB
Statement No. 107, "disclosures about fair value of financial instruments",
defines the fair value of a financial instrument as the amount at which the
instrument could be exchanged in a current transaction between willing parties.
<TABLE>
<CAPTION>
1995 1994
------------------------ -------------------------
CARRYING FAIR CARRYING FAIR
AMOUNT VALUE AMOUNT VALUE
------ ----- ------ -----
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Financial Assets
Cash and cash equivalents . . . . . . $ 26 26 301 301
Investment in Real estate
investment trusts . . . . . . . . . 10,787 10,739 954 805
Mortgage loans . . . . . . . . . . . . 6,008 7,623 8,817 10,451
Financial Liabilities
Mortgage notes payable . . . . . . . . 67,203 67,109 39,558 38,799
Notes payable to banks . . . . . . . . 4,359 4,359 28,671 28,671
</TABLE>
The carrying amounts shown in the table are included in the balance sheet under
the indicated captions.
The following methods and assumptions were used to estimate fair value of each
class of financial instruments.
CASH AND CASH EQUIVALENTS: The carrying amounts approximate fair value because
of the short maturity of those instruments.
MORTGAGE LOANS: The fair value of performing mortgage loans is estimated using
discounted cash flows at current interest rates for loans with similar terms
and maturities. The fair value for nonperforming loans is based on the
underlying collateral value.
INVESTMENT IN REAL ESTATE INVESTMENT TRUSTS: The fair value of the equity
investment is based on quoted market prices at the reporting date for the
investment.
MORTGAGE NOTES PAYABLE: The fair value of the Trust's mortgage notes payable is
estimated based on the quoted market prices for similar issues or by
discounting expected cash flows at the rates currently offered to the Trust for
debt of the same remaining maturities, as advised by the Trust's bankers.
<PAGE> 45
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(14) FAIR VALUE OF FINANCIAL INSTRUMENTS (CONTINUED)
NOTES PAYABLE TO BANKS: The carrying amounts approximate fair value because of
the variable rate of interest on the debt.
(15) SUBSEQUENT EVENTS
On January 31, 1996, the Trust sold its 146 unit Garden Villa
Apartments in Seattle, Washington for a cash price of $4,400,000 including the
assumption of debt of $3,132,000. The Trust will record a gain of
approximately $1,427,000 ($.34 per share) in the first quarter of 1996.
On February 13, 1996, the Trust and Copley Properties, Inc., both of
which are real estate investment trusts, jointly announced that they entered
into an Agreement and Plan of Merger under which Copley will be merged into
EastGroup. In the merger, each share of Copley's common stock will be converted
into EastGroup shares of beneficial interest with a value of $15.60. The value
of EastGroup shares for purposes of calculating the ratio at which Copley shares
will be converted into EastGroup shares in the merger will be the average of the
closing price of EastGroup shares on the New York Stock Exchange on the 20
trading days immediately preceding the fifth trading day prior to the effective
date of the merger (the "EastGroup Stock Price"); however, the EastGroup Stock
Price will be deemed to equal $20.25 if the average price of EastGroup shares
calculated above is less than or equal to $20.25, and $23.00 if the average
price of EastGroup shares is greater than or equal to $23.00. Copley has the
right, waivable by it, to terminate the merger agreement without liability if
the average closing price of EastGroup shares on the New York Stock Exchange on
the 20 trading days immediately preceding the fifth trading day prior to (i) the
date on which the Securities and Exchange Commission declares EastGroup's
Registration Statement with respect to the merger effective or (ii) the date on
which Copley's stockholders' meeting with respect to the merger is held is equal
to or less than $18.25. The merger is subject to several conditions including
approval by the shareholders of both Copley and EastGroup and registration of
the EastGroup shares to be issued in the merger with the Securities and
Exchange Commission. EastGroup presently owns 14.76% of Copley's outstanding
shares.
On September 6, 1995 (as amended on December 6,1995), EastGroup
Properties and LNH REIT, Inc. ("LNH") announced that Special Committees of
their Boards agreed in principle to a merger between LNH and EastGroup
Properties or a wholly-owned subsidiary of EastGroup. The Merger Agreement was
signed on December 22, 1995. LNH shareholders would receive shares of the
Trust with a value of $8.10 for each LNH share. The number of the Trust shares
that LNH shareholders receive will be determined by dividing the value $8.10 by
the average trading price of the Trust shares during the 10 trading days
immediately preceding the fifth trading day prior to the effective date of the
merger. The Trust presently owns 23.4% of LNH. The merger is subject to
several conditions, including LNH shareholder approval, receipt of satisfactory
fairness opinions by LNH and the Trust, and
<PAGE> 46
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(15) SUBSEQUENT EVENTS (CONTINUED)
registration of the Trust shares to be issued in the merger with the Securities
and Exchange Commission.
(16) RELATED PARTY TRANSACTIONS
EastGroup and Parkway continue to share the same office space at One
Jackson Place in Jackson, Mississippi. EastGroup and Parkway share the rent
with respect to their shared office space based upon the number of employees
each has in such office space divided by the total number of employees of both
companies using the office space. In addition, EastGroup and Parkway share the
services of the Trust's Chief Executive Officer and a limited number of
clerical and support staff employees and expenses related thereto are shared
equally between EastGroup and Parkway. Parkway and EastGroup also share the
expenses of certain office supplies and equipment, and EastGroup reimburses
Parkway for the services of certain employees of Parkway who perform services
for EastGroup on an as requested basis. During the year ended December 31,
1995, EastGroup paid Parkway $387,000 under this cost-sharing arrangement.
<PAGE> 47
INDEPENDENT AUDITORS' REPORT ON FINANCIAL STATEMENT SCHEDULES
THE TRUSTEES AND SHAREHOLDERS
EASTGROUP PROPERTIES:
Under date of March 14, 1996, we reported on the consolidated balance sheets of
EastGroup Properties and subsidiaries, a Maryland real estate investment trust,
as of December 31, 1995 and 1994, and the related consolidated statements of
operations, changes in shareholders' equity and cash flows for each of the
years in the three-year period ended December 31, 1995, which are included in
the 1995 Annual Report on Form 10-K. In connection with our audits of the
aforementioned consolidated financial statements, we also have audited the
related consolidated financial statement schedules as listed in Item 14 (a)(2)
of Form 10-K. These financial statement schedules are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statement schedules based on our audits.
In our opinion, such financial statement schedules, when considered in relation
to the basic consolidated financial statements taken as a whole, present
fairly, in all material respects, the information set forth therein.
Jackson, Mississippi
March 14, 1996 KPMG Peat Marwick LLP
<PAGE> 48
SCHEDULE III
REAL ESTATE PROPERTIES AND ACCUMULATED DEPRECIATION
DECEMBER 31, 1995
(IN THOUSANDS)
<TABLE>
<CAPTION>
INITIAL COST TO THE TRUST COSTS CAPITALIZED
------------------------------------------------ SUBSEQUENT TO ACQUISITION
BUILDINGS -------------------------
AND
IMPROVE- ADVANCES CAPITALIZED
DESCRIPTION ENCUMBRANCES LAND MENTS OTHER UNDER LEASE COSTS OTHER
----------- ------------ ---- ----- ----- ----------- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C>
Acquired
Land subject to
long-term net leases:
Apartments:
Country Club - Alabama (c)(i) 4,245 500 - - - - -
Shopping Centers:
Bellevue Plaza-Nebraska 1,678 437 - - - - (g)(437)
Taco Bell - Kentucky - 12 - - - - -
Ponderosa - Kentucky - 27 - - - - -
Total land subject to
------ -------- ---------- -------- -------- -------- --------
long-term leases 5,923 976 - - - - (437)
------ ------ --------- -------- -------- -------- --------
</TABLE>
<TABLE>
<CAPTION>
GROSS AMOUNT
AT WHICH CARRIED
AT CLOSE OF PERIOD
------------------ ACCUMULATED
BUILDINGS AND DEPRECIATION
LAND IMPROVEMENTS OTHER TOTAL 12/31/95 ACQUIRED
---- ------------ ----- ----- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Acquired
Land subject to
long-term net leases:
Apartments:
Country Club - Alabama (c)(i) 500 - - 500 - 1973
Shopping Centers:
Bellevue Plaza-Nebraska - - - - - 1972
Taco Bell - Kentucky 12 - - 12 - 1994
Ponderosa - Kentucky 27 - - 27 - 1994
Total land subject to ---- ------- ------ ----- ------
long-term leases 539 - - 539 -
---- ------- ------ ----- ------
</TABLE>
<PAGE> 49
REAL ESTATE PROPERTIES AND ACCUMULATED DEPRECIATION
DECEMBER 31, 1995
(IN THOUSANDS)
<TABLE>
<CAPTION>
INITIAL COST TO THE TRUST
DESCRIPTION ENCUMBRANCES LAND BUIDINGS AND IMPROVEMENTS
- ----------- ------------ ---- -------------------------
<S> <C> <C> <C>
Real estate properties (d) and (e):
Industrial:
2020/2040 Exchange-Texas - 250 750
401 Exchange-Texas - 286 428
Interstate #1-Texas 914 832 2,161
Interstate #2-Texas 1,139 925 2,780
Venture Duplex-Texas - 422 891
Venture Distribution-Texas - 1,030 2,871
Rampart-Colorado - 1,023 3,861
Sunbelt-Florida 4,204 1,034 5,056
La Quinta-Florida - 421 575
Deerwood-Florida 1,798 1,147 1,799
56th Street - Florida 2,331 551 2,126
JetPort Commerce Park - Florida (j) 3,986 469 1,882
Lake Pointe - Florida 10,985 3,442 6,450
Exchange Dist. - Florida 2,484 603 2,414
Jetport 516 - Florida (j) - 267 1,068
Jetport 515 - Florida (j) - 121 685
Phillips - Florida - 1,375 2,961
Northwest Point - Texas 4,238 1,243 5,640
Westport - Florida 3,327 980 3,800
Baxter Healthcare - Oklahoma - 120 1,154
Office Buildings:
Nobel Center - California 3,108 542 -
8150 Leesburg Pike - Virginia 6,327 2,208 14,068
Santa Fe Energy - Texas - 623 9,793
Apartments:
Pin Oaks-Texas (k) - 275 1,378
Garden Villa-Washington 3,135 304 2,219
LaVista-Georgia 5,933 1,526 2,886
Doral Club-Texas 4,359 670 5,976
Sutton House - Texas 5,894 471 8,098
Plantations at Killearn - Florida 5,300 855 6,351
Hampton House - Mississippi (k) 2,100 575 5,706
Grande Pointe - Alabama (k) - 615 5,499
EastGate - Kansas - 276 884
Land (f):
Jefferson Parish-Louisiana - 3,050 -
Denver-Colorado - 196 -
-------- ------ -------
Total real estate owned 71,562 28,727 112,210
-------- ------ -------
Total $ 77,485 29,703 112,210
======== ====== =======
</TABLE>
Notes:
<PAGE> 50
SCHEDULE III
(CONTINUED)
<TABLE>
<CAPTION>
GROSS AMOUNT
COSTS CAPITALIZED AT WHICH CARRIED
SUBSEQUENT TO ACQUISITION AT CLOSE OF PERIOD
-------------------------- ------------------
BUILDINGS ACCUMULATED
CAPITALIZED AND DEPRECIATION YEAR YEAR
COSTS OTHER LAND IMPROVEMENTS TOTAL DEC. 31, 1995 ACQUIRED CONSTRUCTED
----- ----- ---- ------------ ----- ------------- -------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
170 - 250 920 1,170 198 1988 1979
28 - 286 456 742 88 1988 1979
389 - 832 2,550 3,382 593 1988 1978
186 - 925 2,966 3,891 661 1988 1978
173 - 422 1,064 1,486 256 1988 1979
540 - 1,030 3,411 4,441 667 1988 1979
282 - 1,023 4,143 5,166 792 1988 1987
546 - 1,034 5,602 6,636 931 1989 1987
79 - 440 635 1,075 123 1989 1974
201 - 1,147 2,000 3,147 330 1989 1978
235 - 551 2,361 2,912 189 1993 1981/86
609 - 469 2,491 2,960 214 1993 1974
798 - 3,442 7,248 10,690 604 1993 1986/87
295 - 603 2,709 3,312 133 1994 1975
21 - 267 1,089 1,356 43 1994 1979/85
1 - 121 686 807 6 1995 1985
1,263 - 1,375 4,224 5,599 128 1994 1984
74 - 1,243 5,714 6,957 188 1994 1984/85
88 - 980 3,888 4,868 121 1994 1983/87
- - 120 1,154 1,274 30 1994 1986
3,687 - 542 3,687 4,229 1,159 1987 1986
2,898 - 2,208 16,966 19,174 5,833 1975/89 1974
256 - 623 10,049 10,672 496 1994 1981
985 - 275 2,363 2,638 913 1980 1968
1,304 - 531 3,296 3,827 1,101 1986/93 1968
1,313 - 1,526 4,199 5,725 924 1991 1968
453 - 670 6,429 7,099 870 1992 1985
165 - 471 8,263 8,734 621 1993 1985
210 - 855 6,561 7,416 411 1994 1990
171 - 575 5,877 6,452 271 1994 1990
249 - 615 5,748 6,363 274 1994 1983
244 - 276 1,128 1,404 38 1995 1968/69
49 (2,541)(h) 558 - 558 - 1978 n/a
34 - 230 - 230 - 1991 n/a
------ ------ ------ ------- ------- ------
17,996 (2,541) 26,515 129,877 156,392 19,206
------ ------ ------ ------- ------- ------
17,996 (2,978) 27,054 129,877 156,931 19,206
====== ====== ====== ======= ======= ======
(a)(b) (a)
</TABLE>
(continued)
<PAGE> 51
(a) CHANGES IN REAL ESTATE PROPERTIES FOLLOW:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
----------------------
1995 1994 1993
---------------------------------------------
(IN THOUSANDS)
<S> <C> <C> <C>
Balance at beginning of year . . . . . . $ 158,110 107,719 86,125
Improvements . . . . . . . . . . . . . . 4,386 4,402 1,802
Deed in lieu of foreclosure . . . . . . 1,002 - -
Investment in real estate
properties (1) . . . . . . . . . . . . 806 51,680 24,443
Writedown of real estate properties . . (136) (429) -
Carrying amount of investments sold . . (7,237) (3,050) (4,651)
Writeoff of fully depreciated assets . . - (2,212) -
--------- --------- -------
Balance at end of year . . . . . . . . . $ 156,931 158,110 107,719
========= ======== =======
</TABLE>
(1) Includes minority interest in JetPort Commerce Park, 56th Street
Commerce Park, Exchange Distribution Center, JetPort 516 Commerce
Park, JetPort 515 Commerce Park and Westport Commerce Center of
$4,054,000 in 1995 and $3,701,000 in 1994.
Changes in the accumulated depreciation on real estate properties follow:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
----------------------
1995 1994 1993
---- ---- ----
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Balance at beginning of year . . . . . . $ 15,888 13,981 11,130
Depreciation expense . . . . . . . . . . 5,235 4,119 2,851
Accumulated depreciation on assets sold (1,917) - -
Write-off of fully depreciated assets . - (2,212) -
--------- -------- -------
Balance at end of year . . . . . . . . . $ 19,206 15,888 13,981
========= ======== ======
</TABLE>
(b) The aggregate cost for federal income tax purposes is approximately
$118,763,000. The federal income tax return for the year ended
December 31, 1995 has not been filed and, accordingly, the income tax
basis of real estate properties as of December 31, 1995 is based on
preliminary data.
(c) The land tenant has the option, subject to certain conditions, to
repurchase the land at a price which would not be less than the cost
of the land interest to the Trust.
(d) Reference is made to allowance for possible losses on real estate
investments in the notes to consolidated financial statements.
(e) The Trust computes depreciation using the straight-line method over
the estimated useful lives of the buildings (25 to 40 years) and other
improvements (5 to 10 years).
(f) The investment is not producing income to the Trust as of December 31,
1995.
<PAGE> 52
(g) Represents net proceeds from the condemnation of a portion of the land
underlying the shopping center of $8,000 and writedown of $429,000.
(h) Represents a writedown of $2,496,000 and income received but deferred
of $45,000.
(i) Real estate land converted to land purchase-leasebacks.
(j) The JetPort mortgage is collateralized by JetPort Commerce Park,
JetPort 516, and JetPort 515.
(k) The acquisition line of credit is collateralized by Pin Oaks
Apartments, Hampton House Apartments and Grande Pointe Apartments.
<PAGE> 53
SCHEDULE IV
MORTGAGE LOANS ON REAL ESTATE
DECEMBER 31, 1995
(IN THOUSANDS)
<TABLE>
<CAPTION>
INTEREST FINAL PERIODIC
NUMBER OF LOANS RATE MATURITY DATE PAYMENT TERMS PRIOR LIENS
--------------- ---- ------------- ------------- -----------
<S> <C> <C> <C> <C> <C>
First mortgage loans (c):
MOTELS:
Jacksonville, Florida 1 10% 4/00 P&I monthly -
Nashville, Tennessee 1 9% 5/98 P&I monthly -
Nashville, Tennessee 1 10% 7/97 P&I monthly -
Gainesville, Florida 1 10% 1/02 Interest monthly -
INDUSTRIAL:
Tampa, Florida 1 prime + .125% 10/01 Interest monthly -
APARTMENTS:
Country Club - Alabama 1 8.5%-9%(d) 12/99 (d) -
OTHER LOANS 3 8.5%-10% 9/99-1/08 P&I monthly -
--------- ---------
Total first mortgage loans 9 -
========= =========
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT
FACE AMOUNT CARRYING OF LOANS SUBJECT TO
OF MORTGAGES AMOUNT OF DELINQUENT PRINCIPAL
DECEMBER 31, 1995 MORTGAGES OR INTEREST (e)
----------------- ---------- --------------------
<S> <C> <C> <C>
First mortgage loans (c):
MOTELS:
Jacksonville, Florida $ 820 437 -
Nashville, Tennessee 953 856 -
Nashville, Tennessee 878 678 878
Gainesville, Florida 1,489 1,102 -
INDUSTRIAL:
Tampa, Florida 181 181 -
APARTMENTS:
Country Club - Alabama 4,245 2,553(d) -
OTHER LOANS 201 201 -
------ ------ ------
Total first mortgage loans $8,767 6,008(a)(b) 878
====== ====== ======
</TABLE>
<PAGE> 54
MORTGAGE LOANS ON REAL ESTATE (CONTINUED)
Notes:
(a) Changes in mortgage loans were as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
---------------------------------------
1995 1994 1993
---- ---- ----
(IN THOUSANDS)
<S> <C> <C> <C>
Balance at beginning of year $ 8,817 8,383 8,588
Loans to facilitate the sale of property, net of
deferred gains 150 - 491
Loan to facilitate the purchase of property - 1,862 1,150
Deed in lieu of foreclosure (1,009) - -
Payments (2,088) (734) (2,066)
Amortization of discount on loans, net 138 154 220
Allocation of allowance - (500) -
Writedown of mortgage notes receivable - (457) -
Mortgage note receivable from Eastover merger - 39 -
Restructure of mortgage note receivable - 70 -
-------- -------- --------
Balance at end of year $ 6,008 8,817 8,383
======== ======== ========
</TABLE>
(b) The aggregate cost for federal income tax purposes is approximately
$7,376,000. The federal income tax return for the year ended
December 31, 1995 has not been filed and, accordingly, the income tax
basis of mortgage loans as of December 31, 1995 is based on
preliminary data.
(c) Reference is made to allowance for possible losses on real estate
investments in the notes to consolidated financial statements.
(d) Effective January 1, 1994, this note was modified. The interest rate
decreased from 9% to 8.50% beginning January 1, 1994, increased to
8.75% as of January 1, 1995 and will increase to 9% as of January 1,
1996. The past due interest and land rent of $70,000 was added to the
outstanding face value of the mortgage balance increasing it to
$4,245,000. The maturity of the loan was extended from August 28,
1996 to December 31, 1999. Prior to this modification, the stated rate
on the note was 9%. The carrying amount of this note is net of the
deferred gain of $1,127,000 and interest valuation of $565,000.
The deferred gain is recognized on the installment method.
(e) Interest or principal in arrears for three months or less is
disregarded in computing principal amount of loans subject to
delinquent principal or interest.
<PAGE> 55
EXHIBIT (11) STATEMENT RE: COMPUTATION OF PER SHARE EARNINGS
(In thousands)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
-----------------------------
1995 1994 1993
-------- -------- --------
<S> <C> <C> <C>
Primary
Average shares outstanding....................... $ 4,226 4,114 2,460
Net effect of dilutive stock options - Based on
the treasury stock method using average
market price....................................... 14 27 39
------- ------ -------
TOTAL.............................................. $ 4,240 4,141 2,499
======= ===== =====
Net income (loss).................................. $ 7,711 7,168 6,415
======= ===== =====
Per share amount................................... $ 1.82 1.73 2.57
======= ====== ======
</TABLE>
Note: The above dilution is less than 3% or anti-dilutive, thus earnings per
share are based on the average shares outstanding.
<PAGE> 56
PART IV
ITEM. 25 LIST OF SUBSIDIARIES
100% Owned Subsidiaries
EastGroup California, Inc.
EastGroup Florida, Inc.
EastGroup Houston, Inc.
EastGroup Jackson, Inc.
EastGroup Jacksonville, Inc.
EastGroup San Antonio, Inc.
EastGroup Sunbelt, Inc.
EastGroup Tallahassee, Inc.
EastGroup Tampa, Inc.
EastGroup Virginia, Inc.
EastGroup Alabama, Inc.
EGP Managers, Inc.
Partnerships, with Partners indented
EGP Houston Partners Ltd.
99% EastGroup Properties
1% EastGroup Houston, Inc.
EGP San Antonio Partners, Ltd.
99% EastGroup Properties
1% EastGroup San Antonio, Inc.
EGP Texas Partners Ltd.
99% EastGroup Properties
1% EastGroup Texas
GV Partners
78% EastGroup Properties
22% EastGroup California, Inc.
<PAGE> 57
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
EASTGROUP PROPERTIES
By: /s/ David H. Hoster
-----------------------------------------
David H. Hoster II, President & Trustee
March 19, 1996
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
<TABLE>
<S> <C>
* /s/ H. C. Bailey /s/ Leland R. Speed
- ------------------------------------------- ---------------------------------------------------
H. C. Bailey, Jr., Trustee Leland R. Speed, Chairman of the Board
March 19, 1996 (Principal Executive Officer)
March 19, 1996
* /s/ David Osnos * /s/ Alexander G. Anagnos
- ------------------------------------------- ---------------------------------------------------
David Osnos, Trustee Alexander G. Anagnos, Trustee
March 19, 1996 March 19, 1996
* /s/ John Palmer /s/ Diane W. Hayman
- ------------------------------------------- ---------------------------------------------------
John N. Palmer, Trustee Diane W. Hayman, Controller
March 19, 1996 (Principal Accounting Officer)
March 19, 1996
* /s/ Harold B. Judell /s/ N. Keith McKey
- ------------------------------------------- ---------------------------------------------------
Harold B. Judell, Trustee N. Keith McKey, Executive Vice-President,
March 19, 1996 Chief Financial Officer and Secretary
(Principal Financial Officer)
March 19, 1996
/s/ N. Keith McKey
- -------------------------------------------
* By N. Keith McKey, Attorney in fact
</TABLE>
<PAGE> 1
EASTGROUP PROPERTIES
POWER OF ATTORNEY
The undersigned Trustee of EastGroup Properties, a State of Maryland
real estate investment trust, hereby constitutes and appoints N. Keith McKey
as the true and lawful Attorney-in-fact and Agent of the undersigned to sign on
behalf of the undersigned: (a) the Annual Report of the Company on Form 10-K
(or such other form as may be required) for the year ended December 31, 1995 to
be filed with the Securities and Exchange Commission ("SEC"); and (b) any and
all amendments to such Report as may be required to be filed with the SEC.
\s\ Alexander G. Anagnos
----------------------------------
Alexander G. Anagnos
Trustee
Date: 3/15/96
------------------
<PAGE> 2
EASTGROUP PROPERTIES
POWER OF ATTORNEY
The undersigned Trustee of EastGroup Properties, a State of Maryland
real estate investment trust, hereby constitutes and appoints N. Keith McKey
as the true and lawful Attorney-in-fact and Agent of the undersigned to sign on
behalf of the undersigned: (a) the Annual Report of the Company on Form 10-K
(or such other form as may be required) for the year ended December 31, 1995 to
be filed with the Securities and Exchange Commission ("SEC"); and (b) any and
all amendments to such Report as may be required to be filed with the SEC.
\s\ H.C. Bailey, Jr.
----------------------------------
H.C. Bailey, Jr.
Trustee
Date: 3/15/96
--------------------------
<PAGE> 3
EASTGROUP PROPERTIES
POWER OF ATTORNEY
The undersigned Trustee of EastGroup Properties, a State of Maryland
real estate investment trust, hereby constitutes and appoints N. Keith McKey
as the true and lawful Attorney-in-fact and Agent of the undersigned to sign on
behalf of the undersigned: (a) the Annual Report of the Company on Form 10-K
(or such other form as may be required) for the year ended December 31, 1995 to
be filed with the Securities and Exchange Commission ("SEC"); and (b) any and
all amendments to such Report as may be required to be filed with the SEC.
\s\ Harold B. Judell
----------------------------------
Harold B. Judell
Trustee
Date: 3/15/96
---------------------------
<PAGE> 4
EASTGROUP PROPERTIES
POWER OF ATTORNEY
The undersigned Trustee of EastGroup Properties, a State of Maryland
real estate investment trust, hereby constitutes and appoints N. Keith McKey
as the true and lawful Attorney-in-fact and Agent of the undersigned to sign on
behalf of the undersigned: (a) the Annual Report of the Company on Form 10-K
(or such other form as may be required) for the year ended December 31, 1995 to
be filed with the Securities and Exchange Commission ("SEC"); and (b) any and
all amendments to such Report as may be required to be filed with the SEC.
\s\ David M. Osnos
----------------------------------
David M. Osnos
Trustee
Date: 3/15/96
-------------------------------
<PAGE> 5
EASTGROUP PROPERTIES
POWER OF ATTORNEY
The undersigned Trustee of EastGroup Properties, a State of Maryland
real estate investment trust, hereby constitutes and appoints N. Keith McKey
as the true and lawful Attorney-in-fact and Agent of the undersigned to sign on
behalf of the undersigned: (a) the Annual Report of the Company on Form 10-K
(or such other form as may be required) for the year ended December 31, 1995 to
be filed with the Securities and Exchange Commission ("SEC"); and (b) any and
all amendments to such Report as may be required to be filed with the SEC.
\s\ John N. Palmer
----------------------------------
John N. Palmer
Trustee
Date: 3/18/96
---------------------------------
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000049600
<NAME> EASTGROUP PROPERTIES
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<CASH> 26
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 155,604
<DEPRECIATION> (19,206)
<TOTAL-ASSETS> 157,955
<CURRENT-LIABILITIES> 0
<BONDS> 71,562
<COMMON> 4,232
0
0
<OTHER-SE> 78,668
<TOTAL-LIABILITY-AND-EQUITY> 157,955
<SALES> 0
<TOTAL-REVENUES> 30,264
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 19,588
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 6,287
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 4,389
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 7,711
<EPS-PRIMARY> 1.82
<EPS-DILUTED> 1.82
</TABLE>
