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<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED): JANUARY 30, 1997
EASGTROUP PROPERTIES
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
MARYLAND
(State or other jurisdiction of incorporation)
1-7094 13-2711135
(Commission File Number) (IRS Employer Identification No.)
300 ONE JACKSON PLACE
188 EAST CAPITOL STREET
P.O. BOX 22728
JACKSON, MISSISSIPPI 39225-2728
(Address of principal executive offices) (Zip Code)
Registrant's telephone number (601) 354-3555
(Former name or former address, if changed since last report)
1
<PAGE> 2
FORM 8-K
EASTGROUP PROPERTIES
ITEM 5. OTHER EVENTS
------------
On August 9, 1996, EastGroup Properties purchased the Walnut Business Center
("Walnut") in Fullerton, California. Walnut is a two building industrial
complex with 234,070 functional square feet. The $8,200,000 purchase price was
paid with funds obtained under a line of credit with a local commercial
bank with an interest rate of LIBOR plus 1.85%. Walnut was 100% leased at the
acquisition date and the Trust expects minimal capital expenditures. Walnut
competes in the North Orange County sub-market of Orange County, California.
The average rental rates of the leases approximate market rates. EastGroup is
not aware of any material factors relating to Walnut that would cause the
reported financial information not to be necessarily indicative of future
operating results.
In 1996, EastGroup completed purchase business combinations - with LNH REIT,
Inc. on May 14, 1996 and Copley Properties, Inc. on June 19, 1996; two
property acquisitions - Walnut on August 9, 1996 and Braniff Park West on
September 19, 1996 and four material dispositions - Garden Villa Apartments on
January 31, 1996, Sample I-95 land on July 26, 1996, Pin Oaks Apartments on
November 27, 1996 and Plantations Apartments on December 19, 1996.
The unaudited Pro Forma Consolidated Financial Statements that are attached
hereto set forth the pro forma effects of the transactions.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
---------------------------------
(A) FINANCIAL STATEMENTS
The following audited financial statement of Walnut Business Center for the year
ended December 15, 1995 is filed herewith. Also included is the unaudited
financial statement for the nine months ended September 15, 1996.
<TABLE>
<CAPTION>
WALNUT BUSINESS CENTER PAGE
- ---------------------- ----
<S> <C>
Independent Auditors' Report 4
Historical Summary of Gross Income and Direct Operating Expenses - for the
year ended December 15, 1995 and nine months ended September 15, 1996 (unaudited) 5
Notes to Historical Summary of Gross Income and Direct Operating Expenses 6
(B) PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS.
The following unaudited Pro Forma Consolidated Financial Statements are filed
herewith:
EASTGROUP PROPERTIES
- --------------------
Pro Forma Consolidated Balance Sheet
(Unaudited) - as of September 30, 1996 8
Pro Forma Consolidated Statement of
Operations (Unaudited) - for the nine
months ended September 30, 1996 10
Pro Forma Consolidated Statement of
Operations (Unaudited) - for the year
ended December 31, 1995 14
</TABLE>
(C) EXHIBITS.
The following exhibit is included herein:
23(a) Consent of Independent Auditors
2
<PAGE> 3
FORM 8-K
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
EastGroup Properties
(Registrant)
Dated: January 30, 1997 By: /s/ Keith McKey
N. Keith McKey, CPA
Executive Vice-
President, Chief
Financial Officer,
and Secretary
/s/ Diane W. Hayman
Diane W. Hayman, CPA
Controller
3
<PAGE> 4
INDEPENDENT AUDITORS' REPORT
WALNUT BUSINESS PARK:
We have audited the accompanying historical summary of gross income and direct
operating expenses (Historical Summary) of Walnut Business Park (the Property)
for the year ended December 15, 1995. This Historical Summary is the
responsibility of the Property's management. Our responsibility is to express an
opinion on the Historical Summary based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the Historical Summary is free of material misstatement.
An audit includes examining, on a test basis, evidence supporting the amounts
and disclosures in the Historical Summary. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall presentation of the Historical Summary. We believe
that our audit provides a reasonable basis for our opinion.
The accompanying Historical Summary was prepared for the purpose of complying
with the rules and regulations of the Securities and Exchange Commission (for
incorporation by reference in the Registration Statement on Form S-3 of
EastGroup Properties) as described in note 2 and is not intended to be a
complete presentation of revenues and expenses.
In our opinion, the historical summary referred to above presents fairly, in all
material respects, the gross income and direct operating expenses described in
note 4 of Walnut Business Park for the year ended December 15, 1995, in
conformity with generally accepted accounting principles.
KPMG Peat Marwick LLP
Jackson, Mississippi
January 28, 1997
4
<PAGE> 5
WALNUT BUSINESS PARK
HISTORICAL SUMMARY OF GROSS INCOME AND DIRECT OPERATING EXPENSES
<TABLE>
<CAPTION>
YEAR ENDED NINE MONTHS ENDED
DECEMBER 15, 1995 SEPTEMBER 15, 1996
----------------- ------------------
(UNAUDITED)
(IN THOUSANDS)
<S> <C> <C>
Gross income:
Base rental income $ 728 688
Common area maintenance reimbursements 118 122
Other income 1 1
------ ------
847 811
------ ------
Direct operating expenses:
Real estate taxes 92 70
Management fees 22 20
Insurance 39 40
Utilities 30 15
Repairs and maintenance 46 39
------ ------
229 184
------ ------
Excess of gross income over
direct operating expenses $ 618 627
====== ======
</TABLE>
See accompanying notes to historical summary.
5
<PAGE> 6
WALNUT BUSINESS PARK
NOTES TO HISTORICAL SUMMARY OF GROSS INCOME AND DIRECT OPERATING EXPENSES
(UNAUDITED AS TO INTERIM PERIOD)
(1) BUSINESS
Walnut Business Park ("Walnut"), is a warehouse complex located in
Fullerton, California. Walnut is comprised of two buildings with a total of
approximately 261,000 square feet of leasable space (26,930 square feet with
limited functionality).
(2) BASIS OF PRESENTATION
The historical summary has been prepared for the purpose of complying
with Rule 3-14 of the Securities and Exchange Commission Regulation S-X (for
incorporation by reference in the Registration Statement on Form S-3 of
EastGroup Properties) and is not a complete presentation of Walnut's revenues
and expenses. The historical summary has been prepared on the accrual basis of
accounting.
The accompanying interim unaudited historical summary has been prepared
pursuant to the rules and regulations of the Securities and Exchange Commission.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted pursuant to such rules and regulations, although
management believes that the disclosures are adequate to make the information
presented not misleading. In the opinion of management, all adjustments and
eliminations (consisting only of normal recurring adjustments) necessary to
present fairly the historical summary for the nine months ended September 15,
1996, have been included. The results of operations for such interim period are
not necessarily indicative of the results for the full year.
Management of Walnut has made estimates and assumptions relating to the
reporting of income and expenses and the disclosure of contingent assets and
liabilities to prepare the historical summary in conformity with generally
accepted accounting principles. Actual results could differ from those
estimates.
6
<PAGE> 7
(3) GROSS INCOME
Walnut leases warehouse space under various operating lease agreements
with its tenants. All leases are accounted for as operating leases. Base rental
income is recognized on a straight-line basis over the terms of the operating
leases. These leases include provisions under which Walnut is reimbursed for
certain common area maintenance costs. Certain leases contain renewal options
for various periods at various rental rates.
A summary of minimum rents to be received from tenants under
noncancellable operating leases in effect at December 15, 1995 follows:
<TABLE>
<CAPTION>
YEAR ENDING
DECEMBER 15,
------------
<S> <C>
1996 $ 857,000
1997 967,000
1998 945,000
1999 916,000
2000 700,000
Later years 1,496,000
---------
$5,881,000
==========
</TABLE>
(4) DIRECT OPERATING EXPENSES
Direct operating expenses include only those costs comparable to the
proposed future operation of Walnut. Costs such as mortgage interest,
depreciation, amortization and professional fees are excluded from the
historical summary.
During 1995, Walnut was managed by Investment Development Services,
Inc. for a fee based on 2.9% of total collections, as defined.
(5) RELATED PARTY TRANSACTIONS
Walnut incurred insurance expense of approximately $39,000 with a
related party in 1995.
(6) SUBSEQUENT EVENT
In August 1996, EastGroup Properties purchased Walnut.
7
<PAGE> 8
EASTGROUP PROPERTIES
PRO FORMA CONSOLIDATED BALANCE SHEET
(UNAUDITED)
AS OF SEPTEMBER 30, 1996
The following unaudited pro forma consolidated balance sheet sets forth
the effect of the November 27, 1996 disposition of Pin Oaks Apartments ("Pin
Oaks") and the December 19, 1996 disposition of Plantation Apartments
("Plantations") as if the dispositions had been consummated on September 30,
1996. The unaudited pro forma consolidated balance sheet has been prepared by
management of EastGroup based upon the historical financial statements of
EastGroup and the adjustments and assumptions in the accompanying notes to the
unaudited pro forma consolidated financial statements. This unaudited pro forma
consolidated balance sheet may not be indicative of the results that actually
would have occurred if the dispositions had been in effect on the dates
indicated. The unaudited pro forma consolidated balance sheet should be read in
conjunction with the financial statements and the notes to the financial
statements of EastGroup in its annual report on Form 10-K for the period ended
December 31, 1995.
<TABLE>
<CAPTION>
EASTGROUP
SEP. 30,
1996 MATERIAL PRO FORMA
(HISTORICAL) DISPOSITIONS(1) CONSOLIDATED
------------ --------------- ------------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C>
ASSETS
Real estate properties (net of
accumulated depreciation) $266,073 $(8,440) $257,633
Investment in joint venture 4,258 -- 4,258
Mortgage loans (net of allowance for
losses) 12,624 -- 12,624
Land and land purchase-leasebacks 1,342 -- 1,342
Cash and cash equivalents 612 -- 612
Other assets 4,310 (117) 4,193
-------- ------- --------
$289,219 $(8,557) $280,662
======== ======= ========
LIABILITIES
Mortgage notes payable $120,885 $(5,226) $115,659
Notes payable to banks 17,780 (6,244) 11,536
Accounts payable, accrued expenses
and other liabilities 3,054 -- 3,054
Minority interest 3,059 -- 3,059
Other liabilities 1,054 -- 1,054
-------- ------- ---------
145,832 (11,470) 134,362
-------- ------- ---------
SHAREHOLDERS' EQUITY
Shares of beneficial interest 7,027 -- 7,027
Additional paid-in-capital 127,178 -- 127,178
Undistributed earnings 9,182 2,913 12,095
-------- ------- --------
143,387 2,913 146,300
-------- ------- --------
$289,219 $(8,557) $280,662
======== ======= ========
Book value per share $ 20.41 $ 20.82
======== ========
Shares outstanding 7,027 7,027
======== ========
</TABLE>
8
<PAGE> 9
EASTGROUP PROPERTIES
NOTES TO PRO FORMA CONSOLIDATED BALANCE SHEET
(UNAUDITED)
AS OF SEPTEMBER 30, 1996
(1) Material dispositions include the disposition of the Pin Oaks
Apartments on November 27, 1996 for $4,235,000 net proceeds and the
Plantations Apartments on December 19, 1996 for $7,235,000 net
proceeds. The proceeds from the Pin Oaks Apartments were used to repay
bank debt. $5,226,000 of the proceeds from the Plantations Apartments
disposition was used to repay mortgage debt and the balance was used to
repay bank debt.
9
<PAGE> 10
EASTGROUP PROPERTIES
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
(UNAUDITED)
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996
The following unaudited pro forma consolidated statement of operations
for the nine months ended September 30, 1996 sets forth the effect of
EastGroup's merger with LNH REIT and Copley and EastGroup and Copley's recent
acquisitions and material dispositions as if these transactions had been
consummated on January 1, 1995. The pro forma consolidated statement of
operations has been prepared by management of EastGroup based upon historical
statements of operations of EastGroup, LNH REIT and Copley and the adjustments
and assumptions in the accompanying notes to the unaudited pro forma
consolidated financial statements. The pro forma statement of operations may
not be indicative of the results that actually would have occurred if the
transactions had been in effect on the dates indicated or which may be obtained
in the future. The pro forma statement of operations should be read in
conjunction with their notes and the other financial statements and notes to
the financial statements of EastGroup.
<TABLE>
<CAPTION> COPLEY 1996
EASTGROUP HISTORICAL
SEP. 30, OPERATIONS
1996 RECENT MATERIAL PRIOR TO
(HISTORICAL) ACQUISITIONS(9) DISPOSITIONS(10) MERGER
------------ --------------- ---------------- -----------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
REVENUES
Income from real estate operations $25,723 $ 1,178 $ (1,854) $ 6,804
Share of real estate investment
operations -- -- -- 39
Land rents 111 -- -- --
Equity in earnings of real estate
investment trust 43 -- -- --
Interest:
Mortgage loans 1,114 -- -- --
Other 42 -- -- --
Other 594 -- -- --
------- ------ ------- -------
27,627 1,178 (1,854) 6,843
------- ------ ------- -------
EXPENSES
Management fees -- -- -- --
Operating expenses from real
estate operations 9,454 246 (1,203) 1,653
Interest expense 6,047 672 (11) (824) (12) 2,526
Depreciation and amortization 5,166 165 (293) 1,700
Minority interest in joint ventures 187 -- -- --
General and administrative expenses 1,684 -- -- 814
------- ------ ------- -------
22,538 1,083 (2,320) 6,693
------- ------ ------- -------
Income before gain on investments 5,089 95 466 150
------- ------ ------- -------
GAIN ON INVESTMENTS
Real estate and mortgage loans 2,161 -- (1,345) (1) 30
------- ------ ------- -------
NET INCOME $ 7,250 $ 95 $ (879) $ 180
======= ====== ======= =======
Net income per share $ 1.35
=======
WEIGHTED AVERAGE SHARES OUTSTANDING 5,367
=======
</TABLE>
10
<PAGE> 11
<TABLE>
<CAPTION> LNH
COPLEY'S HISTORICAL
ACQUISITIONS/ OPERATIONS
DISPOSITIONS/ PRIOR TO PRO FORMA PRO FORMA
EXCHANGES MERGER ADJUSTMENTS CONSOLIDATED
--------- ----------- ----------- ------------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
REVENUES
Income from real estate operations $514 (6) 594 -- 32,959
Share of real estate investment
operations (39)(6) -- -- --
Land rents -- -- -- 111
Equity in earnings of real estate
investment trust -- -- (43) (2) --
Interest:
Mortgage loans -- 251 -- 1,365
Other -- 16 -- 58
Other -- 123 (358) (3,7) 359
------ ------ ------- ------
475 984 (401) 34,852
------ ------ ------- ------
EXPENSES
Management fees -- 119 (119) (4) --
Operating expenses from real
estate operations 86 (6) 208 -- 10,444
Interest expense 231 (6) -- -- 8,652
Depreciation and amortization 144 (6) 140 (218) (8) 6,804
Minority interest in joint ventures -- 41 -- 228
General and administrative expenses -- 259 52 (5) 2,809
------ ------ ------- -------
461 767 (285) 28,937
------ ------ ------- -------
Income before gain on investments 14 217 (116) 5,915
------ ------ ------- -------
GAIN ON INVESTMENTS
Real estate and mortgage loans (30)(6) -- (816) (1) --
------ ------ ------- -------
NET INCOME (16) 217 (932) 5,915
====== ====== ======= =======
Net income per share $ .84
=======
WEIGHTED AVERAGE SHARES OUTSTANDING (13) 7,019
=======
</TABLE>
11
<PAGE> 12
EASTGROUP PROPERTIES
NOTES TO PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
(1) EastGroup acquisitions and significant dispositions have been accounted for
as follows:
The operating revenues and expenses associated with EastGroup's
acquisitions and significant dispositions in 1996 have been eliminated. Gain on
dispositions of $2,161,000 in 1996 has been removed in determining pro forma net
income.
(2) Eliminate equity in earnings of LNH REIT, Inc.
(3) Eliminate equity in earnings of EastGroup Managers, Inc.
(4) Eliminate LNH management fee expense to LNH REIT Managers.
(5) Eliminate management fee income received from LNH REIT Managers.
(6) Copley's acquisitions/dispositions/exchanges:
<TABLE>
<CAPTION>
INCOME
SALES, PURCHASE FROM REAL R.E.
OR EXCHANGE ESTATE OPERATING DEPRECIATION INTEREST
PROPERTY DESCRIPTION DATE OPERATIONS EXPENSE EXPENSE EXPENSE
- -------- ----------- ---- ---------- ------- ------- -------
AMOUNTS (000'S)
<S> <C> <C> <C> <C> <C> <C>
Columbia Place Exchange(A) Feb. 1996 153 (9) (23) (76)
Metro Business Park Exchange(A) Feb. 1996 98 (21) (40) (40)
Dominiguez Properties Exchange(A) Feb. 1996 168 (23) (56) (75)
270 Technology Park Exchange(A) Feb. 1996 -- -- -- --
West Side Business Park Exchange(A) Feb. 1996 7 (6) (7) (7)
Central Distribution Center Exchange(A) Feb. 1996 44 (13) (9) (17)
Carson Industrial Center Exchange(A) Feb. 1996 44 (14) (9) (16)
----- ----- ------ ------
Total $ 514 $ (86) $ (144) $ (231)
===== ===== ====== ======
</TABLE>
<TABLE>
<CAPTION>
SHARE OF
R.E. GAIN (LOSS) ON
PROPERTY OPERATIONS INVESTMENT INVESTMENTS TOTAL
- ------------------- ---------- ----------- -----
AMOUNTS (000'S)
<S> <C> <C> <C>
Columbia Place (35) (30) (20)
Metro Business Park 2 -- (1)
Dominiguez Properties (9) -- 5
270 Technology Park 1 -- 1
West Side Business Park 8 -- (5)
Central Distribution Center (3) -- 2
Carson Industrial Center (3) -- 2
----- ----- -----
Total $ (39) $ (30) $ (16)
===== ===== =====
</TABLE>
(A) In February 1996 Copley effected two exchange transactions swapping
tenancy-in-common interests to gain 100% ownership of certain wholly owned
properties. For purposes of the pro forma statement of operations, share
of real estate investment operations for all investments involved in the
exchange has been eliminated and the separate components of income from
operations for the 100% owned real estate properties have been reflected
for the pro forma periods.
12
<PAGE> 13
(7) Eliminate dividend income from Copley's shares.
(8) Depreciation adjustment based on allocation of the purchase price over
an estimated life of forty years for buildings and three years for tenant
improvements.
(9) Recent acquisitions include Walnut and Braniff.
(10) Material dispositions include Garden Villa on January 31, 1996 for
$4,068,000 net proceeds, Sample I-95 land on July 26, 1996 for $3,267,000 net
proceeds, Pin Oaks on November 27, 1996 for $4,235,000 net proceeds and
Plantations on December 19, 1996 for $7,235,000 net proceeds.
(11) Increase interest expense on bank debt as if the recent acquisitions had
been purchased January 1, 1995.
(12) Decrease interest expense for the repayment of mortgage notes payable on
real estate properties and for the reduction of variable rate debt with proceeds
in excess of mortgage notes payable.
(13) Weighted average EastGroup Shares outstanding were computed as follows:
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPT. 30, 1996
--------------
(IN THOUSANDS)
<S> <C>
Historical weighted average EastGroup Shares outstanding 4,242
EastGroup Shares issued in merger with LNH REIT 618
EastGroup Shares issued in merger with Copley 2,159
-----
Pro Forma weighted average EastGroup Shares outstanding 7,019
=====
</TABLE>
13
<PAGE> 14
EASTGROUP PROPERTIES
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
(UNAUDITED)
FOR THE YEAR ENDED DECEMBER 31, 1995
The following unaudited pro forma consolidated statement of operations
for the year ended December 31, 1995 sets forth the effect of EastGroup's
merger with LNH REIT and Copley and EastGroup and Copley's recent acquisitions
and material dispositions as if these transactions had been consummated on
January 1, 1995. The pro forma consolidated statement of operations has been
prepared by management of EastGroup based upon historical statements of
operations of EastGroup, LNH REIT and Copley and the adjustments and
assumptions in the accompanying notes to the unaudited pro forma consolidated
financial statements. The pro forma statement of operations may not be
indicative of the results that actually would have occurred if the transactions
had been in effect on the dates indicated or which may be obtained in the
future. The unaudited pro forma statement of operations should be read in
conjunction with the other financial statements and the notes to the financial
statements of EastGroup in its annual report on Form 10-K for the year ended
December 31, 1995.
<TABLE>
<CAPTION>
EASTGROUP LNH PRO FORMA
DEC. 31, DEC. 31, MERGER CONSOLIDATED
1995 1995 PRO FORMA BEFORE
(HISTORICAL) (HISTORICAL) ADJUSTMENTS COPLEY
------------ ------------------------------- ------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
REVENUES
Income from real estate operations $28,386 $1,451 $ -- $29,837
Share of real estate investment
operations -- -- -- --
Land rents 217 -- -- 217
Equity in earnings of real estate
investment trust 203 -- (203)(2) --
Interest:
Mortgage loans 1,036 889 -- 1,925
Other -- 52 -- 52
Other 422 87 (146)(3) 363
------- ------ -------- -------
30,264 2,479 (349) 32,394
------- ------ -------- -------
EXPENSES
Management fees -- 294 (294)(4) --
Operating expenses from real
estate operations 11,575 521 -- 12,096
Interest expense 6,287 -- 67 (5) 6,354
Depreciation and amortization 5,613 369 -- 5,982
Minority interest in joint ventures 220 98 -- 318
Provision for losses -- 189 -- 189
General and administrative expenses 2,180 499 125 (6) 2,804
Write-off of deferred financing costs -- -- -- --
------- ------ -------- -------
25,875 1,970 (102) 27,743
------- ------ -------- -------
Income before gain on investments 4,389 509 (247) 4,651
------- ------ -------- -------
GAIN ON INVESTMENTS
Real estate and mortgage loans 3,322 535 (3,857)(1) --
------- ------ -------- -------
NET INCOME $ 7,711 $1,044 $ (4,104) $ 4,651
======= ====== ======== =======
Net income per share $ 1.82 $ .47 $ .96
======= ====== =======
WEIGHTED AVERAGE SHARES OUTSTANDING(7) 4,226 2,200 4,844
======= ====== =======
</TABLE>
14
<PAGE> 15
<TABLE>
<CAPTION>
PRO FORMA
CONSOLIDATED
BEFORE
COPLEY COPLEY'S EASTGROUP'S
DEC. 31, ACQUISITIONS/ MERGER ACQUISITIONS
1995 DISPOSITIONS/ PRO FORMA AND
(HISTORICAL) EXCHANGES ADJUSTMENTS DISPOSITIONS
------------ --------- ----------- ------------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
REVENUES
Income from real estate operations $12,679 $ 2,566 (8) $ -- $45,082
Share of real estate investment
operations 748 (748)(8) -- --
Land rents -- -- -- 217
Equity in earnings of real estate
investment trust -- -- -- --
Interest:
Mortgage loans 39 -- -- 1,964
Other -- -- -- 52
Other -- -- (254)(9) 109
------- -------- ------ ------
13,466 1,818 (254) 47,424
------- -------- ------ ------
EXPENSES
Management fees 452 -- -- 452
Operating expenses from real
estate operations 3,030 51 (8) 15,177
Interest expense 4,533 1,204 (8) 349 (10) 12,440
Depreciation and amortization 3,736 488 (8) 240 (11) 10,446
Minority interest in joint ventures 119 -- -- 437
Provision for losses -- -- -- 189
General and administrative expenses 1,270 -- -- 4,074
Write-off of deferred financing costs 501 -- -- 501
------- -------- ------ -------
13,641 1,743 589 43,716
------- -------- ------ -------
Income before gain on investments (175) 75 (843) 3,708
------- -------- ------ ------
GAIN ON INVESTMENTS
Real estate and mortgage loans 2,564 (2,564)(8) -- --
------- -------- ------ -------
NET INCOME $ 2,389 $ (2,489) $ (843) $ 3,708
======= ======== ====== =======
Net income per share $ 0.67 $ .53
======= =======
WEIGHTED AVERAGE SHARES OUTSTANDING(7) 3,584 7,003
======= =======
</TABLE>
15
<PAGE> 16
<TABLE>
<CAPTION>
RECENT MATERIAL PRO FORMA
ACQUISITIONS (12) DISPOSITIONS (13) CONSOLIDATED
----------------- ----------------- ------------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C>
REVENUES
Income from real estate operations $ 1,478 (3,195) $ 43,365
Share of real estate investment
operations -- -- --
Land rents -- -- 217
Equity in earnings of real estate
investment trust -- -- --
Interest:
Mortgage loans -- -- 1,964
Other -- -- 52
Other -- -- 109
------- ------- -------
1,478 (3,195) 45,707
------- ------- -------
EXPENSES
Management fees -- -- 452
Operating expenses from real
estate operations 311 (1,779) 13,709
Interest expense 1,196 (14) (1,181) (15) 12,455
Depreciation and amortization 248 (530) 10,164
Minority interest in joint ventures -- -- 437
Provision for losses -- -- 189
General and administrative expenses -- -- 4,074
Write-off of deferred financing costs -- -- 501
------- -------- -------
1,755 (3,490) 41,981
------- -------- -------
Income before gain on investments (277) 295 3,726
------- -------- -------
GAIN ON INVESTMENTS
Real estate and mortgage loans -- -- --
------- -------- -------
NET INCOME $ (277) $ 295 $ 3,726
======= ======== =======
Net income per share $ .53
=======
WEIGHTED AVERAGE SHARES OUTSTANDING(7) 7,003
=======
</TABLE>
16
<PAGE> 17
EASTGROUP PROPERTIES
NOTES TO PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
(1) EastGroup and LNH dispositions have been accounted for as follows:
The operating revenues and expenses associated with EastGroup's
acquisitions and dispositions in 1995 are immaterial. Gain on dispositions of
$3,322,000 in 1995 has been removed in determining pro forma net income.
The operating revenues and expenses associated with the LNH
acquisitions and dispositions in 1995 are immaterial. Gain on dispositions of
$535,000 in 1995 has been removed in determining pro forma net income.
(2) Eliminate equity in earnings of LNH REIT, Inc.
(3) Eliminate equity in earnings of EastGroup Managers, Inc.
(4) Eliminate LNH management fee expense to LNH REIT Managers.
(5) Increase interest expense for borrowings to purchase LNH Shares from the
Walker Interests. The borrowings to purchase these shares was $3,070,000 at an
average rate of 8.5% for one quarter in 1995.
(6) Eliminate management fee income received from LNH REIT Managers.
(7) Weighted average EastGroup Shares outstanding were computed as follows:
<TABLE>
<CAPTION>
YEAR ENDED
DEC. 31, 1995
-------------
(IN THOUSANDS)
<S> <C>
Historical weighted average EastGroup Shares outstanding 4,226
EastGroup Shares issued in merger with LNH REIT 618
-----
Pro forma weighted average EastGroup Shares outstanding before Copley 4,844
EastGroup Shares issued in merger with Copley 2,159
-----
Pro Forma weighted average EastGroup Shares outstanding 7,003
=====
</TABLE>
(8) Copley's acquisitions/dispositions/exchanges:
<TABLE>
<CAPTION>
SALE, PURCHASE INCOME SHARES OF
OR EXCHANGES FROM REAL R.E. DEPRE- R.E. GAIN(LOSS)
------------ ESTATE OPERATING CIATION INTEREST INVESTMENT ON
PROPERTY DESCRIPTION DATE OPERATIONS EXPENSE EXPENSE EXPENSE OPERATIONS INVESTMENTS TOTAL
-------- ----------- ---- ---------- ------- ------- ------- ---------- ----------- -----
AMOUNTS (000'S)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Peachtree Corners Dist
Center Sale Nov. 1995 $(1,134) $ 312 $ 396 $ 198 $ -- $ (1,806) $(2,034)
University Business Center (A) (64) -- -- 57 -- -- (7)
Park North Business Center Sale June 1995 (806) 229 411 251 -- (758) (673)
Kingsview Industrial Center Purchase July 1995 231 -- (45) -- -- -- 186
Columbia Place Exchange(B) Feb. 1996 1,838 (32) (237) (921) (599) -- 49
Metro Business Park Exchange(B) Feb. 1996 1,391 (366) (658) (500) 47 -- (86)
Dominiguez Properties Exchange(B) Feb. 1996 1,110 (194) (355) (474) (155) -- (68)
270 Technology Park Exchange(B) Feb. 1996 -- -- -- -- (111) -- (111)
West Side Business
Park Exchange(B) Feb. 1996 -- -- -- -- 106 -- 106
Central Distribution
Center Exchange(B) Feb. 1996 -- -- -- -- (3) -- (3)
Carson Industrial Center Exchange(B) Feb. 1996 -- -- -- -- (33) -- (33)
Line of Credit (A) -- -- -- -- 185 -- -- 185
------- ----- ------ ------- ------ ------- -------
Total $ 2,566 $ (51) $ (488) $(1,204) $ (748) $(2,564) $(2,489)
======= ===== ====== ======= ====== ======= =======
</TABLE>
17
<PAGE> 18
(A) For purposes of determining pro forma adjustments, it was assumed that
the principal due under certain debt agreements was repaid with available
cash and net proceeds available from dispositions which were assumed to
occur on January 1, 1995. Principal on notes payable at University
Business Center was assumed to be repaid on January 1, 1995. As the $3.5
million pay down on the University Business Center note actually occurred
in February 1995, the pro forma adjustment reduces the interest expense
by the interest accrued for that portion of the note ($57,000 in 1995).
As discussed above, on a pro forma basis, Copley had sufficient cash
available throughout the pro forma period to mitigate any need to draw on
the line of credit. In addition, the line of credit balance was
substantially repaid from the proceeds received as a result of the sale
of the Park North Business Center. Therefore, the pro forma adjustments
eliminate the effect of interest charges incurred related to amounts
drawn under the line of credit during the pro forma period.
(B) In February 1996 Copley effected two exchange transactions swapping
tenancy-in-common interests to gain 100% ownership of certain wholly
owned properties. For purposes of the pro forma statement of operations,
share of real estate investment operations for all investments involved
in the exchange has been eliminated and the separate components of income
from operations for the 100% owned real estate properties have been
reflected for the pro forma periods.
(9) Eliminate dividend income from Copley's shares.
(10) Increase interest expense for borrowings to purchase Copley shares. The
borrowings to purchase these shares were $1,992,000 for six months of 1995
and $4,201,000 for three months of 1995 at an average rate 8.42%.
(11) Depreciation adjustment based on allocation of the purchase price over
an estimated life of forty years for buildings and three years for tenant
improvements.
(12) Recent acquisitions include Walnut (discussed previously) and Braniff Park
West acquired on September 19, 1996 for $5,706,000.
(13) Material dispositions include Garden Villa on January 31, 1996 for
$4,068,000 net proceeds, Sample I-95 land on July 26, 1996 for $3,267,000 net
proceeds, Pin Oaks on November 27, 1996 for $4,325,000 net proceeds and
Plantations on December 19, 1996 for $7,235,000 net proceeds.
(14) Increase interest expense on bank debt as if the recent acquisitions had
been purchased January 1, 1995.
(15) Decrease interest expense for the repayment of mortgage notes payable on
real estate properties and for the reduction of variable rate debt with proceeds
in excess of mortgage notes payable.
18
<PAGE> 1
Exhibit 23(a)
INDEPENDENT AUDITORS' CONSENT
-----------------------------
The Trustees and Shareholders
EastGroup Properties:
We consent to the inclusion of our report dated January 28, 1997, with respect
to the historical summary of gross income and direct operating expenses of
Walnut Business Park for the year ended December 15, 1995, which report appears
in the Form 8-K of EastGroup Properties dated January 30, 1997.
KPMG Peat Marwick LLP
Jackson, Mississippi
January 28, 1997
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