EASTGROUP PROPERTIES, S-4, 1997-04-04

EASTGROUP PROPERTIES
S-4, 1997-04-04
REAL ESTATE INVESTMENT TRUSTS

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<PAGE> 1

AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 4, 1997

REGISTRATION NO. 333-
================================================================================

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM S-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
------------------------

EASTGROUP PROPERTIES II, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

<TABLE>
<S> <C> <C>
MARYLAND 6798 13-2711135*
(STATE OR OTHER JURISDICTION (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
OF INCORPORATION OR ORGANIZATION) CLASSIFICATION NO.) IDENTIFICATION NO.)
</TABLE>

300 ONE JACKSON PLACE
188 EAST CAPITOL STREET
JACKSON, MISSISSIPPI 39201-2195
(601) 354-3555
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)

DAVID H. HOSTER II, PRESIDENT
300 ONE JACKSON PLACE
188 EAST CAPITOL STREET
JACKSON, MISSISSIPPI 39201-2195
(601) 354-3555
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF AGENT FOR SERVICE)
------------------------

Copies to:

JOSEPH P. KUBAREK, ESQ.
JAECKLE, FLEISCHMANN & MUGEL
800 FLEET BANK BUILDING
12 FOUNTAIN PLAZA
BUFFALO, NEW YORK 14202
(716) 856-0600

APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: AS SOON AS
PRACTICABLE AFTER THE REGISTRATION STATEMENT BECOMES EFFECTIVE.

IF ANY OF THE SECURITIES BEING REGISTERED ON THIS FORM ARE TO BE OFFERED IN
CONNECTION WITH THE FORMATION OF A HOLDING COMPANY AND THERE IS COMPLIANCE WITH
GENERAL INSTRUCTION G, CHECK THE FOLLOWING BOX. [ ]

* I.R.S. Employer Identification Number of EastGroup Properties, the
predecessor to the registrant prior to the Reorganization described herein.

CALCULATION OF REGISTRATION FEE

<TABLE>
<CAPTION>
==========================================================================================================
PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS OF SECURITIES AMOUNT TO BE OFFERING AGGREGATE OFFERING AMOUNT OF
TO BE REGISTERED REGISTERED(1) PRICE PER UNIT(2) PRICE (2) REGISTRATION FEE
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares of Common Stock, $0.0001 par
value per share.................... 12,673,503 Shares $18.42 $233,445,925 $70,741
==========================================================================================================
<FN>
(1) Represents the estimated maximum number of shares of common stock of
EastGroup Properties II, Inc. to be issued to shareholders of EastGroup
Properties in the merger of EastGroup Properties with and into EastGroup
Properties II, Inc. (the "Merger").

(2) Estimated solely for the purpose of calculating the registration fee in
accordance with Rule 457(f) and based on the average of the high and low
sales price per share of beneficial interest of EastGroup Properties on the
New York Stock Exchange, Inc. on April 3, 1997, multiplied by 12,673,503
shares of beneficial interest of EastGroup Properties outstanding on such
date, as adjusted to give effect to a three-for-two stock split to be
effected by EastGroup Properties on April 7, 1997. If the Merger is
consummated, one share of common stock of EastGroup Properties II, Inc. will
be issued for every one share of beneficial interest of EastGroup
Properties.

</TABLE>

THE REGISTRANT AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES AS
MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE A
FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT
SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF THE
SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THE REGISTRATION STATEMENT SHALL
BECOME EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(a), MAY DETERMINE.
================================================================================
<PAGE> 2

CROSS REFERENCE SHEET PURSUANT TO RULE 404(a)
SHOWING THE LOCATION IN THE PROSPECTUS
OF THE INFORMATION REQUIRED BY PART I OF FORM S-4

<TABLE>
<CAPTION>
FORM S-4 ITEM LOCATION IN PROSPECTUS
---------------------------------------- ------------------------------------------
<S> <C> <C> <C>
A. INFORMATION ABOUT THE
TRANSACTION
1. Forepart of Registration Statement and
Outside Front Cover Page of
Prospectus.............................. Outside front cover page.

2. Inside Front and Outside Back Cover
Pages of Prospectus..................... AVAILABLE INFORMATION; INCORPORATION OF
CERTAIN DOCUMENTS BY REFERENCE; TABLE OF
CONTENTS.

3. Risk Factors, Ratio of Earnings to Fixed
Charges and Other Information........... Not applicable.

4. Terms of the Transaction................ PROXY STATEMENT/PROSPECTUS SUMMARY;
PROPOSAL 1 -- THE REORGANIZATION;
APPENDICES A, B and C.

5. Pro Forma Financial Information......... Not applicable.
6. Material Contacts with the Company Being
Acquired................................ Not applicable.

7. Additional Information Required for
Reoffering by Persons and Parties Deemed
to be Underwriters...................... Not applicable.

8. Interests of Named Experts and
Counsel................................. Not applicable.

9. Disclosure of Commission Position on
Indemnification for Securities Act
Liabilities............................. PROPOSAL 1 -- THE REORGANIZATION --
CERTAIN CHANGES IN THE RIGHTS OF
SHAREHOLDERS RESULTING FROM THE
REORGANIZATION; INDEMNIFICATION
PROVISIONS.

B. INFORMATION ABOUT THE
REGISTRANT
10. Information with Respect to S-3
Registrants............................. INCORPORATION OF CERTAIN DOCUMENTS BY
REFERENCE; AVAILABLE INFORMATION.

11. Incorporation of Certain Information by
Reference............................... INCORPORATION OF CERTAIN DOCUMENTS BY
REFERENCE.

12. Information with Respect to S-2 or S-3
Registrants............................. Not applicable.

13. Incorporation of Certain Information by
Reference............................... Not applicable.
</TABLE>

ii
<PAGE> 3

<TABLE>
<CAPTION>
FORM S-4 ITEM LOCATION IN PROSPECTUS
---------------------------------------- ------------------------------------------
<S> <C> <C> <C>

14. Information with Respect to Registrants
Other than S-3 or S-2 Registrants....... Not applicable.

C. INFORMATION ABOUT THE
COMPANY BEING ACQUIRED
15. Information with Respect to S-3
Companies............................... Not applicable.

16. Information with Respect to S-2 or S-3
Companies............................... Not applicable.

17. Information with Respect to Companies
Other Than S-3 or S-2 Companies......... Not applicable.

D. VOTING AND MANAGEMENT
INFORMATION
18. Information if Proxies, Consents or
Authorizations are to be Solicited...... PROXY STATEMENT/PROSPECTUS SUMMARY;
PROPOSAL 1 -- THE REORGANIZATION; PROPOSAL
2 -- ELECTION OF TRUSTEES; INCORPORATION
OF CERTAIN DOCUMENTS BY REFERENCE.

19. Information if Proxies, Consents or
Authorizations are not to be Solicited
or in an Exchange Offer................. Not applicable.
</TABLE>

iii
<PAGE> 4

EASTGROUP PROPERTIES
300 ONE JACKSON PLACE
188 EAST CAPITOL STREET
JACKSON, MISSISSIPPI 39201-2195

, 1997

Dear Shareholder:

You are cordially invited to the annual meeting (the "Meeting"), of
shareholders of EastGroup Properties (the "Trust"), to be held on June 5, 1997
at 9:00 a.m., Jackson time, at the Trust's offices, 300 One Jackson Place, 188
East Capitol Street, Jackson, Mississippi.

Shareholders will be asked to approve the reorganization (the
"Reorganization"), of the Trust from a Maryland real estate investment trust
("REIT"), into a Maryland business corporation named EastGroup Properties II,
Inc. (the "Corporation"), which is a wholly-owned subsidiary of the Trust. This
Reorganization will modernize and streamline the Trust's governance procedures
by adopting the form of organization used by many recently established REITs.
The Reorganization will be accomplished by the merger of the Trust with and into
the Corporation (the "Merger"); pursuant to the Reorganization and
simultaneously with the Merger, the name of the Corporation will be changed to
EastGroup Properties, Inc. While the Reorganization will result in a modern,
more flexible corporate charter with what the Trustees of the Trust believe are
substantially enhanced rights of stockholders of the Corporation over the
limited rights available to shareholders currently under the Trust's Restated
Declaration of Trust, as amended, some investors may consider that certain
attributes of the Corporation may be detrimental to their rights, and
accordingly, shareholders should carefully consider whether the changes are in
their best interest.

The proposed Reorganization is subject to the affirmative vote of the
holders of two-thirds of all the votes entitled to be cast at the Meeting based
on the shares of beneficial interest of the Trust outstanding as of the close of
business on April 23, 1997, the record date for the Meeting. The Board of
Trustees of the Trust has approved the proposed Reorganization, subject to
shareholder approval, and recommends that you vote in favor of the proposed
Reorganization transaction. In arriving at its decision, the Board considered a
number of factors which are described in detail in the accompanying Proxy
Statement/Prospectus, which shareholders are urged to read carefully.

Trust shareholders will also be voting on the election of seven trustees of
the Trust, or if the Reorganization is approved, directors of the Corporation.

The proposed transactions are very important to you as a shareholder.
Therefore, whether or not you plan to attend the Meeting, I urge you to give
your immediate attention to the proposals. Please review the enclosed materials,
sign and date the enclosed proxy card and return it promptly in the enclosed
postage-paid envelope.

Very truly yours,

LELAND R. SPEED
Chairman of the Board of Trustees
<PAGE> 5

EASTGROUP PROPERTIES
300 ONE JACKSON PLACE
188 EAST CAPITOL STREET
JACKSON, MISSISSIPPI 39201-2195

NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON JUNE 5, 1997

To the Shareholders:

Notice is hereby given that the Annual Meeting of Shareholders of EastGroup
Properties (the "Trust"), will be held at the Trust's offices, 300 One Jackson
Place, 188 East Capitol Street, Jackson, Mississippi, on June 5, 1997 at 9:00
a.m., Jackson time, for the following purposes:

(1) To consider and act on a proposal to reorganize the Trust from a
Maryland real estate investment trust into a Maryland business corporation
(the "Reorganization"), by means of a merger (the "Merger"), of the Trust
with and into a newly formed Maryland business corporation named EastGroup
Properties II, Inc. (the "Corporation"), which is a wholly-owned subsidiary
of the Trust; pursuant to the Reorganization and simultaneously with the
Merger, the name will be changed to EastGroup Properties, Inc.

(2) To elect seven trustees of the Trust, or if the Reorganization is
approved, directors of the Corporation.

(3) To transact such other business as may properly come before the
Meeting or any adjournment thereof.

Only shareholders of record at the close of business on April 23, 1997 are
entitled to notice of and to vote at the Meeting and any adjournment thereof.

Dissenting shareholders will not have appraisal rights in connection with
the Reorganization and Merger.

By Order of the Board of Trustees

N. KEITH MCKEY
Executive Vice President, Chief
Financial Officer and Secretary

DATE: , 1997

THIS IS AN IMPORTANT MEETING. SHAREHOLDERS ARE URGED TO VOTE BY SIGNING, DATING
AND RETURNING THE ENCLOSED PROXY IN THE ENCLOSED ENVELOPE TO WHICH NO POSTAGE
NEED BE AFFIXED IF MAILED IN THE UNITED STATES.
<PAGE> 6

PROXY STATEMENT
OF
EASTGROUP PROPERTIES
AND
PROSPECTUS
OF
EASTGROUP PROPERTIES II, INC.

This Proxy Statement/Prospectus is being furnished to the shareholders of
EastGroup Properties (the "Trust"), in connection with the solicitation of
proxies by the Board of Trustees of the Trust for use at its Annual Meeting of
Shareholders (the "Meeting"), to be held on June 5, 1997 at 9:00 a.m., Jackson
time, in the Trust's offices, 300 One Jackson Place, 188 East Capitol Street,
Jackson, Mississippi. The purposes of the Meeting are to consider and vote on
proposals to (i) reorganize the Trust from a Maryland real estate investment
trust ("REIT"), into a Maryland business corporation (the "Reorganization"), by
means of a merger of the Trust (the "Merger"), with and into a newly formed
Maryland corporation named EastGroup Properties II, Inc. (the "Corporation"),
which is a wholly-owned subsidiary of the Trust; pursuant to the Reorganization
and simultaneously with the Merger, the name will be changed to EastGroup
Properties, Inc.; (ii) to elect seven trustees of the Trust, or if the
Reorganization is approved, directors of the Corporation; and (iii) to transact
any other business as may properly come before the Meeting or any adjournment
thereof.

The Reorganization of the Trust from a Maryland REIT into a Maryland
business corporation shall be by means of the Merger of the Trust with and into
the Corporation, pursuant to which the Corporation shall be the surviving entity
in the Merger, the separate existence of the Trust shall terminate and each
issued and outstanding share of beneficial interest, $1.00 par value per share,
of the Trust (the "Trust Shares"), shall be converted into one share of common
stock, par value $0.0001 per share, of the Corporation (the "Corporation
Stock"). This Proxy Statement/Prospectus also constitutes the Prospectus of the
Corporation filed as part of a Registration Statement on Form S-4 (the
"Registration Statement"), under the Securities Act of 1933, as amended (the
"Securities Act"), with the Securities and Exchange Commission (the "SEC"). The
Registration Statement and the Prospectus relate to 12,673,503 shares of
Corporation Stock into which the Trust Shares may be converted pursuant to the
Reorganization. The Trust Share amounts and per Trust Share information set
forth in this Proxy Statement/Prospectus give retroactive effect to a
three-for-two stock split effected by the Trust on April 7, 1997.

THE BOARD OF TRUSTEES HAS APPROVED THE REORGANIZATION, SUBJECT TO
SHAREHOLDER APPROVAL, AND BELIEVES THAT THE REORGANIZATION IS IN THE BEST
INTERESTS OF THE TRUST AND ITS SHAREHOLDERS. THE BOARD RECOMMENDS THAT YOU VOTE
IN FAVOR OF THE REORGANIZATION AND THE ELECTION OF THE TRUST'S SEVEN NOMINEES AS
TRUSTEES.

Trust Shares are traded on the New York Stock Exchange, Inc. ("NYSE") under
the symbol "EGP." On , 1997, the closing price for Trust Shares as
reported by the NYSE was $ . The principal executive offices of the
Trust and the Corporation are both located at 300 One Jackson Place, 188 East
Capitol Street, Jackson, Mississippi 39201-2195, telephone number (601)
354-3555.

------------------------

THIS TRANSACTION AND THE COMMON STOCK OF THE CORPORATION HAVE NOT BEEN
APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION, NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION PASSED UPON THE FAIRNESS OF THIS TRANSACTION
OR UPON THE ACCURACY OR ADEQUACY OF THE INFORMATION CONTAINED IN THIS PROXY
STATEMENT/PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

------------------------

THE ATTORNEY GENERAL OF THE STATE OF NEW YORK
HAS NOT PASSED ON OR ENDORSED THE MERITS OF THIS OFFERING.
ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL.

------------------------
<PAGE> 7

The approval of the Reorganization and the consummation of the Merger are
subject to the affirmative approval of the holders of at least two-thirds of all
the votes entitled to be cast at the Meeting and certain other conditions. The
trustees and officers of the Trust own 314,004 Trust Shares (2.5% of the
outstanding Trust Shares), and have indicated that they will vote such Trust
Shares FOR the Reorganization and the Merger.

The date of this Proxy Statement/Prospectus is , 1997. This
Proxy Statement/Prospectus is first being mailed to shareholders of the Trust on
or about , 1997.

ii
<PAGE> 8

AVAILABLE INFORMATION

The Trust is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports, proxy statements and other information with the SEC.
Such reports, proxy statements and other information may be inspected at and,
upon payment of the SEC's customary charges, copies obtained from, the Public
Reference Section of the SEC, 450 Fifth Street, N.W., Washington, D.C. 20549.
Such reports, proxy statements and other information are also available for
inspection and copying at prescribed rates at the SEC's regional offices in New
York, New York (Seven World Trade Center, Suite 1300, New York, New York 10048),
and in Chicago, Illinois (Suite 1400, 500 West Madison Street, Chicago, Illinois
60661). The SEC maintains a web site (http://www.sec.gov) that also contains
reports, proxy statements and other information concerning the Trust. In
addition, Trust Shares are traded on the NYSE under the symbol "EGP" and similar
information concerning the Trust can be inspected and copied at the offices of
the NYSE, 20 Broad Street, New York, New York 10005.

The Corporation has filed with the SEC a Registration Statement on Form S-4
(the "Registration Statement") under the Securities Act with respect to
Corporation Stock to be issued in the Merger. This Proxy Statement/Prospectus
constitutes the Prospectus of the Corporation filed as part of the Registration
Statement. As permitted by the rules and regulations of the SEC, this Proxy
Statement/Prospectus omits certain information contained in the Registration
Statement. Reference is made to the Registration Statement and the exhibits
listed therein, which can be inspected at the public reference facilities of the
SEC noted above, and copies of which can be obtained from the SEC at prescribed
rates as indicated above.

NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION OTHER THAN AS CONTAINED HEREIN IN CONNECTION WITH THE MATTERS
DESCRIBED HEREIN AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST
NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE TRUST OR THE CORPORATION.
NEITHER THE DELIVERY HEREOF NOR ANY DISTRIBUTION OF SECURITIES MADE HEREUNDER
SHALL, UNDER ANY CIRCUMSTANCES, CREATE AN IMPLICATION THAT THERE HAS BEEN NO
CHANGE IN THE FACTS HEREIN SET FORTH SINCE THE DATE HEREOF. THIS PROXY
STATEMENT/PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF
AN OFFER TO BUY THE SECURITIES OFFERED BY THIS PROXY STATEMENT/PROSPECTUS OR A
SOLICITATION OF A PROXY IN ANY JURISDICTION WHERE, OR TO ANY PERSON TO WHOM, IT
IS UNLAWFUL TO MAKE SUCH AN OFFER OR SOLICITATION.

iii
<PAGE> 9

INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE

Incorporated into this Proxy Statement/Prospectus by reference are the
documents listed below filed by the Trust under the Exchange Act. Copies of any
such documents, other than exhibits to such documents, are available without
charge to each person to whom a copy of this Proxy Statement/Prospectus has been
delivered upon written or oral request of such person from the Trust, 300 One
Jackson Place, 188 East Capitol Street, Jackson, Mississippi 39201-2195,
Attention: Chief Financial Officer, telephone number (601) 354-3555. In order to
insure timely delivery of the documents, requests should be received by
, 1997.

The following documents or portions thereof are hereby incorporated into
this Proxy Statement/Prospectus by reference:

1. The Trust's Annual Report on Form 10-K for the year ended December 31,
1996 (Commission File No. 1-7094).

2. The Agreement and Plan of Merger dated as of , 1997 by and
between the Trust and the Corporation (attached hereto as Appendix A).

All documents filed by the Trust pursuant to Sections 13(a), 13(c), 14 or
15(d) of the Exchange Act after the date of this Proxy Statement/Prospectus and
prior to the date of the Meeting shall be deemed to be incorporated by reference
herein and to be a part hereof from the respective dates of the filing thereof.
Any statement contained in a document incorporated or deemed to be incorporated
by reference herein shall be deemed to be modified or superseded for purposes of
this Proxy Statement/Prospectus to the extent that a statement contained herein,
or in any other subsequently filed document that also is or is deemed to be
incorporated by reference herein, modifies or supersedes such statement. Any
such statement so modified or superseded shall not be deemed, except as so
modified or superseded, to constitute a part of this Proxy Statement/Prospectus.

iv
<PAGE> 10

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
PROXY STATEMENT/PROSPECTUS SUMMARY..................................................... 1
The Trust and the Corporation..................................................... 1
Shareholders' Meeting; Record Date; Securities Entitled to Vote................... 1
The Reorganization................................................................ 2
Election of Trustees.............................................................. 6
Recommendation of the Board of Trustees........................................... 6

PROPOSAL 1 -- THE REORGANIZATION....................................................... 7
Principal Reasons for the Reorganization.......................................... 7
Terms of the Reorganization....................................................... 8
Certain Changes in the Rights of Shareholders Resulting from the Reorganization... 9
Federal Income Tax Matters........................................................ 17
Vote Required; Dissenters' Rights................................................. 18

PROPOSAL 2 -- ELECTION OF TRUSTEES..................................................... 19
Security Ownership of Certain Beneficial Owners................................... 19
Security Ownership of Management.................................................. 20
Election of Trustees -- Nominees.................................................. 21
Other Directorships and Trusteeships.............................................. 22
Committees and Meeting Data....................................................... 22
Section 16(a) Beneficial Ownership Reporting Compliance........................... 22
Executive Officers................................................................ 23
Executive Compensation............................................................ 23
Certain Transactions and Relationships............................................ 28

EXPERTS................................................................................ 28

LEGAL OPINIONS......................................................................... 29

REPORTS TO SHAREHOLDERS................................................................ 29

OTHER MATTERS.......................................................................... 29

SHAREHOLDER PROPOSALS.................................................................. 29
</TABLE>

APPENDIX A Agreement and Plan of Merger between EastGroup Properties and
EastGroup Properties II, Inc. dated as of , 1997

APPENDIX B Articles of Incorporation of EastGroup Properties II, Inc.

APPENDIX C Bylaws of EastGroup Properties II, Inc.

v
<PAGE> 11

PROXY STATEMENT/PROSPECTUS SUMMARY

The following is a summary of certain information contained elsewhere in
this Proxy Statement/Prospectus and the Appendices hereto relating to (i) the
proposed reorganization (the "Reorganization") pursuant to which EastGroup
Properties (the "Trust"), will merge (the "Merger"), with and into EastGroup
Properties II, Inc. (the "Corporation"), with the Corporation being the
surviving company, and the separate corporate existence of the Trust ceasing;
and (ii) the election of seven trustees of the Trust, or if the Reorganization
is approved, directors of the Corporation (collectively, the Reorganization and
election of trustees are referred to herein as the "Transactions"). This summary
does not purport to contain all material information relating to the
Transactions and is qualified in its entirety by the more detailed information
and financial statements incorporated by reference in this Proxy
Statement/Prospectus. SHAREHOLDERS OF THE TRUST SHOULD READ CAREFULLY THIS PROXY
STATEMENT/PROSPECTUS AND THE APPENDICES AND EXHIBITS ATTACHED HERETO IN THEIR
ENTIRETY. The amounts of shares of beneficial interest, par value $1.00 per
share, of the Trust ("Trust Shares"), and per Trust Share information set forth
in this Proxy Statement/Prospectus give retroactive effect to a three-for-two
stock split effected by the Trust on April 7, 1997.

THE TRUST AND THE CORPORATION

The Trust was organized as a real estate investment trust ("REIT"), under
the laws of the State of Maryland pursuant to a Declaration of Trust dated June
15, 1969, as restated and amended (the "Declaration of Trust"). The Trust is a
self-administered REIT which focuses on the ownership, acquisition and selective
development of industrial properties primarily in major Sunbelt markets, with an
emphasis on the states of Florida, Texas, Arizona and California. The Trust's
portfolio currently includes 27 industrial properties comprising over 4.9
million square feet of leasable space, as well as office buildings containing
approximately 566,000 square feet of leasable space. As of February 28, 1997,
the industrial portfolio was 97% leased and the office portfolio was 94% leased.

The Corporation was organized on , 1997 as a Maryland business
corporation and as a wholly-owned subsidiary of the Trust. The Corporation was
organized by the Trust to acquire and succeed to, and to continue the business
of, the Trust upon the consummation of the Merger. The Corporation has had no
activities to date other than those incident to the Reorganization.

The Trust has qualified and has elected to be taxed as a REIT under the
Internal Revenue Code of 1986, as amended (the "Code"). The Reorganization and
consummation of the Merger will not adversely affect the ability of the
Corporation to continue to qualify as a REIT under the Code.

The principal executive offices of both the Trust and the Corporation are
located at 300 One Jackson Place, 188 East Capitol Street, Jackson, Mississippi
39201, telephone number (601) 354-3555.

SHAREHOLDERS' MEETING; RECORD DATE; SECURITIES ENTITLED TO VOTE

The Annual Meeting of the Shareholders of the Trust will be held on June 5,
1997 at 9:00 a.m., Jackson time, at 300 One Jackson Place, 188 East Capitol
Street, Jackson, Mississippi (the "Meeting"). The purposes of the Meeting are to
consider and vote upon proposals to (i) reorganize the Trust from a Maryland
REIT into a Maryland business corporation by means of the Merger; (ii) elect
seven trustees of the Trust, or if the Reorganization is approved, directors of
the Corporation; and (iii) transact any other business as may properly come
before the Meeting or any adjournment or postponement thereof.

The record date for the Meeting is April 23, 1997 (the "Record Date"). As
of such date, there were
Trust Shares outstanding and entitled to vote at the Meeting. Holders of Trust
Shares are entitled to one vote per Trust Share on all matters except the
election of trustees. Shareholders of the Trust are entitled to cumulative
voting in the election of trustees, entitling each Trust shareholder to as many
votes in the election of trustees as shall equal the number of Trust Shares
owned by that shareholder multiplied by the number of trustees to be elected,
and each shareholder may cast all such votes for a single candidate for trustee
or may distribute them among two or more candidates as that shareholder may
determine.

1
<PAGE> 12

Only Trust shareholders as of the Record Date are entitled to notice of and
to vote at the Meeting. Shareholders of the Trust as of the Record Date may
grant proxies by completing, dating, signing and returning the proxy card
accompanying this Proxy Statement/Prospectus. All Trust Shares represented by
properly executed proxies, unless proxies have been previously revoked, will be
voted in accordance with the instructions indicated in such proxies. IF NO
INSTRUCTIONS ARE INDICATED, SUCH TRUST SHARES WILL BE VOTED FOR THE
REORGANIZATION AND FOR THE NOMINEES FOR TRUSTEES. Shareholders that have given a
proxy may revoke it any time prior to the Meeting by giving written notice
thereof to the Secretary of the Trust, by signing and returning a proxy card
bearing a later date, or by attending the Meeting and voting in person.

THE BOARD OF TRUSTEES OF THE TRUST HAS UNANIMOUSLY APPROVED THE
REORGANIZATION AND UNANIMOUSLY RECOMMENDS THAT TRUST SHAREHOLDERS VOTE FOR
APPROVAL OF THE REORGANIZATION. SEE "PROPOSAL 1 -- THE REORGANIZATION." THE
BOARD OF TRUSTEES OF THE TRUST ALSO RECOMMENDS A VOTE FOR PROPOSAL 2. SEE
"PROPOSAL 2 -- ELECTION OF TRUSTEES."

THE REORGANIZATION

Principal Reasons for the Reorganization.

The purpose of the Reorganization is to reorganize the Trust from a
Maryland REIT into a Maryland business corporation. The Board of Trustees
believes that the well-defined Maryland corporation laws, together with the
Corporation's new Articles of Incorporation and Bylaws, will modernize the
Trust's governance procedures and provide the Trust with a greater degree of
certainty and flexibility in planning and implementing corporate action than is
currently available to the Trust as a Maryland REIT. In addition, both the Trust
and the Corporation are subject to certain provisions of the Maryland General
Corporation Law (the "MGCL"), which are designed to deter hostile or unsolicited
takeover attempts of Maryland corporations or Maryland REITs and to increase the
flexibility of a Maryland corporation or Maryland REIT in dealing with such
takeover attempts. The Board of Trustees believes that this continued
flexibility, together with the favorable perception of the Maryland corporation
by the experienced REIT investor community, combine to make the Reorganization
to be in the best interests of the Trust and its shareholders.

Terms of the Reorganization.

The Reorganization will be effected through the Merger of the Trust with
and into the Corporation, pursuant to which the Corporation will be the
surviving entity in the Merger, the separate existence of the Trust will
terminate and each outstanding Trust Share will be converted into one share of
common stock, $0.0001 par value per share, of the Corporation ("Corporation
Stock"). At the effective time of the Merger, all properties, assets,
liabilities and obligations of the Trust will become properties, assets,
liabilities and obligations of the Corporation. Simultaneously with the Merger,
the Corporation will change its name to EastGroup Properties, Inc. Upon
consummation of the Merger, the Corporation and its stockholders will be
governed by the Corporation's Articles of Incorporation and Bylaws which will
include a number of provisions which are not currently in the Declaration of
Trust. These provisions of the Articles of Incorporation and Bylaws of the
Corporation, together with certain provisions of the MGCL, may have certain
anti-takeover effects. See "Proposal 1 -- The Reorganization -- Certain
Changes in the Rights of Shareholders Resulting from the Reorganization."

The Reorganization has been approved by the Board of Trustees who believe
the Reorganization to be in the best interests of the Trust and its
shareholders. The Merger will become effective upon the filing of Articles of
Merger with the appropriate state agencies, including, without limitation, the
State Department of Assessments and Taxation of the State of Maryland. The Trust
anticipates that the Merger will become effective as promptly as practicable
following shareholder approval of the Reorganization at the Meeting.

On the effective date of the Merger, each of the persons who are then
trustees and officers of the Trust will become directors and officers,
respectively, of the Corporation.

2
<PAGE> 13

At the effective time of the Merger, it is anticipated that the listing of
Trust Shares on the NYSE will be terminated. The Corporation Stock will
thereafter continue to be listed on the NYSE in accordance with the applicable
rules of the NYSE.

If the Reorganization is approved and the Merger is consummated, the Trust
and the Corporation will take such action as may be necessary to provide that
all rights of participants in the Trust's stock option plans (the "Stock Option
Plans"), to receive grants of options and to exercise options and stock
appreciation rights granted thereunder in respect of Trust Shares will become
substantially identical rights to receive grants of options and to exercise
options and stock appreciation rights in respect of shares of Corporation Stock
on substantially identical terms and conditions as set forth in the Trust's
Stock Option Plans.

The Reorganization is subject to certain conditions including approval by
the shareholders of the Trust.

Certain Changes in the Rights of Shareholders Resulting from the
Reorganization.

The rights of shareholders of the Trust are currently governed by the
Trust's Declaration of Trust and Trustees' Regulations, as amended (the
"Trustees' Regulations"), the MGCL and the Maryland Real Estate Investment
Trusts Law (the "MD REIT Law"), and the rules of the NYSE. If the Reorganization
is approved by the shareholders of the Trust and the Merger is consummated, the
Corporation will be the surviving entity in the Merger, the separate existence
of the Trust will terminate, each outstanding Trust Share will be converted into
one share of Corporation Stock and the rights of stockholders will be governed
by the Corporation's Articles of Incorporation and Bylaws, Maryland law,
including the MGCL, and the rules of the NYSE. While a number of the Trust's
current corporate governance provisions will be included in the Corporation's
Articles of Incorporation and Bylaws and, therefore, will not be affected by the
Reorganization and the consummation of the Merger, certain differences between
the Trust's Declaration of Trust and Trustees' Regulations and the Corporation's
Articles of Incorporation and Bylaws will result in certain material differences
between the rights of shareholders of the Trust and the rights of stockholders
of the Corporation. Accordingly, shareholders of the Trust should carefully
consider the changes in their rights that will result from the approval of the
Reorganization and the consummation of the Merger. See "Proposal 1 -- The
Reorganization -- Certain Changes in the Rights of Shareholders Resulting from
the Reorganization." The following table compares certain of the existing rights
of shareholders of the Trust with those of stockholders of the Corporation, if
the Reorganization is approved and the Merger is consummated.

<TABLE>
<CAPTION>
PROVISION TRUST CORPORATION
- --------------------- ---------------------------------- ----------------------------------
<S> <C> <C>
Election of Shareholders entitled to Directors elected by a plurality
Trustees/Directors cumulative voting in the election of the votes with each share being
of trustees, entitling each Trust voted for as many individuals as
shareholder to as many votes in there are directors to be elected
the election of trustees as shall and for whose election the share
equal the number of Trust Shares is entitled to vote.
owned by that shareholder
multiplied by the number of
trustees to be elected, and each
shareholder may cast all such
votes for a single candidate for
trustee or may distribute them
among two or more candidates as
that shareholder may determine.
</TABLE>

3
<PAGE> 14

<TABLE>
<CAPTION>
PROVISION TRUST CORPORATION
- --------------------- ---------------------------------- ----------------------------------
<S> <C> <C>
Removal of Trustees may be removed for cause Directors may be removed from
Trustees/Directors by the unanimous vote of all office only for cause and only by
trustees (except the one so to be the affirmative vote of the
removed) and, with or without holders of at least two-thirds of
cause, by the affirmative vote of the combined voting power of all
holders of not less than shares of capital stock entitled
two-thirds of the Trust Shares to be cast in the election of
then outstanding, at a special directors voting together as a
meeting of shareholders called for single class.
the purpose of removing the
trustee.

Dividends Trustees may declare and pay Directors may declare dividends
dividends in cash, Trust Shares payable in cash, property or stock
(whole or fractional), scrip or in but may, in the Board of
kind out of Trust property and Directors' sole discretion, before
make such distributions from any payment of any dividends set aside
source as the trustees in their such funds as a reserve fund for
discretion deem appropriate. such purpose as the Board of
Directors determines to be in the
best interest of the Corporation.
Holders of excess stock, $0.0001
par value per share, of the
Corporation ("Excess Stock"), are
not entitled to receive dividends.

Voting by Unanimous Any shareholders' action may be Any stockholders' action may be
Consent effected by a written consent effected by a written consent
signed by all the shareholders signed by all stockholders
entitled to vote thereon. entitled to vote thereon.

Amendment of Any amendment to the Declaration Any amendment to the Articles of
Constitutional of Trust requires approval of a Incorporation requires approval of
Documents majority of the trustees and the a majority of the directors and in
affirmative vote of the holders of some cases two-thirds of the Board
not less than two-thirds of the of Directors. Any amendment to
Trust Shares then outstanding; certain provisions of the Articles
provided, however, that by of Incorporation requires the
two-thirds vote of the Trustees, affirmative vote of the holders of
the Declaration of Trust may be not less than 80% of all of the
amended to the extent necessary to votes entitled to be cast on the
meet the REIT requirements matter. Any amendment to any other
pursuant to the Code. Trustees' provision of the Articles of
Regulations may be amended only by Incorporation requires the vote of
the trustees. a majority of the aggregate votes
entitled to be cast thereon.
Bylaws may be amended only by vote
of two-thirds of the Board of
Directors or by the affirmative
vote of not less than 80% of all
the votes entitled to be cast at a
meeting called for such purpose.

Voting on Other The Declaration of Trust limits Holders of voting stock may vote
Matters shareholders to take action only on all matters provided for by the
on the election of trustees, the MGCL.
amendment of the Declaration of
Trust, the termination of the
Trust and the calling of a
shareholders meeting.
</TABLE>

4
<PAGE> 15

<TABLE>
<CAPTION>
PROVISION TRUST CORPORATION
- --------------------- ---------------------------------- ----------------------------------
<S> <C> <C>
Shareholders Rights Special meetings of shareholders A special meeting of stockholders
to Call Special may be called by the Managing may be called by the President,
Meeting Trustee of the Trust or by any two the Chief Executive Officer, the
trustees or, upon the written Chairman of the Board, by a
request of shareholders holding majority of the Board or on the
not less than 25% of the written request of the
outstanding Trust Shares, by any stockholders entitled to cast at
officer or trustee. least a majority of all the votes
entitled to be cast at the
meeting.

Share Ownership Limit The Declaration of Trust "Ownership Limit" of 9.8% of the
authorizes the Board of Trustees, outstanding shares by any holder
when they are of the good faith to assure against "closely held"
opinion that the direct or REIT disqualification, unless
indirect ownership of Trust Shares waived by Directors.
has or may become concentrated to
an extent which threatens the
Trust's REIT status, to call for
the redemption of such Trust
Shares or any number of such Trust
Shares.
</TABLE>

See "Proposal 1 -- The Reorganization -- Certain Changes in the Rights of
Shareholders Resulting from the Reorganization."

Required Votes for Approval of the Reorganization.

The proposal to approve and adopt the Reorganization must be approved by
the affirmative vote of the holders of at least two-thirds of all the votes
entitled to be cast at the Meeting. As of the date hereof, the trustees and
officers of the Trust beneficially own 2.5% of the outstanding Trust Shares. The
Trust's officers and trustees have indicated that they intend to vote all of the
Trust Shares held by them in favor of the Reorganization.

Interests of Certain Persons.

As noted below under "Proposal 2--Election of Trustees," the trustees and
officers of the Trust own approximately 2.5% of the outstanding Trust Shares. If
the Reorganization is approved and the nominees for trustees are elected, those
trustees and the officers of the Trust will become directors and officers,
respectively, of the Corporation. The Corporation's Articles of Incorporation
provide that the directors may be removed from office only for cause and only by
the affirmative vote of the holders of at least two-thirds of the combined
voting power of all shares of capital stock entitled to be cast in the election
of directors voting together as a single class. Under the Declaration of Trust,
trustees may be removed for cause by the unanimous vote of all trustees (except
the one so to be removed) and, with or without cause, by the affirmative vote of
holders of not less than two-thirds of the Trust Shares then outstanding, at a
special meeting of shareholders called for the purpose of removing the trustee.
The provisions in the Corporation's Articles of Incorporation may make it more
difficult to remove a director from office.

Material Federal Income Tax Consequences.

Jaeckle Fleischmann & Mugel, LLP has delivered its opinion to the Trust
that, on the basis of facts, representations and assumptions set forth in such
opinion, that the Reorganization will be treated for United States federal
income tax purposes as a reorganization within the meaning of Section 368(a) of
the Code. Accordingly, (i) no gain or loss will be recognized by the Trust as a
result of the Reorganization; and (ii) no gain or loss will be recognized by any
shareholder of the Trust who receives Corporation Stock in exchange for Trust
Shares. See "Proposal 1 -- Reorganization -- Federal Income Tax Matters."

If certain detailed conditions imposed by the REIT provisions of the Code
are met, entities such as the Trust that invest primarily in real estate and
that otherwise would be treated for federal income tax purposes as

5
<PAGE> 16

corporations generally are not taxed at the corporate level on their "real
estate investment trust taxable income" that is currently distributed to
shareholders. This treatment substantially eliminates the "double taxation" on
earnings (i.e., taxation at both the corporate and shareholder levels) that
generally results from the use of corporations. Prior to the consummation of the
Reorganization, the Trust has operated in a manner intended to allow it to
qualify as a REIT. The Corporation intends to operate following the
Reorganization in a manner so that the Corporation will continue to qualify as a
REIT. See "Proposal 1 -- The Reorganization -- Federal Income Tax Matters."

ELECTION OF TRUSTEES

Seven individuals have been nominated for election as trustees of the Trust
to hold office until the next Annual Meeting of Shareholders and until their
successors have been elected and qualify. If the Reorganization is approved and
the Merger is consummated, the trustees of the Trust at the time of the
consummation of the Merger will become the directors of the Corporation serving
for the same terms with the Corporation as such persons are then serving with
the Trust. See "Proposal 2 -- Election of Trustees."

RECOMMENDATION OF THE BOARD OF TRUSTEES

The Board of Trustees has approved the Reorganization, subject to
shareholder approval, and believes that the Reorganization is in the best
interests of the Trust and its shareholders. The Board of Trustees recommends
that shareholders vote in favor of the Reorganization and the election of
Trustees.

6
<PAGE> 17

PROPOSAL 1 -- THE REORGANIZATION

PRINCIPAL REASONS FOR THE REORGANIZATION

The Trust was organized in 1969 as a Maryland REIT primarily in order to
take advantage of the tax treatment afforded to REITs under the Code. At that
time, only unincorporated trusts and associations taxable as a corporation
(i.e., business trusts) could qualify as REITs, and as such would be eligible
for the tax benefits conferred by such status. However, as a result of certain
subsequently effected amendments to the Code, corporations may now also qualify
as a REIT. In more recent years, an increasing number of REITs have been
incorporated as, or have been reorganized into, corporations (and, in
particular, Maryland corporations) in order to take advantage of the more
well-defined state corporation statutes which provide such REITs with a greater
degree of certainty and flexibility in planning and implementing corporate
action than would otherwise be available as a trust. The Board of Trustees
believes that this greater degree of flexibility, together with the favorable
perception of the Maryland corporation by the experienced REIT investor
community and the other factors set forth below, combine to make the
Reorganization desirable and in the best interests of the Trust and its
shareholders.

Certainty/Flexibility. In states such as Maryland, there is a modern,
well-defined corporate statute as well as decisional case law interpreting such
statute on which a corporation may rely in planning and implementing its
activities. The existence of such a statute and case law allows a corporation to
plan the legal aspects of its future activities with more certainty and
flexibility than do the provisions of the Declaration of Trust and MD REIT Law
currently applicable to the Trust. A modern corporate charter also allows
corporations to determine and change business strategies on an ongoing basis as
circumstances warrant, whereas such flexibility is, at times, unavailable to
trusts which may be restricted by the more specific provisions of their
governing instruments.

Investor Perception. Corporations are far more numerous than trusts and are
more familiar to the investor community. Additionally, in the specific context
of REITs, Maryland corporations are often perceived by the experienced investor
community as conferring the most beneficial framework within which REITs may
operate and develop. This familiarity and favorable perception is considered by
the Board of Trustees as likely to enhance the liquidity and marketability of
the Trust, providing potentially greater access to capital and real estate
markets.

Protections Afforded by Maryland Law Against Hostile/Unsolicited Takeovers.
The Trust and the Corporation are both subject to certain provisions of the MGCL
which are designed to deter hostile or unsolicited takeover attempts of Maryland
corporations or Maryland REITs and to encourage potential acquirors to negotiate
directly with the management of a Maryland corporation or a Maryland REIT. See
"Certain Changes in the Rights of Shareholders Resulting from the
Reorganization -- Shareholder Approval of Certain Business Combination
Transactions." The Board of Trustees believes that the reorganization of the
Trust into a Maryland corporation will allow the Board of Directors of the
Corporation to continue to avail itself of these provisions of the MGCL and, as
with the Trust, will provide the Corporation with a certain amount of
flexibility in the face of any future takeover attempts by encouraging the
potential acquiror to negotiate directly with the Corporation's management.

Unsolicited or hostile takeover attempts are frequently structured in ways
that may not be in the best interests of all shareholders. Although a takeover
attempt may be made at a price substantially above the then current market
prices for a target company's shares, such offers are sometimes made for less
than all of the outstanding shares of the target company. As a result,
shareholders may be presented with the alternative of either partially
liquidating their investment at a time which may be disadvantageous or retaining
their investment as minority shareholders in an enterprise which is controlled
by persons whose objectives may be different from those of the remaining
minority shareholders. A takeover attempt may also take the form of a two-tiered
offer in which cash is offered for a portion of the target company's outstanding
shares and thereafter securities that are or may be worth less than the cash
portion are offered for the remaining shares. Furthermore, hostile takeover
attempts are sometimes timed and designed to foreclose or minimize the
possibility of more favorable competing bids which frequently may result in
shareholders losing the

7
<PAGE> 18

opportunity to receive and consider alternative and possibly more attractive
proposals. On the other hand, transactions approved by a target company's board
of directors can be more carefully planned and undertaken at an opportune time
in order to obtain maximum value for the company and all of its shareholders.

The Board of Trustees recognizes that takeover attempts which have not been
negotiated with and approved by a target company's board of directors or other
managerial body do not always have the unfavorable consequences or effects
described above. However, the Board of Trustees believes that the potential
disadvantages of unapproved takeover attempts are sufficiently great that the
protections afforded by the MGCL against hostile or unsolicited takeover
attempts are in the best interests of the Trust and its shareholders.

Other Considerations. In addition to the foregoing, there are certain other
factors that have caused the Board of Trustees to view a Maryland corporation as
a desirable organization into which the Trust should be reorganized. In
particular, the effectiveness of the so-called "Excess Share" provision
(intended to preserve REIT status), has been specifically upheld in the context
of a REIT organized under Maryland law, and a similar provision is contained in
the Corporation's Articles of Incorporation. Additionally, in contrast to the
Trust's Declaration of Trust, the Corporation's Articles of Incorporation
contain modern and specific provisions concerning shareholdings and shareholder
reporting, all designed to further protect the Corporation's REIT status.

TERMS OF THE REORGANIZATION

The Agreement and Plan of Merger dated , 1997 by and between
the Trust and the Corporation (the "Merger Agreement"), is set forth in its
entirety as Appendix A to this Proxy Statement/Prospectus. The information set
forth below is only a summary of its principal provisions and is qualified in
its entirety by Appendix A.

The Merger will become effective upon the filing of the Articles of Merger
with the appropriate state agencies, including, without limitation, the State
Department of Assessments and Taxation of the State of Maryland. The Trust
anticipates that the Merger will become effective as promptly as practicable
following shareholder approval of the Reorganization at the Meeting.

Upon consummation of the Merger, the Corporation and its stockholders will
be governed by the Corporation's Articles of Incorporation and Bylaws, which
will include a number of provisions which are not currently in the Declaration
of Trust. See "-- Certain Changes in the Rights of Shareholders Resulting from
the Reorganization." These provisions of the Articles of Incorporation and
Bylaws of the Corporation, together with certain provisions of the MGCL, may
have certain anti-takeover effects. A copy of the proposed Articles of
Incorporation and Bylaws of the Corporation are set forth in their entirety as
Appendices B and C, respectively.

On the effective date of the Merger, each of the persons then serving as
trustees and officers of the Trust will be directors and officers, respectively,
of the Corporation. For information concerning the trustees and officers of the
Trust, see "Proposal 2 -- Election of Trustees."

8
<PAGE> 19

and stock appreciation rights in respect of Corporation Stock on substantially
identical terms and conditions as shares set forth in the Trust's Stock Option
Plans.

At the effective time of the Merger, it is anticipated that the listing of
the Trust Shares on the NYSE will be terminated. The Corporation Stock will
thereafter continue to be listed on the NYSE in accordance with the applicable
rules of the NYSE.

At the effective date of the Merger, each certificate representing Trust
Shares will be deemed for all purposes to evidence the same number of shares of
Corporation Stock. The issued shares of Corporation Stock will not be converted
or exchanged in any manner, but each Trust Share which is issued at the
effective time of the Merger will represent one issued share of Corporation
Stock.

The expenses associated with the Reorganization of the Trust into the
Corporation pursuant to the Merger (currently estimated to be approximately
$200,000) will be borne by the Trust.

CERTAIN CHANGES IN THE RIGHTS OF SHAREHOLDERS RESULTING FROM THE REORGANIZATION

The rights of shareholders of the Trust are currently governed by the
Trust's Declaration of Trust, the Trustees' Regulations, Maryland law, including
the MD REIT Law, and the rules of the NYSE. If the Reorganization is approved by
the shareholders of the Trust and the Merger is consummated, the Corporation
will be the surviving entity in the Merger, the separate existence of the Trust
will terminate, each outstanding Trust Share will be converted into one share of
Corporation Stock and the rights of stockholders will be governed by the
Corporation's Articles of Incorporation, the Corporation's Bylaws, Maryland law,
including the MGCL, and the rules of the NYSE. While a number of the Trust's
current corporate governance provisions will be included in the Corporation's
Articles of Incorporation and Bylaws and, therefore, will not be affected by the
approval of the Reorganization and the consummation of the Merger, certain
differences between the Trust's Declaration of Trust and Trustees' Regulations
and the Corporation's Articles of Incorporation and Bylaws will result in
certain material differences between the rights of shareholders of the Trust and
the rights of stockholders of the Corporation. Accordingly, shareholders of the
Trust should carefully consider the changes in their rights that will result
from the approval of the Reorganization and the consummation of the Merger.

Set forth below are descriptions of the principal material differences in
this respect. The descriptions do not, however, purport to be complete and are
qualified in their entirety by reference to the Declaration of Trust and
Trustees' Regulations of the Trust, copies of which are exhibits to the
Registration Statement of which this Proxy Statement/Prospectus forms a part,
and the Articles of Incorporation and the Bylaws of the Corporation, copies of
which are attached hereto as Appendices B and C, respectively.

General/Authorized Shares. The Trust was organized as a REIT under the laws
of the State of Maryland pursuant to the Declaration of Trust originally dated
June 15, 1969. The Corporation was organized on , 1997 by the Trust
to acquire and succeed to, and to continue the business of, the Trust upon the
consummation of the Merger of the Trust with and into the Corporation and has
had no activities to date other than those incident to the Reorganization.

Under the Declaration of Trust, the Trust is authorized to issue up to
20,000,000 Trust Shares. In addition, the trustees have the power to classify or
reclassify any unissued Trust Shares from time to time by setting or changing
the preference, conversion or other rights, voting powers, restrictions,
limitation as to dividends, qualifications, or terms or conditions of redemption
of the shares.

Under its Articles of Incorporation, the Corporation has authority to issue
up to 100,000,000 shares of capital stock, consisting of 70,000,000 shares of
Corporation Stock and 30,000,000 shares of Excess Stock. Subject to the
provisions of the Articles of Incorporation regarding Excess Stock, all shares
of Corporation Stock will have equal dividend, distribution, liquidation and
other rights, and will have no preference or exchange rights. Holders of
Corporation Stock have no conversion, sinking fund or redemption rights, or
preemptive rights to subscribe for any securities of the Corporation. The Board
of Directors of the Corporation generally will have the power to issue such
shares of Corporation Stock without stockholder approval. Other

9
<PAGE> 20

than the 200 shares of Corporation Stock owned by the Trust which will be
cancelled in the Merger, there are currently no shares of any class of capital
stock of the Corporation issued or outstanding. The Articles of Incorporation
authorize the Board of Directors to classify any unissued shares of the capital
stock of the Corporation and to reclassify any previously classified but
unissued shares of such capital stock from time to time, in one or more series
of preferred stock or capital stock issued from time to time, as authorized by
the Board of Directors. Prior to the issuance of shares of each series, the
Board of Directors is required by the MGCL and the Articles of Incorporation to
set for each series, subject to the provisions of the Articles of Incorporation
regarding Excess Stock, the terms, preferences, conversion or other rights,
voting powers, restrictions, limitations as to dividends or other distributions,
qualifications and terms or conditions of redemption, as permitted by Maryland
law. Such rights, powers, restrictions and limitations could include the right
to receive specified dividend payments and payments on liquidation prior to any
such payments being made to the holders of the shares of Corporation Stock. The
Board of Directors could authorize the issuance of shares of preferred stock
with terms and conditions that could have the effect of delaying, deferring or
preventing a transaction or a change of control of the Corporation that might
involve a premium price for holders of shares of Corporation Stock over the then
market price of such shares or otherwise be in the best interests of such
stockholders.

Since the MGCL requires that the Articles of Incorporation fix the maximum
number of shares that are authorized for issuance by the Board of Directors
without further amendment by the stockholders of the Corporation, the authorized
capital of the Corporation authorizes a significantly greater number of shares
than will be issued upon the Merger in order to anticipate current and future
needs for acquisitions, financings, employee benefit plans, stock dividends and
splits and for other corporate purposes. In the event of an unsolicited tender
offer or takeover proposal, the increased number of authorized shares could give
the Board of Directors of the Corporation a greater ability to issue shares in
one or more transactions which might impede or deter such offer or proposal.
Similarly, shares of preferred stock could also be issued in a manner or with
such terms, provisions and rights including, but not limited to, extraordinary
voting, dividend, redemption or conversion rights which could make more
difficult, and therefore less likely, a takeover of the Corporation.

The transfer agent and registrar for the Corporation Stock will be Harris
Trust and Savings Bank, the Trust's current transfer agent.

Dividends. Trustees of the Trust may declare and pay dividends in cash,
Trust Shares (whole or fractional), scrip or in kind out of Trust property and
make such distributions from any source as the trustees in their discretion deem
appropriate, including, but not limited to, amounts sufficient, in the trustees'
opinion, to enable the Trust to reduce or eliminate any liability of the Trust
for federal income tax in respect to any fiscal year. Each distribution in cash
or property will be accompanied by a written communication advising whether the
cash or property so distributed will be treated, in the hands of the
shareholders, as capital gains, ordinary income or return of capital for federal
income tax purposes; provided, however, that in case there is any doubt as to
such treatment, such communication may so state, in which event the shareholders
will be advised as to such treatment not later than sixty days after the close
of the fiscal year in which the distribution was made.

Directors of the Corporation may declare dividends payable in cash,
property or stock but may, in the Board of Directors' sole discretion, before
payment of any dividends set aside such funds as a reserve fund for such purpose
as the Board of Directors determines to be in the best interest of the
Corporation. Holders of Excess Stock are not entitled to receive dividends.
After provisions with respect to preferential dividends on any then outstanding
classes of preferred stock, if any, fixed by the Board of Directors pursuant to
the Articles of Incorporation have been satisfied, and after satisfaction of any
other requirements, if any, including with respect to redemption rights and
preferences, of any such classes of preferred stock, then and thereafter the
holders of Corporation Stock will be entitled to receive, pro rata in relation
to the number of shares of Corporation Stock held by them, such dividends or
other distributions as may be declared from time to time, by the Board of
Directors out of funds legally available therefor.

Ownership Limitation. For an entity to qualify as a REIT under the Code,
among other things, not more than 50% in value of its outstanding capital shares
may be owned, directly or indirectly, by five or fewer

10
<PAGE> 21

individuals (defined in the Code to include certain entities) during the last
half of a taxable year (other than the first year) (the "Five or Fewer
Requirement"), and such shares must be beneficially owned by 100 or more persons
during at least 335 days of a taxable year of 12 months (other than the first
year) or during a proportionate part of a shorter taxable year. Pursuant to the
Code, stock held by most entities, such as, generally, tax-exempt pension trusts
qualifying under Section 401(a) of the Code (subject to certain limited
exceptions), United States investment companies registered under the Investment
Company Act of 1940, partnerships, trusts and corporations, will be attributed
to the beneficial owners (or, as the case may be, beneficiaries) of such
entities for purposes of the Five or Fewer Requirement (i.e., the beneficial
owners or beneficiaries of such entities will be deemed to own their respective
proportionate interests, as specifically determined, in the stock of the REIT).

In order to protect the Trust against the risk of losing its REIT status
due to a concentration of ownership among its shareholders, the Declaration of
Trust authorizes the Board of Trustees, at any time, when they are of the good
faith opinion that the direct or indirect ownership of Trust Shares has or may
become concentrated to an extent which is contrary to the requirements of
section 856(a)(6) of the Code (concerning the Trust's REIT status), by any means
equitable to the trustees, to call for the redemption of such Trust Shares or
any number of such Trust Shares to maintain or bring the direct or indirect
ownership of Trust Shares into conformity with the requirements of Section
856(a)(6) of the Code. The redemption price shall be determined in good faith by
the trustees. From and after the date fixed for redemption by the trustees, the
holder of any Trust Shares so called for redemption will cease to be entitled to
dividends, voting rights and other benefits with respect to such Trust Shares
excepting only the right to payment of the redemption price fixed by the
Trustees. Trust Shares redeemed in accordance with the Declaration of Trust will
be cancelled. To the extent that any redemption results in authorized but
unissued Trust Shares, the trustees may issue the authorized but unissued Trust
Shares in accordance with the provisions of the Declaration of Trust, except
that the trustees are not required to issue the Trust Shares ratably if such
issuance would result in a concentration of Trust Shares contrary to the
provisions of Section 856(a)(6) of the Code. The ownership restrictions
contained in the Declaration of Trust may have the effect of precluding
acquisition of control of the Trust.

In order to protect the Corporation against the risk of losing its REIT
status due to a concentration of ownership among its stockholders, the Articles
of Incorporation contain an Excess Stock provision, which provides that no
person shall acquire beneficial or constructive ownership exceeding 9.8% in
value or number of the capital stock of the Corporation, excluding Excess Stock,
whichever is more restrictive (the "Ownership Limit"). Shares of the capital
stock owned by a person in excess of the Ownership Limit shall be deemed Excess
Stock.

Any transfer of shares of capital stock or any security convertible into
shares of capital stock that would create a direct or indirect ownership of
shares of capital stock in excess of the Ownership Limit or that would result in
the disqualification of the Corporation as a REIT shall be null and void, and
the intended transferee will acquire no rights to the shares of capital stock.
The foregoing restrictions on transferability and ownership will not apply if
the Board of Directors determines that it is no longer in the best interests of
the Corporation to attempt to qualify, or to continue to qualify, as a REIT. The
Board of Directors may, in its sole discretion, waive the Ownership Limit upon
receipt of a ruling by the Internal Revenue Service (the "IRS") or an opinion of
counsel or other evidence satisfactory to the Board of Directors and upon at
least 15 days' written notice of the proposed transfer which would result in the
ownership of stock in excess of the Ownership Limit and upon such other
conditions as the Board of Directors may direct.

Shares of capital stock owned, or deemed to be owned, or transferred to a
stockholder in excess of the Ownership Limit will automatically be converted
into shares of Excess Stock that will be transferred, by operation of law, to
the Corporation as trustee of a trust for the exclusive benefit of the
transferees to whom such shares of capital stock may be ultimately transferred
without violating the Ownership Limit. While the Excess Stock is held in trust,
it will not be entitled to vote and except upon liquidation it will not be
entitled to participate in dividends or other distributions. Any distribution
paid to a proposed transferee of Excess Stock prior to the discovery by the
Corporation that capital stock has been transferred in violation of the
provision of the Corporation's Articles of Incorporation will be repaid to the
Corporation upon demand. The Excess Stock

11
<PAGE> 22

is not treasury stock, but rather constitutes a separate class of issued and
outstanding stock of the Corporation. The original transferee may, at any time
the Excess Stock is held by the Corporation in trust, transfer the interest in
the trust representing the Excess Stock to any person whose ownership of shares
of Corporation Stock exchanged for such Excess Stock would be permitted under
the Ownership Limit, at a price not in excess of (i) the price paid by the
original transferee for the shares of Corporation Stock that were exchanged into
Excess Stock; or (ii) if the original transferee did not give value for such
shares (i.e., the shares were received through a gift, devise or other
transaction), the last reported sales price on the NYSE for the class of stock
from which such shares of Excess Stock were converted on the trading day
immediately preceding such sale or gift or, if not then traded on the NYSE, the
last reported sales price of such stock on the trading day immediately preceding
the relevant date as reported on any exchange or quotation system over which
such stock is traded, or if not so traded, then the market price of such stock
on the relevant date as determined in good faith by the Board of Directors (the
"Market Price"). Immediately upon the transfer to the permitted transferee, the
Excess Stock will automatically be converted back into shares of Corporation
Stock from which it was converted.

In addition, the Corporation will have the right, for a period of 90 days
after the later of (i) the date of the transfer or attempted transfer; or (ii)
the date the Board of Directors determines in good faith that a transfer
occurred if the Corporation receives no notice of the transfer as required by
the Articles of Incorporation, to redeem any of the Excess Stock from the
original transferee at a price per share equal to the lesser of (x) the price
initially paid for such shares by the original transferee in the transaction
that created such violation or attempted violation, or if the original
transferee did not give value for such shares (i.e., the shares were received
through a gift, devise or other transaction), the Market Price; or (y) the
Market Price of the stock to which such shares of Excess Stock relate on the
date the Corporation, or its designee, gives notice of such redemption.

These restrictions will not preclude the settlement of a transaction
entered into through the facilities of any interdealer quotation system or
national securities exchange upon which shares of stock of the Corporation are
traded. Notwithstanding the previous sentence, certain transactions may be
settled by providing Excess Stock pursuant to the Articles of Incorporation. The
fact that the settlement of any transaction is permitted shall not negate the
effect of any other aspect of the Excess Stock provisions, and any transferee in
such a transaction and the shares so transferred will be subject to all of the
other provisions and limitations contained in the Excess Stock provisions. Each
stockholder will upon demand be required to disclose to the Corporation in
writing any information with respect to the direct, indirect and constructive
ownership of capital stock as the Board of Directors deems necessary to comply
with the provisions of the Code applicable to REITs, to comply with the
requirements of any taxing authority or governmental agency or to determine any
such compliance.

The ownership restrictions contained in the Articles of Incorporation may
have the effect of precluding acquisitions of control of the Corporation unless
the Board of Directors determines that maintenance of REIT status is no longer
in the best interests of the Corporation.

Meetings of Stockholders. The Declaration of Trust and Trustees'
Regulations provide for an annual meeting of shareholders to be held each year
at the principal office of the Trust at such place and at such time as the
trustees may determine. Special meetings of shareholders may be called by the
Managing Trustee or by any two trustees, or, upon the written request of
shareholders holding not less than 25% of the outstanding Trust Shares, by any
officer or trustee.

The Bylaws of the Corporation provide for annual meetings of stockholders
to be held at such time on such day as shall be set by the Board of Directors.
Special meetings of stockholders may be called by (i) the Chairman of the Board,
the Chief Executive Officer or the President; (ii) a majority of the Board of
Directors; or (iii) stockholders entitled to cast at least a majority of all the
votes entitled to be cast at the meeting.

Advance Notice of Stockholder Proposals and Director Nominations. Neither
the Declaration of Trust nor the Trustees' Regulations contain any provisions
allowing or detailing the process for a shareholder to propose business to be
considered at an annual meeting or for the nomination of trustees.

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<PAGE> 23

The Corporation's Bylaws, in contrast, contain detailed provisions
concerning stockholder nominations and stockholder business. Pursuant to the
Bylaws, in order to have a stockholder proposal or director nomination
considered at an annual meeting of stockholders, stockholders are generally
required to deliver certain information concerning themselves and their
stockholder proposal or director nomination not less than 60 days nor more than
90 days prior to the anniversary date of the immediately preceding annual
meeting (the "Anniversary Date"); provided, however, that in the event that the
date of the annual meeting is advanced by more than 30 days or delayed by more
than 60 days from the Anniversary Date, notice by the stockholder to be timely
must be delivered not earlier than the 90th day prior to such annual meeting and
not later than the close of business on the later of the 60th day prior to such
annual meeting or the tenth day following the day on which public announcement
of the date of such meeting is first made. Failure to comply with such timing
and informational requirements will result in such proposal or director
nomination not being considered at the annual meeting. The purpose of requiring
stockholders to give the Corporation advance notice of nominations and other
business, and certain information relating thereto, is to ensure that the
Corporation and its stockholders have sufficient time and information to
consider any matters that are proposed to be voted on at an annual meeting, thus
promoting orderly and informed stockholder voting. Such Bylaw provisions could
have the effect of precluding a contest for the election of directors or the
stockholder proposals if the proper procedures are not followed, and of delaying
or deferring a third party from conducting a solicitation of proxies to elect
its own slate of directors or to have its own proposals approved.

Action by Consent of Stockholders. Although the Declaration of Trust is
silent on the issue of action by consent of shareholders, the MGCL provides that
any action required or permitted to be taken by shareholders of the Trust may be
effected by a consent in writing signed by the holders of all of the outstanding
Trust Shares entitled to vote on the matter. The Company's Articles of
Incorporation specifically provide that any action required or permitted to be
taken by stockholders of a corporation may be effected by a consent in writing
signed by the holders of all of the outstanding shares of Corporation Stock
entitled to vote on such action at a meeting of stockholders, if such written
consent is accompanied by a written waiver of any right to dissent signed by
each stockholder entitled to notice of the meeting but not entitled to vote at
such meeting.

Board of Trustees of the Trust Compared to Board of Directors of the
Corporation. The Declaration of Trust provides that the number of trustees shall
generally be established by the trustees provided that there shall be no less
than three and no more than twelve trustees. Pursuant to the Declaration of
Trust, a trustee may be removed for cause by the unanimous vote of all trustees
(except the one so to be removed) and, with or without cause, by the affirmative
vote of holders of not less than two-thirds of the Trust Shares then
outstanding, at a special meeting of shareholders called for the purpose of
removing the trustee. Vacancies in the office of a trustee may be filled by a
written appointment signed by a majority of the trustees then in office.
Trustees are elected for one year terms.

The Corporation's Articles of Incorporation provide that the number of
directors of the Corporation initially shall be seven, which number may
thereafter be increased or decreased from time to time by the directors pursuant
to the Corporation's Bylaws; provided, however, that the total number of
directors shall not be fewer than three, unless there are less than three
stockholders, nor greater than fifteen. The directors of the Corporation will
serve one-year terms.

The Articles of Incorporation of the Corporation also provide that any
director may be removed from office only with cause and only by the affirmative
vote of the holders of at least two-thirds of the combined voting power of all
shares of capital stock entitled to be cast in the election of directors voting
together as a single class. The Articles of Incorporation additionally provide
that any vacancy occurring on the Board of Directors shall be filled by the
affirmative vote of a majority of the remaining directors, except that a vacancy
resulting from an increase in the number of directors will be filled by a
majority of the entire Board of Directors. By the vote required to elect a
director, the stockholders may fill any vacancy on the Board of Directors
resulting from the removal of a director.

The provisions of the Articles of Incorporation relating to the removal of
directors and the filling of vacancies on the Board of Directors could preclude
a third party from removing incumbent directors without cause and simultaneously
gaining control of the Board of Directors by filling, with its own nominees, the

13
<PAGE> 24

vacancies created by such removal. These provisions also limit the power of
stockholders generally, even those with a majority interest in the Corporation,
to remove incumbent directors and to fill vacancies on the Board of Directors
without the support of the incumbent directors.

Amendment of Constitutional Documents of the Trust and the Corporation. Any
amendment to the Declaration of Trust requires approval of a majority of the
trustees and the affirmative vote of the holders of not less than two-thirds of
the Trust Shares then outstanding; provided, however, that by two-thirds vote of
the Trustees, the Declaration of Trust may be amended to the extent necessary to
meet the REIT requirements pursuant to the Code. The Trustees' Regulations may
be amended only by the trustees.

Under the Corporation's Articles of Incorporation, the affirmative vote of
a majority of the Board of Directors and the affirmative vote of the holders of
not less than a majority of the aggregate votes entitled to be cast thereon
(considered for this purpose as a single class) are required to amend the
provisions of the Articles of Incorporation; provided, however, that any
amendment inconsistent with the provisions governing (i) the Board of Directors;
(ii) the indemnification of agents and limitation of liability of officers and
directors; and (iii) the amendment of the Articles of Incorporation, will be
effective only if it is also advised by at least two-thirds of the Board of
Directors. Furthermore, in addition to any vote required by the terms of the
then outstanding preferred stock, approval by the affirmative vote of the
holders of not less than 80% of all the votes entitled to be cast on the matter
is required to (i) amend any provision of the Articles of Incorporation that
would, in the determination of the Board of Directors, cause the Corporation not
to qualify as a REIT under the Code; (ii) amend those provisions (a) governing
amendments to the Bylaws, (b) concerning the indemnification of agents and
limitation of liability of officers and directors and (c) governing amendments
to the Articles of Incorporation; and (iii) add a provision imposing cumulative
voting in the election of directors.

The Bylaws may be amended (i) by the stockholders by the affirmative vote
of not less than 80% of all of the votes entitled to be cast at any meeting
called for that purpose (notice of such purpose having been given); or (ii) by
vote of two-thirds of the Board of Directors at a meeting held in accordance
with the provisions of the Bylaws.

These provisions could make it more difficult for stockholders of the
Corporation to amend the Corporation's Articles of Incorporation and Bylaws.

Consolidation, Merger or Sale of Assets. The Declaration of Trust does not
require shareholder approval of any sale, exchange or other disposition of the
assets of the Trust. However, pursuant to the MD REIT Law, any merger of the
Trust pursuant to which the Trust is terminated, requires the approval of the
holders of two-thirds of all the votes entitled to be cast on the matter and
approval of the Board of Trustees.

The MGCL generally provides that the Board of Directors of a Maryland
corporation must approve a consolidation, merger, share exchange or transfer of
all or substantially all of the Corporation's assets not in the ordinary course
of business and that the stockholders thereafter must approve such
consolidation, merger, share exchange or transfer of assets by a vote of
two-thirds of all the votes entitled to be cast on the matter at a meeting of
the stockholders, except that the articles of incorporation may provide for a
greater or lesser percentage vote, but not less than a majority of all the votes
entitled to be cast on the matter. The Corporation's Articles of Incorporation
provide that any consolidation, merger, share exchange or transfer of all or
substantially all of the assets must first be approved by the affirmative vote
of at least two-thirds of the Board of Directors of the Corporation and
thereafter must be approved by a vote of a majority of all the votes entitled to
be cast on such matter at a meeting of the stockholders.

These provisions could make it difficult for the Corporation to enter into
any consolidation, merger or sale of assets as described above.

Dissolution/Termination. The Trust's Declaration of Trust provides that the
Trust may be terminated by the approval of a majority of trustees and
affirmative vote of the holders of not less than two-thirds of the Trust Shares
then outstanding at a meeting of shareholders called for that purpose.

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<PAGE> 25

Similarly, the MGCL generally permits the dissolution of a corporation if
approved (i) first by the affirmative vote of a majority of the entire Board of
Directors declaring such dissolution to be advisable and directing that the
proposed dissolution be submitted for consideration at an annual or special
meeting of stockholders; and (ii) upon proper notice being given as to the
purpose of the meeting, then by the stockholders of the corporation by the
affirmative vote of two-thirds of all the votes entitled to be cast on the
matter.

Limitations on Dissenters' Appraisal Rights. Generally, so long as the
Trust Shares or the shares of Corporation Stock are listed on a national stock
exchange, holders of such shares who dissent from certain corporate transactions
have no right under the MGCL to an appraisal and payment of the fair value of
their shares, except to the limited extent set forth below. Absent such listing,
as a general matter, the MGCL provides that a dissenting stockholder of a
Maryland corporation has the right to demand and receive the fair value of such
holder's stock, subject to complying with specified procedures, if the
corporation consolidates or merges with or exchanges its shares for shares of
another corporation, or sells substantially all of its assets, or amends its
charter in a way that alters the contract rights expressly set forth in the
charter of any outstanding stock and substantially adversely affects the
stockholder's rights (unless the corporation reserves the right to make such an
amendment in its Articles of Incorporation, in which event stockholders will not
be entitled to exercise dissenters' rights in connection with any such
amendment). Because the Corporation has reserved the right to amend its Articles
of Incorporation in a way which alters the contract rights of holders of any
outstanding capital stock, stockholders will not be entitled to exercise
dissenter's rights in connection with any such amendment.

Shareholder Approval of Certain Business Combination Transactions. Under
the MGCL, the sale, lease, exchange or transfer of all or substantially all of
the assets of a corporation not in the ordinary course of the business conducted
by it, as well as any merger, consolidation or share exchange, requires approval
by holders of two-thirds of the shares of the corporation entitled to vote on
such matter. Similarly, the MD REIT Law, which applies to the Trust, requires
the approval of two-thirds of all the votes entitled to be cast of a trust to
approve a merger. The foregoing voting requirements may be increased or reduced
(but not to less than a majority) by a trust's declaration or a corporation's
articles of incorporation.

Under the MGCL, certain business combinations, including a merger,
consolidation, share exchange, or, in certain circumstances, an asset transfer
or issuance of reclassification of equity securities, between a Maryland
corporation or REIT and an interested shareholder who beneficially owns 10% or
more of the voting power of the corporation's shares or an affiliate of the
corporation who, at any time within the two-year period prior to the date in
question, was the beneficial owner of 10% or more of the voting power of the
then-outstanding voting stock of the corporation or an affiliate thereof are
prohibited for five years after the most recent date on which the interested
shareholder becomes an interested shareholder. Thereafter, any such business
combination must be recommended by the board of directors of the corporation or
board of trustees of the REIT and approved by the affirmative vote of at least
(i) 80% of the votes entitled to be cast by holders of outstanding voting shares
of the corporation or REIT and (ii) two-thirds of the votes entitled to be cast
by holders of outstanding voting shares of the corporation or REIT other than
shares held by the interested shareholder with whom (or with whose affiliate)
the business combination is to be effected, unless, among other conditions, the
corporation's or REIT's shareholders receive a minimum price (as defined in the
MGCL) for their shares and the consideration is received in cash or in the same
form as previously paid by the interested shareholder for its shares. These
provisions of Maryland law do not apply, however, to business combinations that
are approved or exempted by the board of directors of the corporation or board
of trustees of the REIT prior to the time that the interested shareholder
becomes an interested shareholder. Both the Trust and the Corporation are
subject to these provisions of the MGCL.

Control Share Acquisitions. The MGCL provides that "control shares" of a
Maryland corporation acquired in a "control share acquisition" have no voting
rights except to the extent approved by a vote of two-thirds of the votes
entitled to be cast on the matter, excluding shares of stock owned by the
acquiror or by officers or directors who are employees of the corporation.
"Control shares" are voting shares of stock which, if aggregated with all other
such shares of stock previously acquired by the acquiror, or in respect of which
the

15
<PAGE> 26

acquiror is able to exercise or direct the exercise of voting power except
solely by virtue of a revocable proxy, would entitle the acquiror to exercise
voting power in electing directors within one of the following ranges of voting
power: (i) one-fifth or more but less than one-third; (ii) one-third or more but
less than a majority; or (iii) a majority of all voting power. Control shares do
not include shares the acquiring person is then entitled to vote as a result of
having previously obtained shareholder approval. A "control share acquisition"
means the acquisition of control shares, subject to certain exceptions.

A person who has made or proposes to make a control share acquisition, upon
satisfaction of certain conditions (including an undertaking to pay expenses and
delivery of an "acquiring person statement"), may compel the corporation's board
of directors to call a special meeting of shareholders to be held within 50 days
of demand to consider the voting rights of the shares. If no request for a
meeting is made, the corporation may itself present the question at any
shareholders meeting.

Unless the charter or bylaws provide otherwise, if voting rights are not
approved at the meeting or if the acquiring person does not deliver an acquiring
person statement within ten days following a control share acquisition then,
subject to certain conditions and limitations, the corporation may redeem any or
all of the control shares (except those for which voting rights have previously
been approved) for fair value determined, without regard to the absence of
voting rights for the control shares, as of the date of the last control share
acquisition or of any meeting of shareholders at which the voting rights of such
shares are considered and not approved. Moreover, unless the charter or bylaws
provide otherwise, if voting rights for control shares are approved at a
shareholders' meeting and the acquiror becomes entitled to exercise or direct
the exercise of a majority or more of all voting power other shareholders may
exercise appraisal rights. The fair value of the shares as determined for
purposes of such appraisal rights may not be less than the highest price per
share paid by the acquiror in the control share acquisition.

The control share acquisition statute does not apply to shares acquired in
a merger, consolidation or share exchange if the corporation is a party to the
transaction, or to acquisitions approved or exempted by the charter or bylaws of
the corporation. Shareholders of the Trust and stockholders of the Corporation
are subject to the terms of the control share acquisition statute.

Limitation of Liability and Indemnification of Trustees and Directors.
Stockholders and directors of a corporation are generally not responsible for
its debts and obligations. Similarly, under the MD REIT Law, shareholders and
trustees of a REIT generally are not responsible for its debts or obligations.
Both the Trust's Declaration of Trust and the Corporation's Articles of
Incorporation contain provisions authorizing the Trust and the Corporation,
respectively, to indemnify and hold harmless, to the fullest extent permitted by
Maryland law, trustees and officers, or directors and officers, respectively,
involved in an action, suit or proceeding.

Section 2-418 of the MGCL (the "Indemnification Statute"), the law of the
state in which both the Trust and the Corporation are organized, empowers a
trust or a corporation, subject to certain limitations, to indemnify its
officers, trustees and directors against expenses, including attorneys' fees,
judgments, penalties, fines, settlements and expenses, actually and reasonably
incurred by them in any suit or proceeding to which they are parties unless the
act or omission of the trustee was material to the matter giving rise to the
proceeding and was committed in bad faith, or was the result of active and
deliberate dishonesty, or the trustee or director received an improper personal
benefit or, with respect to a criminal action or proceeding, the trustee or
director had no reasonable cause to believe their conduct was unlawful.

The Trust and the Corporation have entered into an indemnification
agreement (the "Indemnification Agreement") with each of its trustees or
directors, and officers, and the Board of Trustees and Board of Directors have
authorized the Trust and the Corporation, respectively, to enter into an
Indemnification Agreement with each of the future trustees or directors, and
officers. The Indemnification Statute permits a corporation to indemnify its
trustees, directors and officers. However, the protection that is specifically
afforded by the Indemnification Statute authorizes other arrangements for
indemnification of trustees, directors and officers, including insurance. The
Board of Trustees has approved and the shareholders have ratified the
Indemnification Agreement, which is intended to provide indemnification to the
maximum extent allowable by, or not in violation of, or offensive to, any law of
the State of Maryland.

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<PAGE> 27

The Indemnification Agreement provides that the Trust or the Corporation
shall indemnify a trustee or officer (or director in the case of the
Corporation) who is a party to the agreement (the "Indemnitee") if he or she was
or is a party to or otherwise involved in any proceeding by reason of the fact
that he or she was or is a trustee or officer of the Trust or a director or
officer of the Corporation, or was or is serving at its request in a certain
capacity of another entity, against losses incurred in connection with the
defense or settlement of such proceeding. This indemnification shall be provided
to the fullest extent permitted by Maryland law. Pursuant to the Indemnification
Statute, indemnification is not available to the Indemnitee who pays any amount
in settlement of a proceeding without the Trust's or Corporation's written
consent.

It is the position of the SEC that indemnification of the trustees,
directors and officers for liabilities arising under the Securities Act is
against public policy and is unenforceable pursuant to Section 14 of the
Securities Act.

Inspection Rights. The Declaration of Trust provides that shareholders of
record are entitled to inspect the books of account of the Trust and the share
register during normal business hours under such reasonable conditions as may be
established by the trustees.

Under the MGCL, the Corporation's stockholders have the right to inspect
and copy during usual business hours the Bylaws, minutes of the proceedings of
stockholders, annual statements of affairs and voting trust agreements on file
at the Corporation's principal offices. In addition, any stockholder may request
in writing a statement of all stock and securities issued by the Corporation
during a specified period of not more than twelve months before the date of such
request. The MGCL also provides additional inspection rights for stockholders
who individually or together are and for at least six months have been
stockholders of record of at least 5% of the outstanding stock of any class of
the Corporation. These rights include (i) the right upon written request to
inspect and copy during usual business hours the Corporation's books of account
and its stock ledger; (ii) the right to require the Corporation to produce a
statement of affairs verified under oath by an officer that sets forth in
reasonable detail the Corporation's assets and liabilities of a reasonably
current date; and (iii) if the Corporation does not maintain the original or
duplicate stock ledger at its principal office, the right to obtain from the
Corporation a list of stockholders setting forth the name and address of each
stockholder and the number of shares of each class that the stockholder holds,
verified under oath by an officer of the Corporation or its transfer agent or
registrar.

FEDERAL INCOME TAX MATTERS

Taxation of the Corporation. The Trust believes it has operated, and the
Trust (and, subsequent to the Merger, the Corporation) intends to continue to
operate, in such a manner as to qualify as a REIT under the Code, but no
assurance can be given that it will at all times so qualify.

The provisions of the Code pertaining to REITs are highly technical and
complex. The following is a brief and general summary of certain provisions that
currently govern the federal income tax treatment of the Trust and its
shareholders and that will equally be applicable to the Corporation and its
stockholders. For the particular provisions that govern the federal income tax
treatment of a REIT and its shareholders, reference is made to Section 856
through 860 of the Code and the regulations thereunder. The following summary is
qualified in its entirety by such reference.

Under the Code, if certain requirements are met in a taxable year, a REIT
generally will not be subject to federal income tax with respect to income that
it distributes to its shareholders. If the Trust (or the Corporation) fails to
qualify during any taxable year as a REIT, unless certain relief provisions are
available, it will be subject to tax (including any applicable alternative
minimum tax) on its taxable income at regular corporate rates, which could have
a material adverse effect upon its shareholders.

In any year in which the Corporation qualifies to be taxed as a REIT,
distributions made to its stockholders out of current or accumulated earnings
and profits will be taxed to stockholders as ordinary income except that
distributions of net capital gains designated by the Corporation as capital gain
dividends will be taxed as long-term capital gain income to the stockholders. To
the extent that distributions exceed current or accumulated earnings and
profits, they will constitute a return of capital, rather than dividend or

17
<PAGE> 28

capital gain income, and will reduce the basis for the stockholder's securities
with respect to which the distribution is paid or, to the extent that they
exceed such basis, will be taxed in the same manner as gain from the sale of
those securities.

Federal Income Tax Consequences of the Reorganization. The Board of
Trustees intends the Merger to qualify as a "reorganization" within the meaning
of the Code, which will result in no recognition of gain or loss to the Trust or
to the Corporation or to the shareholders of the Trust. The basis of each
shareholder's shares of Corporation Stock received in exchange for Trust Shares,
and the holding period for such shares of Corporation Stock, will be the same as
such shareholder's basis in, and holding period for, the shareholder's Trust
Shares. The basis and holding period for the properties of the Trust acquired by
the Corporation upon the consummation of the Merger will be the same in the
hands of the Corporation as they were in the hands of the Trust. The Merger will
not adversely affect the ability of the Corporation to continue to qualify as a
REIT under the Code.

As a condition to the consummation of the Merger, Jaeckle Fleischmann &
Mugel, LLP, as counsel to the Trust and to the Corporation, will render an
opinion to the Trust and to the Corporation to the effect that the Merger will
qualify as a "reorganization" within the meaning of the Code and that for
federal income tax purposes the Corporation will be deemed to be the same
taxpayer as the Trust. Such opinion will be based on certain factual assumptions
and representations of officers of the Trust and the Corporation regarding the
Trust, the Corporation and their respective operations. In the event that any of
such assumptions or representations are incorrect, the treatment of the Merger
as a "reorganization" under the Code may be adversely affected.

State Taxes. Each shareholder is encouraged to check with his or her own
tax advisor to determine whether the tax consequences of the Merger to such
shareholder are the same under applicable income tax laws of the state in which
such shareholder resides as the tax consequences to such shareholder under the
Code.

Shareholders are urged to consult their own tax advisors with respect
generally to the tax consequences arising under Federal law and the laws of any
state, municipality or other taxing jurisdiction, including tax consequences
resulting from such shareholder's own tax characteristics and situation.

VOTE REQUIRED; DISSENTERS' RIGHTS

In accordance with the Declaration of Trust, the Merger Agreement provides
that it is a condition of the Merger that the Reorganization and Merger be
approved by the affirmative vote of the holders of not less than two-thirds of
the votes entitled to be cast at the Meeting. The Trust's shareholders will not
be entitled to dissenters' rights of appraisal in connection with the Merger.

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<PAGE> 29

PROPOSAL 2 -- ELECTION OF TRUSTEES

The Record Date for determining Trust Shares entitled to vote at the
Meeting has been fixed at the close of business on April 23, 1997. On such date
there were Trust Shares outstanding. The holders of Trust Shares are
entitled to cumulative voting in the election of trustees. Each shareholder is
entitled to as many votes in the election of trustees as shall equal the number
of Trust Shares owned by that shareholder multiplied by the number of trustees
to be elected, and each shareholder may cast all such votes for a single
candidate for trustee or may distribute them among two or more candidates as
that shareholder may determine.

The presence, in person or by properly executed proxy, of the holders of
Trust Shares entitled to cast a majority of the votes entitled to be cast by the
holders of all outstanding Trust Shares is necessary to constitute a quorum.
Trust Shares represented by a properly signed, dated and returned proxy will be
treated as present at the Meeting for purposes of determining a quorum.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS

To the best of the Trust's knowledge, no person or group (as those terms
are used in Section 13(d)(3) of the Securities Exchange Act of 1934, as amended
(the "Exchange Act")), beneficially owned, as of March 31, 1997, more than five
percent of the Trust Shares outstanding, except as set forth in the following
table.

<TABLE>
<CAPTION>
NAME AND ADDRESS AMOUNT PERCENT OF
OF BENEFICIAL OWNER BENEFICIALLY OWNED TRUST SHARES(1)
---------------------------------------------- ------------------ ---------------
<S> <C> <C>
Morgan Stanley Group Inc.
1585 Broadway
New York, New York 10036...................... 633,972(2) 5.10%
<FN>

- ---------------

(1) Based on the number of Trust Shares outstanding as of February 21, 1997
which was 12,435,365.

(2) Based upon an amended Statement on Schedule 13G filed with the Securities
and Exchange Commission (the "SEC"), which indicated that Morgan Stanley
Group Inc. ("Morgan Stanley"), had shared voting power with respect to
119,772 Trust Shares and shared dispositive power with respect to 633,972
Trust Shares, which include 117,450 Trust Shares with respect to which
Morgan Stanley's wholly-owned subsidiary, Morgan Stanley Asset Management
Inc. ("MSAM"), has shared voting power and 631,650 Trust Shares with respect
to which MSAM has shared dispositive power.

</TABLE>

19
<PAGE> 30

SECURITY OWNERSHIP OF MANAGEMENT

The following table sets forth certain information available to the Trust
with respect to Trust Shares owned by each trustee, each executive officer, and
all trustees and executive officers as a group.

<TABLE>
<CAPTION>
NO. OF TRUST PERCENTAGE
TRUSTEES, EXECUTIVE OFFICERS SHARES OF TRUST
AND MORE THAN 5% SHAREHOLDERS BENEFICIALLY OWNED SHARES(1)
- --------------------------------------------------------------- ------------------ ----------
<S> <C> <C>
Alexander G. Anagnos........................................... 12,302(2) *%
H.C. Bailey, Jr................................................ 21,605(3) *
Harold B. Judell............................................... 16,440(3) *
John N. Palmer................................................. 10,217(4) *
David M. Osnos................................................. 18,750(5) *
Leland R. Speed................................................ 215,940(6) 1.73
David H. Hoster II............................................. 106,986(7) *
N. Keith McKey................................................. 54,796(8) *
Diane W. Hayman................................................ 12,000(9) *
Marshall A. Loeb............................................... 17,040(10) *
Jann W. Puckett................................................ 12,495(9) *
Stewart R. Speed............................................... 45,308(11) *
All trustees and executive officers as a group................. 543,879(12) 4.29%
<FN>

- ---------------

* Less than 1%

(1) Based on the number of Trust Shares outstanding as of February 21, 1997
which was 12,435,365 Trust Shares.

(2) Includes 12,000 Trust Shares the indicated person has the right to acquire
under the Trust's 1991 Trustees Stock Option Plan, as amended (the
"Trustees Plan").

(3) Includes 2,250 Trust Shares the indicated person has the right to acquire
under the Trustees Plan.

(4) Includes 8,625 Trust Shares the indicated person has the right to acquire
under the Trustees Plan.

(5) Includes 14,250 Trust Shares the indicated person has the right to acquire
under the Trustees Plan.

(6) Includes 75,000 Trust Shares that Mr. Speed has the right to acquire
pursuant to exercisable options granted under the Trust's 1994 Incentive
Plan, and does not include 119,841 Trust Shares beneficially owned by Mr.
Speed's spouse and children, as to which he disclaims beneficial ownership.

(7) Includes 51,000 Trust Shares that Mr. Hoster has the right to acquire
pursuant to exercisable options granted under the Trust's 1994 Incentive
Plan and does not include 4,680 Trust Shares beneficially owned by Mr.
Hoster's wife and daughters, as to which he disclaims beneficial ownership.

(8) Includes 37,500 Trust Shares that Mr. McKey has the right to acquire
pursuant to exercisable options granted under the Trust's 1994 Incentive
Plan and does not include 517.5 Trust Shares beneficially owned by Mr.
McKey's son, as to which he disclaims beneficial ownership.

(9) Includes 12,000 Trust Shares that the indicated person has the right to
acquire pursuant to exercisable options granted under the Trust's 1994
Incentive Plan.

(10) Includes 3,000 Trust Shares that Mr. Loeb has the right to acquire pursuant
to exercisable options granted under the Trust's 1994 Incentive Plan.

(11) Does not include 300 Trust Shares owned by Mr. Speed's wife.

(12) Includes 39,375 Trust Shares that trustees of the Trust have the right to
acquire under the Trustees Plan and 190,500 Trust Shares that officers of
the Trust have the right to acquire pursuant to exercisable options granted
under the Trust's 1994 Incentive Plan.

</TABLE>

20
<PAGE> 31

ELECTION OF TRUSTEES -- NOMINEES

The Declaration of Trust provides that the number of trustees shall not be
less than three nor more than twelve, and that the number of trustees shall be
set forth in the Trustees' Regulations. The Trustees' Regulations provide that
the Trust shall have seven trustees. All seven positions on the Board of
Trustees are to be filled by the vote of the shareholders at the Meeting. Each
person so elected shall serve until the Trust's next Annual Meeting of
Shareholders and until his successor is elected and qualified. If the
Reorganization is approved and the Merger consummated, the trustees of the Trust
so elected will become directors of the Corporation and will serve until the
Corporation's next Annual Meeting of Stockholders and until his successor is
elected and qualified pursuant to the Corporation's Articles of Incorporation,
Bylaws and the MGCL.

The Trust's trustees recommend a vote FOR the seven nominees listed below.
Except where authority to do so has been withheld, it is the intention of the
persons named in the accompanying form of proxy to vote at the Meeting FOR these
nominees, reserving the right, however, to cumulate their votes and distribute
them among the nominees in their discretion so as to elect as many of the
nominees as possible. Each of the nominees listed below was elected a trustee at
the Trust's 1996 Annual Meeting of Shareholders.

Although the trustees do not contemplate that any of the nominees listed
below will be unable to serve, if such a situation arises prior to the Meeting,
the enclosed proxy will be voted in accordance with the best judgment of the
person or persons voting the proxy.

<TABLE>
<CAPTION>
NAME, POSITION(S) AND PRINCIPAL OCCUPATION AND
TENURE WITH THE TRUST AGE BUSINESS FOR PAST FIVE YEARS (1)
- ------------------------------------- ---- ---------------------------------------------
<S> <C> <C>
Alexander G. Anagnos............... 70 Financial Advisor with WR Family Associates.
Trustee since 1994
H. C. Bailey, Jr..................... 57 President of H. C. Bailey Company (real
Trustee since 1980 estate development and investment); President
of Bailey Mortgage Company (mortgage banking)
and Chairman of the Board and Chief Executive
Officer and President of Security Savings &
Loan Association (2) until 1992.
David H. Hoster II.................. 51 President of the Trust since 1993 and
Trustee and President since 1993 Executive Vice President of the Trust until
1993; President of LNH REIT, Inc. ("LNH")
from 1995 to 1996 and its Executive Vice
President from 1992 to 1995; Executive Vice
President of Congress Street Properties, Inc.
("Congress Street"), Eastover Corporation
("Eastover"), The Parkway Company
(predecessor to Parkway Properties, Inc.
("Parkway")), and Rockwood National
Corporation ("Rockwood"), from 1988 to 1994,
Citizens Growth Properties from 1988 to 1993
and EB, Inc. ("EB") from 1993 to 1994.
Harold B. Judell.................... 82 Senior partner in the law firm of Foley &
Trustee since 1981 Judell, LLP (municipal bond attorneys); Vice
President and Treasurer of Dauphine Orleans
Hotel Corp.
John N. Palmer..................... 62 Chairman of Mobile Telecommunications
Trustee since 1994 Technologies since 1989.
</TABLE>

21
<PAGE> 32

- ---------------

(1) Unless otherwise stated, each nominee has held the positions indicated for
at least the past five years.

(2) Security Savings & Loan Association was seized by the Resolution Trust
Company in 1992.

</TABLE>

OTHER DIRECTORSHIPS AND TRUSTEESHIPS

Nominees to the Trust's Board of Trustees serve on the Boards of Directors
or the Boards of Trustees of the following publicly-held companies:

<TABLE>
<CAPTION>
NOMINEE COMPANY
- ------------------------------ -------------------------------------------------------------
<S> <C>
Harold B. Judell.............. Sizeler Property Investors, Inc.
David M. Osnos................ VSE Corporation
Washington Real Estate Investment Trust
John N. Palmer................ Entergy Corporation
Mobile Telecommunications Technologies
Deposit Guaranty National Bank
Leland R. Speed............... Farm Fish, Inc.
ChemFirst Inc.
KLLM Transport Services, Inc.
Parkway
</TABLE>

COMMITTEES AND MEETING DATA

The Audit Committee of the Trust's Board of Trustees consists of Messrs.
Bailey, Judell and Osnos. The Audit Committee met two times during the Trust's
1996 fiscal year. The functions performed by this committee consist principally
of conferring with and reviewing the reports of the Trust's independent
accountants and bringing to the entire Board of Trustees for review those items
relating to audits or to accounting practices which the Audit Committee believes
merit such review.

The Compensation Committee of the Trust's Board of Trustees consists of
Messrs. Anagnos, Bailey and Palmer. Its function is to recommend compensation
levels for trustees, review compensation levels for executive officers and
administer the 1994 Incentive Plan. The Compensation Committee met two times
during the Trust's 1996 fiscal year.

The Trust does not have a standing nominating committee or any committee
performing a similar function.

The Board of Trustees held nine meetings during the Trust's 1996 fiscal
year. Each trustee, except Mr. Palmer, attended at least 75% of the aggregate of
the total number of meetings of the Board of Trustees and the total number of
meetings held by all committees of the Board of Trustees on which he served.

SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

Section 16(a) of the Exchange Act requires that trustees, officers and more
than 10 percent shareholders of the Trust file reports with the SEC within the
first 10 days of the month following any purchase or sale of Trust Shares.
During 1996, no officer or trustee of the Trust was late in filing a report
under Section 16(a).

22
<PAGE> 33

EXECUTIVE OFFICERS

The following is a list of the Trust's executive officers:

<TABLE>
<CAPTION>
NAME, POSITION AND PRINCIPAL OCCUPATION AND BUSINESS
TENURE WITH THE TRUST AGE EXPERIENCE FOR THE PAST FIVE YEARS
- ------------------------------------- ---- ---------------------------------------------
<S> <C> <C>
Leland R. Speed.................... 64 See table under "Election of Trustees --
Managing Trustee since 1983 Nominees."
David H. Hoster II.................. 51 See table under "Election of Trustees --
Trustee and President since 1993 Nominees."
N. Keith McKey.................... 46 Executive Vice President of the Trust since
Executive Vice President since 1993 and Chief Financial Officer and
1993, Chief Financial Officer and Secretary since 1992; Senior Vice President
Secretary since 1992 of LNH from 1992 until 1996; Senior Vice
President of Congress Street, Eastover, EB,
Parkway and Rockwood until 1994.
Diane W. Hayman.................. 36 Controller of the Trust.
Controller
Marshall A. Loeb................... 34 Vice President of the Trust since 1991.
Vice President
Jann W. Puckett.................... 49 Vice President of the Trust since 1995; Vice
Vice President President of Parkway from 1992 to 1995.
Stewart R. Speed.................... 33 Vice President of the Trust since 1997; Vice
Vice President President of Merry Land & Investment (an
apartment REIT) from 1993 to 1997; Asset
Manager of GE Capital (real estate finance)
from 1991 to 1993.
</TABLE>

- ---------------

Leland R. Speed, Managing Trustee, is the father of Stewart R. Speed, a
Vice President of the Trust. There are no other family relationships between any
of the trustees or executive officers of the Trust.

EXECUTIVE COMPENSATION

The following table summarizes, for the fiscal years ended December 31,
1996, 1995 and 1994, the amount of the compensation paid by the Trust to its
Chief Executive Officer and all other executive officers whose cash compensation
during 1996 exceeded $100,000 (the "Named Officers").

<TABLE>
<CAPTION>
LONG TERM
COMPENSATION AWARDS
ANNUAL COMPENSATION (1)(2) ---------------------------------------------
---------------------------------------------------- SECURITIES LTIP
NAME AND OTHER ANNUAL UNDERLYING PAYOUTS ALL OTHER
PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION OPTIONS/SARS(6) (7) COMPENSATION(8)
- --------------------- ---- -------- -------- ------------ --------------- ------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
Leland R. Speed 1996 $130,000(3) $110,502(4) -0- 37,500 -0- $ 9,082
Chief Executive 1995 $129,863(3) $139,014(4) -0- -0- -0- $ 7,500
Officer 1994(5) $139,423 $ 58,715 -0- 75,000 $23,047 $ 5,145
David H. Hoster II 1996 $181,865 $116,028(4) -0- 52,500 -0- $15,223
President 1995 $174,745 $140,351(4) -0- -0- -0- $ 7,500
1994(5) $ 89,977 $ 42,314 -0- 60,000 $21,203 $ 5,145
N. Keith McKey 1996 $132,404 $ 84,471(4) -0- 37,500 -0- $14,595
Executive Vice 1995 $127,212 $102,256(4) -0- -0- -0- $ 7,500
President, Chief 1994(5) $ 63,911 $ 30,103 -0- 37,500 $13,828 $ 4,397
Financial Officer
and Secretary
<FN>

- ---------------

(1) Until December 31, 1994, the executive officers of the Trust also served as
executive officers of all the Expense-Sharing Participants (as defined
below). Their salaries were paid by Congress Street and then allocated among
the Expense-Sharing Participants in accordance with the allocation formula
set forth in the expense-sharing agreement.

23
<PAGE> 34

(2) For 1994, all amounts are the Trust's share of the particular Named
Officer's compensation as allocated under the expense-sharing agreement.

(3) Mr. Speed's salary is paid one-half by the Trust and one-half by Parkway, of
which he is also Chief Executive Officer. This amount is the Trust's share
of Mr. Speed's compensation.

(4) This is the amount of incentive compensation payable to the Named Officer
under the 1994 Incentive Plan. The amount was paid two-thirds in cash and
one-third in Trust Shares.

(5) Until December 31, 1994, the Trust had an expense-sharing agreement with
Congress Street, Parkway and Eastover pursuant to which the participants
shared administrative offices at the same location in Jackson, Mississippi
and common officers and other personnel, subject to the authority of the
board of each member company to elect or appoint and remove its officers in
accordance with its charter documents and applicable law. EB had a separate
administrative agreement with Congress Street which allowed EB to
participate in the expense-sharing arrangement on the same basis as the
companies which were parties to the expense-sharing agreement. LNH had a
separate administration agreement with Congress Street (and later the Trust)
which terminated effective March 31, 1995. Under this arrangement, the
participants shared the cost of the common officers and other employees and
of shared facilities and activities. These common costs were initially paid
by Congress Street, which served as the administrator of the arrangement,
and the other participants paid Congress Street an annual fee (on a monthly
basis) of one-half of one percent of their assets which were publicly-traded
securities, and Congress Street was paid a fixed annual fee in equal monthly
installments by LNH. After these fees and any profits of Eastover Realty
Corporation, a real estate company that was a subsidiary of Congress Street,
were subtracted from total common costs, the remaining common costs were
allocated on a monthly basis among the Trust, Parkway, Congress Street,
Eastover and EB (collectively, the "Expense-Sharing Participants") in
proportion to their assets other than publicly-traded securities, based on
their balance sheets as contained in their most recent SEC filings. Certain
costs which the common officers believed to be particularly attributable to
each member company were not shared.

(6) These options were granted under the Trust's 1994 Incentive Plan and become
exercisable with respect to one-half the shares on the first anniversary
date of grant and one-half the shares on the second anniversary date of
grant.

(7) These payments were made under Incentive Compensation Units granted under
the Trust's 1989 Incentive Plan (the "1989 Plan"). The amount for 1994
includes a payment made in December 1994 in consideration of the officer
agreeing to cancel the remaining term of the Incentive Compensation Units,
which payment was made in Trust Shares. An Incentive Compensation Unit was a
right to receive an amount equal to the dividend paid on a specified number
of Trust Shares during a five year period beginning on the date of the grant
of the unit. The amount that was payable with respect to an Incentive
Compensation Unit was credited to an account for the holder of such unit.
The grantee of the Incentive Compensation Unit was entitled to a cash
payment of 20% of the amount in the account on the first anniversary date of
its grant, 40% on the second anniversary date, 60% on the third anniversary
date, 80% on the fourth anniversary date and 100% on the fifth anniversary
date.

(8) For 1995 and 1996, this is the Trust's discretionary contribution to its
401(k) Plan for the Named Officer's benefit and for 1994 this amount is the
Trust's share of Congress Street's discretionary contribution to a 401(K)
plan for the respective Named Officer's benefit.

</TABLE>

24
<PAGE> 35

Option Grants. The following table gives information with respect to
options granted to the Named Officers during the year ended December 31, 1996.
The "Potential Realizable Value" columns assume that the price of the Trust
Shares will appreciate at annual rates of 5% and 10%, respectively, during the
term of the options. The price of the Trust Shares on the date of grant was
$14.58. There can be no assurance that such appreciation will take place.

<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT ASSUMED
ANNUAL RATES OF
STOCK PRICE
APPRECIATION
INDIVIDUAL GRANTS FOR OPTION TERM
- --------------------------------------------------------------------------------- ----------------------
(C)
(B) % OF TOTAL
NUMBER OF OPTIONS/SARS
SECURITIES GRANTED TO (D)
UNDERLYING EMPLOYEES EXERCISE OR (E)
(A) OPTIONS/SARS IN FISCAL BASE PRICE EXPIRATION (F) (G)
NAME GRANTED(#)(1) YEAR ($/SH) DATE 5% ($) 10% ($)
- --------------------- ------------ ------------ ----------- ---------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
Leland R. Speed 37,500 10.2% $ 14.58 6/18/06 $344,452 $ 869,333
David H. Hoster II 52,500 14.3% $ 14.58 6/18/06 $482,223 $1,217,065
N. Keith McKey 37,500 10.2% $ 14.58 6/18/06 $344,452 $ 869,333
<FN>

- ---------------

(1) These options were granted on June 19, 1996. They become exercisable
one-half on the first anniversary of the date of grant and one-half on the
second anniversary of the date of grant.

</TABLE>

Option Exercises and Year End Values. No options were exercised by Messrs.
Speed and McKey during 1996. The following table shows the value realized by Mr.
Hoster upon the exercise of options, and the year end value of unexercised
in-the-money options held by the Named Officers. Year end values are based upon
the closing price of Trust Shares on the NYSE on December 31, 1996 ($18.25).

AGGREGATED OPTIONS/SAR EXERCISES WITH LAST FISCAL YEAR
AND FY-END OPTION/SAR VALUES

<TABLE>
<CAPTION>
SHARES VALUE OF
ACQUIRED VALUE NUMBER OF UNEXERCISED UNEXERCISED IN-THE-MONEY
NAME ON EXERCISE REALIZED OPTIONS AT FY-END (#) OPTIONS AT FY-END($)
- -------------------------- ----------- -------- ---------------------------- ----------------------------

EXERCISABLE/UNEXERCISABLE(1) EXERCISABLE/UNEXERCISABLE
---------------------------- ----------------------------
<S> <C> <C> <C> <C>
Leland R. Speed N/A N/A 75,000/37,500 $ 418,500/$137,625
Chief Executive Officer

David H. Hoster II 6,000 $ 12,834 54,000/52,500 $ 301,320/$192,675
President

N. Keith McKey N/A N/A 37,500/37,500 $ 209,250/$137,625
Executive Vice
President, Chief
Financial Officer and
Secretary
<FN>

- ---------------

(1) These options, both exercisable and unexercisable, represent options granted
to the Named Officer on June 19, 1996 under the 1994 Incentive Plan.

</TABLE>

Compensation Committee Report.

The Compensation Committee of the Board of Trustees consists of Messrs.
Bailey, Palmer and Anagnos. The Compensation Committee believes that the main
purpose of base compensation is to provide sufficient base compensation to the
executive officers of the Trust in relation to salary levels for other real
estate companies and the officer's level of responsibility. The base
compensation of Mr. Speed, the chief executive officer of the Trust, is shared
equally by the Trust and Parkway, of which Mr. Speed is also chief executive

25
<PAGE> 36

officer. The Trust's Compensation Committee and Parkway's Compensation Committee
jointly determine Mr. Speed's base salary. The Compensation Committee considered
a number of factors in setting his base compensation, the most important of
which were the level of compensation paid to the chief executive officers of
other real estate companies the same relative size as the Trust, the success of
the Trust's recent program of acquiring new properties and engaging in business
combination transactions with other REITs and his importance in delineating and
implementing the Trust's strategic plans.

The Compensation Committee has determined that the primary goals of the
Trust's compensation policies should be as follows:

- To provide total compensation opportunities for executive officers
which are competitive with those provided to persons in similar positions
with which the Trust competes for employees.

- To strengthen the mutuality of interest between management and
shareholders through the use of incentive compensation directly related to
corporate performance and through the use of the stock-based incentives
that result in increased Trust Share ownership by executive officers.

The Compensation Committee believes that incentive compensation payable to
the executive officers of the Trust should be based upon the Trust's performance
and align the interests of management and the Trust's shareholders. In 1994, the
Compensation Committee, in conjunction with an independent compensation
consultant, formulated the 1994 Incentive Plan. The 1994 Incentive Plan was
approved by the Trust shareholders in December 1994. Under the 1994 Incentive
Plan, each year the Compensation Committee establishes a goal for funds from
operations per share ("FFO"), a minimum level for FFO per share below which
incentive compensation should not be paid, and an incentive award payout
objective for each executive officer. Two-thirds of any incentive award is paid
in cash and one-third in Trust Shares. For 1996, the Compensation Committee
computed target FFO before bonus accruals of $2.11 as the minimum FFO per share
necessary for any bonus to be paid, and $2.51 as the target FFO per share under
which management would receive their target bonuses, and $2.75 as the target FFO
under which management would receive 200% of their target bonuses. To the extent
the Trust's actual FFO per share exceeded $2.51 but was less than $2.75, the
target bonus amounts would be increased pro rata. The target bonus amounts were
30% of total base salary (from both the Trust and Parkway) for Mr. Speed and 45%
of base salary for Messrs. Hoster and McKey. The Compensation Committee
determined the FFO targets based upon its analysis of the Trust's internal
projected financial results for 1996 and the estimates of 1996 FFO prepared by
independent securities analysts who followed the Trust. The Compensation
Committee believed that the shareholders of the Trust would be benefitted
significantly if the FFO goal was met and would be further benefitted if such
goal were exceeded, and that management should be compensated for the benefits
derived by the Trust shareholders. The target bonus amounts were set by the
Compensation Committee after consultation with the compensation consultant who
helped the Compensation Committee formulate the 1994 Incentive Plan.

The Trust's 1996 FFO per share before bonus awards was $2.61. After
consideration, the Compensation Committee believed that each of Mr. Speed, Mr.
McKey and Mr. Hoster should be paid the amount of incentive compensation
provided by the above formula, under which Messrs. Speed, Hoster and McKey
received bonuses with respect to 1996 of $110,502, $116,028 and $84,471,
respectively, two-thirds of which were paid in cash and one-third of which was
paid in Trust Shares.

The Compensation Committee also believes that stock based incentive
compensation in the form of stock options helps to align the interest of the
management of the Trust and its shareholders. During 1996, the Compensation
Committee granted options to the Named Officers of the Trust as described under
"Option Grants." In determining the number of options to be granted, the
Compensation Committee took into account the executive's current base
compensation, the amount of stock-based compensation previously granted to the
executive, the executive's duties and performance, and competitive industry
practices.

H.C. BAILEY, JR.
JOHN N. PALMER
ALEXANDER G. ANAGNOS

26
<PAGE> 37

This Compensation Committee Report is not a part of the Corporation's
Prospectus or the Registration Statement and shall not be deemed incorporated by
reference by any general statement incorporating by reference this document or
any portion thereof into any filing under the Securities Act or the Exchange Act
and shall not otherwise be deemed filed under such acts.

Performance Comparison. Set forth below is a line graph comparing the
percentage change in the cumulative return to shareholders on Trust Shares over
the five years ending December 31, 1996 against the cumulative return of the
Standard & Poor's 500 ("S&P 500"), and the Equity REIT Index prepared by the
National Association of Real Estate Investment Trusts ("NAREIT Equity").

<TABLE>
<CAPTION>
Measurement Period
(Fiscal Year Covered) The Trust S&P 500 NAREIT Equity
<S> <C> <C> <C>
1991 100 100 100
1992 145.76 107.67 114.59
1993 192.69 118.43 137.11
1994 184.11 119.97 141.46
1995 237.73 164.88 163.08
1996 329.81 202.74 220.56
</TABLE>

Trustees' Fees. Under the Trust's standard compensation arrangements with
trustees (except Mr. Speed and Mr. Hoster, who are salaried officers), trustees
are paid a monthly stipend of $500, plus $1,000 and reimbursement of actual
expenses for attendance at each meeting of the Board of Trustees and $750 and
reimbursement of expenses for each meeting of a committee established by the
Board of Trustees. Only one fee is paid in the event more than one meeting is
held on a single day.

Trustees Stock Option Plan. At the 1991 annual meeting, the shareholders
of the Trust approved the Trustees Plan. The Trustees Plan authorizes the
issuance of options for up to 150,000 Trust Shares to trustees of the Trust who
are not, and have not been for at least one year prior to the date of
determination, employees of the Trust ("Non-Employee Trustees"). Under the
Trustees Plan, each Non-Employee Trustee of the Trust on March 15, 1991 was
automatically granted an option to purchase 7,500 Trust Shares. Each person who
first becomes a Non-Employee Trustee after March 15, 1991 will automatically be
granted an option to purchase 7,500 Trust Shares on the date the person becomes
a Non-Employee Trustee, if such Trust Shares are available. Each Non-Employee
Trustee will also be granted an option to purchase 2,250 additional Trust Shares
on the date of any annual meeting at which such Non- Employee Trustee is
reelected to the Board of Trustees. The option exercise price is the closing
price of a Trust Share if Trust Shares are listed on an exchange or the average
between the bid and the asked price for the date if the Trust Shares are traded
over-

27
<PAGE> 38

the-counter (or, if no Trust Shares were publicly traded on that date, the next
preceding date that such Trust Shares were so traded). Such options are
exercisable in full on the date of grant and expire ten years after the date of
grant, or, if earlier, six months after the termination of the optionee's
service as a Non-Employee Trustee, unless such service is terminated by reason
of death, in which case the optionee's legal representative shall have one year
in which to exercise the option.

No trustee exercised options under the Trustees Plan during 1996. On June
19, 1996, Messrs. Palmer, Bailey, Judell, Anagnos and Osnos were each granted
options to purchase 2,250 Trust Shares at an exercise price of $14.5841 per
Trust Share.

CERTAIN TRANSACTIONS AND RELATIONSHIPS

Cost Sharing Arrangement with Parkway. The Trust and Parkway continue to
share the same office space at One Jackson Place in Jackson, Mississippi. The
Trust 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, the
Trust and Parkway share the services of Mr. Speed and a limited number of
clerical and support staff employees and expenses related thereto are shared
equally between the Trust and Parkway. Parkway and the Trust also share the
expenses of certain office supplies and equipment, and the Trust reimburses
Parkway for the services of certain employees of Parkway who perform services
for the Trust on an as requested basis. During the year ended December 31, 1996,
the Trust paid Parkway $385,000 under this cost-sharing arrangement.

Administration Agreement. Effective April 22, 1992, LNH REIT Managers
entered into an administration agreement (the "Administration Agreement"), with
Congress Street. Under the Administration Agreement, Congress Street (and later
the Trust) administered the day-to-day business of LNH in return for a $125,000
annual fee, payable by LNH's manager. In connection with the termination of the
expense-sharing arrangements described above, the Trust assumed Congress
Street's duties under the Administration Agreement. The Administration Agreement
was terminated effective March 31, 1995.

Change in Control Agreement. The Trust is a party to a Change-in-Control
Agreement with each of Messrs. Speed, Hoster and McKey (the "Executives"). These
agreements provide that if an Executive is terminated or leaves the Trust's
employment for certain reasons during the 36-month period following a
Change-in-Control, the Trust will pay the Executive a lump sum benefit of 2.99
times the average of the Executive's salary and accrued bonus for the three
calendar years that ended immediately before (or coincident with) the
Change-in-Control (the "Average Annual Compensation"). The Change-in-Control
Agreement also gives the Executive the ability to leave the employment of the
Trust at any time during the six-month period following a Change-in-Control, in
which case the Executive will receive severance payments from the Trust for a
period of 36 months equal to one-twelfth of the Executive's Average Annual
Compensation; provided that if the Executive receives any remuneration in the
form of wages, salary or consulting fees from another employer or income from
self-employment during the 36-month severance pay period, the Trust's obligation
under this sentence shall be reduced by one-half of the amount of such
remuneration. Change-in-Control is defined in such agreement as (i) any change
in control of a nature that would be required to be represented under the
Exchange Act proxy rules; (ii) any person acquiring beneficial ownership of
securities representing 30 percent or more of the combined voting power of the
Trust's outstanding securities; (iii) certain changes in the Trust's Board of
Trustees; (iv) certain mergers; or (v) the approval of a plan of liquidation by
the Trust.

EXPERTS

The consolidated financial statements of the Trust as of December 31, 1996
and 1995, and for each of the years in the three year period ended December 31,
1996, have been incorporated by reference in the Proxy Statement/Prospectus and
the Registration Statement in reliance upon the report of KPMG Peat Marwick LLP,
independent certified public accountants, incorporated by reference herein and
upon the authority of said firm as experts in accounting and auditing.

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LEGAL OPINIONS

The validity of the Corporation Stock being offered hereby has been passed
upon by Jaeckle Fleischmann & Mugel, LLP. Jaeckle Fleischmann & Mugel, LLP has
also passed upon the significant federal income tax consequences of the Merger
to the holders of Trust Shares.

REPORTS TO SHAREHOLDERS

The Trust, or if the Reorganization is approved, the Corporation will
continue to provide shareholders with annual reports containing financial
statements reported upon by independent auditors, and also unaudited quarterly
statements of operations.

OTHER MATTERS

The management of the Trust does not know of any other matters to come
before the Meeting. However, if any other matters come before the Meeting, it is
the intention of the persons designated as proxies to vote in accordance with
their judgment on such matters.

The expense of preparing, printing and mailing the form of proxy and the
material used in the solicitation thereof will be borne by the Trust.

In addition to solicitation by mail, members of the Board of Trustees,
officers and regular employees of the Trust may solicit the return of proxies by
telephone, telegram and personal interview.

The Trust may require brokers, custodians, nominees and other record
holders to forward copies of this Proxy Statement/Prospectus to persons for whom
they hold Trust Shares and to seek authority for the execution of proxies; in
such cases, the Trust will reimburse such holders for their charges and
expenses. The Trust has retained Beacon Hill to assist with the solicitation of
proxies and will pay Beacon Hill a fee of $4,000 (subject to increase for
additional services such as telephone solicitation) plus reimbursement for
out-of-pocket expenses for its services.

SHAREHOLDER PROPOSALS

Any Trust shareholder who wishes to submit a proposal for presentation at
the Trust's 1998 Annual Meeting of Shareholders must submit such proposal to the
Trust at its office at 300 One Jackson Place, 188 East Capitol Street, Jackson,
Mississippi 39201, Attention: Secretary no later than , 1997, in order
to be considered for inclusion, if appropriate, in the Trust's, or if the
Reorganization is approved, the Corporation's, proxy statement and form of proxy
relating to its 1998 Annual Meeting of Shareholders.

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<PAGE> 40

APPENDIX A

AGREEMENT AND PLAN OF MERGER

This Agreement and Plan of Merger (the "Plan"), dated , 1997, is
by and between EastGroup Properties, a real estate investment trust organized
under the laws of the State of Maryland, and EastGroup Properties II, Inc., a
business corporation organized under the laws of the State of Maryland.

1. This Plan was adopted by EastGroup Properties by resolution of its Board
of Trustees on , 1997, and adopted on , 1997 by
EastGroup Properties II, Inc. by resolution of its Board of Directors.

2. The names of the corporations planning to merge are EastGroup Properties
and EastGroup Properties II, Inc.

3. The name of the surviving corporation into which EastGroup Properties
plans to merge pursuant to the provisions of the Maryland General Corporation
Law is EastGroup Properties II, Inc. (sometimes referred to herein as the
"Surviving Corporation").

4. The Surviving Corporation shall, simultaneously with the merger change
its name to EastGroup Properties, Inc. and at the Effective Time (as defined
below) shall continue to exist as the Surviving Corporation under the name
EastGroup Properties, Inc. pursuant to the provisions of the Maryland General
Corporation Law. The separate existence of EastGroup Properties shall cease at
the Effective Time in accordance with the provisions of the Maryland General
Corporation Law.

5. The merger shall be effective upon acceptance for filing with the State
Department of Assessments and Taxation of the State of Maryland (the "Effective
Time").

6. The Articles of Incorporation of EastGroup Properties II, Inc. at the
Effective Time shall be the Articles of Incorporation of the Surviving
Corporation and said Articles of Incorporation shall continue in full force and
effect until amended and changed in the manner prescribed by the provisions of
the Maryland General Corporation Law.

7. The bylaws of EastGroup Properties II, Inc. at the Effective Time shall
be the bylaws of the Surviving Corporation and will continue in full force and
effect until changed, altered or amended as therein provided and in the manner
prescribed by the provisions of the Maryland General Corporation Law.

8. The directors and officers in office of EastGroup Properties II, Inc. at
the Effective Time shall be the members of the first Board of Directors and the
first officers of the Surviving Corporation, all of whom shall hold their
respective directorships and offices until their successors are elected and
qualified or until their tenure is otherwise terminated in accordance with the
Articles of Incorporation and bylaws of the Surviving Corporation.

9. Each issued share of beneficial interest, $1.00 par value per share, of
EastGroup Properties immediately prior to the Effective Time shall be converted
into one share of common stock, $0.0001 par value per share, of the Surviving
Corporation. The issued shares of the Surviving Corporation shall not be
converted or exchanged in any manner, but each share of EastGroup Properties
which is issued at the Effective Time shall represent one issued share of the
Surviving Corporation.

10. The Plan herein made and approved shall be submitted to the
shareholders of EastGroup Properties and to the sole stockholder of EastGroup
Properties II, Inc. for their approval or rejection in the manner prescribed by
the provisions of the Maryland General Corporation Law.

11. As a condition to the consummation of the merger pursuant to the Plan,
Jaeckle Fleischmann & Mugel, LLP will render an opinion to EastGroup Properties
and the Surviving Corporation to the effect that the merger will qualify as a
"reorganization" within the meaning of the Internal Revenue Code of 1986, as
amended, and that for federal income tax purposes the Surviving Corporation will
be deemed to be the same taxpayer as EastGroup Properties.

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12. In the event that the Plan shall have been approved by the shareholders
entitled to vote of EastGroup Properties and by the sole stockholder entitled to
vote of EastGroup Properties II, Inc. in the manner prescribed by the Maryland
General Corporation Law, EastGroup Properties and EastGroup Properties II, Inc.
hereby stipulate that they will cause to be executed and filed and/or recorded
any document or documents prescribed by the laws of the State of Maryland, and
that they will cause to be performed all necessary acts therein and elsewhere to
effectuate the merger.

13. The Plan shall be interpreted in accordance with and governed by the
laws of the State of Maryland.

EASTGROUP PROPERTIES II, INC.

By:________________________________
David H. Hoster II, President

EASTGROUP PROPERTIES

By:________________________________
Leland R. Speed, Chief Executive
Officer

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APPENDIX B

ARTICLES OF INCORPORATION

EASTGROUP PROPERTIES II, INC.

The undersigned, being a natural person and acting as incorporator, does
hereby form a business corporation in the State of Maryland, pursuant to the
provisions of the Maryland General Corporation Law.

ARTICLE I

INCORPORATOR

The name of the incorporator is Kayla E. Klos.

The incorporator's address, including the street and number, if any,
including the county or municipal area, and including the state or county, is:
800 Fleet Bank Building, Twelve Fountain Plaza, Buffalo, New York 14202.

The incorporator is at least eighteen years of age.

The incorporator is forming the corporation named in this Charter under the
general laws of the State of Maryland, to wit, the Maryland General Corporation
Law.

ARTICLE II

NAME AND DURATION

The name of the corporation (hereinafter, the "Corporation") is EastGroup
Properties II, Inc. The duration of the Corporation shall be perpetual.

ARTICLE III

PURPOSES

(a) The purposes for which the Corporation is formed are:

(1) To engage in the business of a real estate investment trust
("REIT") as that term is defined in the Internal Revenue Code of 1986, as
amended, or any successor statute (the "Code"), and to engage in any lawful
act or activity for which corporations may be organized under the general
laws of the State of Maryland now or hereafter in force including the
Maryland General Corporation Law; and

(2) To engage in any one or more businesses or transactions, or to
acquire all or any portion of any entity engaged in any one or more
businesses or transactions which the Board of Directors may from time to
time authorize or approve, whether or not related to the business described
elsewhere in this Article III or to any other business at the time or
theretofore engaged in by the Corporation.

(b) The foregoing enumerated purposes and objects shall be in no way
limited or restricted by reference to, or inference from, the terms of any other
clause of this or any other Article of the Charter of the Corporation, and each
shall be regarded as independent; and they are intended to be and shall be
construed as powers as well as purposes and objects of the Corporation and shall
be in addition to and not in limitation of the general powers of corporations
under the General Laws of the State of Maryland.

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ARTICLE IV

PRINCIPAL OFFICE IN MARYLAND
AND RESIDENT AGENT

The present address of the principal office of the Corporation in the State
of Maryland is c/o The Corporation Trust Incorporated, 32 South Street,
Baltimore, Maryland 21202. The name of the resident agent of the Corporation in
the State of Maryland is The Corporation Trust Incorporated, a Maryland
corporation, 32 South Street, Baltimore, Maryland 21202.

ARTICLE V

CAPITAL STOCK

SECTION 1. AUTHORIZED CAPITAL STOCK.

(a) Authorized Shares. The total number of shares of capital stock of all
classes that the Corporation has authority to issue is 100,000,000, initially
classified as 70,000,000 shares of common stock, par value $0.0001 per share
(the "Common Stock"), and 30,000,000 shares of excess stock, par value $0.0001
per share (the "Excess Stock").

The Common Stock and the Excess Stock shall each constitute a separate
class of capital stock of the Corporation.

(b) Terminology and Aggregate Par Value. All classes of capital stock
(except Excess Stock) are referred to herein as "Equity Stock;" all classes of
capital stock (including Excess Stock) are referred to herein as "Stock." The
aggregate par value of all of the Corporation's authorized Stock is $10,000.

SECTION 2. REIT-RELATED RESTRICTIONS AND LIMITATIONS ON THE EQUITY STOCK.

Until the "Restriction Termination Date," as defined below, all Equity
Stock shall be subject to the following restrictions and limitations intended to
preserve the Corporation's status as a REIT.

(a) Definitions. As used in this Article V, the following terms shall have
the indicated meanings:

"Beneficial Ownership" shall mean ownership of Equity Stock by a
Person who would be treated as an owner of such Equity Stock either
directly or constructively through the application of Section 544 of the
Code, as modified by Section 856(h)(1)(B) of the Code. The terms
"Beneficially Own" and "Beneficially Owned" and "Beneficial Owner" shall
have the correlative meanings.

"Beneficiary" shall mean a beneficiary of the Trust as determined
pursuant to Section 5(b) of this Article V.

"Constructive Ownership" shall mean ownership of Equity Stock by a
Person who would be treated as an owner of such Equity Stock either
directly or indirectly through the application of Section 318 of the Code,
as modified by Section 856(d)(5) of the Code. The terms "Constructively
Own," "Constructively Owned" and "Constructive Owner" shall have the
correlative meanings.

"Market Price" shall mean the last reported sales price reported on
the New York Stock Exchange, Inc. (the "NYSE"), of Equity Stock on the
trading day immediately preceding the relevant date, or if not then traded
on the NYSE, the last reported sales price of Equity Stock on the trading
day immediately preceding the relevant date as reported on any exchange or
quotation system over which Equity Stock may be traded, or if not then
traded over any exchange or quotation system, then the market price of
Equity Stock on the relevant date as determined in good faith by the Board
of Directors of the Corporation.

"Ownership Limit" shall mean 9.8% in value or in number of the
outstanding Equity Stock, whichever is more restrictive. The number and
value of the Equity Stock of the Corporation shall be

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determined by the Board of Directors in good faith, which determination
shall be conclusive for all purposes.

"Person" shall mean an individual, corporation, partnership, estate,
trust (including a trust qualified under Section 401(a) or 501(c)(17) of
the Code), a portion of a trust permanently set aside for or to be used
exclusively for the purposes described in Section 642(c) of the Code,
association, private foundation within the meaning of Section 509(a) of the
Code, joint stock company or other entity and also includes a group as that
term is used for purposes of Section 13(d)(3) of the Securities Exchange
Act of 1934, as amended; but does not include an underwriter that
participated in a public offering of any Equity Stock for a period of 25
days following the purchase by such underwriter of such Equity Stock.

"Purported Beneficial Transferee" shall mean, with respect to any
purported Transfer that results in Excess Stock as defined below in Section
5 of this Article V, the purported beneficial transferee for whom the
Purported Record Transferee would have acquired Equity Stock if such
Transfer had been valid under Section 2(b) of this Article V.

"Purported Record Transferee" shall mean, with respect to any
purported Transfer which results in Excess Stock, the Person who would have
been the record holder of Equity Stock if such Transfer had been valid
under Section 2(b) of this Article V.

"Restriction Termination Date" shall mean the effective date, if any,
for revocation or termination of the Corporation's REIT election pursuant
to Section 856(g) of the Code, as specified in a resolution of the Board of
Directors of the Corporation determining that it is no longer in the best
interests of the Corporation to attempt to, or continue to, qualify as a
REIT. If no such effective date is specified in such resolution, the
Restriction Termination Date shall be the date such revocation or
termination otherwise becomes effective.

"Transfer" shall mean any sale, transfer, gift, assignment, devise or
other disposition of Equity Stock (including (i) the granting of any option
or entering into any agreement for the sale, transfer or other disposition
of Equity Stock or (ii) the sale, transfer, assignment or other disposition
of any securities or rights convertible into or exchangeable for Equity
Stock), whether voluntary or involuntary, whether of record beneficially or
constructively (including but not limited to transfers of interests in
other entities that result in changes in Beneficial Ownership or
Constructive Ownership of Equity Stock), and whether operation of law or
otherwise. The terms "Transfers" and "Transferred" shall have the
correlative meanings.

"Trust" shall mean the trust created pursuant to Section 5(b) of this
Article V.

"Trustee" shall mean the Corporation as trustee of the Trust, and any
successor trustee appointed by the Corporation.

(b) Ownership Limitation and Transfer Restrictions with Respect to Equity
Stock.

(i) Except as provided in Section 2(f) of this Article V, prior to the
Restriction Termination Date, no Person shall Beneficially Own or
Constructively Own shares of Equity Stock in excess of the Ownership Limit.

(ii) Except as provided in Section 2(f) of this Article V, prior to
the Restriction Termination Date, any Transfer that, if effective, would
result in any Person Beneficially Owning or Constructively Owning Equity
Stock in excess of the Ownership Limit shall be void ab initio as to the
Transfer of such Equity Stock that would be otherwise Beneficial Owned or
Constructively Owned (as the case may be) by such Person in excess of the
Ownership Limit; and the Purported Record Transferee (and the Purported
Beneficial Transferee, if different) shall acquire no rights in such excess
shares of Equity Stock.

(iii) Except as provided in Section 2(f) of this Article V, prior to
the Restriction Termination Date, any Transfer that, if effective, would
result in the outstanding Equity Stock being Beneficially Owned by less
than 100 Persons (determined without reference to any rules of attribution)
shall be void ab initio as to the Transfer of such Equity Stock which would
be otherwise Beneficially Owned by the transferee; and

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the Purported Record Transferee (and the Purported Beneficial Transferee,
if different) shall acquire no rights in such shares of Equity Stock.

(iv) Prior to the Restriction Termination Date, any Transfer that, if
effective, would result in the Corporation being "closely held" within the
meaning of Section 856(h) of the Code, or would otherwise result in the
Corporation failing to qualify as a REIT, shall be void ab initio as to the
Transfer of the shares of Equity Stock that would cause the Corporation to
be "closely held" within the meaning of Section 856(h) of the Code or
otherwise to fail to qualify as a REIT, as the case may be; and the
Purported Record Transferee (and the Purported Beneficial Transferee, if
different) shall acquire no rights in such shares of Equity Stock.

(v) If the Board of Directors or its designee shall at any time
determine in good faith that a Transfer of Equity Stock has taken place in
violation of this Section 2(b) or that a Person intends to acquire or has
attempted to acquire Beneficial Ownership (determined without reference to
any rules of attribution) or Constructive Ownership of any Equity Stock of
the Corporation in violation of this Section 2(b), the Board of Directors
or its designee shall take such action as it deems advisable to refuse to
give effect to or to prevent such Transfer, including but not limited to,
refusing to give effect to such Transfer on the books of the Corporation or
instituting proceedings to enjoin such Transfer; provided, however, that
any Transfers or attempted Transfers in violation of Section 2(b)(ii),
Section 2(b)(iii) or Section 2(b)(iv) of this Article V shall automatically
result in the conversion and exchange described in Section 2(c),
irrespective of any action (or non-action) by the Board of Directors,
except as provided in Section 2(f) of this Article V.

Subject to Section 5(a) of this Article V below,

(i) If, notwithstanding the other provisions contained in this Article
V, at any time prior to the Restriction Termination Date there is a
purported Transfer or other change in the capital structure of the
Corporation such that any Person would Beneficially Own or Constructively
Own Equity Stock in excess of the Ownership Limit, then, except as
otherwise provided in Section 2(f) of this Article V, such shares of Equity
Stock in excess of the Ownership Limit (rounded up to the nearest whole
share) shall automatically (and without action by the Corporation or by any
purported Transferor, Purported Record Transferee or Purported Beneficial
Transferee of such Equity Stock, in the case of a Transfer) be converted
into and exchanged for an equal number of Excess Stock. Such conversion and
exchange shall be effective as of the close of business on the business day
prior to the date of the purported Transfer or change in capital structure.

(ii) If, notwithstanding the other provisions in this Article V, at
any time prior to the Restriction Termination Date there is a purported
Transfer or other change in the capital structure of the Corporation that,
if effective, would cause the Corporation to become "closely held" within
the meaning of Section 856(h) of the Code or otherwise to fail to qualify
as a REIT, then the shares of Equity Stock being Transferred, or resulting
from any other change in the capital structure of the Corporation, that
would cause the Corporation to be closely held" within the meaning of
Section 856(h) of the Code or otherwise to fail to qualify as a REIT, as
the case may be, (rounded up to the nearest whole share) shall
automatically (and without any action by the Corporation or by any
purported Transferor, Purported Record Transferee or Purported Beneficial
Transferee of such Equity Stock, in the case of a Transfer) be converted
into and exchanged for an equal number of shares of Excess Stock. Such
conversion and exchange shall be effective as of the close of business on
the business day prior to the date of the purported Transfer or change in
capital structure.

(d) The Corporation's Right to Redeem Stock. The Corporation shall have
the right to redeem any Stock that is Transferred, or is attempted to be
Transferred, in violation of Section 2(b) of this Article V, at a price per
share equal to the lesser of (i) the price per share in the transaction that
created such violation or attempted violation (or, in the case of a devise or
gift, the Market Price at the time of such devise or gift) and (ii) the Market
Price of the class of Equity Stock to which such shares of Excess Stock relate
on the date the

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Corporation, or its designee, gives notice of such redemption. The Corporation
shall have the right to redeem any Stock described in this Section for a period
of 90 days after the later of (i) the date of the Transfer or attempted Transfer
or (ii) the date the Board of Directors determines in good faith that a Transfer
has occurred, if the Corporation does not receive a notice of such Transfer
pursuant to Section 2(e) of this Article V.

(e) Notice Requirements and General Authority of the Board of Directors to
Implement REIT-Related Restrictions and Limitations.

(i) Any Person who acquires or attempts to acquire shares of Equity
Stock in violation of Section 2(b) of this Article V, and any Person who is
a Purported Record Transferee or a Purported Beneficial Transferee such
that Equity Stock proposed to be acquired is converted into Excess Stock
under Section 2(c) of this Article V, shall immediately give written notice
or in the event of a proposed or attempted Transfer, give at least 15 days'
prior written notice to the Corporation, of such event and shall provide to
the Corporation such other information as the Corporation may request in
order to determine the effect, if any, of such Transfer or attempted
Transfer on the Corporation's status as a REIT.

(ii) Prior to the Restriction Termination Date, every Beneficial Owner
or Constructive Owner of more than 5.0% (or such other percentage, between
0.5% and 5.0%, as provided in the income tax regulations promulgated under
the Code) of the number or value of outstanding Equity Stock of the
Corporation shall, within 30 days after January 1 of each year, give
written notice to the Corporation stating the name and address of such
Beneficial Owner or Constructive Owner, the number of shares of Equity
Stock Beneficially Owned or Constructively Owned, and a description of how
such shares are held. Each such Beneficial Owner or Constructive Owner
shall provide to the Corporation such additional information that the
Corporation may reasonably request in order to determine the effect, if
any, of such Beneficial Ownership or Constructive Ownership on the
Corporation's status as a REIT; and

(iii) Prior to the Restriction Termination Date, each Person who is a
Beneficial Owner or Constructive Owner of Equity Stock and each Person
(including the stockholder of record) who is holding Equity Stock for a
Beneficial Owner or Constructive Owner shall provide to the Corporation
such information that the Corporation may reasonably request in order to
determine the Corporation's status as a REIT, to comply with the
requirements of any taxing authority or governmental agency or to determine
any such compliance.

(iv) Each certificate for Equity Stock shall bear substantially the
following legends:

"The Corporation will furnish to any stockholder on request and
without charge a full statement of the designations and any preferences,
conversion and other rights, voting powers, restrictions, limitations as to
dividends, qualifications, and terms and conditions of redemption of the
stock of each class which the Corporation is authorized to issue, of the
differences in the relative rights and preferences between the shares of
each series of a preferred or special class in series which the Corporation
is authorized to issue, to the extent they have been set, and of the
authority of the Board of Directors to set the relative rights and
preferences of subsequent series of a preferred or special class of stock.
Such request may be made to the secretary of the Corporation or to its
transfer agent."

"Keep this certificate in a safe place. If it is lost, stolen or
destroyed, the Corporation will require a bond of indemnity as a condition
to the issuance of a replacement certificate."

"The securities represented by this certificate are subject to
restrictions on ownership and transfer for the purpose of the Corporation's
maintenance of its status as a "real estate investment trust" under the
Internal Revenue Code of 1986, as amended. Except as otherwise provided
pursuant to the Charter of the Corporation, no Person may Beneficially Own
or Constructively Own Equity Stock in excess of 9.8%, (in value or in
number of shares of Equity Stock, whichever is more restrictive) of the
outstanding Equity Stock of the Corporation, with further restrictions and
exceptions set forth in the Charter of the Corporation. There shall be no
Transfer that would cause a violation of the Ownership Limit, that would
result in Equity Stock of the Corporation being Beneficially Owned by fewer
than 100 persons or that

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would result in the Corporation's being "closely held" under section 856(h)
of the Code. Any Person who attempts or proposes to own, Beneficially Own
or Constructively Own Equity Stock in excess of the above limitation must
notify the Corporation in writing at least 15 days prior to such proposed
or attempted Transfer to such Person. If attempt is made to violate these
restrictions on Transfers, (i) any purported Transfer will be void and will
not be recognized by the Corporation, (ii) the Corporation will have the
right to redeem the Stock proposed to be Transferred, and (iii) the Stock
represented hereby will be automatically converted into and exchanged for
Excess Stock (having no dividend or voting rights), which will be held in
trust by the Corporation. All capitalized terms in this legend have the
meanings defined in the Charter of the Corporation, a copy of which,
including the restrictions on ownership and transfer, will be sent without
charge to each stockholder who directs a request to the Secretary of the
Corporation."

(v) Subject to Section 2(f)(iii) of this Article V, nothing contained
in this Article V shall limit the authority of the Board of Directors to
take such other action as it deems necessary or advisable to protect the
Corporation and the interests of its stockholders by preservation of the
Corporation's status as a REIT.

(f) Exemptions.

(i) The Board of Directors, upon receipt of a ruling from the Internal
Revenue Service or an opinion of counsel or other evidence satisfactory to
the Board of Directors and upon at least 15 days' written notice from a
Transferee prior to a proposed Transfer that, if consummated, would result
in the intended Transferee Beneficially Owning Equity Stock in excess of
the Ownership Limit, and upon such other conditions as the Board of
Directors may direct, may in its sole and absolute discretion exempt a
Person from the Ownership Limit.

(ii) The Board of Directors, upon receipt of a ruling from the
Internal Revenue Service or an opinion of counsel or other evidence
satisfactory to the Board Directors, may in its sole and absolute
discretion exempt a Person from the limitation on a Person Constructively
Owning Equity Stock in excess of the Ownership Limit, if (x) such Person
does not and represents that it will not directly own or Constructively Own
more than a 9.8% interest (as set forth in Section 856(d)(2)(B) of the
Code) in a tenant of the Corporation; (y) the Corporation obtains such
representations and undertakings from such Person as are reasonably
necessary to ascertain this fact; and (z) such Person agrees that any
violation or attempted violation of such representations, undertakings and
agreement will result in such Equity Stock in excess of the Ownership Limit
being converted into and exchanged for Excess Stock in accordance with
Section 2(c) of this Article V.

(iii) Nothing in this Article V shall preclude the settlement of a
transaction entered into through the facilities of any interdealer
quotation system or national securities exchange upon which Equity Stock is
traded. Notwithstanding the previous sentence, certain transactions may be
settled by providing Excess Stock as set forth in this Article V.

(iv) The ownership restrictions set forth in this Section 2 of this
Article V shall not apply until the effective date of the merger between
the Corporation and EastGroup Properties, a Maryland real estate investment
trust.

SECTION 3. CLASSIFICATION AND RECLASSIFICATION OF STOCK.

(a) Power of Board to Classify or Reclassify Stock. The Board of Directors
shall have the power, in its sole discretion and without limitation, to classify
or reclassify any unissued Stock, whether now or hereafter authorized, by
setting, altering or eliminating in any one or more respects, from time to time,
before the issuance of such Stock, any feature of such Stock, including, but not
limited to, the designation, preferences, conversion or other rights, voting
powers, qualifications and terms and conditions of redemption of, and
limitations as to dividends and any other restrictions on, such Stock. The power
of the Board of Directors to classify and reclassify any of the shares of
capital stock shall include, without limitation, subject to the provisions of
the Charter, authority to classify or reclassify any unissued shares of such
stock into a class or

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classes of preferred stock, preference stock, special stock or other stock, and
to divide and classify shares of any class into one or more series of such
class, by determining, fixing or altering one or more of the following:

(i) The distinctive designation of such class or series and the number
of shares which constitute such class or series; provided that, unless
otherwise prohibited by the terms of such or any other class or series, the
number of shares of any class or series may be decreased by the Board of
Directors in connection with any classification or reclassification of
unissued shares and the number of shares of such class or series may be
increased by the Board of Directors in connection with any such
classification or reclassification, and any shares of any class or series
which have been redeemed, purchased, otherwise acquired or converted into
shares of Common Stock or any other class or series shall become part of
the authorized capital stock and be subject to classification and
reclassification as provided in this subparagraph.

(ii) Whether or not and, if so, the rates, amounts and times at which,
and the conditions under which, dividends shall be payable on shares of
such class or series, whether any such dividends shall rank senior or
junior to or on a parity with the dividends payable on any other class or
series of stock, and the status of any such dividends as cumulative,
cumulative to a limited extent or non-cumulative and as participating or
non-participating.

(iii) Whether or not shares of such class or series shall have voting
rights, in addition to any voting rights provided by law and, if so, the
terms of such voting rights.

(iv) Whether or not shares of such class or series shall have
conversion or exchange privileges and, if so, the terms and conditions
thereof, including provision for adjustment of the conversion or exchange
rate in such events or at such times as the Board of Directors shall
determine.

(v) Whether or not shares of such class or series shall be subject to
redemption and, if so, the terms and conditions of such redemption,
including the date or dates upon or after which they shall be redeemable
and the amount per share payable in case of redemption, which amount may
vary under different conditions and at different redemption dates; and
whether or not there shall be any sinking fund or purchase account in
respect thereof, and if so, the terms thereof.

(vi) The rights of the holders of shares of such class or series upon
the liquidation, dissolution or winding up of the affairs of, or upon any
distribution of the assets of, the Corporation, which rights may vary
depending upon whether such liquidations dissolution or winding up is
voluntary or involuntary and, if voluntary, may vary at different dates,
and whether such rights shall rank senior or junior to or on a parity with
such rights of any other class or series of stock.

(vii) Whether or not there shall be any limitations applicable, while
shares of such class or series are outstanding, upon the payment of
dividends or making of distributions on, or the acquisition of, or the use
of moneys for purchase or redemption of, any stock of the Corporation, or
upon any other action of the Corporation, including action under this
subparagraph, and, if so, the terms and conditions thereof.

(viii) Any other preferences, rights, restrictions, including
restrictions on transferability, and qualifications of shares of such class
or series, not inconsistent with law and the Charter of the Corporation.

(b) Ranking of Stock. For the purposes hereof and of any articles
supplementary to the Charter providing for the classification or
reclassification of any shares of capital stock or of any other charter document
of the Corporation (unless otherwise provided in any such articles or document),
any class or series of stock of the Corporation shall be deemed to rank:

(i) Prior to another class or series either as to dividends or upon
liquidation, if the holders of such class or series shall be entitled to
the receipt of dividends or of amounts distributable on liquidation,
dissolution or winding up, as the case may be, in preference or priority to
holders of such other class or series.

(ii) On a parity with another class or series either as to dividends
or upon liquidation, whether or not the dividend rates, dividend payment
dates or redemption or liquidation price per share thereof be

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different from those of such others, if the holders of such class or series
of stock shall be entitled to receipt of dividends or amounts distributable
upon liquidation, dissolution or winding up, as the case may be, in
proportion to their respective dividend rates or redemption or liquidation
prices, without preference or priority over the holders of such other class
or series.

(iii) Junior to another class or series either as to dividends or upon
liquidation, if the rights of the holders of such class or series shall be
subject or subordinate to the rights of the holders of such other class or
series in respect of the receipt of dividends or the amounts distributable
upon liquidation, dissolution or winding up, as the case may be.

SECTION 4. COMMON STOCK.

Subject to the provisions of Sections 2 and 5 of this Article V, the Common
Stock shall have the following preferences, rights, powers, restrictions,
limitations and qualifications, and such others as may be afforded by law:

(a) Voting Rights. Except as may otherwise be required by law, and subject
to action, if any, by the Board of Directors, pursuant to Section 3 of this
Article V, each holder of Common Stock shall have one vote in respect of each
share of Common Stock held of record on all matters to be voted upon by the
stockholders. Holders of shares of Common Stock shall not have cumulative voting
rights.

(b) Dividend Rights. After provision(s) with respect to preferential
dividends on any then outstanding classes of preferred stock, if any, fixed by
the Board of Directors pursuant to Section 3 of this Article V, shall have been
satisfied, and after satisfaction of any other requirements, if any, including
with respect to redemption rights and preferences, of any such classes of
preferred stock, then and thereafter the holders of Common Stock shall be
entitled to receive, pro rata in relation to the number of shares of Common
Stock held by them, such dividends or other distributions as may be declared
from time to time by the Board of Directors out of funds legally available
therefor.

(c) Liquidation Rights. In the event of the voluntary or involuntary
liquidation, dissolution or winding-up of the Corporation, after distribution in
full of the preferential amounts, if any, fixed pursuant to Section 3 of this
Article V, to be distributed to the holders of any then outstanding preferred
stock, and subject to the right, if any, of the holders of any outstanding
preferred stock to participate further in any liquidating distributions, all of
the assets of the Corporation, if any, remaining, of whatever kind available for
distribution to stockholders after the foregoing distributions have been made
shall be distributed to the holders of the Common Stock, ratably in proportion
to the number of shares of Common Stock held by them. For purposes of making
liquidating distributions pursuant to this Section 4(c) of this Article V,
Excess Stock shall be included as part of the preferred stock and the Common
Stock to the extent provided in Section 5(e) of this Article V below.

(d) Conversion Rights. Each share of Common Stock is convertible into
Excess Stock as provided in Section 2(c) of this Article V.

SECTION 5. EXCESS STOCK.

(a) Condition to Issuance. The provisions of this Article V to the
contrary notwithstanding, the automatic conversion and exchange of certain
Equity Stock into Excess Stock in the circumstances provided for in Section 2(c)
of this Article V shall be deemed not to have occurred, nunc pro tunc, if the
Corporation shall have determined, in the sole and absolute discretion of the
Board of Directors, that the issuance by the Corporation of Excess Stock would
cause the Corporation to fail to satisfy the organizational and operational
requirements that must be met for the Corporation to qualify for treatment as a
REIT.

(b) Ownership of Excess Stock in Trust. Upon any purported Transfer that
results in Excess Stock pursuant to Section 2(c) of this Article V, such Excess
Stock shall not be issued in certificated form but shall be held by the
Corporation, in book entry form, as Trustee in Trust for the exclusive benefit
of such Beneficiary or Beneficiaries to whom an interest in such Excess Stock
may later be transferred pursuant to Section 5(f) of this Article V. Excess
Stock so held in Trust shall be issued and outstanding Stock of the

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Corporation. The Purported Record Transferee shall have no rights in such Excess
Stock except the right to designate a transferee of such Excess Stock upon the
terms specified in Section 5(f) of this Article V. The Purported Beneficial
Transferee shall have no rights in such Excess Stock except as provided in
Section 5(f) of this Article V.

(d) No Dividend Rights. Excess Stock shall not be entitled to any
dividends. Any dividend or distribution paid prior to the discovery by the
Corporation that Equity Stock had been converted into Excess Stock shall be
repaid to the Corporation upon demand.

(e) Liquidation Rights. In the event of any voluntary or involuntary
liquidation, dissolution or winding up of, or any distribution of the assets of,
the Corporation, each holder of share(s) of Excess Stock shall be entitled to
receive that portion of the assets of the Corporation that would have been
distributed to the Equity Stock in respect of which the Excess Stock was issued.
The Corporation, as holder of the Excess Stock in Trust or, if the Corporation
has been dissolved, any trustee appointed by the Corporation prior to its
dissolution, shall distribute ratably to the Beneficiaries of the Trust, when
determined, any such assets received in respect of the Excess Stock in any
liquidation, dissolution or winding up of, or any distribution of the assets of,
the Corporation.

(f) Restrictions on Transfer; Designation of Beneficiary.

(i) Excess Stock shall not be transferable. The Purported Record
Transferee may freely designate a Beneficiary of an interest in the Trust
(representing the number of shares of Excess Stock held by the Trust
attributable to a purported Transfer that resulted in Excess Stock), if the
Excess Stock held in the Trust would not be Excess Stock in the hands of
such Beneficiary and the Purported Record Transferee does not receive a
price for designating such Beneficiary that reflects a price per share of
Excess Stock that exceeds (x) the price per share that such Purported
Record Transferee paid for the Equity Stock in the purported Transfer that
resulted in the Excess Stock; or (y) if the Purported Record Transferee did
not give value for such Excess Stock (through a gift, devise or other
transaction), the price per share equal to the Market Price on the date of
the purported Transfer that resulted in the Excess Stock. Upon such
transfer of an interest in the Trust, the corresponding shares of Excess
Stock in the Trust shall automatically be exchanged for an equal number of
shares of Equity Stock, and such shares of Equity Stock shall be
transferred of record to the transferee of the interest in the Trust if
such Equity Stock would not be Excess Stock in the hands of such
Beneficiary. Prior to any transfer of any interest in the Trust, the
Purported Record Transferee must give advance notice to the Corporation of
the intended transfer and the Corporation must have waived in writing its
redemption rights under Section 2(d) of this Article V.

(ii) Notwithstanding the foregoing, if a Purported Record Transferee
receives a price for designating a Beneficiary of an interest in the Trust
that exceeds the amounts allowable under Section 5(f)(i) of this Article V,
such Purported Record Transferee shall pay, or cause such Beneficiary to
pay, such excess to the Corporation.

(g) Conversion Right. Each share of Excess Stock is convertible into
Equity Stock as provided in Section 2(c) of this Article V.

SECTION 6. GENERAL PROVISIONS.

(a) Interpretation and Ambiguities. The Board of Directors shall have the
power to interpret and to construe the provisions of this Article V, including
any definition contained in Section 1, and the Board of Directors shall have the
power to determine the application of the provisions of this Article V with
respect to any situation based on the facts known to it, and any such
interpretation, construction and determination shall be final and binding on all
interested parties, including the stockholders.

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(b) Severability. If any provision of this Article V or any application of
any such provision is determined to be void, invalid or unenforceable by any
court having jurisdiction over the issue, the validity and enforceability of the
remaining provisions shall not be affected and other applications of such
provision shall be affected only to the extent necessary to comply with the
determination of such court.

ARTICLE VI

THE BOARD OF DIRECTORS

SECTION 1. AUTHORIZED NUMBER AND INITIAL DIRECTORS.

The business and affairs of the Corporation shall be managed by a Board of
Directors. The authorized number of directors of the Corporation initially shall
be seven, which number may be increased or decreased pursuant to the Bylaws of
the Corporation, but shall never be less than the minimum number permitted by
the General Laws of the State of Maryland now or hereafter in force. The persons
who shall serve as directors effectively immediately and until the first annual
meeting of stockholders and until their successors are duly elected and qualify
are as follows:

Alexander G. Anagnos
H.C. Bailey, Jr.
David H. Hoster II
Harold B. Judell
David M. Osnos
John N. Palmer
Leland R. Speed

SECTION 2. GENERAL TERM OF OFFICE.

Each director shall serve for a term of one year and until such director's
successor is elected and qualified or until such director's death, retirement,
resignation or removal.

SECTION 3. REMOVAL OF DIRECTORS.

A director may be removed from office but only for cause and only by the
affirmative vote of the holders of at least two-thirds of the combined voting
power of all shares of capital stock entitled to be cast in the election of
directors voting together as a single class.

SECTION 4. FILLING VACANCIES.

Except as may otherwise be provided with respect to any rights of holders
of preferred stock to elect additional directors, or in any agreement relating
to the right to designate nominees for election to the Board of Directors,
should a vacancy on the Board of Directors occur or be created (whether arising
through death, retirement resignation or removal), other than through an
increase but not a decrease, in the number of authorized directors, such vacancy
shall be filled by the affirmative vote of a majority of the remaining
directors, even though less than a quorum of the Board of Directors. A vacancy
on the Board of Directors resulting from an increase in the number of directors
shall be filled by the affirmative vote of a majority of the entire Board of
Directors. By the vote required to elect a director, the stockholders may fill
any vacancy on the Board of Directors resulting from the removal of a director.

SECTION 5. BOARD AUTHORIZATION OF SHARE ISSUANCES.

The Board of Directors of the Corporation may authorize the issuance from
time to time of Stock of any class, whether now or hereafter authorized, or
securities convertible into Stock of any class, whether now or hereafter
authorized, for such consideration as the Board of Directors may deem advisable,
subject to such restrictions or limitations, if any, as may be set forth in the
Charter or the Bylaws of the Corporation.

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SECTION 6. PREEMPTIVE RIGHTS.

No holder of any Stock or any other securities of the Corporation, whether
now or hereafter authorized, shall have any preemptive right to subscribe for or
purchase any Stock or any other securities of the Corporation other than such,
if any, as the Board of Directors, in its sole discretion, may determine and at
such price or prices and upon such other terms as the Board of Directors, in its
sole discretion, may fix; and any Stock or other securities which the Board of
Directors may determine to offer for subscription may, as the Board of Directors
in its sole discretion shall determine, be offered to the holders of any class,
series or type of Stock or other securities at the time outstanding to the
exclusion of the holders of any or all other classes, series or types of stock
or other securities at the time outstanding.

SECTION 7. AMENDMENTS TO THE BYLAWS.

In furtherance and not in limitation of the power conferred by statute, the
Board of Directors is expressly authorized to adopt, alter or repeal Bylaws of
the Corporation by vote of two-thirds of the Board of Directors. The
stockholders may adopt, alter and repeal Bylaws of the Corporation only by the
affirmative vote of 80% of the aggregate votes entitled to be cast with respect
thereto.

SECTION 8. CERTAIN OTHER DETERMINATIONS BY THE BOARD OF DIRECTORS.

The determination as to any of the following matters, made in good faith by
or pursuant to the direction of the Board of Directors consistent with the
Charter and in the absence of actual receipt of an improper benefit in money,
property or services or active and deliberate dishonesty established by a court,
shall be final and conclusive and shall be binding upon the Corporation and
every holder of Stock: the amount of the net income of the Corporation for any
period and the amount of assets at any time legally available for the payment of
dividends, redemption of Stock or the payment of other distributions on Stock;
the amount of paid-in surplus, net assets, annual or other net profit, net
assets in excess of capital, undivided profits or excess of profits over losses
on sales of assets; the amount, purpose, time of creation, increase or decrease,
alteration or cancellation of any reserves or charges and the propriety thereof
(whether or not any obligation nor liability for which such reserves or charges
shall have been created shall have been paid or discharged); the fair value, or
any sale, bid or asked price to be applied in determining the fair value, of any
asset owned or held by the Corporation; and any matters relating to the
acquisition, holding and disposition of any assets of the Corporation.

SECTION 9. RESERVED POWERS OF THE BOARD OF DIRECTORS.

The enumeration and definition of particular powers of the Board of
Directors included in this Article VI shall in no way be limited or restricted
by reference to or inference from the terms of any other clause of this or any
other provision of the charter of the Corporation, or construed or deemed by
inference or otherwise in any manner to exclude or limit the powers conferred
upon the Board of Directors under the general laws of the State of Maryland as
now or hereafter in force.

ARTICLE VII

PROVISIONS FOR DEFINING, LIMITING AND REGULATING
CERTAIN POWERS OF THE CORPORATION AND OF THE
STOCKHOLDERS AND DIRECTORS

SECTION 1. RELATED PARTY TRANSACTIONS.

Without limiting any other procedure available by law or otherwise to the
Corporation, the Board of Directors may authorize any agreement or other
transaction with any person, corporation, association, company, trust,
partnership (limited or general) or other organization, although one or more of
the directors or officers of the Corporation may be a party to any such
agreement or any officer, director, stockholder or member of such other party
(an "Interested Officer/Director"), and no such agreement or transaction shall
be

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invalidated or rendered void or voidable solely by reason of the existence of
any such relationship if: ii) the existence is disclosed or known to the Board
of Directors, and the contract or transaction is authorized, approved or
ratified by the affirmative vote of a majority of the disinterested directors,
even if they constitute less than a quorum of the Board of Directors; or (ii)
the existence is disclosed to the stockholders entitled to vote, and the
contract or transaction is authorized, approved or ratified by a majority of the
votes cast by the stockholders entitled to vote, other than the votes of the
stock held of record by the Interested Officers/Directors; or (iii) the contract
or transaction is fair and reasonable to the Corporation. Any Interested
Officer/Director of the Corporation or the stock owned by them or by a
corporation, association, company, trust, partnership (limited or general) or
other organization in which an Interested Officer/Director may have an interest,
may be counted in determining the presence of a quorum at a meeting of the Board
of Directors or a committee of the Board of Directors or at a meeting of the
stockholders, as the case may be, at which the contract or transaction is
authorized, approved or ratified.

SECTION 2. REIT QUALIFICATION.

After the Corporation has initially elected to qualify as a REIT under the
Code, the Board of Directors shall use its reasonable best efforts to cause the
Corporation and its stockholders to qualify for U.S. federal income tax
treatment in accordance with the provision of the Code applicable to a REIT. In
furtherance of the foregoing, the Board of Directors shall use its reasonable
best efforts to take such actions as are necessary, and may take such actions as
in its sole judgment and discretion are desirable, to preserve the status of the
Corporation as a REIT, provided, however, that if the Board of Directors
determines in its discretion, that it is no longer in the best interests of the
Corporation to continue to have the Corporation qualify as a REIT, the Board of
Directors may revoke or otherwise terminate the Corporation's REIT election
pursuant to Section 856(g) of the Code. Nothing contained in the Charter shall
limit the authority of the Board of Directors to take such action as it in its
sole discretion deems necessary or advisable to protect the Corporation and the
interests of the stockholders by maintaining the Corporation's eligibility to
be, and preserving the Corporation's status as, a qualified REIT under the Code.

SECTION 3. STOCKHOLDER ACTIONS.

(a) Stockholder Meetings. Action shall be taken by the stockholders only
at annual or special meetings of stockholders, or by unanimous written consent
of the holders of all Equity Stock entitled to vote on such action at a meeting
of stockholders, if such written consent is accompanied by a written waiver of
any right to dissent signed by each stockholder entitled to notice of the
meeting but not entitled to vote at such meeting.

(b) Special Meetings of the Stockholders. Special meetings of the
stockholders of the Corporation for any purpose or purposes may be called at any
time by the President, the Chief Executive Officer, the Chairman of the Board of
Directors, or by a majority of the members of the Board of Directors. Special
meetings of stockholders of the Corporation shall be called at the request of
the holders of a majority of all the votes entitled to be cast at the meeting.

SECTION 4. OTHER CONSIDERATIONS.

The Board of Directors shall, in connection with the exercise of its
business judgment involving a Business Combination (as defined in Section 3-601
of the Corporations and Associations Article of the Annotated Code of Maryland)
or any actual or proposed transaction which would or may involve a change in
control of the Corporation (whether by purchases of shares of stock or any other
securities of the Corporation in the open market, or otherwise, tender offer,
merger, consolidation, dissolution, liquidation, sale of all or substantially
all of the assets of the Corporation, proxy solicitation or otherwise), in
determining what is in the best interests of the Corporation and its
stockholders and in making any recommendation to its stockholders, give due
consideration to all relevant factors, including, but not limited to (a) the
economic effect, both immediate and long-term, upon the Corporation's
stockholders, including stockholders, if any, who do not participate in the
transaction; (b) the social and economic effect on the employees, customers of,
and others dealing with, the Corporation and its subsidiaries and on the
communities in which the Corporation and its subsidiaries operate or are
located; (c) whether the proposal is acceptable based on the historical and
current

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operating results or financial condition of the Corporation; (d) whether a more
favorable price could be obtained for the Corporation's stock or other
securities in the future; (e) the reputation and business practices of the
offeror and its management and affiliates as they would affect the employees of
the Corporation and its subsidiaries; (f) the future value of the stock or any
other securities of the Corporation; (g) any antitrust or other legal and
regulatory issues that are raised by the proposal; and (h) the business and
financial condition and earnings prospects of the acquiring person or entity,
including, but not limited to, debt service and other existing financial
obligations, financial obligations to be incurred in connection with the
acquisition, and other likely financial obligations of the acquiring person or
entity. If the Board of Directors determines that any proposed Business
Combination (as defined in Section 3-601 of the Corporations and Associations
Article of the Annotated Code of Maryland) or actual or proposed transaction
which would or may involve a change in control of the Corporation should be
rejected, it may take any lawful action to defeat such transaction, including,
but not limited to, any or all of the following: advising stockholders not to
accept the proposal; instituting litigation against the party making the
proposal; filing complaints with governmental and regulatory authorities;
acquiring the stock or any of the securities of the Corporation; selling or
otherwise issuing authorized but unissued stock, other securities or granting
options or rights with respect thereto; acquiring a company to create an
antitrust or other regulatory problem for the party making the proposal; and
obtaining a more favorable offer from another individual or entity.

SECTION 5. STOCKHOLDER PROPOSALS.

For any stockholder proposal to be presented in connection with an annual
meeting of stockholders of the Corporation, including any proposal relating to
the nomination of a director to be elected to the Board of Directors of the
Corporation, the stockholders must have given timely written notice thereof in
Writing to the Secretary of the Corporation in the manner and containing the
information required by the Bylaws. Stockholder proposals to be presented in
connection with a special meeting of stockholders will be presented by the
Corporation only to the extent required by Section 2-502 of the Corporations and
Associations Article of the Annotated Code of Maryland.

SECTION 6. VOTING REQUIREMENTS.

Notwithstanding any provision of law requiring the authorization of any
action by a greater proportion than a majority of the total number of shares of
all classes of capital stock or the total number of shares of any class of
capital stock, such action shall be valid and effective if authorized by the
affirmative vote of the holders of a majority of the total number of shares of
all classes and entitled to vote thereon, except as otherwise provided in the
Charter of the Corporation. All mergers, consolidations, share exchanges,
recapitalizations or dissolutions to which the Corporation is a party and all
sales of all or substantially all the assets of the Corporation shall not be
valid and effective unless advised by at least two-thirds of the Board of
Directors.

ARTICLE VIII

INDEMNIFICATION OF AGENTS
AND LIMITATION OF LIABILITY OF OFFICERS AND DIRECTORS

SECTION 1. INDEMNIFICATION.

The Corporation shall provide any indemnification permitted by the laws of
Maryland and shall indemnify directors, officers, agents and employees as
follows: (a) the Corporation shall indemnify its directors and officers, whether
serving the Corporation or at its request any other entity, to the full extent
required or permitted by the General Laws of the State of Maryland now or
hereafter in force, including the advance of expenses under the procedures and
to the full extent permitted by law and (b) the Corporation shall indemnify
other employees and agents, whether serving the Corporation or at its request
any other entity, to such extent as shall be authorized by the Board of
Directors or the Corporation's Bylaws and be permitted by law. The foregoing
rights of indemnification shall not be exclusive of any other rights to which
those

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seeking indemnification may be entitled. The Board of Directors may take such
action as is necessary to carry out these indemnification provisions and is
expressly empowered to adopt, approve and amend from time to time such bylaws,
resolutions or contracts implementing such provisions or such further
indemnification arrangements as may be permitted by law. No amendment of the
Charter of the Corporation or repeal of any of its provisions shall limit or
eliminate the right to indemnification provided hereunder with respect to acts
or omissions occurring prior to such amendment or repeal or shall limit or
eliminate the rights granted under indemnification agreements entered into by
the corporation and its directors, officers, agents and employees.

SECTION 2. LIMITATION OF LIABILITY.

To the fullest extent permitted by Maryland statutory or decisional law, as
amended or interpreted, no director or officer of the Corporation shall be
liable to the Corporation or its stockholders for money damages. No amendment of
the Charter of the Corporation or repeal any of its provisions shall apply to or
affect in any respect the applicability of the preceding sentence with respect
to any act or omission which occurred prior to such amendment or repeal.

ARTICLE IX

AMENDMENTS

(a) Right to Amend Charter. The Corporation reserves the right to amend,
alter, change or repeal any provision contained in the Charter, including any
amendments changing the terms or contract rights, as expressly set forth in the
Charter, of any of its outstanding stock by classification, reclassification or
otherwise, by a majority of the directors' adopting a resolution setting forth
the proposed change, declaring its advisability, and either calling a special
meeting of the stockholders entitled to vote on the proposed change, or
directing the proposed change to be considered at the next annual stockholders
meeting. Unless otherwise provided herein, the proposed change will be effective
only if it is adopted upon the affirmative vote of the holders of not less than
a majority of the aggregate votes entitled to be cast thereon (considered for
this purpose as a single class); provided, however, that any amendment to,
repeal of or adoption of any provision inconsistent with Article VI, Article
VIII or this Article IX will be effective only if it is also advised by at least
two-thirds of the Board of Directors.

(b) Certain Amendments Requiring Special Stockholder Vote. Any provision
of the Charter of the Corporation to the contrary notwithstanding:

(i) no term or provision of the Charter of the Corporation may be
added, amended or repealed in any respect that would, in the determination
of the Board of Directors, cause the Corporation not to qualify as a REIT
under the Code;

(ii) Article VI, Section 3 (removal of directors) and Section 6
(amendments of Bylaws); Article VIII (indemnification of agents and
limitation of liability of officers and directors); and this Article IX
shall not be amended or repealed; and

(iii) no provision imposing cumulative voting in the election of
directors may be added to the Charter of the Corporation;

unless in each such case, in addition to any vote required by the terms of then
outstanding preferred stock, such action is approved by the affirmative vote of
the holders of not less than eighty percent (80%) of all of the votes entitled
to be cast on the matter.

IN WITNESS WHEREOF, I have adopted and signed these Articles of
Incorporation and do hereby acknowledge that the adoption and signing are my
act.

Dated: April 3, 1997
/s/ Kayla E. Klos

------------------------------------
Kayla E. Klos, Incorporator

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APPENDIX C

BYLAWS

EASTGROUP PROPERTIES II, INC.

A Maryland Corporation
<PAGE> 57

EASTGROUP PROPERTIES II, INC.

BYLAWS

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
ARTICLE I............................................................................ 1
OFFICES......................................................................... 1
SECTION 1. PRINCIPAL OFFICE.............................................. 1
SECTION 2. ADDITIONAL OFFICES............................................ 1
ARTICLE II........................................................................... 1
STOCKHOLDERS.................................................................... 1
SECTION 1. ANNUAL MEETING................................................ 1
SECTION 2. SPECIAL MEETING............................................... 1
SECTION 3. PLACE OF MEETINGS............................................. 1
SECTION 4. NOTICE........................................................ 1
SECTION 5. SCOPE OF NOTICE............................................... 2
SECTION 6. QUORUM........................................................ 2
SECTION 7. VOTING........................................................ 2
SECTION 8. PROXIES....................................................... 2
SECTION 9. LIST OF STOCKHOLDERS.......................................... 3
SECTION 10. VOTING OF STOCK BY CERTAIN HOLDERS............................ 3
SECTION 11. INSPECTORS.................................................... 3
SECTION 12. NOMINATIONS AND STOCKHOLDER BUSINESS.......................... 3
SECTION 13. INFORMAL ACTION BY STOCKHOLDERS............................... 5
ARTICLE III.......................................................................... 5
DIRECTORS....................................................................... 5
SECTION 1. GENERAL POWERS; QUALIFICATIONS................................ 5
SECTION 2. NUMBER AND TENURE............................................. 5
SECTION 3. REGULAR MEETINGS.............................................. 5
SECTION 4. SPECIAL MEETINGS.............................................. 6
SECTION 5. VACANCY ON BOARD.............................................. 6
SECTION 6. NOTICE........................................................ 6
SECTION 7. QUORUM........................................................ 6
SECTION 8. VOTING........................................................ 7
SECTION 9. TELEPHONE MEETINGS............................................ 7
SECTION 10. INFORMAL ACTION BY DIRECTORS.................................. 7
SECTION 11. COMPENSATION.................................................. 7
SECTION 12. REMOVAL OF DIRECTORS.......................................... 7
SECTION 13. LOSS OF DEPOSIT............................................... 7
SECTION 14. SURETY BONDS.................................................. 7
SECTION 15. RELIANCE...................................................... 7
SECTION 16. CERTAIN RIGHTS OF DIRECTORS................................... 7
ARTICLE IV........................................................................... 8
COMMITTEES...................................................................... 8
SECTION 1. NUMBER, TENURE AND QUALIFICATIONS............................. 8
SECTION 2. POWERS........................................................ 8
SECTION 3. MEETINGS...................................................... 8
SECTION 4. TELEPHONE MEETINGS............................................ 8
SECTION 5. INFORMAL ACTION BY COMMITTEES................................. 8
ARTICLE V............................................................................ 8
OFFICERS........................................................................ 8
SECTION 1. GENERAL PROVISIONS............................................ 8
SECTION 2. ELECTION, TENURE AND REMOVAL OF OFFICERS...................... 9
SECTION 3. CHIEF EXECUTIVE OFFICER....................................... 9
SECTION 4. CHIEF OPERATING OFFICER....................................... 9
SECTION 5. CHIEF FINANCIAL OFFICER....................................... 9
SECTION 6. CHAIRMAN OF THE BOARD......................................... 9
</TABLE>

i
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<TABLE>
<CAPTION>
PAGE
<S> <C>
SECTION 7. PRESIDENT..................................................... 9
SECTION 8. VICE PRESIDENTS............................................... 10
SECTION 9. SECRETARY..................................................... 10
SECTION 10. TREASURER..................................................... 10
SECTION 11. ASSISTANT SECRETARIES AND ASSISTANT TREASURERS................ 10
SECTION 12. SALARIES...................................................... 10
ARTICLE VI........................................................................... 10
FINANCE......................................................................... 10
SECTION 1. CONTRACTS..................................................... 10
SECTION 2. CHECKS AND DRAFTS............................................. 11
SECTION 3. DEPOSITS...................................................... 11
SECTION 4. ANNUAL STATEMENT OF AFFAIRS................................... 11
ARTICLE VII.......................................................................... 11
STOCK........................................................................... 11
SECTION 1. CERTIFICATES.................................................. 11
SECTION 2. TRANSFERS..................................................... 11
SECTION 3. LOST CERTIFICATE.............................................. 12
SECTION 4. CLOSING OF TRANSFER BOOKS OR FIXING OF RECORD DATE............ 12
SECTION 5. STOCK LEDGER.................................................. 12
SECTION 6. FRACTIONAL STOCK; ISSUANCE OF UNITS........................... 12
SECTION 7. CERTIFICATION OF BENEFICIAL OWNERS............................ 12
ARTICLE VIII......................................................................... 13
ACCOUNTING YEAR................................................................. 13
ARTICLE IX........................................................................... 13
DIVIDENDS....................................................................... 13
SECTION 1. DECLARATION................................................... 13
SECTION 2. CONTINGENCIES................................................. 13
ARTICLE X............................................................................ 13
INVESTMENT POLICY............................................................... 13
ARTICLE XI........................................................................... 13
SEAL............................................................................ 13
SECTION 1. SEAL.......................................................... 13
SECTION 2. AFFIXING SEAL................................................. 13
ARTICLE XII.......................................................................... 14
INDEMNIFICATION................................................................. 14
SECTION 1. PROCEDURE..................................................... 14
SECTION 2. EXCLUSIVITY, ETC.............................................. 14
SECTION 3. SEVERABILITY; DEFINITIONS..................................... 14
ARTICLE XIII......................................................................... 14
WAIVER OF NOTICE................................................................ 14
ARTICLE XIV.......................................................................... 15
SUNDRY PROVISIONS............................................................... 15
SECTION 1. BOOKS AND RECORDS............................................. 15
SECTION 2. BONDS......................................................... 15
SECTION 3. VOTING UPON SHARES IN OTHER CORPORATIONS...................... 15
SECTION 4. MAIL.......................................................... 15
SECTION 5. EXECUTION OF DOCUMENTS........................................ 15
ARTICLE XV........................................................................... 15
AMENDMENT OF BYLAWS............................................................. 15
</TABLE>

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MARYLAND BYLAWS

EASTGROUP PROPERTIES II, INC.

ARTICLE I

OFFICES

SECTION 1. PRINCIPAL OFFICE.

The principal office of the Corporation shall be located at such place as
the Board of Directors may designate.

SECTION 2. ADDITIONAL OFFICES.

The Corporation may have additional offices at such places as the Board of
Directors may from time to time determine or the business of the Corporation may
require.

ARTICLE II

STOCKHOLDERS

SECTION 1. ANNUAL MEETING.

The Corporation shall hold an annual meeting of its stockholders to elect
directors and transact any other business within its powers at such time on such
day as shall be set by the Board of Directors. Except as the Charter or statute
provides otherwise, any business may be considered at an annual meeting without
the purpose of the meeting having been specified in the notice. Failure to hold
an annual meeting does not invalidate the Corporation's existence or affect any
otherwise valid corporate acts.

SECTION 2. SPECIAL MEETING.

At any time in the interval between annual meetings, a special meeting of
the stockholders may be called by the President, the Chief Executive Officer,
the Chairman of the Board of Directors by vote of a majority of the Board of
Directors at a meeting or in writing (addressed to the Secretary of the
corporation) with or without a meeting. Special meetings of the stockholders
shall also be called by the Secretary at the request of stockholders only on the
written request of stockholders entitled to cast at least a majority of all the
votes entitled to be cast at the meeting. A request for a special meeting shall
state the purpose of such meeting and the matters proposed to be acted on at
such meeting. The Secretary shall inform the stockholders making the request of
the reasonably estimated costs of preparing and mailing a notice of the meeting
and, upon such stockholders' payment to the Corporation of such costs, the
Secretary shall give notice to each stockholder entitled to notice of the
meeting.

SECTION 3. PLACE OF MEETINGS.

Meetings of stockholders shall be held at such place in the United States
as is set from time to time by the Board of Directors.

SECTION 4. NOTICE.

Not less than ten nor more than 90 days before each meeting of
stockholders, the Secretary shall give to each stockholder entitled to vote at
such meeting and to each stockholder not entitled to vote who is entitled to
notice of the meeting, written or printed notice stating the time and place of
the meeting and, in the case of a special meeting or as otherwise may be
required by statute, the purpose of the meeting. Notice is given to a
stockholder when it is personally delivered to him or her, left at his or her
residence or usual place of business,

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or mailed to him or her at his or her address as it appears on the records of
the Corporation. Notwithstanding the foregoing provisions, each person who is
entitled to notice waives notice if he or she before or after the meeting signs
a waiver of the notice which is filed with the records of the stockholders'
meetings, or is present at the meeting in person or by proxy.

SECTION 5. SCOPE OF NOTICE.

Any business of the Corporation may be transacted at an annual meeting of
stockholders without being specifically designated in the notice, except such
business as is required by statute or the Charter to be stated in such notice.
No business shall be transacted at a special meeting of stockholders except as
specifically designated in the notice.

SECTION 6. QUORUM.

Unless the statute or the Charter provides otherwise, at a meeting of
stockholders, the presence in person or by proxy of stockholders entitled to
cast a majority of all the votes entitled to be cast at such meeting shall
constitute a quorum; but this section shall not affect any requirement under any
statute or the Charter of the Corporation for the vote necessary for the
adoption of any measure. Whether or not a quorum is present at any meeting of
the stockholders, a majority of the stockholders entitled to vote at such
meeting, present in person or by proxy, shall have power to adjourn the meeting
from time to time to a date not more than 120 days after the original record
date without notice other than announcement at the meeting. At such adjourned
meeting at which a quorum shall be present, any business may be transacted which
might have been transacted at the meeting as originally notified.

SECTION 7. VOTING.

A plurality of all the votes cast at a meeting of stockholders duly called
and at which a quorum is present shall be sufficient to elect a director. Each
share may be voted for as many individuals as there are directors to be elected
and for whose election the share is entitled to be voted. A majority of the
votes cast at a meeting of stockholders duly called and at which a quorum is
present shall be sufficient to approve any other matter which may properly come
before the meeting, unless more than a majority of the votes cast is required by
statute or by the Charter of the Corporation. Unless otherwise provided in the
Charter and other than Excess Stock of the Corporation, each outstanding share,
regardless of class, shall be entitled to one vote on each matter submitted to a
vote at a meeting of stockholders.

SECTION 8. PROXIES.

A stockholder may vote the stock the stockholder owns of record either in
person or by proxy. A stockholder may sign a writing authorizing another person
to act as proxy. Signing may be accomplished by the stockholder or the
stockholder's authorized agent signing the writing or causing the stockholder's
signature to be affixed to the writing by any reasonable means, including
facsimile signature. A stockholder may authorize another person to act as proxy
by transmitting, or authorizing the transmission of, a telegram, cablegram,
datagram, or other means of electronic transmission to the person authorized to
act as proxy or to a proxy solicitation firm, proxy support service
organization, or other person authorized by the person who will act as proxy to
receive the transmission. Unless a proxy provides otherwise, it is not valid
more than 11 months after its date. A proxy is revocable by a stockholder at any
time without condition or qualification unless the proxy states that it is
irrevocable and the proxy is coupled with an interest. A proxy may be made
irrevocable for so long as it is coupled with an interest. The interest with
which a proxy may be coupled includes an interest in the stock to be voted under
the proxy or another general interest in the Corporation or its assets or
liabilities. A proxy shall be filed with the Secretary of the Corporation before
or at time of the meeting.

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SECTION 9. LIST OF STOCKHOLDERS.

At each meeting of stockholders, a full, true and complete list of all
stockholders entitled to vote at such meeting, showing the number and class of
shares held by each and certified by the transfer agent for such class or by the
Secretary, shall be furnished by the Secretary.

SECTION 10. VOTING OF STOCK BY CERTAIN HOLDERS.

Stock registered in the name of a corporation, partnership, trust or other
entity, if entitled to be voted, may be voted by the president or a vice
president, a general partner or trustee thereof, as the case may be, or a proxy
appointed by any of the foregoing individuals, unless some other person who has
been appointed to vote such stock pursuant to a bylaw or a resolution of the
board of directors of such corporation or other entity presents a certified copy
of such bylaw or resolution, in which case such person may vote such stock. Any
director or other fiduciary may vote stock registered in his or her name as such
fiduciary, either in person or by proxy.

Shares of stock of the Corporation directly or indirectly owned by it shall
not be voted at any meeting and shall not be counted in determining the total
number of outstanding shares entitled to be voted at any given time, unless they
are held by it in a fiduciary capacity, in which case they may be voted and
shall be counted in determining the total number of outstanding shares at any
given time.

The Board of Directors may adopt by resolution a procedure by which a
stockholder may certify in writing to the Corporation that any shares of stock
registered in the name of the stockholder are held for the account of a
specified person other than the stockholder. The resolution shall set forth the
class of stockholders who may make the certification, the purpose for which the
certification may be made, the form of certification and the information to be
contained in it; if the certification is with respect to a record date of
closing of the stock transfer books, the time after the record date of closing
of the stock transfer books within which the certification must be received by
the Corporation; and any other provisions with respect to the procedure which
the Board of Directors considers necessary or desirable. On receipt of such
certification, the person specified in the certification shall be regarded as,
for the purposes set forth in the certification, the stockholder of record of
the specified stock in place of the stockholder who makes the certification.

SECTION 11. INSPECTORS.

At all meetings of stockholders, unless the voting is conducted by an
inspector, the proxies and ballots shall be received, and all questions touching
the qualification of voters and the validity of proxies, the acceptance or
rejection of votes and procedures for the conduct of business not otherwise
specified by these Bylaws, the Charter or law, shall be decided or determined by
the chairman of the meeting. If demanded by stockholders, present in person or
by proxy, entitled to cast 10% in number of votes entitled to be cast, or if
ordered by the chairman, the vote upon any election or question shall be taken
by ballot and, upon like demand or order, the voting shall be conducted by an
inspector, in which event the proxies and ballots shall be received, and all
questions touching the qualification of voters and the validity of proxies and
the acceptance or rejection of votes shall be decided, by such inspector. Unless
so demanded or ordered, no vote need be by ballot and voting need not be
conducted by an inspector. The stockholders at any meeting may choose an
inspector to act at such meeting, and in default of such election the chairman
of the meeting may appoint an inspector. No candidate for election as a director
at a meeting shall serve as an inspector thereat.

Each report of an inspector shall be in writing and signed by him, her or
by a majority of them if there is more than one inspector acting at such
meeting. If there is more than one inspector, the report of a majority shall be
the report of the inspectors. The report of the inspector or inspectors on the
number of shares represented at the meeting and the results of the voting shall
be prima facie evidence thereof.

SECTION 12. NOMINATIONS AND STOCKHOLDER BUSINESS.

(a) Annual Meeting of Stockholders.

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(1) For nominations or other business to be properly brought before an
annual meeting by a stockholder, including any proposal relating to the
nomination of a director to be elected to the Board of Directors of the
Corporation, the stockholder must have given timely notice thereof in
writing to the Secretary of the Corporation. To be timely, a stockholder's
notice shall be delivered to the Secretary at the principal executive
offices of the Corporation not less than 60 days nor more than 90 days
prior to the first anniversary of the preceding year's annual meeting;
provided, however, that in the event that the date of the annual meeting is
advanced by more than 30 days or delayed by more than 60 days from such
anniversary date, notice by the stockholder to be timely must be so
delivered not earlier than the 90th day prior to such annual meeting and
not later than the close of business on the later of the 60th day prior to
such annual meeting or the tenth day following the day on which public
announcement of the date of such meeting is first made. Such stockholder's
notice shall set forth (i) as to each person whom the stockholder proposes
to nominate for election or reelection as a director all information
relating to such person that is required to be disclosed in solicitations
of proxies for election of directors, or is otherwise required, in each
case pursuant to Regulation 14A under the Securities Exchange Act of 1934,
as amended (the "Exchange Act") (including such person's written consent to
being named in the proxy statement as a nominee and to serving as a
director if elected); (ii) as to any other business that the stockholder
proposes to bring before the meeting, a brief description of the business
desired to be brought before the meeting, the reasons for conducting such
business at the meeting and any material interest in such business of such
stockholder and of the beneficial owner, if any, on whose behalf the
proposal is made; and (iii) as to the stockholder giving the notice and the
beneficial owner, if any, on whose behalf the nomination or proposal is
made, (x) the name and address of such stockholder, as they appear on the
Corporation's books, and of such beneficial owner, if any; and (y) the
class and number of shares of stock of the Corporation which are owned
beneficially and of record by such stockholder and such beneficial owner,
if any.

(2) Notwithstanding anything in the second sentence of paragraph (a)
(1) of this Section 12 to the contrary, in the event that the number of
directors to be elected to the Board of Directors is increased and there is
no public announcement naming all of the nominees for director or
specifying the size of the increased Board of Directors made by the
Corporation at least 70 days prior to the first anniversary of the
preceding year's annual meeting, a stockholder's notice required by this
Section 12(a) shall also be considered timely, but only with respect to
nominees for any new positions created by such increase, if it shall be
delivered to the secretary at the principal executive offices of the
Corporation not later than the close of business on the tenth day following
the day on which such public announcement is first made by the Corporation.

(b) Special Meetings of Stockholders. Only such business shall be
conducted at a special meeting of stockholders as shall have been brought
before the meeting pursuant to the Corporation's notice of meeting.
Nominations of persons for election to the Board of Directors may be made
at a special meeting of stockholders at which directors are to be elected
(i) pursuant to the Corporation's notice of meeting; (ii) by or at the
direction of the Board of Directors; or (iii) provided that the Board of
Directors has determined that directors shall be elected at such special
meeting, by any stockholder of the Corporation who is a stockholder of
record at the time of giving of notice provided for in this Section 12(b),
who is entitled to vote at the meeting and who complied with the notice
procedures set forth in this Section 12(b). In the event the Corporation
calls a special meeting of stockholders for the purpose of electing one or
more directors to the Board of Directors, any such stockholder may nominate
a person or persons (as the case may be) for election to such position as
specified in the Corporation's notice of meeting, if the stockholder's
notice required by this Section 12(b) shall be delivered to the Secretary
at the principal executive offices of the Corporation not earlier than the
90th day prior to such special meeting and not later than the close of
business on the later of the 60th day prior to such special meeting or the
tenth day following the day on which public announcement is first made of
the date of the special meeting and of the nominees proposed by the Board
of Directors to be elected at such meeting.

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(1) Only such persons who are nominated in accordance with the
procedures set forth in this Section 12 shall be eligible to serve as
directors and only such business shall be conducted at a meeting of
stockholders as shall have been brought before the meeting in accordance
with the procedures set forth in this Section 12. The presiding officer of
the meeting shall have the power and duty to determine whether a nomination
or any business proposed to be brought before the meeting was made in
accordance with the procedures set forth in this Section 12 and, if the
proposed nomination or business is not in compliance with this Section 12,
to declare that such defective nomination or proposal be disregarded.

(2) For purposes of this Section 12, "public announcement" shall mean
disclosure in a press release reported by the Dow Jones News Service, the
Associated Press or a comparable news service or in a document publicly
filed by the Corporation with the Securities and Exchange Commission
pursuant to Sections 13, 14 or 15(d) of the Exchange Act.

(3) Notwithstanding the foregoing provisions of this Section 12, a
stockholder shall also comply with all applicable requirements of state law
and of the Exchange Act and the rules and regulations thereunder with
respect to the matters set forth in this Section 12. Nothing in this
Section 12 shall be deemed to affect any rights of stockholders to request
inclusion of proposals in the Corporation's proxy statement pursuant to
Rule 14a-8 under the Exchange Act.

SECTION 13. INFORMAL ACTION BY STOCKHOLDERS.

Any action required or permitted to be taken at a meeting of stockholders
may be taken without a meeting if there is filed with the records of
stockholders meetings an unanimous written consent which sets forth the action
and is signed by each stockholder entitled to vote on the matter and a written
waiver of any right to dissent signed by each stockholder entitled to notice of
the meeting but not entitled to vote at it. Meetings shall not be held by means
of a conference telephone or similar communications equipment.

ARTICLE III

DIRECTORS

SECTION 1. GENERAL POWERS; QUALIFICATIONS.

The business and affairs of the Corporation shall be managed under the
direction of its Board of Directors. All powers of the Corporation may be
exercised by or under authority of the Board of Directors, except as conferred
on or reserved to the stockholders by statute or by the Charter or Bylaws.

SECTION 2. NUMBER AND TENURE.

The Corporation shall have at least three directors; provided that, if
there is no stock outstanding, the number of directors may be less than three
but not less than one, and, if there is stock outstanding and so long as there
are less than three stockholders, the number of directors may be less than three
but not less than the number of stockholders. The Corporation shall have the
number of directors provided in the Charter until changed as herein provided.
Except as the Charter provides otherwise, a majority of the entire Board of
Directors may alter the number of directors set by the Charter to not exceeding
15 nor less than the minimum number then permitted herein, but the action may
not affect the tenure of office of any director. Each director shall hold office
for a term of one year and until his or her successor is elected and qualified,
or until his or her resignation, removal (in accordance with the Charter),
retirement or death.

SECTION 3. REGULAR MEETINGS.

After each meeting of stockholders at which directors shall have been
elected, the Board of Directors shall meet as soon as practicable for the
purpose of organization and the transaction of other business. In the event that
no other time and place are specified by resolution of the Board, the President
or the Chairman,

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with notice in accordance with Section 6 of this Article III, the Board of
Directors shall meet immediately following the close of, and at the place of,
such stockholders' meeting. Any other regular meeting of the Board of Directors
shall be held on such date and at any place as may be designated from time to
time by the Board of Directors.

SECTION 4. SPECIAL MEETINGS.

Special meetings of the Board of Directors may be called at any time by or
at the request of the Chairman of the Board, the President or by a majority of
the directors then in office by vote at a meeting, or in writing with or without
a meeting. The person or persons authorized to call special meetings of the
Board of Directors may fix the date, time and place, either within or without
the State of Maryland, as the date, time and place for holding any special
meeting of the Board of Directors called by them. In the absence of such
designation the meeting shall be held at such place as may be designated in the
call.

SECTION 5. VACANCY ON BOARD.

The stockholders may elect a successor to fill a vacancy on the Board of
Directors which results from the removal of a director. A director elected by
the stockholders to fill a vacancy which results from the removal of a director
serves for the balance of the term of the removed director. A majority of the
remaining directors, whether or not sufficient to constitute a quorum, may fill
a vacancy on the Board of Directors which results from any cause except an
increase in the number of directors and a majority of the entire Board of
Directors may fill a vacancy which results from an increase in the number of
directors. A director elected by the Board of Directors to fill a vacancy serves
until the next annual meeting of stockholders and until his or her successor is
elected and qualifies.

SECTION 6. NOTICE.

Except as provided in Section 3 of this Article III, the Secretary shall
give notice to each director of each regular and special meeting of the Board of
Directors. The notice shall state the time and place of the meeting. Notice is
given to a director when it is delivered personally to him or her, left at his
or her residence or usual place of business, or sent by telegraph, facsimile
transmission or telephone, at least 24 hours before the time of the meeting or,
in the alternative by mail to his or her address as it shall appear on the
records of the Corporation, at least 72 hours before the time of the meeting.
Unless these Bylaws or a resolution of the Board of Directors provides
otherwise, the notice need not state the business to be transacted at or the
purposes of any regular or special meeting of the Board of Directors. No notice
of any meeting of the Board of Directors need be given to any director who
attends except where a director attends a meeting for the express purpose of
objecting to the transaction of any business because the meeting is not lawfully
called or convened, or to any director who, in writing executed and filed with
the records of the meeting either before or after the holding thereof, waives
such notice. Any meeting of the Board of Directors, regular or special, may be
adjourned from time to time to reconvene at the same or some other place, and no
notice need be given of any such adjourned meeting other than by announcement.

SECTION 7. QUORUM.

A majority of the entire Board of Directors shall constitute a quorum for
the transaction of business at any meeting of the Board of Directors, provided
that, if less than a majority of such directors are present at said meeting, a
majority of the directors present may adjourn the meeting from time to time
without further notice, and provided further that if, pursuant to the Charter of
the Corporation or these Bylaws, the vote of a majority of a particular group of
directors is required for action, a quorum must also include a majority of such
group.

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SECTION 8. VOTING.

The action of a majority of the directors present at a meeting at which a
quorum is present shall be the action of the Board of Directors, unless the
concurrence of a greater or lesser proportion is required for such action by the
Charter, these Bylaws or applicable statute.

SECTION 9. TELEPHONE MEETINGS.

Directors may participate in a meeting by means of a conference telephone
or similar communications equipment if all persons participating in the meeting
can hear each other at the same time. Participation in a meeting by these means
constitutes presence in person at a meeting.

SECTION 10. INFORMAL ACTION BY DIRECTORS.

Any action required or permitted to be taken at a meeting of the Board of
Directors may be taken without a meeting, if an unanimous consent in writing to
such action is signed by each director and such written consent is filed with
the minutes of proceedings of the Board of Directors.

SECTION 11. COMPENSATION.

Unless restricted by the Charter, the Board of Directors shall have the
authority to fix the compensation of directors.

SECTION 12. REMOVAL OF DIRECTORS.

The stockholders may remove any director or the entire Board of Directors
in the manner provided in the Charter of the Corporation.

SECTION 13. LOSS OF DEPOSIT.

No director shall be liable for any loss which may occur by reason of the
failure of the bank, trust company, savings and loan association or other
institution with whom moneys or stock have been deposited.

SECTION 14. SURETY BONDS.

Unless required by law, no director shall be obligated to give any bond or
surety or other security for the performance of any of his or her duties.

SECTION 15. RELIANCE.

Each director, officer, employee and agent of the Corporation shall, in the
performance of his duties with respect to the Corporation, be fully justified
and protected with regard to any act or failure to act in reliance in good faith
upon the books of account or other records of the Corporation, upon an opinion
of counsel or upon reports made to the Corporation by any of its officers or
employees or by the advisers, accountants, appraisers or other experts or
consultants selected by the Board of Directors or officers of the Corporation,
regardless of whether such counsel or expert may also be a director.

SECTION 16. CERTAIN RIGHTS OF DIRECTORS.

The directors shall have no responsibility to devote their full time to the
affairs of the Corporation. Any director, officer, employee or agent of the
Corporation, in his or her personal capacity or in a capacity as an affiliate,
employee, or agent of any other person, or otherwise, may have business
interests and engage in business activities similar to or in addition to those
of or relating to the Corporation.

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ARTICLE IV

COMMITTEES

SECTION 1. NUMBER, TENURE AND QUALIFICATIONS.

The Board of Directors may appoint from among its members an Executive
Committee, an Audit Committee and other committees, composed of one or more
directors, to serve at the pleasure of the Board of Directors.

SECTION 2. POWERS.

The Board of Directors may delegate to committees appointed under Section 1
of this Article IV any of the powers of the Board of Directors, except the power
to authorize dividends on stock, elect directors, issue stock other than as
provided below, recommend to the stockholders any action which requires
stockholder approval, amend these Bylaws, or approve any merger or share
exchange which does not require stockholder approval. If the Board of Directors
has given general authorization for the issuance of stock providing for or
establishing a method or procedure for determining the maximum number of shares
to be issued, a committee of the Board, in accordance with that general
authorization or any stock option or other plan or program adopted by the Board
of Directors, may authorize or fix the terms of stock subject to classification
or reclassification and the terms on which any stock may be issued, including
all terms and conditions required or permitted to be established or authorized
by the Board of Directors.

SECTION 3. MEETINGS.

At every meeting of any such committee, the presence of a majority of all
the members thereof shall constitute a quorum and the affirmative vote of a
majority of the members present shall be necessary for the adoption by it of any
resolution. In the absence of any member of any such committee, the members
thereof present at any meeting, whether or not they constitute a quorum, may
appoint another director to act in the place of such absent member.

SECTION 4. TELEPHONE MEETINGS.

Members of a committee of the Board of Directors may participate in a
meeting by means of a conference telephone or similar communications equipment
if all persons participating in the meeting can hear each other at the same
time. Participation in a meeting by these means constitutes presence in person
at a meeting.

SECTION 5. INFORMAL ACTION BY COMMITTEES.

Any action required or permitted to be taken at any meeting of a committee
of the Board of Directors may be taken without a meeting if an unanimous consent
in writing to such action is signed by each member of the committee and such
written consent is filled with the minutes of proceedings of such committee.

ARTICLE V

OFFICERS

SECTION 1. GENERAL PROVISIONS.

The officers of the Corporation shall include a Chief Executive Officer, a
President, one or more Vice Presidents, a Secretary and a Treasurer and may
include a Chairman of the Board, a Chief Operating Officer, a Chief Financial
Officer, one or more Assistant Secretaries and one or more Assistant Treasurers.
In addition, the Board of Directors may from time to time appoint such other
officers with such powers and duties as they shall deem necessary or desirable.
The Chairman of the Board shall be a director, other officers need not be
directors. Any two or more offices except president and vice president may be
held by the same person. In its

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discretion, the Board of Directors may leave unfilled any office except that of
President, Treasurer and Secretary.

SECTION 2. ELECTION, TENURE AND REMOVAL OF OFFICERS.

The Board of Directors shall elect the officers. The Board of Directors may
from time to time authorize any committee or officer to appoint assistant and
subordinate officers. Election or appointment of an officer, employee or agent
shall not of itself create contract rights. All officers shall be appointed to
hold their offices, respectively, during the pleasure of the Board. The Board of
Directors (or, as to any assistant or subordinate officer, any committee or
officer authorized by the Board) may remove an officer at any time. The removal
of an officer does not prejudice any of his or her contract rights. The Board of
Directors (or, as to any assistant or subordinate officer, any committee or
officer authorized by the Board) may fill a vacancy which occurs in any office
for the unexpired portion of the term.

SECTION 3. CHIEF EXECUTIVE OFFICER.

The President shall be the Chief Executive Officer of the Corporation
unless the Board of Directors
designates the Chairman of the Board as Chief Executive Officer. Subject to the
control of the Board of Directors and the executive committee (if any), the
Chief Executive Officer shall have general executive charge, management and
control of the properties, business and operations of the Corporation with all
such powers as may be reasonably incident to such responsibilities; he or she
may agree upon and execute all leases, contracts, evidences of indebtedness and
other obligations in the name of the Corporation and may sign all certificates
for shares of capital stock of the Corporation; and shall have such other powers
and duties as designated in accordance with these Bylaws and as from time to
time may be assigned to him or her by the Board of Directors.

SECTION 4. CHIEF OPERATING OFFICER.

The Board of Directors may designate a Chief Operating Officer. The Chief
Operating Officer shall have the responsibilities and duties as set forth by the
Board of Directors or the Chief Executive Officer.

SECTION 5. CHIEF FINANCIAL OFFICER.

The Board of Directors may designate a Chief Financial Officer. The Chief
Financial Officer shall have the responsibilities and duties as set forth by the
Board of Directors or the Chief Executive Officer.

SECTION 6. CHAIRMAN OF THE BOARD.

If elected, the Chairman of the Board shall preside at all meetings of the
stockholders and of the Board of Directors at which he or she shall be present;
and the Chairman shall have such other powers and duties as designated in these
Bylaws and as from time to time may be assigned to the Chairman by the Board of
Directors.

SECTION 7. PRESIDENT.

Unless the Board of Directors otherwise determines, the President shall
have the authority to agree upon and execute all leases, contracts, evidences of
indebtedness authorized deeds, mortgages and other obligations in the name of
the Corporation; and, unless the Board of Directors otherwise determines, he or
she shall, in the absence of the Chairman of the Board or if there be no
Chairman of the Board, preside at all meetings of the stockholders and (should
the President be a director) of the Board of Directors; and the President shall
have such other powers and duties as designated in accordance with these Bylaws
and as from time to time may be assigned to the President by the Board of
Directors.

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SECTION 8. VICE PRESIDENTS.

The Vice Presidents shall perform such duties and have such powers as the
Board of Directors may from time to time prescribe.

SECTION 9. SECRETARY.

The Secretary shall keep the minutes of the meetings of the stockholders,
of the Board of Directors and of any committees, in books provided for that
purpose; he or she shall see that all notices are duly given in accordance with
the provisions of these Bylaws or as required by law; he or she shall be
custodian of the records of the Corporation; he or she may witness any document
on behalf of the Corporation, the execution of which is duly authorized, see
that the corporate seal is affixed where such document is required or desired to
be under its seal, and, when so affixed, may attest the same. In general, he or
she shall perform such other duties customarily performed by a secretary of a
corporation, and shall perform such other duties and have such other powers as
are from time to time assigned to him or her by the Board of Directors, the
Chief Executive Officer, or the President.

SECTION 10. TREASURER.

The Treasurer shall have charge of and be responsible for all funds,
securities, receipts and disbursements of the Corporation, and shall deposit, or
cause to be deposited, in the name of the Corporation, all moneys or other
valuable effects in such banks, trust companies or other depositories as shall,
from time to time, be selected by the Board of Directors; he or she shall render
to the President and to the Board of Directors, whenever requested, an account
of the financial condition of the Corporation. In general, he or she shall
perform such other duties customarily performed by a treasurer of a corporation,
and shall perform such other duties and have such other powers as are from time
to time assigned to him or her by the Board of Directors, the Chief Executive
Officer or the President.

SECTION 11. ASSISTANT SECRETARIES AND ASSISTANT TREASURERS.

Each Assistant Treasurer and Assistant Secretary shall have the usual
powers and duties pertaining to his or her office, together with such other
powers and duties as may be assigned to him or her by the Chief Executive
Officer or the Board of Directors. The Assistant Treasurers shall exercise the
powers of the Treasurer during that officer's absence or inability or refusal to
act. The Assistant Secretaries shall exercise the powers of the Secretary during
that officer's absence or inability or refusal to act.

SECTION 12. SALARIES.

The salaries and other compensation or remuneration, of whatever kind, of
the officers shall be fixed from time to time by the Board of Directors and no
officer shall be prevented from receiving such salary and other compensation or
remuneration by reason of the fact that he or she is also a director of the
Corporation.

ARTICLE VI

FINANCE

SECTION 1. CONTRACTS.

To the extend permitted by applicable law, and except as otherwise
prescribed by the Charter of the Corporation or these Bylaws, the Board of
Directors may authorize any officer, employee or agent to enter into any
contract or to execute and deliver any instrument in the name of and on behalf
of the Corporation. Such authority may be general or confined to specific
instances. Any agreement, deed, mortgage, lease or other document executed by
one or more of the directors or by an authorized person shall be valid and
binding upon the Board of Directors and upon the Corporation when authorized or
ratified by action of the Board of Directors.

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SECTION 2. CHECKS AND DRAFTS.

All checks, drafts or other orders for the payment of money, notes or other
evidences of indebtedness, in the name of the Corporation shall be signed by
such officer or officers, agent or agents of the Corporation and in such manner
as shall from time to time be determined by the Board of Directors.

SECTION 3. DEPOSITS.

All funds of the Corporation not otherwise employed shall be deposited from
time to time to the credit of the Corporation in such banks, trust companies or
other depositories as the Board of Directors may designate.

SECTION 4. ANNUAL STATEMENT OF AFFAIRS.

The President or Chief Accounting Officer shall prepare annually a full and
correct statement of the affairs of the Corporation, to include a balance sheet
and a financial statement of operations for the preceding fiscal year. The
statement of affairs shall be submitted at the annual meeting of the
stockholders and, within 20 days after the meeting, placed on file at the
Corporation's principal office.

ARTICLE VII

STOCK

SECTION 1. CERTIFICATES.

The Corporation's Excess Stock (the "Excess Stock"), shall be issued in
book entry form only, and without certificates. For that purpose, the
Corporation shall cause appropriate records to be maintained of all registered
holders of the Excess Stock and the number of shares of Excess Stock,
respectively, held by each, from time to time.

Except as provided above with respect to the Excess Stock, each stockholder
shall be entitled to a certificate or certificates which shall represent and
certify the number of shares of each class of stock held by him or her in the
Corporation. Each certificate shall be signed by the Chief Executive Officer,
the President or a Vice President and countersigned by the Secretary or an
Assistant Secretary or the Treasurer or an Assistant Treasurer and may be sealed
with the actual seal or a facsimile thereof, if any, of the Corporation. The
signatures may be either manual or facsimile. Certificates shall be
consecutively numbered; and if the Corporation shall, from time to time, issue
several classes or series of stock, each class or series may have its own number
sequence. A certificate is valid and may be issued whether or not an officer who
signed it is still an officer when it is issued. Each stock certificate shall
include on its face the name of the Corporation, the name of the stockholder or
other person to whom it is issued, and the class of stock and number of shares
it represents. Each certificate representing shares which are restricted as to
their transferability or voting powers, which are preferred or limited as to
their dividends or as to their allocable portion of the assets upon liquidation
or which are redeemable at the option of the Corporation, shall have a statement
of such restriction, limitation, preference or redemption provision, or a
summary thereof, plainly stated on the certificate. In lieu of such statement or
summary, the Corporation may set forth upon the face or back of the certificate
a statement that the Corporation will furnish to any stockholder, upon request
made to the Secretary and without charge, a full statement of such information.
A certificate may not be issued until the stock represented by it is fully paid.

SECTION 2. TRANSFERS.

The Board of Directors shall have the power and authority to make such
rules and regulations as it may deem expedient concerning the issue, transfer
and registration of certificates of stock; and may appoint transfer agents and
registrars thereof. The duties of the transfer agent and registrar may be
combined.

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SECTION 3. LOST CERTIFICATE.

The Board of Directors of the Corporation may determine the conditions for
issuing a new stock certificate in place of one which is alleged to have been
lost, stolen or destroyed, or the Board of Directors may delegate such power to
any officer or officers of the Corporation. In their discretion, the Board of
Directors or such officer or officers may require the owner of the certificate
to give a bond, with sufficient surety, to indemnify the Corporation against any
loss or claim arising as a result of the issuance of a new certificate. In their
discretion, the Board of Directors or such officer or officers may refuse to
issue such new certificate save upon the order of some court having jurisdiction
in the premises.

SECTION 4. CLOSING OF TRANSFER BOOKS OR FIXING OF RECORD DATE.

The Board of Directors may set a record date or direct that the stock
transfer books be closed for a stated period for the purpose of making any
proper determination with respect to stockholders, including which stockholders
are entitled to notice of a meeting, vote at a meeting, receive a dividend, or
be allotted other rights. The record date may not be prior to the close of
business on the day the record date is fixed nor, subject to Section 1.06, more
than 90 days before the date on which the action requiring the determination
will be taken; the transfer books may not be closed for a period longer than 20
days; and, in the case of a meeting of stockholders, the record date or the
closing of the transfer books shall be at least ten days before the date of the
meeting.

If no record date is fixed and the stock transfer books are not closed for
the determination of stockholders, (a) the record date for the determination of
stockholders entitled to notice of or to vote at a meeting of stockholders shall
be at the close of business on the day on which the notice of meeting is mailed;
and (b) the record date for the determination of stockholders entitled to
receive payment of a dividend or an allotment of any other rights shall be the
close of business on the day on which the resolution of the directors, declaring
the dividend or allotment of rights, is adopted.

When a determination of stockholders entitled to vote at any meeting of
stockholders has been made as provided in this section, such determination shall
apply to any adjournment thereof, except where the determination has been made
through the closing of the transfer books and the stated period of closing has
expired.

SECTION 5. STOCK LEDGER.

The Corporation shall maintain at its principal office or at the office of
its counsel, accountants or transfer agent, an original or duplicate share
ledger containing the name and address of each stockholder and the number of
shares of each class held by such stockholder. The stock ledger may be in
written form or in any other form which can be converted within a reasonable
time into written form for visual inspection.

SECTION 6. FRACTIONAL STOCK; ISSUANCE OF UNITS.

The Board of Directors may issue fractional stock or provide for the
issuance of scrip, all on such terms and under such conditions as they may
determine. Notwithstanding any other provision of the Charter or these Bylaws,
the Board of Directors may issue units consisting of different securities of the
Corporation. Any security issued in a unit shall have the same characteristics
as any identical securities issued by the Corporation, except that the Board of
Directors may provide that for a specified period securities of the Corporation
issued in such unit may be transferred on the books of the Corporation only in
such unit.

SECTION 7. CERTIFICATION OF BENEFICIAL OWNERS.

The Board of Directors may adopt by resolution a procedure by which a
stockholder of the Corporation may certify in writing to the Corporation that
any shares of stock registered in the name of the stockholder are held for the
account of a specified person other than the stockholder. The resolution shall
set forth the class of stockholders who may certify; the purpose for which the
certification may be made; the form of certification and the information to be
contained in it; if the certification is with respect to a record date or
closing of the

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stock transfer books, the time after the record date or closing of the stock
transfer books within which the certification must be received by the
Corporation; and any other provisions with respect to the procedure which the
Board considers necessary or desirable. On receipt of a certification which
complies with the procedure adopted by the Board in accordance with this Section
7, the person specified in the certification is, for the purpose set forth in
the certification, the holder of record of the specified stock in place of the
stockholder who makes the certification.

ARTICLE VIII

ACCOUNTING YEAR

The Board of Directors shall have the power, from time to time, to fix the
fiscal year of the Corporation by a duly adopted resolution.

ARTICLE IX

DIVIDENDS

SECTION 1. DECLARATION.

Dividends upon the stock of the Corporation may be declared by the Board of
Directors, subject to the provisions of law and the Charter of the Corporation.
Dividends may be paid in cash, property or stock of the Corporation, subject to
the provisions of law and the Charter.

SECTION 2. CONTINGENCIES.

Before payment of any dividends, there may be set aside out of any funds of
the Corporation available for dividends such sum or sums as the Board of
Directors may from time to time, in its absolute discretion, think proper as a
reserve fund for contingencies, for equalizing dividends, for repairing or
maintaining any property of the Corporation or for such other purpose as the
Board of Directors shall determine to be in the best interest of the
Corporation, and the Board of Directors may modify or abolish any such reserve
in the manner in which it was created.

ARTICLE X

INVESTMENT POLICY

Subject to the provisions of the Charter of the Corporation, the Board of
Directors may from time to time adopt, amend, revise or terminate any policy or
policies with respect to investments by the Corporation as it shall deem
appropriate in its sole discretion.

ARTICLE XI

SEAL

SECTION 1. SEAL.

The Board of Directors may authorize the adoption of a seal by the
Corporation. The seal shall have inscribed thereon the name of the Corporation
and the year of its organization. The Board of Directors may authorize one or
more duplicate seals and provide for the custody thereof.

SECTION 2. AFFIXING SEAL.

Whenever the Corporation is required to place its seal to a document, it
shall be sufficient to meet the requirements of any law, rule or regulation
relating to a seal to place the word "(seal)" adjacent to the signature of the
person authorized to execute the document on behalf of the Corporation.

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ARTICLE XII

INDEMNIFICATION

SECTION 1. PROCEDURE.

Any indemnification, or payment of expenses in advance of the final
disposition of any proceeding, shall be made promptly, and in any event within
60 days, upon the written request of the director or officer entitled to seek
indemnification (the "Indemnified Party"). The right to indemnification and
advances hereunder shall be enforceable by the Indemnified Party in any court of
competent jurisdiction, if (i) the Corporation denies such request, in whole or
in part; or (ii) no disposition thereof is made within 60 days. The Indemnified
Party's costs and expenses incurred in connection with successfully establishing
his or her right to indemnification, in whole or in part, in any such action
shall also be reimbursed by the Corporation. It shall be a defense to any action
for advance for expenses that (a) a determination has been made that the facts
then known to those making the determination would preclude indemnification or
(b) the Corporation has not received both (i) an undertaking as required by law
to repay such advances in the event it shall ultimately be determined that the
standard of conduct has not been met and (ii) a written affirmation by the
Indemnified Party of such Indemnified Party's good faith belief that the
standard of conduct necessary for indemnification by the Corporation has been
met.

SECTION 2. EXCLUSIVITY, ETC.

The indemnification and advance of expenses provided by the Charter and
these Bylaws shall not be deemed exclusive of any other rights to which a person
seeking indemnification or advance of expenses may be entitled under any law
(common or statutory), or any agreement, vote of stockholders or disinterested
directors or other provision that is consistent with law, both as to action in
his or her official capacity and as to action in another capacity while holding
office or while employed by or acting as agent for the Corporation, shall
continue in respect of all events occurring while a person was a director or
officer after such person has ceased to be a director or officer, and shall
inure to the benefit of the estate, heirs, executors and administrators of such
person. The Corporation shall not be liable for any payment under this Bylaw in
connection with a claim made by a director or officer to the extent such
director or officer has otherwise actually received payment under an insurance
policy, agreement, vote or otherwise, of the amounts otherwise indemnifiable
hereunder. All rights to indemnification and advance of expenses under the
Charter of the Corporation and hereunder shall be deemed to be a contract
between the Corporation and each director or officer of the Corporation who
serves or served in such capacity at any time while this Bylaw is in effect.
Nothing herein shall prevent the amendment of this Bylaw, provided that no such
amendment shall diminish the rights of any person hereunder with respect to
events occurring or claims made before its adoption or as to claims made after
its adoption in respect of events occurring before its adoption. Any repeal or
modification of this Bylaw shall not in any way diminish any rights to
indemnification or advance of expenses of such director or officer or the
obligations of the Corporation arising hereunder with respect to events
occurring, or claims made, while this Bylaw or any provision hereof is in force.

SECTION 3. SEVERABILITY; DEFINITIONS.

The invalidity or unenforceability of any provision of this Article XII
shall not affect the validity or enforceability of any other provision hereof.
The phrase "this Bylaw" in this Article XII means this Article XII in its
entirety.

ARTICLE XIII

WAIVER OF NOTICE

Whenever any notice is required to be given pursuant to the Charter of the
Corporation or these Bylaws or pursuant to applicable law, a waiver thereof in
writing, signed by the person or persons entitled to such notice, whether before
or after the time stated herein, shall be deemed equivalent to the giving of
such notice.

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Neither the business to be transacted at nor the purpose of any meeting need be
set forth in the waiver of notice, unless specifically required by statute. The
attendance of any person at any meeting shall constitute a waiver of notice of
such meeting, except where such person attends a meeting for the express purpose
of objecting to the transaction of any business on the ground that the meeting
is not lawfully called or convened.

ARTICLE XIV

SUNDRY PROVISIONS

SECTION 1. BOOKS AND RECORDS.

The Corporation shall keep correct and complete books and records of its
accounts and transactions and minutes of the proceedings of its stockholders and
Board of Directors and of any executive or other committee when exercising any
of the powers of the Board of Directors. The books and records of the
Corporation may be in written form or in any other form which can be converted
within a reasonable time into written form for visual inspection. Minutes shall
be recorded in written form but may be maintained in the form of a reproduction.
The original or a certified copy of these Bylaws shall be kept at the principal
office of the Corporation.

SECTION 2. BONDS.

The Board of Directors may require any officer, agent or employee of the
Corporation to give a bond to the Corporation, conditioned upon the faithful
discharge of his or her duties, with one or more sureties and in such amount as
may be satisfactory to the Board of Directors.

SECTION 3. VOTING UPON SHARES IN OTHER CORPORATIONS.

Stock of other corporations, associations or trusts, registered in the name
of the Corporation, may be voted by the President, a Vice-President or a proxy
appointed by either of them. The Board of Directors, however, may by resolution
appoint some other person to vote such shares, in which case such person shall
be entitled to vote such shares upon the production of a certified copy of such
resolution.

SECTION 4. MAIL.

Any notice or other document which is required by these Bylaws to be mailed
shall be deposited in the United States mails, postage prepaid.

SECTION 5. EXECUTION OF DOCUMENTS.

A person who holds more than one office in the Corporation may not act in
more than one capacity to execute, acknowledge or verify an instrument required
by law to be executed, acknowledged or verified by more than one officer.

ARTICLE XV

AMENDMENT OF BYLAWS

In accordance with the Charter, these Bylaws may be repealed, altered,
amended or rescinded (a) by the stockholders of the Corporation (considered for
this purpose as one class) by the affirmative vote of not less than 80% of all
of the votes entitled to be cast at any meeting of stockholders called for that
purpose (provided that notice of such proposed repeal, alteration, amendment or
rescission is included in the notice of such meeting) or (b) by vote of
two-thirds of the Board of Directors at a meeting held in accordance with the
provisions of these Bylaws.

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PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS

The Corporation's Articles of Incorporation contain a provision authorizing
the Corporation to indemnify and hold harmless, to the fullest extent permitted
by Maryland law, directors and officers involved in an action, suit or
proceeding.

Section 2-418 of the MGCL (the "Indemnification Statute"), the law of the
state in which the Corporation is organized, empowers a corporation, subject to
certain limitations, to indemnify its officers and directors against expenses,
including attorneys' fees, judgments, penalties, fines, settlements and
expenses, actually and reasonably incurred by them in any suit or proceeding to
which they are parties unless the act or omission of the director was material
to the matter giving rise to the proceeding and was committed in bad faith, or
was the result of active and deliberate dishonesty, or the director received an
improper personal benefit or, with respect to a criminal action or proceeding,
the director had no reasonable cause to believe their conduct was unlawful.

The Corporation has entered into an indemnification agreement (the
"Indemnification Agreement") with each of its directors and officers, and the
Board of Directors has authorized the Corporation to enter into an
Indemnification Agreement with each of the future directors and officers of the
Corporation. The Indemnification Statute permits a corporation to indemnify its
directors and officers. However, the protection that is specifically afforded by
the Indemnification Statute authorizes other arrangements for indemnification of
directors and officers, including insurance. The Board of Directors has approved
and the sole shareholder has ratified the Indemnification Agreement, which is
intended to provide indemnification to the maximum extent allowable by, or not
in violation of, or offensive to, any law of the State of Maryland.

The Indemnification Agreement provides that the Corporation shall indemnify
a director or officer who is a party to the agreement (the "Indemnitee") if he
or she was or is a party to or otherwise involved in any proceeding by reason of
the fact that he or she was or is a director or officer of the Corporation, or
was or is serving at its request in a certain capacity of another entity,
against losses incurred in connection with the defense or settlement of such
proceeding. This indemnification shall be provided to the fullest extent
permitted by Maryland law. Pursuant to the Indemnification Statute,
indemnification is not available to the Indemnitee who pays any amount in
settlement of a proceeding without the Corporation's written consent.

It is the position of the Securities and Exchange Commission (the "SEC"),
that indemnification of directors and officers for liabilities arising under the
Securities Act of 1933, as amended (the "Securities Act"), is against public
policy and is unenforceable pursuant to Section 14 of the Securities Act.

ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

The following exhibits are filed herewith (or incorporated by reference):

<TABLE>
<C> <S> <C>
(2) (a) Agreement and Plan of Merger between the Trust and the Corporation dated as of
, 1997, attached to the Proxy Statement/Prospectus as Appendix A.
The Trust agrees to furnish supplementally to the SEC upon request a copy of
any omitted schedule or exhibit to the Merger Agreement.

(b) The Trust's Annual Report on Form 10-K for the year ended December 31, 1996
(Commission file No. 1-7094) (incorporated by reference).

(c) Amendment No. 2 to the Trust's Registration Statement on Form S-2 (No.
33-70574) filed January 20, 1994 (incorporated by reference).

(3) (a) The Trust's Restated Declaration of Trust (incorporated by reference to
Amendment No. 1 to the Trust's Registration Statement on Form S-4 (No.
33-65337) filed February 27, 1996).

(b) The Trust's Trustees' Regulations (incorporated by reference to Exhibit 3 of
the Trust's 1980 Annual Report on Form 10-K).
</TABLE>

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<TABLE>
<C> <S> <C>
(c) Amendment to the Trust's Trustees' Regulations (incorporated by reference to
Exhibit 3 of the Trust's 1980 Annual Report on Form 10-K).

(d) Amendment to the Trust's Trustees' Regulations (incorporated by reference to
Exhibit 3(d) of the Trust's 1983 Annual Report on Form 10-K).

(5) Opinion of Jaeckle Fleischmann & Mugel, LLP regarding legality of shares being
registered, to be filed by amendment.

(8) (a) Opinion of Jaeckle Fleischmann & Mugel, LLP, as to federal income tax
consequences of the Merger, to be filed by amendment.

(10) (a) Amendment and Restatement of the Expense-Sharing Agreement among Congress
Street Properties, Inc., Eastover Corporation, the Trust and The Parkway
Company dated as of September 1, 1990 (incorporated by reference to Exhibit
10(a) of the Trust's 1991 Annual Report on Form 10-K).

(b) First Amendment to Amendment and Restatement of Expense-Sharing Agreement among
Congress Street Properties, Inc., Eastover Corporation, the Trust and The
Parkway Company dated as of October 1, 1993 (incorporated by reference to
Exhibit 10B of the Trust's Registration Statement on Form S-2 (No. 33-70574)
filed October 19, 1993).

(c) The Trust's 1989 Incentive Plan (incorporated by reference to Exhibit A of the
Trust's proxy statement dated April 26, 1991).

(d) The Trust's 1991 Trustees Stock Option Plan (incorporated by reference to
Exhibit B of the Trust's proxy statement dated April 26, 1991).

(e) The Trust's 1994 Management Incentive Plan (incorporated by reference to
Exhibit A of the Trust's proxy statement dated November 11, 1994).

(11) Statement regarding computation of earnings per share (incorporated by
reference to Exhibit (11) of the Trust's 1993 Annual Report on Form 10-K).

(13) (a) The Trust's Annual Report to Shareholders for the year ended December 31, 1996
(Commission file No. 1-7094) (incorporated by reference).

(21) Subsidiaries of the Trust (incorporated by reference to Exhibit (22) of
Amendment No. 1 to the Trust's Registration Statement filed on Form S-4 (No.
33-65337) filed February 27, 1996).

(23) (a) Consent of KPMG Peat Marwick LLP, filed herewith.

(b) Consent of Jaeckle Fleischmann & Mugel, LLP contained in Exhibit 5 hereto.

(24) Powers of Attorney, filed herewith at page II-4.

(99) (a) Agreement of the Trust to furnish the SEC with copies of instruments defining
the rights of holders of long-term debt (incorporated by reference to Exhibit
28(e) of the Trust's 1986 Annual Report on Form 10-K).

(b) The Trust's form of proxy, filed herewith.
</TABLE>

ITEM 22. UNDERTAKINGS

The undersigned registrant, hereby undertakes:

(1) To file, during any period during which offers or sales are being
made, a post-effective amendment to this Registration Statement:

(a) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;

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(b) To reflect in the prospectus any facts or events arising after
the effective date of the Registration Statement (or the most
recent post-effective amendment thereof) which, individually or
in the aggregate, represent a fundamental change in the
information set forth in the Registration Statement;

(c) To include any material information with respect to the plan of
distribution not previously disclosed in the Registration
Statement or any material change to such information in the
Registration Statement.

(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each post-effective amendment shall be deemed to be
a new registration statement relating to the securities offered therein,
and the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.

(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.

(4) For purposes of determining any liability under the Securities Act
of 1933, each filing of the registrant's annual report pursuant to section
13(a) or section 15(d) of the Securities Exchange Act of 1934 that is
incorporated by reference in the registration statement shall be deemed to
be a new registration statement relating to the securities offered therein,
and the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.

(5) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to trustees, directors, officers
and controlling persons of the registrant pursuant to the foregoing
provisions, or otherwise, the registrant has been advised that in the
opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Securities Act of 1933, and, is,
therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of
expenses incurred or paid by a trustee, director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such trustee, director, officer or controlling
person in connection with the securities being registered, the registrant
will, unless in the opinion of its counsel the matter has been settled by
controlling precedent, submit to a court of appropriate jurisdiction the
question of whether such indemnification by it is against public policy as
expressed in the Securities Act of 1933 and will be governed by the final
adjudication of this issue.

(6) To respond to requests for information that is incorporated by
reference into the prospectus pursuant to Items 4, 10(b), 11 or 13 of this
Form, within one business day of receipt of such request, and to send the
incorporated documents by first class mail or other equally prompt means.
This includes information contained in documents filed subsequent to the
effective date of the registration statement through the date of responding
to the request.

(7) To supply by means of a post-effective amendment all information
concerning a transaction, and the company being acquired involved therein,
that was not the subject of and included in the registration statement when
it became effective.

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SIGNATURES

Pursuant to the requirements of the Securities Act, the registrant has duly
caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Jackson, State of
Mississippi, on April 1, 1997.

EASTGROUP PROPERTIES II, INC.

By: /s/ DAVID H. HOSTER II
------------------------------------
David H. Hoster II, President

POWER OF ATTORNEY

Each person whose signature appears below hereby constitutes and appoints
each of David H. Hoster II and N. Keith McKey his or her true and lawful
attorney-in-fact and agent, each with full power of substitution and revocation,
for him or her and in his or her name, place and stead, in any and all
capacities, to sign any and all amendments (including post-effective amendments)
to this Registration Statement, and to file the same with all exhibits thereto,
and other documents in connection therewith, with the Securities and Exchange
Commission, granting unto each attorney-in-fact and agent, full power and
authority to do and perform each such and every act and thing requisite and
necessary to be done, as fully to all intents and purposes as such person might
or could do in person, hereby ratifying and confirming all that said
attorney-in-fact and agent or his or her substitute or substitutes, may lawfully
do or cause to be done by virtue hereof.

Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement and the foregoing Powers of Attorney have been signed by
the following persons in the capacities indicated and on the dates indicated.

<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------ ---------------------------------------------------------------
<S> <C> <C>

/s/ LELAND R. SPEED Chairman of the Board and Chief April 1, 1997
- ------------------------------ Executive Officer (Principal
Leland R. Speed Executive Officer)

/s/ DAVID H. HOSTER II President and Director April 1, 1997
- ------------------------------
David H. Hoster II

/s/ N. KEITH MCKEY Executive Vice President, Chief April 1, 1997
- ------------------------------ Financial Officer and Secretary
N. Keith McKey

/s/ DIANE W. HAYMAN Controller (Principal Accounting April 1, 1997
- ------------------------------ Officer)
Diane W. Hayman

/s/ ALEXANDER G. ANAGNOS Director April 1, 1997
- ------------------------------
Alexander G. Anagnos

/s/ H.C. BAILEY, JR. Director April 1, 1997
- ------------------------------
H.C. Bailey, Jr.

/s/ HAROLD B. JUDELL Director April 1, 1997
- ------------------------------
Harold B. Judell

/s/ DAVID M. OSNOS Director April 1, 1997
- ------------------------------
David M. Osnos

/s/ JOHN N. PALMER Director April 1, 1997
- ------------------------------
John N. Palmer
</TABLE>

II-4

<PAGE> 1
Exhibit 23(a)

Independent Auditors' Consent
-----------------------------

We consent to the use of our report incorporated herein by reference and to the
reference to our firm under the heading "Experts" in the prospectus.

KPMG Peat Marwick LLP

Jackson, Mississippi
April 4, 1997

<PAGE> 1
Exhibit 28(b)

EASTGROUP PROPERTIES
300 One Jackson Place
188 East Capitol Street
Jackson, Mississippi 39201

THIS PROXY IS SOLICITED ON BEHALF
OF THE BOARD OF TRUSTEES

The undersigned hereby appoints DAVID H. HOSTER II and N. KEITH McKEY, or either
of them, Proxies for the undersigned, each with full power of substitution, and
hereby authorizes them to represent and to vote all shares of beneficial
interest, $1.00 par value per share, of EastGroup Properties (the "Trust"),
which the undersigned would be entitled to vote at the Annual Meeting of
Shareholders to be held at the Trust's offices, 300 One Jackson Place, 188 East
Capitol Street, Jackson, Mississippi, on Thursday, June 5, 1997, at 9:00 a.m.,
Jackson time, or any adjournment or postponement thereof, and directs that the
shares represented by this Proxy shall be voted as indicated below:

1. REORGANIZATION

Proposal to reorganize the Trust from a Maryland real estate
investment trust into a Maryland business corporation by means of a
merger (the "Merger") of the Trust with and into a newly formed
Maryland business corporation named EastGroup Properties II, Inc.,
which is a wholly-owned subsidiary of the Trust; pursuant to the
reorganization and simultaneously with the Merger, the Trust's name
will change to EastGroup Properties, Inc.

[ ] FOR [ ] AGAINST [ ] ABSTAIN

2. ELECTION OF TRUSTEES

[ ] FOR all nominees listed below [ ] WITHHOLD
(EXCEPT AS MARKED TO THE CONTRARY AUTHORITY
BELOW) to vote for all nominees
listed below

INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE,
STRIKE A LINE THROUGH HIS NAME IN THE LIST BELOW:

Alexander G. Anagnos; H. C. Bailey, Jr.; David H. Hoster II; Harold B. Judell;
David M. Osnos; John N. Palmer; and Leland R. Speed.

(CONTINUED AND TO BE SIGNED ON THE REVERSE SIDE)
(FRONT)

<PAGE> 2

3. In their discretion, the Proxies are authorized to vote upon such other
business as may properly come before the meeting or any adjournments
thereof.

THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED HEREIN
BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE
VOTED FOR THE MATTERS INDICATED IN 1 AND 2 ABOVE AND WILL BE VOTED IN THE
DISCRETION OF THE PROXIES NAMED HEREIN WITH RESPECT TO ANY MATTER REFERRED TO IN
3 ABOVE. NOTE: IN REGARD TO THE MATTER INDICATED IN 2 ABOVE, THE HOLDERS OF THIS
PROXY RESERVE THE RIGHT TO CUMULATE THEIR VOTES AND DISTRIBUTE THEM AMONG THE
NOMINEES AS DIRECTED BY THE BOARD OF TRUSTEES OR, IF NOT SO DIRECTED, IN THEIR
DISCRETION SO AS TO ELECT AS MANY OF THE NOMINEES FOR TRUSTEE NAMED IN THE
ACCOMPANYING PROXY STATEMENT/PROSPECTUS AS POSSIBLE. YOU ARE ENCOURAGED TO
SPECIFY YOUR CHOICES BY MARKING THE APPROPRIATE BOXES, BUT YOU NEED NOT MARK ANY
BOXES IF YOU WISH TO VOTE IN ACCORDANCE WITH THE BOARD OF TRUSTEES'
RECOMMENDATIONS. THE PROXIES CANNOT VOTE YOUR SHARES UNLESS YOU SIGN AND RETURN
THIS CARD.

Dated:_________________________, 1997
PLEASE SIGN EXACTLY AS NAME(S) APPEAR
ON STOCK CERTIFICATE(S). A corporation
is requested to sign its name by its
President or other authorized officer,
with the office held so designated. A
partnership should sign in the
partnership name by an authorized
person. Executors, trustees,
administrators, etc. are requested to
indicate the capacity in which they
are signing. JOINT TENANTS SHOULD BOTH
SIGN.

-------------------------------------

-------------------------------------
(Signature(s) of Shareholder(s))

PLEASE SIGN, DATE AND RETURN THIS PROXY CARD
IN THE ACCOMPANYING POSTAGE-PAID ENVELOPE.

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