0000049600 egp:HoustonMember egp:BeltwayCrossingVMember stpr:TX egp:IndustrialMember 2019-01-01 2019-12-31
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON,Washington, D.C. 20549
__________________________
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 2017 COMMISSION FILE NUMBER 1-07094
EASTGROUP PROPERTIES, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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MARYLAND | | | | |
| ☒ | | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | | |
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| | FOR THE FISCAL YEAR ENDED | | |
| | December 31, 2019 | | |
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| ☐ | | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | | |
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| | For the transition period from to | | �� |
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| | COMMISSION FILE NUMBER | | |
| | 1-07094 | | |
EASTGROUP PROPERTIES, INC.
(Exact Name of Registrant as Specified in its Charter)
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| Maryland | | 13-2711135 |
| (State or other jurisdiction | (I.R.S. Employer |
| of incorporation or organization) | | (I.R.S. Employer Identification No.) |
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400 W PARKWAY PLACEParkway Place | | |
SUITESuite 100 | | |
RIDGELAND, MISSISSIPPIRidgeland, | Mississippi | | 39157 |
| (Address of principal executive offices) | | (Zip code) |
Registrant’s telephone number: (601) 354-3555
Securities registered pursuant to Section 12(b) of the Act:
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Registrant’s telephone number: (601) 354-3555 | | |
| Title of each class | Trading symbol(s) | Name of each exchange on which registered |
| Common stock, $0.0001 par value per share | EGP | New York Stock Exchange |
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
SHARES OF COMMON STOCK, $.0001 PAR VALUE,Securities registered pursuant to Section 12(g) of the Act: None
NEW YORK STOCK EXCHANGE
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: NONE
Indicate by check mark if the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. YES (x) NO ( )Yes ☒ No ☐
Indicate by check mark if the Registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act. YES ( ) NO (x)Yes ☐ No ☒
Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES (x) NO ( )Yes ☐ No ☒
Indicate by check mark whether the registrantRegistrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). YES (x) NO ( )Yes ☒ No ☐
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. (x)
Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.
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Large Accelerated Filer (x) | ☒ | Accelerated Filer ( ) | ☐ | Non-accelerated Filer ( ) | ☐ |
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Smaller Reporting Company ( ) | ☐ | Emerging Growth Company ( ) | ☐ | | |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ( )☐
Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). YES ( ) NO (x)Act. Yes ☐ No ☒
State the aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was last sold, or the average bid and asked price of such common equity, as of June 30, 2017,28, 2019, the last business day of the Registrant's most recently completed second fiscal quarter: $2,789,236,000.$4,258,843,000.
The number of shares of common stock, $.0001$0.0001 par value, outstanding as of February 13, 201812, 2020 was 34,738,860.38,901,637.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrant’s Proxy Statement for the 2018relating to its 2020 Annual Meeting of Stockholders are incorporated by reference into Part III. The Registrant intends to file such Proxy Statement with the Securities and Exchange Commission not later than 120 days after the end of the fiscal year ended December 31, 2019.
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| PART I | | |
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| PART II | | |
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| PART III | | |
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| PART IV | | |
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FORWARD-LOOKING STATEMENTS
This Annual Report on Form 10-K includes “forward-looking statements” (within the meaning of the federal securities laws, Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Exchange Act of 1934, as amended (the “Exchange Act”)) that reflect EastGroup Properties, Inc.'s (the "Company" or "EastGroup") expectations and projections about the Company’s future results, performance, prospects, plans and opportunities. The Company has attempted to identify these forward-looking statements by the use of words such as “may,” “will,” “seek,” “expects,” “anticipates,” “believes,” “targets,” “intends,” “should,” “estimates,” “could,” “continue,” “assume,” “projects,” "goals," “plans” or variations of such words and similar expressions. These forward-looking statements are based on information currently available to the Company and are subject to a number of known and unknown assumptions, risks, uncertainties and other factors that may cause the Company’s actual results, performance, plans or achievements to be materially different from any future results, performance or achievements expressed or implied by these forward-looking statements. These factors include, among other things, those discussed below. The Company intends for all such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in Section 27A of the Securities Act and Section 21E of the Exchange Act, as applicable by law. The Company does not undertake publicly to update or revise any forward-looking statements, whether as a result of changes in underlying assumptions or new information, future events or otherwise, except as may be required to satisfy the Company’s obligations under federal securities laws.
The following are some, but not all, of the risks, uncertainties and other factors that could cause the Company’s actual results to differ materially from those presented in the Company’s forward-looking statements (the Company refers to itself as "we," "us" or "our" in the following):
international, national, regional and local economic conditions;
the general level of interest rates and ability to raise equity capital on attractive terms;
financing risks, including the risks that our cash flows from operations may be insufficient to meet required payments of principal and interest and we may be unable to refinance our existing debt upon maturity or obtain new financing on attractive terms or at all;
the competitive environment in which the Company operates;
fluctuations of occupancy or rental rates;
potential defaults (including bankruptcies or insolvency) on or non-renewal of leases by tenants;
potential changes in the law or governmental regulations and interpretations of those laws and regulations, including changes in real estate laws or real estate investment trust (“REIT”) or corporate income tax laws, and potential increases in real property tax rates;
our ability to maintain our qualification as a REIT;
acquisition and development risks, including failure of such acquisitions and development projects to perform in accordance with projections;
natural disasters such as fires, floods, tornadoes, hurricanes and earthquakes;
the terms of governmental regulations that affect us and interpretations of those regulations, including the costs of compliance with those regulations, changes in real estate and zoning laws and increases in real property tax rates;
credit risk in the event of non-performance by the counterparties to the interest rate swaps;
lack of or insufficient amounts of insurance;
litigation, including costs associated with prosecuting or defending claims and any adverse outcomes;
our ability to retain key personnel;
the consequences of future terrorist attacks or civil unrest; and
environmental liabilities, including costs, fines or penalties that may be incurred due to necessary remediation of contamination of properties presently owned or previously owned by us.
All forward-looking statements should be read in light of the risks identified in Part I, Item 1A. Risk Factors within this Annual Report on Form 10-K for the year ended December 31, 2019.
PART I
ITEM 1. BUSINESS.
OrganizationThe Company
EastGroup Properties, Inc. (the Company, which we refer to in this Annual Report as the "Company" or EastGroup)"EastGroup," is an internally-managed equity real estate investment trust (REIT)("REIT") first organized in 1969. EastGroup is focused on the development, acquisition and operation of industrial properties in major Sunbelt markets throughout the United States, primarily in the states of Florida, Texas, Arizona, California and North Carolina. EastGroup’s strategy for growth is based on ownership of premier distribution facilities generally clustered near major transportation features in supply-constrained submarkets. EastGroup is a Maryland corporation, and its common stock is publicly traded on the New York Stock Exchange (“NYSE”) under the symbol “EGP.” The Company has elected to be taxed and intends to continue to qualify as a REIT under Sections 856-860 of the Internal Revenue Code of 1986, as amended (the Code), as amended."Internal Revenue Code").
Available Information
The Company maintains a website at eastgroup.net.www.eastgroup.net. The Company posts its annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) of the Securities Exchange Act of 1934, as amended, as soon as reasonably practicable after it electronically files or furnishes such materials to the Securities and Exchange Commission (SEC)(the "SEC"). In addition, the Company's website includes items related to corporate governance matters, including, among other things, the Company's corporate governance guidelines, charters of various committees of the Board of Directors, and the Company's code of business conduct and ethics applicable to all employees, officers and directors. The Company intends to disclose on its website any amendment to, or waiver of, any provision of this code of business conduct and ethics applicable to the Company's directors and executive officers that would otherwise be required to be disclosed under the rules of the SEC or the New York Stock Exchange. Copies of these reports and corporate governance documents may be obtained, free of charge, from the Company's website. Any shareholder also may obtain copies of these documents, free of charge, by sending a request in writing to: Investor Relations, EastGroup Properties, Inc., 400 W. Parkway Place, Suite 100, Ridgeland, MS 39157.
The SEC also maintains a website that contains reports, proxy and information statements, and other information we file with the SEC at www.sec.gov.
Administration
EastGroup maintains its principal executive office and headquarters in Ridgeland, Mississippi. The Company also has regional offices in Orlando,Atlanta, Dallas and Los Angeles and asset management offices in Charlotte,Orlando, Miami, Houston and Phoenix. EastGroup has property management offices in Jacksonville, Tampa, Ft. LauderdaleCharlotte and San Antonio. Offices at these locations allow the Company to provide property management services to all of its Florida, Texas (except Austin and El Paso), Arizona Mississippi and North Carolina properties, which together account for 78% of the Company’s total portfolio on a square foot basis. In addition, the Company currently provides property administration (accounting of operations) for its entire portfolio. The regional offices in Florida,Georgia, Texas and California provide oversight of the Company's development and value-add program. As of February 13, 2018,12, 2020, EastGroup had 6975 full-time employees and 2 part-time employees.
OperationsBusiness Overview
EastGroup's goal is to maximize shareholder value by being a leading provider in its markets of functional, flexible and quality business distribution space for location sensitive customers primarily(primarily in the 15,000 to 50,00070,000 square foot range.range). The Company develops, acquires and operates distribution facilities, the majority of which are clustered around major transportation features in supply-constrained submarkets in major Sunbelt regions. The Company's core markets are in the states of Florida, Texas, Arizona, California and North Carolina. Over 99%
As of December 31, 2019, EastGroup owned 399 industrial properties and one office building in 11 states. As of that same date, the Company's portfolio, including development projects and value-add properties in lease-up and under construction, included approximately 45.4 million square feet consisting of 361 business distribution buildings containing 40.6 million square feet, 13 bulk distribution buildings containing 3.5 million square feet, and 26 business service buildings containing 1.3 million square feet. As of December 31, 2019, EastGroup's operating portfolio was 97.6% leased to approximately 1,500 tenants, with no single tenant accounting for more than approximately 1.0% of the Company’s revenue consists of rentalCompany's income from real estate properties.operations. As of February 12, 2020, the properties which were in the development and value-add program at year-end were approximately 41% leased.
During 2017,2019, EastGroup increased its holdings in real estate properties through its acquisition and development programs. The Company purchased 840,0001,774,000 square feet of operating and value-add properties and 90188 acres of land for a total of $82$269 million. Also during 2017,2019, the Company began construction of 1218 development projects containing 1.32.7 million square feet and
transferred 1213 projects, which contain 2.21.8 million square feet and had costs of $160.1$156.7 million at the date of transfer, from its development and value-add program to real estate properties.
Typically, theDuring 2019, EastGroup completed dispositions including 617,000 square feet of operating properties and 0.2 acres of land, which generated gross proceeds of $68.7 million.
The Company typically initially funds its development and acquisition programs through its $335$395 million unsecured bank credit facilities.facilities (as discussed under the heading Liquidity and Capital Resources in Part II, Item 7 of this Annual Report on Form 10-K). As market conditions permit, EastGroup issues equity and/or employs fixed-ratefixed rate debt, including variable-ratevariable rate debt that has been swapped to an effectively fixed rate through the use of interest rate swaps, to replace short-term bank borrowings. In May 2017,June 2019, Moody's Investors Service affirmed the Company's issuer rating of Baa2 with a stable outlook. A security rating is not a recommendation to buy, sell, or hold securities and may be subject to revision or withdrawal at any time by the assigning rating agency. Each rating should be evaluated independently of any other rating. For future debt issuances, the Company intends to issue primarily unsecured fixed-ratefixed rate debt, including variable-ratevariable rate debt that has been swapped to an effectively fixed rate through the use of interest rate swaps. The Company may also access the public debt market in the future as a means to raise capital.
EastGroup holds its properties as long-term investments but may determine to sell certain properties that no longer meet its investment criteria. The Company may provide financing to a prospective purchaser in connection with such sales of property if market conditions require. In addition, the Company may provide financing to a partner or co-owner in connection with an acquisition of real estate in certain situations.
Subject to the requirements necessary to maintain EastGroup’s qualifications as a REIT, the Company may acquire securities of entities engaged in real estate activities or securities of other issuers, including for the purpose of exercising control over those entities.
The Company intends to continue to qualify as a REIT under the Code. To maintain its status as a REIT, the Company is required to distribute at least 90% of its ordinary taxable income to its stockholders. If the Company has a capital gain, it has the option of (i) deferring recognition of the capital gain through a tax-deferred exchange, (ii) declaring and paying a capital gain dividend on any recognized net capital gain resulting in no corporate level tax, or (iii) retaining and paying corporate income tax on its net long-term capital gain, with shareholders reporting their proportional share of the undistributed long-term capital gain and receiving a credit or refund of their share of the tax paid by the Company.
EastGroup has no present intention of acting as an underwriter of offerings of securities of other issuers. The strategies and policies set forth above were determined and are subject to review by EastGroup's Board of Directors, which may change such strategies or policies based upon its evaluation of the state of the real estate market, the performance of EastGroup's assets, capital and credit market conditions, and other relevant factors. EastGroup provides annual reports to its stockholders, which contain financial statements audited by the Company’s independent registered public accounting firm.
Competition
The market for the leasing of industrial real estate is competitive. We experience competition for tenants from existing properties in proximity to our buildings as well as from new development. Institutional investors, other REITs and local real estate operators generally own such properties; however, no single competitor or small group of competitors is dominant in our current markets. Even so, as a result of competition, we may have to provide concessions, incur charges for tenant improvements or offer other inducements, all of which may have an adverse impact on our results of operations. The market for the acquisition of industrial real estate is also competitive. We compete for real property investments with other REITs and institutional investors such as pension funds and their advisors, private real estate investment funds, insurance company investment accounts, private investment companies, individuals and other entities engaged in real estate investment activities.
Environmental Property Matters
Under various federal, state and local laws, ordinances and regulations, an owner of real estate may be liable for the costs of removal or remediation of certain hazardous or toxic substances on or in such property. Many such laws impose liability without regard to whether the owner knows of, or was responsible for, the presence of such hazardous or toxic substances. The presence of such substances, or the failure to properly remediate such substances, may adversely affect the owner’s ability to sell or rent such property or to use such property as collateral in its borrowings. EastGroup’s properties have generally been subjectedsubject to Phase I Environmental Site Assessments (ESAs)("ESAs") by independent environmental consultants and, as necessary, have been subjected to Phase II ESAs. These reports have not revealed any potential significant environmental liability. Management of EastGroupOur management is not aware of any environmental liability that would have a material adverse effect on EastGroup’s business, assets, financial position or results of operations. See "Item 1A. Risk Factors" in this Annual Report for additional information.
Environmental, Social and Governance ("ESG") Matters
At EastGroup, protecting the environment is important to the Company's employees, families, customers and communities. The Company strives to support sustainability through its commitment to build high performance and environmentally responsible properties. Through EastGroup’s continued efforts, numerous properties have been Leadership in Energy and Environmental Design ("LEED") and ENERGY STAR certified, and all of the Company's development properties are built to LEED certifiable standards whether or not the actual certification is pursued. The Company believes its continued commitment to pursue
environmentally conscious performance and standards through sustainability best practices creates long-term value for the environment, the Company and shareholders.
In addition, EastGroup and its employees are committed to social responsibility and participate in various charitable service organizations in the Company's business communities. EastGroup's employees volunteer for numerous charities, and the Company coordinates volunteer opportunities for its employees and allows time away from work in order to encourage participation and increase social engagement in all of the communities in which we operate. The Company offers a comprehensive employee benefits program and socially-responsible policies and practices in order to attract, develop and advance a qualified and diverse workforce that will strengthen the Company and its culture.
EastGroup operates on the premise that good corporate governance is fundamental to the Company's business and core values, and the Company believes its corporate governance policies and practices are well aligned with the interests of shareholders. The honesty and integrity of the Company's management and Board of Directors are critical assets in maintaining the trust of the Company's investors, employees, customers, vendors and the communities in which the Company operates.
ITEM 1A. RISK FACTORS.
In addition to the other information contained or incorporated by reference in this document, readers should carefully consider the following risk factors. Any of these risks or the occurrence of any one or more of the uncertainties described below could have a material adverse effect on the Company's financial condition and the performance of its business. Additional risks and uncertainties not presently known to the Company or that the Company currently deems immaterial also may impair its business operations. The Company refers to itself as "we", "us" or "our" in the following risk factors.
Real Estate Industry Risks
We face risks associated with local real estate conditions in areas where we own properties. We may be adversely affected by general economic conditions and local real estate conditions. For example, an oversupply of industrial properties in a local area or a decline in the attractiveness of our properties to tenants would have a negative effect on us. Other factors that may affect general economic conditions or local real estate conditions include:
population and demographic trends;
employment and personal income trends;
income and other tax laws;
changes in interest rates and availability and costs of financing;
increased operating costs, including insurance premiums, utilities and real estate taxes, due to inflation and other factors which may not necessarily be offset by increased rents;
changes in the price of oil; and
construction costs.
We may be unable to compete for properties and tenants. The real estate business is highly competitive. We compete for interests in properties with other real estate investors and purchasers, some of whom have greater financial resources, revenues and geographical diversity than we have. Furthermore, we compete for tenants with other property owners. All of our industrial properties are subject to significant local competition. We also compete with a wide variety of institutions and other investors for capital funds necessary to support our investment activities and asset growth.
We are subject to significant regulation that constrains our activities. Local zoning and land use laws, environmental statutes and other governmental requirements restrict our expansion, rehabilitation and reconstruction activities. These regulations may prevent
us from taking advantage of economic opportunities. Legislation such as the Americans with Disabilities Act may require us to modify our properties, and noncompliance could result in the imposition of fines or an award of damages to private litigants. Future legislation may impose additional requirements. We cannot predict what requirements may be enacted or what changes may be implemented to existing legislation.
Risks Associated with Our Properties
We may be unable to lease space. space on favorable terms or at all. When a lease expires, a tenant may elect not to renew it. We may not be able to re-lease the property on similarfavorable terms, if we are able to re-lease the property at all. The terms of renewal or re-lease (including the cost of required renovations and/or concessions to tenants) may be less favorable to us than the prior lease. We also routinely develop properties with no pre-leasing. If we are unable to lease all or a substantial portion of our properties, or if the rental rates upon such leasing are significantly lower than expected rates, our cash generated before debt repayments and capital expenditures and our ability to make expected distributions to stockholders may be adversely affected.
We have been and may continue to be affected negatively by tenant bankruptcies and leasing delays. At any time, a tenant may experience a downturn in its business that may weaken its financial condition. Similarly, a general decline in the economy may result in a decline in the demand for space at our industrial properties. As a result, our tenants may delay lease commencement, fail to make rental payments when due, or declare bankruptcy. Any such event could result in the termination of that tenant’s lease and losses to us, and distributionsfunds available for distribution to investors may decrease. We receive a substantial portion of our income as rents under mid-term and long-term leases. If tenants are unable to comply with the terms of their leases for any reason, including because of rising costs or falling sales, we may deem it advisable to modify lease terms to allow tenants to pay a lower rent or a smaller share of taxes, insurance and other operating costs. If a tenant becomes insolvent or bankrupt, we cannot be sure that we could recover the premises from the tenant promptly or from a trustee or debtor-in-possession in any bankruptcy proceeding relating to the tenant. We also cannot be sure that we would receive rent in the proceeding sufficient to cover our expenses with respect to the premises. If a tenant becomes bankrupt, the federal bankruptcy code will apply and, in some instances, may restrict the amount and recoverability of our claims against the tenant. A tenant’s default on its obligations to us could adversely affect our financial condition and the cash we have available for distribution.
We face risks associated with our property development. We intend to continue to develop properties where we believe market conditions warrant such investment. Once made, our investments may not produce results in accordance with our expectations. Risks associated with our current and future development and construction activities include:
the availability of favorable financing alternatives;
the risk that we may not be able to obtain land on which to develop or that due to the increased cost of land, our activities may not be as profitable;
construction costs exceeding original estimates due to rising interest rates and increases in the costs of materials and labor;
construction and lease-up delays resulting in increased debt service, fixed expenses and construction costs;
expenditure of funds and devotion of management's time to projects that we do not complete;
fluctuations of occupancy and rental rates at newly completed properties, which depend on a number of factors, including market and economic conditions, resulting in lower than projected rental rates and a corresponding lower return on our investment; and
complications (including building moratoriums and anti-growth legislation) in obtaining necessary zoning, occupancy and other governmental permits.
We face risks associated with property acquisitions. We acquire individual properties and portfolios of properties and intend to continue to do so. Our acquisition activities and their success are subject to the following risks:
when we are able to locate a desired property, competition from other real estate investors may significantly increase the purchase price;
acquired properties may fail to perform as expected;we project;
the actual costs of repositioning or redeveloping acquired properties may be higher than our estimates;
acquired properties may be located in new markets where we face risks associated with an incomplete knowledge or understanding of the local market, a limited number of established business relationships in the area and a relative unfamiliarity with local governmental and permitting procedures;
we may be unable to quickly and efficiently integrate new acquisitions, particularly acquisitions of portfolios of properties, into our existing operations, and as a result, our results of operations and financial condition could be adversely affected; and
we may acquire properties subject to liabilities and without any recourse, or with only limited recourse, to the transferor with respect to unknown liabilities. As a result, if a claim were asserted against us based upon ownership of those properties, we might have to pay substantial sums to settle it, which could adversely affect our cash flow.
Coverage under our existing insurance policies may be inadequate to cover losses. We generally maintain insurance policies related to our business, including casualty, general liability and other policies, covering our business operations, employees and assets as appropriate for the markets where our properties and business operations are located. However, we would be required to bear all losses that are not adequately covered by insurance. In addition, there may be certain losses that are not generally insured against or that are not generally fully insured against because it is not deemed economically feasible or prudent to do so, including losses due to floods, wind, earthquakes, acts of war, acts of terrorism or riots. If an uninsured loss or a loss in excess of insured limits occurs with respect to one or more of our properties, then we could lose the capital we invested in the properties, as well as the anticipated future revenue from the properties. In addition, if the damaged properties are subject to recourse indebtedness, we would continue to be liable for the indebtedness, even if these properties were irreparably damaged.
We face risks due to lack of geographic and real estate sector diversity. Substantially all of our properties are located in the Sunbelt region of the United States with an emphasis in the states of Florida, Texas, Arizona, California and North Carolina. As of December 31, 2017, we2019, our two largest markets were Houston and Tampa. We owned operating properties totaling 5.55.7 million square feet in Houston and 4.24.3 million square feet in Tampa, which represent 14.8%13.9% and 11.4%10.5%, respectively, of the Company's total Real estate properties on a square foot basis. A downturn in general economic conditions and local real estate conditions in these geographic regions, as a result of oversupply of or reduced demand for industrial properties, local business climate, business layoffs and changing demographics, would have a particularly strong adverse effect on us. OurIn addition, our investments in real estate assets are concentrated in the industrial distribution sector. This concentration may expose us to the risk of economic downturns in this sector to a greater extent than if our business activities included other sectors of the real estate industry.
We face risks due to the illiquidity of real estate which may limit our ability to vary our portfolio. Real estate investments are relatively illiquid. Our ability to vary our portfolio in response to changes in economic and other conditions will therefore be limited. In addition, because of our status as a REIT, the Internal Revenue Code limits our ability to sell our properties. If we must sell an investment, we cannot ensure that we will be able to dispose of the investment on terms favorable to the Company.
We are subject to environmental laws and regulations. Current and previous real estate owners and operators may be required under various federal, state and local laws, ordinances and regulations to investigate and clean up hazardous substances released at the properties they own or operate. They may also be liable to the government or to third parties for substantial property or natural resource damage, investigation costs and cleanup costs. Such laws often impose liability without regard to whether the owner or operator knew of, or was responsible for, the release or presence of such hazardous substances. In addition, some environmental laws create a lien on the contaminated site in favor of the government for damages and costs the government incurs in connection with the contamination. Contamination may adversely affect the owner’s ability to use, sell or lease real estate or to borrow using the real estate as collateral. We have no way of determining at this time the magnitude of any potential liability to which we may be subject arising out of environmental conditions or violations with respect to the properties we currently or formerly owned. Environmental laws today can impose liability on a previous owner or operator of a property that owned or operated the property at a time when hazardous or toxic substances were disposed of, released from, or present at the property. A conveyance of the property, therefore, may not relieve the owner or operator from liability. Although ESAs have been conducted at our properties to identify potential sources of contamination at the properties, such ESAs do not reveal all environmental liabilities or compliance concerns that could arise from the properties. Moreover, material environmental liabilities or compliance concerns may exist, of which we are currently unaware, that in the future may have a material adverse effect on our business, assets or results of operations.
ComplianceClimate change and its effects, including compliance with new laws or regulations related to climate change, including compliance withsuch as “green” building codes, may require us to make improvements to our existing properties. Proposedproperties or result in unanticipated losses that could affect our business and financial condition. To the extent that climate change causes an increase in catastrophic weather events, such as severe storms, fires or floods, our properties may be susceptible to an increase in weather-related damage. Even in the absence of direct physical damage to our properties, the occurrence of any natural disasters or a changing climate in the area of any of our properties could have a material adverse effect on business, supply chains and the economy generally. The potential impacts of future climate change on our properties could adversely affect our ability to lease, develop or sell our properties or to borrow using our properties as collateral. In addition, any proposed legislation enacted to address climate change could also increase the costs of energy, utilities and utilities.overall development. The costresulting costs of theany proposed legislation may adversely affect our financial position, results of operations and cash flows. We may be adversely affected by floods, hurricanes and other climate related events.
Financing Risks
We face risks associated with the use of debt to fund acquisitions and developments, including refinancing risk. We are subject to the risks normally associated with debt financing, including the risk that our cash flow will be insufficient to meet required payments of principal and interest. In addition, certain of our debt will have significant outstanding principal balances on their maturity dates, commonly known as “balloon payments.” Therefore, we will likely need to refinance at least a portion of our outstanding debt as it matures. There is a risk that we may not be able to refinance existing debt or that the terms of any refinancing will not be as favorable as the terms of the existing debt.
We face risks associated with our dependence on external sources of capital. In order to qualify as a REIT, we are required each year to distribute to our stockholders at least 90% of our ordinary taxable income, and we are subject to tax on our income to the extent it is not distributed. Because of this distribution requirement, we may not be able to fund all future capital needs from cash retained from operations. As a result, to fund capital needs, we rely on third-party sources of capital, which we may not be able to obtain on favorable terms, if at all. Our access to third-party sources of capital depends upon a number of factors, including (i) general market conditions; (ii) the market’s perception of our growth potential; (iii) our current and potential future earnings and cash distributions; and (iv) the market price of our capital stock. Additional debt financing may substantially increase our debt-to-total market capitalization ratio. Additional equity financing may dilute the holdings of our current stockholders.
Covenants in our credit agreements could limit our flexibility and adversely affect our financial condition. The terms of our various credit agreements and other indebtedness require us to comply with a number of customary financial and other covenants, such as maintaining debt service coverage and leverage ratios and maintaining insurance coverage. These covenants may limit our flexibility in our operations, and breaches of these covenants could result in defaults under the instruments governing the applicable indebtedness even if we had satisfied our payment obligations. If we are unable to refinance our indebtedness at maturity or meet our payment obligations, the amount of our distributable cash flow and our financial condition would be adversely affected.
Adverse changes in our credit ratings could impair our ability to obtain additional debt and equity financing on favorable terms, if at all. Our credit ratings are based on our operating performance, liquidity and leverage ratios, overall financial position and other factors employed by the credit rating agencies in their rating analysis of us. Our credit ratings can affect the amount and type of capital we can access, as well as the terms of any financings we may obtain. There can be no assurance that we will be able to maintain our current credit ratings. In the event our current credit ratings deteriorate, it may be more difficult or expensive to obtain additional financing or refinance existing obligations and commitments. Also, a downgrade in our credit ratings would trigger additional costs or other potentially negative consequences under our current and future credit facilities and debt instruments.
Increases in interest rates would increase our interest expense. At December 31, 2017,2019, we had $116.3$112.7 million of variable-ratevariable rate debt outstanding not protected by interest rate hedge contracts. We may incur additional variable-ratevariable rate debt in the future. If interest rates increase, then so would the interest expense on our unhedged variable-ratevariable rate debt, which would adversely affect our financial condition and results of operations. From time to time, we manage our exposure to interest rate risk with interest rate hedge contracts that effectively fix or cap a portion of our variable-ratevariable rate debt. In addition, we refinance fixed-ratefixed rate debt at times when we believe rates and terms are appropriate. Our efforts to manage these exposures may not be successful. Our use of interest rate hedge contracts to manage risk associated with interest rate volatility may expose us to additional risks, including a risk that a counterparty to a hedge contract may fail to honor its obligations. Developing an effective interest rate risk strategy is complex and no strategy can completely insulate us from risks associated with interest rate fluctuations. There can be no assurance that our hedging activities will have the desired beneficial impact on our results of operations or financial condition. Termination of interest rate hedge contracts typically involves costs, such as transaction fees or breakage costs.
AThe lack of any limitationcertain limitations on our debt could result in our becoming more highly leveraged. Our governing documents do not limit the amount of indebtedness we may incur. Accordingly, we may incur additional debt and would do so, for example, if it were necessary to maintain our status as a REIT. We might become more highly leveraged as a result, and our financial condition and cash available for distribution to stockholders might be negatively affected and the risk of default on our indebtedness could increase.
Other Risks
The market value of our common stock could decrease based on our performance and market perception and conditions. The market value of our common stock may be affected by the market’s perception of our operating results, growth potential, and current and future cash dividends and may also be affected by the real estate market value of our underlying assets. The market price of our common stock may also be influenced by the dividend on our common stock relative to market interest rates. Rising interest rates may lead potential buyers of our common stock to expect a higher dividend rate, which would adversely affect the market price of our common stock. In addition, rising interest rates would result in increased expense, thereby adversely affecting cash flow and our ability to service our indebtedness and pay dividends.
The state of the economy or other adverse changes in general or local economic conditions may adversely affect our operating results and financial condition. Turmoil in the global financial markets may have an adverse impact on the availability of credit to businesses generally and could lead to a further weakening of the U.S. and global economies. Currently these conditions have not impaired our ability to access credit markets and finance our operations. However, our ability to access the capital markets may be restricted at a time when we would like, or need, to raise financing, which could have an impact on our flexibility to react to changing economic and business conditions. Furthermore, deteriorating economic conditions including business layoffs, downsizing, industry slowdowns and other similar factors that affect our customers could continue to negatively impact commercial real estate fundamentals and result in lower occupancy, lower rental rates and declining values in our real estate portfolio and in
the collateral securing any loan investments we may make. Additionally, an adverse economic situation could have an impact on our lenders or customers, causing them to fail to meet their obligations to us. No assurances can be given that the effects of an adverse economic situation will not have a material adverse effect on our business, financial condition and results of operations.
We may fail to qualify as a REIT. If we fail to qualify as a REIT, we will not be allowed to deduct distributions to stockholders in computing our taxable income and will be subject to federal income tax at regular corporate rates. In addition, we may be barred from qualification as a REIT for the four years following disqualification. The additional tax incurred at regular corporate rates would significantly reduce the cash flow available for distribution to stockholders and for debt service. Furthermore, we
would no longer be required by the Internal Revenue Code to make any distributions to our stockholders as a condition of REIT qualification. Any distributions to stockholders would be taxable as ordinary income to the extent of our current and accumulated earnings and profits. Corporate distributees, however, may be eligible for the dividends received deduction on the distributions, subject to limitations under the Internal Revenue Code. ToThe REIT qualification requirements are extremely complex, and interpretation of the U.S. federal income tax laws governing REIT qualification is limited. Although we believe we have operated and intend to operate in a manner that will continue to qualify us as a REIT, we must comply with certain highly technical and complex requirements. We cannot be certain that we have complied with these requirements because there are few judicial and administrative interpretations of these provisions.been or will be successful in continuing to be taxed as a REIT. In addition, facts and circumstances that may be beyond our control may affect our ability to qualify as a REIT. We cannot assure you that new legislation, regulations, administrative interpretations or court decisions will not change the tax laws significantly with respect to our qualification as a REIT or with respect to the federal income tax consequences of qualification. We cannot assure you that we will remain qualified as a REIT.
There is a risk of changes in the tax law applicableLegislative or regulatory action with respect to real estate investment trusts. Since the Internal Revenue Service, the United States Treasury Department and Congress frequently review federal income tax legislation, we cannot predict whether, when or to what extent new federal tax laws and regulations interpretations or rulings will be adopted. Any such legislative action may prospectively or retroactively modify our tax treatment and, therefore, maycould adversely affect taxation of us and/orthe Company and our investors.
stockholders. We face possible adverse changes inare subject to state and local tax laws. From time to time, changeslaws and regulations. Changes in state and local tax laws or regulations are enacted which may result in an increase in our tax liability. A shortfall in tax revenues for states and municipalities in which we operate may lead to an increase in the frequency and size of such changes. If such changes occur, we may be required to pay additional taxes on our assets or income. These increased tax costs could adversely affect our financial condition, results of operations and the amount of cash available for the payment of dividends.
In addition, in recent years, numerous legislative, judicial and administrative changes have been made to the federal income tax laws applicable to investments in REITs and similar entities. Additional changes to tax laws are likely to continue to occur in the future, and we cannot assure our stockholders that any such changes will not adversely affect the taxation of a stockholder. We cannot assure you that future changes to tax laws and regulations will not have an adverse effect on an investment in our stock.
To maintain our status as a REIT, we limit the amount of shares any one stockholder can own. The Internal Revenue Code imposes certain limitations on the ownership of the stock of a REIT. For example, not more than 50% in value of our outstanding shares of capital stock may be owned, directly or indirectly, by five or fewer individuals (as defined in the Internal Revenue Code) during the last half of any taxable year. To protect our REIT status, our charter prohibits any holder from acquiring more than 9.8% (in value or in number, whichever is more restrictive) of our outstanding equity stock (defined as all of our classes of capital stock, except our excess stock (of which there is none outstanding)) unless our Board of Directors grants a waiver. The ownership limit may limit the opportunity for stockholders to receive a premium for their shares of common stock that might otherwise exist if an investor were attempting to assemble a block of shares in excess of 9.8% of the outstanding shares of equity stock or otherwise effect a change in control.
Certain tax and anti-takeover provisions of our charter and bylaws may inhibit a change of our control. Certain provisions contained in our charter and bylaws and the Maryland General Corporation Law may discourage a third party from making a tender offer or acquisition proposal to us. If this were to happen, it could delay, deter or prevent a change in control or the removal of existing management. These provisions also may delay or prevent the shareholdersour stockholders from receiving a premium for their common shares over then-prevailing market prices. These provisions include:
the REIT ownership limit described above;
special meetings of our stockholders may be called only by the chairman of the board, the chief executive officer, the president, a majority of the board or by stockholders possessing a majority of all the votes entitled to be cast at the meeting;
our Board of Directors may authorize and issue securities without stockholder approval; and
advance-notice requirements for proposals to be presented at stockholder meetings.
In addition, Maryland law provides protection for Maryland corporations against unsolicited takeovers by limiting, among other things, the duties of the directors in unsolicited takeover situations. The duties of directors of Maryland corporations do not require them to (a) accept, recommend or respond to any proposal by a person seeking to acquire control of the corporation, (b) authorize the corporation to redeem any rights under, or modify or render inapplicable, any stockholders rights plan, (c) make a determination under the Maryland Business Combination Act or the Maryland Control Share Acquisition Act, or (d) act or fail to act solely because of the effect of the act or failure to act may have on an acquisition or potential acquisition of control of the corporation or the amount or type of consideration that may be offered or paid to the stockholders in an acquisition. Moreover, under Maryland
law the act of a director of a Maryland corporation relating to or affecting an acquisition or potential acquisition of control is not subject to any higher duty or greater scrutiny than is applied to any other act of a director. Maryland law also contains a statutory presumption that an act of a director of a Maryland corporation satisfies the applicable standards of conduct for directors under Maryland law.
The Maryland Business Combination Act provides that unless exempted, a Maryland corporation may not engage in business combinations, including mergers, dispositions of 10 percent or more of its assets,situations and certain issuances of shares of stock"business combinations" and other specified transactions, with an "interested stockholder" or an affiliate of an interested stockholder for five years after the most recent date on which the interested stockholder became an interested stockholder, and thereafter unless specified criteria are met. An interested stockholder is generally a person owning or controlling, directly or indirectly, 10 percent or more of the voting power of the outstanding stock of the Maryland corporation. These provisions of Maryland law do not apply, however, to business combinations that are approved or exempted by a board of directors prior to the time that the interested stockholder becomes an interested stockholder. Pursuant to the statute, our Board of Directors has by resolution exempted business combinations between us and any other person and such resolution may not be revoked, altered or amended without prior stockholder approval.
The Maryland Control Share Acquisition Act provides that "control shares" of a corporation acquired in a "control share acquisition" shall have no voting rights except to the extent approved by a vote of two-thirds of the votes eligible to cast on the matter. "Control Shares" means shares of stock that, if aggregated with all other shares of stock previously acquired by the acquirer, would entitle the acquirer to exercise voting power in electing directors within one of the following ranges of the voting power: one-tenth or more but less than one-third, one-third or more but less than a majority, or a majority or more of all voting power. A "control share acquisition" means the acquisition of control shares, subject to certain exceptions.
If voting rights of control shares acquired in a control share acquisition are not approved at a stockholders' meeting, then subject to certain conditions and limitations, the issuer may redeem any or all of the control shares for fair value. If voting rights of such control shares are approved at a stockholders' meeting and the acquirer becomes entitled to vote a majority of the shares of stock entitled to vote, all other stockholders may exercise appraisal rights.acquisitions." Our bylaws contain a provisionprovisions exempting us from the Maryland Control Share Acquisition Act any and all acquisitions by any person of our stock.the Maryland Business Combination Act. Our bylaws prohibit the repeal, amendment or alteration of this provisionour Maryland Control Share Acquisition opt out without the approval by the Company’s stockholders; however, there can be no assurance that this provision will not be amended or eliminated at some time in the future.
The Company faces risks in attracting and retaining key personnel. Many of our senior executives have strong industry reputations, which aid us in identifying acquisition and development opportunities and negotiating with tenants and sellers of properties. The loss of the services of these key personnel could affect our operations because of diminished relationships with existing and prospective tenants, property sellers and industry personnel. In addition, attracting new or replacement personnel may be difficult in a competitive market.
We have severance and change in control agreements with certain of our officers that may deter changes in control of the Company. If, within a certain time period (as set in the officer’s agreement) following a change in control, we terminate the officer's employment other than for cause, or if the officer elects to terminate his or her employment with us for reasons specified in the agreement, we will make a severance payment equal to the officer's average annual compensation times an amount specified in the officer's agreement, together with the officer's base salary and vacation pay that have accrued but are unpaid through the date of termination. These agreements may deter a change in control because of the increased cost for a third party to acquire control of us.
We rely on information technology in our operations, and any material failure, inadequacy, interruption or security failure of that technology could harm our business. We rely on information technology networks and systems, including the internet, to process, transmit and store electronic information, and to manage or support a variety of business processes, including financial transactions and records, and maintaining personal identifying information and customer and lease data. We purchase some of our information technology from vendors, on whom our systems depend. We rely on commercially available systems, software, tools and monitoring to provide security for the processing, transmission and storage of confidential customer data, including individually identifiable information relating to financial accounts. Although we have taken steps to protect the security of our information systems and the data maintained in those systems, it is possible that our safety and security measures will not prevent the systems' improper functioning or damage, or the improper access or disclosure of personally identifiable information such as in the event of cyber-attacks. Security breaches, including physical or electronic break-ins, computer viruses, attacks by hackers and similar breaches, can create system disruptions, shutdowns or unauthorized disclosure of confidential information. In some cases, it may be difficult to anticipate or immediately detect such incidents and the damage they cause. Any failure to maintain proper function, security and availability of our information systems could interrupt our operations, damage our reputation, subject us to liability claims or regulatory penalties and could have a materially adverse effect on our business, financial condition and results of operations.
We may be impacted by changes in U.S. social, political, regulatory and economic conditions or laws and policies. Any changes to U.S. tax laws, foreign trade, manufacturing, and development and investment in the territories and countries where our customers operate could adversely affect our operating results and our business.
ITEM 1B. UNRESOLVED STAFF COMMENTS.
None.
ITEM 2. PROPERTIES.
EastGroup owned 363399 industrial properties and one office building at December 31, 20172019. These properties are located primarily in the Sunbelt states of Florida, Texas, Arizona, California and North Carolina, and the majority are clustered around major transportation features in supply constrained submarkets. As of February 13, 2018,12, 2020, EastGroup’s portfolio was 96.7%97.4% leased and 96.2% occupied.97.1% occupied by approximately 1,500 tenants, with no single tenant accounting for more than approximately 1.0% of the Company's income from real estate operations. The Company has developed approximately 45%47% of its total portfolio (on a square foot basis), including real estate properties and development and value-add properties in lease-up and under construction. The Company’s focus is the ownership of business distribution space (87%(89% of the total portfolio) with the remainder in bulk distribution space (9%(8%) and business service space (4%(3%). Business distribution space properties are typically multi-tenant buildings with a building depth of 200 feet or less, clear height of 24-30 feet, office finish of 10-25% and truck courts with a depth of 100-120 feet. See Consolidated Financial Statement Schedule III – Real Estate Properties and Accumulated Depreciation for a detailed listing of the Company’s properties.
At December 31, 20172019, EastGroup did not own any single property with a book value that was 10% or more of total book value or with gross revenues that were 10% or more of total gross revenues.
The Company's lease expirations excluding month-to-month leases of 373,000 square feet, for the next ten years are detailed below:
| | | Years Ending December 31, | | Number of Leases Expiring | | Total Area of Leases Expiring (in Square Feet) | | Annualized Current Base Rent of Leases Expiring (1) | | % of Total Base Rent of Leases Expiring | | Number of Leases Expiring | | Total Area of Leases Expiring (in Square Feet) | | Annualized Current Base Rent of Leases Expiring (1) | | % of Total Base Rent of Leases Expiring |
| 2018 | | 275 | | 4,111,000 |
| | $ | 24,273,000 |
| | 11.6% | |
| 2019 | | 289 | | 5,699,000 |
| | $ | 34,637,000 |
| | 16.5% | |
| 2020 | | 313 | | 6,263,000 |
| | $ | 36,519,000 |
| | 17.4% | |
2020 (2) | | | 329 | | 5,660,000 |
| | $ | 36,530,000 |
| | 14.6% |
| 2021 | | 207 | | 6,324,000 |
| | $ | 36,079,000 |
| | 17.2% | | 297 | | 7,590,000 |
| | $ | 48,814,000 |
| | 19.6% |
| 2022 | | 149 | | 4,671,000 |
| | $ | 27,920,000 |
| | 13.3% | | 281 | | 7,305,000 |
| | $ | 43,535,000 |
| | 17.5% |
| 2023 | | 85 | | 2,696,000 |
| | $ | 13,275,000 |
| | 6.3% | | 197 | | 4,649,000 |
| | $ | 29,694,000 |
| | 11.9% |
| 2024 | | 58 | | 2,736,000 |
| | $ | 15,600,000 |
| | 7.4% | | 200 | | 5,882,000 |
| | $ | 36,426,000 |
| | 14.6% |
| 2025 | | 17 | | 1,156,000 |
| | $ | 6,184,000 |
| | 2.9% | | 80 | | 3,264,000 |
| | $ | 18,555,000 |
| | 7.4% |
| 2026 | | 16 | | 724,000 |
| | $ | 4,784,000 |
| | 2.3% | | 51 | | 1,926,000 |
| | $ | 12,793,000 |
| | 5.1% |
| 2027 and beyond | | 32 | | 1,481,000 |
| | $ | 8,158,000 |
| | 3.9% | |
| 2027 | | | 27 | | 1,305,000 |
| | $ | 7,676,000 |
| | 3.1% |
| 2028 | | | 20 | | 1,024,000 |
| | $ | 5,899,000 |
| | 2.4% |
| 2029 and beyond | | | 24 | | 1,664,000 |
| | $ | 9,467,000 |
| | 3.8% |
| |
| (1) | Represents the monthly cash rental rates, excluding tenant expense reimbursements, as of December 31, 2017,2019, multiplied by 12 months. |
| |
| (2) | Includes month-to-month leases. |
ITEM 3. LEGAL PROCEEDINGS.
The Company is not presently involved in any material litigation nor, to its knowledge, is any material litigation threatened against the Company or its properties, other than routine litigation arising in the ordinary course and other actions not deemed to be material, substantially all of business or which is expectedare to be covered by the Company’s liability insurance.insurance and which, in the aggregate, are not expected to have a material adverse effect on the Company's financial condition or results of operations. The Company cannot predict the outcome of any litigation with certainty, and some lawsuits, claims or proceedings may be disposed of unfavorably to the Company, which could materially affect its financial condition or results of operations.
ITEM 4. MINE SAFETY DISCLOSURES.
Not applicable.
PART II. OTHER INFORMATION
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES.
The Company’s shares of common stock are listed for trading on the New York Stock ExchangeNYSE under the symbol “EGP.” The following table shows the high and low share prices for each quarter reported by the New York Stock Exchange during the past two years and the per share distributions paid for each quarter.
Shares of Common Stock Market Prices and Dividends
|
| | | | | | | | | | | | | | | | | | | | | | |
| Quarter | | Calendar Year 2017 | | Calendar Year 2016 |
| | High | | Low | | Distributions | | High | | Low | | Distributions |
| First | | $ | 76.13 |
| | 67.69 |
| | $ | 0.62 |
| | $ | 60.46 |
| | 49.31 |
| | $ | 0.60 |
|
| Second | | 87.40 |
| | 73.13 |
| | 0.62 |
| | 69.35 |
| | 58.28 |
| | 0.60 |
|
| Third | | 91.51 |
| | 80.10 |
| | 0.64 |
| | 76.00 |
| | 68.40 |
| | 0.62 |
|
| Fourth | | 95.03 |
| | 86.41 |
| | 0.64 |
| | 74.71 |
| | 63.99 |
| | 0.62 |
|
| | | |
| | |
| | $ | 2.52 |
| | |
| | |
| | $ | 2.44 |
|
As of February 13, 2018,12, 2020, there were 467414 holders of record of the Company’s 34,738,860Company's 38,901,637 outstanding shares of common stock. The Company distributed all of its 20172019 and 20162018 taxable income to its stockholders. Accordingly, no significant provisions for income taxes were necessary. The following table summarizes the federal income tax treatment for all distributions by the Company for the years 20172019 and 2016.2018.
Federal Income Tax Treatment of Share Distributions
| | | | Years Ended December 31, | Years Ended December 31, |
| 2017 | | 2016 | 2019 | | 2018 |
| Common Share Distributions: | | | | (Per share) |
| Ordinary dividends | $ | 2.49146 |
| | 2.10494 |
| $ | 3.14000 |
| | 2.14305 |
|
| Nondividend distributions | 0.02686 |
| | 0.05202 |
| — |
| | — |
|
| Unrecaptured Section 1250 capital gain | — |
| | 0.12872 |
| — |
| | — |
|
| Other capital gain | 0.00168 |
| | 0.15432 |
| — |
| | — |
|
| Total Common Distributions | $ | 2.52000 |
| | 2.44000 |
| $ | 3.14000 |
| | 2.14305 |
|
Securities Authorized For Issuance Under Equity Compensation Plans
See Item 12 of this Annual Report on Form 10-K, “Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters,” for certain information regarding the Company’s equity compensation plans.
Purchases of Equity Securities by the Issuer and Affiliated Purchasers
No shares of the Company's common stock were purchased by the Company or withheld by the Company to satisfy any tax withholding obligations during the three-month period ended December 31, 2017.2019.
Performance Graph
The following graph compares, over the five years ended December 31, 2017,2019, the cumulative total shareholder return on EastGroup’s common stock with the cumulative total return of the Standard & Poor’s 500 Total Return Index (S&P 500 Total Return) and the FTSE Equity REIT index prepared by the National Association of Real Estate Investment Trusts (FTSE NAREITNareit Equity REITs).
The performance graph and related information shall not be deemed “soliciting material” or be deemed to be “filed” with the SEC, nor shall such information be incorporated by reference into any future filing, except to the extent that the Company specifically incorporates it by reference into such filing.
| | | | Fiscal years ended December 31, | Fiscal years ended December 31, |
| 2012 | | 2013 | | 2014 | | 2015 | | 2016 | | 2017 | 2014 | | 2015 | | 2016 | | 2017 | | 2018 | | 2019 |
| EastGroup | $ | 100.00 |
| | 111.69 |
| | 126.46 |
| | 115.72 |
| | 159.16 |
| | 196.32 |
| $ | 100.00 |
| | 91.51 |
| | 126.09 |
| | 155.48 |
| | 166.30 |
| | 246.46 |
|
| FTSE NAREIT Equity REITs | 100.00 |
| | 102.47 |
| | 133.35 |
| | 137.62 |
| | 149.35 |
| | 157.16 |
| |
| FTSE Nareit Equity REITs | | 100.00 |
| | 103.20 |
| | 111.99 |
| | 117.84 |
| | 112.39 |
| | 141.61 |
|
| S&P 500 Total Return | 100.00 |
| | 132.39 |
| | 150.51 |
| | 152.59 |
| | 170.84 |
| | 208.13 |
| 100.00 |
| | 101.38 |
| | 113.51 |
| | 138.29 |
| | 132.23 |
| | 173.86 |
|
The information above assumes that the value of the investment in shares of EastGroup’s common stock and each index was $100 on December 31, 2012,2014, and that all dividends were reinvested.
ITEM 6. SELECTED FINANCIAL DATA.
The following table sets forth selected consolidated financial and operating data on a historical basis for the Company derived from the audited consolidated financial statements andCompany. The following data should be read in conjunction with the consolidatedCompany’s financial statements and notes thereto and Management’s Discussion and Analysis of Financial Condition and Results of Operations included elsewhere in this report.Annual Report on Form 10-K. The Company’s historical operating results may not be comparable to the Company’s future operating results.
| | | | Years Ended December 31, | Years Ended December 31, |
| 2017 | | 2016 | | 2015 | | 2014 | | 2013 | 2019 | | 2018 | | 2017 | | 2016 | | 2015 |
| OPERATING DATA | (In thousands, except per share data) | (In thousands, except per share data) |
| REVENUES | | | | | | | | | | | | | | | | | | |
| Income from real estate operations | $ | 274,031 |
| | 252,961 |
| | 234,918 |
| | 219,706 |
| | 201,849 |
| $ | 330,813 |
| | 299,018 |
| | 274,031 |
| | 252,961 |
| | 234,918 |
|
| Other revenue | 119 |
| | 86 |
| | 90 |
| | 123 |
| | 322 |
| 574 |
| | 1,374 |
| | 119 |
| | 86 |
| | 90 |
|
| | 274,150 |
| | 253,047 |
| | 235,008 |
| | 219,829 |
| | 202,171 |
| 331,387 |
| | 300,392 |
| | 274,150 |
| | 253,047 |
| | 235,008 |
|
| Expenses | |
| | |
| | |
| | |
| | |
| |
| | |
| | |
| | |
| | |
|
| Expenses from real estate operations | 80,108 |
| | 74,347 |
| | 67,402 |
| | 62,797 |
| | 57,885 |
| 93,274 |
| | 86,394 |
| | 80,108 |
| | 74,347 |
| | 67,402 |
|
| Depreciation and amortization | 83,874 |
| | 77,935 |
| | 73,290 |
| | 70,314 |
| | 65,789 |
| 104,724 |
| | 91,704 |
| | 83,874 |
| | 77,935 |
| | 73,290 |
|
| General and administrative | 14,972 |
| | 13,232 |
| | 15,091 |
| | 12,726 |
| | 11,725 |
| 16,406 |
| | 13,738 |
| | 14,972 |
| | 13,232 |
| | 15,091 |
|
| Indirect leasing costs | | 411 |
| | — |
| | — |
| | — |
| | — |
|
| Acquisition costs | — |
| | 161 |
| | 164 |
| | 210 |
| | 191 |
| — |
| | — |
| | — |
| | 161 |
| | 164 |
|
| | 178,954 |
| | 165,675 |
| | 155,947 |
| | 146,047 |
| | 135,590 |
| 214,815 |
| | 191,836 |
| | 178,954 |
| | 165,675 |
| | 155,947 |
|
| Operating income | 95,196 |
| | 87,372 |
| | 79,061 |
| | 73,782 |
| | 66,581 |
| |
| Other income (expense) | |
| | |
| | |
| | |
| | |
| |
| | |
| | |
| | |
| | |
|
| Interest expense | (34,775 | ) | | (35,213 | ) | | (34,666 | ) | | (35,486 | ) | | (35,192 | ) | (34,463 | ) | | (35,106 | ) | | (34,775 | ) | | (35,213 | ) | | (34,666 | ) |
| Gain, net of loss, on sales of real estate investments | 21,855 |
| | 42,170 |
| | 2,903 |
| | 9,188 |
| | — |
| 41,068 |
| | 14,273 |
| | 21,855 |
| | 42,170 |
| | 2,903 |
|
| Other | 1,313 |
| | 1,765 |
| | 1,101 |
| | 989 |
| | 949 |
| 163 |
| | 913 |
| | 1,313 |
| | 1,765 |
| | 1,101 |
|
| Income from continuing operations | 83,589 |
| | 96,094 |
| | 48,399 |
| | 48,473 |
| | 32,338 |
| |
| Discontinued operations | |
| | |
| | |
| | |
| | |
| |
| Income from real estate operations | — |
| | — |
| | — |
| | — |
| | 89 |
| |
| Gain on sales of nondepreciable real estate investments | — |
| | — |
| | — |
| | — |
| | — |
| |
| Gain on sales of real estate investments | — |
| | — |
| | — |
| | — |
| | 798 |
| |
| Income from discontinued operations | — |
| | — |
| | — |
| | — |
| | 887 |
| |
| Net income | 83,589 |
| | 96,094 |
| | 48,399 |
| | 48,473 |
| | 33,225 |
| 123,340 |
| | 88,636 |
| | 83,589 |
| | 96,094 |
| | 48,399 |
|
| Net income attributable to noncontrolling interest in joint ventures | (406 | ) | | (585 | ) | | (533 | ) | | (532 | ) | | (610 | ) | (1,678 | ) | | (130 | ) | | (406 | ) | | (585 | ) | | (533 | ) |
| Net income attributable to EastGroup Properties, Inc. common stockholders | 83,183 |
| | 95,509 |
| | 47,866 |
| | 47,941 |
| | 32,615 |
| 121,662 |
| | 88,506 |
| | 83,183 |
| | 95,509 |
| | 47,866 |
|
| Other comprehensive income (loss) - Cash flow hedges | 3,353 |
| | 5,451 |
| | (1,099 | ) | | (3,986 | ) | | 2,021 |
| (3,894 | ) | | 1,353 |
| | 3,353 |
| | 5,451 |
| | (1,099 | ) |
| TOTAL COMPREHENSIVE INCOME | $ | 86,536 |
| | 100,960 |
| | 46,767 |
| | 43,955 |
| | 34,636 |
| $ | 117,768 |
| | 89,859 |
| | 86,536 |
| | 100,960 |
| | 46,767 |
|
| BASIC PER COMMON SHARE DATA FOR NET INCOME ATTRIBUTABLE TO EASTGROUP PROPERTIES, INC. COMMON STOCKHOLDERS | |
| | |
| | |
| | |
| | |
| |
| | |
| | |
| | |
| | |
|
| Income from continuing operations | $ | 2.45 |
| | 2.93 |
| | 1.49 |
| | 1.53 |
| | 1.05 |
| |
| Income from discontinued operations | — |
| | — |
| | — |
| | — |
| | 0.03 |
| |
| Net income attributable to common stockholders | $ | 2.45 |
| | 2.93 |
| | 1.49 |
| | 1.53 |
| | 1.08 |
| $ | 3.25 |
| | 2.50 |
| | 2.45 |
| | 2.93 |
| | 1.49 |
|
| Weighted average shares outstanding | 33,996 |
| | 32,563 |
| | 32,091 |
| | 31,341 |
| | 30,162 |
| 37,442 |
| | 35,439 |
| | 33,996 |
| | 32,563 |
| | 32,091 |
|
| DILUTED PER COMMON SHARE DATA FOR NET INCOMEATTRIBUTABLE TO EASTGROUP PROPERTIES, INC. COMMON STOCKHOLDERS | |
| | |
| | |
| | |
| | |
| |
| Income from continuing operations | $ | 2.44 |
| | 2.93 |
| | 1.49 |
| | 1.52 |
| | 1.05 |
| |
| Income from discontinued operations | — |
| | — |
| | — |
| | — |
| | 0.03 |
| |
| DILUTED PER COMMON SHARE DATA FOR NET INCOME ATTRIBUTABLE TO EASTGROUP PROPERTIES, INC. COMMON STOCKHOLDERS | | |
| | |
| | |
| | |
| | |
|
| Net income attributable to common stockholders | $ | 2.44 |
| | 2.93 |
| | 1.49 |
| | 1.52 |
| | 1.08 |
| $ | 3.24 |
| | 2.49 |
| | 2.44 |
| | 2.93 |
| | 1.49 |
|
| Weighted average shares outstanding | 34,047 |
| | 32,628 |
| | 32,196 |
| | 31,452 |
| | 30,269 |
| 37,527 |
| | 35,506 |
| | 34,047 |
| | 32,628 |
| | 32,196 |
|
AMOUNTS ATTRIBUTABLE TO EASTGROUP PROPERTIES, INC. COMMON STOCKHOLDERS | |
| | |
| | |
| | |
| | |
| |
| Income from continuing operations | $ | 83,183 |
| | 95,509 |
| | 47,866 |
| | 47,941 |
| | 31,728 |
| |
| Income from discontinued operations | — |
| | — |
| | — |
| | — |
| | 887 |
| |
| Net income attributable to common stockholders | $ | 83,183 |
| | 95,509 |
| | 47,866 |
| | 47,941 |
| | 32,615 |
| |
| OTHER PER SHARE DATA | |
| | |
| | |
| | |
| | |
| |
| | |
| | |
| | |
| | |
|
| Book value, at end of year | $ | 21.56 |
| | 19.13 |
| | 17.11 |
| | 17.72 |
| | 16.61 |
| $ | 30.84 |
| | 24.74 |
| | 21.56 |
| | 19.13 |
| | 17.11 |
|
| Common distributions declared | 2.52 |
| | 2.44 |
| | 2.34 |
| | 2.22 |
| | 2.14 |
| 2.94 |
| | 2.72 |
| | 2.52 |
| | 2.44 |
| | 2.34 |
|
| Common distributions paid | 2.52 |
| | 2.44 |
| | 2.34 |
| | 2.22 |
| | 2.14 |
| 2.91 |
| | 2.00 |
| | 2.52 |
| | 2.44 |
| | 2.34 |
|
| BALANCE SHEET DATA (AT END OF YEAR) | |
| | |
| | |
| | |
| | |
| |
| | |
| | |
| | |
| | |
|
Real estate investments, at cost (1) | $ | 2,590,083 |
| | 2,419,414 |
| | 2,232,327 |
| | 2,087,821 |
| | 1,938,960 |
| $ | 3,274,050 |
| | 2,827,609 |
| | 2,591,358 |
| | 2,419,461 |
| | 2,232,344 |
|
Real estate investments, net of accumulated depreciation (1) | 1,840,482 |
| | 1,725,164 |
| | 1,574,873 |
| | 1,487,295 |
| | 1,388,847 |
| 2,402,911 |
| | 2,012,694 |
| | 1,841,757 |
| | 1,725,211 |
| | 1,574,890 |
|
| Total assets | 1,953,221 |
| | 1,825,764 |
| | 1,661,904 |
| | 1,572,112 |
| | 1,468,963 |
| 2,546,078 |
| | 2,131,705 |
| | 1,953,221 |
| | 1,825,764 |
| | 1,661,904 |
|
| Unsecured bank credit facilities, unsecured debt and secured debt | 1,108,282 |
| | 1,101,333 |
| | 1,027,909 |
| | 929,465 |
| | 889,296 |
| 1,182,602 |
| | 1,105,787 |
| | 1,108,282 |
| | 1,101,333 |
| | 1,027,909 |
|
| Total liabilities | 1,202,091 |
| | 1,183,898 |
| | 1,102,703 |
| | 996,497 |
| | 950,258 |
| 1,343,749 |
| | 1,227,002 |
| | 1,202,091 |
| | 1,183,898 |
| | 1,102,703 |
|
| Noncontrolling interest in joint ventures | 1,658 |
| | 4,205 |
| | 4,339 |
| | 4,486 |
| | 4,707 |
| 1,765 |
| | 1,644 |
| | 1,658 |
| | 4,205 |
| | 4,339 |
|
| Total stockholders’ equity | 749,472 |
| | 637,661 |
| | 554,862 |
| | 571,129 |
| | 513,998 |
| 1,200,564 |
| | 903,059 |
| | 749,472 |
| | 637,661 |
| | 554,862 |
|
| |
| (1) | Includes mortgage loans receivable and unconsolidated investment. See Notes 3 and 4 in the Notes to Consolidated Financial Statements. |
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION
CertainThe following discussion and analysis of results of operations and financial condition should be read in conjunction with the consolidated financial statements containedand notes thereto appearing elsewhere in this report may be deemed “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Words such as “will,” “anticipates,” “expects,” “believes,” “intends,” “plans,” “seeks,” “estimates,” variations of such words and similar expressions are intended to identify such forward-looking statements, which generally are not historical in nature. All statements that address operating performance, events or developments that the Company expects or anticipates will occur in the future, including statements relating to rent and occupancy growth, development activity, the acquisition or sale of properties, general conditions in the geographic areas where the Company operates and the availability of capital, are forward-looking statements. Forward-looking statements are inherently subject to known and unknown risks and uncertainties, many of which the Company cannot predict, including, without limitation: changes in general economic conditions; the extent of tenant defaults or of any early lease terminations; the Company's ability to lease or re-lease space at current or anticipated rents; the availability of financing; the failure to maintain credit ratings with rating agencies; changes in the supply of and demand for industrial/warehouse properties; increases in interest rate levels; increases in operating costs; natural disasters, terrorism, riots and acts of war, and the Company's ability to obtain adequate insurance; changes in governmental regulation, tax rates and similar matters; and other risks associated with the development and acquisition of properties, including risks that development projects may not be completedAnnual Report on schedule, development or operating costs may be greater than anticipated or acquisitions may not close as scheduled, and those additional factors discussed under “Item 1A. Risk Factors” in Part I of this report. Although the Company believes the expectations reflected in the forward-looking statements are based upon reasonable assumptions at the time made, the Company can give no assurance that such expectations will be achieved. The Company assumes no obligation whatsoever to publicly update or revise any forward-looking statements. See also the information contained in the Company’s reports filed or to be filed from time to time with the Securities and Exchange Commission pursuant to the Securities Exchange Act of 1934, as amended (the “Exchange Act”).Form 10-K.
OVERVIEW
EastGroup’s goal is to maximize shareholder value by being a leading provider in its markets of functional, flexible and quality business distribution space for location sensitive customers primarily(primarily in the 15,000 to 50,00070,000 square foot range.range). The Company develops, acquires and operates distribution facilities, the majority of which are clustered around major transportation features in supply constrainedsupply-constrained submarkets in major Sunbelt regions. The Company’s core markets are in the states of Florida, Texas, Arizona, California and North Carolina.
The Company believes its current operating cash flow and unsecured bank credit facilities provide the capacity to fund the operations of the Company, and the Company also believes it can issue common and/or preferred equity and obtain debt financing. During 2017,2019, EastGroup obtained unsecured debt totaling $60 million and issued 1,370,4572,388,342 shares of common stock through its continuous common equity offering program, providing net proceeds to the Company of $109$284.7 million. Also during 2019, the Company closed on a private placement of $190 million of senior unsecured notes and a $100 million senior unsecured term loan. EastGroup's financing and equity issuances are further described in Liquidity and Capital Resources.
The Company’s primary revenue is rental income; as such, EastGroup’s greatest challenge is leasing space.income. During 2017,2019, EastGroup executed leases expired on 6,475,0006,922,000 square feet (17.3%(16.8% of EastGroup’s total square footage of 37,338,000), and the Company was successful in renewing or re-leasing 85%41,271,000 as of the expiring square feet. In addition, EastGroup leased 2,120,000 square feet of other vacant space during the year. During 2017, average rental rates onDecember 31, 2019). For new and renewal leases signed during 2019, average rental rates increased by 16.8%. 17.3% as compared to the former leases on the same spaces.
Property net operating income (PNOI)Net Operating Income ("PNOI") Excluding Income from Lease Terminations from same properties defined(defined as operating properties owned during the entire current period and prior year reporting period,periods – January 1, 2018 through December 31, 2019), increased 2.8%3.7% for 20172019 compared to 2016.2018.
EastGroup’s totalportfolio was 97.6% leased percentage was 97.0% at December 31, 20172019 compared to 97.3% at December 31, 2016.2018. Leases scheduled to expire in 20182020 were 11.0%13.7% of the portfolio on a square foot basis at December 31, 2017. As2019, and this percentage was reduced to 11.8% as of February 13, 2018, leases scheduled to expire during the remainder of 2018 were 9.6% of the portfolio on a square foot basis.12, 2020.
The Company generates new sources of leasing revenue through its development and acquisition programs. The Company mitigates risks associated with development through a Board-approved maximum level of land held for development and by adjusting development start dates according to leasing activity.
During 2017,2019, EastGroup acquired 840,0001,774,000 square feet of operating and value-add properties in Tampa, Greenville, Dallas, Denver, Phoenix, Las Vegas and 90San Diego and 188 acres of land in Tampa, Dallas, Houston and San Diego for a total of $82$269 million. The Company began construction of 1218 development projects containing 1,339,0002,696,000 square feet in Austin,Miami, Orlando, Fort Myers, Charlotte, Atlanta, Dallas, San Antonio, Phoenix, Tampa, Orlando,Houston, Austin and Charlotte.Phoenix. Also in 2017,2019, the Company transferred 12 properties (2,197,00013 development projects and value-add acquisitions (1,763,000 square feet) in Miami, Orlando, Fort Myers, Charlotte, Atlanta, Dallas, Houston, San Antonio, Las Vegas, Orlando, Tampa, CharlottePhoenix and PhoenixSan Diego from its development and value-add program to real estate properties with costs of $160.1$156.7 million
at the date of transfer. As of December 31, 2017,2019, EastGroup's development and value-add program consisted of 18 buildings (2,166,00028 projects (4,088,000 square feet) located in 1113 cities. The projected total cost for the development and value-add projects, which were collectively 50%41% leased as of February 13, 2018,12, 2020, is $185$420 million, of which $54$104 million remained to be invested as of December 31, 2017.2019.
During 2017,2019, EastGroup sold 514,000617,000 square feet of operating properties and 190.2 acres of land, generating gross sales proceeds of $41.8$68.7 million. The Company recognized $21,855,000$41,068,000 in Gain net of loss, on sales of real estate investments and $293,000$83,000 in Gain, net of loss,gains on sales of non-operating real estate (included in Other on the Consolidated Statements of Income and Comprehensive Income) during 2017.2019.
Typically, theThe Company typically initially funds its development and acquisition programs through its $335$395 million unsecured bank credit facilities (as discussed in below under Liquidity and Capital Resources). As market conditions permit, EastGroup issues equity and/or employs fixed-ratefixed rate debt, including variable-ratevariable rate debt that has been swapped to an effectively fixed rate through the use of interest rate swaps, to replace short-term bank borrowings. In May 2017,June 2019, Moody's Investors Service affirmed the Company's issuer rating of Baa2 with a stable outlook. A security rating is not a recommendation to buy, sell or hold securities and may be subject to revision or withdrawal at any time by the assigning rating agency. Each rating should be evaluated independently of any other rating. For future debt issuances, the Company intends to issue primarily unsecured fixed-ratefixed rate debt, including variable-ratevariable rate debt
that has been swapped to an effectively fixed rate through the use of interest rate swaps. The Company may also access the public debt market in the future as a means to raise capital.
EastGroup has one reportable segment – industrial properties. TheseThe Company's properties, are primarily located in major Sunbelt regions of the United States, have similar economic characteristics and also meet the other criteria permitting the properties to beas a result, have been aggregated into one reportable segment.
The Company’s chief decision makers use two primary measures of operating results in making decisions: (1) property net operating income (PNOI), defined as Income from real estate operations less Expenses from real estate operations (including market-based internal management fee expense) plus the Company's share of income and property operating expenses from its less-than-wholly-owned real estate investments, and (2) funds from operations attributable to common stockholders (FFO)(“FFO”), definedand (2) property net operating income (“PNOI”).
FFO is computed in accordance with standards established by the National Association of Real Estate Investment Trusts, Inc. (“Nareit”). In December 2018, Nareit issued the “Nareit Funds from Operations White Paper - 2018 Restatement” (the “2018 White Paper”), which reaffirmed, and in some cases refined, Nareit's prior determinations concerning FFO. The guidance in the 2018 White Paper allows preparers an option as it pertains to whether gains or losses on sale, or impairment charges, on real estate assets incidental to a REIT's business are excluded from the calculation of FFO. EastGroup has made the election to exclude activity related to such assets that are incidental to our business. In 2019, the Company revised prior periods to reflect this guidance.
FFO is calculated as net income (loss) attributable to common stockholders computed in accordance with U.S. generally accepted accounting principles (GAAP)("GAAP"), excluding gains orand losses from sales of depreciable real estate property (including other assets incidental to the Company’s business) and impairment losses, plusadjusted for real estate related depreciation and amortization, and after adjustments for unconsolidated partnerships and joint ventures. FFO is not considered as an alternative to net income (determined in accordance with GAAP) as an indication of the Company’s financial performance, nor is it a measure of the Company’s liquidity or indicative of funds available to provide for the Company’s cash needs, including its ability to make distributions. The Company’s key drivers affecting FFO are changes in PNOI (as discussed below), interest rates, the amount of leverage the Company employs and general and administrative expenses.
PNOI is defined as Income from real estate operations less Expenses from real estate operations (including market-based internal management fee expense) plus the Company’s share of income and property operating expenses from its less-than-wholly-owned real estate investments.
EastGroup sometimes refers to PNOI from Same Properties as “Same PNOI”; the Company also presents Same PNOI Excluding Income from Lease Terminations. Same Properties is defined as operating properties owned during the entire current period and prior year reporting period. Properties developed or acquired are excluded until held in the operating portfolio for both the current and prior year reporting periods. Properties sold during the current or prior year reporting periods are also excluded. For the year ended December 31, 2019, Same Properties includes properties which were included in the operating portfolio for the entire period from January 1, 2018 through December 31, 2019. The Company calculates FFO based on the National Associationpresents Same PNOI and Same PNOI Excluding Income from Lease Terminations as a property-level supplemental measure of Real Estate Investment Trusts’ (NAREIT) definition.
PNOI is a supplemental industry reporting measurementperformance used to evaluate the performance of the Company’s investments in real estate investments.assets and its operating results on a same property basis. The Company believes it is useful to evaluate Same PNOI Excluding Income from Lease Terminations on both a straight-line and cash basis. The straight-line basis is calculated by averaging the customers’ rent payments over the lives of the leases; GAAP requires the recognition of rental income on the straight-line basis. The cash basis excludes adjustments for straight-line rent and amortization of market rent intangibles for acquired leases; the cash basis is an indicator of the rents charged to customers by the Company during the periods presented and is useful in analyzing the embedded rent growth in the Company’s portfolio.
FFO and PNOI are supplemental industry reporting measurements used to evaluate the performance of the Company’s investments in real estate assets and its operating results. The Company believes that the exclusion of depreciation and amortization in the industry’s calculationcalculations of PNOI and FFO provides a supplemental indicatorindicators of the properties’ performance since real estate values have historically risen or fallen with market conditions. PNOI and FFO as calculated by the Company may not be comparable to similarly titled but differently calculated measures for other real estate investment trusts (REITs)(“REITs”). The major factors influencing PNOIInvestors should be aware that items excluded from or added back to FFO are occupancy levels, acquisitionssignificant components in understanding and sales, development properties that achieve stabilized operations, rental rate increases or decreases, andassessing the recoverability of operating expenses. The Company’s success depends largely upon its ability to lease space and to recover from tenants the operating costs associated with those leases.financial performance.
PNOI is comprised of Income from real estate operations, less Expenses from real estate operations plus the Company's share of income and property operating expenses from its less-than-wholly-owned real estate investments.
PNOI was calculated as follows for the three fiscal years ended December 31, 2017, 20162019, 2018 and 2015.2017.
| | | | Years Ended December 31, | Years Ended December 31, |
| 2017 | | 2016 | | 2015 | 2019 | | 2018 | | 2017 |
(In thousands) | | Income from real estate operations | $ | 274,031 |
| | 252,961 |
| | 234,918 |
| $ | 330,813 |
| | 299,018 |
| | 274,031 |
|
| Expenses from real estate operations | (80,108 | ) | | (74,347 | ) | | (67,402 | ) | (93,274 | ) | | (86,394 | ) | | (80,108 | ) |
| Noncontrolling interest in PNOI of consolidated 80% joint ventures | (633 | ) | | (823 | ) | | (851 | ) | |
| Noncontrolling interest in PNOI of consolidated joint ventures | | (199 | ) | | (314 | ) | | (633 | ) |
| PNOI from 50% owned unconsolidated investment | 897 |
| | 906 |
| | 842 |
| 976 |
| | 869 |
| | 897 |
|
| PROPERTY NET OPERATING INCOME (PNOI) | $ | 194,187 |
| | 178,697 |
| | 167,507 |
| |
| PROPERTY NET OPERATING INCOME ("PNOI") | | $ | 238,316 |
| | 213,179 |
| | 194,187 |
|
Income from real estate operations is comprised of rental income, expense reimbursement pass-through income and other real estate income including lease termination fees. Expenses from real estate operations is comprised of property taxes, insurance, utilities, repair and maintenance expenses, management fees, other operating costs and bad debt expense. Generally, the Company’s most significant operating expenses are property taxes and insurance. Tenant leases may be net leases in which the total operating expenses are recoverable, modified gross leases in which some of the operating expenses are recoverable, or gross leases in which no expenses are recoverable (gross leases represent only a small portion of the Company’s total leases). Increases in property
operating expenses are fully recoverable under net leases and recoverable to a high degree under modified gross leases. Modified gross leases often include base year amounts, and expense increases over these amounts are recoverable. The Company’s exposure to property operating expenses is primarily due to vacancies and leases for occupied space that limit the amount of expenses that can be recovered.
The following table presents reconciliations of Net Income to PNOI, Same PNOI and Same PNOI Excluding Income from Lease Terminations for the three fiscal years ended December 31, 2017, 20162019, 2018 and 2015.2017.
|
| | | | | | | | | |
| | Years Ended December 31, |
| 2017 | | 2016 | | 2015 |
| | | (In thousands) | | |
| NET INCOME | $ | 83,589 |
| | 96,094 |
| | 48,399 |
|
| (Gain) loss on sales of real estate investments | (21,855 | ) | | (42,170 | ) | | (2,903 | ) |
| (Gain), net of loss, on sales of non-operating real estate | (293 | ) | | (733 | ) | | (123 | ) |
| Interest income | (247 | ) | | (255 | ) | | (258 | ) |
| Other income | (119 | ) | | (86 | ) | | (90 | ) |
| Interest rate swap ineffectiveness | — |
| | 5 |
| | — |
|
| Depreciation and amortization | 83,874 |
| | 77,935 |
| | 73,290 |
|
| Company's share of depreciation from unconsolidated investment | 124 |
| | 124 |
| | 122 |
|
| Interest expense | 34,775 |
| | 35,213 |
| | 34,666 |
|
| General and administrative expense | 14,972 |
| | 13,232 |
| | 15,091 |
|
| Acquisition costs �� | — |
| | 161 |
| | 164 |
|
| Noncontrolling interest in PNOI of consolidated 80% joint ventures | (633 | ) | | (823 | ) | | (851 | ) |
| PROPERTY NET OPERATING INCOME (PNOI) | $ | 194,187 |
| | 178,697 |
| | 167,507 |
|
|
| | | | | | | | | |
| | Years Ended December 31, |
| 2019 | | 2018 | | 2017 |
| | | (In thousands) | | |
| NET INCOME | $ | 123,340 |
| | 88,636 |
| | 83,589 |
|
| (Gain) on sales of real estate investments | (41,068 | ) | | (14,273 | ) | | (21,855 | ) |
| (Gain) on sales of non-operating real estate | (83 | ) | | (86 | ) | | (293 | ) |
| (Gain) on sales of other assets | — |
| | (427 | ) | | — |
|
| Net loss on other | 884 |
| | 497 |
| | — |
|
| Interest income | (129 | ) | | (156 | ) | | (247 | ) |
| Other revenue | (574 | ) | | (1,374 | ) | | (119 | ) |
| Indirect leasing costs | 411 |
| | — |
| | — |
|
| Depreciation and amortization | 104,724 |
| | 91,704 |
| | 83,874 |
|
| Company's share of depreciation from unconsolidated investment | 141 |
| | 128 |
| | 124 |
|
| Interest expense | 34,463 |
| | 35,106 |
| | 34,775 |
|
| General and administrative expense | 16,406 |
| | 13,738 |
| | 14,972 |
|
| Noncontrolling interest in PNOI of consolidated joint ventures | (199 | ) | | (314 | ) | | (633 | ) |
| PROPERTY NET OPERATING INCOME ("PNOI") | 238,316 |
| | 213,179 |
| | 194,187 |
|
| PNOI from 2018 and 2019 Acquisitions | (6,520 | ) | | (1,444 | ) | | * |
|
| PNOI from 2018 and 2019 Development and Value-Add Properties | (20,321 | ) | | (7,771 | ) | | * |
|
| PNOI from 2018 and 2019 Operating Property Dispositions | (3,812 | ) | | (4,783 | ) | | * |
|
| Other PNOI | 247 |
| | 372 |
| | * |
|
| SAME PNOI | 207,910 |
| | 199,553 |
| | * |
|
| Net lease termination fee (income) from same properties | (1,257 | ) | | (294 | ) | | * |
|
| SAME PNOI EXCLUDING INCOME FROM LEASE TERMINATIONS | $ | 206,653 |
| | 199,259 |
| | * |
|
* Same property metrics are not applicable to the year ended December 31, 2017, as the same property metrics for 2019 and 2018 are based on operating properties owned during the entire current and prior year reporting periods (January 1, 2018 through December 31, 2019).
The Company believes FFO is a meaningful supplemental measure of operating performance for equity REITs. The Company believes excluding depreciation and amortization in the calculation of FFO is appropriate since real estate values have historically increased or decreased based on market conditions. FFO is not considered as an alternative to net income (determined in accordance with GAAP) as an indication of the Company’s financial performance, nor is it a measure of the Company’s liquidity or indicative of funds available to provide for the Company’s cash needs, including its ability to make distributions. In addition, FFO, as reported by the Company, may not be comparable to FFO reported by other REITs that do not define the term in accordance with the current NAREIT definition. The Company’s key drivers affecting FFO are changes in PNOI (as discussed above), interest rates, the amount of leverage the Company employs and general and administrative expenses.
The following table presents reconciliations of Net Income Attributable to EastGroup Properties, Inc. Common Stockholders to FFO Attributable to Common Stockholders for the three fiscal years ended December 31, 2017, 20162019, 2018 and 2015.2017.
| | | | Years Ended December 31, | Years Ended December 31, | |
| 2017 | | 2016 | | 2015 | 2019 | | 2018 | | 2017 | |
| (In thousands, except per share data) | (In thousands, except per share data) | |
| NET INCOME ATTRIBUTABLE TO EASTGROUP PROPERTIES, INC. COMMON STOCKHOLDERS | $ | 83,183 |
| | 95,509 |
| | 47,866 |
| $ | 121,662 |
| | 88,506 |
| | 83,183 |
| |
| Depreciation and amortization | 83,874 |
| | 77,935 |
| | 73,290 |
| 104,724 |
| | 91,704 |
| | 83,874 |
| |
| Company's share of depreciation from unconsolidated investment | 124 |
| | 124 |
| | 122 |
| 141 |
| | 128 |
| | 124 |
| |
| Depreciation and amortization from noncontrolling interest | (224 | ) | | (214 | ) | | (206 | ) | (186 | ) | | (182 | ) | | (224 | ) | |
| (Gain) loss on sales of real estate investments | (21,855 | ) | | (42,170 | ) | | (2,903 | ) | |
FUNDS FROM OPERATIONS (FFO) ATTRIBUTABLE TO COMMON STOCKHOLDERS | $ | 145,102 |
| | 131,184 |
| | 118,169 |
| |
| Net (gain) on sales of real estate investments | | (41,068 | ) | | (14,273 | ) | | (21,855 | ) | |
| Net (gain) on sales of non-operating real estate | | (83 | ) | | (86 | ) | | (293 | ) | |
| Net (gain) on sales of other assets | | — |
| | (427 | ) | | — |
| |
| Noncontrolling interest in gain on sales of real estate investments of consolidated joint ventures | | 1,671 |
| | — |
| | — |
| |
FUNDS FROM OPERATIONS ("FFO") ATTRIBUTABLE TO COMMON STOCKHOLDERS | | $ | 186,861 |
| | 165,370 |
| | 144,809 |
| |
| Net income attributable to common stockholders per diluted share | $ | 2.44 |
| | 2.93 |
| | 1.49 |
| $ | 3.24 |
| | 2.49 |
| | 2.44 |
| |
| Funds from operations attributable to common stockholders per diluted share | 4.26 |
| | 4.02 |
| | 3.67 |
| |
Funds from operations ("FFO") attributable to common stockholders per diluted share | | 4.98 |
| | 4.66 |
| 1.0 | (1) | 4.25 |
| 1.0 | (1) |
| Diluted shares for earnings per share and funds from operations | 34,047 |
| | 32,628 |
| | 32,196 |
| 37,527 |
| | 35,506 |
| | 34,047 |
| |
| |
| (1) | The Company initially reported FFO of $4.67 per share and $4.26 per share during the years ended December 31, 2018 and 2017, respectively. In connection with the Company's adoption of the Nareit Funds from Operations White Paper - 2018 Restatement, the Company now excludes from FFO the gains and losses on sales of non-operating real estate and assets incidental to the Company’s business and therefore adjusted the prior year results, including the Company’s FFO for 2018 and 2017, to conform to the updated definition of FFO. |
The Company analyzes the following performance trends in evaluating the progressrevenues and expenses of the Company:
The change in FFO change per share represents the increase or decrease in FFO per share from the current year compared to the prior year. For 2017,2019, FFO was $4.26$4.98 per share compared with $4.02$4.66 per share for 2016,2018, an increase of 6.0% per share.6.9%.
For the year ended December 31, 2017,2019, PNOI increased by $15,490,000,$25,137,000, or 8.7%11.8%, compared to 2016.2018. PNOI increased $10,327,000$12,550,000 from newly developed and redevelopedvalue-add properties, $4,765,000$8,357,000 from same property operations and $3,355,000$5,076,000 from 20162018 and 20172019 acquisitions; PNOI decreased $2,767,000$971,000 from operating properties sold in 20162018 and 2017.2019.
The same property net operating income change in Same PNOI represents the PNOI increase or decrease for the same operating properties owned during the entire current period and prior year reporting period.periods (January 1, 2018 through December 31, 2019). Same PNOI, excluding income from same propertieslease terminations, increased 2.8%3.7% for the year ended December 31, 2017,2019, compared to 2016.2018.
Same property average occupancy represents the average month-end percentage of leased square footage for which the lease term has commenced as compared to the total leasable square footage for the same operating properties owned during the entire current period and prior year reporting period.periods (January 1, 2018 through December 31, 2019). Same property average occupancy for the year ended December 31, 2017,2019, was 96.8%96.9% compared to 96.5%96.3% for 2016.2018.
Occupancy is the percentage of leased square footage for which the lease term has commenced as compared to the total leasable square footage as of the close of the reporting period. Occupancy at December 31, 20172019 was 96.4%97.1%. Quarter-end occupancy ranged from 94.9%96.5% to 96.8%97.4% over the previous four quarters ended December 31, 20162018 to September 30, 2017.2019.
Rental rate change represents the rental rate increase or decrease on new and renewal leases compared to the prior leases on the same space. For the year 2017,2019, rental rate increases on new and renewal leases (20.5%(16.8% of total square footage) averaged 16.8%17.3%.
| |
| • | Lease termination fee income is included in Income from real estate operations. For the year 2019, lease termination fee income was $1,336,000 compared to $294,000 for 2018. |
Lease termination fee income is included in Income from real estate operations. For the year 2017, lease termination fee income was $468,000 compared to $812,000 for 2016.
| |
| • | In 2018 and prior years, the Company’s bad debt expense was included in Expenses from real estate operations. In 2019, the Company began recording reserves for uncollectible rent as reductions to Income from real estate operations. The Company recorded reserves for uncollectible rent of $448,000 in 2019 compared to $784,000 in 2018. |
Bad debt expense is included in Expenses from real estate operations. The Company recorded bad debt expense of $499,000 in 2017 and $992,000 in 2016.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
The Company’s management considers the following accounting policies and estimates to be critical to the reported operations of the Company.
Real Estate Properties
The Company applied the principles of Accounting Standards Codification (ASC) 805, Business Combinations, when accounting for purchases of real estate until its adoption of ASU 2017-01, Business Combinations (Topic 805): Clarifying the Definition of a Business, which was effective October 1, 2016. ASU 2017-01 provides a new framework for determining whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. Under the new guidance, companies are required to utilize an initial screening test to determine whether substantially all of the fair value of the gross assets acquired (or disposed of) is concentrated in a single identifiable asset or a group of similar identifiable assets; if so, the set is not a business. EastGroup has determined that some of its real estate property acquisitions may be considered to be acquisitions of groups of similar identifiable assets; therefore, the acquisitions are not considered to be acquisitions of a business.
The Financial Accounting Standards Board (FASB)("FASB") Codification provides guidance on how to properly determine the allocation of the purchase price among the individual components of both the tangible and intangible assets based on their respective fair values. Goodwill for business combinations is recorded when the purchase price exceeds the fair value of the assets and liabilities acquired. Factors considered by management in allocating the cost of the properties acquired include an estimate of carrying costs during the expected lease-up periods considering current market conditions and costs to execute similar leases. The allocation to tangible assets (land, building and improvements) is based upon management’s determination of the value of the property as if it were vacant using discounted cash flow models. The Company determines whether any financing assumed is above or below market based upon comparison to similar financing terms for similar properties. The cost of the properties acquired may be adjusted based on indebtedness assumed from the seller that is determined to be above or below market rates.
The purchase price is also allocated among the following categories of intangible assets: the above or below market component of in-place leases, the value of in-place leases, and the value of customer relationships. The value allocable to the above or below market component of an acquired in-place lease is determined based upon the present value (using a discount rate reflecting the risks associated with the acquired leases) of the difference between (i) the contractual amounts to be paid pursuant to the lease over its remaining term, and (ii) management’s estimate of the amounts that would be paid using faircurrent market ratesrents over the remaining term of the lease. The amounts allocated to above and below market leases are included in Other assets and Other liabilities, respectively, on the Consolidated Balance Sheets and are amortized to rental income over the remaining terms of the respective leases. The total amount of intangible assets is further allocated to in-place lease values and customer relationship values based upon management’s assessment of their respective values. These intangible assets are included in Other assets on the Consolidated Balance Sheets and are amortized over the remaining term of the existing lease, or the anticipated life of the customer relationship, as applicable.
For properties under development and value-add properties acquired in the development stage, costs associated with development (i.e., land, construction costs, interest expense, property taxes and other costs associated with development) are aggregated into the total capitalized costs of the property. Included in these costs are management’s estimates for the portions of internal costs (primarily personnel costs) deemed related to such development activities. The internal costs are allocated to specific development propertiesprojects based on development activity.
The Company reviews its real estate investments for impairment of value whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. If any real estate investment is considered permanently impaired, a loss is recorded to reduce the carrying value of the property to its estimated fair value. Real estate assets classified as held for sale are reported at the lower of the carrying amount or fair value less estimated costs of sale. The evaluation of real estate investments involves many subjective assumptions dependent upon future economic events that affect the ultimate value of the property. Currently, the Company’s management has not identified any impairment charges which should be recorded nor has it recorded any impairment charges in recent years. In the event of impairment, the property’s basis would be reduced, and the impairment would be recognized as a current period charge on the Consolidated Statements of Income and Comprehensive Income.
Valuation of Receivables
The Company is subject to tenant defaults and bankruptcies that could affect the collection of outstanding receivables. In order to mitigate these risks, the Company performs credit reviews and analyses on prospective tenants before significant leases are executed and on existing tenants before properties are acquired. On a quarterly basis, the Company evaluates outstanding receivables and estimates the allowance for doubtful accounts. Management specifically analyzes aged receivables, customer credit-worthiness, historical bad debts and current economic trends when evaluating the adequacy of the allowance for doubtful accounts. The Company believes its allowance for doubtful accounts is adequate for its outstanding receivables for the periods presented. In the event the allowance for doubtful accounts is insufficient for an account that is subsequently written off, additional bad debt expense would be recognized as a current period charge on the Consolidated Statements of Income and Comprehensive Income.
Tax Status
EastGroup, a Maryland corporation, has qualified as a real estate investment trust under Sections 856-860 of the Internal Revenue Code and intends to continue to qualify as such. To maintain its status as a REIT, the Company is required to distribute at least 90% of its ordinary taxable income to its stockholders. If the Company has a capital gain, it has the option of (i) deferring recognition of the capital gain through a tax-deferred exchange, (ii) declaring and paying a capital gain dividend on any recognized net capital gain resulting in no corporate level tax, or (iii) retaining and paying corporate income tax on its net long-term capital gain, with shareholders reporting their proportional share of the undistributed long-term capital gain and receiving a credit or refund of their share of the tax paid by the Company. The Company distributed all of its 2017, 2016 and 2015 taxable income to its stockholders. Accordingly, no significant provisions for income taxes were necessary.
FINANCIAL CONDITION
EastGroup’s Total Assets were $1,953,221,0002,546,078,000 at December 31, 20172019, an increase of $127,457,000414,373,000 from December 31, 20162018. Total Liabilitiesincreased$18,193,000116,747,000 to $1,202,091,0001,343,749,000, and Total Equityincreased$109,264,000297,626,000 to $751,130,0001,202,329,000 during the same period. The following paragraphs explain these changes in detail.
Assets
Real Estate Properties
Real estate properties increased $222,386,000$291,086,000 during the year ended December 31, 2017,2019. The increase was primarily due toto: (i) operating property acquisitions; (ii) the transfer of 1213 properties from Development, as and value-add properties to Real estate properties (as detailed under Development below; the purchase of the operating properties detailed below; and
Value-Add Properties below); (iii) capital improvements at the Company's properties.properties; and (iv) right of use assets for the Company's ground leases. These increases were partially offset by the operating property sales discussed below.
During 2017,2019, EastGroup acquired the following operating properties:
|
| | | | | | | | | | | |
| REAL ESTATE OPERATING PROPERTIES ACQUIRED IN 2017 | | Location | | Size | | Date Acquired | | Cost (1) |
| | | | | (Square feet) | | | | (In thousands) |
| Shiloh 400 | | Atlanta, GA | | 238,000 |
| | 02/07/2017 | | $ | 18,712 |
|
| Broadmoor Commerce Park | | Atlanta, GA | | 84,000 |
| | 04/26/2017 | | 5,363 |
|
| Southpark Corporate Center 5-7 | | Austin, TX | | 99,000 |
| | 05/12/2017 | | 9,590 |
|
| Hurricane Shoals 1 & 2 | | Atlanta, GA | | 260,000 |
| | 12/12/2017 | | 17,874 |
|
| Total Acquisitions | | | | 681,000 |
| | | | $ | 51,539 |
|
|
| | | | | | | | | | | |
| REAL ESTATE PROPERTIES ACQUIRED IN 2019 | | Location | | Size | | Date Acquired | | Cost (1) |
| | | | | (Square feet) | | | | (In thousands) |
| Airways Business Center | | Denver, CO | | 382,000 |
| | 05/20/2019 | | $ | 45,775 |
|
| 385 Business Park | | Greenville, SC | | 155,000 |
| | 07/31/2019 | | 12,138 |
|
| Grand Oaks 75 Business Center 1 | | Tampa, FL | | 169,000 |
| | 09/06/2019 | | 16,554 |
|
| Siempre Viva Distribution Center 2 | | San Diego, CA | | 60,000 |
| | 10/04/2019 | | 8,590 |
|
| Rocky Point Distribution Center 1 | | San Diego, CA | | 118,000 |
| | 12/17/2019 | | 22,244 |
|
| Total Real Estate Property Acquisitions | | | | 884,000 |
| | | | $ | 105,301 |
|
| |
| (1) | Total cost of the operating properties acquired was $54,879,000,$113,218,000, of which $51,539,000$105,301,000 was allocated to Real estate properties as indicated above. The Company allocated $9,984,000$22,750,000 of the total purchase price to land using third party land valuations for the AtlantaDenver, Greenville, Tampa and AustinSan Diego markets. The market values are considered to be Level 3 inputs as defined by FASB Accounting Standards Codification ("ASC") 820, Fair Value Measurement (see Note 18 in the Notes to Consolidated Financial Statements for additional information on ASC 820). Intangibles associated with the purchases of real estate were allocated as follows: $9,597,000 to in-place lease intangibles and $344,000 to above market leases (both included in Other assets on the Consolidated Balance Sheets), and $2,024,000 to below market leases (included in Other liabilities on the Consolidated Balance Sheets). |
Also during 2019, EastGroup acquired 6.5 acres of operating land in San Diego for $13,386,000. In connection with the acquisition, the Company allocated value to land and below market leases. EastGroup recorded land of $13,979,000 based on third party land valuations for the San Diego market. The market values are considered to be Level 3 inputs as defined by ASC 820, Fair Value Measurement. This land, which is included in Real estate properties on the Consolidated Balance Sheets, is currently leased to a tenant that operates a parking lot on the site. The Company recorded $593,000 to below market leases in connection with this land acquisition. These costs are amortized over the remaining life of the associated lease in place at the time of acquisition.
EastGroup also acquired 41.6 acres of operating land in San Diego for $15,282,000. This land, which is included in Real estate properties on the Consolidated Balance Sheets, is currently leased (on a month-to-month basis) to various tenants operating outdoor storage on the site.
During 2019, EastGroup also acquired a small parcel of land (0.5 acres) adjacent to its Yosemite Distribution Center in Milpitas (San Francisco), California, for $472,000. This land is included in Real estate properties on the Consolidated Balance Sheets.
During the year ended December 31, 2019, the Company made capital improvements of $38,656,000 on existing and acquired properties (included in the Capital Expenditures table under Results of Operations). Also, the Company incurred costs of $5,264,000 on development and value-add projects subsequent to transfer to Real estate properties; the Company records these expenditures as development and value-add costs on the Consolidated Statements of Cash Flows.
EastGroup sold the following operating properties during 2019: World Houston 5 in Houston, Altamonte Commerce Center in Orlando, Southpointe Distribution Center in Tucson and three of its four University Business Center buildings in Santa Barbara,
California. The properties (617,000 square feet combined) were sold for $68.5 million and the Company recognized gains on the sales of $41.1 million.
During 2019, EastGroup sold (through eminent domain procedures) a small parcel of land (0.2 acres) adjacent to its Siempre Viva Distribution Center 1 in San Diego for $185,000, and the Company recognized a gain on the sale of $83,000.
In connection with the Company’s January 1, 2019 implementation of the new lease accounting standard, EastGroup recorded right of use assets for its ground leases (classified as operating leases). The unamortized balance of the Company’s right of use assets for its ground leases was $11,997,000 as of December 31, 2019. The right of use assets for ground leases are included in Real estate properties on the Consolidated Balance Sheets.
Development and Value-Add Properties
EastGroup’s investment in Development and value-add properties at December 31, 2019 consisted of properties in lease-up and under construction of $315,794,000 and prospective development (primarily land) of $104,205,000. The Company’s total investment in Development and value-add properties at December 31, 2019 was $419,999,000 compared to $263,664,000 at December 31, 2018. Total capital invested for development and value-add properties during 2019 was $318,288,000, which primarily consisted of costs of $265,609,000 as detailed in the Development and Value-Add Properties Activity table below, $47,415,000 as detailed in the Development and Value-Add Properties Transferred to Real Estate Properties During 2019 table below and costs of $5,264,000 on projects subsequent to transfer to Real estate properties. The capitalized costs incurred on development and value-add projects subsequent to transfer to Real estate properties include capital improvements at the properties and do not include other capitalized costs associated with development (i.e., interest expense, property taxes and internal personnel costs).
EastGroup capitalized internal development costs of $6,918,000 during the year ended December 31, 2019, compared to $4,696,000 during 2018.
During 2019, EastGroup acquired the following value-add properties:
|
| | | | | | | | | | | |
| VALUE-ADD PROPERTIES ACQUIRED IN 2019 | | Location | | Size | | Date Acquired | | Cost (1) |
| | | | | (Square feet) | | | | (In thousands) |
| Logistics Center 6 & 7 | | Dallas, TX | | 142,000 |
| | 04/23/2019 | | $ | 12,605 |
|
| Arlington Tech Centre 1 & 2 | | Dallas, TX | | 151,000 |
| | 08/16/2019 | | 12,615 |
|
| Grand Oaks 75 Business Center 2 | | Tampa, FL | | 150,000 |
| | 09/06/2019 | | 12,815 |
|
| Interstate Commons Distribution Center 2 | | Phoenix, AZ | | 142,000 |
| | 10/21/2019 | | 9,386 |
|
| Southwest Commerce Center | | Las Vegas, NV | | 196,000 |
| | 10/30/2019 | | 25,609 |
|
| Rocky Point Distribution Center 2 | | San Diego, CA | | 109,000 |
| | 12/17/2019 | | 19,238 |
|
| Total Value-Add Property Acquisitions | | | | 890,000 |
| | | | $ | 92,268 |
|
| |
| (1) | Total cost of the value-add properties acquired was $92,623,000, of which $92,268,000 was allocated to Development and value-add properties as indicated above. The Company allocated $24,028,000 of the total purchase price to land using third party land valuations for the Dallas, Tampa, Phoenix, Las Vegas and San Diego markets. The market values are considered to be Level 3 inputs as defined by ASC 820, Fair Value Measurement (see Note 18 in the Notes to Consolidated Financial Statements for additional information on ASC 820). The Logistics Center acquisition is under a ground lease; therefore, no value was allocated to land for this transaction. Intangibles associated with the purchases of real estate were allocated as follows: $3,610,000$423,000 to in-place lease intangibles and $115,000 to above market leases (both included(included in Other assets on the Consolidated Balance Sheets), and $385,000$68,000 to below market leases (included in Other liabilities on the Consolidated Balance Sheets). These costs are amortized over the remaining lives of the associated leases in place at the time of acquisition. Costs associated with the value-add property acquisitions, except for the amounts allocated to the acquired lease intangibles, are included in the Development and Value-Add Properties Activity table below. |
During the year ended December 31, 2017, the Company made capital improvements of $27,471,000 on existing and acquired properties (included in the Capital Expenditures table under Results of Operations). Also the Company incurred costs of $12,811,000 on development projects subsequent to transfer to Real estate properties; the Company records these expenditures as development costs on the Consolidated Statements of Cash Flows.
EastGroup sold the following operating properties during 2017: Stemmons Circle in Dallas and Techway Southwest I-IV in Houston. The properties (514,000 square feet combined) were sold for $38.0 million and the Company recognized gains on the sales of $21.9 million.
Development
EastGroup’s investment in development at December 31, 2017 consisted of properties in lease-up and under construction of $130,505,000 and prospective development (primarily land) of $111,509,000. The Company’s total investment in development at December 31, 2017 was $242,014,000 compared to $293,908,000 at December 31, 2016. Total capital invested for development during 2017 was $124,938,000, which primarily consisted of costs of $93,395,000 and $14,819,000 as detailed in the development activity table below and costs of $12,811,000 on development projects subsequent to transfer to Real estate properties. The capitalized costs incurred on development projects subsequent to transfer to Real estate properties include capital improvements at the properties and do not include other capitalized costs associated with development (i.e., interest expense, property taxes and internal personnel costs).
EastGroup capitalized internal development costs of $4,754,000 during the year ended December 31, 2017, compared to $3,789,000 during 2016.
During 2017, the Company acquired Progress Center 1 & 2, a development-stage operating property containing 132,000 square feet, in Atlanta for $10,364,000, of which $10,312,000 was allocated to Development. The Company allocated $1,297,000 of the total purchase price to land using third party land valuations for the Atlanta market. Intangibles associated with the purchase of real estate were allocated as follows: $52,000 to in-place lease intangibles (included in Other assets on the Consolidated Balance Sheets). These costs are amortized over the remaining lives of the associated leases in place at the time of acquisition. Costs associated with the development-stage operating property acquisitions, except for the amounts allocated to in-place lease intangibles, are included in the development activity table below.
During 20172019, EastGroup purchased 88140 acres of development land in San Antonio, Austin, AtlantaHouston, Dallas and CharlotteTampa for $12,226,000.$34,289,000. Costs associated with these acquisitions are included in the development activityDevelopment and Value-Add Properties Activity table. These increases were offset by the sale of 19 acres of land for $3,778,000 and the transfer of 1213 development projects to Real estate properties during 20172019 with a total investment of $160,108,000$156,689,000 as of the date of transfer.
|
| | | | | | | | | | | | | | | | | | |
| DEVELOPMENT ACTIVITY | | | | Costs Incurred | | | | |
| | | | Costs Transferred in 2017 (1) | | For the Year Ended 12/31/17 | | Cumulative as of 12/31/17 | | Estimated Total Costs (2) | | Anticipated Building Conversion Date |
| | | | | (In thousands) | | |
| LEASE-UP | | Building Size (Square feet) | | | | | | | | | | |
| Alamo Ridge IV, San Antonio, TX | | 97,000 |
| | $ | — |
| | 2,152 |
| | 7,097 |
| | 8,300 |
| | 03/18 |
Weston, Ft. Lauderdale, FL (3) | | 134,000 |
| | — |
| | 1,239 |
| | 15,520 |
| | 16,000 |
| | 03/18 |
| Oak Creek VII, Tampa, FL | | 116,000 |
| | 2,153 |
| | 3,978 |
| | 6,131 |
| | 7,500 |
| | 04/18 |
Progress Center 1 & 2, Atlanta, GA (4) | | 132,000 |
| | — |
| | 10,333 |
| | 10,333 |
| | 11,100 |
| | 04/18 |
| Eisenhauer Point 3, San Antonio, TX | | 71,000 |
| | — |
| | 3,411 |
| | 6,159 |
| | 6,800 |
| | 06/18 |
| SunCoast 4, Ft. Myers, FL | | 93,000 |
| | — |
| | 2,865 |
| | 9,120 |
| | 10,000 |
| | 06/18 |
| Steele Creek VII, Charlotte, NC | | 120,000 |
| | 2,393 |
| | 5,404 |
| | 7,797 |
| | 8,600 |
| | 09/18 |
| Horizon XII, Orlando, FL | | 140,000 |
| | 3,825 |
| | 7,405 |
| | 11,230 |
| | 12,100 |
| | 12/18 |
| Total Lease-Up | | 903,000 |
| | 8,371 |
| | 36,787 |
| | 73,387 |
| | 80,400 |
| | |
| UNDER CONSTRUCTION | | | | | | | | | | | | |
| Country Club V, Tucson, AZ | | 300,000 |
| | — |
| | 10,656 |
| | 13,951 |
| | 24,200 |
| | 04/18 |
| Kyrene 202 III, IV & V, Phoenix, AZ | | 166,000 |
| | 2,280 |
| | 9,263 |
| | 11,543 |
| | 13,800 |
| | 02/19 |
| CreekView 121 3 & 4, Dallas, TX | | 158,000 |
| | 3,701 |
| | 6,610 |
| | 10,311 |
| | 14,200 |
| | 03/19 |
| Eisenhauer Point 5, San Antonio, TX | | 98,000 |
| | 1,253 |
| | 4,551 |
| | 5,804 |
| | 7,500 |
| | 03/19 |
| Eisenhauer Point 6, San Antonio, TX | | 85,000 |
| | 878 |
| | 3,172 |
| | 4,050 |
| | 5,200 |
| | 03/19 |
| Horizon X, Orlando, FL | | 104,000 |
| | 2,101 |
| | 1,449 |
| | 3,550 |
| | 8,000 |
| | 04/19 |
| Falcon Field, Phoenix, AZ | | 96,000 |
| | 1,733 |
| | 1,214 |
| | 2,947 |
| | 9,000 |
| | 05/19 |
| Airport Commerce Center 3, Charlotte, NC | | 96,000 |
| | 1,653 |
| | 80 |
| | 1,733 |
| | 7,300 |
| | 07/19 |
| Settlers Crossing 1, Austin, TX | | 77,000 |
| | 1,494 |
| | 62 |
| | 1,556 |
| | 7,400 |
| | 10/19 |
| Settlers Crossing 2, Austin, TX | | 83,000 |
| | 1,606 |
| | 67 |
| | 1,673 |
| | 8,000 |
| | 10/19 |
| Total Under Construction | | 1,263,000 |
| | 16,699 |
| | 37,124 |
| | 57,118 |
| | 104,600 |
| | |
| PROSPECTIVE DEVELOPMENT (PRIMARILY LAND) | | Estimated Building Size (Square feet) | | | | | | | | | | |
| Phoenix, AZ | | — |
| | (4,013 | ) | | 120 |
| | — |
| | | | |
Tucson, AZ (5) | | — |
| | — |
| | (417 | ) | | — |
| | | | |
| Ft. Myers, FL | | 570,000 |
| | — |
| | 469 |
| | 14,112 |
| | | | |
| Miami, FL | | 850,000 |
| | — |
| | 3,632 |
| | 30,876 |
| | | | |
| Orlando, FL | | 418,000 |
| | (5,926 | ) | | 917 |
| | 11,120 |
| | | | |
| Tampa, FL | | 32,000 |
| | (2,153 | ) | | 32 |
| | 1,560 |
| | | | |
| Atlanta, GA | | 196,000 |
| | — |
| | 1,207 |
| | 1,207 |
| | | | |
| Jackson, MS | | 28,000 |
| | — |
| | — |
| | 706 |
| | | | |
| Charlotte, NC | | 655,000 |
| | (4,046 | ) | | 1,472 |
| | 6,729 |
| | | | |
| Austin, TX | | 180,000 |
| | (3,100 | ) | | 6,120 |
| | 3,020 |
| | | | |
| Dallas, TX | | 491,000 |
| | (3,701 | ) | | 975 |
| | 9,596 |
| | | | |
El Paso, TX (6) | | — |
| | — |
| | (2,444 | ) | | — |
| | | | |
Houston, TX (7) | | 1,476,000 |
| | — |
| | (184 | ) | | 21,190 |
| | | | |
| San Antonio, TX | | 965,000 |
| | (2,131 | ) | | 7,585 |
| | 11,393 |
| | | | |
| Total Prospective Development | | 5,861,000 |
| | (25,070 | ) | | 19,484 |
| | 111,509 |
| | | | |
| | | 8,027,000 |
| | $ | — |
| | 93,395 |
| | 242,014 |
| | | | |
| COMPLETED DEVELOPMENT AND TRANSFERRED TO REAL ESTATE PROPERTIES DURING 2017 | | Building Size (Square feet) | | | | | | | | | | Building Conversion Date |
| Eisenhauer Point 1 & 2, San Antonio, TX | | 201,000 |
| | $ | — |
| | 19 |
| | 15,795 |
| | | | 01/17 |
South 35th Avenue, Phoenix, AZ (8) | | 125,000 |
| | — |
| | — |
| | 1,664 |
| | | | 01/17 |
| Alamo Ridge III, San Antonio, TX | | 135,000 |
| | — |
| | 28 |
| | 10,587 |
| | | | 02/17 |
Parc North 1-4, Dallas, TX (9) | | 446,000 |
| | — |
| | 132 |
| | 32,252 |
| | | | 02/17 |
| Madison IV & V, Tampa, FL | | 145,000 |
| | — |
| | 549 |
| | 8,074 |
| | | | 03/17 |
Jones Corporate Park, Las Vegas, NV (10) | | 416,000 |
| | — |
| | 275 |
| | 39,815 |
| | | | 04/17 |
| Steele Creek VI, Charlotte, NC | | 137,000 |
| | — |
| | 519 |
| | 7,525 |
| | | | 04/17 |
| Ten Sky Harbor, Phoenix, AZ | | 64,000 |
| | — |
| | 100 |
| | 5,365 |
| | | | 04/17 |
| Horizon V, Orlando, FL | | 141,000 |
| | — |
| | 4,814 |
| | 9,249 |
| | | | 05/17 |
| Horizon VII, Orlando, FL | | 109,000 |
| | — |
| | 1,375 |
| | 8,266 |
| | | | 06/17 |
| Eisenhauer Point 4, San Antonio, TX | | 85,000 |
| | — |
| | 2,544 |
| | 5,197 |
| | | | 07/17 |
| CreekView 121 1 & 2, Dallas, TX | | 193,000 |
| | — |
| | 4,464 |
| | 16,319 |
| | | | 08/17 |
| Total Transferred to Real Estate Properties | | 2,197,000 |
| | $ | — |
| | 14,819 |
| | 160,108 |
| | (11) | | |
|
| | | | | | | | | | | | | | | | | | |
DEVELOPMENT AND VALUE-ADD PROPERTIES ACTIVITY | | | | Costs Incurred | | | | |
| | | | Costs Transferred in 2019 (1) | | For the Year Ended 12/31/19 | | Cumulative as of 12/31/19 | | Projected Total Costs (2) | | Anticipated Building Conversion Date |
| | | | | (In thousands) | | |
| LEASE-UP | | Building Size (Square feet) | | | | | | | | | | |
Logistics Center 6 & 7, Dallas, TX (3) | | 142,000 |
| | $ | — |
| | 15,735 |
| | 15,735 |
| | 16,400 |
| | 01/20 |
| Settlers Crossing 1, Austin, TX | | 77,000 |
| | — |
| | 2,999 |
| | 9,259 |
| | 10,200 |
| | 01/20 |
| Settlers Crossing 2, Austin, TX | | 83,000 |
| | — |
| | 1,360 |
| | 8,475 |
| | 9,200 |
| | 01/20 |
| Parc North 5, Dallas, TX | | 100,000 |
| | — |
| | 1,736 |
| | 8,689 |
| | 9,200 |
| | 02/20 |
| Airport Commerce Center 3, Charlotte, NC | | 96,000 |
| | — |
| | 2,763 |
| | 8,556 |
| | 9,100 |
| | 03/20 |
| Horizon VIII & IX, Orlando, FL | | 216,000 |
| | 4,967 |
| | 11,634 |
| | 16,601 |
| | 18,800 |
| | 04/20 |
| Ten West Crossing 8, Houston, TX | | 132,000 |
| | — |
| | 3,174 |
| | 9,764 |
| | 10,900 |
| | 04/20 |
| Tri-County Crossing 1 & 2, San Antonio, TX | | 203,000 |
| | — |
| | 6,491 |
| | 15,386 |
| | 16,700 |
| | 04/20 |
| CreekView 121 5 & 6, Dallas, TX | | 139,000 |
| | — |
| | 7,546 |
| | 13,151 |
| | 16,200 |
| | 06/20 |
| Parc North 6, Dallas, TX | | 96,000 |
| | 2,552 |
| | 5,738 |
| | 8,290 |
| | 10,100 |
| | 07/20 |
Arlington Tech Centre 1 & 2, Dallas, TX (3) | | 151,000 |
| | — |
| | 13,277 |
| | 13,277 |
| | 15,100 |
| | 08/20 |
| Gateway 5, Miami, FL | | 187,000 |
| | 11,944 |
| | 11,161 |
| | 23,105 |
| | 23,500 |
| | 09/20 |
Grand Oaks 75 2, Tampa, FL (3) | | 150,000 |
| | — |
| | 13,115 |
| | 13,115 |
| | 13,600 |
| | 09/20 |
Southwest Commerce Center, Las Vegas, NV (3) | | 196,000 |
| | — |
| | 26,613 |
| | 26,613 |
| | 30,100 |
| | 10/20 |
| SunCoast 6, Ft. Myers, FL | | 81,000 |
| | 3,915 |
| | 4,019 |
| | 7,934 |
| | 9,200 |
| | 10/20 |
Rocky Point 2, San Diego, CA (3) | | 109,000 |
| | — |
| | 19,275 |
| | 19,275 |
| | 20,600 |
| | 12/20 |
| Steele Creek IX, Charlotte, NC | | 125,000 |
| | 1,766 |
| | 7,354 |
| | 9,120 |
| | 9,800 |
| | 12/20 |
| Total Lease-Up | | 2,283,000 |
| | 25,144 |
| | 153,990 |
| | 226,345 |
| | 248,700 |
| | |
| UNDER CONSTRUCTION | | | | | | | | | | | | |
| SunCoast 8, Ft. Myers, FL | | 77,000 |
| | 4,361 |
| | 123 |
| | 4,484 |
| | 9,000 |
| | 05/20 |
| Gilbert Crossroads A & B, Phoenix, AZ | | 140,000 |
| | 3,221 |
| | 10,729 |
| | 13,950 |
| | 16,000 |
| | 01/21 |
| Hurricane Shoals 3, Atlanta, GA | | 101,000 |
| | 3,890 |
| | 2,739 |
| | 6,629 |
| | 8,800 |
| | 03/21 |
Interstate Commons 2, Phoenix, AZ (3) | | 142,000 |
| | — |
| | 9,882 |
| | 9,882 |
| | 11,800 |
| | 03/21 |
| Tri-County Crossing 3 & 4, San Antonio, TX | | 203,000 |
| | 2,334 |
| | 6,364 |
| | 8,698 |
| | 14,700 |
| | 05/21 |
| World Houston 44, Houston, TX | | 134,000 |
| | 1,546 |
| | 3,244 |
| | 4,790 |
| | 9,100 |
| | 05/21 |
| Ridgeview 1 & 2, San Antonio, TX | | 226,000 |
| | 2,499 |
| | 4,032 |
| | 6,531 |
| | 18,500 |
| | 06/21 |
| Creekview 121 7 & 8, Dallas, TX | | 137,000 |
| | 5,489 |
| | 1,310 |
| | 6,799 |
| | 16,300 |
| | 07/21 |
| Northwest Crossing 1-3, Houston, TX | | 278,000 |
| | 6,109 |
| | 5,426 |
| | 11,535 |
| | 25,700 |
| | 07/21 |
| Settlers Crossing 3 & 4, Austin, TX | | 173,000 |
| | 4,030 |
| | 4,059 |
| | 8,089 |
| | 18,400 |
| | 07/21 |
| LakePort 1-3, Dallas, TX | | 194,000 |
| | 3,542 |
| | 4,520 |
| | 8,062 |
| | 22,500 |
| | 09/21 |
| Total Under Construction | | 1,805,000 |
| | 37,021 |
| | 52,428 |
| | 89,449 |
| | 170,800 |
| | |
| PROSPECTIVE DEVELOPMENT (PRIMARILY LAND) | | Estimated Building Size (Square feet) | | | | | | | | | | |
| Phoenix, AZ | | 178,000 |
| | (3,221 | ) | | 785 |
| | 4,373 |
| | | | |
| Ft. Myers, FL | | 329,000 |
| | (8,276 | ) | | 2,457 |
| | 7,503 |
| | | | |
| Miami, FL | | 463,000 |
| | (11,944 | ) | | 9,798 |
| | 34,185 |
| | | | |
| Orlando, FL | | — |
| | (4,967 | ) | | 323 |
| | 1,075 |
| | | | |
| Tampa, FL | | 349,000 |
| | — |
| | 4,241 |
| | 5,801 |
| | | | |
| Atlanta, GA | | — |
| | (3,890 | ) | | 3,164 |
| | — |
| | | | |
| Jackson, MS | | 28,000 |
| | — |
| | — |
| | 706 |
| | | | |
| Charlotte, NC | | 475,000 |
| | (1,766 | ) | | 1,884 |
| | 7,327 |
| | | | |
| Austin, TX | | — |
| | (4,030 | ) | | 288 |
| | — |
| | | | |
| Dallas, TX | | 997,000 |
| | (11,583 | ) | | 18,979 |
| | 19,588 |
| | | | |
| Houston, TX | | 1,223,000 |
| | (13,126 | ) | | 16,135 |
| | 19,448 |
| | | | |
| San Antonio, TX | | 373,000 |
| | (5,987 | ) | | 1,137 |
| | 4,199 |
| | | | |
| Total Prospective Development | | 4,415,000 |
| | (68,790 | ) | | 59,191 |
| | 104,205 |
| | | | |
| | | 8,503,000 |
| | $ | (6,625 | ) | | 265,609 |
| | 419,999 |
| | | | |
| The Development and Value-Add Properties Activity table is continued on the following page. |
Footnotes for the Development Activity table are on the following page. |
| | | | | | | | | | | | | | | | | | |
| DEVELOPMENT AND VALUE-ADD PROPERTIES TRANSFERRED TO REAL ESTATE PROPERTIES DURING 2019 | | | | Costs Incurred | | | | |
| | | | Costs Transferred in 2019 (1) | | For the Year Ended 12/31/19 | | Cumulative as of 12/31/19 | | | | |
| | | Building Size (Square feet) | | (In thousands) | | | | Building Conversion Date |
| | | | | | | | | | | |
Siempre Viva I, San Diego, CA (3) | | 115,000 |
| | $ | — |
| | — |
| | 14,075 |
| | | | 01/19 |
| CreekView 121 3 & 4, Dallas, TX | | 158,000 |
| | — |
| | 1,739 |
| | 15,539 |
| | | | 03/19 |
| Horizon VI, Orlando, FL | | 148,000 |
| | — |
| | 3,682 |
| | 11,907 |
| | | | 03/19 |
| Horizon XI, Orlando, FL | | 135,000 |
| | — |
| | 507 |
| | 9,230 |
| | | | 04/19 |
| Falcon Field, Phoenix, AZ | | 97,000 |
| | — |
| | 181 |
| | 8,413 |
| | | | 05/19 |
| Gateway 1, Miami, FL | | 200,000 |
| | — |
| | 3,402 |
| | 23,643 |
| | | | 05/19 |
| SunCoast 5, Ft. Myers, FL | | 81,000 |
| | — |
| | 1,335 |
| | 7,870 |
| | | | 05/19 |
| Steele Creek V, Charlotte, NC | | 54,000 |
| | — |
| | 2,223 |
| | 5,537 |
| | | | 07/19 |
| Broadmoor 2, Atlanta, GA | | 111,000 |
| | — |
| | 1,478 |
| | 7,892 |
| | | | 11/19 |
| Eisenhauer Point 9, San Antonio, TX | | 82,000 |
| | 1,154 |
| | 5,175 |
| | 6,329 |
| | | | 11/19 |
| World Houston 43, Houston, TX | | 86,000 |
| | 1,041 |
| | 5,381 |
| | 6,422 |
| | | | 11/19 |
| Eisenhauer Point 7 & 8, San Antonio, TX | | 336,000 |
| | — |
| | 9,790 |
| | 22,880 |
| | | | 12/19 |
| World Houston 45, Houston, TX | | 160,000 |
| | 4,430 |
| | 12,522 |
| | 16,952 |
| | | | 12/19 |
| Total Transferred to Real Estate Properties | | 1,763,000 |
| | $ | 6,625 |
| | 47,415 |
| | 156,689 |
| | (4) | | |
| |
| (1) | Represents costs transferred from Prospective Development (primarily land) to Under Construction during the period. Negative amounts represent land inventory costs transferred to Under Construction. |
| |
| (2) | Included in these costs are development obligations of $29.0$59.3 million and tenant improvement obligations of $5.8$7.5 million on properties under development. |
| |
| (3) | This project wasRepresents value-add projects acquired by EastGroup on 11/1/16 and underwent redevelopment.EastGroup. |
| |
| (4) | This project was acquired by EastGroup on 12/12/17 during the lease-up phase. |
| |
(5) | Negative amount represents land inventory costs transferred to Real Estate Properties for storage yard and parking lot expansion. |
| |
(6) | Negative amount represents land sold on 11/3/17. |
| |
(7) | Negative amount represents West Road retention ponds and infrastructure conveyed to West Harris County Municipal Utility District. |
| |
(8) | This property was redeveloped from a manufacturing building to a multi-tenant distribution building. |
| |
(9) | This project was acquired by EastGroup on 7/8/16 during the lease-up phase. |
| |
(10) | This project was acquired by EastGroup on 11/15/16 during the lease-up phase. |
| |
(11) | Represents cumulative costs at the date of transfer. |
Accumulated Depreciation
Accumulated depreciation on real estate, development and developmentvalue-add properties increased$55,351,000 $56,224,000 during 20172019 due primarily to depreciation expense of $69,010,000,$86,590,000, offset by the sale of 514,000617,000 square feet of operating properties during the period.2019.
Other Assets
Other assetsincreased$12,474,000 $23,391,000 during 2017.2019. A summary of Other assets follows:
| | | | December 31, | December 31, |
| 2017 | | 2016 | 2019 | | 2018 |
(In thousands) | | Leasing costs (principally commissions) | $ | 72,722 |
| | 65,521 |
| $ | 89,191 |
| | 78,985 |
|
| Accumulated amortization of leasing costs | (27,973 | ) | | (26,340 | ) | (34,963 | ) | | (30,185 | ) |
| Leasing costs (principally commissions), net of accumulated amortization | 44,749 |
| | 39,181 |
| 54,228 |
| | 48,800 |
|
| | | | | | | |
| Straight-line rents receivable | 31,609 |
| | 28,369 |
| |
| Allowance for doubtful accounts on straight-line rents receivable | (48 | ) | | (76 | ) | |
| Straight-line rents receivable, net of allowance for doubtful accounts | 31,561 |
| | 28,293 |
| |
| | | | | |
| Accounts receivable | 6,004 |
| | 6,824 |
| |
| Allowance for doubtful accounts on accounts receivable | (577 | ) | | (809 | ) | |
| Accounts receivable, net of allowance for doubtful accounts | 5,427 |
| | 6,015 |
| |
| | | | | |
| Acquired in-place lease intangibles | 20,690 |
| | 21,231 |
| 28,834 |
| | 21,696 |
|
| Accumulated amortization of acquired in-place lease intangibles | (8,974 | ) | | (8,642 | ) | (11,918 | ) | | (9,833 | ) |
| Acquired in-place lease intangibles, net of accumulated amortization | 11,716 |
| | 12,589 |
| 16,916 |
| | 11,863 |
|
| | | | | | | |
| Acquired above market lease intangibles | 1,550 |
| | 1,594 |
| 1,721 |
| | 1,465 |
|
| Accumulated amortization of acquired above market lease intangibles | (794 | ) | | (736 | ) | (1,007 | ) | | (902 | ) |
| Acquired above market lease intangibles, net of accumulated amortization | 756 |
| | 858 |
| 714 |
| | 563 |
|
| | | | | | | |
| Straight-line rents receivable | | 40,369 |
| | 36,022 |
|
| Accounts receivable | | 5,581 |
| | 5,433 |
|
| Mortgage loans receivable | 4,581 |
| | 4,752 |
| 1,679 |
| | 2,594 |
|
| Interest rate swap assets | 6,034 |
| | 4,546 |
| 3,485 |
| | 6,701 |
|
Right of use assets – Office leases (operating) (1) | | 2,115 |
| | — |
|
| Goodwill | 990 |
| | 990 |
| 990 |
| | 990 |
|
| Prepaid expenses and other assets | 11,490 |
| | 7,606 |
| 18,545 |
| | 8,265 |
|
Total Other assets | $ | 117,304 |
| | 104,830 |
| $ | 144,622 |
| | 121,231 |
|
| |
| (1) | See Note 1(o) in the Notes to Consolidated Financial Statements for information regarding the Company’s January 1, 2019, implementation of FASB ASC 842, Leases, and the Company’s right of use assets for office leases. |
Liabilities
Unsecured bank credit facilitiesincreased$4,719,000 decreased $82,532,000 during 2017,2019, mainly due to proceeds of $391,617,000 exceeding repayments of $387,298,000$1,015,678,000 and new debt issuance costs incurred during the period, partially offset by borrowings of $932,658,000 and the amortization of debt issuance costs during the period. The Company’s credit facilities are described in greater detail below under Liquidity and Capital Resources.
Unsecured debt increased $60,223,000$214,715,000 during 2017,2019, primarily due to the closing of $60$80 million of senior unsecured private placement notes in December 2017,March, the closing of $110 million of senior unsecured private placement notes in August, the closing of a $100 million senior unsecured term loan in October and the amortization of debt issuance costs. These increases were offset by the repayment of a $75 million senior unsecured term loan in July and new debt issuance costs incurred during the period. The borrowings and repayments on Unsecured debt are described in greater detail below under Liquidity and Capital Resources.
Secured debt decreased $57,993,000$55,368,000 during the year ended December 31, 2017.2019. The decrease primarily resulted from the repayment of onetwo mortgage loanloans with a balanceprincipal balances of $45,069,000,$45,725,000 and $47,000, regularly scheduled principal payments of $13,139,000$9,821,000 and amortization of premiums on Secured debt, offset by the amortization of debt issuance costs during the period.
Accounts payable and accrued expenses increased $12,266,000$5,461,000 during 2017.2019. A summary of the Company’s Accounts payable and accrued expenses follows:
| | | | December 31, | December 31, |
| 2017 | | 2016 | 2019 | | 2018 |
(In thousands) | | Property taxes payable | $ | 12,081 |
| | 14,186 |
| $ | 2,696 |
| | 10,718 |
|
| Development costs payable | 9,699 |
| | 9,844 |
| 11,766 |
| | 15,410 |
|
| Real estate improvements and capitalized leasing costs payable | 3,957 |
| | 2,304 |
| 4,636 |
| | 3,911 |
|
| Interest payable | 3,744 |
| | 3,822 |
| 6,370 |
| | 4,067 |
|
| Dividends payable on unvested restricted stock | 1,365 |
| | 1,530 |
| |
| Dividends payable | | 30,714 |
| | 27,738 |
|
Book overdraft (1) | 20,902 |
| | 14,452 |
| 25,771 |
| | 15,048 |
|
| Other payables and accrued expenses | 13,219 |
| | 6,563 |
| 10,071 |
| | 9,671 |
|
Total Accounts payable and accrued expenses | $ | 64,967 |
| | 52,701 |
| $ | 92,024 |
| | 86,563 |
|
| |
| (1) | Represents checks written before the end of the period which have not cleared the bank; therefore, the bank has not yet advanced cash to the Company. When the checks clear the bank, they will be funded through the Company's working cash line of credit. See Note 1(p) in the Notes to Consolidated Financial Statements. |
(1) Represents unfunded outstanding checks for which the bank has not advanced cash to the Company. See Note 1(p)
in the Notes to Consolidated Financial Statements.
Other liabilitiesdecreasedincreased$1,022,00034,471,000 during 20172019. A summary of the Company’s Other liabilities follows:
| | | | December 31, | December 31, |
| 2017 | | 2016 | 2019 | | 2018 |
(In thousands) | | Security deposits | $ | 16,668 |
| | 14,782 |
| $ | 20,351 |
| | 18,432 |
|
| Prepaid rent and other deferred income | 9,352 |
| | 9,795 |
| 13,855 |
| | 12,728 |
|
Operating lease liabilities — Ground leases (1) | | 12,048 |
| | — |
|
Operating lease liabilities — Office leases (1) | | 2,141 |
| | — |
|
| | | | | | | |
| Acquired below market lease intangibles | 4,135 |
| | 4,012 |
| |
| Accumulated amortization of acquired below market lease intangibles | (2,147 | ) | | (1,662 | ) | |
| Acquired below market lease intangibles, net of accumulated amortization | 1,988 |
| | 2,350 |
| |
| Acquired below-market lease intangibles | | 8,616 |
| | 5,891 |
|
| Accumulated amortization of acquired below-market lease intangibles | | (4,494 | ) | | (3,028 | ) |
| Acquired below-market lease intangibles, net of accumulated amortization | | 4,122 |
| | 2,863 |
|
| | | | | | | |
| Interest rate swap liabilities | 695 |
| | 2,578 |
| 678 |
| | — |
|
| Prepaid tenant improvement reimbursements | 124 |
| | 343 |
| 56 |
| | 614 |
|
| Other liabilities | 15 |
| | 16 |
| 15,872 |
| | 15 |
|
Total Other liabilities | $ | 28,842 |
| | 29,864 |
| $ | 69,123 |
| | 34,652 |
|
| |
| (1) | See Note 1(o) in the Notes to Consolidated Financial Statements for information regarding the Company’s January 1, 2019, implementation of FASB ASC 842, Leases, and the Company’s right of use assets and related liabilities for ground leases and office leases. |
Equity
Additional paid-in capitalincreased$111,835,000291,508,000 during 20172019 primarily due to the issuance of common stock under the Company's continuous common equity offering program (as discussed in below under Liquidity and Capital Resources) and stock-based compensation (as discussed in Note 11 in the Notes to Consolidated Financial Statements). EastGroup issued 1,370,4572,388,342 shares of common stock under its continuous common equity offering program with net proceeds to the Company of $109,207,000. $284,710,000.
During 20172019, Distributions in excess of earnings increased decreased $3,377,0009,891,000 as a result of dividends on common stock of $86,560,000 exceeding Net Income Attributable to EastGroup Properties, Inc. Common Stockholders of $83,183,000.$121,662,000 exceeding dividends on common stock of $111,771,000.
Accumulated other comprehensive income increased decreased $3,353,0003,894,000 during 20172019. The increasedecrease resulted from the change in fair value of the Company's interest rate swaps (cash flow hedges) which are further discussed in Notes 12 and 13 in the Notes to Consolidated Financial Statements.
RESULTS OF OPERATIONS
20172019 Compared to 20162018
Net Income Attributable to EastGroup Properties, Inc. Common Stockholders for 20172019 was $83,183,000 ($2.45$121,662,000 ($3.25 per basic and $2.44$3.24 per diluted share) compared to $95,509,000 ($2.93$88,506,000 ($2.50 per basic and diluted share) for 2016. PNOI increased by $15,490,000 ($.45$2.49 per diluted share) for 2017 as compared to 2016. 2018. The following paragraphs explain the change:
| |
| • | PNOI increased by $25,137,000 ($0.67 per diluted share) for 2019 as compared to 2018. PNOI increased $12,550,000 from newly developed and value-add properties, $8,357,000 from same property operations and $5,076,000 from 2018 and 2019 acquisitions; PNOI decreased $971,000 from operating properties sold in 2018 and 2019. For the year 2019, lease termination fee income was $1,336,000 compared to $294,000 for 2018. The Company recorded reserves for uncollectible rent of $448,000 in 2019 and $784,000 in 2018. Straight-lining of rent increased Income from real estate operations by $4,985,000 and $5,116,000 in 2019 and 2018, respectively. |
EastGroup recognized net gains on sales of real estate investments and non-operating real estate of $22,148,000$41,068,000 ($.651.09 per diluted share) compared to $42,903,000$14,273,000 ($1.310.40 per diluted share) during 2016. In addition, 2018.
| |
| • | Depreciation and amortization expense increased by $13,020,000 ($0.35 per diluted share) during 2019 compared to 2018. |
During 2019, EastGroup recognized gain on casualties and amortization expense increased by $5,939,000involuntary conversion of $428,000 ($.170.01 per diluted share), and General and administrative expense increased by $1,740,000compared to $1,245,000 ($.050.04 per diluted share) during 2017 compared to 2016.2018.
PNOI increased by $15,490,000, or 8.7%, for 2017 compared to 2016. PNOI increased $10,327,000 from newly developed and redeveloped properties, $4,765,000 from same property operations and $3,355,000 from 2016 and 2017 acquisitions; PNOI decreased $2,767,000 from operating properties sold in 2016 and 2017. For the year 2017, lease termination fee income was $468,000 compared to $812,000 for 2016. The Company recorded net bad debt expense of $499,000 in 2017 and $992,000 in 2016. Straight-lining of rent increased Income from real estate operations by $3,723,000 and $2,839,000 in 2017 and 2016, respectively.
The CompanyEastGroup signed 138160 leases with certain free rent concessions on 3,919,0004,281,000 square feet during 20172019 with total free rent concessions of $5,672,000$6,114,000 over the lives of the leases, compared to 143132 leases with free rent concessions on 4,176,0003,800,000 square feet with total free rent concessions of $5,286,000$5,944,000 over the lives of the leases in 2016.2018.
The Company’s percentage of leased square footage was 97.0%97.6% at December 31, 2017,2019, compared to 97.3% at December 31, 2016.2018. Occupancy at the end of 20172019 was 96.4%97.1% compared to 96.8% at the end of 2016.December 31, 2018.
Same property average occupancy represents the average month-end percentage of leased square footage for which the lease term has commenced as compared to the total leasable square footage for the same operating properties owned during the entire current period and prior year reporting period.periods (January 1, 2018 through December 31, 2019). Same property average occupancy for the year ended December 31, 2017,2019, was 96.8%96.9% compared to 96.5%96.3% for 2016.2018.
The same property average rental rate calculated in accordance with GAAP represents the average annual rental rates of leases in place for the same operating properties owned during the entire current period and prior year reporting period.periods (January 1, 2018 through December 31, 2019). The same property average rental rate was $5.79$6.10 per square foot for the year ended December 31, 2017,2019, compared to $5.57$5.92 per square foot for 2016.2018.
Interest Expense decreased $438,000$643,000 for 2017the year ended December 31, 2019 compared to 20162018. The following table presents the components of Interest Expense for 20172019 and 20162018:
| | | | Years Ended December 31, | Years Ended December 31, |
| 2017 | | 2016 | | Increase (Decrease) | 2019 | | 2018 | | Increase (Decrease) |
(In thousands) | | VARIABLE RATE INTEREST EXPENSE | |
| | |
| | |
| |
| | |
| | |
|
Unsecured bank credit facilities interest - variable rate (excluding amortization of facility fees and debt issuance costs) | $ | 2,379 |
| | 1,583 |
| | 796 |
| $ | 5,756 |
| | 3,736 |
| | 2,020 |
|
| Amortization of facility fees - unsecured bank credit facilities | 670 |
| | 670 |
| | — |
| 790 |
| | 736 |
| | 54 |
|
| Amortization of debt issuance costs - unsecured bank credit facilities | 451 |
| | 450 |
| | 1 |
| 556 |
| | 508 |
| | 48 |
|
| Total variable rate interest expense | 3,500 |
| | 2,703 |
| | 797 |
| 7,102 |
| | 4,980 |
| | 2,122 |
|
| FIXED RATE INTEREST EXPENSE | |
| | |
| | |
| |
| | |
| | |
|
Unsecured bank credit facilities interest - fixed rate (1) (excluding amortization of facility fees and debt issuance costs) | 1,616 |
| | 614 |
| | 1,002 |
| |
Unsecured bank credit facilities interest - fixed rate (1) (2) (excluding amortization of facility fees and debt issuance costs) | | — |
| | 1,001 |
| | (1,001 | ) |
Unsecured debt interest (1) (excluding amortization of debt issuance costs) | 22,425 |
| | 19,245 |
| | 3,180 |
| 28,039 |
| | 24,544 |
| | 3,495 |
|
Secured debt interest (excluding amortization of debt issuance costs) | 12,201 |
| | 16,907 |
| | (4,706 | ) | 6,987 |
| | 10,071 |
| | (3,084 | ) |
| Amortization of debt issuance costs - unsecured debt | 479 |
| | 700 |
| | (221 | ) | 539 |
| | 564 |
| | (25 | ) |
| Amortization of debt issuance costs - secured debt | 319 |
| | 384 |
| | (65 | ) | 249 |
| | 280 |
| | (31 | ) |
| Total fixed rate interest expense | 37,040 |
| | 37,850 |
| | (810 | ) | 35,814 |
| | 36,460 |
| | (646 | ) |
| Total interest | 40,540 |
| | 40,553 |
| | (13 | ) | 42,916 |
| | 41,440 |
| | 1,476 |
|
| Less capitalized interest | (5,765 | ) | | (5,340 | ) | | (425 | ) | (8,453 | ) | | (6,334 | ) | | (2,119 | ) |
| TOTAL INTEREST EXPENSE | $ | 34,775 |
| | 35,213 |
| | (438 | ) | $ | 34,463 |
| | 35,106 |
| | (643 | ) |
| |
| (1) | Includes interest on the Company's unsecured bank credit facilities and unsecured debt with fixed interest rates per the debt agreements or effectively fixed interest rates due to interest rate swaps, as discussed in Note 13 in the Notes to Consolidated Financial Statements. |
| |
| (2) | The Company had designated an interest rate swap to an $80 million unsecured bank credit facility draw that effectively fixed the interest rate on the $80 million draw to 2.020% through the interest rate swap's maturity date. This swap matured on August 15, 2018, and the $80 million draw has reverted to the variable interest rate associated with the Company's unsecured bank credit facilities. |
EastGroup's variable rate interest expense increased by $797,000$2,122,000 for 20172019 as compared to 20162018 primarily due to increases in the Company's weighted average interest rate and average borrowings on its unsecured bank credit facilities as shown in the following table:
| | | | | Years Ended December 31, | | Years Ended December 31, |
| | | 2017 | | 2016 | | Increase (Decrease) | | 2019 | | 2018 | | Increase (Decrease) |
| | | (In thousands, except rates of interest) | | (In thousands, except rates of interest) |
| Average borrowings on unsecured bank credit facilities - variable rate | | $ | 114,751 |
| | 106,352 |
| | 8,399 |
| | $ | 172,175 |
| | 141,223 |
| | 30,952 |
|
Weighted average variable interest rates (excluding amortization of facility fees and debt issuance costs) | | 2.07 | % | | 1.49 | % | | |
| | 3.34 | % | | 2.64 | % | | |
|
The Company's fixed rate interest expense decreased by $810,000$646,000 for 20172019 as compared to 20162018 as a result of the secured debt, unsecured debt and fixed rate unsecured bank credit facilities and unsecured debt activity described below.
Secured debt interest decreased by $4,706,000$3,084,000 in 20172019 as compared to 20162018 as a result of regularly scheduled principal payments and debt repayments. Regularly scheduled principal payments on secured debt were $13,139,000$9,821,000 during 20172019 and $17,037,000$11,289,000 in 2016.2018. The Company did not repay any secured debt in 2018. The details of the secured debt repaid in 2016 and 20172019 are shown in the following table:
|
| | | | | | | | |
| SECURED DEBT REPAID IN 2016 AND 2017 | | Interest Rate | | Date Repaid | | Payoff Amount |
| | | | | | | (In thousands) |
| Huntwood and Wiegman I | | 5.68% | | 08/05/2016 | | $ | 24,543 |
|
Alamo Downs, Arion 1-15 & 17, Rampart I-IV, Santan 10 I and
World Houston 16 | | 5.97% | | 09/06/2016 | | 51,194 |
|
| Weighted Average/Total Amount for 2016 | | 5.88% | | | | $ | 75,737 |
|
Arion 16, Broadway VI, Chino, East University I & II, Northpark I-IV, Santan 10 II, 55th Avenue and World Houston 1 & 2, 21 & 23 | | 5.57% | | 08/07/2017 | | $ | 45,069 |
|
| Weighted Average/Total Amount for 2016 and 2017 | | 5.76% | | | | $ | 120,806 |
|
|
| | | | | | | | |
| SECURED DEBT REPAID IN 2019 | | Interest Rate | | Date Repaid | | Payoff Amount |
| | | | | | | (In thousands) |
| Dominguez, Industry I & III, Kingsview, Shaw, Walnut and Washington | | 7.50% | | 04/05/2019 | | $ | 45,725 |
|
| Blue Heron II | | 5.39% | | 12/16/2019 | | 47 |
|
| Weighted Average/Total Amount for 2019 | | 7.50% | | | | $ | 45,772 |
|
EastGroup did not obtain any new secured debt during 20162018 or 2017.2019.
The decrease in secured debt interest expense was partially offset by increases in interestInterest expense from fixed rate unsecured bank credit facilities anddecreased by $1,001,000 during 2019 as compared to 2018 due to the August 15, 2018 maturity of an interest rate swap designated to an $80 million draw on the Company's unsecured debt. The Company'sbank credit facilities. See footnote (2) in the interest expense summary table above for additional details.
Interest expense from fixed rate unsecured bank credit facilitiesdebt increased by $1,002,000$3,495,000 during 20172019 as compared to 2016. In August 2016, EastGroup repaid (with no penalty) an $80 million unsecured term loan with an effectively fixed interest rate of 2.770% and an original maturity date of August 15, 2018. On the same day, the Company borrowed $80 million through its $300 million unsecured bank credit facility; the maturity date for the credit facility is July 30, 2019. The Company re-designated the interest rate swap that was previously applied to the $80 million unsecured term loan to the $80 million unsecured bank credit facility borrowing. The $80 million unsecured bank credit facility draw has an effectively fixed interest rate of 2.020% through the interest rate swap's maturity date of August 15, 2018.
The Company's interest expense from unsecured debt increased by $3,180,000 during 2017 as compared to 20162018 as a result of the Company's unsecured debt activity described below. The details of the unsecured debt obtained in 20162018 and 20172019 are shown in the following table:
|
| | | | | | | | | | |
| NEW UNSECURED DEBT IN 2016 and 2017 | | Effective Interest Rate | | Date Obtained | | Maturity Date | | Amount |
| | | | | | | | | (In thousands) |
$65 Million Unsecured Term Loan (1) | | 2.863% | | 04/01/2016 | | 04/01/2023 | | $ | 65,000 |
|
$40 Million Unsecured Term Loan (2) | | 2.335% | | 07/29/2016 | | 07/30/2021 | | 40,000 |
|
| $60 Million Senior Unsecured Notes | | 3.480% | | 12/15/2016 | | 12/15/2024 | | 60,000 |
|
| $40 Million Senior Unsecured Notes | | 3.750% | | 12/15/2016 | | 12/15/2026 | | 40,000 |
|
| Weighted Average/Total Amount for 2016 | | 3.114% | | | | | | $ | 205,000 |
|
| $60 Million Senior Unsecured Notes | | 3.460% | | 12/13/2017 | | 12/13/2024 | | $ | 60,000 |
|
| Weighted Average/Total Amount for 2016 and 2017 | | 3.192% | | | | | | $ | 265,000 |
|
|
| | | | | | | | | | |
| NEW UNSECURED DEBT IN 2018 and 2019 | | Effective Interest Rate | | Date Obtained | | Maturity Date | | Amount |
| | | | | | | | | (In thousands) |
| $60 Million Senior Unsecured Notes | | 3.93% | | 04/10/2018 | | 04/10/2028 | | $ | 60,000 |
|
| $80 Million Senior Unsecured Notes | | 4.27% | | 03/28/2019 | | 03/28/2029 | | 80,000 |
|
| $35 Million Senior Unsecured Notes | | 3.54% | | 08/15/2019 | | 08/15/2031 | | 35,000 |
|
| $75 Million Senior Unsecured Notes | | 3.47% | | 08/19/2019 | | 08/19/2029 | | 75,000 |
|
$100 Million Senior Unsecured Term Loan (1) | | 2.75% | | 10/10/2019 | | 10/10/2026 | | 100,000 |
|
| Weighted Average/Total Amount for 2018 and 2019 | | 3.53% | | | | | | $ | 350,000 |
|
| |
| (1) | The interest rate on this unsecured term loan is comprised of LIBOR plus 165150 basis points subject to a pricing grid for changes in the Company's coverage ratings. The Company entered into an interest rate swap to convert the loan's LIBOR rate to a fixed interest rate, providing the Company a weighted average effective interest rate on the term loan of 2.863% as of December 31, 2017. See Note 13 in the Notes to Consolidated Financial Statements for additional information on the interest rate swaps. |
| |
(2) | The interest rate on this unsecured term loan is comprised of LIBOR plus 110 basis points subject to a pricing grid for changes in the Company's coverage ratings. The Company entered into an interest rate swap to convert the loan's LIBOR rate to a fixed interest rate, providing the Company a weighted average effective interest rate on the term loan of 2.335% as of December 31, 2017. See Note 13 in the Notes to Consolidated Financial Statements for additional information on the interest rate swaps. |
Additionally, in December 2017,providing the Company refinanced a $75 million unsecuredweighted average effective interest rate on the term loan resulting in a 30 basis point reductionof 2.75% as of December 31, 2019. See Note 13 in the loan's interest rate. The loan, which has a maturity date of December 20, 2020, now has an effectively fixedNotes to Consolidated Financial Statements for additional information on the interest rate swaps.
The increase in interest expense from the new unsecured debt was partially offset by the repayment of 3.452%.the following unsecured loans during 2018 and 2019:
|
| | | | | | | | |
| UNSECURED DEBT REPAID IN 2018 AND 2019 | | Interest Rate | | Date Repaid | | Payoff Amount |
| | | | | | | (In thousands) |
| $50 Million Senior Unsecured Term Loan | | 3.91% | | 06/21/2018 | | $ | 50,000 |
|
| $75 Million Senior Unsecured Term Loan | | 2.85% | | 07/31/2019 | | 75,000 |
|
| Weighted Average/Total Amount for 2018 and 2019 | | 3.27% | | | | $ | 125,000 |
|
Interest costs during the period of construction of real estate properties are capitalized and offset against interest expense. Capitalized interest increased by $425,000$2,119,000 for 20172019 as compared to 2016.2018. The increase is due to changes in development spending and borrowing rates.
Depreciation and amortization expense increased $5,939,000$13,020,000 for 20172019 compared to 20162018 primarily due to the operating properties acquired by the Company during 20162018 and 20172019 and the properties transferred from Development and value-add properties in 20162018 and 2017,2019, partially offset by operating properties sold in 20162018 and 2017. 2019.
Gain net of loss, on sales of real estate investments, which includes gains and losses on the sales of operating properties, decreased $20,315,000increased $26,795,000 for 20172019 as compared to 2016. Gain, net of loss, on sales of non-operating real estate (included in Other on the Consolidated Statements of Income and Comprehensive Income) decreased $440,000 for 2017 as compared to 2016.2018. The Company's 20162018 and 20172019 sales transactions are described below in Real Estate Sold and Held for Sale/Discontinued Operations.
Real Estate Improvements
Real estate improvements for EastGroup’s operating properties for the years ended December 31, 2017 and 2016 were as follows:
|
| | | | | | | | |
| | Estimated Useful Life | | Years Ended December 31, |
| | 2017 | | 2016 |
| | | (In thousands) |
| Upgrade on Acquisitions | 40 yrs | | $ | 161 |
| | 394 |
|
| Tenant Improvements: | | | |
| | |
| New Tenants | Lease Life | | 11,413 |
| | 9,976 |
|
| Renewal Tenants | Lease Life | | 3,357 |
| | 2,748 |
|
| Other: | | | |
| | |
|
| Building Improvements | 5-40 yrs | | 3,362 |
| | 5,113 |
|
| Roofs | 5-15 yrs | | 6,197 |
| | 2,785 |
|
| Parking Lots | 3-5 yrs | | 1,880 |
| | 1,377 |
|
| Other | 5 yrs | | 1,101 |
| | 764 |
|
Total Real Estate Improvements (1) | | | $ | 27,471 |
| | 23,157 |
|
| |
(1) | Reconciliation of Total Real Estate Improvements to Real Estate Improvements on the Consolidated Statements of Cash Flows: |
|
| | | | | | | |
| | | Years Ended December 31, |
| | 2017 | | 2016 |
| | (In thousands) |
| Total Real Estate Improvements | | $ | 27,471 |
| | 23,157 |
|
| Change in Real Estate Property Payables | | (1,313 | ) | | 621 |
|
| Real Estate Improvements on the Consolidated Statements of Cash Flows | | $ | 26,158 |
| | 23,778 |
|
Capitalized Leasing Costs
The Company’s leasing costs (principally commissions) are capitalized and included in Other assets. The costs are amortized over the terms of the associated leases and are included in Depreciation and amortization expense. Capitalized leasing costs for the years ended December 31, 2017 and 2016 were as follows:
|
| | | | | | | | |
| | Estimated Useful Life | | Years Ended December 31, |
| | 2017 | | 2016 |
| | | (In thousands) |
| Development | Lease Life | | $ | 5,571 |
| | 4,217 |
|
| New Tenants | Lease Life | | 5,782 |
| | 5,273 |
|
| Renewal Tenants | Lease Life | | 4,907 |
| | 4,978 |
|
| Total Capitalized Leasing Costs | | | $ | 16,260 |
| | 14,468 |
|
| Amortization of Leasing Costs | | | $ | 10,329 |
| | 9,932 |
|
Real Estate Sold and Held for Sale/Discontinued Operations
The Company considers a real estate property to be held for sale when it meets the criteria established under ASC 360, Property, Plant and Equipment, including when it is probable that the property will be sold within a year. Real estate properties held for sale are reported at the lower of the carrying amount or fair value less estimated costs to sell and are not depreciated while they are held for sale.
In accordance with FASB Accounting Standards Update (ASU) 2014-08, Presentation of Financial Statements (Topic 205) and Property, Plant, and Equipment (Topic 360), Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity, the Company would report a disposal of a component of an entity or a group of components of an entity in discontinued
operations if the disposal represents a strategic shift that has (or will have) a major effect on an entity's operations and financial results when the component or group of components meets the criteria to be classified as held for sale or when the component or group of components is disposed of by sale or other than by sale. In addition, the Company would provide additional disclosures about both discontinued operations and the disposal of an individually significant component of an entity that does not qualify for discontinued operations presentation in the financial statements. EastGroup performs an analysis of properties sold to determine whether the sales qualify for discontinued operations presentation.
The Company did not classify any properties as held for sale as of December 31, 2017 and 2016.
The Company does not consider its sales in 2016 and 2017 to be disposals of a component of an entity or a group of components of an entity representing a strategic shift that has (or will have) a major effect on the entity's operations and financial results.
In 2017, Eastgroup sold Stemmons Circle and Techway Southwest I-IV. The properties, which contain 514,000 square feet and are located in Houston and Dallas, were sold for $38.0 million and the Company recognized net gains on the sales of $21.9 million. The Company also sold 19 acres of land in El Paso and Dallas for $3,778,000 and recognized net gains of $293,000.
During 2016, EastGroup sold the following operating properties: Northwest Point Distribution and Service Centers, North Stemmons II and III, America Plaza, Lockwood Distribution Center, West Loop Distribution Center 1 & 2, two of its four Interstate Commons Distribution Center buildings, Castilian Research Center and Memphis I. The properties, which contain 1,256,000 square feet and are located in Houston, Dallas, Phoenix, Santa Barbara and Memphis, were sold for $75.7 million and the Company recognized net gains on the sales of $42.2 million. The Company also sold 25 acres of land in Dallas, Orlando and Houston for $5.4 million and recognized net gains on sales of $733,000.
The gains and losses on the sales of land are included in Other on the Consolidated Statements of Income and Comprehensive Income, and the gains and losses on the sales of operating properties are included in Gain, net of loss, on sales of real estate investments. See Notes 1(f) and 2 in the Notes to Consolidated Financial Statements for more information related to discontinued operations and gains and losses on sales of real estate investments.
2016 Compared to 2015
Net Income Attributable to EastGroup Properties, Inc. Common Stockholders for 2016 was $95,509,000 ($2.93 per basic and diluted share) compared to $47,866,000 ($1.49 per basic and diluted share) for 2015. EastGroup recognized Gain, net of loss, on sales of real estate investments of $42,170,000 during 2016 and $2,903,000 during 2015.
PNOI increased by $11,190,000, or 6.7%, for 2016 compared to 2015. PNOI increased $7,345,000 from newly developed and redeveloped properties, $4,943,000 from same property operations and $2,488,000 from 2015 and 2016 acquisitions; PNOI decreased $3,447,000 from properties sold in 2015 and 2016. For the year 2016, lease termination fee income was $812,000 compared to $225,000 for 2015. The Company recorded net bad debt expense of $992,000 in 2016 and $747,000 in 2015. Straight-lining of rent increased Income from real estate operations by $2,839,000 and $1,889,000 in 2016 and 2015, respectively.
The Company signed 143 leases with certain free rent concessions on 4,176,000 square feet during 2016 with total free rent concessions of $5,286,000 over the lives of the leases, compared to 164 leases with free rent concessions on 3,678,000 square feet with total free rent concessions of $4,024,000 over the lives of the leases in 2015.
The Company’s percentage of leased square footage was 97.3% at December 31, 2016, compared to 97.2% at December 31, 2015. Occupancy at the end of 2016 was 96.8% compared to 96.1% at the end of 2015.
Same property average occupancy for the year ended December 31, 2016, was 96.4% compared to 96.1% for 2015. The same property average rental rate was $5.61 per square foot for the year ended December 31, 2016, compared to $5.26 per square foot for 2015.
Interest expense increased $547,000 in 2016 compared to 2015. The following table presents the components of Interest expense for 2016 and 2015:
|
| | | | | | | | | |
| | Years Ended December 31, |
| 2016 | | 2015 | | Increase (Decrease) |
| (In thousands) |
| VARIABLE RATE INTEREST EXPENSE | |
| | |
| | |
|
Unsecured bank credit facilities interest - variable rate (excluding amortization of facility fees and debt issuance costs) | $ | 1,583 |
| | 1,420 |
| | 163 |
|
| Amortization of facility fees - unsecured bank credit facilities | 670 |
| | 608 |
| | 62 |
|
| Amortization of debt issuance costs - unsecured bank credit facilities | 450 |
| | 493 |
| | (43 | ) |
| Total variable rate interest expense | 2,703 |
| | 2,521 |
| | 182 |
|
| FIXED RATE INTEREST EXPENSE | |
| | |
| | |
|
Unsecured bank credit facilities interest - fixed rate (1) (excluding amortization of facility fees and debt issuance costs) | 614 |
| | — |
| | 614 |
|
Unsecured debt interest (1) (excluding amortization of debt issuance costs) | 19,245 |
| | 15,498 |
| | 3,747 |
|
Secured debt interest (excluding amortization of debt issuance costs) | 16,907 |
| | 21,061 |
| | (4,154 | ) |
| Amortization of debt issuance costs - unsecured debt | 700 |
| | 422 |
| | 278 |
|
| Amortization of debt issuance costs - secured debt | 384 |
| | 421 |
| | (37 | ) |
| Total fixed rate interest expense | 37,850 |
| | 37,402 |
| | 448 |
|
| Total interest | 40,553 |
| | 39,923 |
| | 630 |
|
| Less capitalized interest | (5,340 | ) | | (5,257 | ) | | (83 | ) |
| TOTAL INTEREST EXPENSE | $ | 35,213 |
| | 34,666 |
| | 547 |
|
| |
(1) | Includes interest on the Company's unsecured bank credit facilities and unsecured debt with fixed interest rates per the debt agreements or effectively fixed interest rates due to interest rate swaps, as discussed in Note 13 in the Notes to Consolidated Financial Statements. |
The Company's fixed rate interest expense increased by $448,000 for 2016 as compared to 2015 as a result of the fixed rate unsecured bank credit facilities, unsecured debt and secured debt activity described below.
EastGroup's unsecured debt interest increased by $3,747,000 in 2016 as compared to 2015 as a result of the unsecured debt activity described below. The details of the new unsecured debt in 2015 and 2016 are shown in the following table:
|
| | | | | | | | | | |
| NEW UNSECURED DEBT IN 2015 and 2016 | | Effective Interest Rate | | Date Obtained | | Maturity Date | | Amount |
| | | | | | | | | (In thousands) |
$75 Million Unsecured Term Loan (1) | | 3.031% | | 03/02/2015 | | 02/28/2022 | | $ | 75,000 |
|
| $25 Million Senior Unsecured Notes | | 3.970% | | 10/01/2015 | | 10/01/2025 | | 25,000 |
|
| $50 Million Senior Unsecured Notes | | 3.990% | | 10/07/2015 | | 10/07/2025 | | 50,000 |
|
| Weighted Average/Total Amount for 2015 | | 3.507% | | | | | | $ | 150,000 |
|
$65 Million Unsecured Term Loan (2) | | 2.863% | | 04/01/2016 | | 04/01/2023 | | $ | 65,000 |
|
$40 Million Unsecured Term Loan (3) | | 2.335% | | 07/29/2016 | | 07/30/2021 | | 40,000 |
|
| $60 Million Senior Unsecured Notes | | 3.480% | | 12/15/2016 | | 12/15/2024 | | 60,000 |
|
| $40 Million Senior Unsecured Notes | | 3.750% | | 12/15/2016 | | 12/15/2026 | | 40,000 |
|
| Weighted Average/Total Amount for 2016 | | 3.114% | | | | | | $ | 205,000 |
|
| Weighted Average/Total Amount for 2015 and 2016 | | 3.280% | | | | | | $ | 355,000 |
|
| |
(1) | The interest rate on this unsecured term loan is comprised of LIBOR plus 140 basis points subject to a pricing grid for changes in the Company's coverage ratings. The Company entered into an interest rate swap to convert the loan's LIBOR rate to a fixed interest rate, providing the Company a weighted average effective interest rate on the term loan of 3.031% as of December 31, 2016. See Note 13 in the Notes to Consolidated Financial Statements for additional information on the interest rate swaps. |
| |
(2) | The interest rate on this unsecured term loan is comprised of LIBOR plus 165 basis points subject to a pricing grid for changes in the Company's coverage ratings. The Company entered into an interest rate swap to convert the loan's LIBOR rate to a fixed interest rate, providing the Company a weighted average effective interest rate on the term loan of 2.863% as of December 31, 2016. See Note 13 in the Notes to Consolidated Financial Statements for additional information on the interest rate swaps. |
| |
(3) | The interest rate on this unsecured term loan is comprised of LIBOR plus 110 basis points subject to a pricing grid for changes in the Company's coverage ratings. The Company entered into an interest rate swap to convert the loan's LIBOR rate to a fixed interest rate, providing the Company a weighted average effective interest rate on the term loan of 2.335% as of December 31, 2016. See Note 13 in the Notes to Consolidated Financial Statements for additional information on the interest rate swaps. |
In August 2016, EastGroup repaid (with no penalty) an $80 million unsecured term loan with an effectively fixed interest rate of 2.770% and an original maturity date of August 15, 2018. On the same day, the Company borrowed $80 million through its $300 million unsecured bank credit facility; the maturity date for the credit facility is July 30, 2019. The Company re-designated the interest rate swap that was previously applied to the $80 million unsecured term loan to the $80 million unsecured bank credit facility borrowing. The $80 million unsecured bank credit facility draw has an effectively fixed interest rate of 2.020% through the interest rate swap's maturity date of August 15, 2018.
Secured debt interest decreased by $4,154,000 in 2016 as compared to 2015 as a result of regularly scheduled principal payments and debt repayments. Regularly scheduled principal payments on secured debt were $17,037,000 during 2016 and $20,484,000 in 2015. The details of the secured debt repaid in 2015 and 2016 are shown in the following table:
|
| | | | | | | | |
| SECURED DEBT REPAID IN 2015 AND 2016 | | Interest Rate | | Date Repaid | | Payoff Amount |
| | | | | | | (In thousands) |
Beltway II-IV, Commerce Park I, Eastlake, Fairgrounds, Nations Ford,
Techway Southwest III, Wetmore 1-4 and World Houston 15 & 22 | | 5.50% | | 03/06/2015 | | $ | 57,450 |
|
Country Club I, Lake Pointe, Techway Southwest II and
World Houston 19 & 20 | | 4.98% | | 11/06/2015 | | 24,403 |
|
| Weighted Average/Total Amount for 2015 | | 5.34% | | | | $ | 81,853 |
|
| Huntwood and Wiegman I | | 5.68% | | 08/05/2016 | | $ | 24,543 |
|
Alamo Downs, Arion 1-15 & 17, Rampart I-IV, Santan 10 I and
World Houston 16 | | 5.97% | | 09/06/2016 | | 51,194 |
|
| Weighted Average/Total Amount for 2016 | | 5.88% | | | | $ | 75,737 |
|
| Weighted Average/Total Amount for 2015 and 2016 | | 5.60% | | | | $ | 157,590 |
|
EastGroup did not obtain any new secured debt during 2015 and 2016.
EastGroup's variable rate interest expense increased by $182,000 for 2016 as compared to 2015 primarily due to an increase in the Company's weighted average interest rate on unsecured bank credit facilities borrowings, offset by a decrease in average unsecured bank credit facilities borrowings as shown in the following table:
|
| | | | | | | | | | |
| | | Years Ended December 31, |
| | | 2016 | | 2015 | | Increase (Decrease) |
| | | (In thousands, except rates of interest) |
| Average borrowings on unsecured bank credit facilities - variable rate | | $ | 106,352 |
| | 109,777 |
| | (3,425 | ) |
Weighted average variable interest rates (excluding amortization of facility fees and debt issuance costs) | | 1.49 | % | | 1.29 | % | | |
|
Interest costs during the period of construction of real estate properties are capitalized and offset against interest expense. Capitalized interest increased $83,000 for 2016 as compared to 2015.
Depreciation and amortization expense increased $4,645,000 for 2016 compared to 2015 primarily due to the operating properties acquired by the Company in 2015 and 2016 and the properties transferred from Development in 2015 and 2016, partially offset by operating properties sold in 2015 and 2016.
Gain, net of loss, on sales of real estate investments, which includes gains on the sales of operating properties, increased $39,267,000 for 2016 as compared to 2015. Gain, net of loss, on sales of non-operating real estate (included in Other on the Consolidated Statements of Income and Comprehensive Income) increased $610,000 for 2016 as compared to 2015. The Company's 2015 and 2016 sales transactions are described below in Real Estate Sold and Held for Sale/Discontinued Operations.
Real Estate Improvements
Real Estate Improvementsestate improvements for EastGroup’s operating properties for the years ended December 31, 20162019 and 20152018 were as follows:
| | | | Estimated Useful Life | | Years Ended December 31, | Estimated Useful Life | | Years Ended December 31, |
| | 2016 | | 2015 | | 2019 | | 2018 |
| | | (In thousands) | | | (In thousands) |
| Upgrade on Acquisitions | 40 yrs | | $ | 394 |
| | 5 |
| 40 yrs | | $ | 1,863 |
| | 294 |
|
| Tenant Improvements: | | | | | | | | |
| | |
|
| New Tenants | Lease Life | | 9,976 |
| | 10,100 |
| Lease Life | | 13,113 |
| | 12,896 |
|
| Renewal Tenants �� | Lease Life | | 2,748 |
| | 1,936 |
| |
| Renewal Tenants | | Lease Life | | 3,908 |
| | 2,926 |
|
| Other: | | | |
| | |
| | | |
| | |
|
| Building Improvements | 5-40 yrs | | 5,113 |
| | 4,599 |
| 5-40 yrs | | 5,304 |
| | 9,012 |
|
| Roofs | 5-15 yrs | | 2,785 |
| | 7,562 |
| 5-15 yrs | | 12,179 |
| | 9,053 |
|
| Parking Lots | 3-5 yrs | | 1,377 |
| | 808 |
| 3-5 yrs | | 1,455 |
| | 2,878 |
|
| Other | 5 yrs | | 764 |
| | 768 |
| 5 yrs | | 834 |
| | 861 |
|
Total Real Estate Improvements (1) | | | $ | 23,157 |
| | 25,778 |
| | | $ | 38,656 |
| | 37,920 |
|
| |
| (1) | Reconciliation of Total Real Estate Improvements to Real Estate Improvements on the Consolidated Statements of Cash Flows: |
| | | | | Years Ended December 31, | | Years Ended December 31, |
| | 2016 | | 2015 | | 2019 | | 2018 |
| | (In thousands) | | (In thousands) |
| Total Real Estate Improvements | | $ | 23,157 |
| | 25,778 |
| | $ | 38,656 |
| | 37,920 |
|
| Change in Real Estate Property Payables | | 621 |
| | (716 | ) | | (876 | ) | | 581 |
|
| Change in Construction in Progress | | | (5 | ) | | (999 | ) |
| Real Estate Improvements on the Consolidated Statements of Cash Flows | | $ | 23,778 |
| | 25,062 |
| | $ | 37,775 |
| | 37,502 |
|
Capitalized Leasing Costs
The Company’s leasing costs (principally commissions) are capitalized and included in Other assets. The costs are amortized over the terms of the associated leases, and arethe amortization is included in Depreciation and amortization expense. Capitalized leasing costs for the years ended December 31, 20162019 and 20152018 were as follows:
| | | | Estimated Useful Life | | Years Ended December 31, | Estimated Useful Life | | Years Ended December 31, |
| | 2016 | | 2015 | | 2019 | | 2018 |
| | | (In thousands) | | | (In thousands) |
| Development | Lease Life | | $ | 4,217 |
| | 3,824 |
| |
| Development and Value-Add | | Lease Life | | $ | 8,065 |
| | 4,843 |
|
| New Tenants | Lease Life | | 5,273 |
| | 3,893 |
| Lease Life | | 5,900 |
| | 5,880 |
|
| Renewal Tenants | Lease Life | | 4,978 |
| | 3,773 |
| Lease Life | | 5,069 |
| | 5,038 |
|
| Total Capitalized Leasing Costs | | | $ | 14,468 |
| | 11,490 |
| | | $ | 19,034 |
| | 15,761 |
|
| Amortization of Leasing Costs | | | $ | 9,932 |
| | 9,038 |
| | | $ | 13,167 |
| | 11,493 |
|
Real Estate Sold and Held for Sale/Discontinued Operations
The Company considers a real estate property to be held for sale when it meets the criteria established under ASC 360, Property, Plant and Equipment, including when it is probable that the property will be sold within a year. Real estate properties held for sale are reported at the lower of the carrying amount or fair value less estimated costs to sell and are not depreciated while they are held for sale.
The Company did not classify any properties as held for sale as of December 31, 20162019 and 2015.2018.
In accordance with FASB Accounting Standards Update ("ASU") 2014-08, Presentation of Financial Statements (Topic 205) and Property, Plant, and Equipment (Topic 360), Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity, the Company would report a disposal of a component of an entity or a group of components of an entity in discontinued operations if the disposal represents a strategic shift that has (or will have) a major effect on an entity's operations and financial results when the component or group of components meets the criteria to be classified as held for sale or when the component or
group of components is disposed of by sale or other than by sale. In addition, the Company would provide additional disclosures about both discontinued operations and the disposal of an individually significant component of an entity that does not qualify for discontinued operations presentation in the financial statements. EastGroup performs an analysis of properties sold to determine whether the sales qualify for discontinued operations presentation.
The Company does not consider its sales in 20152018 and 20162019 to be disposals of a component of an entity or a group of components of an entity representing a strategic shift that has (or will have) a major effect on the entity's operations and financial results.
During 2016,EastGroup sold the following operating properties during 2019: World Houston 5 in Houston, Altamonte Commerce Center in Orlando, Southpointe Distribution Center in Tucson and three of its four University Business Center buildings in Santa Barbara, California. The properties (617,000 square feet combined) were sold for $68.5 million and the Company recognized gains on the sales of $41.1 million. The Company also sold (through eminent domain procedures) a small parcel of land (0.2 acres) adjacent to its Siempre Viva Distribution Center 1 in San Diego for $185,000 and the Company recognized a gain on the sale of $83,000.
In 2018, EastGroup sold the following operating properties: Northwest Point DistributionWorld Houston 18 in Houston, 56 Commerce Park in Tampa, and Service Centers, North Stemmons II and III, America Plaza, Lockwood35th Avenue Distribution Center West Loop Distribution Center 1 & 2, two of its four Interstate Commons Distribution Center buildings, Castilian Research Center and Memphis I.in Phoenix. The properties which contain 1,256,000a combined 339,000 square feet and are located in Houston, Dallas, Phoenix, Santa Barbara and Memphis, were sold for $75.7 million and the Company$22.9 million. EastGroup recognized net gains on the sales of $42.2$14.3 million. The Company also sold 2511 acres of land in Dallas, Orlando and Houston for $5.4 million and recognized net gains on sales of $733,000.
During 2015, EastGroup sold one operating property, the last of its three Ambassador Row Warehouses in Dallas containing 185,000 square feet, for $5.3$2.6 million and recognized a gain on the sale of $2.9 million. The Company also sold a small parcel of land in New Orleans for $170,000 and recognized a gain of $123,000.$86,000.
The gains and losses on the sales of land are included in Other on the Consolidated Statements of Income and Comprehensive Income, and the gains and losses on the sales of operating properties are included in Gain net of loss, on sales of real estate investments. See Notes 1(f) and 2 in the Notes to Consolidated Financial Statements for more information related to discontinued operations and gains and losses on sales of real estate investments.
2018 Compared to 2017
Net Income Attributable to EastGroup Properties, Inc. Common Stockholders for 2018 was $88,506,000 ($2.50 per basic and $2.49 per diluted share) compared to $83,183,000 ($2.45 per basic and $2.44 per diluted share) for 2017.
| |
| • | PNOI increased by $18,992,000 ($0.53 per diluted share) for 2018 as compared to 2017. PNOI increased $11,900,000 from newly developed and value-add properties, $6,712,000 from same property operations and $2,134,000 from 2017 and 2018 acquisitions; PNOI decreased $1,831,000 from operating properties sold in 2017 and 2018. For the year 2018, lease termination fee income was $294,000 compared to $468,000 for 2017. The Company recorded net bad debt expense of $784,000 in 2018 and $499,000 in 2017. Straight-lining of rent increased Income from real estate operations by $5,116,000 and $3,723,000 in 2018 and 2017, respectively. |
EastGroup recognized gains on sales of real estate investments of $14,273,000 ($0.40 per diluted share) compared to $21,855,000 ($0.64 per diluted share) during 2017.
| |
| • | Depreciation and amortization expense increased by $7,830,000 ($0.22 per diluted share). |
During 2018, EastGroup recognized gain on casualties and involuntary conversion of $1,245,000 ($0.04 per diluted share), compared to zero during 2017.
The Company signed 132 leases with certain free rent concessions on 3,800,000 square feet during 2018 with total free rent concessions of $5,944,000 over the lives of the leases, compared to 138 leases with free rent concessions on 3,919,000 square feet with total free rent concessions of $5,672,000 over the lives of the leases in 2017.
The Company’s percentage of leased square footage was 97.3% at December 31, 2018, compared to 97.0% at December 31, 2017. Occupancy at the end of 2018 was 96.8% compared to 96.4% at the end of 2017.
Same property average occupancy (for the same operating properties owned during the period from January 1, 2017 through December 31, 2018) for the year ended December 31, 2018, was 96.9% compared to 96.6% for 2017. The same property average rental rate was $5.94 per square foot for the year ended December 31, 2018, compared to $5.74 per square foot for 2017.
Interest expense increased $331,000 in 2018 compared to 2017. The following table presents the components of Interest expense for 2018 and 2017:
|
| | | | | | | | | |
| | Years Ended December 31, |
| 2018 | | 2017 | | Increase (Decrease) |
| (In thousands) |
| VARIABLE RATE INTEREST EXPENSE | |
| | |
| | |
|
Unsecured bank credit facilities interest - variable rate (excluding amortization of facility fees and debt issuance costs) | $ | 3,736 |
| | 2,379 |
| | 1,357 |
|
| Amortization of facility fees - unsecured bank credit facilities | 736 |
| | 670 |
| | 66 |
|
| Amortization of debt issuance costs - unsecured bank credit facilities | 508 |
| | 451 |
| | 57 |
|
| Total variable rate interest expense | 4,980 |
| | 3,500 |
| | 1,480 |
|
| FIXED RATE INTEREST EXPENSE | |
| | |
| | |
|
Unsecured bank credit facilities interest - fixed rate (1)(2) (excluding amortization of facility fees and debt issuance costs) | 1,001 |
| | 1,616 |
| | (615 | ) |
Unsecured debt interest (1) (excluding amortization of debt issuance costs) | 24,544 |
| | 22,425 |
| | 2,119 |
|
Secured debt interest (excluding amortization of debt issuance costs) | 10,071 |
| | 12,201 |
| | (2,130 | ) |
| Amortization of debt issuance costs - unsecured debt | 564 |
| | 479 |
| | 85 |
|
| Amortization of debt issuance costs - secured debt | 280 |
| | 319 |
| | (39 | ) |
| Total fixed rate interest expense | 36,460 |
| | 37,040 |
| | (580 | ) |
| Total interest | 41,440 |
| | 40,540 |
| | 900 |
|
| Less capitalized interest | (6,334 | ) | | (5,765 | ) | | (569 | ) |
| TOTAL INTEREST EXPENSE | $ | 35,106 |
| | 34,775 |
| | 331 |
|
| |
| (1) | Includes interest on the Company's unsecured bank credit facilities and unsecured debt with fixed interest rates per the debt agreements or effectively fixed interest rates due to interest rate swaps, as discussed in Note 13 in the Notes to Consolidated Financial Statements. |
| |
| (2) | The Company had designated an interest rate swap to an $80 million unsecured bank credit facility draw that effectively fixed the interest rate on the $80 million draw to 2.020% through the interest rate swap's maturity date. This swap matured on August 15, 2018, and the $80 million draw has reverted to the variable interest rate associated with the Company's unsecured bank credit facilities. |
EastGroup's variable rate interest expense increased by $1,480,000 for 2018 as compared to 2017 primarily due to increases in the Company's weighted average interest rate and average borrowings on its unsecured bank credit facilities as shown in the following table:
|
| | | | | | | | | | |
| | | Years Ended December 31, |
| | | 2018 | | 2017 | | Increase (Decrease) |
| | | (In thousands, except rates of interest) |
| Average borrowings on unsecured bank credit facilities - variable rate | | $ | 141,223 |
| | 114,751 |
| | 26,472 |
|
Weighted average variable interest rates (excluding amortization of facility fees and debt issuance costs) | | 2.64 | % | | 2.07 | % | | |
|
The Company's fixed rate interest expense decreased by $580,000 for 2018 as compared to 2017 as a result of the secured debt, fixed rate unsecured bank credit facilities and unsecured debt activity described below.
Secured debt interest decreased by $2,130,000 in 2018 as compared to 2017 as a result of regularly scheduled principal payments and debt repayments. Regularly scheduled principal payments on secured debt were $11,289,000 during 2018 and $13,139,000 in 2017. The Company did not repay any secured debt in 2018. The details of the secured debt repaid in 2017 are shown in the following table:
|
| | | | | | | | |
| SECURED DEBT REPAID IN 2017 | | Interest Rate | | Date Repaid | | Payoff Amount |
| | | | | | | (In thousands) |
Arion 16, Broadway VI, Chino, East University I & II, Northpark I-IV, Santan 10 II, 55th Avenue and World Houston 1 & 2, 21 & 23 | | 5.57% | | 08/07/2017 | | $ | 45,069 |
|
EastGroup did not obtain any new secured debt during 2017 or 2018.
The Company's interest expense from fixed rate unsecured bank credit facilities decreased by $615,000 during 2018 as compared to 2017 due to the August 15, 2018 maturity of an interest rate swap designated to an $80 million draw on the Company's unsecured bank credit facilities. See footnote (2) in the interest expense summary table above for additional details.
The Company's interest expense from fixed rate unsecured debt increased by $2,119,000 during 2018 as compared to 2017 as a result of the Company's unsecured debt activity described below. The details of the unsecured debt obtained in 2017 and 2018 are shown in the following table:
|
| | | | | | | | | | |
| NEW UNSECURED DEBT IN 2017 and 2018 | | Effective Interest Rate | | Date Obtained | | Maturity Date | | Amount |
| | | | | | | | | (In thousands) |
| $60 Million Senior Unsecured Notes | | 3.460% | | 12/13/2017 | | 12/13/2024 | | $ | 60,000 |
|
| $60 Million Senior Unsecured Notes | | 3.930% | | 04/10/2018 | | 04/10/2028 | | 60,000 |
|
| Weighted Average/Total Amount for 2017 and 2018 | | 3.695% | | | | | | $ | 120,000 |
|
The increase in interest expense from the new unsecured debt was partially offset by the refinancing of two unsecured loans and the repayment of a $50 million unsecured term loan. In December 2017, the Company refinanced a $75 million unsecured term loan, resulting in a 30 basis point reduction in the loan's interest rate. The loan, which has a maturity date of December 20, 2020, now has an effectively fixed interest rate of 3.452%. In February 2018, EastGroup refinanced a $65 million unsecured term loan, resulting in a 55 basis point reduction in the loan's interest rate. The loan, which has a maturity date of April 1, 2023, now has an effectively fixed interest rate of 2.313%. In June 2018, the Company repaid (with no penalty) a $50 million senior unsecured term loan with an effective interest rate of 3.91% and an original maturity date of December 21, 2018.
Interest costs during the period of construction of real estate properties are capitalized and offset against interest expense. Capitalized interest increased by $569,000 for 2018 as compared to 2017. The increase was due to changes in development spending and borrowing rates.
Depreciation and amortization expense increased $7,830,000 for 2018 compared to 2017 primarily due to the operating properties acquired by the Company during 2017 and 2018 and the properties transferred from Development and value-add properties in 2017 and 2018, partially offset by operating properties sold in 2017 and 2018.
Gain on sales of real estate investments, which includes gains on the sales of operating properties, decreased $7,582,000 for 2018 as compared to 2017. The Company's 2017 and 2018 sales transactions are described below in Real Estate Sold and Held for Sale/Discontinued Operations.
Real Estate Improvements
Real Estate Improvements for EastGroup’s operating properties for the years ended December 31, 2018 and 2017 were as follows:
|
| | | | | | | | |
| | Estimated Useful Life | | Years Ended December 31, |
| | 2018 | | 2017 |
| | | (In thousands) |
| Upgrade on Acquisitions | 40 yrs | | $ | 294 |
| | 161 |
|
| Tenant Improvements: | | | | | |
| New Tenants | Lease Life | | 12,896 |
| | 11,413 |
|
| Renewal Tenants | Lease Life | | 2,926 |
| | 3,357 |
|
| Other: | | | |
| | |
|
| Building Improvements | 5-40 yrs | | 9,012 |
| | 3,362 |
|
| Roofs | 5-15 yrs | | 9,053 |
| | 6,197 |
|
| Parking Lots | 3-5 yrs | | 2,878 |
| | 1,880 |
|
| Other | 5 yrs | | 861 |
| | 1,101 |
|
Total Real Estate Improvements (1) | | | $ | 37,920 |
| | 27,471 |
|
| |
| (1) | Reconciliation of Total Real Estate Improvements to Real Estate Improvements on the Consolidated Statements of Cash Flows: |
|
| | | | | | | |
| | | Years Ended December 31, |
| | 2018 | | 2017 |
| | (In thousands) |
| Total Real Estate Improvements | | $ | 37,920 |
| | 27,471 |
|
| Change in Real Estate Property Payables | | 581 |
| | (1,313 | ) |
| Change in Construction in Progress | | (999 | ) | | 1,227 |
|
Real Estate Improvements on the Consolidated Statements of Cash Flows | | $ | 37,502 |
| | 27,385 |
|
Capitalized Leasing Costs
The Company’s leasing costs (principally commissions) are capitalized and included in Other assets. The costs are amortized over the terms of the associated leases, and the amortization is included in Depreciation and amortization expense. Capitalized leasing costs for the years ended December 31, 2018 and 2017 were as follows:
|
| | | | | | | | |
| | Estimated Useful Life | | Years Ended December 31, |
| | 2018 | | 2017 |
| | | (In thousands) |
| Development and Value-Add | Lease Life | | $ | 4,843 |
| | 5,571 |
|
| New Tenants | Lease Life | | 5,880 |
| | 5,782 |
|
| Renewal Tenants | Lease Life | | 5,038 |
| | 4,907 |
|
| Total Capitalized Leasing Costs | | | $ | 15,761 |
| | 16,260 |
|
| Amortization of Leasing Costs | | | $ | 11,493 |
| | 10,329 |
|
Real Estate Held for Sale/Discontinued Operations
The Company did not classify any properties as held for sale as of December 31, 2018 and 2017.
The Company does not consider its sales in 2017 and 2018 to be disposals of a component of an entity or a group of components of an entity representing a strategic shift that has (or will have) a major effect on the entity's operations and financial results.
In 2018, EastGroup sold the following operating properties: World Houston 18 in Houston, 56 Commerce Park in Tampa, and 35th Avenue Distribution Center in Phoenix. The properties contain a combined 339,000 square feet and were sold for $22.9 million. EastGroup recognized gains on the sales of $14.3 million. The Company also sold 11 acres of land in Houston for $2.6 million and recognized a gain on the sale of $86,000.
During 2017, Eastgroup sold Stemmons Circle and Techway Southwest I-IV. The properties, which contain 514,000 square feet and are located in Houston and Dallas, were sold for $38.0 million and the Company recognized net gains on the sales of $21.9 million. The Company also sold 19 acres of land in El Paso and Dallas for $3,778,000 and recognized net gains of $293,000.
The gains and losses on the sales of land are included in Other on the Consolidated Statements of Income and Comprehensive Income, and the gains and losses on the sales of operating properties are included in Gain on sales of real estate investments. See Notes 1(f) and 2 in the Notes to Consolidated Financial Statements for more information related to discontinued operations and gains and losses on sales of real estate investments.
RECENT ACCOUNTING PRONOUNCEMENTS
EastGroup has evaluated all ASUs recently released by the FASB through the date the financial statements were issued and determined that the following ASUs apply to the Company.
In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers, which requires an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. The FASB issued further guidance in ASU 2016-12, Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients, that provides clarifying guidance in certain narrow areas and adds some practical expedients. ASU 2014-09 will replace most existing revenue recognition guidance in U.S. GAAP when it becomes effective. The effective date of ASU 2014-09 was extended by one year by ASU 2015-14, Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date. The new standard was effective for the Company on January 1, 2018, and the Company is using the modified retrospective approach upon adoption. The Company has made significant progress in evaluating the effect of ASU 2014-09 on its consolidated financial statements and related disclosures beginning with the Form 10-Q for the period ending March 31, 2018. The Company has completed its inventory of its sources of revenue and does not believe there will be a material financial statement impact or that its pattern of revenue recognition will be materially impacted by the adoption of ASU 2014-09.
In January 2016, the FASB issued ASU 2016-01, Financial Instruments - Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities,which requires public business entities to use the exit price notion when measuring the fair value of financial instruments for disclosure purposes, requires separate presentation of financial assets and financial liabilities by measurement category and form of financial asset, and eliminates the requirement for public business entities to disclose the methods and significant assumptions used to estimate the fair value that is required to be disclosed for financial instruments measured at amortized costs on the balance sheet. EastGroup adopted ASU 2016-01 effective January 1, 2018. The Company does not anticipate the adoption of ASU 2016-01 will have a material impact on the Company's financial condition or results of operations.
In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842), and in subsequent periods, issued ASU 2018-10, 2018-11, and 2018-20, all of which requires lesseesrelate to recognize the following for all leases (withnew lease accounting guidance. The Company adopted the exception of short-term leases) at the commencement date: (1) anew lease liability, which is a lessee's obligation to make lease payments arising from a lease, measuredaccounting guidance effective January 1, 2019, and has applied its provisions on a discounted basis; and (2) a right-of-use asset, which is an asset that representsprospective basis. The following changes are applicable to the lessee's right to use, or control the use of, a specified asset for the lease term. The Company is a lessee on a limited number of leases, including office and ground leases, and while the adoption of ASU 2016-02 will impact the Company's accounting for office and ground leases, the Company anticipates the impact will not be material to its overallCompany’s financial condition and results of operations. operations:
| |
| • | Lessees are required to recognize the following for all leases (with the exception of short-term leases) at the commencement date: (1) a lease liability, which is a lessee’s obligation to make lease payments arising from a lease, measured on a discounted basis; and (2) a right of use asset, which is an asset that represents the lessee’s right to use, or control the use of, a specified asset for the lease term. The Company is a lessee on a limited number of leases, including office and ground leases. As of January 1, 2019, the Company recorded its right of use asset and lease liability values for its operating leases as follows: office leases of $2,376,000 and ground leases of $10,226,000. The combined values of the Company's right of use assets and lease liabilities for its ground leases and office leases are less than 1% of the Company’s Total assets as of December 31, 2019. |
Lessor accounting is largely unchanged under ASU 2016-02. The Company'sCompany’s primary revenue is rental income; as such, the Company is a lessor on a significant number of leases. The Company is continuing to evaluate the potential impacts of the ASU and believes it will continue to account for its leases in substantially the same manner. The most significant changes for the Company related to lessor accounting include bifurcating its revenue into lease and non-lease components and the new standard's narrow definition of initial direct costs for leases. The new definition will resultinclude:
| |
| ◦ | The new standard’s narrow definition of initial direct costs for leases — The new definition of initial direct costs results in certain costs (primarily legal costs related to lease negotiations) being expensed rather than capitalized upon adoption of the new standard. EastGroup recorded Indirect leasing costs of $411,000 on the Consolidated Statements of Income and Comprehensive Income during 2019. |
| |
| ◦ | The guidance applicable to recording uncollectible rents — Upon adoption of the lease accounting guidance, reserves for uncollectible accounts are recorded as a reduction to revenue. Prior to adoption, reserves for uncollectible accounts were recorded as bad debt expenses. The standard also provides guidance related to calculating the reserves; however, those changes did not impact the Company. |
EastGroup has elected the practical expedient permitting lessors and lessees to make an accounting policy election by class of underlying asset to not separate non-lease components (such as common area maintenance) of a contract from the lease component to which they relate when specific criteria are met. The Company believes its leases meet the criteria.
The Company has applied the provisions of the new standard. Public business entities arelease accounting standard and provided the required to apply the amendmentsdisclosures in ASU 2016-02 for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. EastGroup plans to adopt ASU 2016-02 effective January 1, 2019. The Company is continuing the process of evaluating and quantifying the effect that ASU 2016-02 will havethis Annual Report on its consolidated financial statements and related disclosures beginning with the Form 10-Q for the period ending March 31, 2019.10-K.
In March 2016, the FASB issued ASU 2016-09, Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting. The ASU is intended to improve the accounting for share-based payments and affects all organizations that issue share-based payment awards to their employees. Several aspects of the accounting for share-based payment awards are simplified with the ASU, including income tax consequences, classification of awards as equity or liabilities and classification on the Consolidated Statements of Cash Flows. ASU 2016-09 is effective for public business entities for annual periods beginning after December 15, 2016, and interim periods within those fiscal years; early adoption is permitted. EastGroup
adopted ASU 2016-09 effective January 1, 2017. As a result, the Company elected to reverse compensation cost of any forfeited awards when they occur and will continue to classify the cash flows resulting from remitting cash to the tax authorities for the payment of taxes on the vesting of share-based payment awards as a financing activity on the Consolidated Statements of Cash Flows. In addition, upon vesting of share-based payments, the Company will withhold up to the maximum individual statutory tax rate and classify the entire award as equity. The adoption of ASU 2016-09 did not have a material impact on the Company's financial condition or results of operations.
In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments, which addresses certain cash flow issues, including how debt prepayments or debt extinguishment costs and distributions received from equity method investees are presented. ASU 2016-15 is effective for public business entities for annual periods beginning after December 15, 2017, and interim periods within those fiscal years. Early adoption is permitted, and the Company has adopted ASU 2016-15 effective January 1, 2017. The adoption of ASU 2016-15 did not have a material impact on the Company's financial condition or results of operations.
In January 2017, the FASB issued ASU 2017-01, Business Combinations (Topic 805): Clarifying the Definition of a Business. The ASU is intended to provide a new framework for determining whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. Under the new guidance, companies are required to utilize an initial screening test to determine whether substantially all of the fair value of the gross assets acquired (or disposed of) is concentrated in a single identifiable asset or a group of similar identifiable assets; if so, the set is not a business. The Company has determined that some of its real estate property acquisitions may be considered to be acquisitions of groups of similar identifiable assets; therefore, the acquisitions are not considered to be acquisitions of a business. EastGroup adopted ASU 2017-01 for transactions beginning on October 1, 2016. As a result, the Company has capitalized acquisition costs related to its 2017 and fourth quarter 2016 acquisitions as they were determined not to be acquisitions of a business.
In January 2017, the FASB issued ASU 2017-04, Intangibles - Goodwill and Others (Topic 350): Simplifying the Test for Goodwill Impairment, which simplifies the measurement of goodwill impairment by eliminating the requirement of performing a hypothetical purchase price allocation to measure goodwill impairment. The Company adopted ASU 2017-04 effective January 1, 2017, and is applying the new guidance for goodwill impairment tests with measurement dates after January 1, 2017. The adoption of ASU 2017-04 did not have a material impact on the Company's financial condition or results of operations.
In May 2017, the FASB issued ASU 2017-09, Compensation - Stock Compensation (Topic 718): Scope of Modification Accounting, which clarifies what constitutes a modification of a share-based payment award. The ASU is intended to provide clarity and reduce both diversity in practice and cost and complexity when applying the guidance in Topic 718 to a change to the terms or conditions of a share-based payment award. ASU 2017-09 is effective for public entities for annual periods beginning after December 15, 2017, and interim periods within those fiscal years. The Company adopted ASU 2017-09 on January 1, 2018, and it does not anticipate that the adoption of ASU 2017-09 will have a material impact on its financial condition or results of operations, as the Company does not expect to have any modifications to share-based payment awards. However, if the Company does have a modification to an award in the future, it will follow the guidance in ASU 2017-09.
In August 2017, the FASB issued ASU 2017-12, Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities. The ASU is intended to better align a company'scompany’s financial reporting for hedging activities with the economic objectives of those activities. The transition method is a modified retrospective approach that will require the Companyrequires companies to recognize the cumulative effect of initially applying the ASU as an adjustment to Accumulated other comprehensive income with a corresponding adjustment to the opening balance of retained earnings as of the beginning of the fiscal year the entity adopts the ASU. The primary provision in the ASU that will require an adjustment to beginning retained earnings is the change in timing and income statement presentation for ineffectiveness related to cash flow and net investment hedges. As a result of the transition guidance in the ASU, cumulative ineffectiveness that has previously been recognized on cash flow and net investment hedges that are still outstanding and designated as of the date of adoption will be adjusted and removed from beginning retained earnings and placed in Accumulated other comprehensive income. The Company adopted ASU 2017-12 ison January 1, 2019; the adoption of ASU 2017-12 did not have a material impact on its financial condition, results of operations or disclosures.
In October 2018, the FASB issued ASU 2018-16, Derivatives and Hedging (Topic 815): Inclusion of the Secured Overnight Financing Rate (SOFR) Overnight Index Swap (OIS) Rate as a Benchmark Interest Rate for Hedge Accounting Purposes. The ASU applies to all entities that elect to apply hedge accounting to benchmark interest rates under Topic 815 and permits the use of the OIS rate based on SOFR as a United States (U.S.) benchmark rate for hedge accounting purposes under Topic 815 in addition to the interest rates on direct Treasury obligations of the U.S. government, the London Inter-bank Offered Rate (“LIBOR”) swap rate, the OIS rate based on the Fed Funds Effective Rate, and the Securities Industry and Financial Markets Association (“SIFMA”) Municipal Swap Rate. ASU 2018-16 was effective upon adoption of ASU 2017-12. The Company adopted ASU 2017-12 and ASU 2018-16 on January 1, 2019, and the adoption of both ASUs did not have a material impact on its financial condition, results of operations or disclosures.
In June 2016, the FASB issued ASU 2016-13, Financial Instruments — Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, and subsequently issued ASU 2018-19, Codification Improvements to Topic 326, Financial Instruments — Credit Losses in November 2018. The ASUs amend guidance on reporting credit losses for public businessassets held at amortized cost basis and available for sale debt securities. For assets held at amortized cost, Topic 326 eliminates the probable initial recognition threshold in current GAAP and, instead, requires an entity to reflect its current estimate of all expected credit losses. For available for sale debt securities (EastGroup does not currently hold any and does not intend to hold any in the future), credit losses should be measured in a similar manner to current GAAP; however, Topic 326 will require that credit losses be presented as an allowance rather than a write-down. The ASUs affect entities holding financial assets and are effective for annual periods beginning after December 15, 2018,2019, and interim periods within those fiscal years. Early adoption is permitted; however, theThe Company plans to adoptadopted ASU 2017-122016-13 and ASU 2018-19 on January 1, 2019. While2020, and will provide the Company continues to assess all potential impacts of ASU 2017-12, itnecessary disclosures beginning with its Form 10-Q for the period ending March 31, 2020. EastGroup does not expect the adoption to have a material impact on the Company'sits financial condition, or results of operations.operations or disclosures.
In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement. The ASU is intended to improve the effectiveness of fair value measurement disclosures. ASU 2018-13 is effective for all entities for annual periods beginning after December 15, 2019, and interim periods within those fiscal years. The Company adopted ASU 2018-13 on January 1, 2020, and will provide the necessary disclosures beginning with its Form 10-Q for the period ending March 31, 2020. EastGroup does not expect the adoption to have a material impact on its financial condition, results of operations or disclosures.
LIQUIDITY AND CAPITAL RESOURCES
Net cash provided by operating activities was $155,014,000$195,912,000 for the year ended December 31, 2017.2019. The primary other sources of cash were from borrowings on unsecured bank credit facilities; proceeds from unsecured debt; proceeds from common stock offerings; proceeds from unsecured debt; and net proceeds from sales of real estate investments and non-operating real estate. The Company distributed $86,725,000$108,795,000 in common stock dividends during 2017.2019. Other primary uses of cash were for repayments on unsecured bank credit facilities, unsecured debt and secured debt; the construction and development of properties; purchases of real estate; and capital improvements at various properties.
Total debt at December 31, 20172019 and 20162018 is detailed below. The Company’s unsecured bank credit facilities and unsecured debt instruments have certain restrictive covenants, such as maintaining debt service coverage and leverage ratios and maintaining insurance coverage, and the Company was in compliance with all of its debt covenants at December 31, 20172019 and 2016.2018.
| | | | December 31, | December 31, |
| 2017 | | 2016 | 2019 | | 2018 |
(In thousands) | | Unsecured bank credit facilities - variable rate, carrying amount | $ | 116,339 |
| | 112,020 |
| $ | 112,710 |
| | 195,730 |
|
Unsecured bank credit facilities - fixed rate, carrying amount (1) | 80,000 |
| | 80,000 |
| |
| Unamortized debt issuance costs | (630 | ) | | (1,030 | ) | (1,316 | ) | | (1,804 | ) |
| Unsecured bank credit facilities | 195,709 |
| | 190,990 |
| 111,394 |
| | 193,926 |
|
| | | | | | | |
Unsecured debt - fixed rate, carrying amount (1) | 715,000 |
| | 655,000 |
| 940,000 |
| | 725,000 |
|
| Unamortized debt issuance costs | (1,939 | ) | | (2,162 | ) | (1,885 | ) | | (1,600 | ) |
| Unsecured debt | 713,061 |
| | 652,838 |
| 938,115 |
| | 723,400 |
|
| | | | | | | |
Secured debt - fixed rate, carrying amount (1) | 200,354 |
| | 258,594 |
| 133,422 |
| | 189,038 |
|
| Unamortized debt issuance costs | (842 | ) | | (1,089 | ) | (329 | ) | | (577 | ) |
| Secured debt | 199,512 |
| | 257,505 |
| 133,093 |
| | 188,461 |
|
| | | | | | | |
| Total debt | $ | 1,108,282 |
| | 1,101,333 |
| $ | 1,182,602 |
| | 1,105,787 |
|
| |
| (1) | These loans have a fixed interest rate or an effectively fixed interest rate due to interest rate swaps. |
Until June 14, 2018, EastGroup has ahad $300 million and $35 million unsecured revolvingbank credit facilities with margins over LIBOR of 100 basis points, facility fees of 20 basis points and maturity dates of July 30, 2019. The Company amended and restated these credit facilities on June 14, 2018, expanding the capacity to $350 million and $45 million, as detailed below.
The $350 million unsecured bank credit facility is with a group of nine banks that matures inand has a maturity date of July 2019.30, 2022. The credit facility contains options for a one-year extensiontwo six-month extensions (at the Company's election) and a $150 million expansionaccordion (with agreement by all parties). The interest rate on each tranche is usually reset on a monthly basis and as of December 31, 2017,2019, was LIBOR plus 100 basis points with an annual facility fee of 20 basis points. The margin and facility fee are subject to changes in the Company's credit ratings. The Company hashad designated an interest rate swap to an $80 million unsecured bank credit facility draw that effectively fixesfixed the interest rate on the $80 million draw to 2.020% through the interest rate swap's maturity date ofdate. This swap matured on August 15, 2018.2018, and the $80 million draw has reverted to the variable interest rate associated with the Company's unsecured bank credit facilities. As of December 31, 2017, EastGroup2019, the Company had an additional $110,000,000$105,000,000 of variable rate borrowings outstanding on this unsecured bank credit facility with a weighted average interest rate of 2.528%2.776%. The Company has a standby letter of credit of $674,000 pledged on this facility.
The Company's $45 million unsecured bank credit facility has a maturity date of July 30, 2022, or such later date as designated by the bank; the Company also has a $35 million unsecured revolving credit facility that matures in July 2019. This credit facility automatically extends for one yeartwo six-month extensions available if the extension optionoptions in the $300$350 million revolving credit facility isare exercised. The interest rate is reset on a daily basis and as of December 31, 2017,2019, was LIBOR plus 100 basis points with an annual facility fee of 20 basis points. The margin and facility fee are subject to changes in the Company's credit ratings. AtAs of December 31, 2017,2019, the interest rate was 2.564%2.763% on a balance of $6,339,000.$7,710,000.
As market conditions permit, EastGroup issues equity and/or employs fixed-ratefixed rate debt, including variable-ratevariable rate debt that has been swapped to an effectively fixed rate through the use of interest rate swaps, to replace the short-term bank borrowings. The Company believes its current operating cash flow and unsecured bank credit facilities provide the capacity to fund the operations of the Company. The Company also believes it can obtain debt financing and issue common and/or preferred equity. For future debt
issuances, the Company intends to issue primarily unsecured fixed-ratefixed rate debt, including variable-ratevariable rate debt that has been swapped to an effectively fixed rate through the use of interest rate swaps. The Company may also access the public debt market in the future as a means to raise capital.
In August 2017, EastGroup repaid (with no penalty) a mortgage loan with a balance of $45.1 million, an interest rate of 5.57% and an original maturity date of September 5, 2017. The loan was collateralized by 1.4 million square feet of operating properties.
In December 2017,March 2019, the Company closed $60on the private placement of $80 million of senior unsecured private placement notes with an insurance company. The notes have a seven-year10-year term and a fixed interest rate of 3.46%4.27% with semi-annual interest payments. In August 2019, the Company closed on the private placement of $35 million of senior unsecured notes with an insurance company. The notes have a 12-year term and a fixed interest rate of 3.54% with semi-annual interest payments. Also in August 2019, the Company closed on the private placement of $75 million of senior unsecured notes with an insurance company. The notes have a 10-year term and a fixed rate of 3.47% with semi-annual interest payments. None of these senior unsecured notes are or will not be and have not been registered under the Securities Act of 1933, as amended, and they may not be offered or sold in the United States absent registration or an applicable exemption from the registration requirements.
Also in December,In October 2019, the Company refinancedclosed a $100 million senior unsecured term loan with a seven-year term and interest only payments. It bears interest at the annual rate of LIBOR plus an applicable margin (1.50% as of December 31, 2019 and February 12, 2020) based on the Company’s senior unsecured long-term debt rating. The Company also entered into an interest rate swap agreement to convert the loan’s LIBOR rate component to a fixed interest rate for the entire term of the loan providing a total effective fixed interest rate of 2.75%.
In April 2019, EastGroup repaid (with no penalty) a mortgage loan with a balance of $45,725,000, an interest rate of 7.50% and an original maturity date of May 5, 2019. The loan was collateralized by 1.7 million square feet of operating properties. In December 2019, the Company repaid (with no penalty) a mortgage loan with a balance of $47,000, an interest rate of 5.39% and an original maturity date of February 29, 2020.
In July 2019, the Company repaid a $75 million unsecured term loan resulting in a 30 basis point reduction in the loan's interest rate. The loan, which has aat maturity date of December 20, 2020, now haswith an effectively fixed interest rate of 3.452%2.85%.
In July 2017, the Financial Conduct Authority (“FCA”) that regulates LIBOR announced it intends to stop compelling banks to submit rates for the calculation of LIBOR after 2021. As a result, the Federal Reserve Board and the Federal Reserve Bank of New York organized the Alternative Reference Rates Committee ("ARRC") which identified the Secured Overnight Financing Rate ("SOFR") as its preferred alternative to USD-LIBOR in derivatives and other financial contracts. The refinancingCompany is not able to predict when LIBOR will providecease to be available or when there will be sufficient liquidity in the SOFR markets. Any changes adopted by FCA or other governing bodies in the method used for determining LIBOR may result in a net annual savingssudden or prolonged increase or decrease in reported LIBOR. If that were to occur, interest payments could change. In addition, uncertainty about the extent and manner of future changes may result in interest rates and/or payments that are higher or lower than if LIBOR were to remain available in its current form.
The Company’s unsecured bank credit facilities, senior unsecured term loans and interest rate swap contracts are indexed to LIBOR. The Company is continuously monitoring and evaluating the related risks, which include interest on loans and amounts received and paid on derivative instruments. These risks arise in connection with transitioning contracts to a new alternative rate, including any resulting value transfer that may occur. The value of loans or derivative instruments tied to LIBOR could also be impacted if LIBOR is limited or discontinued as interest rates may be adversely affected. While we expect LIBOR to be available in substantially its current form until the end of 2021, it is possible that LIBOR will become unavailable prior to that point. This could result, for example, if sufficient banks decline to make submissions to the CompanyLIBOR administrator. In that case, the risks associated with the transition to an alternative reference rate will be accelerated and magnified.
Each of approximately $170,000.
In connection with EastGroup's continuous equity program,the Company’s contracts, which are indexed to LIBOR, include provisions for a replacement rate which will be substantially equivalent to the all-in LIBOR-based interest rate in effect prior to its replacement. Therefore, the Company hasbelieves the transition will not have a material impact on our consolidated financial statements.
EastGroup entered into sales agency financing agreements with various sales agents undereach of BNY Mellon Capital Markets, LLC; Merrill Lynch, Pierce, Fenner & Smith Incorporated; Jefferies LLC; and Raymond James & Associates, Inc. on March 6, 2017, and with BTIG, LLC; Robert W. Baird & Co. Incorporated and Wells Fargo Securities, LLC on February 15, 2018 in connection with the establishment of a continuous equity offering program pursuant to which the Company may issue andwould sell up to an aggregate of 10,000,000 shares of its common stock from time to time (the "Prior Program"). Pursuant to the Prior Program, the shares could be offered and sold in transactions that are deemed to be "at the market" offerings as defined in Rule 415 of the Securities Act of 1933. The1933, as amended, or certain other transactions. Since its establishment in 2017, the Company previously sold an aggregate of 3,598,6607,693,476 shares of common stock under the sales agency financing agreements and, as of February 14, 2018, EastGroup may offer and sell an additional 6,401,340 shares of common stock through the sales agents.Prior Program.
During 2017, the Companyyear ended December 31, 2019, EastGroup issued and sold 1,370,4572,388,342 shares of common stock under its continuous equity programPrior Program at an average price of $80.71$120.76 per share with gross proceeds to the Company of $110,606,000.$288,419,000. The Company incurred offering-related costs of $1,399,000$3,709,000 during the year, resulting in net proceeds to the Company of $109,207,000.$284,710,000.
On December 20, 2019, EastGroup entered into sales agreements with each of BNY Mellon Capital Markets, LLC; BofA Securities, Inc.; BTIG, LLC; Jefferies LLC; Raymond James & Associates, Inc.; Regions Securities LLC; and Wells Fargo Securities, LLC in connection with the establishment of a new continuous common equity offering program pursuant to which the Company may sell shares of its common stock with an aggregate gross sales price of up to $750,000,000 from time to time (the "Current Program"). The Current Program replaced the Prior Program. As of February 13, 2020, the Company has not sold any shares of common stock under the Current Program; therefore, under the Current Program, EastGroup may offer and sell shares of its common stock having an aggregate offering price of up to $750,000,000 through the sales agents.
Contractual Obligations
EastGroup’s fixed, non-cancelable obligations as of December 31, 20172019 were as follows:
| | | | Payments Due by Period | Payments Due by Period |
| Total | | Less Than 1 Year | | 1-3 Years | | 3-5 Years | | More Than 5 Years | Total | | Less Than 1 Year | | 1-3 Years | | 3-5 Years | | More Than 5 Years |
(In thousands) | Unsecured Bank Credit Facilities (1) (2) | $ | 196,339 |
| | — |
| | 196,339 |
| | — |
| | — |
| $ | 112,710 |
| | — |
| | 112,710 |
| | — |
| | — |
|
Interest on Unsecured Bank Credit Facilities (3) | 8,905 |
| | 5,382 |
| | 3,523 |
| | — |
| | — |
| 10,221 |
| | 3,918 |
| | 6,303 |
| | — |
| | — |
|
Unsecured Debt (1) | 715,000 |
| | 50,000 |
| | 180,000 |
| | 115,000 |
| | 370,000 |
| 940,000 |
| | 105,000 |
| | 115,000 |
| | 235,000 |
| | 485,000 |
|
| Interest on Unsecured Debt | 120,729 |
| | 24,139 |
| | 40,986 |
| | 29,517 |
| | 26,087 |
| 183,230 |
| | 31,638 |
| | 53,528 |
| | 44,970 |
| | 53,094 |
|
Secured Debt (1) | 200,354 |
| | 11,314 |
| | 64,665 |
| | 122,332 |
| | 2,043 |
| 133,422 |
| | 9,047 |
| | 122,332 |
| | 241 |
| | 1,802 |
|
| Interest on Secured Debt | 26,467 |
| | 10,116 |
| | 13,264 |
| | 2,809 |
| | 278 |
| 8,797 |
| | 5,710 |
| | 2,809 |
| | 149 |
| | 129 |
|
Dividends Payable (4) | | 29,096 |
| | 29,096 |
| | — |
| | — |
| | — |
|
| Operating Lease Obligations: |
|
| | |
| | |
| | |
| | |
|
|
| | |
| | |
| | |
| | |
|
| Office Leases | 1,864 |
| | 349 |
| | 706 |
| | 809 |
| | — |
| 2,277 |
| | 495 |
| | 884 |
| | 850 |
| | 48 |
|
| Ground Leases | 13,534 |
| | 761 |
| | 1,522 |
| | 1,522 |
| | 9,729 |
| 22,400 |
| | 970 |
| | 1,940 |
| | 1,974 |
| | 17,516 |
|
Real Estate Property Obligations (4) | 2,402 |
| | 2,402 |
| | — |
| | — |
| | — |
| |
Development Obligations (5) | 29,024 |
| | 29,024 |
| | — |
| | — |
| | — |
| |
Tenant Improvements (6) | 13,231 |
| | 13,231 |
| | — |
| | — |
| | — |
| |
Real Estate Property Obligations (5) | | 8,250 |
| | 8,250 |
| | — |
| | — |
| | — |
|
Development and Value-Add Obligations (6) | | 59,268 |
| | 59,268 |
| | — |
| | — |
| | — |
|
Tenant Improvements (7) | | 13,908 |
| | 13,908 |
| | — |
| | — |
| | — |
|
| Purchase Obligations | 3,368 |
| | 3,206 |
| | 162 |
| | — |
| | — |
| 10,822 |
| | 10,522 |
| | 300 |
| | — |
| | — |
|
| Total | $ | 1,331,217 |
| | 149,924 |
| | 501,167 |
| | 271,989 |
| | 408,137 |
| $ | 1,534,401 |
| | 277,822 |
| | 415,806 |
| | 283,184 |
| | 557,589 |
|
| |
| (1) | These amounts are included on the Consolidated Balance Sheets net of unamortized debt issuance costs. |
| |
| (2) | The Company’s balances under its unsecured bank credit facilities change depending on the Company’s cash needs and, as such, both the principal amounts and the interest rates are subject to variability. At December 31, 2017,2019, the weighted average interest rate was 2.530%2.775% on the $116,339,000$112,710,000 of variable-ratevariable rate debt that matures in July 2019. Unsecured bank credit facilities also included $80,000,000 of debt with an effectively fixed interest rate of 2.020% due to an interest rate swap that matures on August 15, 2018.2022. The $300$350 million unsecured credit facility has options for a one-year extensiontwo six-month extensions (at the Company's election) and a $150 million expansionaccordion (with agreement by all parties). The $35$45 million unsecured credit facility automatically extends for one yeartwo six-month terms if the extension optionoptions in the $300$350 million revolving facility isare exercised. As of December 31, 2017,2019, the interest rate on the $300$350 million facility was LIBOR plus 100 basis points (weighted average interest rate of 2.528%2.776%) with an annual facility fee of 20 basis points, and the interest rate on the $35$45 million facility, which resets on a daily basis, was LIBOR plus 100 basis points (2.564%(2.763%) with an annual facility fee of 20 basis points. The margin and facility fee are subject to changes in the Company's credit ratings. |
| |
| (3) | Represents an estimate of interest due on the Company's unsecured bank credit facilities based on the outstanding unsecured credit facilities as of December 31, 20172019 and interest rates and maturity dates on the facilities as of December 31, 20172019 as discussed in note 2 above. |
| |
| (4) | Represents dividends declared during December 2019, which were paid in January 2020. Dividends Payable excludes dividends payable on unvested restricted stock of $1,618,000, which are subject to continued service and will be paid upon vesting in future periods. |
| |
| (5) | Represents commitments on real estate properties, except for tenant improvement obligations. |
| |
(5)(6) | Represents commitments on properties underin the Company's development and value-add program, except for tenant improvement obligations. |
| |
(6)(7) | Represents tenant improvement allowance obligations. |
The Company anticipates that its current cash balance, operating cash flows, borrowings under its unsecured bank credit facilities, proceeds from new debt and/or proceeds from the issuance of equity instruments will be adequate for (i) operating and administrative expenses, (ii) normal repair and maintenance expenses at its properties, (iii) debt service obligations, (iv) maintaining compliance with its debt covenants, (v) distributions to stockholders, (vi) capital improvements, (vii) purchases of properties, (viii) development, and (ix) any other normal business activities of the Company, both in the short-term and long-term.
Off-Balance Sheet Arrangements
The Company has no material off-balance sheet arrangements that have had or are reasonably likely to have a material current or future effect on its financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.
INFLATION AND OTHER ECONOMIC CONSIDERATIONS
Most of the Company's leases include scheduled rent increases. Additionally, most of the Company's leases require the tenants to pay their pro rata share of operating expenses, including real estate taxes, insurance and common area maintenance, thereby reducing the Company's exposure to increases in operating expenses resulting from inflation. In the event inflation causes increases in the Company’s general and administrative expenses or the level of interest rates, such increased costs would not be passed through to tenants and could adversely affect the Company’s results of operations.
EastGroup's financial results are affected by general economic conditions in the markets in which the Company's properties are located. The state of the economy, or other adverse changes in general or local economic conditions, could result in the inability of some of the Company's existing tenants to make lease payments and may therefore increase bad debt expense. It may also impact the Company’s ability to (i) renew leases or re-lease space as leases expire, or (ii) lease development space. In addition, an economic downturn or recession could also lead to an increase in overall vacancy rates or a decline in rents the Company can charge to re-lease properties upon expiration of current leases. In all of these cases, EastGroup’s cash flows would be adversely affected.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
The Company is exposed to interest rate changes primarily as a result of its unsecured bank credit facilities and long-term debt maturities. This debt is used to maintain liquidity and fund capital expenditures and expansion of the Company’s real estate investment portfolio and operations. The Company’s objective for interest rate risk management is to limit the impact of interest rate changes on earnings and cash flows and to lower its overall borrowing costs. The Company has two variable rate unsecured bank credit facilities as discussed under the heading Liquidity and Capital Resources.in Part II, Item 7 of this Annual Report on Form 10-K. As market conditions permit, EastGroup issues equity and/or employs fixed-ratefixed rate debt, including variable-ratevariable rate debt that has been swapped to an effectively fixed rate through the use of interest rate swaps, to replace the short-term bank borrowings. The Company's interest rate swaps are discussed in Note 13 in the Notes to Consolidated Financial Statements. The table below presents the principal payments due and weighted average interest rates, which include the impact of interest rate swaps, for both the fixed-ratefixed rate and variable-ratevariable rate debt as of December 31, 2017.2019.
| | | | 2018 | | 2019 | | 2020 | | 2021 | | 2022 | | Thereafter | | Total | | Fair Value | 2020 | | 2021 | | 2022 | | 2023 | | 2024 | | Thereafter | | Total | | Fair Value |
Unsecured bank credit facilities - variable rate (in thousands) | $ | — |
| | 116,339 |
| (1) | — |
| | — |
| | — |
| | — |
| | 116,339 |
| | 116,277 (2) | $ | — |
| | — |
| | 112,710 |
| (1) | — |
| | — |
| | — |
| | 112,710 |
| | 113,174 (2) |
Weighted average interest rate | — |
| | 2.53 | % | (3) | — |
| | — |
| | — |
| | — |
| | 2.53 | % | | | — |
| | — |
| | 2.78 | % | (3) | — |
| | — |
| | — |
| | 2.78 | % | | |
Unsecured bank credit facilities - fixed rate (in thousands) | $ | — |
| | 80,000 |
| | — |
| | — |
| | — |
| | — |
| | 80,000 |
| | 80,003 (4) | |
Weighted average interest rate | — |
| | 2.02 | % | | — |
| | — |
| | — |
| | — |
| | 2.02 | % | | |
Unsecured debt - fixed rate (in thousands) | $ | 50,000 |
| | 75,000 |
| | 105,000 |
| | 40,000 |
| | 75,000 |
| | 370,000 |
| | 715,000 |
| | 703,871 (4) | $ | 105,000 |
| | 40,000 |
| | 75,000 |
| | 115,000 |
| | 120,000 |
| | 485,000 |
| | 940,000 |
| | 959,177 (4) |
Weighted average interest rate | 3.91 | % | | 2.85 | % | | 3.55 | % | | 2.34 | % | | 3.03 | % | | 3.56 | % | | 3.38 | % | | | 3.55 | % | | 2.34 | % | | 3.03 | % | | 2.96 | % | | 3.47 | % | | 3.63 | % | | 3.42 | % | | |
Secured debt - fixed rate (in thousands) | $ | 11,314 |
| | 55,569 |
| | 9,096 |
| | 89,563 |
| | 32,769 |
| | 2,043 |
| | 200,354 |
| | 206,408 (4) | $ | 9,047 |
| | 89,562 |
| | 32,770 |
| | 119 |
| | 122 |
| | 1,802 |
| | 133,422 |
| | 136,107 (4) |
Weighted average interest rate | 5.21 | % | | 7.01 | % | | 4.43 | % | | 4.55 | % | | 4.09 | % | | 3.85 | % | | 5.18 | % | | | 4.42 | % | | 4.55 | % | | 4.09 | % | | 3.85 | % | | 3.85 | % | | 3.85 | % | | 4.42 | % | | |
| |
| (1) | The variable-ratevariable rate unsecured bank credit facilities mature in July 20192022 and as of December 31, 2017,2019, have balances of $110,000,000 (excluding the $80,000,000 draw with an effectively fixed rate due to an interest rate swap, as shown in the table above)$105,000,000 on the $300$350 million unsecured bank credit facility and $6,339,000$7,710,000 on the $35$45 million unsecured bank credit facility. |
| |
| (2) | The fair value of the Company’s variable-ratevariable rate debt is estimated by discounting expected cash flows at current market rates, excluding the effects of debt issuance costs. |
| |
| (3) | Represents the weighted average interest rate for the Company's variable rate unsecured bank credit facilities as of December 31, 2017.2019. |
| |
| (4) | The fair value of the Company’s fixed-ratefixed rate debt, including variable-ratevariable rate debt that has been swapped to an effectively fixed rate through the use of interest rate swaps, is estimated by discounting expected cash flows at the rates currently offered to the Company for debt of the same remaining maturities, as advised by the Company’s bankers, excluding the effects of debt issuance costs. |
As the table above incorporates only those exposures that existed as of December 31, 2017,2019, it does not consider those exposures or positions that could arise after that date. If the weighted average interest rate on the variable-ratevariable rate unsecured bank credit facilities, as shown above, changes by 10%, or approximately 2528 basis points, interest expense and cash flows would increase or decrease
by approximately $294,000$313,000 annually. This does not include variable-ratevariable rate debt that has been effectively fixed through the use of interest rate swaps.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The Registrant's Consolidated Balance Sheets as of December 31, 2017 and 2016, and its Consolidated Statements of Income and Comprehensive Income, Changes in Equity and Cash Flows and Notesinformation required by this Item 8 is hereby incorporated by reference to the Company’s Consolidated Financial Statements for the years ended December 31, 2017, 2016 and 2015 and the Report of Independent Registered Public Accounting Firm thereon are included under Item 15beginning on page 44 of this report and are incorporated herein by reference. Unaudited quarterly results of operations included in the Notes to Consolidated Financial Statements are also incorporated herein by reference.Annual Report on Form 10-K.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.
None.
ITEM 9A. CONTROLS AND PROCEDURES.
| |
| (i) | Disclosure Controls and Procedures. |
The Company carried out an evaluation, under the supervision and with the participation of the Company’s management, including the Company’s Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures pursuant to Exchange Act Rule 13a-15. Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that, as of December 31, 2017,2019, the Company’s disclosure controls and procedures were effective in timely alerting them to material information relating to the Company (including its consolidated subsidiaries) required to be included in the Company’s periodic SEC filings.
| |
| (ii) | Internal Control Over Financial Reporting. |
| |
| (a) | Management's annual report on internal control over financial reporting. |
Management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rule 13a-15(f). EastGroup’s Management Report on Internal Control Over Financial Reporting is set forth in Part IV, Item 15 of this Form 10-K on page 4348 and is incorporated herein by reference.
| |
| (b) | Report of the independent registered public accounting firm. |
The report of KPMG LLP, the Company's independent registered public accounting firm, on the Company's internal control over financial reporting is set forth in Part IV, Item 15 of this Form 10-K on page 4449 and is incorporated herein by reference.
| |
| (c) | Changes in internal control over financial reporting. |
There was no change in the Company's internal control over financial reporting during the Company's fourth fiscal quarter ended December 31, 20172019 that has materially affected, or is reasonably likely to materially affect, the Company's internal control over financial reporting.
ITEM 9B. OTHER INFORMATION.
Not applicable.
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE.
The following table sets forth information regarding the Company’s executive officers and directors.
|
| |
Name | Position |
D. Pike Aloian | Director since 1999; Partner in Almanac Realty Investors, LLC (real estate advisory and investment management services) |
H.C. Bailey, Jr. | Director since 1980; Chairman and President of H.C. Bailey Company (real estate development and investment) |
H. Eric Bolton, Jr. | Director since 2013; Chairman and Chief Executive Officer of Mid-America Apartment Communities, Inc. |
Donald F. Colleran | Director since 2017; Executive Vice President, Chief Sales Officer of FedEx Corporation |
Hayden C. Eaves III | Director since 2002; President of Hayden Holdings, Inc. (real estate investment) |
Fredric H. Gould | Director since 1998; Chairman of the General Partner of Gould Investors L.P., Member of the Board of Directors of BRT Realty Trust and Vice-Chairman of One Liberty Properties, Inc. |
Mary E. McCormick | Director since 2005; Director of Xenia Hotels and Resorts (lodging real estate investment trust (REIT)); Senior Lecturer at The Ohio State University, Fisher College of Business |
Leland R. Speed | Director since 1978; Chairman Emeritus of the Board of the Company since 2016; Chairman of the Board of the Company from 1983 to 2015 |
David H. Hoster II | Director since 1993; Chairman of the Board of the Company since 2016; President of the Company from 1993 to 2015; Chief Executive Officer of the Company from 1997 to 2015 |
Marshall A. Loeb | Director, President and Chief Executive Officer of the Company |
Brent W. Wood | Executive Vice President, Chief Financial Officer and Treasurer of the Company |
John F. Coleman | Executive Vice President of the Company |
Ryan M. Collins | Senior Vice President of the Company |
Bruce Corkern | Senior Vice President, Chief Accounting Officer and Secretary of the Company |
R. Reid Dunbar | Senior Vice President of the Company |
All other information required by Item 10 of Part III regardingwill be included in the Company’s executive officersdefinitive proxy statement to be filed with the SEC relating to the Company’s 2020 Annual Meeting of Stockholders and directors is incorporated herein by reference from the sections entitled "Corporate Governance and Board Matters" and “Executive Officers” in the Company's definitive Proxy Statement ("2018 Proxy Statement") to be filed pursuant to Regulation 14A of the Securities Exchange Act of 1934, as amended, for EastGroup's Annual Meeting of Stockholders to be held on May 24, 2018. The 2018 Proxy Statement will be filed within 120 days after the end of the Company's fiscal year ended December 31, 2017.reference.
The information regarding compliance with Section 16(a) of the Exchange Act is incorporated herein by reference from the subsection entitled "Section 16(a) Beneficial Ownership Reporting Compliance" in the Company's 2018 Proxy Statement.
Information regarding EastGroup's code of business conduct and ethics found in the subsection captioned "Available Information" in Item 1 of Part I hereof is also incorporated herein by reference into this Item 10.
The information regarding the Company's audit committee, its members and the audit committee financial experts is incorporated herein by reference from the subsection entitled "Committees and Meeting Data” in the Company's 2018 Proxy Statement.
ITEM 11. EXECUTIVE COMPENSATION.
The information required by Item 11 will be included under the following captions in the Company's 2018 Proxy StatementCompany’s definitive proxy statement to be filed with the SEC relating to the Company’s 2020 Annual Meeting of Stockholders and is incorporated herein by reference: "Compensation Discussion and Analysis," "Summary Compensation Table," "Grants of Plan-Based Awards in 2017," "Outstanding Equity Awards at 2017 Fiscal Year-End," "Option Exercises and Stock Vested in 2017," "Potential Payments upon Termination or Change in Control," "Compensation of Directors" and "Compensation Committee Interlocks." The information included under the heading "Report of the Compensation Committee" in the Company's 2018 Proxy Statement is incorporated herein by reference; however, this information shall not be deemed to be "soliciting material" or to be "filed" with the SEC or subject to Regulation 14A or 14C, or to the liabilities of Section 18 of the Exchange Act.reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS.
Information regarding security ownershipThe information required by Item 12 will be included in the Company’s definitive proxy statement to be filed with the SEC relating to the Company’s 2020 Annual Meeting of certain beneficial ownersStockholders and management is incorporated herein by reference from the subsections entitled “Security Ownership of Certain Beneficial Owners” and “Security Ownership of Management and Directors” in the Company’s 2018 Proxy Statement.reference.
The following table summarizes the Company’s equity compensation plan information as of December 31, 2017.
|
| | | | | | | | | |
Equity Compensation Plan Information |
Plan category | | (a)
Number of securities to be issued upon exercise of outstanding options, warrants and rights
| | (b)
Weighted-average exercise price of outstanding options,
warrants and rights
| | (c)
Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a))
|
Equity compensation plans approved by security holders | | — |
| | — |
| | 1,671,981 |
|
Equity compensation plans not approved by security holders | | — |
| | — |
| | — |
|
Total | | — |
| | — |
| | 1,671,981 |
|
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE.
The information regarding transactionsrequired by Item 13 will be included in the Company’s definitive proxy statement to be filed with related partiesthe SEC relating to the Company’s 2020 Annual Meeting of Stockholders and director independence is incorporated herein by reference from the subsection entitled "Independent Directors" and the section entitled “Certain Transactions and Relationships” in the Company's 2018 Proxy Statement.reference.
ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES.
The information regarding principal auditor feesrequired by Item 14 will be included in the Company’s definitive proxy statement to be filed with the SEC relating to the Company’s 2020 Annual Meeting of Stockholders and services is incorporated herein by reference from the section entitled "Auditor Fees and Services" in the Company's 2018 Proxy Statement.reference.
PART IV
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
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| | |
(a) | | |
| Financial Statements | Page |
| The following documents are filed as part of this Annual Report on Form 10-K: |
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| | |
| | Page |
(1) | Consolidated Financial Statements: | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
(2) | Consolidated Financial Statement Schedules:Schedules | Page |
| The following documents are filed as part of this Annual Report on Form 10-K: | |
| | | |
| | | |
| | | |
| | All other schedules for which provision is made in the applicable accounting regulations of the Securities and Exchange CommissionSEC are not required under the related instructions or are inapplicable, and therefore have been omitted, or the required information is included in the Notes to Consolidated Financial Statements. |
| | | |
(3) |
| Exhibits: | |
| Exhibits | |
| The following exhibits are filed withincluded in this Annual Report on Form 10-K or incorporated by reference tofor the listed document previously filed with the SEC: | fiscal year ended December 31, 2019: |
|
| |
| Exhibit Number | Description |
(3) | Articles of Incorporation and Bylaws |
(a) | Articles of Incorporation (incorporatedEastGroup Properties, Inc. (incorporated by reference to Appendix B to the Company'sCompany’s Definitive Proxy Statement for its Annual Meeting of Stockholders held on June 5, 1997)Form DEF 14A (File No. 001-07094) filed April 4, 1997). |
(b) | Amended and Restated Bylaws of EastGroup Properties, Inc. (incorporated(incorporated by reference to Exhibit 3.1 to the Company'sCompany’s Current Report on Form 8-K (File No. 001-07094) filed March 3, 2017)2017). |
| Description of Securities (filed herewith) |
(10) | Material Contracts (*Indicates management or compensatory agreement): |
(a) | Form of Severance and Change in Control Agreement that the Company has entered into with Marshall A. Loeb, Brent W. Wood and John F. Coleman (incorporated by reference to Exhibit 10(a) to the Company's Form 8-K filed May 18, 2016).* |
(b) | Form of Severance and Change in Control Agreement that the Company has entered into with Ryan M. Collins, C. Bruce Corkern and R. Reid Dunbar (incorporated by reference to Exhibit 10(b) to the Company's Form 8-K filed May 18, 2016).* |
(c) | Third Amended and Restated Credit Agreement Dated January 2, 2013 among EastGroup Properties, L.P.; EastGroup Properties, Inc.; PNC Bank, National Association, as Administrative Agent; Regions Bank and SunTrust Bank as Co-Syndication Agents; U.S. Bank National Association and Wells Fargo Bank, National Association as Co-Documentation Agents; PNC Capital Markets LLC, as Sole Lead Arranger and Sole Bookrunner; and the Lenders thereunder (incorporated by reference to Exhibit 10.1 to the Company's Form 8-K filed January 8, 2013). |
(d) | First Amendment to Third Amended and Restated Credit Agreement, dated as of August 9, 2013, among EastGroup Properties, L.P., EastGroup Properties, Inc. and PNC Bank, National Association, as administrative agent, and each of the financial institutions party thereto as lenders (incorporated by reference to Exhibit 10.2 to the Company's Form 8-K filed August 30, 2013). |
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| |
(e) | Second Amendment to Third Amended and Restated Credit Agreement dated as of July 30, 2015 by and among EastGroup Properties, L.P.; EastGroup Properties, Inc.; PNC Bank, National Association, as Administrative Agent; and each of the financial institutions party thereto as lenders (incorporated by reference to Exhibit 10.1 to the Company's Form 8-K filed August 4, 2015). |
(f) | EastGroup Properties, Inc. 2013 Equity Incentive Plan, as amended and restated as of March 3, 2017 (incorporated(incorporated by reference to Exhibit 10.1 to the Company's Form 8-K (File No. 001-07094) filed March 3, 2017)2017).* |
| Form of Severance and Change in Control Agreement entered into by and between the Company and each of Marshall A. Loeb, Brent W. Wood and John F. Coleman (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K (File No. 001-07094) filed May 18, 2016). |
| Form of Severance and Change in Control Agreement by and between the Company and each of Ryan M. Collins, C. Bruce Corkern and R. Reid Dunbar (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K (File No. 001-07094) filed May 18, 2016). |
| EastGroup Properties, Inc. Director Compensation Program (filed herewith)Including the Independent Director Compensation Policy pursuant to the 2013 Equity Incentive Plan (incorporated by reference to Exhibit 10(g) to the Company’s Annual Report on Form 10-K (File No. 001-07094) filed February 14, 2018).* |
(h) | Note Purchase Agreement, dated as of August 28, 2013, by and among EastGroup Properties, L.P., EastGroup Properties, Inc.the Company and the purchaserseach of the notesPurchasers of the Notes party thereto (including the form of the 3.80% Senior Notes due August 28, 2025) (incorporated(incorporated by reference to Exhibit 10.1 to the Company'sCompany’s Current Report on Form 8-K (File No. 001-07094) filed August 30, 2013)2013). |
(i) | Fourth Amended and Restated Sales Agency FinancingCredit Agreement, dated March 6, 2017 betweenas of June 14, 2018, by and among EastGroup Properties, Inc.L.P.; the Company; PNC Bank, National Association, as Administrative Agent; Regions Bank as Syndication Agent; U.S. Bank National Association, Wells Fargo Bank, National Association and BNY MellonBank of America, N.A., as Co-Documentation Agents; PNC Capital Markets LLC (incorporatedand Regions Capital Markets, as Joint Lead Arrangers and Joint Bookrunners; and the Lenders thereunder (incorporated by reference to Exhibit 1.110.1 to the Company'sCompany’s Current Report on Form 8-K (File No. 001-07094) filed March 10, 2017)June 14, 2018). |
(j) | Amended and Restated Sales Agency Financing Agreement dated March 6, 2017 between EastGroup Properties, Inc. and Merrill Lynch, Pierce, Fenner & Smith Incorporated (incorporated by reference to Exhibit 1.2 to the Company's Form 8-K filed March 10, 2017). |
(k) | Amended and Restated Sales Agency Financing Agreement dated March 6, 2017 between EastGroup Properties, Inc. and Raymond James & Associates, Inc. (incorporated by reference to Exhibit 1.3 to the Company's Form 8-K filed March 10, 2017). |
(l) | Sales Agency Financing Agreement dated March 6, 2017 between EastGroup Properties, Inc. and Jefferies LLC (incorporated by reference to Exhibit 1.4 to the Company's Form 8-K filed March 10, 2017). |
| |
| StatementSubsidiaries of computation of ratio of earnings to combined fixed charges and preferred stock distributions (filed herewith)the Company (filed herewith). |
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| Subsidiaries of EastGroup Properties, Inc. (filed herewith). |
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| Consent of KPMG LLP (filed herewith)(filed herewith). |
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| Powers of attorney (filed herewith)(included on signature page hereto). |
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(31) | Rule 13a-14(a)/15d-14(a) Certifications (pursuant to Section 302 of the Sarbanes-Oxley Act of 2002) |
| of Marshall A. Loeb, Chief Executive Officer (filed herewith). |
| Rule 13a-14(a)/15d-14(a) Certifications (pursuant to Section 302 of the Sarbanes-Oxley Act of 2002) of Brent W. Wood, Chief Financial Officer (filed herewith). |
| |
(32) | Section 1350 Certifications (pursuant to Section 906 of the Sarbanes-Oxley Act of 2002) |
| of Marshall A. Loeb, Chief Executive Officer (furnished herewith). |
| Section 1350 Certifications (pursuant to Section 906 of the Sarbanes-Oxley Act of 2002) of Brent W. Wood, Chief Financial Officer (furnished herewith). |
| 101.SCH | Inline XBRL Taxonomy Extension Schema Document (filed herewith) |
(99)101.CAL | Material United States Federal Income Tax Considerations (incorporated by reference to Exhibit 99.1 to the Company's Form 8-K Inline XBRL Taxonomy Extension Calculation Linkbase Document (filed February 14, 2018).herewith) |
| 101.DEF | Inline XBRL Taxonomy Extension Definition Linkbase Document (filed herewith) |
(101)101.LAB | The following materials from EastGroup Properties, Inc.’s Annual Report on Form 10-K for the year ended December 31, 2017, formattedInline XBRL Taxonomy Extension Label Linkbase Document (filed herewith) |
| 101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase Document (filed herewith) |
| 104 | Cover Page Interactive Data File (formatted as inline XBRL with applicable taxonomy extension information contained in XBRL (eXtensible Business Reporting Language): (i) consolidated balance sheets, (ii) consolidated statements of income and comprehensive income, (iii) consolidated statements of changes in equity, (iv) consolidated statements of cash flows, and (v) the notes to the consolidated financial statements.Exhibits 101.*) (filed herewith) |
| |
(b)* | ExhibitsIndicates a management contract or any compensatory plan, contract or arrangement. |
The exhibits required to be filed with this Report pursuant to Item 601 of Regulation S-K are listed under “Exhibits” in Part IV, Item 15(a)(3) of this Report and are incorporated herein by reference.
| |
(c) | Financial Statement Schedules |
The Financial Statement Schedules required to be filed with this Report are listed under “Consolidated Financial Statement Schedules” in Part IV, Item 15(a)(2) of this Report, and are incorporated herein by reference.
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
TO THE STOCKHOLDERS AND BOARD OF DIRECTORS
EASTGROUP PROPERTIES, INC.:
Opinion on the Consolidated Financial Statements
We have audited the accompanying consolidated balance sheets of EastGroup Properties, Inc. and subsidiaries (the "Company")Company) as of December 31, 20172019 and 2016,2018, the related consolidated statements of income and comprehensive income, changes in equity, and cash flows for each of the years in the three-year period ended December 31, 2017,2019, and the related notes and financial statement schedules III and IV (collectively, the "consolidatedconsolidated financial statements")statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 20172019 and 2016,2018, and the results of theirits operations and theirits cash flows for each of the years in the three-year period ended December 31, 2017,2019, in conformity with U.S. generally accepted accounting principles.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) ("PCAOB")(PCAOB), the Company’s internal control over financial reporting as of December 31, 2017,2019, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission, and our report dated February 14, 201813, 2020, expressed an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting.
Basis for Opinion
These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgment. The communication of a critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
Evaluation of the estimated fair value of certain acquired tangible and intangible assets in an asset acquisition
As discussed in Note 1(j) to the consolidated financial statements, the Company acquired $205,841,000 of real estate properties and development and value-add properties during 2019 that were accounted for as acquisitions of assets. The purchase price in an asset acquisition is allocated among the individual components of both the tangible and intangible assets acquired based on their respective fair values. The fair value of the tangible assets or property (land, building and improvements) assumes the property to be vacant and is determined using a discounted cash flow model. A portion of the fair value of the property is allocated to land as determined using comparable land sales. The fair value of in-place lease intangibles is determined using estimates of carrying costs during the expected lease-up periods considering current market conditions and costs to execute similar leases, and present value techniques for the above or below market rent component of in-place lease intangibles.
We identified the evaluation of the estimated fair value of certain acquired tangible and intangible assets in an asset acquisition, as a critical audit matter. Certain acquired tangible and intangible assets include land, buildings, and in-place lease intangibles, including the above or below market rent component of in-place lease intangibles. Specifically, the assumptions used in the Company’s determination of the estimated fair value involved subjective auditor judgment in evaluating comparable land
sales, current market rents, and terminal capitalization rates used in the discounted cash flow model, especially when comparable transactions and market data may be limited, or not entirely comparable.
The primary procedures we performed to address this critical audit matter included the following. We tested certain internal controls within the Company’s process to estimate fair value of acquired tangible and intangible assets in an asset acquisition, including the Company’s development of comparable land sales, current market rents and terminal capitalization rates. We involved valuation professionals with specialized skills and knowledge who assisted in evaluating the Company’s estimated fair value of land, current market rents and terminal capitalization rates by comparing the Company’s estimates to our independently developed ranges of comparable land sales, current market rents and terminal capitalization rates using publicly available market data.
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| |
| | (Signed) KPMG LLP |
| | |
| We have served as the Company's auditor since 1970. |
| | |
| Jackson, Mississippi | |
February 14, 201813, 2020 | |
MANAGEMENT REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING
EastGroup’s management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rule 13a-15(f). Under the supervision and with the participation of management, including the Chief Executive Officer and Chief Financial Officer, EastGroup conducted an evaluation of the effectiveness of internal control over financial reporting based on the framework in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. The design of any system of internal control over financial reporting is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Based on EastGroup’s evaluation under the framework in Internal Control – Integrated Framework (2013), management concluded that our internal control over financial reporting was effective as of December 31, 2017.2019.
|
| |
| | /s/ EASTGROUP PROPERTIES, INC. |
| Ridgeland, Mississippi | |
February 14, 201813, 2020 | |
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
TO THE STOCKHOLDERS AND BOARD OF DIRECTORS
EASTGROUP PROPERTIES, INC.:
Opinion on Internal Control Over Financial Reporting
We have audited EastGroup Properties, Inc. and subsidiaries’ (the "Company")Company) internal control over financial reporting as of December 31, 2017,2019, based on the criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2017,2019, based on the criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) ("PCAOB")(PCAOB), the consolidated balance sheets of the Company as of December 31, 20172019 and 2016, and2018, the related consolidated statements of income and comprehensive income, changes in equity, and cash flows for each of the years in the three-year period ended December 31, 2017,2019, and the related notes and financial statement schedules III and IV (collectively, the "consolidatedconsolidated financial statements")statements), and our report dated February 14, 201813, 2020, expressed an unqualified opinion on those consolidated financial statements.
Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
Definition and Limitations of Internal Control Over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
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| |
| | (Signed) KPMG LLP |
| Jackson, Mississippi | |
February 14, 201813, 2020 | |
EASTGROUP PROPERTIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
| | | | December 31, | December 31, |
| 2017 | | 2016 | 2019 | | 2018 |
(In thousands, except share and per share data) | | ASSETS | | | | | | |
| Real estate properties | $ | 2,335,459 |
| | 2,113,073 |
| $ | 2,844,567 |
| | 2,553,481 |
|
| Development | 242,014 |
| | 293,908 |
| |
| Development and value-add properties | | 419,999 |
| | 263,664 |
|
| | 2,577,473 |
| | 2,406,981 |
| 3,264,566 |
| | 2,817,145 |
|
| Less accumulated depreciation | (749,601 | ) | | (694,250 | ) | (871,139 | ) | | (814,915 | ) |
| | 1,827,872 |
| | 1,712,731 |
| 2,393,427 |
| | 2,002,230 |
|
| Unconsolidated investment | 8,029 |
| | 7,681 |
| 7,805 |
| | 7,870 |
|
| Cash | 16 |
| | 522 |
| 224 |
| | 374 |
|
| Other assets | 117,304 |
| | 104,830 |
| 144,622 |
| | 121,231 |
|
| TOTAL ASSETS | $ | 1,953,221 |
| | 1,825,764 |
| $ | 2,546,078 |
| | 2,131,705 |
|
| LIABILITIES AND EQUITY | |
| | |
| |
| | |
|
| LIABILITIES | |
| | |
| |
| | |
|
| Unsecured bank credit facilities | $ | 195,709 |
| | 190,990 |
| $ | 111,394 |
| | 193,926 |
|
| Unsecured debt | 713,061 |
| | 652,838 |
| 938,115 |
| | 723,400 |
|
| Secured debt | 199,512 |
| | 257,505 |
| 133,093 |
| | 188,461 |
|
| Accounts payable and accrued expenses | 64,967 |
| | 52,701 |
| 92,024 |
| | 86,563 |
|
| Other liabilities | 28,842 |
| | 29,864 |
| 69,123 |
| | 34,652 |
|
| Total Liabilities | 1,202,091 |
| | 1,183,898 |
| 1,343,749 |
| | 1,227,002 |
|
| EQUITY | |
| | |
| |
| | |
|
| Stockholders’ Equity: | |
| | |
| |
| | |
|
Common shares; $.0001 par value; 70,000,000 shares authorized; 34,758,167 shares issued and outstanding at December 31, 2017 and 33,332,213 at December 31, 2016 | 3 |
| | 3 |
| |
Excess shares; $.0001 par value; 30,000,000 shares authorized; no shares issued | — |
| | — |
| |
Common stock; $0.0001 par value; 70,000,000 shares authorized; 38,925,953 shares issued and outstanding at December 31, 2019 and 36,501,356 at December 31, 2018 | | 4 |
| | 4 |
|
Excess shares; $0.0001 par value; 30,000,000 shares authorized; no shares issued | | — |
| | — |
|
| Additional paid-in capital | 1,061,153 |
| | 949,318 |
| 1,514,055 |
| | 1,222,547 |
|
| Distributions in excess of earnings | (317,032 | ) | | (313,655 | ) | (316,302 | ) | | (326,193 | ) |
| Accumulated other comprehensive income | 5,348 |
| | 1,995 |
| 2,807 |
| | 6,701 |
|
| Total Stockholders’ Equity | 749,472 |
| | 637,661 |
| 1,200,564 |
| | 903,059 |
|
| Noncontrolling interest in joint ventures | 1,658 |
| | 4,205 |
| 1,765 |
| | 1,644 |
|
| Total Equity | 751,130 |
| | 641,866 |
| 1,202,329 |
| | 904,703 |
|
| TOTAL LIABILITIES AND EQUITY | $ | 1,953,221 |
| | 1,825,764 |
| $ | 2,546,078 |
| | 2,131,705 |
|
See accompanying Notes to Consolidated Financial Statements.
EASTGROUP PROPERTIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME | | | | Years Ended December 31, | Years Ended December 31, |
| 2017 | | 2016 | | 2015 | 2019 | | 2018 | | 2017 |
(In thousands, except per share data) | | REVENUES | | | | | | | | | | |
| Income from real estate operations | $ | 274,031 |
| | 252,961 |
| | 234,918 |
| $ | 330,813 |
| | 299,018 |
| | 274,031 |
|
| Other revenue | 119 |
| | 86 |
| | 90 |
| 574 |
| | 1,374 |
| | 119 |
|
| | 274,150 |
| | 253,047 |
| | 235,008 |
| 331,387 |
| | 300,392 |
| | 274,150 |
|
| EXPENSES | |
| | |
| | | |
| | |
| | |
| Expenses from real estate operations | 80,108 |
| | 74,347 |
| | 67,402 |
| 93,274 |
| | 86,394 |
| | 80,108 |
|
| Depreciation and amortization | 83,874 |
| | 77,935 |
| | 73,290 |
| 104,724 |
| | 91,704 |
| | 83,874 |
|
| General and administrative | 14,972 |
| | 13,232 |
| | 15,091 |
| 16,406 |
| | 13,738 |
| | 14,972 |
|
| Acquisition costs | — |
| | 161 |
| | 164 |
| |
| Indirect leasing costs | | 411 |
| | — |
| | — |
|
| | 178,954 |
| | 165,675 |
| | 155,947 |
| 214,815 |
| | 191,836 |
| | 178,954 |
|
| OPERATING INCOME | 95,196 |
| | 87,372 |
| | 79,061 |
| |
| | | | | | | |
| OTHER INCOME (EXPENSE) | |
| | |
| | |
| |
| | |
| | |
|
| Interest expense | (34,775 | ) | | (35,213 | ) | | (34,666 | ) | (34,463 | ) | | (35,106 | ) | | (34,775 | ) |
| Gain, net of loss, on sales of real estate investments | 21,855 |
| | 42,170 |
| | 2,903 |
| |
| Gain on sales of real estate investments | | 41,068 |
| | 14,273 |
| | 21,855 |
|
| Other | 1,313 |
| | 1,765 |
| | 1,101 |
| 163 |
| | 913 |
| | 1,313 |
|
| NET INCOME | 83,589 |
| | 96,094 |
| | 48,399 |
| 123,340 |
| | 88,636 |
| | 83,589 |
|
| Net income attributable to noncontrolling interest in joint ventures | (406 | ) | | (585 | ) | | (533 | ) | (1,678 | ) | | (130 | ) | | (406 | ) |
| NET INCOME ATTRIBUTABLE TO EASTGROUP PROPERTIES, INC. COMMON STOCKHOLDERS | 83,183 |
| | 95,509 |
| | 47,866 |
| 121,662 |
| | 88,506 |
| | 83,183 |
|
| Other comprehensive income (loss) - cash flow hedges | 3,353 |
| | 5,451 |
| | (1,099 | ) | |
| Other comprehensive income (loss) – cash flow hedges | | (3,894 | ) | | 1,353 |
| | 3,353 |
|
| TOTAL COMPREHENSIVE INCOME | $ | 86,536 |
| | 100,960 |
| | 46,767 |
| $ | 117,768 |
| | 89,859 |
| | 86,536 |
|
| BASIC PER COMMON SHARE DATA FOR NET INCOME ATTRIBUTABLE TO EASTGROUP PROPERTIES, INC. COMMON STOCKHOLDERS | |
| | |
| | |
| |
| | |
| | |
|
| Net income attributable to common stockholders | $ | 2.45 |
| | 2.93 |
| | 1.49 |
| $ | 3.25 |
| | 2.50 |
| | 2.45 |
|
| Weighted average shares outstanding �� | 33,996 |
| | 32,563 |
| | 32,091 |
| |
| Weighted average shares outstanding | | 37,442 |
| | 35,439 |
| | 33,996 |
|
| DILUTED PER COMMON SHARE DATA FOR NET INCOME ATTRIBUTABLE TO EASTGROUP PROPERTIES, INC. COMMON STOCKHOLDERS | |
| | |
| | |
| |
| | |
| | |
|
| Net income attributable to common stockholders | $ | 2.44 |
| | 2.93 |
| | 1.49 |
| $ | 3.24 |
| | 2.49 |
| | 2.44 |
|
| Weighted average shares outstanding | 34,047 |
| | 32,628 |
| | 32,196 |
| 37,527 |
| | 35,506 |
| | 34,047 |
|
See accompanying Notes to Consolidated Financial Statements.
EASTGROUP PROPERTIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
| | | | Common Stock | | Additional Paid-In Capital | | Distributions In Excess Of Earnings | | Accumulated Other Comprehensive Income (Loss) | | Noncontrolling Interest in Joint Ventures | | Total | Common Stock | | Additional Paid-In Capital | | Distributions In Excess Of Earnings | | Accumulated Other Comprehensive Income | | Noncontrolling Interest in Joint Ventures | | Total |
(In thousands, except share and per share data) | | Balance, December 31, 2014 | $ | 3 |
| | 874,335 |
| | (300,852 | ) | | (2,357 | ) | | 4,486 |
| | 575,615 |
| |
| Net income | — |
| | — |
| | 47,866 |
| | — |
| | 533 |
| | 48,399 |
| |
| Net unrealized change in fair value of cash flow hedges | — |
| | — |
| | — |
| | (1,099 | ) | | — |
| | (1,099 | ) | |
| Common dividends declared – $2.34 per share | — |
| | — |
| | (75,906 | ) | | — |
| | — |
| | (75,906 | ) | |
| Stock-based compensation, net of forfeitures | — |
| | 8,423 |
| | — |
| | — |
| | — |
| | 8,423 |
| |
Issuance of 106,751 shares of common stock, common stock offering, net of expenses | — |
| | 6,233 |
| | — |
| | — |
| | — |
| | 6,233 |
| |
Issuance of 4,536 shares of common stock,
dividend reinvestment plan | — |
| | 257 |
| | — |
| | — |
| | — |
| | 257 |
| |
| Withheld 32,409 shares of common stock to satisfy tax withholding obligations in connection with the vesting of restricted stock | — |
| | (2,041 | ) | | — |
| | — |
| | — |
| | (2,041 | ) | |
| Distributions to noncontrolling interest | — |
| | — |
| | — |
| | — |
| | (680 | ) | | (680 | ) | |
| Balance, December 31, 2015 | 3 |
| | 887,207 |
| | (328,892 | ) | | (3,456 | ) | | 4,339 |
| | 559,201 |
| |
| Net income | — |
| | — |
| | 95,509 |
| | — |
| | 585 |
| | 96,094 |
| |
| Net unrealized change in fair value of cash flow hedges | — |
| | — |
| | — |
| | 5,451 |
| | — |
| | 5,451 |
| |
| Common dividends declared – $2.44 per share | — |
| | — |
| | (80,272 | ) | | — |
| | — |
| | (80,272 | ) | |
| Stock-based compensation, net of forfeitures | — |
| | 5,831 |
| | — |
| | — |
| | — |
| | 5,831 |
| |
| Issuance of 875,052 shares of common stock, common stock offering, net of expenses | — |
| | 59,283 |
| | — |
| | — |
| | — |
| | 59,283 |
| |
Issuance of 3,326 shares of common stock, dividend reinvestment plan | — |
| | 228 |
| | — |
| | — |
| | — |
| | 228 |
| |
| Withheld 57,316 shares of common stock to satisfy tax withholding obligations in connection with the vesting of restricted stock | — |
| | (3,231 | ) | | — |
| | — |
| | — |
| | (3,231 | ) | |
| Distributions to noncontrolling interest | — |
| | — |
| | — |
| | — |
| | (719 | ) | | (719 | ) | |
| Balance, December 31, 2016 | 3 |
| | 949,318 |
| | (313,655 | ) | | 1,995 |
| | 4,205 |
| | 641,866 |
| $ | 3 |
| | 949,318 |
| | (313,655 | ) | | 1,995 |
| | 4,205 |
| | 641,866 |
|
| Net income | — |
| | — |
| | 83,183 |
| | — |
| | 406 |
| | 83,589 |
| — |
| | — |
| | 83,183 |
| | — |
| | 406 |
| | 83,589 |
|
| Net unrealized change in fair value of cash flow hedges | — |
| | — |
| | — |
| | 3,353 |
| | — |
| | 3,353 |
| — |
| | — |
| | — |
| | 3,353 |
| | — |
| | 3,353 |
|
| Common dividends declared – $2.52 per share | — |
| | — |
| | (86,560 | ) | | — |
| | — |
| | (86,560 | ) | — |
| | — |
| | (86,560 | ) | | — |
| | — |
| | (86,560 | ) |
| Stock-based compensation, net of forfeitures | — |
| | 7,012 |
| | — |
| | — |
| | — |
| | 7,012 |
| — |
| | 7,012 |
| | — |
| | — |
| | — |
| | 7,012 |
|
| Issuance of 1,370,457 shares of common stock, common stock offering, net of expenses | — |
| | 109,207 |
| | — |
| | — |
| | — |
| | 109,207 |
| — |
| | 109,207 |
| | — |
| | — |
| | — |
| | 109,207 |
|
Issuance of 2,744 shares of common stock, dividend reinvestment plan | — |
| | 228 |
| | — |
| | — |
| | — |
| | 228 |
| — |
| | 228 |
| | — |
| | — |
| | — |
| | 228 |
|
| Withheld 33,695 shares of common stock to satisfy tax withholding obligations in connection with the vesting of restricted stock | — |
| | (2,505 | ) | | — |
| | — |
| | — |
| | (2,505 | ) | — |
| | (2,505 | ) | | — |
| | — |
| | — |
| | (2,505 | ) |
| Purchase of noncontrolling interest in joint venture | — |
| | (2,107 | ) | | — |
| | — |
| | (2,597 | ) | | (4,704 | ) | — |
| | (2,107 | ) | | — |
| | — |
| | (2,597 | ) | | (4,704 | ) |
| Distributions to noncontrolling interest | — |
| | — |
| | — |
| | — |
| | (478 | ) | | (478 | ) | — |
| | — |
| | — |
| | — |
| | (478 | ) | | (478 | ) |
| Contributions from noncontrolling interest | — |
| | — |
| | — |
| | — |
| | 122 |
| | 122 |
| — |
| | — |
| | — |
| | — |
| | 122 |
| | 122 |
|
| Balance, December 31, 2017 | $ | 3 |
| | 1,061,153 |
| | (317,032 | ) | | 5,348 |
| | 1,658 |
| | 751,130 |
| 3 |
| | 1,061,153 |
| | (317,032 | ) | | 5,348 |
| | 1,658 |
| | 751,130 |
|
| Net income | | — |
| | — |
| | 88,506 |
| | — |
| | 130 |
| | 88,636 |
|
| Net unrealized change in fair value of cash flow hedges | | — |
| | — |
| | — |
| | 1,353 |
| | — |
| | 1,353 |
|
| Common dividends declared – $2.72 per share | | — |
| | — |
| | (97,667 | ) | | — |
| | — |
| | (97,667 | ) |
| Stock-based compensation, net of forfeitures | | — |
| | 6,103 |
| | — |
| | — |
| | — |
| | 6,103 |
|
| Issuance of 1,706,474 shares of common stock, common stock offering, net of expenses | | 1 |
| | 157,318 |
| | — |
| | — |
| | — |
| | 157,319 |
|
Issuance of 1,844 shares of common stock, dividend reinvestment plan | | — |
| | 164 |
| | — |
| | — |
| | — |
| | 164 |
|
| Withheld 23,824 shares of common stock to satisfy tax withholding obligations in connection with the vesting of restricted stock | | — |
| | (2,055 | ) | | — |
| | — |
| | — |
| | (2,055 | ) |
| Purchase of noncontrolling interest in joint venture | | — |
| | (136 | ) | | — |
| | — |
| | — |
| | (136 | ) |
| Distributions to noncontrolling interest | | — |
| | — |
| | — |
| | — |
| | (194 | ) | | (194 | ) |
| Contributions from noncontrolling interest | | — |
| | — |
| | — |
| | — |
| | 50 |
| | 50 |
|
| Balance, December 31, 2018 | | 4 |
| | 1,222,547 |
| | (326,193 | ) | | 6,701 |
| | 1,644 |
| | 904,703 |
|
| Net income | | — |
| | — |
| | 121,662 |
| | — |
| | 1,678 |
| | 123,340 |
|
| Net unrealized change in fair value of cash flow hedges | | — |
| | — |
| | — |
| | (3,894 | ) | | — |
| | (3,894 | ) |
| Common dividends declared – $2.94 per share | | — |
| | — |
| | (111,771 | ) | | — |
| | — |
| | (111,771 | ) |
| Stock-based compensation, net of forfeitures | | — |
| | 9,374 |
| | — |
| | — |
| | — |
| | 9,374 |
|
| Issuance of 2,388,342 shares of common stock, common stock offering, net of expenses | | — |
| | 284,710 |
| | — |
| | — |
| | — |
| | 284,710 |
|
Issuance of 1,893 shares of common stock, dividend reinvestment plan | | — |
| | 212 |
| | — |
| | — |
| | — |
| | 212 |
|
| Withheld 28,955 shares of common stock to satisfy tax withholding obligations in connection with the vesting of restricted stock | | — |
| | (2,788 | ) | | — |
| | — |
| | — |
| | (2,788 | ) |
| Contributions from noncontrolling interest | | — |
| | — |
| | — |
| | — |
| | 821 |
| | 821 |
|
| Distributions to noncontrolling interest | | — |
| | — |
| | — |
| | — |
| | (2,378 | ) | | (2,378 | ) |
| Balance, December 31, 2019 | | $ | 4 |
| | 1,514,055 |
| | (316,302 | ) | | 2,807 |
| | 1,765 |
| | 1,202,329 |
|
See accompanying Notes to Consolidated Financial Statements.
EASTGROUP PROPERTIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
| | | | Years Ended December 31, | Years Ended December 31, |
| 2017 | | 2016 | | 2015 | 2019 | | 2018 | | 2017 |
(In thousands) | | OPERATING ACTIVITIES | | | | | | | | | | |
| Net income | $ | 83,589 |
| | 96,094 |
| | 48,399 |
| $ | 123,340 |
| | 88,636 |
| | 83,589 |
|
| Adjustments to reconcile net income to net cash provided by operating activities: | |
| | |
| | |
| |
| | |
| | |
|
| Depreciation and amortization | 83,874 |
| | 77,935 |
| | 73,290 |
| 104,724 |
| | 91,704 |
| | 83,874 |
|
| Stock-based compensation expense | 5,521 |
| | 4,590 |
| | 6,733 |
| 6,838 |
| | 5,283 |
| | 5,521 |
|
| Gain, net of loss, on sales of real estate investments and non-operating real estate | (22,148 | ) | | (42,903 | ) | | (3,026 | ) | |
| Net gain on sales of real estate investments and non-operating real estate | | (41,151 | ) | | (14,359 | ) | | (22,148 | ) |
| Gain on casualties and involuntary conversion on real estate assets | | (180 | ) | | (1,245 | ) | | — |
|
| Changes in operating assets and liabilities: | |
| | | | | |
| | | | |
| Accrued income and other assets | (5,034 | ) | | (2,883 | ) | | (2,118 | ) | (5,558 | ) | | (4,091 | ) | | (5,034 | ) |
| Accounts payable, accrued expenses and prepaid rent | 8,333 |
| | 5,736 |
| | 6,928 |
| 6,514 |
| | (2,682 | ) | | 8,333 |
|
| Other | 879 |
| | 295 |
| | (157 | ) | 1,385 |
| | 1,485 |
| | 879 |
|
| NET CASH PROVIDED BY OPERATING ACTIVITIES | 155,014 |
| | 138,864 |
| | 130,049 |
| 195,912 |
| | 164,731 |
| | 155,014 |
|
| INVESTING ACTIVITIES | |
| | |
| | |
| |
| | |
| | |
|
| Real estate development | (124,938 | ) | | (203,765 | ) | | (95,032 | ) | |
| Development and value-add properties | | (318,288 | ) | | (167,667 | ) | | (124,938 | ) |
| Purchases of real estate | (55,195 | ) | | (27,668 | ) | | (31,574 | ) | (142,712 | ) | | (57,152 | ) | | (55,195 | ) |
| Real estate improvements | (26,158 | ) | | (23,778 | ) | | (25,062 | ) | (37,775 | ) | | (37,502 | ) | | (27,385 | ) |
| Net proceeds from sales of real estate investments and non-operating real estate | 42,710 |
| | 78,780 |
| | 5,156 |
| 66,737 |
| | 24,508 |
| | 42,710 |
|
| Proceeds from casualties and involuntary conversion on real estate assets | | 723 |
| | 1,635 |
| | — |
|
| Repayments on mortgage loans receivable | 171 |
| | 123 |
| | 116 |
| 915 |
| | 1,987 |
| | 171 |
|
| Changes in accrued development costs | (144 | ) | | 3,629 |
| | (1,705 | ) | (3,644 | ) | | 5,711 |
| | (144 | ) |
| Changes in other assets and other liabilities | (15,872 | ) | | (13,793 | ) | | (8,317 | ) | (9,293 | ) | | (12,955 | ) | | (14,645 | ) |
| NET CASH USED IN INVESTING ACTIVITIES | (179,426 | ) | | (186,472 | ) | | (156,418 | ) | (443,337 | ) | | (241,435 | ) | | (179,426 | ) |
| FINANCING ACTIVITIES | |
| | |
| | |
| |
| | |
| | |
|
| Proceeds from unsecured bank credit facilities | 391,617 |
| | 608,349 |
| | 420,104 |
| 932,658 |
| | 448,100 |
| | 391,617 |
|
| Repayments on unsecured bank credit facilities | (387,298 | ) | | (567,165 | ) | | (368,669 | ) | (1,015,678 | ) | | (448,709 | ) | | (387,298 | ) |
| Proceeds from unsecured debt | 60,000 |
| | 205,000 |
| | 150,000 |
| 290,000 |
| | 60,000 |
| | 60,000 |
|
| Repayments on unsecured debt | — |
| | (80,000 | ) | | — |
| (75,000 | ) | | (50,000 | ) | | — |
|
| Repayments on secured debt | (58,209 | ) | | (92,773 | ) | | (102,337 | ) | (55,593 | ) | | (11,289 | ) | | (58,209 | ) |
| Debt issuance costs | (380 | ) | | (1,487 | ) | | (1,952 | ) | (893 | ) | | (1,922 | ) | | (380 | ) |
| Distributions paid to stockholders (not including dividends accrued on unvested restricted stock) | (86,725 | ) | | (80,899 | ) | | (75,845 | ) | |
| Distributions paid to stockholders (not including dividends accrued) | | (108,795 | ) | | (71,294 | ) | | (86,725 | ) |
| Proceeds from common stock offerings | 109,207 |
| | 59,283 |
| | 6,233 |
| 284,710 |
| | 157,319 |
| | 109,207 |
|
| Proceeds from dividend reinvestment plan | 228 |
| | 236 |
| | 256 |
| 212 |
| | 221 |
| | 228 |
|
| Other | (4,534 | ) | | (2,462 | ) | | (1,384 | ) | |
| Other �� | | (4,346 | ) | | (5,364 | ) | | (4,534 | ) |
| NET CASH PROVIDED BY FINANCING ACTIVITIES | 23,906 |
| | 48,082 |
| | 26,406 |
| 247,275 |
| | 77,062 |
| | 23,906 |
|
| INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS | (506 | ) | | 474 |
| | 37 |
| (150 | ) | | 358 |
| | (506 | ) |
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR | 522 |
| | 48 |
| | 11 |
| 374 |
| | 16 |
| | 522 |
|
CASH AND CASH EQUIVALENTS AT END OF YEAR | $ | 16 |
| | 522 |
| | 48 |
| $ | 224 |
| | 374 |
| | 16 |
|
| SUPPLEMENTAL CASH FLOW INFORMATION | |
| | |
| | |
| |
| | |
| | |
|
Cash paid for interest, net of amount capitalized of $5,765, $5,340, and $5,257 for 2017, 2016 and 2015, respectively | $ | 33,634 |
| | 33,595 |
| | 33,164 |
| |
Cash paid for interest, net of amount capitalized of $8,453, $6,334, and $5,765 for 2019, 2018 and 2017, respectively | | $ | 30,839 |
| | 33,458 |
| | 33,634 |
|
| Cash paid for operating lease liabilities | | 1,314 |
| | — |
| | — |
|
| NON-CASH OPERATING ACTIVITY | | | | | | |
| Operating lease liabilities arising from obtaining right of use assets | | $ | 15,435 |
| | — |
| | — |
|
See accompanying Notes to Consolidated Financial Statements.
EASTGROUP PROPERTIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2017, 20162019, 2018 and 20152017
| |
| (1) | SIGNIFICANT ACCOUNTING POLICIES |
| |
| (a) | Principles of Consolidation |
The consolidated financial statements include the accounts of EastGroup Properties, Inc. ("EastGroup" or "the Company"), its wholly owned subsidiaries and its investment in any joint ventures in which the Company has a controlling interest.
At December 31, 2015, EastGroup had a controlling interest in two joint ventures, the 80% owned University Business Center and the 80% owned Castilian Research Center. During the second quarter of 2016, Castilian Research Center was sold, and the joint venture was subsequently terminated. At December 31, 2016, the Company had a controlling interest in one joint venture, the 80% owned University Business Center. During the fourth quarter of 2017, EastGroup closed the acquisition of the 20% noncontrolling interest in two2 of the four4 University Business Center buildings;buildings which were owned in a joint venture partnership; the Company now ownsthen directly owned 100% of University Business Center 125 and 175. As of December 31, 2018 and 2017, EastGroup had an 80% controlling interest in University Business Center 120 and 130. During the fourth quarter of 2019, the Company, along with the noncontrolling interest partner, sold University Business Center 130. As of December 31, 2019, EastGroup had an 80% controlling interest in University Business Center 120.
Also during 2019, EastGroup entered into 2 new joint venture arrangements. On May 31, 2019, the Company acquired 6.5 acres of land in San Diego, known by the Company as the Miramar Land. In the second quarter of 2019, a joint venture was formed through which EastGroup owns a 95% controlling interest in this property. Also, on December 31, 2019, the Company acquired 41.6 acres of land in San Diego, known by the Company as the Otay Mesa Land, with the same noncontrolling interest partner with EastGroup owning a 99% controlling interest in the property.
The Company records 100% of the assets, liabilities, revenues and expenses of the buildings held in joint ventures with the noncontrolling interests provided for in accordance with the joint venture agreements.
The equity method of accounting is used for the Company’s 50% undivided tenant-in-common interest in Industry Distribution Center II. All significant intercompany transactions and accounts have been eliminated in consolidation.
EastGroup, a Maryland corporation, has qualified as a real estate investment trust (REIT)("REIT") under Sections 856-860 of the Internal Revenue Code and intends to continue to qualify as such. To maintain its status as a REIT, the Company is required to, among other things, distribute at least 90% of its ordinary taxable income to its stockholders. If the Company has a capital gain, it has the option of (i) deferring recognition of the capital gain through a tax-deferred exchange, (ii) declaring and paying a capital gain dividend on any recognized net capital gain resulting in no corporate level tax, or (iii) retaining and paying corporate income tax on its net long-term capital gain, with the shareholders reporting their proportional share of the undistributed long-term capital gain and receiving a credit or refund of their share of the tax paid by the Company. The Company distributed all of its 20172019, 20162018 and 20152017 taxable income to its stockholders. Accordingly, no significant provisions for income taxes were necessary. The following table summarizes the federal income tax treatment for all distributions by the Company for the years ended 20172019, 20162018 and 20152017.
Federal Income Tax Treatment of Share Distributions
|
| | | | | | | | | |
| | Years Ended December 31, |
| | 2019 | | 2018 | | 2017 |
| Common Share Distributions: | (Per share) |
| Ordinary dividends | $ | 3.14000 |
| | 2.14305 |
| | 2.49146 |
|
| Nondividend distributions | — |
| | — |
| | 0.02686 |
|
| Unrecaptured Section 1250 capital gain | — |
| | — |
| | — |
|
| Other capital gain | — |
| | — |
| | 0.00168 |
|
| Total Common Share Distributions | $ | 3.14000 |
| | 2.14305 |
| | 2.52000 |
|
|
| | | | | | | | | |
| | Years Ended December 31, |
| | 2017 | | 2016 | | 2015 |
| Common Share Distributions: | | | | | |
| Ordinary dividends | $ | 2.49146 |
| | 2.10494 |
| | 2.24258 |
|
| Nondividend distributions | 0.02686 |
| | 0.05202 |
| | 0.02774 |
|
| Unrecaptured Section 1250 capital gain | — |
| | 0.12872 |
| | 0.06968 |
|
| Other capital gain | 0.00168 |
| | 0.15432 |
| | — |
|
| Total Common Share Distributions | $ | 2.52000 |
| | 2.44000 |
| | 2.34000 |
|
EastGroup applies the principles of Financial Accounting Standards Board (FASB)("FASB") Accounting Standards Codification (ASC)("ASC") 740, Income Taxes, when evaluating and accounting for uncertainty in income taxes. With few exceptions, the Company’s 20132015 and earlier tax years are closed for examination by U.S. federal, state and local tax authorities. In accordance with the provisions of ASC 740, the Company had no significant uncertain tax positions as of December 31, 20172019 and 2016.2018.
The Company’s income may differ for tax and financial reporting purposes principally because of (1)(i) the timing of the deduction for the provision for possible losses and losses on investments, (2)(ii) the timing of the recognition of gains or losses from the sale
EASTGROUP PROPERTIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
of investments, (3)(iii) different income recognition methods for rental income, (iv) different depreciation methods and lives, (4)(v) real estate properties having a different basis for tax and financial reporting purposes, (5)(vi) mortgage loans having a different basis for tax and financial reporting purposes, thereby producing different gains upon collection of these loans, and (6)(vii) differences in book and tax allowances and timing for stock-based compensation expense.
EASTGROUP PROPERTIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The Company’s primary revenue is rental income from business distribution space. Minimum rental income from real estate operations is recognized on a straight-line basis. The straight-line rent calculation on leases includes the effects of rent concessions and scheduled rent increases, and the calculated straight-line rent income is recognized over the lives of the individual leases. The Company maintains allowances for doubtful accounts receivable, including straight-line rents receivable, based upon estimates determined by management. Management specifically analyzes aged receivables, customer credit-worthiness and current economic trends when evaluating the adequacy of the allowance for doubtful accounts.
Revenue is recognized on payments received from tenants for early terminations after all criteria have been met in accordance with ASC 840, Leases.Leases, prior to January 1, 2019, and in accordance with ASC 842, Leases, subsequently.
In February 2016, the FASB issued Accounting Standards Update (“ASU”) 2016-02, Leases (Topic 842), and in subsequent periods, issued ASU 2018-10, 2018-11, and 2018-20, all of which relate to the new lease accounting guidance. The Company adopted the new lease accounting guidance effective January 1, 2019, and has applied its provisions on a prospective basis. Lessor accounting is largely unchanged under ASU 2016-02. The Company’s primary revenue is rental income; as such, the Company is a lessor on a significant number of leases. The Company is continuing to account for its leases in substantially the same manner. The most significant changes for the Company related to lessor accounting include: (i) the new standard’s narrow definition of initial direct costs for leases, and (ii) the guidance applicable to recording uncollectible rents, as discussed in the following paragraphs.
The new standard’s narrow definition of initial direct costs for leases — The new definition of initial direct costs results in certain costs (primarily legal costs related to lease negotiations) being expensed rather than capitalized upon adoption of the new standard. EastGroup recorded Indirect leasing costs of $411,000 on the Consolidated Statements of Income and Comprehensive Income during 2019.
The guidance applicable to recording uncollectible rents — Upon adoption of the lease accounting guidance, reserves for uncollectible accounts are recorded as a reduction to revenue. Prior to adoption, reserves for uncollectible accounts were recorded as bad debt expenses. The standard also provides guidance related to calculating the reserves; however, those changes did not impact the Company.
EastGroup has elected the practical expedient permitting lessors to make an accounting policy election by class of underlying asset to not separate non-lease components (such as common area maintenance) of a contract from the lease component to which they relate when specific criteria are met. The Company believes its leases meet the criteria.
The Company has applied the provisions of the new lease accounting standard and provided the required disclosures in the notes to the consolidated financial statements.
The table below presents the components of Income from real estate operations for the year ended December 31, 2019:
|
| | | |
| | Year Ended
December 31, 2019 |
| | (In thousands) |
| | |
| Lease income — operating leases | $ | 248,237 |
|
Variable lease income (1) | 82,576 |
|
| Income from real estate operations | $ | 330,813 |
|
| |
| (1) | Primarily includes tenant reimbursements for real estate taxes, insurance and common area maintenance. |
Future Minimum Rental Receipts Under Non-Cancelable Leases
The Company’s leases with its customers may include various provisions such as scheduled rent increases, renewal options and termination options. The majority of the Company’s leases include defined rent increases rather than variable payments based on an index or unknown rate. In calculating the disclosures presented below, the Company included the fixed, non-cancelable terms of the leases. The following schedule indicates approximate future minimum rental receipts under non-cancelable leases for real estate properties by year as of December 31, 2019:
EASTGROUP PROPERTIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|
| | | | |
| Years Ending December 31, | | (In thousands) |
| 2020 | | $ | 252,654 |
|
| 2021 | | 215,820 |
|
| 2022 | | 171,607 |
|
| 2023 | | 132,274 |
|
| 2024 | | 99,183 |
|
| Thereafter | | 171,392 |
|
| Total minimum receipts | | $ | 1,042,930 |
|
As noted above, the Company adopted the new lease accounting guidance effective January 1, 2019. Since the Company has applied the provisions on a prospective basis, the following represents approximate future minimum rental receipts under non-cancelable leases for real estate properties by year as of December 31, 2018, as applicable under ASC 840, Leases, prior to the adoption of ASC 842.
|
| | | | |
| Years Ending December 31, | | (In thousands) |
| 2019 | | $ | 226,330 |
|
| 2020 | | 195,850 |
|
| 2021 | | 151,564 |
|
| 2022 | | 112,007 |
|
| 2023 | | 82,262 |
|
| Thereafter | | 163,499 |
|
| Total minimum receipts | | $ | 931,512 |
|
The Company recognizes gains on sales of real estate in accordance with the principles set forth in the Codification. For each transaction, the Company evaluates whether the guidance in ASC 360, Property, Plant606, Revenue from Contracts with Customers, or ASC 610, Other Income - Gains and Equipment.Losses from the Derecognition of Nonfinancial Assets, is applicable. Upon closing of real estate transactions, the provisions of ASC 360the Codification require consideration forof whether the transferseller has a controlling financial interest in the entity that holds the nonfinancial asset after the transaction. In addition, the seller evaluates whether a contract exists under ASC 606 and whether the counterparty obtained control of rightseach nonfinancial asset that is sold. If a contract exists and the counterparty obtained control of ownership toeach nonfinancial asset, the purchaser, receiptseller derecognizes the assets at the close of an adequate cash down payment from the purchaser, adequate continuing investment bytransaction with resulting gains or losses reflected on the purchaserConsolidated Statements of Income and no substantial continuing involvement by the Company. If the requirements for recognizing gains have not been met, the sale and related costs are recorded, but the gain is deferred and recognized by a method other than the full accrual method.Comprehensive Income.
The Company recognizes interest income on mortgage loans on the accrual method unless a significant uncertainty of collection exists. If a significant uncertainty exists, interest income is recognized as collected. If applicable, discounts on mortgage loans receivable are amortized over the lives of the loans using a method that does not differ materially from the interest method. The Company evaluates the collectibility of both interest and principal on each of its loans to determine whether the loans are impaired. A loan is considered to be impaired when, based on current information and events, it is probable that the Company will be unable to collect all amounts due according to the existing contractual terms. When a loan is considered to be impaired, the amount of loss is calculated by comparing the recorded investment to the value determined by discounting the expected future cash flows at the loan’s effective interest rate or to the fair value of the underlying collateral (if the loan is collateralized) less costs to sell. As of December 31, 20172019 and 20162018, there was no significant uncertainty of collection; therefore, interest income was recognized. As of December 31, 20172019 and 20162018, the Company determined that no allowance for collectibility of the mortgage loans receivable was necessary.
| |
| (d) | Real Estate Properties |
EastGroup has one1 reportable segment–industrial properties. These properties are concentratedprimarily located in major Sunbelt marketsregions of the United States, primarily in the states of Florida, Texas, Arizona, California and North Carolina,States. The Company's properties have similar economic characteristics and also meet the other criteria that permit the properties to beas a result, have been aggregated into one reportable segment.
The Company reviews long-lived assets for impairment whenever events or changes in circumstances indicate the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to future undiscounted net cash flows (including estimated future expenditures necessary to substantially complete the asset) expected to be generated by the asset. If the carrying amount of an asset exceeds its estimated future cash
EASTGROUP PROPERTIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
flows, an impairment charge is recognized for the amount by which the carrying amount of the asset exceeds the fair value of the asset. As of December 31, 20172019 and 20162018, the Company did not identify any impairment charges which should be recorded.
Depreciation of buildings and other improvements is computed using the straight-line method over estimated useful lives of generally 40 years for buildings and 3 to 15 years for improvements. Building improvements are capitalized, while maintenance and repair expenses are charged to expense as incurred. Significant renovations and improvements that improve or extend the useful life of the assets are capitalized. Depreciation expense was $86,590,000, $76,007,000 and $69,010,000 $63,793,000for 2019, 2018 and $59,882,000 for 2017, 2016 and 2015, respectively.
| |
| (e) | Development and Value-Add Properties |
For properties under development and value-add properties (defined in Note 2) acquired in the development stage, costs associated with development (i.e., land, construction costs, interest expense, property taxes and other direct and indirect costs associated with development) are aggregated into the total capitalized costs of the property. Included in these costs are management’s estimates for the portions of internal costs (primarily personnel costs) deemed related to such development activities. The internal costs are allocated to specific development propertiesprojects based on development activity. As the property becomes occupied, depreciation commences on the occupied portion of the building, and costs are capitalized only for the portion of the building that remains vacant. WhenThe Company transfers properties from the property becomes 80% occupied or one year after completion of the shell construction (whichever comes first), capitalization of development costs, including interest expense, property taxes and internal personnel costs, ceases. The properties are then transferredvalue-add program to Real estate properties, and depreciation commences on the entire property (excluding the land).
EASTGROUP PROPERTIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Effective January 1, 2018, the Company is implementing an accounting policy change and will begin transferring as follows: (i) for development properties, from Development to Real estate properties at the earlier of 90% occupancy or one year after completion of the shell construction.construction, and (ii) for value-add properties, at the earlier of 90% occupancy or one year after acquisition. Upon the earlier of 90% occupancy or one year after completion of the shell construction, capitalization of development costs, including interest expense, property taxes and internal personnel costs, ceases and depreciation commences on the entire property (excluding the land).
| |
| (f) | Real Estate Held for Sale |
The Company considers a real estate property to be held for sale when it meets the criteria established under ASC 360, Property, Plant and Equipment, including when it is probable that the property will be sold within a year. Real estate properties held for sale are reported at the lower of the carrying amount or fair value less estimated costs to sell and are not depreciated while they are held for sale.
In accordance with FASB Accounting Standards Update (ASU)ASU 2014-08, Presentation of Financial Statements (Topic 205) and Property, Plant, and Equipment (Topic 360), Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity, the Company would report a disposal of a component of an entity or a group of components of an entity in discontinued operations if the disposal represents a strategic shift that has (or will have) a major effect on an entity's operations and financial results when the component or group of components meets the criteria to be classified as held for sale or when the component or group of components is disposed of by sale or other than by sale. In addition, the Company would provide additional disclosures about both discontinued operations and the disposal of an individually significant component of an entity that does not qualify for discontinued operations presentation in the financial statements. EastGroup performs an analysis of properties sold to determine whether the sales qualify for discontinued operations presentation.
| |
| (g) | Derivative Instruments and Hedging Activities |
EastGroup applies ASC 815, Derivatives and Hedging, which requires all entities with derivative instruments to disclose information regarding how and why the entity uses derivative instruments and how derivative instruments and related hedged items affect the entity’s financial position, financial performance and cash flows. See Note 13 for a discussion of the Company's derivative instruments and hedging activities.
The Company considers all highly liquid investments with a maturity of three months or less when purchased to be cash equivalents.
Debt origination costs are deferred and amortized over the term of each loan using the effective interest method. Amortization of debt issuance costs was $1,344,000, $1,352,000 and $1,250,000 $1,534,000for 2019, 2018 and $1,336,000 for 2017, 2016 and 2015, respectively. Amortization of facility fees was $790,000, $736,000 and $670,000 $670,000for 2019, 2018 and $608,000 for 2017, 2016 and 2015, respectively.
Leasing costs are deferred and amortized using the straight-line method over the term of the lease. Leasing costs paid during the period are included in Changes in other assets and other liabilities in the Investing Activities section on the Consolidated Statements of Cash Flows. Leasing costs amortization expense was $13,167,000, $11,493,000 and $10,329,000 $9,932,000for 2019, 2018 and $9,038,000 for 2017, 2016 and 2015, respectively.
Amortization expense for in-place lease intangibles is disclosed below in Real Estate Property Acquisitions and Acquired Intangibles.
EASTGROUP PROPERTIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
| |
| (j) | Real Estate Property Acquisitions and Acquired Intangibles |
Upon acquisition of real estate properties, EastGroup applies the principles of ASC 805, Business Combinations. Prior to the Company's adoption of ASU 2017-01, Business Combinations (Topic 805): Clarifying the Definition of a Business, effective October 1, 2016, acquisition-related costs were recognized as expenses in the periods in which the costs were incurred and the services were received.
As discussed in Note 1(o), beginning with acquisitions after October 1, 2016, the Company follows the guidance in ASU 2017-01, whichThe FASB Codification provides a new framework for determining whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. Under the new guidance, companies are required to utilize an initial screening test to determine whether substantially all of the fair value of the gross assets acquired (or disposed of) is concentrated in a single identifiable asset or a group of similar identifiable assets; if so, the set is not a business. EastGroup has determined that its real estate property acquisitions in 20172019, 2018 and the fourth quarter of 20162017 are considered to be acquisitions of groups of similar identifiable assets; therefore, the acquisitions are not considered to be acquisitions of a business. As a result, the Company has capitalized acquisition costs related to its 2019, 2018 and 2017 and fourth quarter 2016 acquisitions.
The FASB Codification also provides guidance on how to properly determine the allocation of the purchase price among the individual components of both the tangible and intangible assets based on their respective fair values. Goodwill for business combinations is recorded when the purchase price exceeds the fair value of the assets and liabilities acquired. Factors considered by management
EASTGROUP PROPERTIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
in allocating the cost of the properties acquired include an estimate of carrying costs during the expected lease-up periods considering current market conditions and costs to execute similar leases. The allocation to tangible assets (land, building and improvements) is based upon management’s determination of the value of the property as if it were vacant using discounted cash flow models. The Company determines whether any financing assumed is above or below market based upon comparison to similar financing terms for similar properties. The cost of the properties acquired may be adjusted based on indebtedness assumed from the seller that is determined to be above or below market rates.
The purchase price is also allocated among the following categories of intangible assets: the above or below market component of in-place leases, the value of in-place leases, and the value of customer relationships. The value allocable to the above or below market component of an acquired in-place lease is determined based upon the present value (using a discount rate reflecting the risks associated with the acquired leases) of the difference between (i) the contractual amounts to be paid pursuant to the lease over its remaining term, and (ii) management’s estimate of the amounts that would be paid using faircurrent market ratesrents over the remaining term of the lease. The amounts allocated to above and below market leases are included in Other assets and Other liabilities, respectively, on the Consolidated Balance Sheets and are amortized to rental income over the remaining terms of the respective leases. The total amount of intangible assets is further allocated to in-place lease values and customer relationship values based upon management’s assessment of their respective values. These intangible assets are included in Other assets on the Consolidated Balance Sheets and are amortized over the remaining term of the existing lease, or the anticipated life of the customer relationship, as applicable.
Amortization of above and below market leases increased rental income by $1,229,000, $667,000 and $529,000 $488,000in 2019, 2018 and $448,000 in 20172016 and 2015, respectively. Amortization expense for in-place lease intangibles was $4,967,000, $4,204,000 and $4,535,000 $4,210,000for 2019, 2018 and $4,370,000 for 2017, 2016 and 2015, respectively.
Projected amortization of in-place lease intangibles for the next five years as of December 31, 20172019 is as follows:
|
| | | | |
| Years Ending December 31, | | (In thousands) |
| 2020 | | $ | 4,949 |
|
| 2021 | | 3,719 |
|
| 2022 | | 2,697 |
|
| 2023 | | 2,160 |
|
| 2024 | | 1,593 |
|
During 2019, the Company acquired the following operating properties: Airways Business Center in Denver; 385 Business Park in Greenville; Grand Oaks 75 Business Center 1 in Tampa; and Siempre Viva Distribution Center 2 and Rocky Point Distribution Center 1 in San Diego. The Company also acquired the following value-add properties: Logistics Center 6 & 7 and Arlington Tech Centre 1 & 2 in Dallas; Grand Oaks 75 Business Center 2 in Tampa; Interstate Commons Distribution Center 2 in Phoenix; Southwest Commerce Center in Las Vegas; and Rocky Point Distribution Center 2 in San Diego. At the time of acquisition, these value-add properties were classified in the lease-up or under construction phase. The total cost for the properties acquired by the Company was $205,841,000, of which $105,301,000 was allocated to Real estate properties and $92,268,000 was allocated to Development and value-add properties. EastGroup allocated $46,778,000 of the total purchase price to land using third party land valuations for the Denver, Greenville, Tampa, Dallas, Phoenix, Las Vegas and San Diego markets. Logistics Center 6 & 7 is located on land under a ground lease; therefore, no value was allocated to land for this transaction. The market values are considered
EASTGROUP PROPERTIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|
| | | | |
| Years Ending December 31, | | (In thousands) |
| 2018 | | $ | 3,576 |
|
| 2019 | | 2,555 |
|
| 2020 | | 1,911 |
|
| 2021 | | 1,482 |
|
| 2022 | | 893 |
|
to be Level 3 inputs as defined by ASC 820, Fair Value Measurement (see Note 18 for additional information on ASC 820). Intangibles associated with the purchase of real estate were allocated as follows: $10,020,000 to in-place lease intangibles and $344,000 to above market leases (both included in Other assets on the Consolidated Balance Sheets) and $2,092,000 to below market leases (included in Other liabilities on the Consolidated Balance Sheets). These costs are amortized over the remaining lives of the associated leases in place at the time of acquisition.
Also during 2019, EastGroup acquired 6.5 acres of operating land in San Diego for $13,386,000. In connection with the acquisition, the Company allocated value to land and below market leases. EastGroup recorded land of $13,979,000 based on third party land valuations for the San Diego market. The market values are considered to be Level 3 inputs as defined by ASC 820, Fair Value Measurement. This land, which is included in Real estate properties on the Consolidated Balance Sheets, is currently leased to a tenant that operates a parking lot on the site. The Company recorded $593,000 to below market leases in connection with this land acquisition. These costs are amortized over the remaining life of the associated lease in place at the time of acquisition.
EastGroup also acquired 41.6 acres of operating land in San Diego for $15,282,000. This land, which is included in Real estate properties on the Consolidated Balance Sheets, is currently leased (on a month-to-month basis) to various tenants operating outdoor storage on the site.
During 2019, EastGroup also acquired a small parcel of land (0.5 acres) adjacent to its Yosemite Distribution Center in Milpitas (San Francisco), California, for $472,000. This land is included in Real estate properties on the Consolidated Balance Sheets.
During 2018, the Company acquired the following operating properties: Gwinnett 316 in Atlanta; Eucalyptus Distribution Center in Chino (Los Angeles); Allen Station I & II in Dallas; and Greenhill Distribution Center in Austin. The Company also acquired one value-add property, Siempre Viva Distribution Center in San Diego. At the time of acquisition, Siempre Viva was classified in the lease-up phase. The total cost for the properties acquired by the Company was $71,086,000, of which $54,537,000 was allocated to Real estate properties and $13,934,000was allocated to Development and value-add properties. EastGroup allocated $23,263,000 of the total purchase price to land using third party land valuations for the Atlanta, Dallas, Austin, San Diego and Chino (Los Angeles) markets. The market values are considered to be Level 3 inputs as defined by ASC 820, Fair Value Measurement (see Note 18 for additional information on ASC 820). Intangibles associated with the purchase of real estate were allocated as follows: $4,350,000 to in-place lease intangibles, $21,000 to above market leases and $1,756,000 to below market leases. These costs are amortized over the remaining lives of the associated leases in place at the time of acquisition.
During 2017, the Company acquired the following operating properties: Shiloh 400, Broadmoor Commerce Park and Hurricane Shoals 1 & 2 in Atlanta and Southpark Corporate Center 5-7 in Austin. The Company also acquired one development stagevalue-add property, Progress Center 1 & 2 in Atlanta. At the time of acquisition, Progress Center 1 & 2 was classified in the lease-up phase of development. The total cost for the properties acquired by the Company was $65,243,000, of which $51,539,000 was allocated to Real estate properties and $10,312,000was allocated to Development and value-add properties. EastGroup allocated $11,281,000 of the total purchase price to land using third party land valuations for the Atlanta and Austin markets. The market values are considered to be Level 3 inputs as defined by ASC 820, Fair Value Measurement (see Note 18 for additional information on ASC 820). Intangibles associated with the purchase of real estate were allocated as follows: $3,662,000 to in-place lease intangibles, and $115,000 to above market leases (included in Other assets on the Consolidated Balance Sheets), and $385,000 to below market leases (included in Other liabilities on the Consolidated Balance Sheets). These costs are amortized over the remaining lives of the associated leases in place at the time of acquisition.leases.
During 2016, the Company acquired the following development-stage properties: Parc North in Ft. Worth (Dallas), Weston Commerce Park in Weston (South Florida), and Jones Corporate Park in Las Vegas. At the time of acquisition, the properties were classified as under construction or in the lease-up phase of development.
Also in 2016, the Company acquired Flagler Center, a three-building business distribution complex in Jacksonville, Florida.
The properties purchased in 2016 were acquired for a total cost of $112,158,000, of which $22,228,000 was allocated to Real estate properties and $84,490,000was allocated to Development. EastGroup allocated $29,164,000 of the total purchase price to land using third party land valuations for the Dallas, South Florida, Las Vegas and Jacksonville markets. The market values are considered to be Level 3 inputs as defined by ASC 820. Intangibles associated with the purchase of real estate were allocated as follows: $5,941,000 to in-place lease intangibles, $393,000 to above market leases and $894,000 to below market leases.
EASTGROUP PROPERTIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
During 2015, the Company acquired Southpark Corporate Center and Springdale Business Center, both in Austin, Texas, for a total cost of $31,574,000, of which $28,648,000 was allocated to Real estate properties. The Company allocated $5,494,000 of the total purchase price to land using third party land valuations for the Austin market. The market values are considered to be Level 3 inputs as defined by ASC 820. Intangibles associated with the purchase of real estate were allocated as follows: $3,453,000 to in-place lease intangibles and $527,000 to below market leases.
The Company periodically reviews the recoverability of goodwill (at least annually) and the recoverability of other intangibles (on a quarterly basis) for possible impairment. In management’s opinion, no impairment of goodwill and other intangibles existed at December 31, 20172019 and 20162018.
| |
| (k) | Stock-Based Compensation |
In May 2004, the stockholders of the Company approved the EastGroup Properties, Inc. 2004 Equity Incentive Plan ("the 2004 Plan"), which was further amended by the Board of Directors in September 2005 and December 2006. This plan authorized the issuance of common stock to employees in the form of options, stock appreciation rights, restricted stock, deferred stock units, performance shares, bonus stock or stock in lieu of cash compensation.
In April 2013, the Board of Directors adopted the EastGroup Properties, Inc. 2013 Equity Incentive Plan (the “2013 Equity Plan”) upon the recommendation of the Compensation Committee; the 2013 Equity Plan was approved by the Company's stockholders and became effective May 29, 2013. The 2013 Equity Plan was further amended by the Board of Directors in March 2017. The 2013 Equity Plan replaced the 2004 Plan and the 2005 Directors Equity Incentive Plan. Typically, the Company issues new shares to fulfill stock grants or upon the exercise of stock options.
EastGroup applies the provisions of ASC 718, Compensation – Stock Compensation, to account for its stock-based compensation plans. ASC 718 requires that the compensation cost relating to share-based payment transactions be recognized in the financial
EASTGROUP PROPERTIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
statements and that the cost be measured on the fair value of the equity or liability instruments issued. The cost for market-based awards and awards that only require service are expensed on a straight-line basis over the requisite service periods. The cost for performance-based awards is determined using the graded vesting attribution method which recognizes each separate vesting portion of the award as a separate award on a straight-line basis over the requisite service period. This method accelerates the expensing of the award compared to the straight-line method.
The total compensation expense for service and performance based awards is based upon the fair market value of the shares on the grant date. The grant date fair value for awards that have been granted and are subject to a future market condition (total shareholder return) are determined using a simulation pricing model developed to specifically accommodate the unique features of the awards.
During the restricted period for awards no longer subject to contingencies, the Company accrues dividends and holds the certificates for the shares; however, the employee can vote the shares. Share certificates and dividends are delivered to the employee as they vest.
The Company applies ASC 260, Earnings Per Share, which requires companies to present basic and diluted earnings per share (EPS)("EPS"). Basic EPS represents the amount of earnings for the period attributable to each share of common stock outstanding during the reporting period. The Company’s basic EPS is calculated by dividing Net Income Attributable to EastGroup Properties, Inc. Common Stockholders by the weighted average number of common shares outstanding. The weighted average number of common shares outstanding does not include any potentially dilutive securities or any unvested restricted shares of common stock. These unvested restricted shares, although classified as issued and outstanding, are considered forfeitable until the restrictions lapse and will not be included in the basic EPS calculation until the shares are vested.
Diluted EPS represents the amount of earnings for the period attributable to each share of common stock outstanding during the reporting period and to each share that would have been outstanding assuming the issuance of common shares for all dilutive potential common shares outstanding during the reporting period. The Company calculates diluted EPS by dividing Net Income Attributable to EastGroup Properties, Inc. Common Stockholders by the weighted average number of common shares outstanding plus the dilutive effect of unvested restricted stock. The dilutive effect of unvested restricted stock is determined using the treasury stock method.
The preparation of financial statements in conformity with U.S. generally accepted accounting principles (GAAP)("GAAP") requires management to make estimates and assumptions that affect the reported amounts of assets, and liabilities, and revenues and expenses
EASTGROUP PROPERTIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
during the reporting period and to disclose material contingent assets and liabilities at the date of the financial statements. Actual results could differ from those estimates.
| |
| (n) | Risks and Uncertainties |
The state of the overall economy can significantly impact the Company’s operational performance and thus impact its financial position. Should EastGroup experience a significant decline in operational performance, it may affect the Company’s ability to make distributions to its shareholders, service debt, or meet other financial obligations.
| |
| (o) | Recent Accounting Pronouncements |
EastGroup has evaluated all ASUs recently released by the FASB through the date the financial statements were issued and determined that the following ASUs apply to the Company.
In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers, which requires an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. The FASB issued further guidance in ASU 2016-12, Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients, that provides clarifying guidance in certain narrow areas and adds some practical expedients. ASU 2014-09 will replace most existing revenue recognition guidance in U.S. GAAP when it becomes effective. The effective date of ASU 2014-09 was extended by one year by ASU 2015-14, Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date. The new standard was effective for the Company on January 1, 2018, and the Company is using the modified retrospective approach upon adoption. The Company has made significant progress in evaluating the effect of ASU 2014-09 on its consolidated financial statements and related disclosures beginning with the Form 10-Q for the period ending March 31, 2018. The Company has completed its inventory of its sources of revenue and does not believe there will be a material financial statement impact or that its pattern of revenue recognition will be materially impacted by the adoption of ASU 2014-09.
In January 2016, the FASB issued ASU 2016-01, Financial Instruments - Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities,which requires public business entities to use the exit price notion when measuring the fair value of financial instruments for disclosure purposes, requires separate presentation of financial assets and financial liabilities by measurement category and form of financial asset, and eliminates the requirement for public business entities to disclose the methods and significant assumptions used to estimate the fair value that is required to be disclosed for financial instruments measured at amortized costs on the balance sheet. EastGroup adopted ASU 2016-01 effective January 1, 2018. The Company does not anticipate the adoption of ASU 2016-01 will have a material impact on the Company's financial condition or results of operations.
In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842), and in subsequent periods, issued ASU 2018-10, 2018-11, and 2018-20, all of which requires lesseesrelate to recognize the following for all leases (withnew lease accounting guidance. The Company adopted the exception of short-term leases) at the commencement date: (1) anew lease liability, which is a lessee's obligation to make lease payments arising from a lease, measuredaccounting guidance effective January 1, 2019, and has applied its provisions on a discounted basis; and (2) a right-of-use asset, which is an asset that representsprospective basis. The following changes are applicable to the lessee's right to use, or control the use of, a specified asset for the lease term. The Company is a lessee on a limited number of leases, including office and ground leases, and while the adoption of ASU 2016-02 will impact the Company's accounting for office and ground leases, the Company anticipates the impact will not be material to its overallCompany’s financial condition and results of operations. operations:
| |
| • | Lessees are required to recognize the following for all leases (with the exception of short-term leases) at the commencement date: (1) a lease liability, which is a lessee’s obligation to make lease payments arising from a lease, measured on a discounted basis; and (2) a right of use asset, which is an asset that represents the lessee’s right to use, or control the use of, a specified asset for the lease term. The Company is a lessee on a limited number of leases, including office and ground leases. As of January 1, 2019, the Company recorded its right of use asset and lease liability values for its operating leases as follows: office leases of $2,376,000 and ground leases of $10,226,000. The combined values of the Company's right of use assets and lease liabilities for its ground leases and office leases are less than 1% of the Company’s Total assets as of December 31, 2019. |
EASTGROUP PROPERTIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Lessor accounting is largely unchanged under ASU 2016-02. The Company'sCompany’s primary revenue is rental income; as such, the Company is a lessor on a significant number of leases. The Company is continuing to evaluate the potential impacts of the ASU and believes it will continue to account for its leases in substantially the same manner. The most significant changes for the Company related to lessor accounting include bifurcating its revenue into lease and non-lease components and the new standard's narrow definition of initial direct costs for leases. The new definition will resultinclude:
| |
| ◦ | The new standard’s narrow definition of initial direct costs for leases — The new definition of initial direct costs results in certain costs (primarily legal costs related to lease negotiations) being expensed rather than capitalized upon adoption of the new standard. EastGroup recorded Indirect leasing costs of $411,000 on the Consolidated Statements of Income and Comprehensive Income during 2019. |
| |
| ◦ | The guidance applicable to recording uncollectible rents — Upon adoption of the lease accounting guidance, reserves for uncollectible accounts are recorded as a reduction to revenue. Prior to adoption, reserves for uncollectible accounts were recorded as bad debt expenses. The standard also provides guidance related to calculating the reserves; however, those changes did not impact the Company. |
EastGroup has elected the practical expedient permitting lessors and lessees to make an accounting policy election by class of underlying asset to not separate non-lease components (such as common area maintenance) of a contract from the lease component to which they relate when specific criteria are met. The Company believes its leases meet the criteria.
The Company has applied the provisions of the new standard. Public business entities arelease accounting standard and provided the required to apply the amendmentsdisclosures in ASU 2016-02 for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. EastGroup plans to adopt ASU 2016-02 effective January 1, 2019. The Company is continuing the process of evaluating and quantifying the effect that ASU 2016-02 will havethis Annual Report on its consolidated financial statements and related disclosures beginning with the Form 10-Q for the period ending March 31, 2019.10-K.
In March 2016, the FASB issued ASU 2016-09, Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting. The ASU is intended to improve the accounting for share-based payments and affects all organizations that issue share-based payment awards to their employees. Several aspects of the accounting for share-based payment awards are simplified with the ASU, including income tax consequences, classification of awards as equity or liabilities and classification on the Consolidated Statements of Cash Flows. ASU 2016-09 is effective for public business entities for annual periods beginning after December 15, 2016, and interim periods within those fiscal years; early adoption is permitted. EastGroup adopted ASU 2016-09 effective January 1, 2017. As a result, the Company elected to reverse compensation cost of any forfeited awards when they occur and will continue to classify the cash flows resulting from remitting cash to the tax authorities for the payment of taxes on the vesting of share-based payment awards as a financing activity on the Consolidated Statements of Cash
EASTGROUP PROPERTIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Flows. In addition, upon vesting of share-based payments, the Company will withhold up to the maximum individual statutory tax rate and classify the entire award as equity. The adoption of ASU 2016-09 did not have a material impact on the Company's financial condition or results of operations.
In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments, which addresses certain cash flow issues, including how debt prepayments or debt extinguishment costs and distributions received from equity method investees are presented. ASU 2016-15 is effective for public business entities for annual periods beginning after December 15, 2017, and interim periods within those fiscal years. Early adoption is permitted, and the Company has adopted ASU 2016-15 effective January 1, 2017. The adoption of ASU 2016-15 did not have a material impact on the Company's financial condition or results of operations.
In January 2017, the FASB issued ASU 2017-01, Business Combinations (Topic 805): Clarifying the Definition of a Business. The ASU is intended to provide a new framework for determining whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. Under the new guidance, companies are required to utilize an initial screening test to determine whether substantially all of the fair value of the gross assets acquired (or disposed of) is concentrated in a single identifiable asset or a group of similar identifiable assets; if so, the set is not a business. The Company has determined that some of its real estate property acquisitions may be considered to be acquisitions of groups of similar identifiable assets; therefore, the acquisitions are not considered to be acquisitions of a business. EastGroup adopted ASU 2017-01 for transactions beginning on October 1, 2016. As a result, the Company has capitalized acquisition costs related to its 2017 and fourth quarter 2016 acquisitions as they were determined not to be acquisitions of a business.
In January 2017, the FASB issued ASU 2017-04, Intangibles - Goodwill and Others (Topic 350): Simplifying the Test for Goodwill Impairment, which simplifies the measurement of goodwill impairment by eliminating the requirement of performing a hypothetical purchase price allocation to measure goodwill impairment. The Company adopted ASU 2017-04 effective January 1, 2017, and is applying the new guidance for goodwill impairment tests with measurement dates after January 1, 2017. The adoption of ASU 2017-04 did not have a material impact on the Company's financial condition or results of operations.
In May 2017, the FASB issued ASU 2017-09, Compensation - Stock Compensation (Topic 718): Scope of Modification Accounting, which clarifies what constitutes a modification of a share-based payment award. The ASU is intended to provide clarity and reduce both diversity in practice and cost and complexity when applying the guidance in Topic 718 to a change to the terms or conditions of a share-based payment award. ASU 2017-09 is effective for public entities for annual periods beginning after December 15, 2017, and interim periods within those fiscal years. The Company adopted ASU 2017-09 on January 1, 2018, and it does not anticipate that the adoption of ASU 2017-09 will have a material impact on its financial condition or results of operations, as the Company does not expect to have any modifications to share-based payment awards. However, if the Company does have a modification to an award in the future, it will follow the guidance in ASU 2017-09.
In August 2017, the FASB issued ASU 2017-12, Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities. The ASU is intended to better align a company'scompany’s financial reporting for hedging activities with the economic objectives of those activities. The transition method is a modified retrospective approach that will require the Companyrequires companies to recognize the cumulative effect of initially applying the ASU as an adjustment to Accumulated other comprehensive income with a corresponding adjustment to the opening balance of retained earnings as of the beginning of the fiscal year the entity adopts the ASU. The primary provision in the ASU that will require an adjustment to beginning retained earnings is the change in timing and income statement presentation for ineffectiveness related to cash flow and net investment hedges. As a result of the transition guidance in the ASU, cumulative ineffectiveness that has previously been recognized on cash flow and net investment hedges that are still outstanding and designated as of the date of adoption will be adjusted and removed from beginning retained earnings and placed in Accumulated other comprehensive income. The Company adopted ASU 2017-12 ison January 1, 2019; the adoption of ASU 2017-12 did not have a material impact on its financial condition, results of operations or disclosures.
In October 2018, the FASB issued ASU 2018-16, Derivatives and Hedging (Topic 815): Inclusion of the Secured Overnight Financing Rate (SOFR) Overnight Index Swap (OIS) Rate as a Benchmark Interest Rate for Hedge Accounting Purposes. The ASU applies to all entities that elect to apply hedge accounting to benchmark interest rates under Topic 815 and permits the use of the OIS rate based on SOFR as a United States (U.S.) benchmark rate for hedge accounting purposes under Topic 815 in addition to the interest rates on direct Treasury obligations of the U.S. government, the London Inter-bank Offered Rate (“LIBOR”) swap rate, the OIS rate based on the Fed Funds Effective Rate, and the Securities Industry and Financial Markets Association (“SIFMA”) Municipal Swap Rate. ASU 2018-16 was effective upon adoption of ASU 2017-12. The Company adopted ASU 2017-12 and ASU 2018-16 on January 1, 2019, and the adoption of both ASUs did not have a material impact on its financial condition, results of operations or disclosures.
In June 2016, the FASB issued ASU 2016-13, Financial Instruments — Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, and subsequently issued ASU 2018-19, Codification Improvements to Topic 326, Financial Instruments — Credit Losses in November 2018. The ASUs amend guidance on reporting credit losses for public businessassets held at amortized cost basis and available for sale debt securities. For assets held at amortized cost, Topic 326 eliminates the probable initial recognition threshold in current GAAP and, instead, requires an entity to reflect its current estimate of all expected credit losses. For available for sale debt securities (EastGroup does not currently hold any and does not intend to hold any in the future), credit losses should be measured in a similar manner to current GAAP; however, Topic 326 will require that credit losses be presented as an allowance rather than a write-down. The ASUs affect entities holding financial assets and are effective for annual periods beginning after December 15, 2018,2019, and interim periods within those fiscal years. Early adoption is permitted; however, theThe Company plans to adoptadopted ASU 2017-122016-13 and ASU 2018-19 on January 1, 2019. While2020, and will provide the Company continues to assess all potential impacts of ASU 2017-12, itnecessary disclosures beginning with its Form 10-Q for the period ending March 31, 2020. EastGroup does not expect the adoption to have a material impact on the Company'sits financial condition, or results of operations.operations or disclosures.
In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement. The ASU is intended to improve the effectiveness of fair value measurement disclosures. ASU 2018-13 is effective for all entities for annual periods beginning after December 15, 2019, and interim periods within those fiscal years. The Company adopted ASU 2018-13 on January 1, 2020, and will provide the necessary disclosures beginning with its Form 10-Q for the period ending March 31, 2020. EastGroup does not expect the adoption to have a material impact on its financial condition, results of operations or disclosures.
EASTGROUP PROPERTIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
| |
| (p) | Classification of Book Overdraft on Consolidated Statements of Cash Flows |
The Company classifies changes in book overdraft in which the bank has not advanced cash to the Company to cover outstanding checks as an operating activity. Such amounts are included in Accounts payable, accrued expenses and prepaid rent in the Operating Activities section on the Consolidated Statements of Cash Flows.
Certain reclassifications have been made in the 2016 and 20152018 consolidated financial statements to conform to the 20172019 presentation.
EASTGROUP PROPERTIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
| |
| (2) | REAL ESTATE PROPERTIES |
The Company’s Real estate properties and Development and value-add properties at December 31, 20172019 and 20162018 were as follows:
|
| | | | | | |
| | December 31, |
| 2019 | | 2018 |
| (In thousands) |
| Real estate properties: | | | |
| Land | $ | 452,698 |
| | 380,684 |
|
| Buildings and building improvements | 1,907,963 |
| | 1,732,592 |
|
| Tenant and other improvements | 471,909 |
| | 440,205 |
|
Right of use assets — Ground leases (operating) (1) | 11,997 |
| | — |
|
Development and value-add properties (2) | 419,999 |
| | 263,664 |
|
| | 3,264,566 |
| | 2,817,145 |
|
| Less accumulated depreciation | (871,139 | ) | | (814,915 | ) |
| | $ | 2,393,427 |
| | 2,002,230 |
|
|
| | | | | | |
| | December 31, |
| 2017 | | 2016 |
| (In thousands) |
| Real estate properties: | | | |
| Land | $ | 345,424 |
| | 308,931 |
|
| Buildings and building improvements | 1,587,130 |
| | 1,435,309 |
|
| Tenant and other improvements | 402,905 |
| | 368,833 |
|
| Development | 242,014 |
| | 293,908 |
|
| | 2,577,473 |
| | 2,406,981 |
|
| Less accumulated depreciation | (749,601 | ) | | (694,250 | ) |
| | $ | 1,827,872 |
| | 1,712,731 |
|
| |
| (1) | See Ground Leases discussion below and in Note 1(o) for information regarding the Company's right of use assets for ground leases. |
| |
| (2) | Value-add properties are defined as properties that are either acquired but not stabilized or can be converted to a higher and better use. Acquired properties meeting either of the following two conditions are considered value-add properties: (1) Less than 75% occupied as of the acquisition date (or will be less than 75% occupied within one year of acquisition date based on near term lease roll), or (2) 20% or greater of the acquisition cost will be spent to redevelop the property. |
EastGroup acquired operating properties during 2017, 20162019, 2018 and 20152017 as discussed in Note 1(j).
In 2017, Eastgroup sold Stemmons Circle and Techway Southwest I-IV.
In 2016, theThe Company sold operating properties during 2019, 2018 and 2017 as shown in the following operating properties: Northwest Point Distribution and Service Centers, North Stemmons II and III, America Plaza, Lockwood Distribution Center, West Loop Distribution Center 1 & 2, two of its four Interstate Commons Distribution Center buildings, Castilian Research Center and Memphis I.
In 2015, the Company sold one operating property, the last of its three Ambassador Row Warehouses.
table below. The results of operations and gains and losses on sales for the properties sold during the periods presented are reported in continuing operations on the Consolidated Statements of Income and Comprehensive Income. The gains and losses on sales are included in Gain net of loss, on sales of real estate investments.
The Company did not classify any properties as held for sale as of December 31, 20172019 and 2016.2018.
EASTGROUP PROPERTIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Sales of Real Estate
A summary of Gain net of loss, on sales of real estate investments for the years ended December 31, 2019, 2018 and 2017 2016 and 2015 follows:
|
| | | | | | | | | | | | | | | | | |
| Real Estate Properties | | Location | | Size (in Square Feet) | | Date Sold | | Net Sales Price | | Basis | | Recognized Gain |
| | | | | | | | | (In thousands) |
| 2019 | | | | | | | | | | | | |
| World Houston 5 | | Houston, TX | | 51,000 |
| | 01/29/2019 | | $ | 3,679 |
| | 1,354 |
| | 2,325 |
|
| Altamonte Commerce Center | | Orlando, FL | | 186,000 |
| | 05/20/2019 | | 14,423 |
| | 5,342 |
| | 9,081 |
|
University Business Center 130 (1) | | Santa Barbara, CA | | 40,000 |
| | 11/07/2019 | | 11,083 |
| | 2,729 |
| | 8,354 |
|
| Southpointe Distribution Center | | Tucson, AZ | | 207,000 |
| | 12/03/2019 | | 13,699 |
| | 2,281 |
| | 11,418 |
|
| University Business Center 125 & 175 | | Santa Barbara, CA | | 133,000 |
| | 12/11/2019 | | 23,675 |
| | 13,785 |
| | 9,890 |
|
| Total for 2019 | | | | | | | | $ | 66,559 |
| | 25,491 |
| | 41,068 |
|
| 2018 | | | | | | | | | | | | |
| World Houston 18 | | Houston, TX | | 33,000 |
| | 01/26/2018 | | $ | 2,289 |
| | 1,211 |
| | 1,078 |
|
| 56 Commerce Park | | Tampa, FL | | 181,000 |
| | 03/20/2018 | | 12,032 |
| | 2,888 |
| | 9,144 |
|
| 35th Avenue Distribution Center | | Phoenix, AZ | | 125,000 |
| | 07/26/2018 | | 7,683 |
| | 3,632 |
| | 4,051 |
|
| Total for 2018 | | | | | | | | $ | 22,004 |
| | 7,731 |
| | 14,273 |
|
| 2017 | | | | | | | | | | | | |
| Stemmons Circle | | Dallas, TX | | 99,000 |
| | 05/12/2017 | | $ | 5,051 |
| | 1,329 |
| | 3,722 |
|
| Techway Southwest I-IV | | Houston, TX | | 415,000 |
| | 06/19/2017 | | 32,506 |
| | 14,373 |
| | 18,133 |
|
| Total for 2017 | | | | | | | | $ | 37,557 |
| | 15,702 |
| | 21,855 |
|
|
| | | | | | | | | | | | | | | | | |
| Real Estate Properties | | Location | | Size (in Square Feet) | | Date Sold | | Net Sales Price | | Basis | | Recognized Gain |
| | | | | | | | | (In thousands) |
| 2017 | | | | | | | | | | | | |
| Stemmons Circle | | Dallas, TX | | 99,000 |
| | 05/12/2017 | | $ | 5,051 |
| | 1,329 |
| | 3,722 |
|
| Techway Southwest I-IV | | Houston, TX | | 415,000 |
| | 06/19/2017 | | 32,506 |
| | 14,373 |
| | 18,133 |
|
| Total for 2017 | | | | | | | | $ | 37,557 |
| | 15,702 |
| | 21,855 |
|
| 2016 | | | | | | | | | | | | |
Northwest Point Distribution
and Service Centers | | Houston, TX | | 232,000 |
| | 02/12/2016 | | $ | 15,189 |
| | 5,080 |
| | 10,109 |
|
| North Stemmons III | | Dallas, TX | | 60,000 |
| | 03/04/2016 | | 3,131 |
| | 1,908 |
| | 1,223 |
|
| North Stemmons II | | Dallas, TX | | 26,000 |
| | 04/12/2016 | | 1,203 |
| | 765 |
| | 438 |
|
| Lockwood Distribution Center | | Houston, TX | | 392,000 |
| | 04/18/2016 | | 14,024 |
| | 4,154 |
| | 9,870 |
|
| West Loop Distribution Center 1 & 2 | | Houston, TX | | 161,000 |
| | 04/19/2016 | | 13,154 |
| | 3,564 |
| | 9,590 |
|
| America Plaza | | Houston, TX | | 121,000 |
| | 04/28/2016 | | 7,938 |
| | 3,378 |
| | 4,560 |
|
Interstate Commons Distribution
Center 1 & 2 | | Phoenix, AZ | | 142,000 |
| | 05/31/2016 | | 9,906 |
| | 3,568 |
| | 6,338 |
|
Castilian Research Center (1) | | Santa Barbara, CA | | 30,000 |
| | 06/28/2016 | | 7,698 |
| | 7,513 |
| | 185 |
|
| Memphis I | | Memphis, TN | | 92,000 |
| | 12/16/2016 | | 1,482 |
| | 1,625 |
| | (143 | ) |
| Total for 2016 | | | | | | | | $ | 73,725 |
| | 31,555 |
| | 42,170 |
|
| 2015 | | | | | | | | | | | | |
| Ambassador Row Warehouse | | Dallas, TX | | 185,000 |
| | 04/13/2015 | | $ | 4,998 |
| | 2,095 |
| | 2,903 |
|
| |
| (1) | EastGroup owned 80% of Castilian ResearchUniversity Business Center 130 through a joint venture. The information shown for this transaction also includes the 20% attributable to the Company's noncontrolling interest partner. |
The table above includes sales of operating properties; the Company also sold parcels of land during the years presented. During the year ended December 31, 2017,2019, the Company sold (through eminent domain procedures) a small parcel of land (0.2 acres) in San Diego for $185,000 and recognized a gain on the sale of $83,000. During the year ended December 31, 2018, EastGroup sold a parcel of land in Houston for $2,577,000 and recognized a gain on the sale of $86,000. During the year ended December 31, 2017, EastGroup sold parcels of land in El Paso and Dallas for total gross proceeds of $3,778,000 and recognized a net gaingains on the sales of $293,000. During the year ended December 31, 2016, EastGroup sold parcels of land in Houston, Dallas and Orlando for $5,400,000 and recognized a gain of $733,000. During the year ended December 31, 2015, the Company sold a small parcel of land in New Orleans for $170,000 and recognized a gain of $123,000. The net gains on sales of land are included in Other on the Consolidated Statements of Income and Comprehensive Income.
Development and Value-Add Properties
The Company’s development and value-add program as of December 31, 2017,2019, was comprised of the properties detailed in the table below. Costs incurred include capitalization of interest costs during the period of construction. The interest costs capitalized on development propertiesprojects for 20172019 were $5,765,000$8,453,000 compared to $5,340,000$6,334,000 for 20162018 and $5,257,000$5,765,000 for 2015.2017. In addition, EastGroup capitalized internal development costs of $4,754,000$6,918,000 during the year ended December 31, 2017,2019, compared to $3,789,000$4,696,000 during 20162018 and $4,467,000$4,754,000 in 2015.2017.
Total capital invested for development and value-add properties during 20172019 was $124,938,000,$318,288,000, which primarily consisted of costs of $93,395,000 and $14,819,000$265,609,000 as detailed in the Development and Value-Add Properties Activity table below, $47,415,000 as detailed in the Development and Value-Add Properties Transferred to Real Estate Properties During 2019 table below and costs of $12,811,000$5,264,000 on development propertiesprojects subsequent to transfer to Real estate properties. The capitalized costs incurred on development propertiesprojects subsequent to transfer to Real estate properties include capital improvements at the properties and do not include other capitalized costs associated with development (i.e., interest expense, property taxes and internal personnel costs).
EASTGROUP PROPERTIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|
| | | | | | | | | | | | | | | | | | |
| DEVELOPMENT ACTIVITY | | | | Costs Incurred | | | | Anticipated Building Conversion Date |
| | | | Costs Transferred in 2017 (1) | | For the Year Ended 12/31/17 | | Cumulative as of 12/31/17 | | Estimated Total Costs (2) | |
| | | | | (In thousands) | | |
| | | (Unaudited) | | | | | | | | (Unaudited) | | (Unaudited) |
| LEASE-UP | | Building Size (Square feet) | | | | | | | | | | |
| Alamo Ridge IV, San Antonio, TX | | 97,000 |
| | $ | — |
| | 2,152 |
| | 7,097 |
| | 8,300 |
| | 03/18 |
Weston, Ft. Lauderdale, FL (3) | | 134,000 |
| | — |
| | 1,239 |
| | 15,520 |
| | 16,000 |
| | 03/18 |
| Oak Creek VII, Tampa, FL | | 116,000 |
| | 2,153 |
| | 3,978 |
| | 6,131 |
| | 7,500 |
| | 04/18 |
Progress Center 1 & 2, Atlanta, GA (4) | | 132,000 |
| | — |
| | 10,333 |
| | 10,333 |
| | 11,100 |
| | 04/18 |
| Eisenhauer Point 3, San Antonio, TX | | 71,000 |
| | — |
| | 3,411 |
| | 6,159 |
| | 6,800 |
| | 06/18 |
| SunCoast 4, Ft. Myers, FL | | 93,000 |
| | — |
| | 2,865 |
| | 9,120 |
| | 10,000 |
| | 06/18 |
| Steele Creek VII, Charlotte, NC | | 120,000 |
| | 2,393 |
| | 5,404 |
| | 7,797 |
| | 8,600 |
| | 09/18 |
| Horizon XII, Orlando, FL | | 140,000 |
| | 3,825 |
| | 7,405 |
| | 11,230 |
| | 12,100 |
| | 12/18 |
| Total Lease-Up | | 903,000 |
| | 8,371 |
| | 36,787 |
| | 73,387 |
| | 80,400 |
| | |
| UNDER CONSTRUCTION | | |
| | |
| | |
| | |
| | |
| | |
| Country Club V, Tucson, AZ | | 300,000 |
| | — |
| | 10,656 |
| | 13,951 |
| | 24,200 |
| | 04/18 |
| Kyrene 202 III, IV & V, Phoenix, AZ | | 166,000 |
| | 2,280 |
| | 9,263 |
| | 11,543 |
| | 13,800 |
| | 02/19 |
| CreekView 121 3 & 4, Dallas, TX | | 158,000 |
| | 3,701 |
| | 6,610 |
| | 10,311 |
| | 14,200 |
| | 03/19 |
| Eisenhauer Point 5, San Antonio, TX | | 98,000 |
| | 1,253 |
| | 4,551 |
| | 5,804 |
| | 7,500 |
| | 03/19 |
| Eisenhauer Point 6, San Antonio, TX | | 85,000 |
| | 878 |
| | 3,172 |
| | 4,050 |
| | 5,200 |
| | 03/19 |
| Horizon X, Orlando, FL | | 104,000 |
| | 2,101 |
| | 1,449 |
| | 3,550 |
| | 8,000 |
| | 04/19 |
| Falcon Field, Phoenix, AZ | | 96,000 |
| | 1,733 |
| | 1,214 |
| | 2,947 |
| | 9,000 |
| | 05/19 |
| Airport Commerce Center 3, Charlotte, NC | | 96,000 |
| | 1,653 |
| | 80 |
| | 1,733 |
| | 7,300 |
| | 07/19 |
| Settlers Crossing 1, Austin, TX | | 77,000 |
| | 1,494 |
| | 62 |
| | 1,556 |
| | 7,400 |
| | 10/19 |
| Settlers Crossing 2, Austin, TX | | 83,000 |
| | 1,606 |
| | 67 |
| | 1,673 |
| | 8,000 |
| | 10/19 |
| Total Under Construction | | 1,263,000 |
| | 16,699 |
| | 37,124 |
| | 57,118 |
| | 104,600 |
| | |
| PROSPECTIVE DEVELOPMENT (PRIMARILY LAND) | | Estimated Building Size (Square feet) | | |
| | |
| | |
| | |
| | |
| Phoenix, AZ | | — |
| | (4,013 | ) | | 120 |
| | — |
| | | | |
Tucson, AZ (5) | | — |
| | — |
| | (417 | ) | | — |
| | | | |
| Ft. Myers, FL | | 570,000 |
| | — |
| | 469 |
| | 14,112 |
| | | | |
| Miami, FL | | 850,000 |
| | — |
| | 3,632 |
| | 30,876 |
| | | | |
| Orlando, FL | | 418,000 |
| | (5,926 | ) | | 917 |
| | 11,120 |
| | | | |
| Tampa, FL | | 32,000 |
| | (2,153 | ) | | 32 |
| | 1,560 |
| | | | |
| Atlanta, GA | | 196,000 |
| | — |
| | 1,207 |
| | 1,207 |
| | | | |
| Jackson, MS | | 28,000 |
| | — |
| | — |
| | 706 |
| | | | |
| Charlotte, NC | | 655,000 |
| | (4,046 | ) | | 1,472 |
| | 6,729 |
| | | | |
| Austin, TX | | 180,000 |
| | (3,100 | ) | | 6,120 |
| | 3,020 |
| | | | |
| Dallas, TX | | 491,000 |
| | (3,701 | ) | | 975 |
| | 9,596 |
| | | | |
El Paso, TX (6) | | — |
| | — |
| | (2,444 | ) | | — |
| | | | |
Houston, TX (7) | | 1,476,000 |
| | — |
| | (184 | ) | | 21,190 |
| | | | |
| San Antonio, TX | | 965,000 |
| | (2,131 | ) | | 7,585 |
| | 11,393 |
| | | | |
| Total Prospective Development | | 5,861,000 |
| | (25,070 | ) | | 19,484 |
| | 111,509 |
| | | | |
| | | 8,027,000 |
| | $ | — |
| | 93,395 |
| | 242,014 |
| | | | |
| COMPLETED DEVELOPMENT AND TRANSFERRED TO REAL ESTATE PROPERTIES DURING 2017 | | Building Size (Square feet) | | |
| | |
| | |
| | |
| | Building Conversion Date |
| Eisenhauer Point 1 & 2, San Antonio, TX | | 201,000 |
| | $ | — |
| | 19 |
| | 15,795 |
| | | | 01/17 |
South 35th Avenue, Phoenix, AZ (8) | | 125,000 |
| | — |
| | — |
| | 1,664 |
| | | �� | 01/17 |
| Alamo Ridge III, San Antonio, TX | | 135,000 |
| | — |
| | 28 |
| | 10,587 |
| | | | 02/17 |
Parc North 1-4, Dallas, TX (9) | | 446,000 |
| | — |
| | 132 |
| | 32,252 |
| | | | 02/17 |
| Madison IV & V, Tampa, FL | | 145,000 |
| | — |
| | 549 |
| | 8,074 |
| | | | 03/17 |
Jones Corporate Park, Las Vegas, NV (10) | | 416,000 |
| | — |
| | 275 |
| | 39,815 |
| | | | 04/17 |
| Steele Creek VI, Charlotte, NC | | 137,000 |
| | — |
| | 519 |
| | 7,525 |
| | | | 04/17 |
| Ten Sky Harbor, Phoenix, AZ | | 64,000 |
| | — |
| | 100 |
| | 5,365 |
| | | | 04/17 |
| Horizon V, Orlando, FL | | 141,000 |
| | — |
| | 4,814 |
| | 9,249 |
| | | | 05/17 |
| Horizon VII, Orlando, FL | | 109,000 |
| | — |
| | 1,375 |
| | 8,266 |
| | | | 06/17 |
| Eisenhauer Point 4, San Antonio, TX | | 85,000 |
| | — |
| | 2,544 |
| | 5,197 |
| | | | 07/17 |
| CreekView 121 1 & 2, Dallas, TX | | 193,000 |
| | — |
| | 4,464 |
| | 16,319 |
| | | | 08/17 |
| Total Transferred to Real Estate Properties | | 2,197,000 |
| | $ | — |
| | 14,819 |
| | 160,108 |
| | (11) | | |
Footnotes for the Development Activity table are on the following page. |
| | | | | | | | | | | | | | | | | | |
DEVELOPMENT AND VALUE-ADD PROPERTIES ACTIVITY | | | | Costs Incurred | | | | Anticipated Building Conversion Date |
| | | | Costs Transferred in 2019 (1) | | For the Year Ended 12/31/19 | | Cumulative as of 12/31/19 | | Projected Total Costs (2) | |
| | | | | (In thousands) | | |
| | | (Unaudited) | | | | | | | | (Unaudited) | | (Unaudited) |
| LEASE-UP | | Building Size (Square feet) | | | | | | | | | | |
Logistics Center 6 & 7, Dallas, TX (3) | | 142,000 |
| | $ | — |
| | 15,735 |
| | 15,735 |
| | 16,400 |
| | 01/20 |
| Settlers Crossing 1, Austin, TX | | 77,000 |
| | — |
| | 2,999 |
| | 9,259 |
| | 10,200 |
| | 01/20 |
| Settlers Crossing 2, Austin, TX | | 83,000 |
| | — |
| | 1,360 |
| | 8,475 |
| | 9,200 |
| | 01/20 |
| Parc North 5, Dallas, TX | | 100,000 |
| | — |
| | 1,736 |
| | 8,689 |
| | 9,200 |
| | 02/20 |
| Airport Commerce Center 3, Charlotte, NC | | 96,000 |
| | — |
| | 2,763 |
| | 8,556 |
| | 9,100 |
| | 03/20 |
| Horizon VIII & IX, Orlando, FL | | 216,000 |
| | 4,967 |
| | 11,634 |
| | 16,601 |
| | 18,800 |
| | 04/20 |
| Ten West Crossing 8, Houston, TX | | 132,000 |
| | — |
| | 3,174 |
| | 9,764 |
| | 10,900 |
| | 04/20 |
| Tri-County Crossing 1 & 2, San Antonio, TX | | 203,000 |
| | — |
| | 6,491 |
| | 15,386 |
| | 16,700 |
| | 04/20 |
| CreekView 121 5 & 6, Dallas, TX | | 139,000 |
| | — |
| | 7,546 |
| | 13,151 |
| | 16,200 |
| | 06/20 |
| Parc North 6, Dallas, TX | | 96,000 |
| | 2,552 |
| | 5,738 |
| | 8,290 |
| | 10,100 |
| | 07/20 |
Arlington Tech Centre 1 & 2, Dallas, TX (3) | | 151,000 |
| | — |
| | 13,277 |
| | 13,277 |
| | 15,100 |
| | 08/20 |
| Gateway 5, Miami, FL | | 187,000 |
| | 11,944 |
| | 11,161 |
| | 23,105 |
| | 23,500 |
| | 09/20 |
Grand Oaks 75 2, Tampa, FL (3) | | 150,000 |
| | — |
| | 13,115 |
| | 13,115 |
| | 13,600 |
| | 09/20 |
Southwest Commerce Center, Las Vegas, NV (3) | | 196,000 |
| | — |
| | 26,613 |
| | 26,613 |
| | 30,100 |
| | 10/20 |
| SunCoast 6, Ft. Myers, FL | | 81,000 |
| | 3,915 |
| | 4,019 |
| | 7,934 |
| | 9,200 |
| | 10/20 |
Rocky Point 2, San Diego, CA (3) | | 109,000 |
| | — |
| | 19,275 |
| | 19,275 |
| | 20,600 |
| | 12/20 |
| Steele Creek IX, Charlotte, NC | | 125,000 |
| | 1,766 |
| | 7,354 |
| | 9,120 |
| | 9,800 |
| | 12/20 |
| Total Lease-Up | | 2,283,000 |
| | 25,144 |
| | 153,990 |
| | 226,345 |
| | 248,700 |
| | |
| UNDER CONSTRUCTION | | |
| | |
| | |
| | |
| | |
| | |
| SunCoast 8, Ft. Myers, FL | | 77,000 |
| | 4,361 |
| | 123 |
| | 4,484 |
| | 9,000 |
| | 05/20 |
| Gilbert Crossroads A & B, Phoenix, AZ | | 140,000 |
| | 3,221 |
| | 10,729 |
| | 13,950 |
| | 16,000 |
| | 01/21 |
| Hurricane Shoals 3, Atlanta, GA | | 101,000 |
| | 3,890 |
| | 2,739 |
| | 6,629 |
| | 8,800 |
| | 03/21 |
Interstate Commons 2, Phoenix, AZ (3) | | 142,000 |
| | — |
| | 9,882 |
| | 9,882 |
| | 11,800 |
| | 03/21 |
| Tri-County Crossing 3 & 4, San Antonio, TX | | 203,000 |
| | 2,334 |
| | 6,364 |
| | 8,698 |
| | 14,700 |
| | 05/21 |
| World Houston 44, Houston, TX | | 134,000 |
| | 1,546 |
| | 3,244 |
| | 4,790 |
| | 9,100 |
| | 05/21 |
| Ridgeview 1 & 2, San Antonio, TX | | 226,000 |
| | 2,499 |
| | 4,032 |
| | 6,531 |
| | 18,500 |
| | 06/21 |
| Creekview 121 7 & 8, Dallas, TX | | 137,000 |
| | 5,489 |
| | 1,310 |
| | 6,799 |
| | 16,300 |
| | 07/21 |
| Northwest Crossing 1-3, Houston, TX | | 278,000 |
| | 6,109 |
| | 5,426 |
| | 11,535 |
| | 25,700 |
| | 07/21 |
| Settlers Crossing 3 & 4, Austin, TX | | 173,000 |
| | 4,030 |
| | 4,059 |
| | 8,089 |
| | 18,400 |
| | 07/21 |
| LakePort 1-3, Dallas, TX | | 194,000 |
| | 3,542 |
| | 4,520 |
| | 8,062 |
| | 22,500 |
| | 09/21 |
| Total Under Construction | | 1,805,000 |
| | 37,021 |
| | 52,428 |
| | 89,449 |
| | 170,800 |
| | |
| PROSPECTIVE DEVELOPMENT (PRIMARILY LAND) | | Estimated Building Size (Square feet) | | |
| | |
| | |
| | |
| | |
| Phoenix, AZ | | 178,000 |
| | (3,221 | ) | | 785 |
| | 4,373 |
| | | | |
| Ft. Myers, FL | | 329,000 |
| | (8,276 | ) | | 2,457 |
| | 7,503 |
| | | | |
| Miami, FL | | 463,000 |
| | (11,944 | ) | | 9,798 |
| | 34,185 |
| | | | |
| Orlando, FL | | — |
| | (4,967 | ) | | 323 |
| | 1,075 |
| | | | |
| Tampa, FL | | 349,000 |
| | — |
| | 4,241 |
| | 5,801 |
| | | | |
| Atlanta, GA | | — |
| | (3,890 | ) | | 3,164 |
| | — |
| | | | |
| Jackson, MS | | 28,000 |
| | — |
| | — |
| | 706 |
| | | | |
| Charlotte, NC | | 475,000 |
| | (1,766 | ) | | 1,884 |
| | 7,327 |
| | | | |
| Austin, TX | | — |
| | (4,030 | ) | | 288 |
| | — |
| | | | |
| Dallas, TX | | 997,000 |
| | (11,583 | ) | | 18,979 |
| | 19,588 |
| | | | |
| Houston, TX | | 1,223,000 |
| | (13,126 | ) | | 16,135 |
| | 19,448 |
| | | | |
| San Antonio, TX | | 373,000 |
| | (5,987 | ) | | 1,137 |
| | 4,199 |
| | | | |
| Total Prospective Development | | 4,415,000 |
| | (68,790 | ) | | 59,191 |
| | 104,205 |
| | | | |
| | | 8,503,000 |
| | $ | (6,625 | ) | | 265,609 |
| | 419,999 |
| | | | |
| The Development and Value-Add Properties Activity table is continued on the following page. |
EASTGROUP PROPERTIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|
| | | | | | | | | | | | | | | | | | |
| DEVELOPMENT AND VALUE-ADD PROPERTIES TRANSFERRED TO REAL ESTATE PROPERTIES DURING 2019 | | | | Costs Incurred | | | | |
| | | | Costs Transferred in 2019 (1) | | For the Year Ended 12/31/19 | | Cumulative as of 12/31/19 | | | | |
| | | (Unaudited) | | (In thousands) | | | | (Unaudited) |
| | | Building Size (Square feet) | | | | | | Building Conversion Date |
| | | | | | | |
Siempre Viva I, San Diego, CA (3) | | 115,000 |
| | $ | — |
| | — |
| | 14,075 |
| | | | 01/19 |
| CreekView 121 3 & 4, Dallas, TX | | 158,000 |
| | — |
| | 1,739 |
| | 15,539 |
| | | | 03/19 |
| Horizon VI, Orlando, FL | | 148,000 |
| | — |
| | 3,682 |
| | 11,907 |
| | | | 03/19 |
| Horizon XI, Orlando, FL | | 135,000 |
| | — |
| | 507 |
| | 9,230 |
| | | | 04/19 |
| Falcon Field, Phoenix, AZ | | 97,000 |
| | — |
| | 181 |
| | 8,413 |
| | | | 05/19 |
| Gateway 1, Miami, FL | | 200,000 |
| | — |
| | 3,402 |
| | 23,643 |
| | | | 05/19 |
| SunCoast 5, Ft. Myers, FL | | 81,000 |
| | — |
| | 1,335 |
| | 7,870 |
| | | | 05/19 |
| Steele Creek V, Charlotte, NC | | 54,000 |
| | — |
| | 2,223 |
| | 5,537 |
| | | | 07/19 |
| Broadmoor 2, Atlanta, GA | | 111,000 |
| | — |
| | 1,478 |
| | 7,892 |
| | | | 11/19 |
| Eisenhauer Point 9, San Antonio, TX | | 82,000 |
| | 1,154 |
| | 5,175 |
| | 6,329 |
| | | | 11/19 |
| World Houston 43, Houston, TX | | 86,000 |
| | 1,041 |
| | 5,381 |
| | 6,422 |
| | | | 11/19 |
| Eisenhauer Point 7 & 8, San Antonio, TX | | 336,000 |
| | — |
| | 9,790 |
| | 22,880 |
| | | | 12/19 |
| World Houston 45, Houston, TX | | 160,000 |
| | 4,430 |
| | 12,522 |
| | 16,952 |
| | | | 12/19 |
| Total Transferred to Real Estate Properties | | 1,763,000 |
| | $ | 6,625 |
| | 47,415 |
| | 156,689 |
| | (4) | | |
| |
| (1) | Represents costs transferred from Prospective Development (primarily land) to Under Construction during the period. Negative amounts represent land inventory costs transferred to Under Construction. |
| |
| (2) | Included in these costs are development obligations of $29.0$59.3 million and tenant improvement obligations of $5.8$7.5 million on properties under development. |
| |
| (3) | This project wasRepresents value-add projects acquired by EastGroup on 11/1/16 and underwent redevelopment.EastGroup. |
| |
| (4) | This project was acquired by EastGroup on 12/12/17 during the lease-up phase. |
| |
(5) | Negative amount represents land inventory costs transferred to Real Estate Properties for storage yard and parking lot expansion. |
| |
(6) | Negative amount represents land sold on 11/3/17. |
| |
(7) | Negative amount represents West Road retention ponds and infrastructure conveyed to West Harris County Municipal Utility District. |
| |
(8) | This property was redeveloped from a manufacturing building to a multi-tenant distribution building. |
| |
(9) | This project was acquired by EastGroup on 7/8/16 during the lease-up phase. |
| |
(10) | This project was acquired by EastGroup on 11/15/16 during the lease-up phase. |
| |
(11) | Represents cumulative costs at the date of transfer. |
Future Minimum Rental Receipts Under Non-CancelableGround Leases
On January 1, 2019, EastGroup adopted the principles of FASB Accounting Standards Codification (“ASC”) 842, Leases, as discussed in Note 1(o). In connection with the adoption, the Company recorded right of use assets for its ground leases, which are classified as operating leases, using the effective date transition option; under this option, prior years are not restated. As of January 1, 2019, the Company recorded right of use assets for its ground leases of $10,226,000. In April 2019, the Company acquired Logistics Center 6 & 7 in Dallas, which is located on land under a ground lease. The following schedule indicates approximate future minimum rental receipts under non-cancelable leases for real estate properties by year asCompany recorded a right of use asset of $2,679,000 in connection with this acquisition. As of December 31, 2017:2019, the unamortized balance of the Company’s right of use assets for its ground leases was $11,997,000. The right of use assets for ground leases are included in Real estate properties on the Consolidated Balance Sheets.
|
| | | | |
| Years Ending December 31, | | (In thousands) |
| 2018 | | $ | 204,614 |
|
| 2019 | | 177,110 |
|
| 2020 | | 139,791 |
|
| 2021 | | 100,559 |
|
| 2022 | | 74,092 |
|
| Thereafter | | 147,960 |
|
| Total minimum receipts | | $ | 844,126 |
|
Ground Leases
As of December 31, 2017,2019, the Company owned two2 properties in Florida, two3 properties in Texas and one1 property in Arizona that are subject to ground leases. These leases have terms of 40 to 50 years, expiration dates of August 2031 to November 2037,October 2058, and renewal options of 15 to 35 years, except for the one lease in Arizona which is automatically and perpetually renewed annually. The Company has included renewal options in the lease terms for calculating the ground lease assets and liabilities as the Company is reasonably certain it will exercise these options. Total ground lease expenditures for the years ended December 31, 2019, 2018 and 2017 2016were $966,000, $783,000 and 2015 were $760,000, $756,000 and $756,000, respectively. Payments are subject to increases at 3 to 10 year intervals based upon the agreed or appraised fair market value of the leased premises on the adjustment date or the Consumer Price Index percentage increase since the base rent date. These future changes in payments will be considered variable payments and will not impact the assessment of the asset or liability unless there is a significant event that triggers reassessment, such as amendment with a change in the terms of the lease. The weighted-average remaining lease term as of December 31, 2019, for the ground leases is 43 years. The following schedule indicates approximate future minimum ground lease payments for these properties by year as of December 31, 2017:2019:
EASTGROUP PROPERTIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Future Minimum Ground Lease Payments as of December 31, 2019
|
| | | | |
| Years Ending December 31, | | (In thousands) |
| 2020 | | $ | 970 |
|
| 2021 | | 970 |
|
| 2022 | | 970 |
|
| 2023 | | 975 |
|
| 2024 | | 999 |
|
| Thereafter | | 38,916 |
|
| Total minimum payments | | 43,800 |
|
Imputed interest (1) | | (31,752 | ) |
| Total ground leases | | $ | 12,048 |
|
|
| | | | |
| Years Ending December 31, | | (In thousands) |
| 2018 | | $ | 761 |
|
| 2019 | | 761 |
|
| 2020 | | 761 |
|
| 2021 | | 761 |
|
| 2022 | | 761 |
|
| Thereafter | | 9,729 |
|
| Total minimum payments | | $ | 13,534 |
|
| |
| (1) | As the Company’s leases do not provide an implicit rate, in order to calculate the present value of the remaining ground lease payments, the Company used its incremental borrowing rate, adjusted for a number of factors, including the long-term nature of the ground leases, the Company’s estimated borrowing costs, and the estimated fair value of the underlying land, to determine the imputed interest for its ground leases. The Company elected to use the portfolio approach as all of its ground leases in place as of January 1, 2019, have similar characteristics and determined 7.3% as the appropriate rate as of January 1, 2019, for all leases in place at that time. For the ground lease obtained during April 2019, the Company used its incremental borrowing rate, adjusted for the factors discussed above, which was determined to be 8.0%. |
As noted above, the Company adopted the new lease accounting guidance effective January 1, 2019. Since the Company has applied the provisions on a prospective basis, the following represents approximate future minimum ground lease payments by year as of December 31, 2018, as applicable under ASC 840, Leases, prior to the adoption of ASC 842.
Future Minimum Ground Lease Payments as of December 31, 2018
|
| | | | |
| Years Ending December 31, | | (In thousands) |
| 2019 | | $ | 791 |
|
| 2020 | | 791 |
|
| 2021 | | 791 |
|
| 2022 | | 791 |
|
| 2023 | | 791 |
|
| Thereafter | | 30,751 |
|
| | | $ | 34,706 |
|
At December 31, 2018, the Company had the same ground leases in place as mentioned above, with the exception of the ground lease associated with Logistics Center 6 & 7 which was obtained in April 2019.
| |
| (3) | UNCONSOLIDATED INVESTMENT |
The Company owns a 50% undivided tenant-in-common interest in Industry Distribution Center II, a 309,000 square foot warehouse distribution building in the City of Industry (Los Angeles), California. The building was constructed in 1998 and is 100% leased through December 20182021 to a single tenant who owns the other 50% interest in the property. This investment is accounted for under the equity method of accounting and had a carrying value of $8,029,000$7,805,000 at December 31, 2017,2019, and $7,681,000$7,870,000 at December 31, 2016.2018.
EASTGROUP PROPERTIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
| |
| (4) | MORTGAGE LOANS RECEIVABLE |
As of December 31, 2016, the Company had two mortgage loans receivable, both of which were classified as first mortgage loans, with effective interest rates of 5.25% and maturity dates in October 2017. During 2017, the loan agreements were amended and restated. As of December 31, 2017, EastGroup had two mortgage loans receivable, both of which were classified as first mortgage loans, with effective interest rates of 5.15% and maturity dates in December 2022. In March of 2018, one of the notes was repaid in full. As of December 31, 2018 and 2019, the Company had one mortgage loan receivable which was classified as a first mortgage loan with an effective interest rate of 5.15% and a maturity date in December 2022. Mortgage loans receivable are included in Other assets on the Consolidated Balance Sheets. See Note 5 for a summary of Other assets.
A summary of the Company’s Other assets follows:
|
| | | | | | |
| | December 31, |
| 2017 | | 2016 |
| (In thousands) |
| Leasing costs (principally commissions) | $ | 72,722 |
| | 65,521 |
|
| Accumulated amortization of leasing costs | (27,973 | ) | | (26,340 | ) |
| Leasing costs (principally commissions), net of accumulated amortization | 44,749 |
| | 39,181 |
|
| | | | |
| Straight-line rents receivable | 31,609 |
| | 28,369 |
|
| Allowance for doubtful accounts on straight-line rents receivable | (48 | ) | | (76 | ) |
| Straight-line rents receivable, net of allowance for doubtful accounts | 31,561 |
| | 28,293 |
|
| | | | |
| Accounts receivable | 6,004 |
| | 6,824 |
|
| Allowance for doubtful accounts on accounts receivable | (577 | ) | | (809 | ) |
| Accounts receivable, net of allowance for doubtful accounts | 5,427 |
| | 6,015 |
|
| | | | |
| Acquired in-place lease intangibles | 20,690 |
| | 21,231 |
|
| Accumulated amortization of acquired in-place lease intangibles | (8,974 | ) | | (8,642 | ) |
| Acquired in-place lease intangibles, net of accumulated amortization | 11,716 |
| | 12,589 |
|
| | | | |
| Acquired above market lease intangibles | 1,550 |
| | 1,594 |
|
| Accumulated amortization of acquired above market lease intangibles | (794 | ) | | (736 | ) |
| Acquired above market lease intangibles, net of accumulated amortization | 756 |
| | 858 |
|
| | | | |
| Mortgage loans receivable | 4,581 |
| | 4,752 |
|
| Interest rate swap assets | 6,034 |
| | 4,546 |
|
| Goodwill | 990 |
| | 990 |
|
| Prepaid expenses and other assets | 11,490 |
| | 7,606 |
|
Total Other assets | $ | 117,304 |
| | 104,830 |
|
EASTGROUP PROPERTIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
A summary of the Company’s Other assets follows:
|
| | | | | | |
| | December 31, |
| 2019 | | 2018 |
| (In thousands) |
| Leasing costs (principally commissions) | $ | 89,191 |
| | 78,985 |
|
| Accumulated amortization of leasing costs | (34,963 | ) | | (30,185 | ) |
| Leasing costs (principally commissions), net of accumulated amortization | 54,228 |
| | 48,800 |
|
| | | | |
| Acquired in-place lease intangibles | 28,834 |
| | 21,696 |
|
| Accumulated amortization of acquired in-place lease intangibles | (11,918 | ) | | (9,833 | ) |
| Acquired in-place lease intangibles, net of accumulated amortization | 16,916 |
| | 11,863 |
|
| | | | |
| Acquired above market lease intangibles | 1,721 |
| | 1,465 |
|
| Accumulated amortization of acquired above market lease intangibles | (1,007 | ) | | (902 | ) |
| Acquired above market lease intangibles, net of accumulated amortization | 714 |
| | 563 |
|
| | | | |
| Straight-line rents receivable | 40,369 |
| | 36,022 |
|
| Accounts receivable | 5,581 |
| | 5,433 |
|
| Mortgage loans receivable | 1,679 |
| | 2,594 |
|
| Interest rate swap assets | 3,485 |
| | 6,701 |
|
Right of use assets - Office leases (operating) (1) | 2,115 |
| | — |
|
| Goodwill | 990 |
| | 990 |
|
| Prepaid expenses and other assets | 18,545 |
| | 8,265 |
|
Total Other assets | $ | 144,622 |
| | 121,231 |
|
| |
| (1) | See Note 1(o) for information regarding the Company’s January 1, 2019, implementation of FASB ASC 842, Leases, and the Company’s right of use assets for office leases. |
| |
| (6) | UNSECURED BANK CREDIT FACILITIES |
Until June 14, 2018, EastGroup has ahad $300 million and $35 million unsecured revolvingbank credit facilities with margins over LIBOR of 100 basis points, facility fees of 20 basis points and maturity dates of July 30, 2019. The Company amended and restated these credit facilities on June 14, 2018, expanding the capacity to $350 million and $45 million, as detailed below.
The $350 million unsecured bank credit facility is with a group of nine9 banks that matures in and has a maturity date of July 2019.30, 2022. The credit facility contains options for a one-year extensiontwo six-month extensions (at the Company's election) and a $150 million expansionaccordion (with agreement by all parties). The interest rate on each tranche is usually reset on a monthly basis and as of December 31, 2017,2019, was LIBOR plus 100 basis points with an annual facility fee of 20 basis points. The margin and facility fee are subject to changes in the Company's credit ratings. The Company hashad designated an interest rate swap to an $80 million unsecured bank credit facility draw that effectively fixesfixed the interest rate on the $80 million draw to 2.020% through the interest rate swap's maturity date of date. This swap matured on August 15, 2018.2018, and the $80 million draw has reverted to the variable interest rate associated with the Company's unsecured bank credit facilities. As of December 31, 2017, EastGroup2019, the Company had an additional $110,000,000$105,000,000 of variable rate borrowings outstanding on this unsecured bank credit facility with a weighted average interest rate of 2.528%2.776%. The Company has a standby letter of credit of $674,000 pledged on this facility.
The Company's $45 million unsecured bank credit facility has a maturity date of July 30, 2022, or such later date as designated by the bank; the Company also has a $35 million unsecured revolving credit facility that matures in July 2019. This credit facility automatically extends for one yeartwo six-month extensions available if the extension optionoptions in the $300$350 million revolving credit facility isare exercised. The interest rate is reset on a daily basis and as of December 31, 2017,2019, was LIBOR plus 100 basis points with an annual facility fee of 20 basis points. The margin and facility fee are subject to changes in the Company's credit ratings. AtAs of December 31, 2017,2019, the interest rate was 2.564%2.763% on a balance of $6,339,000.$7,710,000.
EASTGROUP PROPERTIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Average unsecured bank credit facilities borrowings were $172,175,000 in 2019, $141,223,000 in 2018 and $114,751,000 in 2017, $106,352,000 in 2016 and $109,777,000 in 2015, with weighted average interest rates (excluding amortization of facility fees and debt issuance costs) of 3.34% in 2019, 2.64% in 2018 and 2.07% in 2017, 1.49% in 2016 and 1.29% in 2015.2017. Amortization of facility fees was $790,000, $736,000 and $670,000 $670,000for 2019, 2018 and $608,000 for 2017, 2016 and 2015, respectively. Amortization of debt issuance costs for the Company's unsecured bank credit facilities was $556,000, $508,000 and $451,000 $450,000for 2019, 2018 and $493,000 for 2017, 2016 and 2015, respectively.
The Company’s unsecured bank credit facilities have certain restrictive covenants, such as maintaining debt service coverage and leverage ratios and maintaining insurance coverage, and the Company was in compliance with all of its financial debt covenants at December 31, 2017.2019.
See Note 7 for a detail of the outstanding balances of the Company's Unsecured bank credit facilities as of December 31, 20172019 and 2016.2018.
| |
| (7) | UNSECURED AND SECURED DEBT |
The Company's debt is detailed below. EastGroup presents debt issuance costs as reductions of Unsecured bank credit facilities, Unsecured debt and Secured debt on the Consolidated Balance Sheets as detailed below.
| | | | December 31,
2017 | | December 31,
2016 | December 31,
2019 | | December 31,
2018 |
| | (In thousands) | (In thousands) |
| Unsecured bank credit facilities - variable rate, carrying amount | $ | 116,339 |
| | 112,020 |
| $ | 112,710 |
| | 195,730 |
|
Unsecured bank credit facilities - fixed rate, carrying amount (1) | 80,000 |
| | 80,000 |
| |
| Unamortized debt issuance costs | (630 | ) | | (1,030 | ) | (1,316 | ) | | (1,804 | ) |
| Unsecured bank credit facilities | 195,709 |
| | 190,990 |
| 111,394 |
| | 193,926 |
|
| | | | | | | |
Unsecured debt - fixed rate, carrying amount (1) | 715,000 |
| | 655,000 |
| 940,000 |
| | 725,000 |
|
| Unamortized debt issuance costs | (1,939 | ) | | (2,162 | ) | (1,885 | ) | | (1,600 | ) |
| Unsecured debt | 713,061 |
| | 652,838 |
| 938,115 |
| | 723,400 |
|
| | | | | | | |
Secured debt - fixed rate, carrying amount (1) | 200,354 |
| | 258,594 |
| 133,422 |
| | 189,038 |
|
| Unamortized debt issuance costs | (842 | ) | | (1,089 | ) | (329 | ) | | (577 | ) |
| Secured debt | 199,512 |
| | 257,505 |
| 133,093 |
| | 188,461 |
|
| | | | | | | |
| Total debt | $ | 1,108,282 |
| | 1,101,333 |
| $ | 1,182,602 |
| | 1,105,787 |
|
| |
| (1) | These loans have a fixed interest rate or an effectively fixed interest rate due to interest rate swaps. |
EASTGROUP PROPERTIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
A summary of the carrying amount of Unsecured debt follows:
| | | | | Balance at December 31, | | Balance at December 31, |
| | Margin Above LIBOR | Interest Rate | | Maturity Date | | 2017 | | 2016 | Margin Above LIBOR | Interest Rate | | Maturity Date | | 2019 | | 2018 |
| | | (In thousands) | | (In thousands) |
| $50 Million Unsecured Term Loan | Not applicable | 3.910% | | 12/21/2018 | | $ | 50,000 |
| | 50,000 |
| |
$75 Million Unsecured Term Loan (1) | 1.150% | 2.846% | | 07/31/2019 | | 75,000 |
| | 75,000 |
| 1.15% | 2.85% | | 07/31/2019 | | $ | — |
| | 75,000 |
|
$75 Million Unsecured Term Loan (1) | 1.100% | 3.452% | | 12/20/2020 | | 75,000 |
| | 75,000 |
| 1.10% | 3.45% | | 12/20/2020 | | 75,000 |
| | 75,000 |
|
$40 Million Unsecured Term Loan (1) | 1.100% | 2.335% | | 07/30/2021 | | 40,000 |
| | 40,000 |
| 1.10% | 2.34% | | 07/30/2021 | | 40,000 |
| | 40,000 |
|
$75 Million Unsecured Term Loan (1) | 1.400% | 3.031% | | 02/28/2022 | | 75,000 |
| | 75,000 |
| 1.40% | 3.03% | | 02/28/2022 | | 75,000 |
| | 75,000 |
|
$65 Million Unsecured Term Loan (1) | 1.650% | 2.863% | | 04/01/2023 | | 65,000 |
| | 65,000 |
| 1.10% | 2.31% | | 04/01/2023 | | 65,000 |
| | 65,000 |
|
| $100 Million Senior Unsecured Notes: | | | | | | | | |
| $30 Million Notes | Not applicable | 3.800% | | 08/28/2020 | | 30,000 |
| | 30,000 |
| Not applicable | 3.80% | | 08/28/2020 | | 30,000 |
| | 30,000 |
|
| $50 Million Notes | Not applicable | 3.800% | | 08/28/2023 | | 50,000 |
| | 50,000 |
| Not applicable | 3.80% | | 08/28/2023 | | 50,000 |
| | 50,000 |
|
| $20 Million Notes | Not applicable | 3.800% | | 08/28/2025 | | 20,000 |
| | 20,000 |
| Not applicable | 3.80% | | 08/28/2025 | | 20,000 |
| | 20,000 |
|
| $60 Million Senior Unsecured Notes | Not applicable | 3.460% | | 12/13/2024 | | 60,000 |
| | — |
| Not applicable | 3.46% | | 12/13/2024 | | 60,000 |
| | 60,000 |
|
| $100 Million Senior Unsecured Notes: | | | | | | | | |
| $60 Million Notes | Not applicable | 3.480% | | 12/15/2024 | | 60,000 |
| | 60,000 |
| Not applicable | 3.48% | | 12/15/2024 | | 60,000 |
| | 60,000 |
|
| $40 Million Notes | Not applicable | 3.750% | | 12/15/2026 | | 40,000 |
| | 40,000 |
| Not applicable | 3.75% | | 12/15/2026 | | 40,000 |
| | 40,000 |
|
| $25 Million Senior Unsecured Notes | Not applicable | 3.970% | | 10/01/2025 | | 25,000 |
| | 25,000 |
| Not applicable | 3.97% | | 10/01/2025 | | 25,000 |
| | 25,000 |
|
| $50 Million Senior Unsecured Notes | Not applicable | 3.990% | | 10/07/2025 | | 50,000 |
| | 50,000 |
| Not applicable | 3.99% | | 10/07/2025 | | 50,000 |
| | 50,000 |
|
| $60 Million Senior Unsecured Notes | | Not applicable | 3.93% | | 04/10/2028 | | 60,000 |
| | 60,000 |
|
| $80 Million Senior Unsecured Notes | | Not applicable | 4.27% | | 03/28/2029 | | 80,000 |
| | — |
|
| $35 Million Senior Unsecured Notes | | Not applicable | 3.54% | | 08/15/2031 | | 35,000 |
| | — |
|
| $75 Million Senior Unsecured Notes | | Not applicable | 3.47% | | 08/19/2029 | | 75,000 |
| | — |
|
$100 Million Unsecured Term Loan (1) | | 1.50% | 2.75% | | 10/10/2026 | | 100,000 |
| | — |
|
| | | $ | 715,000 |
| | 655,000 |
| | $ | 940,000 |
| | 725,000 |
|
| |
| (1) | The interest rates on these unsecured term loans are comprised of LIBOR plus a margin which is subject to a pricing grid for changes in the Company's coverage ratings. The Company entered into interest rate swap agreements (further described in Note 13) to convert the loans' LIBOR rates to effectively fixed interest rates. The interest rates in the table above are the effectively fixed interest rates for the loans, including the effects of the interest rate swaps, as of December 31, 2017.2019. |
In March 2019, the Company closed on the private placement of $80 million of senior unsecured notes with an insurance company. The notes have a 10-year term and a fixed interest rate of 4.27% with semi-annual interest payments. In August 2019, the Company closed on the private placement of $35 million of senior unsecured notes with an insurance company. The notes have a 12-year term and a fixed interest rate of 3.54% with semi-annual interest payments. Also in August 2019, the Company closed on the private placement of $75 million of senior unsecured notes with an insurance company. The notes have a 10-year term and a fixed rate of 3.47% with semi-annual interest payments. None of these senior unsecured notes are or will be registered under the Securities Act of 1933, as amended, and they may not be offered or sold in the United States absent registration or an applicable exemption from the registration requirements.
In July 2019, the Company repaid a $75 million unsecured term loan at maturity with an effectively fixed interest rate of 2.85%.
In October 2019, the Company closed a $100 million senior unsecured term loan with a seven-year term and interest only payments. It bears interest at the annual rate of LIBOR plus an applicable margin (1.50% as of December 31, 2019 and February 12, 2020) based on the Company’s senior unsecured long-term debt rating. The Company also entered into an interest rate swap agreement to convert the loan’s LIBOR rate component to a fixed interest rate for the entire term of the loan providing a total effective fixed interest rate of 2.75%.
The Company’s unsecured debt instruments have certain restrictive covenants, such as maintaining debt service coverage and leverage ratios and maintaining insurance coverage, and the Company was in compliance with all of its financial debt covenants at December 31, 2017.2019.
A summary of the carrying amount of Secured debt follows:
|
| | | | | | | | | | | | | | | | | |
| | | Interest Rate | | Monthly P&I Payment | | Maturity Date | | Carrying Amount of Securing Real Estate at December 31, 2017 | | Balance at December 31, |
| Property | | | | | | 2017 | | 2016 |
| | | | | | | | | (In thousands) |
Arion 16, Broadway VI, Chino, East University I & II, Northpark, Santan 10 II, 55th Avenue and World Houston 1 & 2, 21 & 23 | | 5.57% | | 518,885 |
| | Repaid | | $ | — |
| | — |
| | 47,496 |
|
Dominguez, Industry I & III, Kingsview, Shaw, Walnut and Washington | | 7.50% | | 539,747 |
| | 05/05/2019 | | 45,886 |
| | 49,580 |
| | 52,231 |
|
| Blue Heron II | | 5.39% | | 16,176 |
| | 02/29/2020 | | 4,425 |
| | 409 |
| | 576 |
|
40th Avenue, Beltway Crossing V, Centennial Park, Executive Airport, Interchange Park I, Ocean View, Wetmore 5-8 and World Houston 26, 28, 29 & 30 | | 4.39% | | 463,778 |
| | 01/05/2021 | | 67,796 |
| | 55,317 |
| | 58,380 |
|
Colorado Crossing, Interstate I-III, Rojas, Steele Creek 1 & 2, Venture and World Houston 3-9 | | 4.75% | | 420,045 |
| | 06/05/2021 | | 56,000 |
| | 50,161 |
| | 52,752 |
|
Arion 18, Beltway Crossing VI & VII, Commerce Park II & III, Concord, Interstate V-VII, Lakeview, Ridge Creek II, Southridge IV & V and World Houston 32 | | 4.09% | | 329,796 |
| | 01/05/2022 | | 56,440 |
| | 42,315 |
| | 44,493 |
|
| Ramona | | 3.85% | | 16,287 |
| | 11/30/2026 | | 9,027 |
| | 2,572 |
| | 2,666 |
|
| | | | | |
| | | | $ | 239,574 |
| | 200,354 |
| | 258,594 |
|
EASTGROUP PROPERTIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
A summary of the carrying amount of Secured debt follows:
|
| | | | | | | | | | | | | | | | | |
| | | Interest Rate | | Monthly P&I Payment | | Maturity Date | | Carrying Amount of Securing Real Estate at December 31, 2019 | | Balance at December 31, |
| Property | | | | | | 2019 | | 2018 |
| | | | | | | | | (In thousands) |
Dominguez, Industry I & III, Kingsview, Shaw, Walnut and Washington | | 7.50% | | 539,747 |
| | Repaid | | $ | — |
| | — |
| | 46,725 |
|
| Blue Heron II | | 5.39% | | 16,176 |
| | Repaid | | — |
| | — |
| | 233 |
|
40th Avenue, Beltway Crossing V, Centennial Park, Executive Airport, Interchange Park I, Ocean View, Wetmore 5-8 and World Houston 26, 28, 29 & 30 | | 4.39% | | 463,778 |
| | 01/05/2021 | | 66,072 |
| | 48,772 |
| | 52,115 |
|
Colorado Crossing, Interstate I-III, Rojas, Steele Creek 1 & 2, Venture and World Houston 3-9 (1) | | 4.75% | | 420,045 |
| | 06/05/2021 | | 50,002 |
| | 44,596 |
| | 47,445 |
|
Arion 18, Beltway Crossing VI & VII, Commerce Park II & III, Concord, Interstate V-VII, Lakeview, Ridge Creek II, Southridge IV & V and World Houston 32 | | 4.09% | | 329,796 |
| | 01/05/2022 | | 53,889 |
| | 37,682 |
| | 40,046 |
|
| Ramona | | 3.85% | | 16,287 |
| | 11/30/2026 | | 8,794 |
| | 2,372 |
| | 2,474 |
|
| | | | | |
| | | | $ | 178,757 |
| | 133,422 |
| | 189,038 |
|
| |
| (1) | During 2019, the Company executed a collateral release for World Houston 5; this property was sold during 2019 and is no longer considered to be collateral securing this loan. |
The Company currently intends to repay its debt obligations, both in the short-term and long-term, through its operating cash flows, borrowings under its unsecured bank credit facilities, proceeds from new debt (primarily unsecured), and/or proceeds from the issuance of equity instruments.
PrincipalScheduled principal payments on long-term debt, including Unsecured debt and Secured debt (not including Unsecured bank credit facilities), due during the next five years as of December 31, 20172019 are as follows:
|
| | | | |
| Years Ending December 31, | | (In thousands) |
| 2020 | | $ | 114,047 |
|
| 2021 | | 129,562 |
|
| 2022 | | 107,770 |
|
| 2023 | | 115,119 |
|
| 2024 | | 120,122 |
|
|
| | | | |
| Years Ending December 31, | | (In thousands) |
| 2018 | | $ | 61,314 |
|
| 2019 | | 130,569 |
|
| 2020 | | 114,096 |
|
| 2021 | | 129,563 |
|
| 2022 | | 107,769 |
|
| |
| (8) | ACCOUNTS PAYABLE AND ACCRUED EXPENSES |
A summary of the Company’s Accounts payable and accrued expenses follows:
| | | | December 31, | December 31, |
| 2017 | | 2016 | 2019 | | 2018 |
(In thousands) | | Property taxes payable | $ | 12,081 |
| | 14,186 |
| $ | 2,696 |
| | 10,718 |
|
| Development costs payable | 9,699 |
| | 9,844 |
| 11,766 |
| | 15,410 |
|
| Real estate improvements and capitalized leasing costs payable | 3,957 |
| | 2,304 |
| 4,636 |
| | 3,911 |
|
| Interest payable | 3,744 |
| | 3,822 |
| 6,370 |
| | 4,067 |
|
| Dividends payable on unvested restricted stock | 1,365 |
| | 1,530 |
| |
| Dividends payable | | 30,714 |
| | 27,738 |
|
Book overdraft (1) | 20,902 |
| | 14,452 |
| 25,771 |
| | 15,048 |
|
| Other payables and accrued expenses | 13,219 |
| | 6,563 |
| 10,071 |
| | 9,671 |
|
Total Accounts payable and accrued expenses | $ | 64,967 |
| | 52,701 |
| $ | 92,024 |
| | 86,563 |
|
(1) Represents unfunded outstanding checks forwritten before the end of the period which have not cleared the bank; therefore, the bank has not yet advanced cash to the Company. When the checks clear the bank, they will be funded through the Company's working cash line of credit. See Note 1(p).
A summary of the Company’s Other liabilities follows:
|
| | | | | | |
| | December 31, |
| 2017 | | 2016 |
| (In thousands) |
| Security deposits | $ | 16,668 |
| | 14,782 |
|
| Prepaid rent and other deferred income | 9,352 |
| | 9,795 |
|
| | | | |
| Acquired below-market lease intangibles | 4,135 |
| | 4,012 |
|
| Accumulated amortization of below-market lease intangibles | (2,147 | ) | | (1,662 | ) |
| Acquired below-market lease intangibles, net of accumulated amortization | 1,988 |
| | 2,350 |
|
| | | | |
| Interest rate swap liabilities | 695 |
| | 2,578 |
|
| Prepaid tenant improvement reimbursements | 124 |
| | 343 |
|
| Other liabilities | 15 |
| | 16 |
|
Total Other liabilities | $ | 28,842 |
| | 29,864 |
|
EASTGROUP PROPERTIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
A summary of the Company’s Other liabilities follows:
|
| | | | | | |
| | December 31, |
| 2019 | | 2018 |
| (In thousands) |
| Security deposits | $ | 20,351 |
| | 18,432 |
|
| Prepaid rent and other deferred income | 13,855 |
| | 12,728 |
|
Operating lease liabilities — Ground leases (1) | 12,048 |
| | — |
|
Operating lease liabilities — Office leases (1) | 2,141 |
| | — |
|
| | | | |
| Acquired below-market lease intangibles | 8,616 |
| | 5,891 |
|
| Accumulated amortization of acquired below-market lease intangibles | (4,494 | ) | | (3,028 | ) |
| Acquired below-market lease intangibles, net of accumulated amortization | 4,122 |
| | 2,863 |
|
| | | | |
| Interest rate swap liabilities | 678 |
| | — |
|
| Prepaid tenant improvement reimbursements | 56 |
| | 614 |
|
| Other liabilities | 15,872 |
| | 15 |
|
Total Other liabilities | $ | 69,123 |
| | 34,652 |
|
| |
| (1) | See Note 1(o) for information regarding the Company’s January 1, 2019, implementation of FASB ASC 842, Leases, and the Company’s right of use assets and related liabilities for office leases. |
| |
| (10) | COMMON STOCK ACTIVITY |
The following table presents the common stock activity for the three years ended December 31, 2017:2019:
| | | | Years Ended December 31, | Years Ended December 31, |
| 2017 | | 2016 | | 2015 | 2019 | | 2018 | | 2017 |
| Common Shares | Common Stock (in shares) |
| Shares outstanding at beginning of year | 33,332,213 |
| | 32,421,460 |
| | 32,232,587 |
| 36,501,356 |
| | 34,758,167 |
| | 33,332,213 |
|
| Common stock offerings | 1,370,457 |
| | 875,052 |
| | 106,751 |
| 2,388,342 |
| | 1,706,474 |
| | 1,370,457 |
|
| Dividend reinvestment plan | 2,744 |
| | 3,326 |
| | 4,536 |
| 1,893 |
| | 1,844 |
| | 2,744 |
|
| Incentive restricted stock granted | 93,285 |
| | 80,529 |
| | 100,622 |
| 59,943 |
| | 50,217 |
| | 93,285 |
|
| Incentive restricted stock forfeited | (16,000 | ) | | (910 | ) | | — |
| (3,010 | ) | | — |
| | (16,000 | ) |
| Director common stock awarded | 8,881 |
| | 10,072 |
| | 9,373 |
| 6,384 |
| | 8,478 |
| | 8,881 |
|
| Director restricted stock granted | 282 |
| | — |
| | — |
| — |
| | — |
| | 282 |
|
| Restricted stock withheld for tax obligations | (33,695 | ) | | (57,316 | ) | | (32,409 | ) | (28,955 | ) | | (23,824 | ) | | (33,695 | ) |
| Shares outstanding at end of year | 34,758,167 |
| | 33,332,213 |
| | 32,421,460 |
| 38,925,953 |
| | 36,501,356 |
| | 34,758,167 |
|
Common Stock Issuances
The following table presents the common stock issuance activity for the three years ended December 31, 2017:2019:
|
| | | | | | | |
| Years Ended December 31, | | Number of Shares of Common Stock Issued | | Net Proceeds |
| | | | | (In thousands) |
| 2019 | | 2,388,342 |
| | $ | 284,710 |
|
| 2018 | | 1,706,474 |
| | 157,319 |
|
| 2017 | | 1,370,457 |
| | 109,207 |
|
EASTGROUP PROPERTIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|
| | | | | | | |
| Years Ended December 31, | | Number of Common Shares Issued | | Net Proceeds |
| | | | | (In thousands) |
| 2017 | | 1,370,457 |
| | $ | 109,207 |
|
| 2016 | | 875,052 |
| | 59,283 |
|
| 2015 | | 106,751 |
| | 6,233 |
|
Dividend Reinvestment Plan
The Company hashad a dividend reinvestment plan that allowsallowed stockholders to reinvest cash distributions in new shares of the Company. On December 12, 2019, the dividend reinvestment plan was terminated and any unsold shares pursuant to the plan were deregistered.
| |
| (11) | STOCK-BASED COMPENSATION |
The CompanyEastGroup applies the provisions of ASC 718, Compensation – Stock Compensation, to account for its stock-based compensation plans. ASC 718 requires that the compensation cost relating to share-based payment transactions be recognized in the financial statements and that the cost be measured on the fair value of the equity or liability instruments issued.
Equity Incentive Plan
In May 2004, the stockholders of the Company approved the EastGroup Properties, Inc. 2004 Equity Incentive Plan (the “2004 Plan”) that authorized the issuance of up to 1,900,000 shares of common stock to employees in the form of options, stock appreciation rights, restricted stock, deferred stock units, performance shares, bonus stock or stock in lieu of cash compensation. The 2004 Plan was further amended by the Board of Directors in September 2005 and December 2006.
In April 2013, the Board of Directors adopted the EastGroup Properties, Inc. 2013 Equity Incentive Plan (the “2013 Equity Plan”) upon the recommendation of the Compensation Committee; the 2013 Equity Plan was approved by the Company's stockholders and became effective May 29, 2013. The 2013 Equity Plan was further amended by the Board of Directors in March 2017. The 2013 Equity Plan replaced the 2004 Plan and the 2005 Directors Equity Incentive Plan. The 2013 Equity Plan permits the grant of awards to employees and directors with respect to 2,000,000 shares of common stock.
There were 1,671,981, 1,752,3451,583,223, 1,629,281 and 1,802,0001,671,981 total shares available for grant under the 2013 Equity Plan as of December 31, 2017, 20162019, 2018 and 2015,2017, respectively. Typically, the Company issues new shares to fulfill stock grants.
Stock-based compensation cost for employees was $8,647,000, $5,322,000 and $6,309,000 for 2019, $5,184,0002018 and $7,891,000 for 2017, 2016 and 2015, respectively, of which $2,536,000, $1,173,000 and $1,458,000, $1,183,000 and $1,672,000 were capitalized as part of the Company’s development costs for the respective years.
EASTGROUP PROPERTIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Employee Equity Awards
The Company's restricted stock program is designed to provide incentives for management to achieve goals established by the Compensation Committee of the Company's Board of Directors (the Committee)"Committee"). The awards act as a retention device, as they vest over time, allowing participants to benefit from dividends on shares as well as potential stock appreciation. Equity awards align management's interests with the long-term interests of shareholders. The vesting periods of the Company’s restricted stock plans vary, as determined by the Compensation Committee. Restricted stock is granted to executive officers subject to both continued service and the satisfaction of certain annual performance goals and multi-year market conditions as determined by the Compensation Committee. Restricted stock is granted to non-executive officers subject only to continued service. The cost for market-based awards and awards that only require service is amortized on a straight-line basis over the requisite service periods. The total compensation expense for service and performance based awards is based upon the fair market value of the shares on the grant date.
In March 2017, the Committee evaluated the Company's performance compared to certain annual performance measures (primarily funds from operations (FFO) per share and total shareholder return) for the year ended December 31, 2016. Based on the evaluation, 36,571 shares were awarded to the Company’s executive officers at the grant date (March 2, 2017) fair value of $74.80 per share. These shares vested 20% on the date shares were determined and awarded and will vest 20% per year on January 1 in years 2018, 2019, 2020 and 2021. The shares are being expensed on a straight-line basis over the remaining service period.
Also in March 2017, the Committee evaluated the Company’s total shareholder return, both on an absolute basis for 2016 as well as on a relative basis compared to the NAREIT Equity Index, NAREIT Industrial Index and Russell 2000 Index for the five-year period ended December 31, 2016. Based on the evaluation, 33,289 shares were awarded to the Company’s executive officers at the grant date (March 2, 2017) fair value of $74.80 per share. These shares vested 25% on the date shares were determined and awarded and will vest 25% per year on January 1 in years 2018, 2019 and 2020. The shares are being expensed on a straight-line basis over the remaining service period.
Notwithstanding the foregoing, the shares issued to the Company’s former Chief Financial Officer under these plans became fully vested on the grant date of the awards in the first quarter of 2017.
In the second quarter of 2017, the Committee approved an equity compensation plan for certain of its executive officers based upon certain annual performance measures for 2017, including FFO per share, same property net operating income change, general and administrative costs, and fixed charge coverage. During the first quarter of 2018, the Committee will measure the Company's performance for 2017 against bright-line tests established by the Committee on the grant date of May 10, 2017. The number of shares that may be earned for the achievement of the annual performance measures could range from zero to 21,096. These shares, which have a grant date fair value of $78.18, would vest 20% on the date shares are determined and 20% per year on each January 1 for the subsequent four years. On the grant date of May 10, 2017, the Company began recognizing expense for its estimate of the shares that may be earned pursuant to these awards; the shares are being expensed using the graded vesting attribution method which recognizes each separate vesting portion of the award as a separate award on a straight-line basis over the requisite service period.
Also in the second quarter of 2017, the Committee approved an equity compensation plan for certain of its executive officers based upon the achievement of individual goals for each of the officers included in the plan. Any shares issued pursuant to the individual goals in this compensation plan will be determined by the Committee in its discretion and issued in the first quarter of 2018. The number of shares to be issued on the grant date for the achievement of individual goals could range from zero to 5,274. These shares would vest 20% on the date shares are determined and awarded and 20% per year on each January 1 for the subsequent four years. The Company will begin recognizing the expense for any shares awarded on the grant date in the first quarter of 2018, and the shares will be expensed on a straight-line basis over the remaining service period.
Also in the second quarter of 2017, the Committee approved a long-term equity compensation plan for certain of the Company’s executive officers that includes three3 components based on total shareholder return and one1 component based only on continued service as of the vesting dates.
The three long-term equity compensation plan components based on total shareholder return are subject to bright-line tests that will compare the Company's total shareholder return to the NAREITNareit Equity Index and to the Company'smember companies of the Nareit industrial REIT peer group.index. The first plan will measuremeasured the bright-line tests over the one-year period endingended December 31, 2017. During the first quarter of 2018, the Committee will measuremeasured the Company's performance for the one-year1-year period against bright-line tests established by the Committee on the grant date of May 10, 2017. The number of shares to be earneddetermined on the measurement date could range from zero to 4,730.was 4,257. These shares would vestvested 100% on March 1, 2018, the date the earned shares arewere determined. On the grant date of May 10, 2017, the Company began recognizing expense for this plan based on the grant date fair value of the awards which was determined using a simulation pricing model developed to specifically accommodate the unique features of the award.
EASTGROUP PROPERTIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The second plan will measuremeasured the bright-line tests over the two-year period endingended December 31, 2018. During the first quarter of 2019, the Committee will measuremeasured the Company'sCompany’s performance for the two-year2-year period against bright-line tests established by the Committee on the grant date of May 10, 2017. The number of shares to be earneddetermined on the measurement date could range from zero towas 9,460. These shares would vestvested 100% on February 14, 2019, the date the earned shares arewere determined. On the grant date of May 10, 2017, the
EASTGROUP PROPERTIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Company began recognizing expense for this plan based on the grant date fair value of the awards which was determined using a simulation pricing model developed to specifically accommodate the unique features of the award.
The third plan will measure the bright-line tests over the three-year3-year period endingended December 31, 2019. During the first quarter of 2020, the Committee will measure the Company'sCompany’s performance for the three-year period against bright-line tests established by the Committee on the grant date of May 10, 2017. The number of shares to be earned on the measurement date could range from zero0 to 18,917. These shares would vest 75% on the date the earned shares are determined in the first quarter of 2020 and 25% on January 1, 2021. On the grant date of May 10, 2017, the Company began recognizing expense for this plan based on the grant date fair value of the awards which was determined using a simulation pricing model developed to specifically accommodate the unique features of the award.
The component of the long-term equity compensation plan based only on continued service as of the vesting dates was awarded on May 10, 2017. On that date, 5,406 shares were granted to certain executive officers subject only to continued service as of the vesting dates. These shares, which have a grant date fair value of $78.18 per share, will vestvested 25% in the first quarter of each of 2018, 2019 and 2020 and will vest 25% on January 1, in years 2019, 2020 and 2021. The shares are being expensed on a straight-line basis over the remaining service period.
Also duringIn the second quarter of 2017, 5,1692018, the Committee approved an equity compensation plan for the Company’s executive officers based upon certain annual performance measures for 2018, including funds from operations (“FFO”) per share, same property net operating income change, general and administrative costs, and fixed charge coverage. On February 14, 2019, the Committee measured the Company’s performance for 2018 against bright-line tests established by the Committee on the grant date of June 1, 2018 and determined that 24,690 shares were earned. These shares, which have a grant date fair value of $95.19, vested 20% on the date shares were determined and will vest 20% per year on each January 1 for the subsequent four years. On the grant date of June 1, 2018, the Company began recognizing expense for its estimate of the shares that may be earned pursuant to these awards; the shares are being expensed using the graded vesting attribution method which recognizes each separate vesting portion of the award as a separate award on a straight-line basis over the requisite service period.
Also in the second quarter of 2018, the Committee approved an equity compensation plan for EastGroup’s executive officers based upon the achievement of individual goals for each of the officers included in the plan. On February 14, 2019, the Committee evaluated the performance of the officers and, in its discretion, awarded 5,671 shares with a grant date fair value of $107.37. These shares vested 20% on the date shares were determined and awarded and will vest 20% per year on each January 1 for the subsequent four years. The Company began recognizing the expense for the shares awarded on the grant date of February 14, 2019, and the shares will be expensed on a straight-line basis over the remaining service period.
Also in the second quarter of 2018, the Committee approved a long-term equity compensation plan for the Company’s executive officers that includes 1 component based on total shareholder return and 1 component based only on continued service as of the vesting dates.
The component of the long-term equity compensation plan based on total shareholder return is subject to bright-line tests that will compare the Company’s total shareholder return to the Nareit Equity Index and to the member companies of the Nareit industrial index. The plan will measure the bright-line tests over the 3-year period ending December 31, 2020. During the first quarter of 2021, the Committee will measure the Company’s performance for the three-year period against bright-line tests established by the Committee on the grant date of June 1, 2018. The number of shares to be earned on the measurement date could range from 0 to 27,596. These shares would vest 75% on the date the earned shares are determined in the first quarter of 2021 and 25% on January 1, 2022. On the grant date of June 1, 2018, the Company began recognizing expense for this plan based on the grant date fair value of the awards which was determined using a simulation pricing model developed to specifically accommodate the unique features of the award.
The component of the long-term equity compensation plan based only on continued service as of the vesting dates was awarded on June 1, 2018. On that date, 7,884 shares were granted to certainthe Company’s executive officers subject only to continued service as of the vesting dates. These shares, which have a weighted average grant date fair value of $81.27 per share,$95.19, vested 20% on January 1, 2018,25% in the first quarter of 2019 and will vest 20% per year25% on each January 1 in years 2019, 2020, 2021 and 2022. for the subsequent four years. The shares are being expensed on a straight-line basis over the remaining service period.
In the first quarter of 2019, the Committee approved an equity compensation award (the “2019 Annual Grant”) for the Company’s executive officers based upon certain annual performance measures for 2019; the 2019 Annual Grant is comprised of 3 components. The first component of the 2019 Annual Grant is based upon the following Company performance measures for 2019: (i) same property net operating income change, (ii) debt-to EBITDAre ratio, and (iii) fixed charge coverage. During the first quarter of 2020, the Committee will measure the Company’s performance for 2019 against bright-line tests established by
EASTGROUP PROPERTIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
the Committee on the grant date of March 7, 2019. The aggregate number of shares that may be earned for the achievement of the annual performance measures could range from 0 to 9,594. These shares, which have a grant date fair value of $105.97, would vest 20% on the date shares are determined and 20% per year on each January 1 for the subsequent four years. On the grant date of March 7, 2019, the Company began recognizing expense for its estimate of the shares that may be earned pursuant to these awards; the shares are being expensed using the graded vesting attribution method which recognizes each separate vesting portion of the award as a separate award on a straight-line basis over the requisite service period.
The second component of the 2019 Annual Grant is based upon the Company’s FFO per share for 2019. During the first quarter of 2020, the Committee will measure the Company’s performance for 2019 against bright-line tests established by the Committee on the grant date of August 28, 2019. The aggregate number of shares that may be earned for the achievement of the annual performance measures for FFO could range from 0 to 15,992. These shares, which have a grant date fair value of $122.61, would vest 20% on the date shares are determined and 20% per year on each January 1 for the subsequent four years. On the grant date of August 28, 2019, the Company began recognizing expense for its estimate of the shares that may be earned pursuant to these awards; the shares are being expensed using the graded vesting attribution method which recognizes each separate vesting portion of the award as a separate award on a straight-line basis over the requisite service period.
The third component of the 2019 Annual Grant is based upon the achievement of individual goals for each of the officers to whom shares were granted. Any shares issued pursuant to the individual goals in this compensation plan will be determined by the Committee in its discretion and issued in the first quarter of 2020. The number of shares to be issued on the grant date for the achievement of individual goals could range from 0 to 6,394. These shares would vest 20% on the date shares are determined and awarded and 20% per year on each January 1 for the subsequent four years. The Company will begin recognizing the expense for any shares awarded on the grant date in the first quarter of 2020, and the shares will be expensed on a straight-line basis over the remaining service period.
Also duringin the first quarter of 2019, the Committee approved a long-term equity compensation award for the Company’s executive officers that includes 1 component based on total shareholder return and 1 component based only on continued service as of the vesting dates.
The component of the long-term equity compensation award based on total shareholder return is subject to bright-line tests that will compare the Company’s total shareholder return to the Nareit Equity Index and to the member companies of the Nareit industrial index. The award will measure the bright-line tests over the 3-year period ending December 31, 2021. During the first quarter of 2022, the Committee will measure the Company’s performance for the three-year period against bright-line tests established by the Committee on the grant date of March 7, 2019. The aggregate number of shares to be earned on the measurement date could range from 0 to 34,812. These shares would vest 75% on the date the earned shares are determined in the first quarter of 2022 and 25% on January 1, 2023. On the grant date of March 7, 2019, the Company began recognizing expense for this award based on the grant date fair value of the awards which was determined using a simulation pricing model developed to specifically accommodate the unique features of the award.
The component of the long-term equity compensation award based only on continued service as of the vesting dates was awarded on March 7, 2019. On that date, an aggregate of 9,947 shares were granted to the Company’s executive officers subject only to continued service as of the vesting dates. These shares, which have a grant date fair value of $105.97, will vest 25% in the first quarter of 2020 and 25% on January 1 in years 2021, 2022 and 2023. The shares are being expensed on a straight-line basis over the remaining service period.
During the second quarter of 2017, 12,8502019, 10,175 shares were granted to certain non-executive officers subject only to continued service as of the vesting dates. These shares, which have a grant date fair value of $84.57 per share, vested 20% on January 1, 2018, and$112.14, will vest 20% per year on January 1 in years 2019, 2020, 2021, 2022, 2023 and 2022. 2024. The shares are being expensed on a straight-line basis over the remaining service period.
During the fourth quarter of 2019, the Committee adopted the Equity Award Retirement Policy (the "retirement policy") which allows for accelerated vesting of unvested shares for retirement-eligible employees (defined as employees who meet certain age and years of service requirements). In order to qualify for accelerated vesting upon retirement, the eligible employees must provide required notification under the retirement policy and must retire from the Company. The Company has adjusted its stock-based compensation expense to accelerate the recognition of expense for retirement-eligible employees.
During the restricted period for awards no longer subject to contingencies, the Company accrues dividends and holds the certificates for the shares; however, the employee can vote the shares. For shares subject to contingencies, dividends are accrued based upon the number of shares expected to be awarded. Share certificates and dividends are delivered to the employee as they vest. As of December 31, 2017,2019, there was $5,988,000$4,556,000 of unrecognized compensation cost related to unvested restricted stock compensation for employees and directors that is expected to be recognized over a weighted average period of 2.7 years.
EASTGROUP PROPERTIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Following is a summary of the total restricted shares granted, forfeited and delivered (vested) to employees with the related weighted average grant date fair value share prices for 2017, 20162019, 2018 and 2015.2017. Of the shares that vested in 2019, 2018 and 2017, 2016 and 2015, 33,69528,955 shares, 57,31623,824 shares and 32,40933,695 shares, respectively, were withheld by the Company to satisfy the tax obligations for those employees who elected this option as permitted under the applicable equity plan. As of the grant date, the fair value of shares that were granted during 2019, 2018 and 2017 2016was $5,672,000, $4,223,000 and 2015 was $7,155,000, $4,736,000 and $6,145,000, respectively. As of the vesting date, the fair value of shares that vested during 2019, 2018 and 2017 2016was $6,662,000, $5,142,000 and 2015 was $6,441,000, $10,013,000 and $6,664,000, respectively.
| | | Restricted Stock Activity: | Years Ended December 31, | Years Ended December 31, |
| 2017 | | 2016 | | 2015 | 2019 | | 2018 | | 2017 |
Shares | | Weighted Average Grant Date Fair Value | | Shares | | Weighted Average Grant Date Fair Value | | Shares | | Weighted Average Grant Date Fair Value | Shares | | Weighted Average Grant Date Fair Value | | Shares | | Weighted Average Grant Date Fair Value | | Shares | | Weighted Average Grant Date Fair Value |
| Unvested at beginning of year | 162,087 |
| | $ | 51.97 |
| | 260,698 |
| | $ | 52.68 |
| | 265,911 |
| | $ | 49.79 |
| 143,314 |
| | $ | 70.26 |
| | 152,644 |
| | $ | 63.18 |
| | 162,087 |
| | $ | 51.97 |
|
Granted (1) | 93,285 |
| | 76.70 |
| | 80,529 |
| | 58.81 |
| | 100,622 |
| | 61.07 |
| 59,943 |
| | 94.62 |
| | 50,217 |
| | 84.09 |
| | 93,285 |
| | 76.70 |
|
| Forfeited | (16,000 | ) | | 36.98 |
| | (910 | ) | | 52.89 |
| | — |
| | — |
| (3,010 | ) | | 86.19 |
| | — |
| | — |
| | (16,000 | ) | | 36.98 |
|
| Vested | (86,728 | ) | | 61.62 |
| | (178,230 | ) | | 56.09 |
| | (105,835 | ) | | 53.40 |
| (69,363 | ) | | 66.99 |
| | (59,547 | ) | | 63.77 |
| | (86,728 | ) | | 61.62 |
|
| Unvested at end of year | 152,644 |
| | 63.18 |
| | 162,087 |
| | 51.97 |
| | 260,698 |
| | 52.68 |
| 130,884 |
| | 82.78 |
| | 143,314 |
| | 70.26 |
| | 152,644 |
| | 63.18 |
|
(1) Does not include the restricted shares that may be earned if the performance goals established in 2017 and 2018 for long-term performance and in 2019 for annual and long-term performance periods are achieved. Depending on the actual level of achievement of the goals at the end of the open performance periods, the number of shares earned could range from zero0 to 59,477.113,305.
EASTGROUP PROPERTIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Following is a vesting schedule of the total unvested shares as of December 31, 20172019:
|
| | | |
| Unvested Shares Vesting Schedule | | Number of Shares |
| 2020 | | 63,931 |
|
| 2021 | | 30,897 |
|
| 2022 | | 21,934 |
|
| 2023 | | 12,152 |
|
| 2024 | | 1,970 |
|
| Total Unvested Shares | | 130,884 |
|
|
| | | |
| Unvested Shares Vesting Schedule | | Number of Shares |
| 2018 | | 50,158 |
|
| 2019 | | 44,235 |
|
| 2020 | | 41,064 |
|
| 2021 | | 13,584 |
|
| 2022 | | 3,603 |
|
| Total Unvested Shares | | 152,644 |
|
Directors Equity Awards
The Company has a directors equity plan that was approved by stockholders and adopted in 2013 (the "2013 Equity Plan"). The Board of Directors has adopted a policy under the 2013 Equity Plan pursuant to which awards will be made to non-employee Directors. The current policy provides that the Company shall automatically award an annual retainer share award to each non-employee Director who has been elected or reelected as a member of the Board of Directors at the Annual Meeting. The number of shares shall be equal to $80,000$90,000 divided by the fair market value of a share on the date of such election. If a non-employee Director is elected or appointed to the Board of Directors other than at an Annual Meeting of the Company, the annual retainer share award shall be pro rated. The policy also provides that each new non-employee Director appointed or elected will receive an automatic award of restricted shares of Common Stock on the effective date of election or appointment equal to $25,000 divided by the fair market value of the Company's Common Stock on such date. These restricted shares will vest over a four-year period upon the performance of future service as a Director, subject to certain exceptions.
Directors were issued 8,8816,384 shares, 10,0728,478 shares and 9,3738,881 shares of common stock as annual retainer awards for 20172019, 20162018 and 20152017, respectively.
During the third quarter of 2017, 282 shares were granted to a newly elected non-employee Director subject only to continued service as of the vesting date. The shares, which have a grant date fair value of $88.86 per share, vested 25% on each of September 8, 2018 and 2019, and will vest 25% per year on September 8 in years 2018, 2019, 2020 and 2021. The shares are being expensed on a straight-line basis over the remaining service period.
During 2013, 417 shares were granted to a newly elected non-employee Director subject only to continued service as of the vesting date. The shares, which have a grant date fair value of $59.97 per share, vested 25% on each of December 6, 2014, 2015, 2016 and 2017.
EASTGROUP PROPERTIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
As of the vesting date, the fair value of shares that vested during 2017, 20162019, 2018 and 20152017 was $9,000, $8,000$7,000 and $6,000,$9,000, respectively. Stock-based compensation expense for directors was $727,000, $1,134,000 and $670,000 for 2019, $589,0002018 and $514,000 for 2017, 2016 and 2015, respectively.
Total Comprehensive Income is comprised of net income plus all other changes in equity from non-owner sources and is presented on the Consolidated Statements of Income and Comprehensive Income. The components of Accumulated other comprehensive income (loss)for 2017, 20162019, 2018 and 20152017 are presented in the Company’s Consolidated Statements of Changes in Equity and are summarized below. See Note 13 for information regarding the Company’s interest rate swaps.
|
| | | | | | | | | |
| | Years Ended December 31, |
| | 2019 | | 2018 | | 2017 |
| ACCUMULATED OTHER COMPREHENSIVE INCOME: | (In thousands) |
| Balance at beginning of year | $ | 6,701 |
| | 5,348 |
| | 1,995 |
|
| Change in fair value of interest rate swaps - cash flow hedges | (3,894 | ) | | 1,353 |
| | 3,353 |
|
| Balance at end of year | $ | 2,807 |
| | 6,701 |
| | 5,348 |
|
|
| | | | | | | | | |
| | Years Ended December 31, |
| | 2017 | | 2016 | | 2015 |
| ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS): | (In thousands) |
| Balance at beginning of year | $ | 1,995 |
| | (3,456 | ) | | (2,357 | ) |
| Change in fair value of interest rate swaps - cash flow hedges | 3,353 |
| | 5,451 |
| | (1,099 | ) |
| Balance at end of year | $ | 5,348 |
| | 1,995 |
| | (3,456 | ) |
EASTGROUP PROPERTIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
| |
| (13) | DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES |
The Company is exposed to certain risks arising from both its business operations and economic conditions. The Company principally manages its exposures to a wide variety of business and operational risks through management of its core business activities. The Company manages economic risk, including interest rate, liquidity and credit risk primarily by managing the amount, sources and duration of its debt funding and, to a limited extent, the use of derivative instruments.
Specifically, the Company has entered into derivative instruments to manage exposures that arise from business activities that result in the payment of future known and uncertain cash amounts, the value of which are determined by interest rates. The Company's derivative instruments, described below, are used to manage differences in the amount, timing and duration of the Company's known or expected cash payments principally related to certain of the Company's borrowings.
The Company's objective in using interest rate derivatives is to change variable interest rates to fixed interest rates by using interest rate swaps. Interest rate swaps designated as cash flow hedges involve the receipt of variable-ratevariable rate amounts from a counterparty in exchange for the Company making fixed-ratefixed rate payments over the life of the agreements without exchange of the underlying notional amount.
As of December 31, 2017,2019, EastGroup had seven6 interest rate swaps outstanding, all of which are used to hedge the variable cash flows associated with unsecured loans. All of the Company's interest rate swaps convert the related loans' LIBOR rate components to effectively fixed interest rates, and the Company has concluded that each of the hedging relationships is highly effective.
The effective portion of changes in the fair value of derivatives designated and qualifying as cash flow hedges is recorded in Other comprehensive income (loss) and is subsequently reclassified into earnings through interest expense as interest payments are made in the period that the hedged forecasted transaction affects earnings. The ineffective portion of the change in fair value of the derivatives, which is immaterial for the periods reported, is recognized directly in earnings (included in Other on the Consolidated Statements of Income and Comprehensive Income).
Amounts reported in Other comprehensive income (loss) related to derivatives will be reclassified to Interest expense as interest payments are made or received on the Company's variable-ratevariable rate debt. The Company estimates the swap interest receiptsthat an additional $223,000 will be $617,000 reclassified from Other comprehensive income (loss) as a decrease to Interest expense over the next twelve months. These receipts approximate the expected cash interest receipts due from counterparties for the swaps. Since the interest payments and receipts on the swaps in combination with the associated debt have been effectively fixed, this estimate is not in addition to the Company's total expected combined interest payments or expense for the next twelve months.
The Company's valuation methodology for over-the-counter (“OTC”("OTC") derivatives is to discount cash flows based on Overnight Index Swap (“OIS”("OIS") rates. Uncollateralized or partially-collateralized trades are discounted at OIS rates, but include appropriate economic adjustments for funding costs (i.e., a LIBOR-OIS basis adjustment to approximate uncollateralized cost of funds) and credit risk. The Company calculates its derivative values using mid-market prices.
In July 2017, the Financial Conduct Authority (the authority that regulates LIBOR) announced it intends to stop compelling banks to submit rates for the calculation of LIBOR after 2021. The Alternative Reference Rates Committee ("ARRC") has proposed that the Secured Overnight Financing Rate ("SOFR") is the rate that represents best practice as the alternative to USD-LIBOR for use in derivatives and other financial contracts that are currently indexed to USD-LIBOR. ARRC has proposed a paced market transition plan to SOFR from USD-LIBOR and organizations are currently working on industry wide and company specific transition plans
EASTGROUP PROPERTIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
as it relates to derivatives and cash markets exposed to USD-LIBOR. The Company has material contracts that are indexed to USD-LIBOR and is monitoring this activity and evaluating the related risks.
As of December 31, 20172019 and 2016,2018, the Company had the following outstanding interest rate derivatives that are designated as cash flow hedges of interest rate risk:
|
| | | | |
| Interest Rate Derivative | | Notional Amount as of December 31, 2019 | | Notional Amount as of December 31, 2018 |
| | | (In thousands) |
| Interest Rate Swap | | — | | $75,000 |
| Interest Rate Swap | | $75,000 | | $75,000 |
| Interest Rate Swap | | $65,000 | | $65,000 |
| Interest Rate Swap | | $60,000 | | $60,000 |
| Interest Rate Swap | | $40,000 | | $40,000 |
| Interest Rate Swap | | $15,000 | | $15,000 |
| Interest Rate Swap | | $100,000 | | — |
|
| | | | |
| Interest Rate Derivative | | Notional Amount as of December 31, 2017 | | Notional Amount as of December 31, 2016 |
| | | (In thousands) |
| Interest Rate Swap | | $80,000 | | $80,000 |
| Interest Rate Swap | | $75,000 | | $75,000 |
| Interest Rate Swap | | $75,000 | | $75,000 |
| Interest Rate Swap | | $65,000 | | $65,000 |
| Interest Rate Swap | | $60,000 | | $60,000 |
| Interest Rate Swap | | $40,000 | | $40,000 |
| Interest Rate Swap | | $15,000 | | $15,000 |
The table below presents the fair value of the Company's derivative financial instruments as well as their classification on the Consolidated Balance Sheets as of December 31, 20172019 and 2016.2018. See Note 18 for additional information on the fair value of the Company's interest rate swaps.
EASTGROUP PROPERTIES, INC. AND SUBSIDIARIES |
| | | | | | | | | | | |
| | Derivatives As of December 31, 2019 | | Derivatives As of December 31, 2018 |
| | Balance Sheet Location | | Fair Value | | Balance Sheet Location | | Fair Value |
| | (In thousands) |
| Derivatives designated as cash flow hedges: | | | | | | | |
| Interest rate swap assets | Other assets | | $ | 3,485 |
| | Other assets | | $ | 6,701 |
|
| Interest rate swap liabilities | Other liabilities | | 678 |
| | Other liabilities | | — |
|
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|
| | | | | | | | | | | |
| | Derivatives As of December 31, 2017 | | Derivatives As of December 31, 2016 |
| | Balance Sheet Location | | Fair Value | | Balance Sheet Location | | Fair Value |
| | (In thousands) |
| Derivatives designated as cash flow hedges: | | | | | | | |
| Interest rate swap assets | Other assets | | $ | 6,034 |
| | Other assets | | $ | 4,546 |
|
| Interest rate swap liabilities | Other liabilities | | 695 |
| | Other liabilities | | 2,578 |
|
The table below presents the effect of the Company's derivative financial instruments on the Consolidated Statements of Income and Comprehensive Income for the years ended December 31, 2017, 20162019, 2018 and 2015:2017:
|
| | | | | | | | | |
| | Years Ended December 31, |
| | 2019 | | 2018 | | 2017 |
| | (In thousands) |
| DERIVATIVES IN CASH FLOW HEDGING RELATIONSHIPS | | | | | |
| Interest Rate Swaps: | | | | | |
Amount of income (loss) recognized in Other comprehensive income (loss) on derivatives | $ | (1,975 | ) | | 2,757 |
| | 1,437 |
|
Amount of (income) loss reclassified from Accumulated other comprehensive income into Interest expense | (1,919 | ) | | (1,404 | ) | | 1,916 |
|
|
| | | | | | | | | |
| | Years Ended December 31, |
| | 2017 | | 2016 | | 2015 |
| | (In thousands) |
| DERIVATIVES IN CASH FLOW HEDGING RELATIONSHIPS | | | | | |
| Interest Rate Swaps: | | | | | |
Amount of income (loss) recognized in Other comprehensive income (loss) on derivatives | $ | 1,437 |
| | 1,410 |
| | (5,374 | ) |
Amount of loss reclassified from Accumulated other comprehensive income (loss) into Interest expense | 1,916 |
| | 4,041 |
| | 4,275 |
|
See Note 12 for additional information on the Company's Accumulated other comprehensive income (loss) resulting from its interest rate swaps.
Derivative financial agreements expose the Company to credit risk in the event of non-performance by the counterparties under the terms of the interest rate hedge agreements. The Company believes it minimizes the credit risk by transacting with financial institutions the Company regards as credit-worthy.
The Company has an agreement with its derivative counterparties containing a provision stating that the Company could be declared in default on its derivative obligations if the Company defaults on any of its indebtedness, including default where repayment of the indebtedness has not been accelerated by the lender.
As of December 31, 2017, the fair value of derivatives in an asset position related to these agreements was $6,034,000, and2019, the fair value of derivatives in a net liability position related to these agreements was $695,000. As of December 31, 2017, the Company has not posted any collateral related to these arrangements. If the Company had breached any of the contractual provisions of the derivative contract, it could have been required to settle its obligations under the agreements at their termination value. The swap termination value of derivatives in an asset position was an asset in the amount of $6,084,000, and the swap termination value of derivatives in a liability position was a liability in the amount of $717,000.$678,000.
EASTGROUP PROPERTIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The Company applies ASC 260, Earnings Per Share, which requires companies to present basic and diluted EPS. Reconciliation of the numerators and denominators in the basic and diluted EPS computations is as follows:
| | | | 2017 | | 2016 | | 2015 | 2019 | | 2018 | | 2017 |
(In thousands) | BASIC EPS COMPUTATION FOR NET INCOME ATTRIBUTABLE TO EASTGROUP PROPERTIES, INC. COMMON STOCKHOLDERS | | | | | | | | | | |
| Numerator – net income attributable to common stockholders | $ | 83,183 |
| | 95,509 |
| | 47,866 |
| $ | 121,662 |
| | 88,506 |
| | 83,183 |
|
| Denominator – weighted average shares outstanding | 33,996 |
| | 32,563 |
| | 32,091 |
| 37,442 |
| | 35,439 |
| | 33,996 |
|
DILUTED EPS COMPUTATION FOR NET INCOME ATTRIBUTABLE TO EASTGROUP PROPERTIES, INC. COMMON STOCKHOLDERS | | | | | | | | | | |
| Numerator – net income attributable to common stockholders | $ | 83,183 |
| | 95,509 |
| | 47,866 |
| $ | 121,662 |
| | 88,506 |
| | 83,183 |
|
| Denominator: | | | | | | | | | | |
| Weighted average shares outstanding | 33,996 |
| | 32,563 |
| | 32,091 |
| 37,442 |
| | 35,439 |
| | 33,996 |
|
| Unvested restricted stock | 51 |
| | 65 |
| | 105 |
| 85 |
| | 67 |
| | 51 |
|
| Total Shares | 34,047 |
| | 32,628 |
| | 32,196 |
| 37,527 |
| | 35,506 |
| | 34,047 |
|
| |
| (15) | QUARTERLY RESULTS OF OPERATIONS – UNAUDITED |
| | | | 2017 Quarter Ended | | 2016 Quarter Ended | 2019 Quarter Ended | | 2018 Quarter Ended |
| Mar 31 | | Jun 30 | | Sep 30 | | Dec 31 | | Mar 31 | | Jun 30 | | Sep 30 | | Dec 31 | Mar 31 | | Jun 30 | | Sep 30 | | Dec 31 | | Mar 31 | | Jun 30 | | Sep 30 | | Dec 31 |
(In thousands, except per share data) | | Revenues | $ | 66,409 |
| | 90,004 |
| | 69,001 |
| | 71,944 |
| | 73,189 |
| | 93,279 |
| | 64,043 |
| | 66,614 |
| $ | 81,365 |
| | 91,425 |
| | 84,180 |
| | 116,532 |
| | 83,179 |
| | 75,107 |
| | 79,593 |
| | 78,196 |
|
| Expenses | (53,436 | ) | | (53,027 | ) | | (53,029 | ) | | (54,277 | ) | | (51,359 | ) | | (49,186 | ) | | (49,243 | ) | | (51,243 | ) | (58,831 | ) | | (64,476 | ) | | (61,605 | ) | | (65,250 | ) | | (54,431 | ) | | (56,843 | ) | | (56,552 | ) | | (59,613 | ) |
| Net Income | 12,973 |
| | 36,977 |
| | 15,972 |
| | 17,667 |
| | 21,830 |
| | 44,093 |
| | 14,800 |
| | 15,371 |
| |
| Net income | | 22,534 |
| | 26,949 |
| | 22,575 |
| | 51,282 |
| | 28,748 |
| | 18,264 |
| | 23,041 |
| | 18,583 |
|
Net income attributable to noncontrolling interest in joint ventures | (154 | ) | | (87 | ) | | (88 | ) | | (77 | ) | | (119 | ) | | (180 | ) | | (139 | ) | | (147 | ) | (5 | ) | | 4 |
| | (4 | ) | | (1,673 | ) | | (35 | ) | | (37 | ) | | (31 | ) | | (27 | ) |
Net income attributable to EastGroup Properties, Inc. common stockholders | $ | 12,819 |
| | 36,890 |
| | 15,884 |
| | 17,590 |
| | 21,711 |
| | 43,913 |
| | 14,661 |
| | 15,224 |
| $ | 22,529 |
| | 26,953 |
| | 22,571 |
| | 49,609 |
| | 28,713 |
| | 18,227 |
| | 23,010 |
| | 18,556 |
|
BASIC PER SHARE DATA FOR NET INCOME ATTRIBUTABLE TO EASTGROUP PROPERTIES, INC. COMMON STOCKHOLDERS (1) | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
|
Net income attributable to common stockholders | $ | 0.38 |
| | 1.09 |
| | 0.46 |
| | 0.51 |
| | 0.67 |
| | 1.36 |
| | 0.45 |
| | 0.46 |
| $ | 0.62 |
| | 0.73 |
| | 0.60 |
| | 1.29 |
| | 0.83 |
| | 0.52 |
| | 0.64 |
| | 0.51 |
|
| Weighted average shares outstanding | 33,361 |
| | 33,987 |
| | 34,215 |
| | 34,406 |
| | 32,254 |
| | 32,376 |
| | 32,741 |
| | 32,874 |
| 36,465 |
| | 36,944 |
| | 37,771 |
| | 38,561 |
| | 34,689 |
| | 35,196 |
| | 35,716 |
| | 36,135 |
|
DILUTED PER SHARE DATA FOR NET INCOME ATTRIBUTABLE TO EASTGROUP PROPERTIES, INC. COMMON STOCKHOLDERS (1) | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
|
Net income attributable to common stockholders | $ | 0.38 |
| | 1.08 |
| | 0.46 |
| | 0.51 |
| | 0.67 |
| | 1.35 |
| | 0.45 |
| | 0.46 |
| $ | 0.62 |
| | 0.73 |
| | 0.60 |
| | 1.28 |
| | 0.83 |
| | 0.52 |
| | 0.64 |
| | 0.51 |
|
| Weighted average shares outstanding | 33,409 |
| | 34,040 |
| | 34,290 |
| | 34,505 |
| | 32,307 |
| | 32,440 |
| | 32,823 |
| | 32,964 |
| 36,526 |
| | 37,019 |
| | 37,869 |
| | 38,687 |
| | 34,736 |
| | 35,259 |
| | 35,798 |
| | 36,232 |
|
| |
| (1) | The above quarterly earnings per share calculations are based on the weighted average number of shares of common sharesstock outstanding during each quarter for basic earnings per share and the weighted average number of outstanding shares of common sharesstock and common stock share equivalents during each quarter for diluted earnings per share. The annual earnings per share calculations in the Consolidated Statements of Income and Comprehensive Income are based on the weighted average number of shares of common sharesstock outstanding during each year for basic earnings per share and the weighted average number of outstanding shares of common sharesstock and common stock share equivalents during each year for diluted earnings per share. The sum of quarterly financial data may vary from the annual data due to rounding. |
EASTGROUP PROPERTIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
| |
| (16) | DEFINED CONTRIBUTION PLAN |
EastGroup maintains a 401(k) plan for its employees. The Company makes matching contributions of 50% of the employee’s contribution (limited to 10% of compensation as defined by the plan) and may also make annual discretionary contributions. The Company’s total expense for this plan was $786,000, $769,000 and $672,000 $675,000for 2019, 2018 and $585,000 for 2017, 2016 and 2015, respectively.
The Company is not presently involved in any material litigation nor, to its knowledge, is any material litigation threatened against the Company or its properties, other than routine litigation arising in the ordinary course of businessbusiness.
As previously reported in the Company’s annual report on Form 10-K for the year ended December 31, 2018 and the Company’s quarterly reports on Form 10-Q for whichthe quarters ended March 31, June 30, and September 30, 2019, the Company is adequately insured.
had been involved in pending litigation related to an action against the Company and certain of its officers in connection with the Company’s November 2016 purchase of a land parcel, alleging breach of contract and other claims in law and in equity. The Company asserted numerous affirmative defenses. In an effort to resolve the litigation, EastGroup made an initial settlement offer for $497,000, which was reserved in the Company’s financial statements as of December 31, 2018 and March 31, 2019. During the three months ended June 30, 2019, the parties came to a mediated resolution of the matter; losses related to the matter are included in Other on the Consolidated Statements of Income and Comprehensive Income. As of June 30, 2019, the matter was resolved. Even though the matter was settled, the case was dismissed, and releases exchanged among all parties, the Plaintiff filed an appeal of the order compelling him to comply with the settlement. The Court of Appeal has since dismissed the appeal. All monies due under the settlement have been paid to the Plaintiff’s lawyers and were accounted for as stated above.
| |
| (18) | FAIR VALUE OF FINANCIAL INSTRUMENTS |
ASC 820, Fair Value Measurements and Disclosures,Measurement, defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. ASC 820 also provides guidance for using fair value to measure financial assets and liabilities. The Codification requires disclosure of the level within the fair value hierarchy in which the fair value measurements fall, including measurements using quoted prices in active markets for identical assets or liabilities (Level 1), quoted prices for similar instruments in active markets or quoted prices for identical or similar instruments in markets that are not active (Level 2), and significant valuation assumptions that are not readily observable in the market (Level 3).
The following table presents the carrying amounts and estimated fair values of the Company’s financial instruments in accordance with ASC 820at December 31, 20172019 and 2016.2018.
| | | | December 31, | December 31, |
| 2017 | | 2016 | 2019 | | 2018 |
Carrying Amount (1) | | Fair Value | | Carrying Amount (1) | | Fair Value | Carrying Amount (1) | | Fair Value | | Carrying Amount (1) | | Fair Value |
(In thousands) | | Financial Assets: | | | | | | | | | | | | | | |
| Cash and cash equivalents | $ | 16 |
| | 16 |
| | 522 |
| | 522 |
| $ | 224 |
| | 224 |
| | 374 |
| | 374 |
|
| Mortgage loans receivable | 4,581 |
| | 4,569 |
| | 4,752 |
| | 4,747 |
| 1,679 |
| | 1,703 |
| | 2,594 |
| | 2,571 |
|
| Interest rate swap assets | 6,034 |
| | 6,034 |
| | 4,546 |
| | 4,546 |
| 3,485 |
| | 3,485 |
| | 6,701 |
| | 6,701 |
|
| Financial Liabilities: | |
| | |
| | |
| | |
| |
| | |
| | |
| | |
|
Unsecured bank credit facilities - variable rate (2) | 116,339 |
| | 116,277 |
| | 112,020 |
| | 111,923 |
| 112,710 |
| | 113,174 |
| | 195,730 |
| | 196,423 |
|
Unsecured bank credit facilities - fixed rate (2) | 80,000 |
| | 80,003 |
| | 80,000 |
| | 79,998 |
| |
Unsecured debt (2) | 715,000 |
| | 703,871 |
| | 655,000 |
| | 623,147 |
| 940,000 |
| | 959,177 |
| | 725,000 |
| | 718,364 |
|
Secured debt (2) | 200,354 |
| | 206,408 |
| | 258,594 |
| | 266,585 |
| 133,422 |
| | 136,107 |
| | 189,038 |
| | 191,742 |
|
| Interest rate swap liabilities | 695 |
| | 695 |
| | 2,578 |
| | 2,578 |
| 678 |
| | 678 |
| | — |
| | — |
|
| |
| (1) | Carrying amounts shown in the table are included in the Consolidated Balance Sheets under the indicated captions, except as indicated in the notes below. |
| |
| (2) | Carrying amounts and fair values shown in the table exclude debt issuance costs (see Notes 6 and 7 for additional information). |
EASTGROUP PROPERTIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The following methods and assumptions were used to estimate the fair value of each class of financial instruments:
Cash and cash equivalents: The carrying amounts approximate fair value due to the short maturity of those instruments.
Mortgage loans receivable (included in Other assets on the Consolidated Balance Sheets): The fair value is estimated by discounting the future cash flows using the current rates at which similar loans would be made to borrowers with similar credit ratings and for the same remaining maturities (Level 2 input).
Interest rate swap assets (included in Other assets on the Consolidated Balances Sheets): The instruments are recorded at fair value based on models using inputs, such as interest rate yield curves, LIBOR swap curves and OIS curves, observable for substantially the full term of the contract (Level 2 input). See Note 13 for additional information on the Company's interest rate swaps.
EASTGROUP PROPERTIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Unsecured bank credit facilities: The fair value of the Company’s unsecured bank credit facilities is estimated by discounting expected cash flows at current market rates (Level 2 input), excluding the effects of debt issuance costs.
Unsecured debt: The fair value of the Company’s unsecured debt is estimated by discounting expected cash flows at the rates currently offered to the Company for debt of the same remaining maturities, as advised by the Company’s bankers (Level 2 input), excluding the effects of debt issuance costs.
Secured debt: The fair value of the Company’s secured debt is estimated by discounting expected cash flows at the rates currently offered to the Company for debt of the same remaining maturities, as advised by the Company’s bankers (Level 2 input), excluding the effects of debt issuance costs.
Interest rate swap liabilities (included in Other liabilities on the Consolidated Balance Sheets): The instruments are recorded at fair value based on models using inputs, such as interest rate yield curves, LIBOR swap curves and OIS curves, observable for substantially the full term of the contract (Level 2 input). See Note 13 for additional information on the Company's interest rate swaps.
On January 26, 2018,16, 2020, EastGroup closedacquired 6.7 acres of development land near the saleCompany's Arlington Tech Centre 1 and 2 in Dallas. The site, which was acquired for $1.7 million, is expected to accommodate the future development of World Houston 18, a 33,00077,000 square foot non-EastGroup developed, single-tenant building in Houston, for $2.5 million. The transaction generated a gain on sale which will be recognized in the first quarter of 2018.business distribution building.
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| SCHEDULE III |
| REAL ESTATE PROPERTIES AND ACCUMULATED DEPRECIATION |
DECEMBER 31, 2019 (In thousands, except footnotes) |
| Description | | Encumbrances | | Initial Cost to the Company | | Costs Capitalized Subsequent to Acquisition | | Gross Amount Carried at Close of Period | | Accumulated Depreciation | | Year Acquired | | Year Constructed |
| | Land | | Buildings and Improvements | | | Land | | Buildings and Improvements | | Total | |
| Real Estate Properties (c): | | | | | | | | | | | | | | | | | | | | |
| Industrial: | | | | | | | | | | | | | | | | | | | | |
| FLORIDA | | | | | | | | | | | | | | | | | | | | |
| Tampa | | | | | | | | | | | | | | | | | | | | |
| Jetport Commerce Park | | $ | — |
| | 1,575 |
| | 6,591 |
| | 6,920 |
| | 1,575 |
| | 13,511 |
| | 15,086 |
| | 9,287 |
| | 1993-99 | | 1974-85 |
| Westport Commerce Center | | — |
| | 980 |
| | 3,800 |
| | 2,996 |
| | 980 |
| | 6,796 |
| | 7,776 |
| | 4,966 |
| | 1994 | | 1983/87 |
| Benjamin Distribution Center I & II | | — |
| | 843 |
| | 3,963 |
| | 1,915 |
| | 883 |
| | 5,838 |
| | 6,721 |
| | 4,120 |
| | 1997 | | 1996 |
| Benjamin Distribution Center III | | — |
| | 407 |
| | 1,503 |
| | 658 |
| | 407 |
| | 2,161 |
| | 2,568 |
| | 1,638 |
| | 1999 | | 1988 |
| Palm River Center | | — |
| | 1,190 |
| | 4,625 |
| | 2,957 |
| | 1,190 |
| | 7,582 |
| | 8,772 |
| | 5,272 |
| | 1997/98 | | 1990/97/98 |
| Palm River North I & III | | — |
| | 1,005 |
| | 4,688 |
| | 2,886 |
| | 1,005 |
| | 7,574 |
| | 8,579 |
| | 4,639 |
| | 1998 | | 2000 |
| Palm River North II | | — |
| | 634 |
| | 4,418 |
| | 454 |
| | 634 |
| | 4,872 |
| | 5,506 |
| | 3,547 |
| | 1997/98 | | 1999 |
| Palm River South I | | — |
| | 655 |
| | 3,187 |
| | 654 |
| | 655 |
| | 3,841 |
| | 4,496 |
| | 2,018 |
| | 2000 | | 2005 |
| Palm River South II | | — |
| | 655 |
| | — |
| | 4,415 |
| | 655 |
| | 4,415 |
| | 5,070 |
| | 2,319 |
| | 2000 | | 2006 |
| Walden Distribution Center I | | — |
| | 337 |
| | 3,318 |
| | 696 |
| | 337 |
| | 4,014 |
| | 4,351 |
| | 2,315 |
| | 1997/98 | | 2001 |
| Walden Distribution Center II | | — |
| | 465 |
| | 3,738 |
| | 1,492 |
| | 465 |
| | 5,230 |
| | 5,695 |
| | 3,145 |
| | 1998 | | 1998 |
| Oak Creek Distribution Center I | | — |
| | 1,109 |
| | 6,126 |
| | 1,395 |
| | 1,109 |
| | 7,521 |
| | 8,630 |
| | 4,484 |
| | 1998 | | 1998 |
| Oak Creek Distribution Center II | | — |
| | 647 |
| | 3,603 |
| | 1,715 |
| | 647 |
| | 5,318 |
| | 5,965 |
| | 2,893 |
| | 2003 | | 2001 |
| Oak Creek Distribution Center III | | — |
| | 439 |
| | — |
| | 3,213 |
| | 556 |
| | 3,096 |
| | 3,652 |
| | 1,334 |
| | 2005 | | 2007 |
| Oak Creek Distribution Center IV | | — |
| | 682 |
| | 6,472 |
| | 837 |
| | 682 |
| | 7,309 |
| | 7,991 |
| | 3,274 |
| | 2005 | | 2001 |
| Oak Creek Distribution Center V | | — |
| | 724 |
| | — |
| | 6,007 |
| | 916 |
| | 5,815 |
| | 6,731 |
| | 2,584 |
| | 2005 | | 2007 |
| Oak Creek Distribution Center VI | | — |
| | 642 |
| | — |
| | 5,579 |
| | 812 |
| | 5,409 |
| | 6,221 |
| | 2,011 |
| | 2005 | | 2008 |
| Oak Creek Distribution Center VII | | — |
| | 740 |
| | — |
| | 6,399 |
| | 740 |
| | 6,399 |
| | 7,139 |
| | 441 |
| | 2005 | | 2017 |
| Oak Creek Distribution Center VIII | | — |
| | 843 |
| | — |
| | 6,251 |
| | 1,051 |
| | 6,043 |
| | 7,094 |
| | 841 |
| | 2005 | | 2015 |
| Oak Creek Distribution Center IX | | — |
| | 618 |
| | — |
| | 5,121 |
| | 781 |
| | 4,958 |
| | 5,739 |
| | 1,620 |
| | 2005 | | 2009 |
| Oak Creek Distribution Center A | | — |
| | 185 |
| | — |
| | 1,498 |
| | 185 |
| | 1,498 |
| | 1,683 |
| | 560 |
| | 2005 | | 2008 |
| Oak Creek Distribution Center B | | — |
| | 227 |
| | — |
| | 1,555 |
| | 227 |
| | 1,555 |
| | 1,782 |
| | 583 |
| | 2005 | | 2008 |
| Airport Commerce Center | | — |
| | 1,257 |
| | 4,012 |
| | 1,037 |
| | 1,257 |
| | 5,049 |
| | 6,306 |
| | 2,983 |
| | 1998 | | 1998 |
| Westlake Distribution Center | | — |
| | 1,333 |
| | 6,998 |
| | 2,623 |
| | 1,333 |
| | 9,621 |
| | 10,954 |
| | 5,999 |
| | 1998 | | 1998/99 |
| Expressway Commerce Center I | | — |
| | 915 |
| | 5,346 |
| | 1,585 |
| | 915 |
| | 6,931 |
| | 7,846 |
| | 3,711 |
| | 2002 | | 2004 |
| Expressway Commerce Center II | | — |
| | 1,013 |
| | 3,247 |
| | 798 |
| | 1,013 |
| | 4,045 |
| | 5,058 |
| | 2,151 |
| | 2003 | | 2001 |
| Silo Bend Distribution Center | | — |
| | 4,131 |
| | 27,497 |
| | 3,872 |
| | 4,132 |
| | 31,368 |
| | 35,500 |
| | 8,026 |
| | 2011 | | 1987/90 |
Subsequent to December 31, 2017, the Company executed a commitment letter for $60 million of senior unsecured private placement notes with an insurance company. The notes, which are expected to close in April 2018, have a 10-year term and a fixed interest rate of 3.93% with semi-annual interest payments. The notes will not be and have not been registered under the Securities Act of 1933, as amended, and may not be offered or sold in the United States absent registration or an applicable exemption from the registration requirements.
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| SCHEDULE III |
| REAL ESTATE PROPERTIES AND ACCUMULATED DEPRECIATION |
DECEMBER 31, 2019 (In thousands, except footnotes) |
| Description | | Encumbrances | | Initial Cost to the Company | | Costs Capitalized Subsequent to Acquisition | | Gross Amount Carried at Close of Period | | Accumulated Depreciation | | Year Acquired | | Year Constructed |
| | Land | | Buildings and Improvements | | | Land | | Buildings and Improvements | | Total | |
| Tampa East Distribution Center | | — |
| | 791 |
| | 4,758 |
| | 671 |
| | 791 |
| | 5,429 |
| | 6,220 |
| | 1,634 |
| | 2011 | | 1984 |
| Tampa West Distribution Center | | — |
| | 2,139 |
| | 8,502 |
| | 1,276 |
| | 2,140 |
| | 9,777 |
| | 11,917 |
| | 2,833 |
| | 2011 | | 1975/93/94 |
| Madison Distribution Center | | — |
| | 495 |
| | 2,779 |
| | 437 |
| | 495 |
| | 3,216 |
| | 3,711 |
| | 989 |
| | 2012 | | 2007 |
| Madison Distribution Center II & III | | — |
| | 624 |
| | — |
| | 7,028 |
| | 624 |
| | 7,028 |
| | 7,652 |
| | 1,227 |
| | 2012 | | 2015 |
| Madison Distribution Center IV & V | | — |
| | 565 |
| | — |
| | 8,232 |
| | 565 |
| | 8,232 |
| | 8,797 |
| | 1,231 |
| | 2012 | | 2016 |
| Grand Oaks 75 Business Center I | | — |
| | 3,572 |
| | 12,979 |
| | 5 |
| | 3,572 |
| | 12,984 |
| | 16,556 |
| | 171 |
| | 2019 | | 2017 |
| Orlando | | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | | | |
| Chancellor Center | | — |
| | 291 |
| | 1,711 |
| | 513 |
| | 291 |
| | 2,224 |
| | 2,515 |
| | 1,416 |
| | 1996/97 | | 1996/97 |
| Exchange Distribution Center I | | — |
| | 603 |
| | 2,414 |
| | 2,348 |
| | 603 |
| | 4,762 |
| | 5,365 |
| | 3,538 |
| | 1994 | | 1975 |
| Exchange Distribution Center II | | — |
| | 300 |
| | 945 |
| | 482 |
| | 300 |
| | 1,427 |
| | 1,727 |
| | 909 |
| | 2002 | | 1976 |
| Exchange Distribution Center III | | — |
| | 320 |
| | 997 |
| | 408 |
| | 320 |
| | 1,405 |
| | 1,725 |
| | 973 |
| | 2002 | | 1980 |
| Sunbelt Distribution Center | | — |
| | 1,472 |
| | 5,745 |
| | 6,043 |
| | 1,472 |
| | 11,788 |
| | 13,260 |
| | 9,239 |
| | 1989/97/98 | | 1974/87/97/98 |
| John Young Commerce Center I | | — |
| | 497 |
| | 2,444 |
| | 1,443 |
| | 497 |
| | 3,887 |
| | 4,384 |
| | 2,387 |
| | 1997/98 | | 1997/98 |
| John Young Commerce Center II | | — |
| | 512 |
| | 3,613 |
| | 533 |
| | 512 |
| | 4,146 |
| | 4,658 |
| | 2,855 |
| | 1998 | | 1999 |
| Sunport Center I | | — |
| | 555 |
| | 1,977 |
| | 1,049 |
| | 555 |
| | 3,026 |
| | 3,581 |
| | 1,729 |
| | 1999 | | 1999 |
| Sunport Center II | | — |
| | 597 |
| | 3,271 |
| | 1,907 |
| | 597 |
| | 5,178 |
| | 5,775 |
| | 3,675 |
| | 1999 | | 2001 |
| Sunport Center III | | — |
| | 642 |
| | 3,121 |
| | 1,268 |
| | 642 |
| | 4,389 |
| | 5,031 |
| | 2,461 |
| | 1999 | | 2002 |
| Sunport Center IV | | — |
| | 642 |
| | 2,917 |
| | 1,820 |
| | 642 |
| | 4,737 |
| | 5,379 |
| | 2,773 |
| | 1999 | | 2004 |
| Sunport Center V | | — |
| | 750 |
| | 2,509 |
| | 2,427 |
| | 750 |
| | 4,936 |
| | 5,686 |
| | 2,944 |
| | 1999 | | 2005 |
| Sunport Center VI | | — |
| | 672 |
| | — |
| | 3,750 |
| | 672 |
| | 3,750 |
| | 4,422 |
| | 1,575 |
| | 1999 | | 2006 |
| Southridge Commerce Park I | | — |
| | 373 |
| | — |
| | 4,992 |
| | 373 |
| | 4,992 |
| | 5,365 |
| | 3,084 |
| | 2003 | | 2006 |
| Southridge Commerce Park II | | — |
| | 342 |
| | — |
| | 4,532 |
| | 342 |
| | 4,532 |
| | 4,874 |
| | 2,398 |
| | 2003 | | 2007 |
| Southridge Commerce Park III | | — |
| | 547 |
| | — |
| | 5,683 |
| | 547 |
| | 5,683 |
| | 6,230 |
| | 2,462 |
| | 2003 | | 2007 |
| Southridge Commerce Park IV (g) | | 2,574 |
| | 506 |
| | — |
| | 4,918 |
| | 506 |
| | 4,918 |
| | 5,424 |
| | 2,052 |
| | 2003 | | 2006 |
| Southridge Commerce Park V (g) | | 2,339 |
| | 382 |
| | — |
| | 4,547 |
| | 382 |
| | 4,547 |
| | 4,929 |
| | 2,284 |
| | 2003 | | 2006 |
| Southridge Commerce Park VI | | — |
| | 571 |
| | — |
| | 5,396 |
| | 571 |
| | 5,396 |
| | 5,967 |
| | 2,216 |
| | 2003 | | 2007 |
| Southridge Commerce Park VII | | — |
| | 520 |
| | — |
| | 6,787 |
| | 520 |
| | 6,787 |
| | 7,307 |
| | 2,766 |
| | 2003 | | 2008 |
| Southridge Commerce Park VIII | | — |
| | 531 |
| | — |
| | 6,368 |
| | 531 |
| | 6,368 |
| | 6,899 |
| | 2,213 |
| | 2003 | | 2008 |
| Southridge Commerce Park IX | | — |
| | 468 |
| | — |
| | 6,460 |
| | 468 |
| | 6,460 |
| | 6,928 |
| | 1,971 |
| | 2003 | | 2012 |
| Southridge Commerce Park X | | — |
| | 414 |
| | — |
| | 4,879 |
| | 414 |
| | 4,879 |
| | 5,293 |
| | 1,181 |
| | 2003 | | 2012 |
| Southridge Commerce Park XI | | — |
| | 513 |
| | — |
| | 5,939 |
| | 513 |
| | 5,939 |
| | 6,452 |
| | 1,600 |
| | 2003 | | 2012 |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| SCHEDULE III |
| REAL ESTATE PROPERTIES AND ACCUMULATED DEPRECIATION |
DECEMBER 31, 2019 (In thousands, except footnotes) |
| Description | | Encumbrances | | Initial Cost to the Company | | Costs Capitalized Subsequent to Acquisition | | Gross Amount Carried at Close of Period | | Accumulated Depreciation | | Year Acquired | | Year Constructed |
| | Land | | Buildings and Improvements | | | Land | | Buildings and Improvements | | Total | |
| Southridge Commerce Park XII | | — |
| | 2,025 |
| | — |
| | 17,180 |
| | 2,025 |
| | 17,180 |
| | 19,205 |
| | 5,547 |
| | 2005 | | 2008 |
| Horizon Commerce Park I | | — |
| | 991 |
| | — |
| | 6,586 |
| | 991 |
| | 6,586 |
| | 7,577 |
| | 1,450 |
| | 2008 | | 2014 |
| Horizon Commerce Park II | | — |
| | 1,111 |
| | — |
| | 7,249 |
| | 1,111 |
| | 7,249 |
| | 8,360 |
| | 1,383 |
| | 2008 | | 2014 |
| Horizon Commerce Park III | | — |
| | 991 |
| | — |
| | 6,480 |
| | 991 |
| | 6,480 |
| | 7,471 |
| | 1,071 |
| | 2008 | | 2016 |
| Horizon Commerce Park IV | | — |
| | 1,097 |
| | — |
| | 8,549 |
| | 1,097 |
| | 8,549 |
| | 9,646 |
| | 1,334 |
| | 2008 | | 2015 |
| Horizon Commerce Park V | | — |
| | 1,108 |
| | — |
| | 8,604 |
| | 1,108 |
| | 8,604 |
| | 9,712 |
| | 857 |
| | 2008 | | 2017 |
| Horizon Commerce Park VI | | — |
| | 1,099 |
| | — |
| | 11,130 |
| | 1,099 |
| | 11,130 |
| | 12,229 |
| | 514 |
| | 2008 | | 2019 |
| Horizon Commerce Park VII | | — |
| | 962 |
| | — |
| | 7,523 |
| | 962 |
| | 7,523 |
| | 8,485 |
| | 929 |
| | 2008 | | 2017 |
| Horizon Commerce Park X | | — |
| | 846 |
| | — |
| | 6,601 |
| | 846 |
| | 6,601 |
| | 7,447 |
| | 465 |
| | 2009 | | 2018 |
| Horizon Commerce Park XI | | — |
| | 1,101 |
| | — |
| | 9,873 |
| | 1,101 |
| | 9,873 |
| | 10,974 |
| | 220 |
| | 2009 | | 2019 |
| Horizon Commerce Park XII | | — |
| | 1,416 |
| | — |
| | 10,581 |
| | 1,416 |
| | 10,581 |
| | 11,997 |
| | 697 |
| | 2009 | | 2017 |
| Jacksonville | | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | | | |
| Deerwood Distribution Center | | — |
| | 1,147 |
| | 1,799 |
| | 4,112 |
| | 1,147 |
| | 5,911 |
| | 7,058 |
| | 3,828 |
| | 1989 | | 1978 |
| Phillips Distribution Center | | — |
| | 1,375 |
| | 2,961 |
| | 4,545 |
| | 1,375 |
| | 7,506 |
| | 8,881 |
| | 5,611 |
| | 1994 | | 1984/95 |
| Lake Pointe Business Park | | — |
| | 3,442 |
| | 6,450 |
| | 9,538 |
| | 3,442 |
| | 15,988 |
| | 19,430 |
| | 12,272 |
| | 1993 | | 1986/87 |
| Ellis Distribution Center | | — |
| | 540 |
| | 7,513 |
| | 1,981 |
| | 540 |
| | 9,494 |
| | 10,034 |
| | 5,401 |
| | 1997 | | 1977 |
| Westside Distribution Center | | — |
| | 2,011 |
| | 15,374 |
| | 9,725 |
| | 2,011 |
| | 25,099 |
| | 27,110 |
| | 13,614 |
| | 1997/2008 | | 1984/85 |
| Beach Commerce Center | | — |
| | 476 |
| | 1,899 |
| | 856 |
| | 476 |
| | 2,755 |
| | 3,231 |
| | 1,535 |
| | 2000 | | 2000 |
| Interstate Distribution Center | | — |
| | 1,879 |
| | 5,700 |
| | 2,089 |
| | 1,879 |
| | 7,789 |
| | 9,668 |
| | 4,562 |
| | 2005 | | 1990 |
| Flagler Center | | — |
| | 7,317 |
| | 14,912 |
| | 486 |
| | 7,317 |
| | 15,398 |
| | 22,715 |
| | 1,690 |
| | 2016 | | 1997 & 2005 |
| Ft. Lauderdale/Palm Beach area | | | | | | | | | | | | | | | | | | | | |
| Linpro Commerce Center | | — |
| | 613 |
| | 2,243 |
| | 3,553 |
| | 616 |
| | 5,793 |
| | 6,409 |
| | 3,680 |
| | 1996 | | 1986 |
| Cypress Creek Business Park | | — |
| | — |
| | 2,465 |
| | 2,582 |
| | — |
| | 5,047 |
| | 5,047 |
| | 3,335 |
| | 1997 | | 1986 |
| Lockhart Distribution Center | | — |
| | — |
| | 3,489 |
| | 3,051 |
| | — |
| | 6,540 |
| | 6,540 |
| | 4,701 |
| | 1997 | | 1986 |
| Interstate Commerce Center | | — |
| | 485 |
| | 2,652 |
| | 1,782 |
| | 485 |
| | 4,434 |
| | 4,919 |
| | 2,375 |
| | 1998 | | 1988 |
| Executive Airport Distribution Ctr (e) | | 6,016 |
| | 1,991 |
| | 4,857 |
| | 5,506 |
| | 1,991 |
| | 10,363 |
| | 12,354 |
| | 5,339 |
| | 2001 | | 2004/06 |
| Sample 95 Business Park | | — |
| | 2,202 |
| | 8,785 |
| | 4,123 |
| | 2,202 |
| | 12,908 |
| | 15,110 |
| | 8,220 |
| | 1996/98 | | 1990/99 |
| Blue Heron Distribution Center | | — |
| | 975 |
| | 3,626 |
| | 2,441 |
| | 975 |
| | 6,067 |
| | 7,042 |
| | 3,852 |
| | 1999 | | 1986 |
| Blue Heron Distribution Center II | | — |
| | 1,385 |
| | 4,222 |
| | 2,088 |
| | 1,385 |
| | 6,310 |
| | 7,695 |
| | 3,071 |
| | 2004 | | 1988 |
| Blue Heron Distribution Center III | | — |
| | 450 |
| | — |
| | 2,833 |
| | 450 |
| | 2,833 |
| | 3,283 |
| | 1,059 |
| | 2004 | | 2009 |
| Weston Commerce Park | | — |
| | 4,163 |
| | 9,951 |
| | 1,693 |
| | 4,163 |
| | 11,644 |
| | 15,807 |
| | 1,141 |
| | 2016 | | 1998 |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| SCHEDULE III |
| REAL ESTATE PROPERTIES AND ACCUMULATED DEPRECIATION |
DECEMBER 31, 2019 (In thousands, except footnotes) |
| Description | | Encumbrances | | Initial Cost to the Company | | Costs Capitalized Subsequent to Acquisition | | Gross Amount Carried at Close of Period | | Accumulated Depreciation | | Year Acquired | | Year Constructed |
| | Land | | Buildings and Improvements | | | Land | | Buildings and Improvements | | Total | |
| | | | | | | | | | | | | | | | | | | | | |
| Ft. Myers | | | | | | | | | | | | | | | | | | | | |
SunCoast Commerce Center I | | — |
| | 911 |
| | — |
| | 4,830 |
| | 928 |
| | 4,813 |
| | 5,741 |
| | 1,961 |
| | 2005 | | 2008 |
| SunCoast Commerce Center II | | — |
| | 911 |
| | — |
| | 5,002 |
| | 928 |
| | 4,985 |
| | 5,913 |
| | 2,210 |
| | 2005 | | 2007 |
| SunCoast Commerce Center III | | — |
| | 1,720 |
| | — |
| | 6,700 |
| | 1,763 |
| | 6,657 |
| | 8,420 |
| | 2,599 |
| | 2006 | | 2008 |
| SunCoast Commerce Center IV | | — |
| | 1,733 |
| | — |
| | 7,546 |
| | 1,762 |
| | 7,517 |
| | 9,279 |
| | 659 |
| | 2006 | | 2017 |
| SunCoast Commerce Center V | | — |
| | 1,511 |
| | — |
| | 6,722 |
| | 1,594 |
| | 6,639 |
| | 8,233 |
| | 203 |
| | 2006 | | 2019 |
| Miami | | | | | | | | | | | | | | | | | | | | |
| Gateway Commerce Park 1 | | — |
| | 5,746 |
| | — |
| | 18,841 |
| | 5,746 |
| | 18,841 |
| | 24,587 |
| | 545 |
| | 2016 | | 2018 |
| CALIFORNIA | | | | | | | | | | | | | | | | | | | | |
| San Francisco area | | | | | | | | | | | | | | | | | | | | |
Wiegman Distribution Center I | | — |
| | 2,197 |
| | 8,788 |
| | 2,211 |
| | 2,308 |
| | 10,888 |
| | 13,196 |
| | 6,903 |
| | 1996 | | 1986/87 |
Wiegman Distribution Center II | | — |
| | 2,579 |
| | 4,316 |
| | 152 |
| | 2,579 |
| | 4,468 |
| | 7,047 |
| | 947 |
| | 2012 | | 1998 |
| Huntwood Distribution Center | | — |
| | 3,842 |
| | 15,368 |
| | 3,228 |
| | 3,842 |
| | 18,596 |
| | 22,438 |
| | 11,996 |
| | 1996 | | 1988 |
| San Clemente Distribution Center | | — |
| | 893 |
| | 2,004 |
| | 944 |
| | 893 |
| | 2,948 |
| | 3,841 |
| | 2,022 |
| | 1997 | | 1978 |
| Yosemite Distribution Center | | — |
| | 259 |
| | 7,058 |
| | 1,992 |
| | 731 |
| | 8,578 |
| | 9,309 |
| | 5,185 |
| | 1999 | | 1974/87 |
| Los Angeles area | | | | | | | | | | | | | | | | | | | | |
| Eucalyptus Distribution Center | | — |
| | 11,392 |
| | 11,498 |
| | 194 |
| | 11,392 |
| | 11,692 |
| | 23,084 |
| | 637 |
| | 2018 | | 1988 |
| Kingsview Industrial Center | | — |
| | 643 |
| | 2,573 |
| | 883 |
| | 643 |
| | 3,456 |
| | 4,099 |
| | 2,209 |
| | 1996 | | 1980 |
| Dominguez Distribution Center | | — |
| | 2,006 |
| | 8,025 |
| | 1,170 |
| | 2,006 |
| | 9,195 |
| | 11,201 |
| | 5,922 |
| | 1996 | | 1977 |
| Main Street Distribution Center | | — |
| | 1,606 |
| | 4,103 |
| | 831 |
| | 1,606 |
| | 4,934 |
| | 6,540 |
| | 2,998 |
| | 1999 | | 1999 |
| Walnut Business Center | | — |
| | 2,885 |
| | 5,274 |
| | 2,500 |
| | 2,885 |
| | 7,774 |
| | 10,659 |
| | 4,779 |
| | 1996 | | 1966/90 |
| Washington Distribution Center | | — |
| | 1,636 |
| | 4,900 |
| | 751 |
| | 1,636 |
| | 5,651 |
| | 7,287 |
| | 3,434 |
| | 1997 | | 1996/97 |
| Chino Distribution Center | | — |
| | 2,544 |
| | 10,175 |
| | 1,623 |
| | 2,544 |
| | 11,798 |
| | 14,342 |
| | 8,865 |
| | 1998 | | 1980 |
| Ramona Distribution Center | | 2,372 |
| | 3,761 |
| | 5,751 |
| | 83 |
| | 3,761 |
| | 5,834 |
| | 9,595 |
| | 801 |
| | 2014 | | 1984 |
| Industry Distribution Center I | | — |
| | 10,230 |
| | 12,373 |
| | 4,750 |
| | 10,230 |
| | 17,123 |
| | 27,353 |
| | 10,054 |
| | 1998 | | 1959 |
| Industry Distribution Center III | | — |
| | — |
| | 3,012 |
| | (157 | ) | | — |
| | 2,855 |
| | 2,855 |
| | 2,855 |
| | 2007 | | 1992 |
| Chestnut Business Center | | — |
| | 1,674 |
| | 3,465 |
| | 361 |
| | 1,674 |
| | 3,826 |
| | 5,500 |
| | 2,109 |
| | 1998 | | 1999 |
| Los Angeles Corporate Center | | — |
| | 1,363 |
| | 5,453 |
| | 3,614 |
| | 1,363 |
| | 9,067 |
| | 10,430 |
| | 6,277 |
| | 1996 | | 1986 |
| Santa Barbara | | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | | | |
University Business Center | | — |
| | 1,375 |
| | 5,517 |
| | 4,587 |
| | 1,375 |
| | 10,104 |
| | 11,479 |
| | 6,031 |
| | 1996 | | 1987/88 |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| SCHEDULE III |
| REAL ESTATE PROPERTIES AND ACCUMULATED DEPRECIATION |
DECEMBER 31, 2019 (In thousands, except footnotes) |
| Description | | Encumbrances | | Initial Cost to the Company | | Costs Capitalized Subsequent to Acquisition | | Gross Amount Carried at Close of Period | | Accumulated Depreciation | | Year Acquired | | Year Constructed |
| | Land | | Buildings and Improvements | | | Land | | Buildings and Improvements | | Total | |
| Fresno | | | | | | | | | | | | | | | | | | | | |
Shaw Commerce Center | | — |
| | 2,465 |
| | 11,627 |
| | 7,236 |
| | 2,465 |
| | 18,863 |
| | 21,328 |
| | 12,043 |
| | 1998 | | 1978/81/87 |
| San Diego | | | | | | | | | | | | | | | | | | | | |
| Eastlake Distribution Center | | — |
| | 3,046 |
| | 6,888 |
| | 1,955 |
| | 3,046 |
| | 8,843 |
| | 11,889 |
| | 5,687 |
| | 1997 | | 1989 |
| Miramar Land | | — |
| | 13,980 |
| | — |
| | — |
| | 13,980 |
| | — |
| | 13,980 |
| | — |
| | 2019 | | n/a |
| Ocean View Corporate Center (e) | | 7,322 |
| | 6,577 |
| | 7,105 |
| | 1,353 |
| | 6,577 |
| | 8,458 |
| | 15,035 |
| | 3,158 |
| | 2010 | | 2005 |
| Otay Mesa Land | | — |
| | 15,282 |
| | — |
| | — |
| | 15,282 |
| | — |
| | 15,282 |
| | — |
| | 2019 | | n/a |
| Rocky Point Distribution Center I | | — |
| | 8,857 |
| | 13,388 |
| | — |
| | 8,857 |
| | 13,388 |
| | 22,245 |
| | 51 |
| | 2019 | | 2019 |
| Siempre Viva Distribution Center I | | — |
| | 4,628 |
| | 9,211 |
| | 209 |
| | 4,628 |
| | 9,420 |
| | 14,048 |
| | 375 |
| | 2018 | | 2003 |
| Siempre Viva Distribution Center II | | — |
| | 2,868 |
| | 5,694 |
| | 28 |
| | 2,877 |
| | 5,713 |
| | 8,590 |
| | 46 |
| | 2019 | | 2002 |
| TEXAS | | | | | | | | | | | | | | | | | | | | |
| Dallas | | | | | | | | | | | | | | | | | | | | |
| Allen Station 1 & 2 | | — |
| | 5,815 |
| | 17,612 |
| | 764 |
| | 5,815 |
| | 18,376 |
| | 24,191 |
| | 997 |
| | 2018 | | 2001 |
| Interstate Warehouse I & II (f) | | 4,997 |
| | 1,746 |
| | 4,941 |
| | 3,812 |
| | 1,746 |
| | 8,753 |
| | 10,499 |
| | 6,955 |
| | 1988 | | 1978 |
| Interstate Warehouse III (f) | | 1,964 |
| | 519 |
| | 2,008 |
| | 1,599 |
| | 519 |
| | 3,607 |
| | 4,126 |
| | 2,481 |
| | 2000 | | 1979 |
| Interstate Warehouse IV | | — |
| | 416 |
| | 2,481 |
| | 762 |
| | 416 |
| | 3,243 |
| | 3,659 |
| | 1,714 |
| | 2004 | | 2002 |
| Interstate Warehouse V, VI, & VII (g) | | 4,078 |
| | 1,824 |
| | 4,106 |
| | 2,663 |
| | 1,824 |
| | 6,769 |
| | 8,593 |
| | 3,670 |
| | 2009 | | 1979/80/81 |
| Venture Warehouses (f) | | 3,793 |
| | 1,452 |
| | 3,762 |
| | 2,755 |
| | 1,452 |
| | 6,517 |
| | 7,969 |
| | 5,496 |
| | 1988 | | 1979 |
| ParkView Commerce Center I-3 | | — |
| | 2,663 |
| | — |
| | 18,861 |
| | 2,663 |
| | 18,861 |
| | 21,524 |
| | 2,717 |
| | 2014 | | 2015 |
| Shady Trail Distribution Center | | — |
| | 635 |
| | 3,621 |
| | 1,371 |
| | 635 |
| | 4,992 |
| | 5,627 |
| | 2,750 |
| | 2003 | | 1998 |
| Valwood Distribution Center | | — |
| | 4,361 |
| | 34,405 |
| | 4,146 |
| | 4,361 |
| | 38,551 |
| | 42,912 |
| | 10,498 |
| | 2012 | | 1986/87/97/98 |
| Northfield Distribution Center | | — |
| | 12,470 |
| | 50,713 |
| | 4,845 |
| | 12,471 |
| | 55,557 |
| | 68,028 |
| | 14,922 |
| | 2013 | | 1999-2001/03/04/08 |
| Parc North 1-4 | | — |
| | 4,615 |
| | 26,358 |
| | 6,021 |
| | 4,615 |
| | 32,379 |
| | 36,994 |
| | 3,669 |
| | 2016 | | 2016 |
| CreekView 121 1 & 2 | | — |
| | 3,275 |
| | — |
| | 14,614 |
| | 3,275 |
| | 14,614 |
| | 17,889 |
| | 1,771 |
| | 2015 | | 2017 |
| CreekView 121 3 & 4 | | — |
| | 2,600 |
| | — |
| | 13,518 |
| | 2,600 |
| | 13,518 |
| | 16,118 |
| | 839 |
| | 2015 | | 2018 |
| Houston | | | | | | | | | | | | | | | | | | | | |
| World Houston Int'l Business Ctr 1 & 2 | | — |
| | 660 |
| | 5,893 |
| | 2,457 |
| | 660 |
| | 8,350 |
| | 9,010 |
| | 5,166 |
| | 1998 | | 1996 |
| World Houston Int'l Business Ctr 3 & 4 (f) | | 2,969 |
| | 820 |
| | 5,130 |
| | 289 |
| | 707 |
| | 5,532 |
| | 6,239 |
| | 3,518 |
| | 1998 | | 1998 |
| World Houston Int'l Business Ctr 6 (f) | | 1,674 |
| | 425 |
| | 2,423 |
| | 669 |
| | 425 |
| | 3,092 |
| | 3,517 |
| | 2,034 |
| | 1998 | | 1998 |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| SCHEDULE III |
| REAL ESTATE PROPERTIES AND ACCUMULATED DEPRECIATION |
DECEMBER 31, 2019 (In thousands, except footnotes) |
| Description | | Encumbrances | | Initial Cost to the Company | | Costs Capitalized Subsequent to Acquisition | | Gross Amount Carried at Close of Period | | Accumulated Depreciation | | Year Acquired | | Year Constructed |
| | Land | | Buildings and Improvements | | | Land | | Buildings and Improvements | | Total | |
| World Houston Int'l Business Ctr 7 & 8 (f) | | 4,893 |
| | 680 |
| | 4,584 |
| | 5,017 |
| | 680 |
| | 9,601 |
| | 10,281 |
| | 6,305 |
| | 1998 | | 1998 |
| World Houston Int'l Business Ctr 9 (f) | | 3,455 |
| | 800 |
| | 4,355 |
| | 2,105 |
| | 800 |
| | 6,460 |
| | 7,260 |
| | 3,451 |
| | 1998 | | 1998 |
| World Houston Int'l Business Ctr 10 | | — |
| | 933 |
| | 4,779 |
| | 824 |
| | 933 |
| | 5,603 |
| | 6,536 |
| | 2,889 |
| | 2001 | | 1999 |
| World Houston Int'l Business Ctr 11 | | — |
| | 638 |
| | 3,764 |
| | 1,799 |
| | 638 |
| | 5,563 |
| | 6,201 |
| | 3,078 |
| | 1999 | | 1999 |
| World Houston Int'l Business Ctr 12 | | — |
| | 340 |
| | 2,419 |
| | 383 |
| | 340 |
| | 2,802 |
| | 3,142 |
| | 1,734 |
| | 2000 | | 2002 |
| World Houston Int'l Business Ctr 13 | | — |
| | 282 |
| | 2,569 |
| | 769 |
| | 282 |
| | 3,338 |
| | 3,620 |
| | 2,094 |
| | 2000 | | 2002 |
| World Houston Int'l Business Ctr 14 | | — |
| | 722 |
| | 2,629 |
| | 1,329 |
| | 722 |
| | 3,958 |
| | 4,680 |
| | 2,188 |
| | 2000 | | 2003 |
| World Houston Int'l Business Ctr 15 | | — |
| | 731 |
| | — |
| | 6,278 |
| | 731 |
| | 6,278 |
| | 7,009 |
| | 3,568 |
| | 2000 | | 2007 |
| World Houston Int'l Business Ctr 16 | | — |
| | 519 |
| | 4,248 |
| | 1,602 |
| | 519 |
| | 5,850 |
| | 6,369 |
| | 3,421 |
| | 2000 | | 2005 |
| World Houston Int'l Business Ctr 17 | | — |
| | 373 |
| | 1,945 |
| | 799 |
| | 373 |
| | 2,744 |
| | 3,117 |
| | 1,557 |
| | 2000 | | 2004 |
| World Houston Int'l Business Ctr 19 | | — |
| | 373 |
| | 2,256 |
| | 1,127 |
| | 373 |
| | 3,383 |
| | 3,756 |
| | 2,095 |
| | 2000 | | 2004 |
| World Houston Int'l Business Ctr 20 | | — |
| | 1,008 |
| | 1,948 |
| | 2,053 |
| | 1,008 |
| | 4,001 |
| | 5,009 |
| | 2,313 |
| | 2000 | | 2004 |
| World Houston Int'l Business Ctr 21 | | — |
| | 436 |
| | — |
| | 4,155 |
| | 436 |
| | 4,155 |
| | 4,591 |
| | 1,717 |
| | 2000/03 | | 2006 |
| World Houston Int'l Business Ctr 22 | | — |
| | 436 |
| | — |
| | 4,542 |
| | 436 |
| | 4,542 |
| | 4,978 |
| | 2,337 |
| | 2000 | | 2007 |
| World Houston Int'l Business Ctr 23 | | — |
| | 910 |
| | — |
| | 7,428 |
| | 910 |
| | 7,428 |
| | 8,338 |
| | 3,298 |
| | 2000 | | 2007 |
| World Houston Int'l Business Ctr 24 | | — |
| | 837 |
| | — |
| | 6,065 |
| | 838 |
| | 6,064 |
| | 6,902 |
| | 2,727 |
| | 2005 | | 2008 |
| World Houston Int'l Business Ctr 25 | | — |
| | 508 |
| | — |
| | 4,287 |
| | 508 |
| | 4,287 |
| | 4,795 |
| | 1,781 |
| | 2005 | | 2008 |
| World Houston Int'l Business Ctr 26 (e) | | 1,808 |
| | 445 |
| | — |
| | 3,267 |
| | 445 |
| | 3,267 |
| | 3,712 |
| | 1,263 |
| | 2005 | | 2008 |
| World Houston Int'l Business Ctr 27 | | — |
| | 837 |
| | — |
| | 5,242 |
| | 838 |
| | 5,241 |
| | 6,079 |
| | 2,139 |
| | 2005 | | 2008 |
| World Houston Int'l Business Ctr 28 (e) | | 2,540 |
| | 550 |
| | — |
| | 4,665 |
| | 550 |
| | 4,665 |
| | 5,215 |
| | 2,042 |
| | 2005 | | 2009 |
| World Houston Int'l Business Ctr 29 (e) | | 2,416 |
| | 782 |
| | — |
| | 4,179 |
| | 974 |
| | 3,987 |
| | 4,961 |
| | 1,461 |
| | 2007 | | 2009 |
| World Houston Int'l Business Ctr 30 (e) | | 3,348 |
| | 981 |
| | — |
| | 5,894 |
| | 1,222 |
| | 5,653 |
| | 6,875 |
| | 2,403 |
| | 2007 | | 2009 |
| World Houston Int'l Business Ctr 31A | | — |
| | 684 |
| | — |
| | 4,092 |
| | 684 |
| | 4,092 |
| | 4,776 |
| | 1,820 |
| | 2008 | | 2011 |
| World Houston Int'l Business Ctr 31B | | — |
| | 546 |
| | — |
| | 3,561 |
| | 546 |
| | 3,561 |
| | 4,107 |
| | 1,407 |
| | 2008 | | 2012 |
| World Houston Int'l Business Ctr 32 (g) | | 3,265 |
| | 1,225 |
| | — |
| | 5,655 |
| | 1,526 |
| | 5,354 |
| | 6,880 |
| | 1,563 |
| | 2007 | | 2012 |
| World Houston Int'l Business Ctr 33 | | — |
| | 1,166 |
| | — |
| | 7,867 |
| | 1,166 |
| | 7,867 |
| | 9,033 |
| | 1,973 |
| | 2011 | | 2013 |
| World Houston Int'l Business Ctr 34 | | — |
| | 439 |
| | — |
| | 3,405 |
| | 439 |
| | 3,405 |
| | 3,844 |
| | 932 |
| | 2005 | | 2012 |
| World Houston Int'l Business Ctr 35 | | — |
| | 340 |
| | — |
| | 2,576 |
| | 340 |
| | 2,576 |
| | 2,916 |
| | 569 |
| | 2005 | | 2012 |
| World Houston Int'l Business Ctr 36 | | — |
| | 684 |
| | — |
| | 4,882 |
| | 684 |
| | 4,882 |
| | 5,566 |
| | 1,339 |
| | 2011 | | 2013 |
| World Houston Int'l Business Ctr 37 | | — |
| | 759 |
| | — |
| | 6,411 |
| | 759 |
| | 6,411 |
| | 7,170 |
| | 1,758 |
| | 2011 | | 2013 |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| SCHEDULE III |
| REAL ESTATE PROPERTIES AND ACCUMULATED DEPRECIATION |
DECEMBER 31, 2019 (In thousands, except footnotes) |
| Description | | Encumbrances | | Initial Cost to the Company | | Costs Capitalized Subsequent to Acquisition | | Gross Amount Carried at Close of Period | | Accumulated Depreciation | | Year Acquired | | Year Constructed |
| | Land | | Buildings and Improvements | | | Land | | Buildings and Improvements | | Total | |
| World Houston Int'l Business Ctr 38 | | — |
| | 1,053 |
| | — |
| | 7,324 |
| | 1,053 |
| | 7,324 |
| | 8,377 |
| | 1,989 |
| | 2011 | | 2013 |
| World Houston Int'l Business Ctr 39 | | — |
| | 620 |
| | — |
| | 5,203 |
| | 621 |
| | 5,202 |
| | 5,823 |
| | 1,068 |
| | 2011 | | 2014 |
| World Houston Int'l Business Ctr 40 | | — |
| | 1,072 |
| | — |
| | 9,347 |
| | 1,072 |
| | 9,347 |
| | 10,419 |
| | 1,659 |
| | 2011 | | 2014 |
| World Houston Int'l Business Ctr 41 | | — |
| | 649 |
| | — |
| | 5,950 |
| | 649 |
| | 5,950 |
| | 6,599 |
| | 1,090 |
| | 2011 | | 2014 |
| World Houston Int'l Business Ctr 42 | | — |
| | 571 |
| | — |
| | 4,814 |
| | 571 |
| | 4,814 |
| | 5,385 |
| | 741 |
| | 2011 | | 2015 |
| World Houston Int'l Business Ctr 43 | | — |
| | 443 |
| | — |
| | 6,026 |
| | 443 |
| | 6,026 |
| | 6,469 |
| | 42 |
| | 2011 | | 2019 |
| World Houston Int'l Business Ctr 45 | | — |
| | 3,243 |
| | — |
| | 13,711 |
| | 3,243 |
| | 13,711 |
| | 16,954 |
| | 38 |
| | 2015 | | 2019 |
| Central Green Distribution Center | | — |
| | 566 |
| | 4,031 |
| | 1,041 |
| | 566 |
| | 5,072 |
| | 5,638 |
| | 2,716 |
| | 1999 | | 1998 |
| Glenmont Business Park | | — |
| | 936 |
| | 6,161 |
| | 3,029 |
| | 937 |
| | 9,189 |
| | 10,126 |
| | 5,980 |
| | 1998 | | 1999/2000 |
| Beltway Crossing Business Park I | | — |
| | 458 |
| | 5,712 |
| | 2,786 |
| | 458 |
| | 8,498 |
| | 8,956 |
| | 5,267 |
| | 2002 | | 2001 |
| Beltway Crossing Business Park II | | — |
| | 415 |
| | — |
| | 2,998 |
| | 415 |
| | 2,998 |
| | 3,413 |
| | 1,461 |
| | 2005 | | 2007 |
| Beltway Crossing Business Park III | | — |
| | 460 |
| | — |
| | 3,305 |
| | 460 |
| | 3,305 |
| | 3,765 |
| | 1,505 |
| | 2005 | | 2008 |
| Beltway Crossing Business Park IV | | — |
| | 460 |
| | — |
| | 3,315 |
| | 460 |
| | 3,315 |
| | 3,775 |
| | 1,414 |
| | 2005 | | 2008 |
| Beltway Crossing Business Park V (e) | | 2,898 |
| | 701 |
| | — |
| | 5,249 |
| | 701 |
| | 5,249 |
| | 5,950 |
| | 2,378 |
| | 2005 | | 2008 |
| Beltway Crossing Business Park VI (g) | | 3,432 |
| | 618 |
| | — |
| | 6,614 |
| | 618 |
| | 6,614 |
| | 7,232 |
| | 2,258 |
| | 2005 | | 2008 |
| Beltway Crossing Business Park VII (g) | | 3,227 |
| | 765 |
| | — |
| | 6,035 |
| | 765 |
| | 6,035 |
| | 6,800 |
| | 2,669 |
| | 2005 | | 2009 |
| Beltway Crossing Business Park VIII | | — |
| | 721 |
| | — |
| | 5,516 |
| | 721 |
| | 5,516 |
| | 6,237 |
| | 1,950 |
| | 2005 | | 2011 |
| Beltway Crossing Business Park IX | | — |
| | 418 |
| | — |
| | 2,141 |
| | 418 |
| | 2,141 |
| | 2,559 |
| | 640 |
| | 2007 | | 2012 |
| Beltway Crossing Business Park X | | — |
| | 733 |
| | — |
| | 3,907 |
| | 733 |
| | 3,907 |
| | 4,640 |
| | 1,077 |
| | 2007 | | 2012 |
| Beltway Crossing Business Park XI | | — |
| | 690 |
| | — |
| | 4,138 |
| | 690 |
| | 4,138 |
| | 4,828 |
| | 1,006 |
| | 2007 | | 2013 |
| West Road Business Park I | | — |
| | 621 |
| | — |
| | 4,031 |
| | 541 |
| | 4,111 |
| | 4,652 |
| | 1,019 |
| | 2012 | | 2014 |
| West Road Business Park II | | — |
| | 981 |
| | — |
| | 4,819 |
| | 854 |
| | 4,946 |
| | 5,800 |
| | 975 |
| | 2012 | | 2014 |
| West Road Business Park III | | — |
| | 597 |
| | — |
| | 4,222 |
| | 520 |
| | 4,299 |
| | 4,819 |
| | 537 |
| | 2012 | | 2015 |
| West Road Business Park IV | | — |
| | 621 |
| | — |
| | 4,622 |
| | 541 |
| | 4,702 |
| | 5,243 |
| | 915 |
| | 2012 | | 2015 |
| West Road Business Park V | | — |
| | 484 |
| | — |
| | 4,372 |
| | 421 |
| | 4,435 |
| | 4,856 |
| | 313 |
| | 2012 | | 2018 |
| Ten West Crossing 1 | | — |
| | 566 |
| | — |
| | 3,039 |
| | 566 |
| | 3,039 |
| | 3,605 |
| | 784 |
| | 2012 | | 2013 |
| Ten West Crossing 2 | | — |
| | 829 |
| | — |
| | 4,483 |
| | 833 |
| | 4,479 |
| | 5,312 |
| | 1,472 |
| | 2012 | | 2013 |
| Ten West Crossing 3 | | — |
| | 609 |
| | — |
| | 4,367 |
| | 613 |
| | 4,363 |
| | 4,976 |
| | 1,322 |
| | 2012 | | 2013 |
| Ten West Crossing 4 | | — |
| | 694 |
| | — |
| | 4,512 |
| | 699 |
| | 4,507 |
| | 5,206 |
| | 1,341 |
| | 2012 | | 2014 |
| Ten West Crossing 5 | | — |
| | 933 |
| | — |
| | 5,872 |
| | 940 |
| | 5,865 |
| | 6,805 |
| | 1,325 |
| | 2012 | | 2014 |
| Ten West Crossing 6 | | — |
| | 640 |
| | — |
| | 4,646 |
| | 644 |
| | 4,642 |
| | 5,286 |
| | 935 |
| | 2012 | | 2014 |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| SCHEDULE III |
| REAL ESTATE PROPERTIES AND ACCUMULATED DEPRECIATION |
DECEMBER 31, 2019 (In thousands, except footnotes) |
| Description | | Encumbrances | | Initial Cost to the Company | | Costs Capitalized Subsequent to Acquisition | | Gross Amount Carried at Close of Period | | Accumulated Depreciation | | Year Acquired | | Year Constructed |
| | Land | | Buildings and Improvements | | | Land | | Buildings and Improvements | | Total | |
| Ten West Crossing 7 | | — |
| | 584 |
| | — |
| | 5,321 |
| | 589 |
| | 5,316 |
| | 5,905 |
| | 877 |
| | 2012 | | 2015 |
| El Paso | | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | | | |
Butterfield Trail | | — |
| | — |
| | 20,725 |
| | 9,457 |
| | — |
| | 30,182 |
| | 30,182 |
| | 20,462 |
| | 1997/2000 | | 1987/95 |
| Rojas Commerce Park (f) | | 4,023 |
| | 900 |
| | 3,659 |
| | 3,893 |
| | 900 |
| | 7,552 |
| | 8,452 |
| | 5,512 |
| | 1999 | | 1986 |
| Americas Ten Business Center I | | — |
| | 526 |
| | 2,778 |
| | 1,741 |
| | 526 |
| | 4,519 |
| | 5,045 |
| | 2,425 |
| | 2001 | | 2003 |
| San Antonio | | | | | | | | | | | | | | | | | | | | |
| Alamo Downs Distribution Center | | — |
| | 1,342 |
| | 6,338 |
| | 1,842 |
| | 1,342 |
| | 8,180 |
| | 9,522 |
| | 4,746 |
| | 2004 | | 1986/2002 |
| Arion Business Park 1-13, 15 | | — |
| | 4,143 |
| | 31,432 |
| | 9,283 |
| | 4,143 |
| | 40,715 |
| | 44,858 |
| | 20,344 |
| | 2005 | | 1988-2000/06 |
| Arion Business Park 14 | | — |
| | 423 |
| | — |
| | 3,484 |
| | 423 |
| | 3,484 |
| | 3,907 |
| | 1,613 |
| | 2005 | | 2006 |
| Arion Business Park 16 | | — |
| | 427 |
| | — |
| | 3,715 |
| | 427 |
| | 3,715 |
| | 4,142 |
| | 1,577 |
| | 2005 | | 2007 |
| Arion Business Park 17 | | — |
| | 616 |
| | — |
| | 4,377 |
| | 616 |
| | 4,377 |
| | 4,993 |
| | 2,539 |
| | 2005 | | 2007 |
| Arion Business Park 18 (g) | | 1,338 |
| | 418 |
| | — |
| | 2,402 |
| | 418 |
| | 2,402 |
| | 2,820 |
| | 1,173 |
| | 2005 | | 2008 |
| Wetmore Business Center 1-4 | | — |
| | 1,494 |
| | 10,804 |
| | 3,755 |
| | 1,494 |
| | 14,559 |
| | 16,053 |
| | 8,077 |
| | 2005 | | 1998/99 |
| Wetmore Business Center 5 (e) | | 2,085 |
| | 412 |
| | — |
| | 3,870 |
| | 412 |
| | 3,870 |
| | 4,282 |
| | 1,843 |
| | 2006 | | 2008 |
| Wetmore Business Center 6 (e) | | 2,189 |
| | 505 |
| | — |
| | 3,991 |
| | 505 |
| | 3,991 |
| | 4,496 |
| | 1,652 |
| | 2006 | | 2008 |
| Wetmore Business Center 7 (e) | | 2,595 |
| | 546 |
| | — |
| | 4,783 |
| | 546 |
| | 4,783 |
| | 5,329 |
| | 1,644 |
| | 2006 | | 2008 |
| Wetmore Business Center 8 (e) | | 4,574 |
| | 1,056 |
| | — |
| | 8,337 |
| | 1,056 |
| | 8,337 |
| | 9,393 |
| | 3,166 |
| | 2006 | | 2008 |
| Fairgrounds Business Park | | — |
| | 1,644 |
| | 8,209 |
| | 2,483 |
| | 1,644 |
| | 10,692 |
| | 12,336 |
| | 5,670 |
| | 2007 | | 1985/86 |
| Rittiman Distribution Center | | — |
| | 1,083 |
| | 6,649 |
| | 602 |
| | 1,083 |
| | 7,251 |
| | 8,334 |
| | 1,760 |
| | 2011 | | 2000 |
| Thousand Oaks Distribution Center 1 | | — |
| | 607 |
| | — |
| | 4,356 |
| | 607 |
| | 4,356 |
| | 4,963 |
| | 1,709 |
| | 2008 | | 2012 |
| Thousand Oaks Distribution Center 2 | | — |
| | 794 |
| | — |
| | 4,793 |
| | 794 |
| | 4,793 |
| | 5,587 |
| | 1,484 |
| | 2008 | | 2012 |
| Thousand Oaks Distribution Center 3 | | — |
| | 772 |
| | — |
| | 4,547 |
| | 772 |
| | 4,547 |
| | 5,319 |
| | 1,380 |
| | 2008 | | 2013 |
| Thousand Oaks Distribution Center 4 | | — |
| | 753 |
| | — |
| | 4,744 |
| | 753 |
| | 4,744 |
| | 5,497 |
| | 733 |
| | 2013 | | 2015 |
| Alamo Ridge Business Park I | | — |
| | 623 |
| | — |
| | 8,145 |
| | 623 |
| | 8,145 |
| | 8,768 |
| | 1,887 |
| | 2007 | | 2015 |
| Alamo Ridge Business Park II | | — |
| | 402 |
| | — |
| | 5,368 |
| | 402 |
| | 5,368 |
| | 5,770 |
| | 858 |
| | 2007 | | 2015 |
| Alamo Ridge Business Park III | | — |
| | 907 |
| | — |
| | 10,144 |
| | 907 |
| | 10,144 |
| | 11,051 |
| | 1,054 |
| | 2007 | | 2017 |
| Alamo Ridge Business Park IV | | — |
| | 354 |
| | — |
| | 7,479 |
| | 355 |
| | 7,478 |
| | 7,833 |
| | 703 |
| | 2007 | | 2017 |
| Eisenhauer Point Business Park 1 & 2 | | — |
| | 1,881 |
| | — |
| | 14,717 |
| | 1,881 |
| | 14,717 |
| | 16,598 |
| | 2,061 |
| | 2015 | | 2016 |
| Eisenhauer Point Business Park 3 | | — |
| | 577 |
| | — |
| | 6,094 |
| | 577 |
| | 6,094 |
| | 6,671 |
| | 673 |
| | 2015 | | 2017 |
| Eisenhauer Point Business Park 4 | | — |
| | 555 |
| | — |
| | 4,817 |
| | 555 |
| | 4,817 |
| | 5,372 |
| | 482 |
| | 2015 | | 2017 |
| Eisenhauer Point Business Park 5 | | — |
| | 818 |
| | — |
| | 7,015 |
| | 818 |
| | 7,015 |
| | 7,833 |
| | 650 |
| | 2015 | | 2018 |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| SCHEDULE III |
| REAL ESTATE PROPERTIES AND ACCUMULATED DEPRECIATION |
DECEMBER 31, 2019 (In thousands, except footnotes) |
| Description | | Encumbrances | | Initial Cost to the Company | | Costs Capitalized Subsequent to Acquisition | | Gross Amount Carried at Close of Period | | Accumulated Depreciation | | Year Acquired | | Year Constructed |
| | Land | | Buildings and Improvements | | | Land | | Buildings and Improvements | | Total | |
| Eisenhauer Point Business Park 6 | | — |
| | 569 |
| | — |
| | 4,856 |
| | 569 |
| | 4,856 |
| | 5,425 |
| | 224 |
| | 2015 | | 2018 |
| Eisenhauer Point Business Park 7 & 8 | | — |
| | 1,000 |
| | — |
| | 22,202 |
| | 2,593 |
| | 20,609 |
| | 23,202 |
| | 400 |
| | 2016 | | 2019 |
| Eisenhauer Point Business Park 9 | | — |
| | 632 |
| | — |
| | 5,718 |
| | 632 |
| | 5,718 |
| | 6,350 |
| | 27 |
| | 2016 | | 2019 |
| Austin | | | | | | | | | | | | | | | | | | | | |
| Colorado Crossing Distribution Center (f) | | 11,680 |
| | 4,602 |
| | 19,757 |
| | 184 |
| | 4,595 |
| | 19,948 |
| | 24,543 |
| | 5,583 |
| | 2014 | | 2009 |
| Greenhill Distribution Center | | — |
| | 802 |
| | 3,273 |
| | 201 |
| | 802 |
| | 3,474 |
| | 4,276 |
| | 129 |
| | 2018 | | 1999 |
| Southpark Corporate Center 3 & 4 | | — |
| | 2,670 |
| | 14,756 |
| | 1,813 |
| | 2,670 |
| | 16,569 |
| | 19,239 |
| | 3,504 |
| | 2015 | | 1995 |
| Southpark Corporate Center 5-7 | | — |
| | 1,301 |
| | 7,589 |
| | 1,029 |
| | 1,301 |
| | 8,618 |
| | 9,919 |
| | 1,030 |
| | 2017 | | 1995 |
| Springdale Business Center | | — |
| | 2,824 |
| | 8,398 |
| | 395 |
| | 2,824 |
| | 8,793 |
| | 11,617 |
| | 1,774 |
| | 2015 | | 2000 |
| ARIZONA | | | | | | | | | | | | | | | | | | | | |
| Phoenix area | | | | | | | | | | | | | | | | | | | | |
| Broadway Industrial Park I | | — |
| | 837 |
| | 3,349 |
| | 1,144 |
| | 837 |
| | 4,493 |
| | 5,330 |
| | 3,055 |
| | 1996 | | 1971 |
| Broadway Industrial Park II | | — |
| | 455 |
| | 482 |
| | 390 |
| | 455 |
| | 872 |
| | 1,327 |
| | 500 |
| | 1999 | | 1971 |
| Broadway Industrial Park III | | — |
| | 775 |
| | 1,742 |
| | 589 |
| | 775 |
| | 2,331 |
| | 3,106 |
| | 1,431 |
| | 2000 | | 1983 |
| Broadway Industrial Park IV | | — |
| | 380 |
| | 1,652 |
| | 915 |
| | 380 |
| | 2,567 |
| | 2,947 |
| | 1,687 |
| | 2000 | | 1986 |
| Broadway Industrial Park V | | — |
| | 353 |
| | 1,090 |
| | 748 |
| | 353 |
| | 1,838 |
| | 2,191 |
| | 851 |
| | 2002 | | 1980 |
| Broadway Industrial Park VI | | — |
| | 599 |
| | 1,855 |
| | 793 |
| | 599 |
| | 2,648 |
| | 3,247 |
| | 1,753 |
| | 2002 | | 1979 |
| Broadway Industrial Park VII | | — |
| | 450 |
| | 650 |
| | 288 |
| | 450 |
| | 938 |
| | 1,388 |
| | 297 |
| | 2011 | | 1999 |
| Kyrene Distribution Center | | — |
| | 1,490 |
| | 4,453 |
| | 1,951 |
| | 1,490 |
| | 6,404 |
| | 7,894 |
| | 4,164 |
| | 1999 | | 1981/2001 |
| Falcon Field Business Center | | — |
| | 1,312 |
| | — |
| | 7,458 |
| | 1,312 |
| | 7,458 |
| | 8,770 |
| | 270 |
| | 2015 | | 2018 |
| Southpark Distribution Center | | — |
| | 918 |
| | 2,738 |
| | 1,982 |
| | 918 |
| | 4,720 |
| | 5,638 |
| | 2,404 |
| | 2001 | | 2000 |
| Santan 10 Distribution Center I | | — |
| | 846 |
| | 2,647 |
| | 692 |
| | 846 |
| | 3,339 |
| | 4,185 |
| | 1,675 |
| | 2001 | | 2005 |
| Santan 10 Distribution Center II | | — |
| | 1,088 |
| | — |
| | 5,343 |
| | 1,088 |
| | 5,343 |
| | 6,431 |
| | 2,477 |
| | 2004 | | 2007 |
| Chandler Freeways | | — |
| | 1,525 |
| | — |
| | 7,381 |
| | 1,525 |
| | 7,381 |
| | 8,906 |
| | 1,732 |
| | 2012 | | 2013 |
| Kyrene 202 Business Park I | | — |
| | 653 |
| | — |
| | 5,777 |
| | 653 |
| | 5,777 |
| | 6,430 |
| | 1,040 |
| | 2011 | | 2014 |
| Kyrene 202 Business Park II | | — |
| | 387 |
| | — |
| | 3,414 |
| | 387 |
| | 3,414 |
| | 3,801 |
| | 594 |
| | 2011 | | 2014 |
| Kyrene 202 Business Park III, IV, & V | | — |
| | 1,244 |
| | — |
| | 11,878 |
| | 1,244 |
| | 11,878 |
| | 13,122 |
| | 760 |
| | 2011 | | 2018 |
| Kyrene 202 Business Park VI | | — |
| | 936 |
| | — |
| | 8,333 |
| | 936 |
| | 8,333 |
| | 9,269 |
| | 1,194 |
| | 2011 | | 2015 |
| Metro Business Park | | — |
| | 1,927 |
| | 7,708 |
| | 7,911 |
| | 1,927 |
| | 15,619 |
| | 17,546 |
| | 11,373 |
| | 1996 | | 1977/79 |
| 51st Avenue Distribution Center | | — |
| | 300 |
| | 2,029 |
| | 1,134 |
| | 300 |
| | 3,163 |
| | 3,463 |
| | 2,182 |
| | 1998 | | 1987 |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| SCHEDULE III |
| REAL ESTATE PROPERTIES AND ACCUMULATED DEPRECIATION |
DECEMBER 31, 2019 (In thousands, except footnotes) |
| Description | | Encumbrances | | Initial Cost to the Company | | Costs Capitalized Subsequent to Acquisition | | Gross Amount Carried at Close of Period | | Accumulated Depreciation | | Year Acquired | | Year Constructed |
| | Land | | Buildings and Improvements | | | Land | | Buildings and Improvements | | Total | |
| East University Distribution Center I and II | | — |
| | 1,120 |
| | 4,482 |
| | 1,926 |
| | 1,120 |
| | 6,408 |
| | 7,528 |
| | 4,736 |
| | 1998 | | 1987/89 |
| East University Distribution Center III | | — |
| | 444 |
| | 698 |
| | 461 |
| | 444 |
| | 1,159 |
| | 1,603 |
| | 467 |
| | 2010 | | 1981 |
| 55th Avenue Distribution Center | | — |
| | 912 |
| | 3,717 |
| | 1,149 |
| | 917 |
| | 4,861 |
| | 5,778 |
| | 3,662 |
| | 1998 | | 1987 |
| Interstate Commons Distribution Center I | | — |
| | 311 |
| | 1,416 |
| | 863 |
| | 311 |
| | 2,279 |
| | 2,590 |
| | 1,498 |
| | 1999 | | 1988 |
| Interstate Commons Distribution Center III | | — |
| | 242 |
| | — |
| | 3,112 |
| | 242 |
| | 3,112 |
| | 3,354 |
| | 1,207 |
| | 2000 | | 2008 |
| Airport Commons Distribution Center | | — |
| | 1,000 |
| | 1,510 |
| | 1,610 |
| | 1,000 |
| | 3,120 |
| | 4,120 |
| | 2,150 |
| | 2003 | | 1971 |
| 40th Avenue Distribution Center (e) | | 3,294 |
| | 703 |
| | — |
| | 6,061 |
| | 703 |
| | 6,061 |
| | 6,764 |
| | 2,409 |
| | 2004 | | 2008 |
| Sky Harbor Business Park | | — |
| | 5,839 |
| | — |
| | 21,925 |
| | 5,839 |
| | 21,925 |
| | 27,764 |
| | 8,387 |
| | 2006 | | 2008 |
| Sky Harbor Business Park 6 | | — |
| | 807 |
| | — |
| | 2,177 |
| | 807 |
| | 2,177 |
| | 2,984 |
| | 347 |
| | 2014 | | 2015 |
| Ten Sky Harbor Business Center | | — |
| | 1,568 |
| | — |
| | 5,125 |
| | 1,569 |
| | 5,124 |
| | 6,693 |
| | 576 |
| | 2015 | | 2016 |
| Tucson | | | | | | | | | | | | | | | | | | | | |
Country Club Commerce Center I | | — |
| | 506 |
| | 3,564 |
| | 3,916 |
| | 693 |
| | 7,293 |
| | 7,986 |
| | 3,260 |
| | 1997/2003 | | 1994/2003 |
| Country Club Commerce Center II | | — |
| | 442 |
| | 3,381 |
| | 1,065 |
| | 709 |
| | 4,179 |
| | 4,888 |
| | 1,455 |
| | 2007 | | 2000 |
| Country Club Commerce Center III & IV | | — |
| | 1,407 |
| | — |
| | 12,250 |
| | 1,575 |
| | 12,082 |
| | 13,657 |
| | 4,914 |
| | 2007 | | 2009 |
| Country Club Commerce Center V | | — |
| | 2,885 |
| | — |
| | 21,437 |
| | 2,886 |
| | 21,436 |
| | 24,322 |
| | 1,063 |
| | 2016 | | 2018 |
| Airport Distribution Center | | — |
| | 1,403 |
| | 4,672 |
| | 1,834 |
| | 1,403 |
| | 6,506 |
| | 7,909 |
| | 4,145 |
| | 1998/2000 | | 1995 |
| Benan Distribution Center | | — |
| | 707 |
| | 1,842 |
| | 737 |
| | 707 |
| | 2,579 |
| | 3,286 |
| | 1,538 |
| | 2005 | | 2001 |
| NORTH CAROLINA | | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | | | |
| Charlotte area | | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | | | |
| NorthPark Business Park | | — |
| | 2,758 |
| | 15,932 |
| | 5,138 |
| | 2,758 |
| | 21,070 |
| | 23,828 |
| | 10,793 |
| | 2006 | | 1987-89 |
| Lindbergh Business Park | | — |
| | 470 |
| | 3,401 |
| | 668 |
| | 470 |
| | 4,069 |
| | 4,539 |
| | 1,908 |
| | 2007 | | 2001/03 |
| Commerce Park Center I | | — |
| | 765 |
| | 4,303 |
| | 1,064 |
| | 765 |
| | 5,367 |
| | 6,132 |
| | 2,384 |
| | 2007 | | 1983 |
| Commerce Park Center II (g) | | 1,107 |
| | 335 |
| | 1,603 |
| | 395 |
| | 335 |
| | 1,998 |
| | 2,333 |
| | 763 |
| | 2010 | | 1987 |
| Commerce Park Center III (g) | | 1,803 |
| | 558 |
| | 2,225 |
| | 1,016 |
| | 558 |
| | 3,241 |
| | 3,799 |
| | 1,219 |
| | 2010 | | 1981 |
| Nations Ford Business Park | | — |
| | 3,924 |
| | 16,171 |
| | 5,099 |
| | 3,924 |
| | 21,270 |
| | 25,194 |
| | 10,211 |
| | 2007 | | 1989/94 |
| Airport Commerce Center | | — |
| | 1,454 |
| | 10,136 |
| | 2,604 |
| | 1,454 |
| | 12,740 |
| | 14,194 |
| | 5,232 |
| | 2008 | | 2001/02 |
| Interchange Park I (e) | | 4,689 |
| | 986 |
| | 7,949 |
| | 694 |
| | 986 |
| | 8,643 |
| | 9,629 |
| | 3,228 |
| | 2008 | | 1989 |
| Interchange Park II | | — |
| | 746 |
| | 1,456 |
| | 65 |
| | 746 |
| | 1,521 |
| | 2,267 |
| | 324 |
| | 2013 | | 2000 |
| Ridge Creek Distribution Center I | | — |
| | 1,284 |
| | 13,163 |
| | 1,091 |
| | 1,284 |
| | 14,254 |
| | 15,538 |
| | 4,898 |
| | 2008 | | 2006 |
| Ridge Creek Distribution Center II (g) | | 7,902 |
| | 3,033 |
| | 11,497 |
| | 2,116 |
| | 3,033 |
| | 13,613 |
| | 16,646 |
| | 3,688 |
| | 2011 | | 2003 |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| SCHEDULE III |
| REAL ESTATE PROPERTIES AND ACCUMULATED DEPRECIATION |
DECEMBER 31, 2019 (In thousands, except footnotes) |
| Description | | Encumbrances | | Initial Cost to the Company | | Costs Capitalized Subsequent to Acquisition | | Gross Amount Carried at Close of Period | | Accumulated Depreciation | | Year Acquired | | Year Constructed |
| | Land | | Buildings and Improvements | | | Land | | Buildings and Improvements | | Total | |
| Ridge Creek Distribution Center III | | — |
| | 2,459 |
| | 11,147 |
| | 696 |
| | 2,459 |
| | 11,843 |
| | 14,302 |
| | 2,207 |
| | 2014 | | 2013 |
| Lakeview Business Center (g) | | 3,504 |
| | 1,392 |
| | 5,068 |
| | 922 |
| | 1,392 |
| | 5,990 |
| | 7,382 |
| | 1,921 |
| | 2011 | | 1996 |
| Steele Creek Commerce Park I (f) | | 2,554 |
| | 993 |
| | — |
| | 4,372 |
| | 1,010 |
| | 4,355 |
| | 5,365 |
| | 1,175 |
| | 2013 | | 2014 |
| Steele Creek Commerce Park II (f) | | 2,594 |
| | 941 |
| | — |
| | 4,510 |
| | 957 |
| | 4,494 |
| | 5,451 |
| | 1,190 |
| | 2013 | | 2014 |
| Steele Creek Commerce Park III | | — |
| | 1,464 |
| | — |
| | 6,604 |
| | 1,469 |
| | 6,599 |
| | 8,068 |
| | 1,547 |
| | 2013 | | 2014 |
| Steele Creek Commerce Park IV | | — |
| | 684 |
| | — |
| | 4,021 |
| | 687 |
| | 4,018 |
| | 4,705 |
| | 908 |
| | 2013 | | 2015 |
| Steele Creek Commerce Park V | | — |
| | 610 |
| | — |
| | 5,222 |
| | 631 |
| | 5,201 |
| | 5,832 |
| | 94 |
| | 2013/14/15 | | 2019 |
| Steele Creek Commerce Park VI | | — |
| | 867 |
| | — |
| | 7,032 |
| | 919 |
| | 6,980 |
| | 7,899 |
| | 845 |
| | 2013/14 | | 2016 |
| Steele Creek Commerce Park VII | | — |
| | 1,207 |
| | — |
| | 7,988 |
| | 1,253 |
| | 7,942 |
| | 9,195 |
| | 557 |
| | 2013/14/15 | | 2017 |
| Waterford Distribution Center | | — |
| | 654 |
| | 3,392 |
| | 918 |
| | 654 |
| | 4,310 |
| | 4,964 |
| | 1,571 |
| | 2008 | | 2000 |
| SOUTH CAROLINA | | | | | | | | | | | | | | | | | | | | |
| Greenville | | | | | | | | | | | | | | | | | | | | |
| 385 Business Park | | — |
| | 1,308 |
| | 10,822 |
| | 512 |
| | 1,308 |
| | 11,334 |
| | 12,642 |
| | 246 |
| | 2019 | | 2019 |
| GEORGIA | | | | | | | | | | | | | | | | | | | | |
| Atlanta | | | | | | | | | | | | | | | | | | | | |
| Shiloh 400 Business Center I & II | | — |
| | 3,092 |
| | 14,216 |
| | 2,268 |
| | 3,092 |
| | 16,484 |
| | 19,576 |
| | 2,045 |
| | 2017 | | 2008 |
| Broadmoor Commerce Park I | | — |
| | 1,307 |
| | 3,560 |
| | 907 |
| | 1,307 |
| | 4,467 |
| | 5,774 |
| | 759 |
| | 2017 | | 1999 |
| Broadmoor Commerce Park II | | — |
| | 519 |
| | — |
| | 7,370 |
| | 519 |
| | 7,370 |
| | 7,889 |
| | 126 |
| | 2017 | | 2018 |
| Gwinnett 316 | | — |
| | 531 |
| | 3,617 |
| | 21 |
| | 531 |
| | 3,638 |
| | 4,169 |
| | 179 |
| | 2018 | | 1990 |
| Hurricane Shoals I & II | | — |
| | 4,284 |
| | 12,449 |
| | 3,457 |
| | 4,284 |
| | 15,906 |
| | 20,190 |
| | 1,208 |
| | 2017 | | 2017 |
| Progress Center I & II | | — |
| | 1,297 |
| | 9,015 |
| | 258 |
| | 1,297 |
| | 9,273 |
| | 10,570 |
| | 867 |
| | 2017 | | 2017 |
| LOUISIANA | | | | | | | | | | | | | | | | | | | | |
| New Orleans | | | | | | | | | | | | | | | | | | | | |
Elmwood Business Park | | — |
| | 2,861 |
| | 6,337 |
| | 6,496 |
| | 2,861 |
| | 12,833 |
| | 15,694 |
| | 8,741 |
| | 1997 | | 1979 |
| Riverbend Business Park | | — |
| | 2,557 |
| | 17,623 |
| | 9,692 |
| | 2,557 |
| | 27,315 |
| | 29,872 |
| | 16,814 |
| | 1997 | | 1984 |
| COLORADO | | | | | | | | | | | | | | | | | | | | |
| Denver | | | | | | | | | | | | | | | | | | | | |
| Airways Business Center | | — |
| | 6,137 |
| | 39,637 |
| | 2 |
| | 6,137 |
| | 39,639 |
| | 45,776 |
| | 880 |
| | 2019 | | 2007/08 |
| Rampart Distribution Center I | | — |
| | 1,023 |
| | 3,861 |
| | 2,530 |
| | 1,023 |
| | 6,391 |
| | 7,414 |
| | 4,874 |
| | 1988 | | 1987 |
| Rampart Distribution Center II | | — |
| | 230 |
| | 2,977 |
| | 1,659 |
| | 230 |
| | 4,636 |
| | 4,866 |
| | 3,067 |
| | 1996/97 | | 1997 |
| Rampart Distribution Center III | | — |
| | 1,098 |
| | 3,884 |
| | 2,606 |
| | 1,098 |
| | 6,490 |
| | 7,588 |
| | 3,637 |
| | 1997/98 | | 1999 |
| Rampart Distribution Center IV | | — |
| | 590 |
| | — |
| | 8,340 |
| | 590 |
| | 8,340 |
| | 8,930 |
| | 1,318 |
| | 2012 | | 2014 |
| Concord Distribution Center (g) | | 3,113 |
| | 1,051 |
| | 4,773 |
| | 735 |
| | 1,051 |
| | 5,508 |
| | 6,559 |
| | 2,248 |
| | 2007 | | 2000 |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| SCHEDULE III |
| REAL ESTATE PROPERTIES AND ACCUMULATED DEPRECIATION |
DECEMBER 31, 2019 (In thousands, except footnotes) |
| Description | | Encumbrances | | Initial Cost to the Company | | Costs Capitalized Subsequent to Acquisition | | Gross Amount Carried at Close of Period | | Accumulated Depreciation | | Year Acquired | | Year Constructed |
| | Land | | Buildings and Improvements | | | Land | | Buildings and Improvements | | Total | |
| Centennial Park (e) | | 2,998 |
| | 750 |
| | 3,319 |
| | 2,087 |
| | 750 |
| | 5,406 |
| | 6,156 |
| | 2,093 |
| | 2007 | | 1990 |
| NEVADA | | | | | | | | | | | | | | | | | | | | |
| Las Vegas | | | | | | | | | | | | | | | | | | | | |
| Arville Distribution Center | | — |
| | 4,933 |
| | 5,094 |
| | 446 |
| | 4,933 |
| | 5,540 |
| | 10,473 |
| | 2,111 |
| | 2009 | | 1997 |
| Jones Corporate Park | | — |
| | 13,068 |
| | 26,325 |
| | 1,913 |
| | 13,068 |
| | 28,238 |
| | 41,306 |
| | 2,697 |
| | 2016 | | 2016 |
| MISSISSIPPI | | | | | | | | | | | | | | | | | | | | |
| Jackson area | | | | | | | | | | | | | | | | | | | | |
| Interchange Business Park | | — |
| | 343 |
| | 5,007 |
| | 5,168 |
| | 343 |
| | 10,175 |
| | 10,518 |
| | 6,322 |
| | 1997 | | 1981 |
| Tower Automotive | | — |
| | — |
| | 9,958 |
| | 1,937 |
| | 17 |
| | 11,878 |
| | 11,895 |
| | 5,583 |
| | 2001 | | 2002 |
| Metro Airport Commerce Center I | | — |
| | 303 |
| | 1,479 |
| | 1,251 |
| | 303 |
| | 2,730 |
| | 3,033 |
| | 1,666 |
| | 2001 | | 2003 |
| RIGHT OF USE ASSETS, NET - GROUND LEASES (OPERATING) | | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | 11,997 |
| | — |
| | n/a | | n/a |
| | | 133,422 |
| | 448,401 |
| | 1,142,571 |
| | 1,241,598 |
| | 452,698 |
| | 2,379,872 |
| | 2,844,567 |
| | 869,988 |
| | | | |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| SCHEDULE III |
| REAL ESTATE PROPERTIES AND ACCUMULATED DEPRECIATION |
DECEMBER 31, 2019 (In thousands, except footnotes) |
| Description | | Encumbrances | | Initial Cost to the Company | | Costs Capitalized Subsequent to Acquisition | | Gross Amount Carried at Close of Period | | Accumulated Depreciation | | Year Acquired | | Year Constructed |
| | Land | | Buildings and Improvements | | | Land | | Buildings and Improvements | | Total | |
| Development and Value-Add Properties (d): | | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | | | |
| CALIFORNIA | | | | | | | | | | | | | | | | | | | | |
| Rocky Point Distribution Center II | | — |
| | 7,623 |
| | 11,614 |
| | 38 |
| | 7,623 |
| | 11,652 |
| | 19,275 |
| | — |
| | 2019 | | 2019 |
| FLORIDA | | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | | | |
| Suncoast Commerce Center 6 | | — |
| | 1,537 |
| | — |
| | 6,397 |
| | 1,594 |
| | 6,340 |
| | 7,934 |
| | 6 |
| | 2006 | | 2019 |
| Suncoast Commerce Center 8 | | — |
| | 1,533 |
| | — |
| | 2,951 |
| | 1,534 |
| | 2,950 |
| | 4,484 |
| | — |
| | 2006 | | n/a |
| Suncoast Commerce Center Land | | — |
| | 1,533 |
| | — |
| | 5,970 |
| | 4,851 |
| | 2,652 |
| | 7,503 |
| | — |
| | 2006 | | n/a |
| Gateway Commerce Park 5 | | — |
| | 5,746 |
| | — |
| | 17,359 |
| | 5,357 |
| | 17,748 |
| | 23,105 |
| | 114 |
| | 2016 | | 2019 |
| Gateway Commerce Park Land | | — |
| | 21,132 |
| | — |
| | 13,053 |
| | 15,775 |
| | 18,410 |
| | 34,185 |
| | — |
| | 2016 | | n/a |
| Horizon Commerce Park VIII & IX | | — |
| | 1,590 |
| | — |
| | 15,011 |
| | 1,590 |
| | 15,011 |
| | 16,601 |
| | 42 |
| | 2008 | | 2019 |
| Horizon Commerce Park Land | | — |
| | — |
| | — |
| | 1,075 |
| | 650 |
| | 425 |
| | 1,075 |
| | — |
| | 2008/09 | | n/a |
| Grand Oaks 75 Business Center II | | — |
| | 2,589 |
| | 10,226 |
| | 300 |
| | 2,589 |
| | 10,526 |
| | 13,115 |
| | — |
| | 2019 | | 2019 |
| Grand Oaks 75 Land | | — |
| | 4,101 |
| | — |
| | 140 |
| | 4,109 |
| | 132 |
| | 4,241 |
| | — |
| | 2019 | | n/a |
| Oak Creek Distribution Center Land | | — |
| | 841 |
| | — |
| | 719 |
| | 707 |
| | 853 |
| | 1,560 |
| | — |
| | 2005 | | n/a |
| TEXAS | | | | | | | | | | | | | | | | | | | | |
| Arlington Tech Centre 1 & 2 | | — |
| | 2,510 |
| | 10,096 |
| | 671 |
| | 2,515 |
| | 10,762 |
| | 13,277 |
| | — |
| | 2019 | | 2019 |
| Basswood Land | | — |
| | 15,766 |
| | — |
| | 158 |
| | 15,767 |
| | 157 |
| | 15,924 |
| | — |
| | 2019 | | n/a |
| CreekView 121 5 & 6 | | — |
| | 2,682 |
| | — |
| | 10,469 |
| | 2,681 |
| | 10,470 |
| | 13,151 |
| | 6 |
| | 2016 | | n/a |
| CreekView 121 7 & 8 | | — |
| | 2,640 |
| | — |
| | 4,159 |
| | 2,640 |
| | 4,159 |
| | 6,799 |
| | — |
| | 2016 | | n/a |
| LakePort 2499 | | — |
| | 2,984 |
| | — |
| | 5,078 |
| | 2,983 |
| | 5,079 |
| | 8,062 |
| | — |
| | 2018 | | n/a |
| LakePort 2499 Land | | — |
| | 2,716 |
| | — |
| | 948 |
| | 2,715 |
| | 949 |
| | 3,664 |
| | — |
| | 2018 | | n/a |
| Logistics Center 6 & 7 | | — |
| | — |
| | 12,605 |
| | 3,130 |
| | — |
| | 15,735 |
| | 15,735 |
| | 186 |
| | 2019 | | 2018 |
| Parc North 5 | | — |
| | 1,286 |
| | — |
| | 7,403 |
| | 1,286 |
| | 7,403 |
| | 8,689 |
| | 103 |
| | 2016 | | 2019 |
| Parc North 6 | | — |
| | 1,233 |
| | — |
| | 7,057 |
| | 1,233 |
| | 7,057 |
| | 8,290 |
| | — |
| | 2016 | | 2019 |
| Grand West Crossing Land | | — |
| | 8,757 |
| | — |
| | 596 |
| | 8,749 |
| | 604 |
| | 9,353 |
| | — |
| | 2019 | | n/a |
| Lee Road Land | | — |
| | 2,689 |
| | — |
| | — |
| | 1,960 |
| | 729 |
| | 2,689 |
| | — |
| | 2007 | | n/a |
| Northwest Crossing 1-3 | | — |
| | 5,665 |
| | — |
| | 5,870 |
| | 5,665 |
| | 5,870 |
| | 11,535 |
| | — |
| | 2019 | | n/a |
| Ten West Crossing 8 | | — |
| | 1,126 |
| | — |
| | 8,638 |
| | 1,134 |
| | 8,630 |
| | 9,764 |
| | 151 |
| | 2012 | | 2019 |
| World Houston Int'l Business Ctr 44 | | — |
| | 653 |
| | — |
| | 4,137 |
| | 653 |
| | 4,137 |
| | 4,790 |
| | — |
| | 2011 | | n/a |
| World Houston Int'l Business Ctr land - 2011 expansion | | — |
| | 1,636 |
| | — |
| | 1,831 |
| | 1,824 |
| | 1,643 |
| | 3,467 |
| | — |
| | 2011 | | n/a |
| World Houston Int'l Business Ctr land - 2015 expansion | | — |
| | 2,798 |
| | — |
| | 1,141 |
| | 2,798 |
| | 1,141 |
| | 3,939 |
| | — |
| | 2015 | | n/a |
| Ridgeview 1 & 2 | | — |
| | 2,004 |
| | — |
| | 4,527 |
| | 2,004 |
| | 4,527 |
| | 6,531 |
| | — |
| | 2018 | | n/a |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| SCHEDULE III |
| REAL ESTATE PROPERTIES AND ACCUMULATED DEPRECIATION |
DECEMBER 31, 2019 (In thousands, except footnotes) |
| Description | | Encumbrances | | Initial Cost to the Company | | Costs Capitalized Subsequent to Acquisition | | Gross Amount Carried at Close of Period | | Accumulated Depreciation | | Year Acquired | | Year Constructed |
| | Land | | Buildings and Improvements | | | Land | | Buildings and Improvements | | Total | |
| Ridgeview Land | | — |
| | 1,269 |
| | — |
| | 382 |
| | 1,269 |
| | 382 |
| | 1,651 |
| | — |
| | 2018 | | n/a |
| Tri-County Crossing 1 and 2 | | — |
| | 1,623 |
| | — |
| | 13,763 |
| | 1,623 |
| | 13,763 |
| | 15,386 |
| | 182 |
| | 2017 | | 2019 |
| Tri-County Crossing 3 and 4 | | — |
| | 1,733 |
| | — |
| | 6,965 |
| | 1,733 |
| | 6,965 |
| | 8,698 |
| | — |
| | 2017 | | n/a |
| Tri-County Crossing Land | | — |
| | 1,904 |
| | — |
| | 644 |
| | 1,904 |
| | 644 |
| | 2,548 |
| | — |
| | 2017 | | n/a |
| Settlers Crossing 1 | | — |
| | 1,211 |
| | — |
| | 8,048 |
| | 1,212 |
| | 8,047 |
| | 9,259 |
| | — |
| | 2017 | | 2019 |
| Settlers Crossing 2 | | — |
| | 1,306 |
| | — |
| | 7,169 |
| | 1,305 |
| | 7,170 |
| | 8,475 |
| | 188 |
| | 2017 | | 2019 |
| Settlers Crossing 3 & 4 | | — |
| | 2,774 |
| | — |
| | 5,315 |
| | 2,774 |
| | 5,315 |
| | 8,089 |
| | — |
| | 2017 | | n/a |
| ARIZONA | | | | | | | | | | | | | | | | | | | | |
| Gilbert Crossroads A & B | | — |
| | 2,825 |
| | — |
| | 11,125 |
| | 2,825 |
| | 11,125 |
| | 13,950 |
| | — |
| | 2018 | | n/a |
| Gilbert Crossroads Land | | — |
| | 3,709 |
| | — |
| | 664 |
| | 3,602 |
| | 771 |
| | 4,373 |
| | — |
| | 2018 | | n/a |
| Interstate Commons Distribution Center II | | — |
| | 2,298 |
| | 7,088 |
| | 496 |
| | 2,298 |
| | 7,584 |
| | 9,882 |
| | 19 |
| | 2019 | | 1988/2001 |
| NEVADA | | | | | | | | | | | | | | | | | | | | |
| Southwest Commerce Center | | — |
| | 9,008 |
| | 16,576 |
| | 1,029 |
| | 9,008 |
| | 17,605 |
| | 26,613 |
| | — |
| | 2019 | | 2019 |
| NORTH CAROLINA | | | | | | | | | | | | | | | | | | | | |
| Airport Commerce Center III | | — |
| | 855 |
| | — |
| | 7,701 |
| | 855 |
| | 7,701 |
| | 8,556 |
| | 154 |
| | 2008 | | 2019 |
| Steele Creek Commerce Park IX | | — |
| | 949 |
| | — |
| | 8,171 |
| | 949 |
| | 8,171 |
| | 9,120 |
| | — |
| | 2016 | | 2019 |
| Steele Creek Commerce Park Land | | — |
| | 2,726 |
| | — |
| | 4,601 |
| | 3,953 |
| | 3,374 |
| | 7,327 |
| | — |
| | 2016/17 | | n/a |
| GEORGIA | | | | | | | | | | | | | | | | | | | | |
| Hurricane Shoals 3 | | — |
| | 497 |
| | — |
| | 6,132 |
| | 644 |
| | 5,985 |
| | 6,629 |
| | — |
| | 2017 | | n/a |
| MISSISSIPPI | | | | | | | | | | | | | | | | | | | | |
Metro Airport Commerce Center II land | | — |
| | 307 |
| | — |
| | 399 |
| | 307 |
| | 399 |
| | 706 |
| | — |
| | 2001 | | n/a |
| | | — |
| | 140,364 |
| | 68,205 |
| | 211,430 |
| | 139,247 |
| | 280,752 |
| | 419,999 |
| | 1,151 |
| | | | |
| Total real estate owned (a)(b) | | $ | 133,422 |
| | 588,765 |
| | 1,210,776 |
| | 1,453,028 |
| | 591,945 |
| | 2,660,624 |
| | 3,264,566 |
| | 871,139 |
| | | | |
See accompanying Report of Independent Registered Public Accounting Firm. | | |
| | | | |
(a) Changes in Real Estate Properties follow:
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| SCHEDULE III |
| REAL ESTATE PROPERTIES AND ACCUMULATED DEPRECIATION |
DECEMBER 31, 2017 (In thousands, except footnotes) |
| Description | | Encumbrances | | Initial Cost to the Company | | Costs Capitalized Subsequent to Acquisition | | Gross Amount Carried at Close of Period | | Accumulated Depreciation | | Year Acquired | | Year Constructed |
| | Land | | Buildings and Improvements | | | Land | | Buildings and Improvements | | Total | |
| Real Estate Properties (c): | | | | | | | | | | | | | | | | | | | | |
| Industrial: | | | | | | | | | | | | | | | | | | | | |
| FLORIDA | | | | | | | | | | | | | | | | | | | | |
| Tampa | | | | | | | | | | | | | | | | | | | | |
| 56th Street Commerce Park | | $ | — |
| | 843 |
| | 3,567 |
| | 4,527 |
| | 843 |
| | 8,094 |
| | 8,937 |
| | 6,129 |
| | 1993 | | 1981/86/97 |
| Jetport Commerce Park | | — |
| | 1,575 |
| | 6,591 |
| | 5,899 |
| | 1,575 |
| | 12,490 |
| | 14,065 |
| | 8,545 |
| | 1993-99 | | 1974-85 |
| Westport Commerce Center | | — |
| | 980 |
| | 3,800 |
| | 2,765 |
| | 980 |
| | 6,565 |
| | 7,545 |
| | 4,628 |
| | 1994 | | 1983/87 |
| Benjamin Distribution Center I & II | | — |
| | 843 |
| | 3,963 |
| | 1,572 |
| | 883 |
| | 5,495 |
| | 6,378 |
| | 3,788 |
| | 1997 | | 1996 |
| Benjamin Distribution Center III | | — |
| | 407 |
| | 1,503 |
| | 650 |
| | 407 |
| | 2,153 |
| | 2,560 |
| | 1,559 |
| | 1999 | | 1988 |
| Palm River Center | | — |
| | 1,190 |
| | 4,625 |
| | 2,585 |
| | 1,190 |
| | 7,210 |
| | 8,400 |
| | 4,763 |
| | 1997/98 | | 1990/97/98 |
| Palm River North I & III | | — |
| | 1,005 |
| | 4,688 |
| | 2,404 |
| | 1,005 |
| | 7,092 |
| | 8,097 |
| | 4,234 |
| | 1998 | | 2000 |
| Palm River North II | | — |
| | 634 |
| | 4,418 |
| | 399 |
| | 634 |
| | 4,817 |
| | 5,451 |
| | 3,399 |
| | 1997/98 | | 1999 |
| Palm River South I | | — |
| | 655 |
| | 3,187 |
| | 655 |
| | 655 |
| | 3,842 |
| | 4,497 |
| | 1,823 |
| | 2000 | | 2005 |
| Palm River South II | | — |
| | 655 |
| | — |
| | 4,417 |
| | 655 |
| | 4,417 |
| | 5,072 |
| | 2,140 |
| | 2000 | | 2006 |
| Walden Distribution Center I | | — |
| | 337 |
| | 3,318 |
| | 625 |
| | 337 |
| | 3,943 |
| | 4,280 |
| | 2,111 |
| | 1997/98 | | 2001 |
| Walden Distribution Center II | | — |
| | 465 |
| | 3,738 |
| | 1,479 |
| | 465 |
| | 5,217 |
| | 5,682 |
| | 2,788 |
| | 1998 | | 1998 |
| Oak Creek Distribution Center I | | — |
| | 1,109 |
| | 6,126 |
| | 1,374 |
| | 1,109 |
| | 7,500 |
| | 8,609 |
| | 4,020 |
| | 1998 | | 1998 |
| Oak Creek Distribution Center II | | — |
| | 647 |
| | 3,603 |
| | 1,670 |
| | 647 |
| | 5,273 |
| | 5,920 |
| | 2,514 |
| | 2003 | | 2001 |
| Oak Creek Distribution Center III | | — |
| | 439 |
| | — |
| | 3,196 |
| | 556 |
| | 3,079 |
| | 3,635 |
| | 1,171 |
| | 2005 | | 2007 |
| Oak Creek Distribution Center IV | | — |
| | 682 |
| | 6,472 |
| | 773 |
| | 682 |
| | 7,245 |
| | 7,927 |
| | 2,750 |
| | 2005 | | 2001 |
| Oak Creek Distribution Center V | | — |
| | 724 |
| | — |
| | 5,853 |
| | 916 |
| | 5,661 |
| | 6,577 |
| | 2,260 |
| | 2005 | | 2007 |
| Oak Creek Distribution Center VI | | — |
| | 642 |
| | — |
| | 5,241 |
| | 812 |
| | 5,071 |
| | 5,883 |
| | 1,655 |
| | 2005 | | 2008 |
| Oak Creek Distribution Center VIII | | — |
| | 843 |
| | — |
| | 6,230 |
| | 1,051 |
| | 6,022 |
| | 7,073 |
| | 425 |
| | 2005 | | 2015 |
| Oak Creek Distribution Center IX | | — |
| | 618 |
| | — |
| | 4,963 |
| | 781 |
| | 4,800 |
| | 5,581 |
| | 1,341 |
| | 2005 | | 2009 |
| Oak Creek Distribution Center A | | — |
| | 185 |
| | — |
| | 1,493 |
| | 185 |
| | 1,493 |
| | 1,678 |
| | 477 |
| | 2005 | | 2008 |
| Oak Creek Distribution Center B | | — |
| | 227 |
| | — |
| | 1,549 |
| | 227 |
| | 1,549 |
| | 1,776 |
| | 498 |
| | 2005 | | 2008 |
| Airport Commerce Center | | — |
| | 1,257 |
| | 4,012 |
| | 937 |
| | 1,257 |
| | 4,949 |
| | 6,206 |
| | 2,725 |
| | 1998 | | 1998 |
| Westlake Distribution Center | | — |
| | 1,333 |
| | 6,998 |
| | 2,367 |
| | 1,333 |
| | 9,365 |
| | 10,698 |
| | 5,409 |
| | 1998 | | 1998/99 |
| Expressway Commerce Center I | | — |
| | 915 |
| | 5,346 |
| | 1,372 |
| | 915 |
| | 6,718 |
| | 7,633 |
| | 3,334 |
| | 2002 | | 2004 |
| Expressway Commerce Center II | | — |
| | 1,013 |
| | 3,247 |
| | 462 |
| | 1,013 |
| | 3,709 |
| | 4,722 |
| | 1,934 |
| | 2003 | | 2001 |
| Silo Bend Distribution Center | | — |
| | 4,131 |
| | 27,497 |
| | 1,635 |
| | 4,132 |
| | 29,131 |
| | 33,263 |
| | 6,071 |
| | 2011 | | 1987/90 |
|
| | | | | | | | | |
| | Years Ended December 31, |
| 2019 | | 2018 | | 2017 |
| (In thousands) |
| Balance at beginning of year | $ | 2,817,145 |
| | 2,578,748 |
| | 2,407,029 |
|
| Purchases of real estate properties | 135,033 |
| | 54,537 |
| | 51,802 |
|
| Development of real estate properties and value-add properties | 318,288 |
| | 167,667 |
| | 124,938 |
|
| Improvements to real estate properties | 37,558 |
| | 36,921 |
| | 28,698 |
|
| Right-of-use assets, net – ground leases | 11,997 |
| | — |
| | — |
|
| Carrying amount of investments sold | (51,662 | ) | | (18,372 | ) | | (32,787 | ) |
| Write-off of improvements | (3,793 | ) | | (2,356 | ) | | (932 | ) |
Balance at end of year (1) | $ | 3,264,566 |
| | 2,817,145 |
| | 2,578,748 |
|
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| SCHEDULE III |
| REAL ESTATE PROPERTIES AND ACCUMULATED DEPRECIATION |
DECEMBER 31, 2017 (In thousands, except footnotes) |
| Description | | Encumbrances | | Initial Cost to the Company | | Costs Capitalized Subsequent to Acquisition | | Gross Amount Carried at Close of Period | | Accumulated Depreciation | | Year Acquired | | Year Constructed |
| | Land | | Buildings and Improvements | | | Land | | Buildings and Improvements | | Total | |
| Tampa East Distribution Center | | — |
| | 791 |
| | 4,758 |
| | 513 |
| | 791 |
| | 5,271 |
| | 6,062 |
| | 1,271 |
| | 2011 | | 1984 |
| Tampa West Distribution Center | | — |
| | 2,139 |
| | 8,502 |
| | 1,145 |
| | 2,140 |
| | 9,646 |
| | 11,786 |
| | 2,250 |
| | 2011 | | 1975/93/94 |
| Madison Distribution Center | | — |
| | 495 |
| | 2,779 |
| | 428 |
| | 495 |
| | 3,207 |
| | 3,702 |
| | 774 |
| | 2012 | | 2007 |
| Madison Distribution Center II & III | | — |
| | 624 |
| | — |
| | 7,004 |
| | 624 |
| | 7,004 |
| | 7,628 |
| | 632 |
| | 2012 | | 2015 |
| Madison Distribution Center IV & V | | — |
| | 565 |
| | — |
| | 8,202 |
| | 565 |
| | 8,202 |
| | 8,767 |
| | 271 |
| | 2012 | | 2016 |
| Orlando | | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | | | |
| Chancellor Center | | — |
| | 291 |
| | 1,711 |
| | 476 |
| | 291 |
| | 2,187 |
| | 2,478 |
| | 1,272 |
| | 1996/97 | | 1996/97 |
| Exchange Distribution Center I | | — |
| | 603 |
| | 2,414 |
| | 2,275 |
| | 603 |
| | 4,689 |
| | 5,292 |
| | 3,314 |
| | 1994 | | 1975 |
| Exchange Distribution Center II | | — |
| | 300 |
| | 945 |
| | 454 |
| | 300 |
| | 1,399 |
| | 1,699 |
| | 810 |
| | 2002 | | 1976 |
| Exchange Distribution Center III | | — |
| | 320 |
| | 997 |
| | 403 |
| | 320 |
| | 1,400 |
| | 1,720 |
| | 903 |
| | 2002 | | 1980 |
| Sunbelt Distribution Center | | — |
| | 1,472 |
| | 5,745 |
| | 5,901 |
| | 1,472 |
| | 11,646 |
| | 13,118 |
| | 8,622 |
| | 1989/97/98 | | 1974/87/97/98 |
| John Young Commerce Center I | | — |
| | 497 |
| | 2,444 |
| | 1,291 |
| | 497 |
| | 3,735 |
| | 4,232 |
| | 2,082 |
| | 1997/98 | | 1997/98 |
| John Young Commerce Center II | | — |
| | 512 |
| | 3,613 |
| | 529 |
| | 512 |
| | 4,142 |
| | 4,654 |
| | 2,632 |
| | 1998 | | 1999 |
| Altamonte Commerce Center I | | — |
| | 1,498 |
| | 2,661 |
| | 2,675 |
| | 1,498 |
| | 5,336 |
| | 6,834 |
| | 3,856 |
| | 1999 | | 1980/82 |
| Altamonte Commerce Center II | | — |
| | 745 |
| | 2,618 |
| | 1,252 |
| | 745 |
| | 3,870 |
| | 4,615 |
| | 2,212 |
| | 2003 | | 1975 |
| Sunport Center I | | — |
| | 555 |
| | 1,977 |
| | 1,011 |
| | 555 |
| | 2,988 |
| | 3,543 |
| | 1,516 |
| | 1999 | | 1999 |
| Sunport Center II | | — |
| | 597 |
| | 3,271 |
| | 1,872 |
| | 597 |
| | 5,143 |
| | 5,740 |
| | 3,379 |
| | 1999 | | 2001 |
| Sunport Center III | | — |
| | 642 |
| | 3,121 |
| | 1,032 |
| | 642 |
| | 4,153 |
| | 4,795 |
| | 2,194 |
| | 1999 | | 2002 |
| Sunport Center IV | | — |
| | 642 |
| | 2,917 |
| | 1,804 |
| | 642 |
| | 4,721 |
| | 5,363 |
| | 2,324 |
| | 1999 | | 2004 |
| Sunport Center V | | — |
| | 750 |
| | 2,509 |
| | 2,385 |
| | 750 |
| | 4,894 |
| | 5,644 |
| | 2,694 |
| | 1999 | | 2005 |
| Sunport Center VI | | — |
| | 672 |
| | — |
| | 3,486 |
| | 672 |
| | 3,486 |
| | 4,158 |
| | 1,358 |
| | 1999 | | 2006 |
| Southridge Commerce Park I | | — |
| | 373 |
| | — |
| | 4,829 |
| | 373 |
| | 4,829 |
| | 5,202 |
| | 2,805 |
| | 2003 | | 2006 |
| Southridge Commerce Park II | | — |
| | 342 |
| | — |
| | 4,424 |
| | 342 |
| | 4,424 |
| | 4,766 |
| | 2,195 |
| | 2003 | | 2007 |
| Southridge Commerce Park III | | — |
| | 547 |
| | — |
| | 5,543 |
| | 547 |
| | 5,543 |
| | 6,090 |
| | 2,118 |
| | 2003 | | 2007 |
| Southridge Commerce Park IV (h) | | 2,798 |
| | 506 |
| | — |
| | 4,632 |
| | 506 |
| | 4,632 |
| | 5,138 |
| | 1,842 |
| | 2003 | | 2006 |
| Southridge Commerce Park V (h) | | 2,660 |
| | 382 |
| | — |
| | 4,502 |
| | 382 |
| | 4,502 |
| | 4,884 |
| | 2,056 |
| | 2003 | | 2006 |
| Southridge Commerce Park VI | | — |
| | 571 |
| | — |
| | 5,284 |
| | 571 |
| | 5,284 |
| | 5,855 |
| | 1,879 |
| | 2003 | | 2007 |
| Southridge Commerce Park VII | | — |
| | 520 |
| | — |
| | 6,715 |
| | 520 |
| | 6,715 |
| | 7,235 |
| | 2,354 |
| | 2003 | | 2008 |
| Southridge Commerce Park VIII | | — |
| | 531 |
| | — |
| | 6,345 |
| | 531 |
| | 6,345 |
| | 6,876 |
| | 1,902 |
| | 2003 | | 2008 |
| Southridge Commerce Park IX | | — |
| | 468 |
| | — |
| | 6,453 |
| | 468 |
| | 6,453 |
| | 6,921 |
| | 1,415 |
| | 2003 | | 2012 |
| Southridge Commerce Park X | | — |
| | 414 |
| | — |
| | 4,867 |
| | 414 |
| | 4,867 |
| | 5,281 |
| | 794 |
| | 2003 | | 2012 |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| SCHEDULE III |
| REAL ESTATE PROPERTIES AND ACCUMULATED DEPRECIATION |
DECEMBER 31, 2017 (In thousands, except footnotes) |
| Description | | Encumbrances | | Initial Cost to the Company | | Costs Capitalized Subsequent to Acquisition | | Gross Amount Carried at Close of Period | | Accumulated Depreciation | | Year Acquired | | Year Constructed |
| | Land | | Buildings and Improvements | | | Land | | Buildings and Improvements | | Total | |
| Southridge Commerce Park XI | | — |
| | 513 |
| | — |
| | 5,927 |
| | 513 |
| | 5,927 |
| | 6,440 |
| | 1,123 |
| | 2003 | | 2012 |
| Southridge Commerce Park XII | | — |
| | 2,025 |
| | — |
| | 16,896 |
| | 2,025 |
| | 16,896 |
| | 18,921 |
| | 4,715 |
| | 2005 | | 2008 |
| Horizon Commerce Park I | | — |
| | 991 |
| | — |
| | 6,519 |
| | 991 |
| | 6,519 |
| | 7,510 |
| | 898 |
| | 2008 | | 2014 |
| Horizon Commerce Park II | | — |
| | 1,111 |
| | — |
| | 7,197 |
| | 1,111 |
| | 7,197 |
| | 8,308 |
| | 796 |
| | 2008 | | 2014 |
| Horizon Commerce Park III | | — |
| | 991 |
| | — |
| | 6,471 |
| | 991 |
| | 6,471 |
| | 7,462 |
| | 490 |
| | 2008 | | 2016 |
| Horizon Commerce Park IV | | — |
| | 1,097 |
| | — |
| | 8,549 |
| | 1,097 |
| | 8,549 |
| | 9,646 |
| | 663 |
| | 2008 | | 2015 |
| Horizon Commerce Park V | | — |
| | 1,108 |
| | — |
| | 8,590 |
| | 1,108 |
| | 8,590 |
| | 9,698 |
| | 209 |
| | 2008 | | 2017 |
| Horizon Commerce Park VII | | — |
| | 962 |
| | — |
| | 7,468 |
| | 961 |
| | 7,469 |
| | 8,430 |
| | 233 |
| | 2008 | | 2017 |
| Jacksonville | | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | | | |
| Deerwood Distribution Center | | — |
| | 1,147 |
| | 1,799 |
| | 3,389 |
| | 1,147 |
| | 5,188 |
| | 6,335 |
| | 3,181 |
| | 1989 | | 1978 |
| Phillips Distribution Center | | — |
| | 1,375 |
| | 2,961 |
| | 4,414 |
| | 1,375 |
| | 7,375 |
| | 8,750 |
| | 5,373 |
| | 1994 | | 1984/95 |
| Lake Pointe Business Park | | — |
| | 3,442 |
| | 6,450 |
| | 8,272 |
| | 3,442 |
| | 14,722 |
| | 18,164 |
| | 11,091 |
| | 1993 | | 1986/87 |
| Ellis Distribution Center | | — |
| | 540 |
| | 7,513 |
| | 1,752 |
| | 540 |
| | 9,265 |
| | 9,805 |
| | 4,770 |
| | 1997 | | 1977 |
| Westside Distribution Center | | — |
| | 2,011 |
| | 15,374 |
| | 8,211 |
| | 2,011 |
| | 23,585 |
| | 25,596 |
| | 12,109 |
| | 1997/2008 | | 1984/85 |
| Beach Commerce Center | | — |
| | 476 |
| | 1,899 |
| | 678 |
| | 476 |
| | 2,577 |
| | 3,053 |
| | 1,385 |
| | 2000 | | 2000 |
| Interstate Distribution Center | | — |
| | 1,879 |
| | 5,700 |
| | 1,808 |
| | 1,879 |
| | 7,508 |
| | 9,387 |
| | 4,012 |
| | 2005 | | 1990 |
| Flagler Center | | — |
| | 7,317 |
| | 14,912 |
| | 28 |
| | 7,317 |
| | 14,940 |
| | 22,257 |
| | 675 |
| | 2016 | | 1997/2005 |
| Ft. Lauderdale/Palm Beach area | | | | | | | | | | | | | | | | | | | | |
| Linpro Commerce Center | | — |
| | 613 |
| | 2,243 |
| | 3,049 |
| | 616 |
| | 5,289 |
| | 5,905 |
| | 3,382 |
| | 1996 | | 1986 |
| Cypress Creek Business Park | | — |
| | — |
| | 2,465 |
| | 1,892 |
| | — |
| | 4,357 |
| | 4,357 |
| | 3,001 |
| | 1997 | | 1986 |
| Lockhart Distribution Center | | — |
| | — |
| | 3,489 |
| | 2,935 |
| | — |
| | 6,424 |
| | 6,424 |
| | 4,291 |
| | 1997 | | 1986 |
| Interstate Commerce Center | | — |
| | 485 |
| | 2,652 |
| | 836 |
| | 485 |
| | 3,488 |
| | 3,973 |
| | 2,308 |
| | 1998 | | 1988 |
| Executive Airport Distribution Ctr (f) | | 6,915 |
| | 1,991 |
| | 4,857 |
| | 5,265 |
| | 1,991 |
| | 10,122 |
| | 12,113 |
| | 4,879 |
| | 2001 | | 2004/06 |
| Sample 95 Business Park | | — |
| | 2,202 |
| | 8,785 |
| | 3,524 |
| | 2,202 |
| | 12,309 |
| | 14,511 |
| | 7,917 |
| | 1996/98 | | 1990/99 |
| Blue Heron Distribution Center | | — |
| | 975 |
| | 3,626 |
| | 1,961 |
| | 975 |
| | 5,587 |
| | 6,562 |
| | 3,572 |
| | 1999 | | 1986 |
| Blue Heron Distribution Center II | | 409 |
| | 1,385 |
| | 4,222 |
| | 1,333 |
| | 1,385 |
| | 5,555 |
| | 6,940 |
| | 2,515 |
| | 2004 | | 1988 |
| Blue Heron Distribution Center III | | — |
| | 450 |
| | — |
| | 2,683 |
| | 450 |
| | 2,683 |
| | 3,133 |
| | 904 |
| | 2004 | | 2009 |
| | | | | | | | | | | | | | | | | | | | | |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| SCHEDULE III |
| REAL ESTATE PROPERTIES AND ACCUMULATED DEPRECIATION |
DECEMBER 31, 2017 (In thousands, except footnotes) |
| Description | | Encumbrances | | Initial Cost to the Company | | Costs Capitalized Subsequent to Acquisition | | Gross Amount Carried at Close of Period | | Accumulated Depreciation | | Year Acquired | | Year Constructed |
| | Land | | Buildings and Improvements | | | Land | | Buildings and Improvements | | Total | |
| Ft. Myers | | | | | | | | | | | | | | | | | | | | |
SunCoast Commerce Center I | | — |
| | 911 |
| | — |
| | 4,809 |
| | 928 |
| | 4,792 |
| | 5,720 |
| | 1,754 |
| | 2005 | | 2008 |
| SunCoast Commerce Center II | | — |
| | 911 |
| | — |
| | 4,993 |
| | 928 |
| | 4,976 |
| | 5,904 |
| | 2,005 |
| | 2005 | | 2007 |
| SunCoast Commerce Center III | | — |
| | 1,720 |
| | — |
| | 6,665 |
| | 1,763 |
| | 6,622 |
| | 8,385 |
| | 2,216 |
| | 2006 | | 2008 |
| CALIFORNIA | | | | | | | | | | | | | | | | | | | | |
| San Francisco area | | | | | | | | | | | | | | | | | | | | |
Wiegman Distribution Center I | | — |
| | 2,197 |
| | 8,788 |
| | 2,105 |
| | 2,308 |
| | 10,782 |
| | 13,090 |
| | 6,211 |
| | 1996 | | 1986/87 |
Wiegman Distribution Center II | | — |
| | 2,579 |
| | 4,316 |
| | 152 |
| | 2,579 |
| | 4,468 |
| | 7,047 |
| | 695 |
| | 2012 | | 1998 |
| Huntwood Distribution Center | | — |
| | 3,842 |
| | 15,368 |
| | 3,109 |
| | 3,842 |
| | 18,477 |
| | 22,319 |
| | 10,819 |
| | 1996 | | 1988 |
| San Clemente Distribution Center | | — |
| | 893 |
| | 2,004 |
| | 932 |
| | 893 |
| | 2,936 |
| | 3,829 |
| | 1,846 |
| | 1997 | | 1978 |
| Yosemite Distribution Center | | — |
| | 259 |
| | 7,058 |
| | 1,344 |
| | 259 |
| | 8,402 |
| | 8,661 |
| | 4,670 |
| | 1999 | | 1974/87 |
| Los Angeles area | | | | | | | | | | | | | | | | | | | | |
Kingsview Industrial Center (e) | | 2,455 |
| | 643 |
| | 2,573 |
| | 892 |
| | 643 |
| | 3,465 |
| | 4,108 |
| | 1,949 |
| | 1996 | | 1980 |
| Dominguez Distribution Center (e) | | 6,693 |
| | 2,006 |
| | 8,025 |
| | 1,170 |
| | 2,006 |
| | 9,195 |
| | 11,201 |
| | 5,525 |
| | 1996 | | 1977 |
| Main Street Distribution Center | | — |
| | 1,606 |
| | 4,103 |
| | 831 |
| | 1,606 |
| | 4,934 |
| | 6,540 |
| | 2,757 |
| | 1999 | | 1999 |
| Walnut Business Center (e) | | 6,352 |
| | 2,885 |
| | 5,274 |
| | 2,471 |
| | 2,885 |
| | 7,745 |
| | 10,630 |
| | 4,113 |
| | 1996 | | 1966/90 |
| Washington Distribution Center (e) | | 4,321 |
| | 1,636 |
| | 4,900 |
| | 695 |
| | 1,636 |
| | 5,595 |
| | 7,231 |
| | 3,133 |
| | 1997 | | 1996/97 |
| Chino Distribution Center | | — |
| | 2,544 |
| | 10,175 |
| | 1,623 |
| | 2,544 |
| | 11,798 |
| | 14,342 |
| | 7,929 |
| | 1998 | | 1980 |
| Ramona Distribution Center | | 2,572 |
| | 3,761 |
| | 5,751 |
| | 3 |
| | 3,761 |
| | 5,754 |
| | 9,515 |
| | 488 |
| | 2014 | | 1984 |
| Industry Distribution Center I (e) | | 16,148 |
| | 10,230 |
| | 12,373 |
| | 4,418 |
| | 10,230 |
| | 16,791 |
| | 27,021 |
| | 8,796 |
| | 1998 | | 1959 |
| Industry Distribution Center III (e) | | 1,706 |
| | — |
| | 3,012 |
| | (157 | ) | | — |
| | 2,855 |
| | 2,855 |
| | 2,855 |
| | 2007 | | 1992 |
| Chestnut Business Center | | — |
| | 1,674 |
| | 3,465 |
| | 284 |
| | 1,674 |
| | 3,749 |
| | 5,423 |
| | 1,902 |
| | 1998 | | 1999 |
| Los Angeles Corporate Center | | — |
| | 1,363 |
| | 5,453 |
| | 3,214 |
| | 1,363 |
| | 8,667 |
| | 10,030 |
| | 5,807 |
| | 1996 | | 1986 |
| Santa Barbara | | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | | | |
University Business Center | | — |
| | 5,517 |
| | 22,067 |
| | 8,225 |
| | 5,520 |
| | 30,289 |
| | 35,809 |
| | 17,119 |
| | 1996 | | 1987/88 |
| Fresno | | | | | | | | | | | | | | | | | | | | |
Shaw Commerce Center (e) | | 11,905 |
| | 2,465 |
| | 11,627 |
| | 5,830 |
| | 2,465 |
| | 17,457 |
| | 19,922 |
| | 10,711 |
| | 1998 | | 1978/81/87 |
| | | | | | | | | | | | | | | | | | | | | |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| SCHEDULE III |
| REAL ESTATE PROPERTIES AND ACCUMULATED DEPRECIATION |
DECEMBER 31, 2017 (In thousands, except footnotes) |
| Description | | Encumbrances | | Initial Cost to the Company | | Costs Capitalized Subsequent to Acquisition | | Gross Amount Carried at Close of Period | | Accumulated Depreciation | | Year Acquired | | Year Constructed |
| | Land | | Buildings and Improvements | | | Land | | Buildings and Improvements | | Total | |
| San Diego | | | | | | | | | | | | | | | | | | | | |
Eastlake Distribution Center | | — |
| | 3,046 |
| | 6,888 |
| | 1,786 |
| | 3,046 |
| | 8,674 |
| | 11,720 |
| | 5,279 |
| | 1997 | | 1989 |
| Ocean View Corporate Center (f) | | 8,358 |
| | 6,577 |
| | 7,105 |
| | 957 |
| | 6,577 |
| | 8,062 |
| | 14,639 |
| | 2,638 |
| | 2010 | | 2005 |
| TEXAS | | | | | | | | | | | | | | | | | | | | |
| Dallas | | | | | | | | | | | | | | | | | | | | |
| Interstate Warehouse I & II (g) | | 5,447 |
| | 1,746 |
| | 4,941 |
| | 3,628 |
| | 1,746 |
| | 8,569 |
| | 10,315 |
| | 6,223 |
| | 1988 | | 1978 |
| Interstate Warehouse III (g) | | 2,163 |
| | 519 |
| | 2,008 |
| | 1,570 |
| | 519 |
| | 3,578 |
| | 4,097 |
| | 2,082 |
| | 2000 | | 1979 |
| Interstate Warehouse IV | | — |
| | 416 |
| | 2,481 |
| | 535 |
| | 416 |
| | 3,016 |
| | 3,432 |
| | 1,541 |
| | 2004 | | 2002 |
| Interstate Warehouse V, VI, & VII (h) | | 4,424 |
| | 1,824 |
| | 4,106 |
| | 2,190 |
| | 1,824 |
| | 6,296 |
| | 8,120 |
| | 2,974 |
| | 2009 | | 1979/80/81 |
| Venture Warehouses (g) | | 4,155 |
| | 1,452 |
| | 3,762 |
| | 2,654 |
| | 1,452 |
| | 6,416 |
| | 7,868 |
| | 5,126 |
| | 1988 | | 1979 |
| ParkView Commerce Center 1-3 | | — |
| | 2,663 |
| | — |
| | 18,452 |
| | 2,663 |
| | 18,452 |
| | 21,115 |
| | 998 |
| | 2014 | | 2015 |
| Shady Trail Distribution Center | | — |
| | 635 |
| | 3,621 |
| | 1,255 |
| | 635 |
| | 4,876 |
| | 5,511 |
| | 2,397 |
| | 2003 | | 1998 |
| Valwood Distribution Center | | — |
| | 4,361 |
| | 34,405 |
| | 3,027 |
| | 4,361 |
| | 37,432 |
| | 41,793 |
| | 7,806 |
| | 2012 | | 1986/87/97/98 |
| Northfield Distribution Center | | — |
| | 12,470 |
| | 50,713 |
| | 2,973 |
| | 12,470 |
| | 53,686 |
| | 66,156 |
| | 11,119 |
| | 2013 | | 1999-2001/03/04/08 |
| Parc North 1-4 | | — |
| | 4,615 |
| | 26,358 |
| | 4,482 |
| | 4,615 |
| | 30,840 |
| | 35,455 |
| | 998 |
| | 2016 | | 2016 |
| CreekView 121 1 & 2 | | — |
| | 3,275 |
| | — |
| | 14,568 |
| | 3,275 |
| | 14,568 |
| | 17,843 |
| | 310 |
| | 2015/16 | | 2017 |
| Houston | | | | | | | | | | | | | | | | | | | | |
| World Houston Int'l Business Ctr 1 & 2 | | — |
| | 660 |
| | 5,893 |
| | 2,066 |
| | 660 |
| | 7,959 |
| | 8,619 |
| | 4,714 |
| | 1998 | | 1996 |
| World Houston Int'l Business Ctr 3, 4 & 5 (g) | | 4,730 |
| | 1,025 |
| | 6,413 |
| | 1,518 |
| | 1,025 |
| | 7,931 |
| | 8,956 |
| | 4,700 |
| | 1998 | | 1998 |
| World Houston Int'l Business Ctr 6 (g) | | 1,850 |
| | 425 |
| | 2,423 |
| | 655 |
| | 425 |
| | 3,078 |
| | 3,503 |
| | 1,833 |
| | 1998 | | 1998 |
| World Houston Int'l Business Ctr 7 & 8 (g) | | 5,392 |
| | 680 |
| | 4,584 |
| | 4,947 |
| | 680 |
| | 9,531 |
| | 10,211 |
| | 5,580 |
| | 1998 | | 1998 |
| World Houston Int'l Business Ctr 9 (g) | | 3,750 |
| | 800 |
| | 4,355 |
| | 1,945 |
| | 800 |
| | 6,300 |
| | 7,100 |
| | 2,986 |
| | 1998 | | 1998 |
| World Houston Int'l Business Ctr 10 | | — |
| | 933 |
| | 4,779 |
| | 599 |
| | 933 |
| | 5,378 |
| | 6,311 |
| | 2,601 |
| | 2001 | | 1999 |
| World Houston Int'l Business Ctr 11 | | — |
| | 638 |
| | 3,764 |
| | 1,316 |
| | 638 |
| | 5,080 |
| | 5,718 |
| | 2,771 |
| | 1999 | | 1999 |
| World Houston Int'l Business Ctr 12 | | — |
| | 340 |
| | 2,419 |
| | 383 |
| | 340 |
| | 2,802 |
| | 3,142 |
| | 1,608 |
| | 2000 | | 2002 |
| World Houston Int'l Business Ctr 13 | | — |
| | 282 |
| | 2,569 |
| | 417 |
| | 282 |
| | 2,986 |
| | 3,268 |
| | 1,923 |
| | 2000 | | 2002 |
| World Houston Int'l Business Ctr 14 | | — |
| | 722 |
| | 2,629 |
| | 1,027 |
| | 722 |
| | 3,656 |
| | 4,378 |
| | 1,782 |
| | 2000 | | 2003 |
| World Houston Int'l Business Ctr 15 | | — |
| | 731 |
| | — |
| | 6,266 |
| | 731 |
| | 6,266 |
| | 6,997 |
| | 3,237 |
| | 2000 | | 2007 |
| World Houston Int'l Business Ctr 16 | | — |
| | 519 |
| | 4,248 |
| | 1,493 |
| | 519 |
| | 5,741 |
| | 6,260 |
| | 3,175 |
| | 2000 | | 2005 |
| World Houston Int'l Business Ctr 17 | | — |
| | 373 |
| | 1,945 |
| | 799 |
| | 373 |
| | 2,744 |
| | 3,117 |
| | 1,382 |
| | 2000 | | 2004 |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| SCHEDULE III |
| REAL ESTATE PROPERTIES AND ACCUMULATED DEPRECIATION |
DECEMBER 31, 2017 (In thousands, except footnotes) |
| Description | | Encumbrances | | Initial Cost to the Company | | Costs Capitalized Subsequent to Acquisition | | Gross Amount Carried at Close of Period | | Accumulated Depreciation | | Year Acquired | | Year Constructed |
| | Land | | Buildings and Improvements | | | Land | | Buildings and Improvements | | Total | |
| World Houston Int'l Business Ctr 18 | | — |
| | 323 |
| | 1,512 |
| | 259 |
| | 323 |
| | 1,771 |
| | 2,094 |
| | 883 |
| | 2005 | | 1995 |
| World Houston Int'l Business Ctr 19 | | — |
| | 373 |
| | 2,256 |
| | 1,126 |
| | 373 |
| | 3,382 |
| | 3,755 |
| | 1,946 |
| | 2000 | | 2004 |
| World Houston Int'l Business Ctr 20 | | — |
| | 1,008 |
| | 1,948 |
| | 2,060 |
| | 1,008 |
| | 4,008 |
| | 5,016 |
| | 1,976 |
| | 2000 | | 2004 |
| World Houston Int'l Business Ctr 21 | | — |
| | 436 |
| | — |
| | 3,942 |
| | 436 |
| | 3,942 |
| | 4,378 |
| | 1,492 |
| | 2000/03 | | 2006 |
| World Houston Int'l Business Ctr 22 | | — |
| | 436 |
| | — |
| | 4,542 |
| | 436 |
| | 4,542 |
| | 4,978 |
| | 2,111 |
| | 2000 | | 2007 |
| World Houston Int'l Business Ctr 23 | | — |
| | 910 |
| | — |
| | 7,347 |
| | 910 |
| | 7,347 |
| | 8,257 |
| | 2,989 |
| | 2000 | | 2007 |
| World Houston Int'l Business Ctr 24 | | — |
| | 837 |
| | — |
| | 5,883 |
| | 837 |
| | 5,883 |
| | 6,720 |
| | 2,354 |
| | 2005 | | 2008 |
| World Houston Int'l Business Ctr 25 | | — |
| | 508 |
| | — |
| | 3,882 |
| | 508 |
| | 3,882 |
| | 4,390 |
| | 1,454 |
| | 2005 | | 2008 |
| World Houston Int'l Business Ctr 26 (f) | | 2,077 |
| | 445 |
| | — |
| | 3,194 |
| | 445 |
| | 3,194 |
| | 3,639 |
| | 1,124 |
| | 2005 | | 2008 |
| World Houston Int'l Business Ctr 27 | | — |
| | 837 |
| | — |
| | 5,004 |
| | 837 |
| | 5,004 |
| | 5,841 |
| | 1,782 |
| | 2005 | | 2008 |
| World Houston Int'l Business Ctr 28 (f) | | 2,977 |
| | 550 |
| | — |
| | 4,665 |
| | 550 |
| | 4,665 |
| | 5,215 |
| | 1,559 |
| | 2005 | | 2009 |
| World Houston Int'l Business Ctr 29 (f) | | 2,810 |
| | 782 |
| | — |
| | 4,141 |
| | 974 |
| | 3,949 |
| | 4,923 |
| | 1,247 |
| | 2007 | | 2009 |
| World Houston Int'l Business Ctr 30 (f) | | 3,870 |
| | 981 |
| | — |
| | 5,798 |
| | 1,222 |
| | 5,557 |
| | 6,779 |
| | 2,079 |
| | 2007 | | 2009 |
| World Houston Int'l Business Ctr 31A | | — |
| | 684 |
| | — |
| | 4,087 |
| | 684 |
| | 4,087 |
| | 4,771 |
| | 1,567 |
| | 2008 | | 2011 |
| World Houston Int'l Business Ctr 31B | | — |
| | 546 |
| | — |
| | 3,539 |
| | 546 |
| | 3,539 |
| | 4,085 |
| | 1,069 |
| | 2008 | | 2012 |
| World Houston Int'l Business Ctr 32 (h) | | 3,747 |
| | 1,225 |
| | — |
| | 5,655 |
| | 1,526 |
| | 5,354 |
| | 6,880 |
| | 1,244 |
| | 2007 | | 2012 |
| World Houston Int'l Business Ctr 33 | | — |
| | 1,166 |
| | — |
| | 7,867 |
| | 1,166 |
| | 7,867 |
| | 9,033 |
| | 1,401 |
| | 2011 | | 2013 |
| World Houston Int'l Business Ctr 34 | | — |
| | 439 |
| | — |
| | 3,373 |
| | 439 |
| | 3,373 |
| | 3,812 |
| | 683 |
| | 2005 | | 2012 |
| World Houston Int'l Business Ctr 35 | | — |
| | 340 |
| | — |
| | 2,475 |
| | 340 |
| | 2,475 |
| | 2,815 |
| | 419 |
| | 2005 | | 2012 |
| World Houston Int'l Business Ctr 36 | | — |
| | 684 |
| | — |
| | 4,882 |
| | 684 |
| | 4,882 |
| | 5,566 |
| | 913 |
| | 2011 | | 2013 |
| World Houston Int'l Business Ctr 37 | | — |
| | 759 |
| | — |
| | 6,400 |
| | 759 |
| | 6,400 |
| | 7,159 |
| | 1,144 |
| | 2011 | | 2013 |
| World Houston Int'l Business Ctr 38 | | — |
| | 1,053 |
| | — |
| | 7,320 |
| | 1,053 |
| | 7,320 |
| | 8,373 |
| | 1,346 |
| | 2011 | | 2013 |
| World Houston Int'l Business Ctr 39 | | — |
| | 620 |
| | — |
| | 5,202 |
| | 620 |
| | 5,202 |
| | 5,822 |
| | 611 |
| | 2011 | | 2014 |
| World Houston Int'l Business Ctr 40 | | — |
| | 1,072 |
| | — |
| | 9,347 |
| | 1,072 |
| | 9,347 |
| | 10,419 |
| | 1,028 |
| | 2011 | | 2014 |
| World Houston Int'l Business Ctr 41 | | — |
| | 649 |
| | — |
| | 5,950 |
| | 649 |
| | 5,950 |
| | 6,599 |
| | 572 |
| | 2011 | | 2014 |
| World Houston Int'l Business Ctr 42 | | — |
| | 571 |
| | — |
| | 4,814 |
| | 571 |
| | 4,814 |
| | 5,385 |
| | 409 |
| | 2011 | | 2015 |
| Central Green Distribution Center | | — |
| | 566 |
| | 4,031 |
| | 794 |
| | 566 |
| | 4,825 |
| | 5,391 |
| | 2,356 |
| | 1999 | | 1998 |
| Glenmont Business Park | | — |
| | 936 |
| | 6,161 |
| | 2,958 |
| | 936 |
| | 9,119 |
| | 10,055 |
| | 5,416 |
| | 1998 | | 1999/2000 |
| Beltway Crossing Business Park I | | — |
| | 458 |
| | 5,712 |
| | 2,737 |
| | 458 |
| | 8,449 |
| | 8,907 |
| | 4,436 |
| | 2002 | | 2001 |
| Beltway Crossing Business Park II | | — |
| | 415 |
| | — |
| | 2,997 |
| | 415 |
| | 2,997 |
| | 3,412 |
| | 1,268 |
| | 2005 | | 2007 |
| Beltway Crossing Business Park III | | — |
| | 460 |
| | — |
| | 3,124 |
| | 460 |
| | 3,124 |
| | 3,584 |
| | 1,371 |
| | 2005 | | 2008 |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| SCHEDULE III |
| REAL ESTATE PROPERTIES AND ACCUMULATED DEPRECIATION |
DECEMBER 31, 2017 (In thousands, except footnotes) |
| Description | | Encumbrances | | Initial Cost to the Company | | Costs Capitalized Subsequent to Acquisition | | Gross Amount Carried at Close of Period | | Accumulated Depreciation | | Year Acquired | | Year Constructed |
| | Land | | Buildings and Improvements | | | Land | | Buildings and Improvements | | Total | |
| Beltway Crossing Business Park IV | | — |
| | 460 |
| | — |
| | 3,056 |
| | 460 |
| | 3,056 |
| | 3,516 |
| | 1,327 |
| | 2005 | | 2008 |
| Beltway Crossing Business Park V (f) | | 3,358 |
| | 701 |
| | — |
| | 5,181 |
| | 701 |
| | 5,181 |
| | 5,882 |
| | 2,026 |
| | 2005 | | 2008 |
| Beltway Crossing Business Park VI (h) | | 3,751 |
| | 618 |
| | — |
| | 6,268 |
| | 618 |
| | 6,268 |
| | 6,886 |
| | 1,911 |
| | 2005 | | 2008 |
| Beltway Crossing Business Park VII (h) | | 3,663 |
| | 765 |
| | — |
| | 5,961 |
| | 765 |
| | 5,961 |
| | 6,726 |
| | 2,381 |
| | 2005 | | 2009 |
| Beltway Crossing Business Park VIII | | — |
| | 721 |
| | — |
| | 5,219 |
| | 721 |
| | 5,219 |
| | 5,940 |
| | 1,407 |
| | 2005 | | 2011 |
| Beltway Crossing Business Park IX | | — |
| | 418 |
| | — |
| | 2,114 |
| | 418 |
| | 2,114 |
| | 2,532 |
| | 460 |
| | 2007 | | 2012 |
| Beltway Crossing Business Park X | | — |
| | 733 |
| | — |
| | 3,871 |
| | 733 |
| | 3,871 |
| | 4,604 |
| | 773 |
| | 2007 | | 2012 |
| Beltway Crossing Business Park XI | | — |
| | 690 |
| | — |
| | 4,101 |
| | 690 |
| | 4,101 |
| | 4,791 |
| | 681 |
| | 2007 | | 2013 |
| West Road Business Park I | | — |
| | 621 |
| | — |
| | 4,031 |
| | 541 |
| | 4,111 |
| | 4,652 |
| | 593 |
| | 2012 | | 2014 |
| West Road Business Park II | | — |
| | 981 |
| | — |
| | 4,819 |
| | 854 |
| | 4,946 |
| | 5,800 |
| | 611 |
| | 2012 | | 2014 |
| West Road Business Park III | | — |
| | 597 |
| | — |
| | 4,222 |
| | 520 |
| | 4,299 |
| | 4,819 |
| | 222 |
| | 2012 | | 2015 |
| West Road Business Park IV | | — |
| | 621 |
| | — |
| | 4,622 |
| | 541 |
| | 4,702 |
| | 5,243 |
| | 414 |
| | 2012 | | 2015 |
| Ten West Crossing 1 | | — |
| | 566 |
| | — |
| | 2,997 |
| | 566 |
| | 2,997 |
| | 3,563 |
| | 548 |
| | 2012 | | 2013 |
| Ten West Crossing 2 | | — |
| | 829 |
| | — |
| | 4,385 |
| | 833 |
| | 4,381 |
| | 5,214 |
| | 978 |
| | 2012 | | 2013 |
| Ten West Crossing 3 | | — |
| | 609 |
| | — |
| | 4,362 |
| | 613 |
| | 4,358 |
| | 4,971 |
| | 913 |
| | 2012 | | 2013 |
| Ten West Crossing 4 | | — |
| | 694 |
| | — |
| | 4,512 |
| | 699 |
| | 4,507 |
| | 5,206 |
| | 876 |
| | 2012 | | 2014 |
| Ten West Crossing 5 | | — |
| | 933 |
| | — |
| | 5,872 |
| | 940 |
| | 5,865 |
| | 6,805 |
| | 823 |
| | 2012 | | 2014 |
| Ten West Crossing 6 | | — |
| | 640 |
| | — |
| | 4,402 |
| | 644 |
| | 4,398 |
| | 5,042 |
| | 525 |
| | 2012 | | 2014 |
| Ten West Crossing 7 | | — |
| | 584 |
| | — |
| | 5,320 |
| | 588 |
| | 5,316 |
| | 5,904 |
| | 335 |
| | 2012 | | 2015 |
| El Paso | | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | | | |
Butterfield Trail | | — |
| | — |
| | 20,725 |
| | 8,756 |
| | — |
| | 29,481 |
| | 29,481 |
| | 18,626 |
| | 1997/2000 | | 1987/95 |
| Rojas Commerce Park (g) | | 4,106 |
| | 900 |
| | 3,659 |
| | 3,216 |
| | 900 |
| | 6,875 |
| | 7,775 |
| | 5,090 |
| | 1999 | | 1986 |
| Americas Ten Business Center I | | — |
| | 526 |
| | 2,778 |
| | 1,241 |
| | 526 |
| | 4,019 |
| | 4,545 |
| | 2,303 |
| | 2001 | | 2003 |
| San Antonio | | | | | | | | | | | | | | | | | | | | |
| Alamo Downs Distribution Center | | — |
| | 1,342 |
| | 6,338 |
| | 1,554 |
| | 1,342 |
| | 7,892 |
| | 9,234 |
| | 4,328 |
| | 2004 | | 1986/2002 |
| Arion Business Park 1-13, 15 | | — |
| | 4,143 |
| | 31,432 |
| | 6,640 |
| | 4,143 |
| | 38,072 |
| | 42,215 |
| | 17,801 |
| | 2005 | | 1988-2000/06 |
| Arion Business Park 14 | | — |
| | 423 |
| | — |
| | 3,460 |
| | 423 |
| | 3,460 |
| | 3,883 |
| | 1,411 |
| | 2005 | | 2006 |
| Arion Business Park 16 | | — |
| | 427 |
| | — |
| | 3,699 |
| | 427 |
| | 3,699 |
| | 4,126 |
| | 1,341 |
| | 2005 | | 2007 |
| Arion Business Park 17 | | — |
| | 616 |
| | — |
| | 4,143 |
| | 616 |
| | 4,143 |
| | 4,759 |
| | 2,248 |
| | 2005 | | 2007 |
| Arion Business Park 18 (h) | | 1,520 |
| | 418 |
| | — |
| | 2,373 |
| | 418 |
| | 2,373 |
| | 2,791 |
| | 1,059 |
| | 2005 | | 2008 |
| Wetmore Business Center 1-4 | | — |
| | 1,494 |
| | 10,804 |
| | 3,543 |
| | 1,494 |
| | 14,347 |
| | 15,841 |
| | 7,214 |
| | 2005 | | 1998/99 |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| SCHEDULE III |
| REAL ESTATE PROPERTIES AND ACCUMULATED DEPRECIATION |
DECEMBER 31, 2017 (In thousands, except footnotes) |
| Description | | Encumbrances | | Initial Cost to the Company | | Costs Capitalized Subsequent to Acquisition | | Gross Amount Carried at Close of Period | | Accumulated Depreciation | | Year Acquired | | Year Constructed |
| | Land | | Buildings and Improvements | | | Land | | Buildings and Improvements | | Total | |
| Wetmore Business Center 5 (f) | | 2,281 |
| | 412 |
| | — |
| | 3,584 |
| | 412 |
| | 3,584 |
| | 3,996 |
| | 1,636 |
| | 2006 | | 2008 |
| Wetmore Business Center 6 (f) | | 2,463 |
| | 505 |
| | — |
| | 3,809 |
| | 505 |
| | 3,809 |
| | 4,314 |
| | 1,417 |
| | 2006 | | 2008 |
| Wetmore Business Center 7 (f) | | 2,538 |
| | 546 |
| | — |
| | 3,899 |
| | 546 |
| | 3,899 |
| | 4,445 |
| | 1,213 |
| | 2006 | | 2008 |
| Wetmore Business Center 8 (f) | | 4,987 |
| | 1,056 |
| | — |
| | 7,680 |
| | 1,056 |
| | 7,680 |
| | 8,736 |
| | 2,625 |
| | 2006 | | 2008 |
| Fairgrounds Business Park | | — |
| | 1,644 |
| | 8,209 |
| | 2,229 |
| | 1,644 |
| | 10,438 |
| | 12,082 |
| | 5,110 |
| | 2007 | | 1985/86 |
| Rittiman Distribution Center | | — |
| | 1,083 |
| | 6,649 |
| | 337 |
| | 1,083 |
| | 6,986 |
| | 8,069 |
| | 1,379 |
| | 2011 | | 2000 |
| Thousand Oaks Distribution Center 1 | | — |
| | 607 |
| | — |
| | 4,292 |
| | 607 |
| | 4,292 |
| | 4,899 |
| | 1,230 |
| | 2008 | | 2012 |
| Thousand Oaks Distribution Center 2 | | — |
| | 794 |
| | — |
| | 4,719 |
| | 794 |
| | 4,719 |
| | 5,513 |
| | 1,125 |
| | 2008 | | 2012 |
| Thousand Oaks Distribution Center 3 | | — |
| | 772 |
| | — |
| | 4,457 |
| | 772 |
| | 4,457 |
| | 5,229 |
| | 938 |
| | 2008 | | 2013 |
| Thousand Oaks Distribution Center 4 | | — |
| | 753 |
| | — |
| | 4,688 |
| | 753 |
| | 4,688 |
| | 5,441 |
| | 363 |
| | 2013 | | 2015 |
| Alamo Ridge Business Park I | | — |
| | 623 |
| | — |
| | 7,984 |
| | 623 |
| | 7,984 |
| | 8,607 |
| | 881 |
| | 2007 | | 2015 |
| Alamo Ridge Business Park II | | — |
| | 402 |
| | — |
| | 5,347 |
| | 402 |
| | 5,347 |
| | 5,749 |
| | 391 |
| | 2007 | | 2015 |
| Alamo Ridge Business Park III | | — |
| | 907 |
| | — |
| | 10,123 |
| | 907 |
| | 10,123 |
| | 11,030 |
| | 329 |
| | 2007 | | 2017 |
| Eisenhauer Point Business Park 1 & 2 | | — |
| | 1,881 |
| | — |
| | 14,642 |
| | 1,881 |
| | 14,642 |
| | 16,523 |
| | 712 |
| | 2015 | | 2016 |
| Eisenhauer Point Business Park 4 | | — |
| | 555 |
| | — |
| | 4,816 |
| | 555 |
| | 4,816 |
| | 5,371 |
| | 93 |
| | 2015 | | 2017 |
| Austin | | | | | | | | | | | | | | | | | | | | |
| Colorado Crossing Distribution Center (g) | | 12,913 |
| | 4,602 |
| | 19,757 |
| | 94 |
| | 4,602 |
| | 19,851 |
| | 24,453 |
| | 3,821 |
| | 2014 | | 2009 |
| Southpark Corporate Center 3 & 4 | | — |
| | 2,670 |
| | 14,756 |
| | 912 |
| | 2,670 |
| | 15,668 |
| | 18,338 |
| | 2,326 |
| | 2015 | | 1995 |
| Southpark Corporate Center 5-7 | | — |
| | 1,301 |
| | 7,589 |
| | 786 |
| | 1,301 |
| | 8,375 |
| | 9,676 |
| | 270 |
| | 2017 | | 1995 |
| Springdale Business Center | | — |
| | 2,824 |
| | 8,398 |
| | 324 |
| | 2,824 |
| | 8,722 |
| | 11,546 |
| | 986 |
| | 2015 | | 2000 |
| ARIZONA | | | | | | | | | | | | | | | | | | | | |
| Phoenix area | | | | | | | | | | | | | | | | | | | | |
| Broadway Industrial Park I | | — |
| | 837 |
| | 3,349 |
| | 1,063 |
| | 837 |
| | 4,412 |
| | 5,249 |
| | 2,794 |
| | 1996 | | 1971 |
| Broadway Industrial Park II | | — |
| | 455 |
| | 482 |
| | 306 |
| | 455 |
| | 788 |
| | 1,243 |
| | 441 |
| | 1999 | | 1971 |
| Broadway Industrial Park III | | — |
| | 775 |
| | 1,742 |
| | 523 |
| | 775 |
| | 2,265 |
| | 3,040 |
| | 1,398 |
| | 2000 | | 1983 |
| Broadway Industrial Park IV | | — |
| | 380 |
| | 1,652 |
| | 783 |
| | 380 |
| | 2,435 |
| | 2,815 |
| | 1,591 |
| | 2000 | | 1986 |
| Broadway Industrial Park V | | — |
| | 353 |
| | 1,090 |
| | 146 |
| | 353 |
| | 1,236 |
| | 1,589 |
| | 691 |
| | 2002 | | 1980 |
| Broadway Industrial Park VI | | — |
| | 599 |
| | 1,855 |
| | 738 |
| | 599 |
| | 2,593 |
| | 3,192 |
| | 1,585 |
| | 2002 | | 1979 |
| Broadway Industrial Park VII | | — |
| | 450 |
| | 650 |
| | 243 |
| | 450 |
| | 893 |
| | 1,343 |
| | 224 |
| | 2011 | | 1999 |
| Kyrene Distribution Center | | — |
| | 1,490 |
| | 4,453 |
| | 1,863 |
| | 1,490 |
| | 6,316 |
| | 7,806 |
| | 3,857 |
| | 1999 | | 1981/2001 |
| Southpark Distribution Center | | — |
| | 918 |
| | 2,738 |
| | 1,934 |
| | 918 |
| | 4,672 |
| | 5,590 |
| | 1,820 |
| | 2001 | | 2000 |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| SCHEDULE III |
| REAL ESTATE PROPERTIES AND ACCUMULATED DEPRECIATION |
DECEMBER 31, 2017 (In thousands, except footnotes) |
| Description | | Encumbrances | | Initial Cost to the Company | | Costs Capitalized Subsequent to Acquisition | | Gross Amount Carried at Close of Period | | Accumulated Depreciation | | Year Acquired | | Year Constructed |
| | Land | | Buildings and Improvements | | | Land | | Buildings and Improvements | | Total | |
| Santan 10 Distribution Center I | | — |
| | 846 |
| | 2,647 |
| | 658 |
| | 846 |
| | 3,305 |
| | 4,151 |
| | 1,472 |
| | 2001 | | 2005 |
| Santan 10 Distribution Center II | | — |
| | 1,088 |
| | — |
| | 5,163 |
| | 1,088 |
| | 5,163 |
| | 6,251 |
| | 2,238 |
| | 2004 | | 2007 |
| Chandler Freeways | | — |
| | 1,525 |
| | — |
| | 7,381 |
| | 1,525 |
| | 7,381 |
| | 8,906 |
| | 1,124 |
| | 2012 | | 2013 |
| Kyrene 202 Business Park I | | — |
| | 653 |
| | — |
| | 5,777 |
| | 653 |
| | 5,777 |
| | 6,430 |
| | 592 |
| | 2011 | | 2014 |
| Kyrene 202 Business Park II | | — |
| | 387 |
| | — |
| | 3,414 |
| | 387 |
| | 3,414 |
| | 3,801 |
| | 352 |
| | 2011 | | 2014 |
| Kyrene 202 Business Park VI | | — |
| | 936 |
| | — |
| | 8,290 |
| | 936 |
| | 8,290 |
| | 9,226 |
| | 371 |
| | 2011 | | 2015 |
| Metro Business Park | | — |
| | 1,927 |
| | 7,708 |
| | 7,139 |
| | 1,927 |
| | 14,847 |
| | 16,774 |
| | 10,251 |
| | 1996 | | 1977/79 |
| 35th Avenue Distribution Center | | — |
| | 418 |
| | 2,381 |
| | 2,118 |
| | 418 |
| | 4,499 |
| | 4,917 |
| | 1,487 |
| | 1997 | | 1967 |
| 51st Avenue Distribution Center | | — |
| | 300 |
| | 2,029 |
| | 995 |
| | 300 |
| | 3,024 |
| | 3,324 |
| | 1,944 |
| | 1998 | | 1987 |
| East University Distribution Center I and II | | — |
| | 1,120 |
| | 4,482 |
| | 1,799 |
| | 1,120 |
| | 6,281 |
| | 7,401 |
| | 4,120 |
| | 1998 | | 1987/89 |
| East University Distribution Center III | | — |
| | 444 |
| | 698 |
| | 422 |
| | 443 |
| | 1,121 |
| | 1,564 |
| | 336 |
| | 2010 | | 1981 |
| 55th Avenue Distribution Center | | — |
| | 912 |
| | 3,717 |
| | 1,116 |
| | 917 |
| | 4,828 |
| | 5,745 |
| | 3,267 |
| | 1998 | | 1987 |
| Interstate Commons Distribution Center I | | — |
| | 311 |
| | 1,416 |
| | 720 |
| | 311 |
| | 2,136 |
| | 2,447 |
| | 1,308 |
| | 1999 | | 1988 |
| Interstate Commons Distribution Center III | | — |
| | 242 |
| | — |
| | 3,079 |
| | 242 |
| | 3,079 |
| | 3,321 |
| | 1,035 |
| | 2000 | | 2008 |
| Airport Commons Distribution Center | | — |
| | 1,000 |
| | 1,510 |
| | 1,485 |
| | 1,000 |
| | 2,995 |
| | 3,995 |
| | 1,838 |
| | 2003 | | 1971 |
| 40th Avenue Distribution Center (f) | | 3,860 |
| | 703 |
| | — |
| | 6,059 |
| | 703 |
| | 6,059 |
| | 6,762 |
| | 2,078 |
| | 2004 | | 2008 |
| Sky Harbor Business Park | | — |
| | 5,839 |
| | — |
| | 21,754 |
| | 5,839 |
| | 21,754 |
| | 27,593 |
| | 7,186 |
| | 2006 | | 2008 |
| Sky Harbor Business Park 6 | | — |
| | 807 |
| | — |
| | 2,177 |
| | 807 |
| | 2,177 |
| | 2,984 |
| | 183 |
| | 2014 | | 2015 |
| Ten Sky Harbor Business Center | | — |
| | 1,568 |
| | — |
| | 5,009 |
| | 1,569 |
| | 5,008 |
| | 6,577 |
| | 82 |
| | 2015 | | 2016 |
| Tucson | | | | | | | | | | | | | | | | | | | | |
Country Club Commerce Center I | | — |
| | 506 |
| | 3,564 |
| | 2,173 |
| | 693 |
| | 5,550 |
| | 6,243 |
| | 2,660 |
| | 1997/2003 | | 1994/2003 |
| Country Club Commerce Center II | | — |
| | 442 |
| | 3,381 |
| | 304 |
| | 709 |
| | 3,418 |
| | 4,127 |
| | 1,212 |
| | 2007 | | 2000 |
| Country Club Commerce Center III & IV | | — |
| | 1,407 |
| | — |
| | 11,833 |
| | 1,575 |
| | 11,665 |
| | 13,240 |
| | 4,279 |
| | 2007 | | 2009 |
| Airport Distribution Center | | — |
| | 1,403 |
| | 4,672 |
| | 1,619 |
| | 1,403 |
| | 6,291 |
| | 7,694 |
| | 3,827 |
| | 1998/2000 | | 1995 |
| Southpointe Distribution Center | | — |
| | — |
| | 3,982 |
| | 2,950 |
| | — |
| | 6,932 |
| | 6,932 |
| | 4,450 |
| | 1999 | | 1989 |
| Benan Distribution Center | | — |
| | 707 |
| | 1,842 |
| | 648 |
| | 707 |
| | 2,490 |
| | 3,197 |
| | 1,424 |
| | 2005 | | 2001 |
| | | | | | | | | | | | | | | | | | | | | |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| SCHEDULE III |
| REAL ESTATE PROPERTIES AND ACCUMULATED DEPRECIATION |
DECEMBER 31, 2017 (In thousands, except footnotes) |
| Description | | Encumbrances | | Initial Cost to the Company | | Costs Capitalized Subsequent to Acquisition | | Gross Amount Carried at Close of Period | | Accumulated Depreciation | | Year Acquired | | Year Constructed |
| | Land | | Buildings and Improvements | | | Land | | Buildings and Improvements | | Total | |
| NORTH CAROLINA | | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | | | |
| Charlotte area | | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | | | |
| NorthPark Business Park | | — |
| | 2,758 |
| | 15,932 |
| | 4,645 |
| | 2,758 |
| | 20,577 |
| | 23,335 |
| | 9,459 |
| | 2006 | | 1987-89 |
| Lindbergh Business Park | | — |
| | 470 |
| | 3,401 |
| | 482 |
| | 470 |
| | 3,883 |
| | 4,353 |
| | 1,601 |
| | 2007 | | 2001/03 |
| Commerce Park Center I | | — |
| | 765 |
| | 4,303 |
| | 842 |
| | 765 |
| | 5,145 |
| | 5,910 |
| | 1,999 |
| | 2007 | | 1983 |
| Commerce Park Center II (h) | | 1,221 |
| | 335 |
| | 1,603 |
| | 304 |
| | 335 |
| | 1,907 |
| | 2,242 |
| | 626 |
| | 2010 | | 1987 |
| Commerce Park Center III (h) | | 2,034 |
| | 558 |
| | 2,225 |
| | 952 |
| | 558 |
| | 3,177 |
| | 3,735 |
| | 971 |
| | 2010 | | 1981 |
| Nations Ford Business Park | | — |
| | 3,924 |
| | 16,171 |
| | 3,441 |
| | 3,924 |
| | 19,612 |
| | 23,536 |
| | 8,884 |
| | 2007 | | 1989/94 |
| Airport Commerce Center | | — |
| | 1,454 |
| | 10,136 |
| | 2,260 |
| | 1,454 |
| | 12,396 |
| | 13,850 |
| | 4,260 |
| | 2008 | | 2001/02 |
| Interchange Park I (f) | | 5,442 |
| | 986 |
| | 7,949 |
| | 598 |
| | 986 |
| | 8,547 |
| | 9,533 |
| | 2,759 |
| | 2008 | | 1989 |
| Interchange Park II | | — |
| | 746 |
| | 1,456 |
| | 55 |
| | 746 |
| | 1,511 |
| | 2,257 |
| | 224 |
| | 2013 | | 2000 |
| Ridge Creek Distribution Center I | | — |
| | 1,284 |
| | 13,163 |
| | 976 |
| | 1,284 |
| | 14,139 |
| | 15,423 |
| | 4,157 |
| | 2008 | | 2006 |
| Ridge Creek Distribution Center II (h) | | 9,067 |
| | 3,033 |
| | 11,497 |
| | 2,116 |
| | 3,033 |
| | 13,613 |
| | 16,646 |
| | 2,699 |
| | 2011 | | 2003 |
| Ridge Creek Distribution Center III | | — |
| | 2,459 |
| | 11,147 |
| | 538 |
| | 2,459 |
| | 11,685 |
| | 14,144 |
| | 1,474 |
| | 2014 | | 2013 |
| Lakeview Business Center (h) | | 4,017 |
| | 1,392 |
| | 5,068 |
| | 916 |
| | 1,392 |
| | 5,984 |
| | 7,376 |
| | 1,492 |
| | 2011 | | 1996 |
| Steele Creek Commerce Park I (g) | | 2,803 |
| | 993 |
| | — |
| | 4,315 |
| | 1,010 |
| | 4,298 |
| | 5,308 |
| | 770 |
| | 2013 | | 2014 |
| Steele Creek Commerce Park II (g) | | 2,852 |
| | 941 |
| | — |
| | 4,459 |
| | 957 |
| | 4,443 |
| | 5,400 |
| | 775 |
| | 2013 | | 2014 |
| Steele Creek Commerce Park III | | — |
| | 1,464 |
| | — |
| | 6,412 |
| | 1,469 |
| | 6,407 |
| | 7,876 |
| | 889 |
| | 2013 | | 2014 |
| Steele Creek Commerce Park IV | | — |
| | 684 |
| | — |
| | 3,945 |
| | 687 |
| | 3,942 |
| | 4,629 |
| | 467 |
| | 2013 | | 2015 |
| Steele Creek Commerce Park VI | | — |
| | 867 |
| | — |
| | 6,974 |
| | 869 |
| | 6,972 |
| | 7,841 |
| | 227 |
| | 2013/14 | | 2016 |
| Waterford Distribution Center | | — |
| | 654 |
| | 3,392 |
| | 655 |
| | 654 |
| | 4,047 |
| | 4,701 |
| | 1,276 |
| | 2008 | | 2000 |
| | | | | | | | | | | | | | | | | | | | | |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| SCHEDULE III |
| REAL ESTATE PROPERTIES AND ACCUMULATED DEPRECIATION |
DECEMBER 31, 2017 (In thousands, except footnotes) |
| Description | | Encumbrances | | Initial Cost to the Company | | Costs Capitalized Subsequent to Acquisition | | Gross Amount Carried at Close of Period | | Accumulated Depreciation | | Year Acquired | | Year Constructed |
| | Land | | Buildings and Improvements | | | Land | | Buildings and Improvements | | Total | |
| GEORGIA | | | | | | | | | | | | | | | | | | | | |
| Atlanta | | | | | | | | | | | | | | | | | | | | |
| Shiloh 400 Business Center I & II | | — |
| | 3,092 |
| | 14,216 |
| | 1,488 |
| | 3,092 |
| | 15,704 |
| | 18,796 |
| | 672 |
| | 2017 | | 2008 |
| Broadmoor Commerce Park I | | — |
| | 1,307 |
| | 3,560 |
| | 496 |
| | 1,307 |
| | 4,056 |
| | 5,363 |
| | 228 |
| | 2017 | | 1999 |
| Hurricane Shoals I & II | | — |
| | 4,284 |
| | 12,449 |
| | 1,141 |
| | 4,284 |
| | 13,590 |
| | 17,874 |
| | 40 |
| | 2017 | | 2017 |
| LOUISIANA | | | | | | | | | | | | | | | | | | | | |
| New Orleans | | | | | | | | | | | | | | | | | | | | |
Elmwood Business Park | | — |
| | 2,861 |
| | 6,337 |
| | 5,026 |
| | 2,861 |
| | 11,363 |
| | 14,224 |
| | 7,841 |
| | 1997 | | 1979 |
| Riverbend Business Park | | — |
| | 2,557 |
| | 17,623 |
| | 8,471 |
| | 2,557 |
| | 26,094 |
| | 28,651 |
| | 14,573 |
| | 1997 | | 1984 |
| COLORADO | | | | | | | | | | | | | | | | | | | | |
| Denver | | | | | | | | | | | | | | | | | | | | |
| Rampart Distribution Center I | | — |
| | 1,023 |
| | 3,861 |
| | 2,093 |
| | 1,023 |
| | 5,954 |
| | 6,977 |
| | 4,309 |
| | 1988 | | 1987 |
| Rampart Distribution Center II | | — |
| | 230 |
| | 2,977 |
| | 1,173 |
| | 230 |
| | 4,150 |
| | 4,380 |
| | 2,782 |
| | 1996/97 | | 1996/97 |
| Rampart Distribution Center III | | — |
| | 1,098 |
| | 3,884 |
| | 1,931 |
| | 1,098 |
| | 5,815 |
| | 6,913 |
| | 3,092 |
| | 1997/98 | | 1999 |
| Rampart Distribution Center IV | | — |
| | 590 |
| | — |
| | 8,322 |
| | 590 |
| | 8,322 |
| | 8,912 |
| | 623 |
| | 2012 | | 2014 |
| Concord Distribution Center (h) | | 3,413 |
| | 1,051 |
| | 4,773 |
| | 443 |
| | 1,051 |
| | 5,216 |
| | 6,267 |
| | 1,996 |
| | 2007 | | 2000 |
| Centennial Park (f) | | 3,381 |
| | 750 |
| | 3,319 |
| | 1,853 |
| | 750 |
| | 5,172 |
| | 5,922 |
| | 1,822 |
| | 2007 | | 1990 |
| NEVADA | | | | | | | | | | | | | | | | | | | | |
| Las Vegas | | | | | | | | | | | | | | | | | | | | |
| Arville Distribution Center | | — |
| | 4,933 |
| | 5,094 |
| | 424 |
| | 4,933 |
| | 5,518 |
| | 10,451 |
| | 1,823 |
| | 2009 | | 1997 |
| Jones Corporate Park | | — |
| | 13,068 |
| | 26,325 |
| | 1,682 |
| | 13,068 |
| | 28,007 |
| | 41,075 |
| | 746 |
| | 2016 | | 2016 |
| MISSISSIPPI | | | | | | | | | | | | | | | | | | | | |
| Jackson area | | | | | | | | | | | | | | | | | | | | |
| Interchange Business Park | | — |
| | 343 |
| | 5,007 |
| | 3,984 |
| | 343 |
| | 8,991 |
| | 9,334 |
| | 5,589 |
| | 1997 | | 1981 |
| Tower Automotive | | — |
| | — |
| | 9,958 |
| | 1,937 |
| | 17 |
| | 11,878 |
| | 11,895 |
| | 4,926 |
| | 2001 | | 2002 |
| Metro Airport Commerce Center I | | — |
| | 303 |
| | 1,479 |
| | 1,134 |
| | 303 |
| | 2,613 |
| | 2,916 |
| | 1,576 |
| | 2001 | | 2003 |
| | | 200,354 |
| | 343,254 |
| | 1,030,428 |
| | 961,777 |
| | 345,424 |
| | 1,990,035 |
| | 2,335,459 |
| | 749,275 |
| | | | |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| SCHEDULE III |
| REAL ESTATE PROPERTIES AND ACCUMULATED DEPRECIATION |
DECEMBER 31, 2017 (In thousands, except footnotes) |
| Description | | Encumbrances | | Initial Cost to the Company | | Costs Capitalized Subsequent to Acquisition | | Gross Amount Carried at Close of Period | | Accumulated Depreciation | | Year Acquired | | Year Constructed |
| | Land | | Buildings and Improvements | | | Land | | Buildings and Improvements | | Total | |
| Industrial Development (d): | | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | | | |
| FLORIDA | | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | | | |
| Oak Creek Distribution Center VII | | — |
| | 740 |
| | — |
| | 5,391 |
| | 740 |
| | 5,391 |
| | 6,131 |
| | — |
| | 2005 | | 2017 |
| Oak Creek Distribution Center land | | — |
| | 486 |
| | — |
| | 1,074 |
| | 707 |
| | 853 |
| | 1,560 |
| | — |
| | 2005 | | n/a |
| Horizon Commerce Park X | | — |
| | 846 |
| | — |
| | 2,704 |
| | 846 |
| | 2,704 |
| | 3,550 |
| | — |
| | 2009 | | n/a |
| Horizon Commerce Park XII | | — |
| | 1,416 |
| | — |
| | 9,814 |
| | 1,416 |
| | 9,814 |
| | 11,230 |
| | 14 |
| | 2008 | | 2017 |
| Horizon Commerce Park land | | — |
| | 4,439 |
| | — |
| | 6,681 |
| | 4,440 |
| | 6,680 |
| | 11,120 |
| | — |
| | 2008/09 | | n/a |
| SunCoast Commerce Center IV | | — |
| | 1,733 |
| | — |
| | 7,387 |
| | 1,762 |
| | 7,358 |
| | 9,120 |
| | 56 |
| | 2006 | | 2017 |
| SunCoast Commerce Center land | | — |
| | 9,159 |
| | — |
| | 4,953 |
| | 9,343 |
| | 4,769 |
| | 14,112 |
| | — |
| | 2006 | | n/a |
| Weston Commerce Park | | — |
| | 4,163 |
| | 9,951 |
| | 1,406 |
| | 4,163 |
| | 11,357 |
| | 15,520 |
| | 231 |
| | 2016 | | 1998 |
| Gateway Commerce Park land | | — |
| | 26,728 |
| | — |
| | 4,148 |
| | 26,878 |
| | 3,998 |
| | 30,876 |
| | — |
| | 2016 | | n/a |
| TEXAS | | | | | | | | | | | | | | | | | | | | |
| CreekView 121 3 & 4 | | — |
| | 2,600 |
| | — |
| | 7,711 |
| | 2,600 |
| | 7,711 |
| | 10,311 |
| | — |
| | 2015/16 | | n/a |
| CreekView 121 land | | — |
| | 5,322 |
| | — |
| | 1,203 |
| | 5,322 |
| | 1,203 |
| | 6,525 |
| | — |
| | 2015/16 | | n/a |
| Parc North land | | — |
| | 2,519 |
| | — |
| | 552 |
| | 2,519 |
| | 552 |
| | 3,071 |
| | — |
| | 2016 | | n/a |
| World Houston Int'l Business Ctr land | | — |
| | 2,989 |
| | — |
| | 2,119 |
| | 3,723 |
| | 1,385 |
| | 5,108 |
| | — |
| | 2007 | | n/a |
| World Houston Int'l Business Ctr land - 2011 expansion | | — |
| | 1,636 |
| | — |
| | 4,320 |
| | 2,920 |
| | 3,036 |
| | 5,956 |
| | — |
| | 2011 | | n/a |
| World Houston Int'l Business Ctr land - 2015 expansion | | — |
| | 6,040 |
| | — |
| | 1,132 |
| | 6,041 |
| | 1,131 |
| | 7,172 |
| | — |
| | 2015 | | n/a |
| Ten West Crossing land | | — |
| | 1,126 |
| | — |
| | 806 |
| | 1,135 |
| | 797 |
| | 1,932 |
| | — |
| | 2012 | | n/a |
| West Road Business Park land | | — |
| | 484 |
| | — |
| | 538 |
| | 421 |
| | 601 |
| | 1,022 |
| | — |
| | 2012 | | n/a |
| Alamo Ridge Business Park IV | | — |
| | 354 |
| | — |
| | 6,743 |
| | 355 |
| | 6,742 |
| | 7,097 |
| | 23 |
| | 2007 | | 2017 |
| Eisenhauer Point Business Park 3 | | — |
| | 577 |
| | — |
| | 5,582 |
| | 578 |
| | 5,581 |
| | 6,159 |
| | — |
| | 2015 | | 2017 |
| Eisenhauer Point Business Park 5 | | — |
| | 818 |
| | — |
| | 4,986 |
| | 818 |
| | 4,986 |
| | 5,804 |
| | — |
| | 2015 | | n/a |
| Eisenhauer Point Business Park 6 | | — |
| | 569 |
| | — |
| | 3,481 |
| | 569 |
| | 3,481 |
| | 4,050 |
| | — |
| | 2015 | | n/a |
| Eisenhauer Point Business Park land phase 2 | | — |
| | 3,225 |
| | — |
| | 2,507 |
| | 3,225 |
| | 2,507 |
| | 5,732 |
| | — |
| | 2016 | | n/a |
| Tri-County Crossing land | | — |
| | 5,260 |
| | — |
| | 402 |
| | 5,260 |
| | 402 |
| | 5,662 |
| | — |
| | 2017 | | n/a |
| Settlers Crossing 1 | | — |
| | 1,211 |
| | — |
| | 345 |
| | 1,211 |
| | 345 |
| | 1,556 |
| | — |
| | 2017 | | n/a |
| Settlers Crossing 2 | | — |
| | 1,306 |
| | — |
| | 367 |
| | 1,306 |
| | 367 |
| | 1,673 |
| | — |
| | 2017 | | n/a |
| Settlers Crossing land | | — |
| | 2,774 |
| | — |
| | 246 |
| | 2,774 |
| | 246 |
| | 3,020 |
| | — |
| | 2017 | | n/a |
| | | | | | | | | | | | | | | | | | | | | |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| SCHEDULE III |
| REAL ESTATE PROPERTIES AND ACCUMULATED DEPRECIATION |
DECEMBER 31, 2017 (In thousands, except footnotes) |
| Description | | Encumbrances | | Initial Cost to the Company | | Costs Capitalized Subsequent to Acquisition | | Gross Amount Carried at Close of Period | | Accumulated Depreciation | | Year Acquired | | Year Constructed |
| | | | | Land | | Buildings and Improvements | | | | Land | | Buildings and Improvements | | Total | | | | | | |
| ARIZONA | | | | | | | | | | | | | | | | | | | | |
| Kyrene 202 Business Park 3, 4 & 5 | | — |
| | 1,244 |
| | — |
| | 10,299 |
| | 1,244 |
| | 10,299 |
| | 11,543 |
| | — |
| | 2011 | | n/a |
| Falcon Field Business Center | | — |
| | 1,312 |
| | — |
| | 1,635 |
| | 1,312 |
| | 1,635 |
| | 2,947 |
| | — |
| | 2015 | | n/a |
| Country Club Commerce Center V | | — |
| | 2,885 |
| | — |
| | 11,066 |
| | 2,886 |
| | 11,065 |
| | 13,951 |
| | — |
| | 2016 | | n/a |
| NORTH CAROLINA | | | | | | | | | | | | | | | | | | | | |
| Steele Creek Commerce Park VII | | — |
| | 1,207 |
| | — |
| | 6,590 |
| | 1,209 |
| | 6,588 |
| | 7,797 |
| | — |
| | 2013/14/15 | | 2017 |
| Airport Commerce Center III | | — |
| | 855 |
| | — |
| | 878 |
| | 855 |
| | 878 |
| | 1,733 |
| | — |
| | 2008 | | n/a |
| Steele Creek Commerce Park land | | — |
| | 3,318 |
| | — |
| | 1,250 |
| | 3,330 |
| | 1,238 |
| | 4,568 |
| | — |
| | 2013-2016 | | n/a |
| Steele Creek Commerce Park land Phase 4 | | — |
| | 1,866 |
| | — |
| | 294 |
| | 1,866 |
| | 294 |
| | 2,160 |
| | — |
| | 2016/17 | | n/a |
| GEORGIA | | | | | | | | | | | | | | | | | | | | |
| Progress Center I & II | | — |
| | 1,297 |
| | 9,015 |
| | 21 |
| | 1,297 |
| | 9,036 |
| | 10,333 |
| | 2 |
| | 2017 | | 2017 |
| Broadmoor Commerce Park land | | — |
| | 519 |
| | — |
| | 186 |
| | 519 |
| | 186 |
| | 705 |
| | — |
| | 2017 | | n/a |
| Progress Center land | | — |
| | 497 |
| | — |
| | 5 |
| | 497 |
| | 5 |
| | 502 |
| | — |
| | 2017 | | n/a |
| MISSISSIPPI | | | | | | | | | | | | | | | | | | | | |
Metro Airport Commerce Center II land | | — |
| | 307 |
| | — |
| | 399 |
| | 307 |
| | 399 |
| | 706 |
| | — |
| | 2001 | | n/a |
| | | — |
| | 103,827 |
| | 18,966 |
| | 119,221 |
| | 106,394 |
| | 135,620 |
| | 242,014 |
| | 326 |
| | | | |
| Total real estate owned (a)(b) | | $ | 200,354 |
| | 447,081 |
| | 1,049,394 |
| | 1,080,998 |
| | 451,818 |
| | 2,125,655 |
| | 2,577,473 |
| | 749,601 |
| | | | |
See accompanying Report of Independent Registered Public Accounting Firm. | | |
| | | | |
(a) Changes in Real Estate Properties follow:
|
| | | | | | | | | |
| | Years Ended December 31, |
| 2017 | | 2016 | | 2015 |
| (In thousands) |
| Balance at beginning of year | $ | 2,406,981 |
| | 2,219,448 |
| | 2,074,946 |
|
| Purchases of real estate properties | 51,802 |
| | 22,228 |
| | 28,648 |
|
| Development of real estate properties | 124,938 |
| | 203,765 |
| | 95,032 |
|
| Improvements to real estate properties | 27,471 |
| | 23,157 |
| | 25,778 |
|
| Carrying amount of investments sold | (32,787 | ) | | (61,121 | ) | | (4,750 | ) |
| Write-off of improvements | (932 | ) | | (496 | ) | | (206 | ) |
Balance at end of year (1) | $ | 2,577,473 |
| | 2,406,981 |
| | 2,219,448 |
|
| |
| (1) | Includes 20% noncontrolling interest in University Business Centerjoint ventures of $3,217,000$3,148,000 and $6,853,000$3,296,000 at December 31, 20172019 and 2016,2018, respectively. |
Changes in the accumulated depreciation on real estate properties follow:
|
| | | | | | | | | |
| | Years Ended December 31, |
| 2019 | | 2018 | | 2017 |
| (In thousands) |
| Balance at beginning of year | $ | 814,915 |
| | 749,601 |
| | 694,250 |
|
| Depreciation expense | 86,590 |
| | 76,007 |
| | 69,010 |
|
| Accumulated depreciation on assets sold | (27,030 | ) | | (8,670 | ) | | (12,735 | ) |
| Other | (3,336 | ) | | (2,023 | ) | | (924 | ) |
| Balance at end of year | $ | 871,139 |
| | 814,915 |
| | 749,601 |
|
|
| | | | | | | | | |
| | Years Ended December 31, |
| 2017 | | 2016 | | 2015 |
| (In thousands) |
| Balance at beginning of year | $ | 694,250 |
| | 657,454 |
| | 600,526 |
|
| Depreciation expense | 69,010 |
| | 63,793 |
| | 59,882 |
|
| Accumulated depreciation on assets sold | (12,735 | ) | | (26,501 | ) | | (2,748 | ) |
| Other | (924 | ) | | (496 | ) | | (206 | ) |
| Balance at end of year | $ | 749,601 |
| | 694,250 |
| | 657,454 |
|
| |
| (b) | The estimated aggregate cost of real estate properties at December 31, 20172019 for federal income tax purposes was approximately $2,536,820,000$3,179,014,000 before estimated accumulated tax depreciation of $518,257,000.$619,405,000. The federal income tax return for the year ended December 31, 2017,2019, has not been filed and accordingly, this estimate is based on preliminary data. |
| |
| (c) | The Company computes depreciation using the straight-line method over the estimated useful lives of the buildings (generally 40 years) and improvements (generally 3 to 15 years). |
| |
| (d) | The Company transfers properties from the development projectsand value-add program to Real estate properties the earlier of 80% occupancy or one year after completion of the shell construction. Effective January 1, 2018, the Company is implementing an accounting policy change and will begin transferring as follows: (i) for development properties, from Development to Real estate properties at the earlier of 90% occupancy or one year after completion of the shell construction.construction, and (ii) for value-add properties, at the earlier of 90% occupancy or one year after acquisition. Upon the earlier of 90% occupancy or one year after completion of the shell construction, capitalization of development costs, including interest expense, property taxes and internal personnel costs, ceases and depreciation commences on the entire property (excluding the land). |
| |
| (e) | EastGroup has a $49,580,000 non-recourse first mortgage loan with an insurance company secured by Dominguez, Industry I & III, Kingsview, Shaw, Walnut and Washington. |
| |
(f) | EastGroup has a $55,317,000$48,772,000 non-recourse first mortgage loan with an insurance company secured by 40th Avenue, Beltway Crossing V, Centennial Park, Executive Airport, Interchange Park I, Ocean View, Wetmore 5-8 and World Houston 26, 28, 29 & 30. |
| |
(g)(f) | EastGroup has a $50,161,000$44,596,000 non-recourse first mortgage loan with an insurance company secured by Colorado Crossing, Interstate I-III, Rojas, Steele Creek 1 & 2, Venture and World Houston 3-9.3-4 and 6-9. |
| |
(h)(g) | EastGroup has a $42,315,000$37,682,000 non-recourse first mortgage loan with an insurance company secured by Arion 18, Beltway Crossing VI & VII, Commerce Park II & III, Concord, Interstate V-VII, Lakeview, Ridge Creek II, Southridge IV & V and World Houston 32. |
SCHEDULE IV
MORTGAGE LOANS ON REAL ESTATE
December 31, 20172019
| | | | Number of Loans | | Interest Rate | | Maturity Date | | Periodic Payment Terms | Number of Loans | | Interest Rate | | Maturity Date | | Periodic Payment Terms |
| First mortgage loans: | | | | | | | | |
| JCB Limited - California | 1 | | 5.15 | % | | December 2022 | | Principal and interest due monthly | |
| First mortgage loan: | | | | | | | | |
| JCB Limited - California | 1 | | 5.15 | % | | December 2022 | | Principal and interest due monthly | 1 | | 5.15 | % | | December 2022 | | Principal and interest due monthly |
| Total mortgage loans (a) | 2 | | |
| | | | | 1 | | |
| | | | |
| | | | Face Amount of Mortgages Dec. 31, 2017 | | Carrying Amount of Mortgages | | Principal Amount of Loans Subject to Delinquent Principal or Interest (b) | Face Amount of Mortgages Dec. 31, 2019 | | Carrying Amount of Mortgages | | Principal Amount of Loans Subject to Delinquent Principal or Interest (b) |
| | (In thousands) | (In thousands) |
| First mortgage loans: | | | | | | | | | | |
| JCB Limited - California | $ | 1,826 |
| | 1,826 |
| | — |
| $ | 1,679 |
| | 1,679 |
| | — |
|
| JCB Limited - California | 2,755 |
| | 2,755 |
| | — |
| |
| Total mortgage loans | $ | 4,581 |
| | 4,581 | (c)(d) | | — |
| $ | 1,679 |
| | 1,679 | (c)(d) | | — |
|
| |
| (a) | Reference is made to allowance for possible losses on mortgage loans receivable in the Notes to Consolidated Financial Statements. |
| |
| (b) | Interest in arrears for three months or less is disregarded in computing principal amount of loans subject to delinquent interest. |
| |
| (c) | Changes in mortgage loans follow: |
|
| | | | | | | | | |
| | Years Ended December 31, |
| 2019 | | 2018 | | 2017 |
| (In thousands) |
| Balance at beginning of year | $ | 2,594 |
| | 4,581 |
| | 4,752 |
|
| Payments on mortgage loans receivable | (915 | ) | | (1,987 | ) | | (171 | ) |
| Balance at end of year | $ | 1,679 |
| | 2,594 |
| | 4,581 |
|
|
| | | | | | | | | |
| | Years Ended December 31, |
| 2017 | | 2016 | | 2015 |
| (In thousands) |
| Balance at beginning of year | $ | 4,752 |
| | 4,875 |
| | 4,991 |
|
| Payments on mortgage loans receivable | (171 | ) | | (123 | ) | | (116 | ) |
| Balance at end of year | $ | 4,581 |
| | 4,752 |
| | 4,875 |
|
(d) The aggregate cost for federal income tax purposes is approximately $4.58$1.68 million. The federal income tax return for the year ended December 31, 2017,2019, has not been filed and, accordingly, the income tax basis of mortgage loans as of December 31, 2017,2019, is based on preliminary data.
See accompanying Report of Independent Registered Public Accounting Firm.
ITEM 16. FORM 10-K SUMMARY.
None.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
|
| | |
| | EASTGROUP PROPERTIES, INC. | |
| | | |
| | By: /s/ MARSHALL A. LOEB | |
| | Marshall A. Loeb, Chief Executive Officer, President &and Director | |
| | February 14, 201813, 2020 | |
We, the undersigned officers and directors of EastGroup Properties, Inc., hereby severally constitute and appoint Brent W. Wood as our true and lawful attorney, with full power to sign for us and in our names in the capacities indicated below, any and all amendments to this Annual Report on Form 10-K and generally to do all such things in our name and behalf in such capacity to enable EastGroup Properties, Inc. to comply with the applicable provisions of the Securities Exchange Act of 1934, as amended, and we hereby ratify and confirm our signatures as they may be signed by our said attorney to any and all such amendments.
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.
|
| | |
* /s/ D. Pike Aloian | | * /s/ H. C. Bailey, Jr. |
| D. Pike Aloian, Director | | H. C. Bailey, Jr., Director |
February 14, 201813, 2020 | | February 14, 201813, 2020 |
| | | |
* /s/ H. Eric Bolton, Jr. | | * /s/ Donald F. Colleran |
| H. Eric Bolton, Jr., Director | | Donald F. Colleran, Director |
February 14, 201813, 2020 | | February 14, 201813, 2020 |
| | | |
* /s/ Hayden C. Eaves III | | * /s/ Mary Elizabeth McCormick |
| Hayden C. Eaves III, Director | | Fredric H. Gould,Mary Elizabeth McCormick, Director |
February 14, 201813, 2020 | | February 14, 201813, 2020 |
| | | |
* /s/ Leland R. Speed | | * /s/ David H. Hoster II |
Mary Elizabeth McCormick, Director | | Leland R. Speed, Chairman Emeritus of the Board |
February 14, 2018 | | February 14, 2018 |
| | |
* | | /s/ BRENT W. WOOD |
| David H. Hoster II, Chairman of the Board | | * By Brent W. Wood, Attorney-in-fact |
February 14, 201813, 2020 | | February 14, 201813, 2020 |
| | |
|
| |
| /s/ MARSHALL A. LOEB | |
| Marshall A. Loeb, Chief Executive Officer, | |
President &and Director | |
| (Principal Executive Officer) | |
February 14, 201813, 2020 | |
| | |
| /s/ BRUCE CORKERN | |
Bruce Corkern, Sr.Senior Vice-President, Chief Accounting Officer | |
| and Secretary | |
| (Principal Accounting Officer) | |
February 14, 201813, 2020 | |
| | |
| /s/ BRENT W. WOOD | |
| Brent W. Wood, Executive Vice-President, | |
| Chief Financial Officer and Treasurer | |
| (Principal Financial Officer) | |
February 14, 201813, 2020 | |
EXHIBIT INDEX
The following exhibits are filed with this Form 10-K or incorporated by reference to the listed document previously filed with the SEC:
|
| |
Number | Description |
(3) | Articles of Incorporation and Bylaws |
(a) | Articles of Incorporation (incorporated by reference to Appendix B to the Company's Proxy Statement for its Annual Meeting of Stockholders held on June 5, 1997). |
(b) | Amended and Restated Bylaws of EastGroup Properties, Inc. (incorporated by reference to Exhibit 3.1 to the Company's Form 8-K filed March 3, 2017). |
| |
(10) | Material Contracts (*Indicates management or compensatory agreement): |
(a) | Form of Severance and Change in Control Agreement that the Company has entered into with Marshall A. Loeb, Brent W. Wood and John F. Coleman (incorporated by reference to Exhibit 10(a) to the Company's Form 8-K filed May 18, 2016).* |
(b) | Form of Severance and Change in Control Agreement that the Company has entered into with Ryan M. Collins, C. Bruce Corkern and R. Reid Dunbar (incorporated by reference to Exhibit 10(b) to the Company's Form 8-K filed May 18, 2016).* |
(c) | Third Amended and Restated Credit Agreement Dated January 2, 2013 among EastGroup Properties, L.P.; EastGroup Properties, Inc.; PNC Bank, National Association, as Administrative Agent; Regions Bank and SunTrust Bank as Co-Syndication Agents; U.S. Bank National Association and Wells Fargo Bank, National Association as Co-Documentation Agents; PNC Capital Markets LLC, as Sole Lead Arranger and Sole Bookrunner; and the Lenders thereunder (incorporated by reference to Exhibit 10.1 to the Company's Form 8-K filed January 8, 2013). |
(d) | First Amendment to Third Amended and Restated Credit Agreement, dated as of August 9, 2013, among EastGroup Properties, L.P., EastGroup Properties, Inc. and PNC Bank, National Association, as administrative agent, and each of the financial institutions party thereto as lenders (incorporated by reference to Exhibit 10.2 to the Company's Form 8-K filed August 30, 2013). |
(e) | Second Amendment to Third Amended and Restated Credit Agreement dated as of July 30, 2015 by and among EastGroup Properties, L.P.; EastGroup Properties, Inc.; PNC Bank, National Association, as Administrative Agent; and each of the financial institutions party thereto as lenders (incorporated by reference to Exhibit 10.1 to the Company's Form 8-K filed August 4, 2015). |
(f) | EastGroup Properties, Inc. 2013 Equity Incentive Plan, as amended and restated as of March 3, 2017 (incorporated by reference to Exhibit 10.1 to the Company's Form 8-K filed March 3, 2017).* |
| EastGroup Properties, Inc. Director Compensation Program (filed herewith).* |
(h) | Note Purchase Agreement, dated as of August 28, 2013, among EastGroup Properties, L.P., EastGroup Properties, Inc. and the purchasers of the notes party thereto (including the form of the 3.80% Senior Notes due August 28, 2025) (incorporated by reference to Exhibit 10.1 to the Company's Form 8-K filed August 30, 2013). |
(i) | Amended and Restated Sales Agency Financing Agreement dated March 6, 2017 between EastGroup Properties, Inc. and BNY Mellon Capital Markets, LLC (incorporated by reference to Exhibit 1.1 to the Company's Form 8-K filed March 10, 2017). |
(j) | Amended and Restated Sales Agency Financing Agreement dated March 6, 2017 between EastGroup Properties, Inc. and Merrill Lynch, Pierce, Fenner & Smith Incorporated (incorporated by reference to Exhibit 1.2 to the Company's Form 8-K filed March 10, 2017). |
(k) | Amended and Restated Sales Agency Financing Agreement dated March 6, 2017 between EastGroup Properties, Inc. and Raymond James & Associates, Inc. (incorporated by reference to Exhibit 1.3 to the Company's Form 8-K filed March 10, 2017). |
(l) | Sales Agency Financing Agreement dated March 6, 2017 between EastGroup Properties, Inc. and Jefferies LLC (incorporated by reference to Exhibit 1.4 to the Company's Form 8-K filed March 10, 2017). |
| |
| Statement of computation of ratio of earnings to combined fixed charges and preferred stock distributions (filed herewith). |
| |
|
| |
| Subsidiaries of EastGroup Properties, Inc. (filed herewith). |
| |
| Consent of KPMG LLP (filed herewith). |
| |
| Powers of attorney (filed herewith). |
| |
(31) | Rule 13a-14(a)/15d-14(a) Certifications (pursuant to Section 302 of the Sarbanes-Oxley Act of 2002) |
| Marshall A. Loeb, Chief Executive Officer |
| Brent W. Wood, Chief Financial Officer |
| |
(32) | Section 1350 Certifications (pursuant to Section 906 of the Sarbanes-Oxley Act of 2002) |
| Marshall A. Loeb, Chief Executive Officer |
| Brent W. Wood, Chief Financial Officer |
| |
(99) | Material United States Federal Income Tax Considerations (incorporated by reference to Exhibit 99.1 to the Company's Form 8-K filed February 14, 2018). |
| |
(101) | The following materials from EastGroup Properties, Inc.’s Annual Report on Form 10-K for the year ended December 31, 2017, formatted in XBRL (eXtensible Business Reporting Language): (i) consolidated balance sheets, (ii) consolidated statements of income and comprehensive income, (iii) consolidated statements of changes in equity, (iv) consolidated statements of cash flows, and (v) the notes to the consolidated financial statements. |
