What changed in EASTGROUP PROPERTIES INC's 10-K — 2022 vs 2023

As of February 14, 2023, the properties which were in the development and value-add program at year-end were approximately 38% leased. During 2022, EastGroup increased its holdings in real estate properties through its acquisition and development programs. The Company acquired 2,750,000 square feet of operating and value-add properties and 456.3 acres of land for a total of $605,768,000.

Also during 2022, the Company began construction of 14 development projects containing 2.7 million square 5 feet and transferred 19 projects, which contain 3.6 million square feet and had costs of $461,329,000 at the date of transfer, from its development and value-add program to real estate properties.

During 2022, EastGroup sold three operating properties containing 287,000 square feet, which generated gross proceeds of $52,410,000.

The Company typically initially funds its development and acquisition programs through its unsecured bank credit facilities; the total capacity of which was increased in January 2023 by $200,000,000, from $475,000,000 to $675,000,000 (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 or employs fixed rate debt, including variable rate debt that has been swapped to an effectively fixed rate through the use of interest rate swaps, to replace short-term bank borrowings. Moody’s Investors Service has assigned 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 rate debt, including variable 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. 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.

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.

Regulations Compliance with various governmental regulations has an impact on EastGroup’s business, including EastGroup’s capital expenditures, earnings and competitive position, which can be material.

EastGroup incurs costs to monitor and take actions to comply with governmental regulations that are applicable to its business, which include, among others, federal securities laws and regulations, applicable stock exchange requirements, REIT and other tax laws and regulations, environmental and health and safety laws and regulations, local zoning, usage and other regulations relating to real property, and the Americans with Disabilities Act of 1990 (“ADA”).

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 subject to Phase I Environmental Site Assessments (“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.

Our 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. 6 See “ Item 1A. Risk Factors “ in this Annual Report for a discussion of material risks to EastGroup, including related to governmental regulations and environmental matters.

Environmental, Social and Governance (“ESG”) Matters EastGroup’s commitment to ESG initiatives is evidenced by its building standards, corporate policies and procedures and company culture. At EastGroup, protecting the environment is important to the Company’s employees, 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”), Building Owners and Managers Association 360 and ENERGY STAR certified, and while formal certification is not always pursued, the Company builds all of its development properties with the intention of meeting LEED certifiable standards.

The Company consistently invests in energy-efficient improvements throughout its portfolio, such as LED lighting, skylights, white reflective roofing, electric vehicle charging stations and smart sensor irrigation systems. The Company strives for efficiency in operating properties with innovative solutions that are intended to lower operational costs and reduce the environmental footprint.

In June 2021, the Company amended and restated its unsecured revolving credit facility and unsecured working cash credit facility. The new credit facilities provide for an incremental reduction in borrowing costs if a certain sustainability-linked metric is achieved.

This metric is based on a target number of newly-constructed buildings with qualifying electric vehicle charging stations as a percentage of total qualifying buildings for each fiscal year and allows for the reduction of the applicable interest margin by one basis point upon satisfaction of these targets.

The baseline, which will be measured annually beginning with the year ended December 31, 2022, was determined to be 20% based on activity during the year ended December 31, 2021. The Company exceeded the target of 20% for the year ended December 31, 2022.

The Company believes that its continued commitment to pursue environmentally conscious performance and standards through sustainability best practices creates positive impacts on the environment and creates long-term value for the Company and its stakeholders. During 2021, EastGroup hired a full-time Director of Corporate Sustainability to focus on all aspects of the Company's ESG initiatives.

During 2022, the Company furthered its commitment to ESG initiatives by partnering with a sustainability consulting firm and also beginning to utilize an environmental data management platform, with the goal of more reliably tracking and benchmarking operational performance.

The Company released a Corporate Green Office Guide during 2022, which contains best environmental practices for its corporate offices, and it continues to seek additional ways to engage with tenants on environmental matters, including recycling initiatives, Earth Day celebrations, and other tenant appreciation events at certain properties.

In addition, EastGroup and its employees are committed to social responsibility and are active participants in the communities where they live and work.

EastGroup’s employees volunteer for numerous charities, and the Company coordinates volunteer opportunities for its employees and provides paid time off for volunteering in order to encourage participation and increase social engagement in all of the communities in which it operates.

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 stakeholders.

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.

Readers are encouraged to visit the “Priorities” page of the Company's website and review its 2022 Environmental, Social & Governance Report for more detail regarding EastGroup's ESG programs and initiatives. Nothing on the Company's website or in the referenced report shall be deemed to be incorporated by reference into this Annual Report on Form 10-K.

Human Capital Matters We believe our employees are a critical component of the success and sustainability of our Company, and we are committed to providing a diverse and inclusive work environment that encourages collaboration and teamwork. • Workforce Diversity: As of February 14, 2023, we employed 87 team members located in 12 offices in Arizona, California, Florida, Georgia, Mississippi, North Carolina and Texas.

As of February 14, 2023, 100% of our employees were full-time and none were members of a union or subject to a collective bargaining agreement.

Our team is comprised of the following types of personnel: • asset, construction and property managers; • accounting, administrative, human resources and information technology professionals; and • our corporate leadership team. 7 Our current employee base is gender diverse with 76% identifying as women and 91% of new hires in 2022 identifying as women.

The officer group is comprised of 42% women and 58% men. 18% of our employees identify as racial or ethnic minorities. Our Board of Directors is 22% comprised of women, and one of nine Board members identifies as a racial or ethnic minority.

With 87 employees and 9 directors, each team member plays a vital role in the success of the Company. • Employee Tenure: We believe our culture supports our employees and creates a positive, professional environment that encourages longevity for our team members. We seek to develop leaders and promote from within the organization when opportunities arise.

As of February 14, 2023, 79% of our employees at the manager level and above were promoted from within the Company. The average tenure of our workforce is 9 years, and 12 years for our officers.

Our voluntary turnover rate was 5.7% in 2022. • Compensation, Benefits, Health and Safety: We offer a comprehensive employee benefits program and what we believe are socially-responsible policies and practices in order to support the overall well-being of our employees and create a safe, professional and inclusive work environment.

Some of the benefits we offer include a robust 401(k) matching program, company-wide equity award program, generous personal leave policy, paid parental leave, flexible work schedules, paid time off for volunteering, annual health and wellness checkups, employer-paid health insurance for all full-time employees, tobacco cessation program, athletic club and tuition reimbursement programs, and a competitive pay structure.

All of our employees are salaried employees and are eligible for performance-based annual bonuses based on a percentage of salary. • Training and Development: We have a formal, certificate-based learning program for all employees; learning objectives include topics such as diversity and inclusion, unconscious bias, anti-harassment and data security.

Our employees are provided with training, education and peer mentoring programs to further develop their professional skill set, enhancing the level of customer service provided to our customers and the quality of information disclosed to our stakeholders. • Policies: We have various policies and practices in place, including a Code of Ethics and Business Conduct, Whistleblower Program, Equal Opportunity and Commitment to Diversity, Human Rights Statement, Vendor Code of Conduct, ADA & Reasonable Accommodation, Commitment to Safety, Community Service, Family Medical Leave, Maternity and Paternity Leave, Standards of Conduct, Corporate Green Office Guide, Workplace Violence Prevention, Healthy, Wealthy, Wise Benefits Summary, and Cybersecurity. • Company and Board Engagement: We value our employees, and our focus on human capital management and other socially-responsible initiatives is at the forefront of discussions and decisions with both management and the Board of Directors.

On a regular basis, Company management holds ESG-related discussions with the Board of Directors; in 2022, our management and the Board of Directors formally met to discuss these topics four times.

The Nominating and Corporate Governance Committee of the Board of Directors has direct oversight over ESG and met for one formal discussion on ESG and also received periodic updates from Company management. Supplemental U.S.

Federal Income Tax Considerations The following discussion supplements and updates the disclosures under “Certain United States Federal Income Tax Considerations” in the prospectus dated December 16, 2022, contained in our Registration Statement on Form S-3 filed with the SEC on December 16, 2022.

Capitalized terms herein that are not otherwise defined shall have the same meaning as when used in such disclosures (as supplemented). On December 29, 2022, the IRS promulgated final Treasury Regulations under Sections 897, 1441, 1445, and 1446 of the Code that were, in part, intended to coordinate various withholding regimes for non-U.S. stockholders.

The new Treasury Regulations provide that: (i) The withholding rules applicable to ordinary REIT dividends paid to a non-U.S. stockholder (generally, a 30% rate of withholding on gross amounts unless otherwise reduced by treaty or effectively connected with such non-U.S. stockholder’s trade or business within the U.S. and proper certifications are provided) will apply to (a) that portion of any distribution paid by us that is not designated as a capital gain dividend, a return of basis or a distribution in excess of the non-U.S. stockholder’s adjusted basis in its stock that is treated as gain from the disposition of such stock and (b) any portion of a capital gain dividend paid by us that is not treated as gain attributable to the sale or exchange of a U.S. real property interest by reason of the recipient not owning more than 10% of a class of our stock that is regularly traded on an established securities market during the one-year period ending on the date of the capital gain dividend. 8 (ii) The withholding rules under FIRPTA will apply to a distribution paid by us in excess of a non-U.S. stockholder’s adjusted basis in our stock, unless the interest in our stock is not a U.S. real property interest (for example, because we are a domestically controlled qualified investment entity) or the distribution is paid to a “withholding qualified holder.” A “withholding qualified holder” means a qualified holder (as defined below) and a foreign partnership all of the interests of which are held by qualified holders, including through one or more partnerships.

(iii) The withholding rules under FIRPTA will apply to any portion of a capital gain dividend paid to a non-U.S. stockholder that is attributable to the sale or exchange of a U.S. real property interest, unless it is paid to a withholding qualified holder.

In the case of FIRPTA withholding under clause (ii) above, the applicable withholding rate is currently 15%, and in the case of FIRPTA withholding under clause (iii) above the withholding rate is currently 21%.

For purposes of FIRPTA withholding under clause (iii), whether a capital gain dividend is attributable to the sale or exchange of a U.S. real property interest is determined taking into account the general exception from FIRPTA distribution treatment for distributions paid to certain non-U.S. stockholders under which any distribution by us to a non-U.S. stockholder with respect to any class of stock which is regularly traded on an established securities market located in the United States is not treated as gain recognized from the sale or exchange of a U.S. real property interest if such non-U.S. stockholder did not own more than 10% of such class of stock at any time during the 1-year period ending on the date of such distribution.

To the extent inconsistent, these Treasury Regulations supersede the discussion on withholding contained in the above-referenced disclosures (as supplemented) under the heading “Taxation of Non-U.S.

Shareholders.” However, if, notwithstanding these Treasury Regulations, we encounter difficulties in properly characterizing a distribution for purposes of the withholding rules, we may decide to withhold on such distribution at the highest possible U.S. federal withholding rate that we determine could apply. New Treasury Regulations also provide new guidance regarding qualified foreign pension funds.

Accordingly, the discussion contained in the paragraph under “Certain United States Federal Income Tax Considerations – Taxation of Non-U.S. Shareholders – Qualified Foreign Pension Funds” is hereby deleted and replaced with the following: Qualified Foreign Pension Funds .

In general, for FIRPTA purposes, and subject to the discussion below regarding “qualified holders,” neither a “qualified foreign pension fund” (as defined below) nor any entity all of the interests of which are held by a qualified foreign pension fund is treated as a foreign person, thereby exempting such entities from tax under FIRPTA.

A “qualified foreign pension fund” is an organization or arrangement (i) created or organized in a foreign country, (ii) established by a foreign country (or one or more political subdivisions thereof) or one or more employers to provide retirement or pension benefits to current or former employees (including self-employed individuals) or their designees as a result of, or in consideration for, services rendered, (iii) which does not have a single participant or beneficiary that has a right to more than 5% of its assets or income, (iv) which is subject to government regulation and with respect to which annual information about its beneficiaries is provided, or is otherwise available, to relevant local tax authorities and (v) with respect to which, under its local laws, (A) contributions that would otherwise be subject to tax are deductible or excluded from its gross income or taxed at a reduced rate, or (B) taxation of its investment income is deferred, or such income is excluded from its gross income or taxed at a reduced rate.

Under Treasury Regulations, subject to the discussion below regarding “qualified holders,” a “qualified controlled entity” also is not generally treated as a foreign person for purposes of FIRPTA.

A qualified controlled entity generally includes a trust or corporation organized under the laws of a foreign country all of the interests of which are held by one or more qualified foreign pension funds either directly or indirectly through one or more qualified controlled entities.

Treasury Regulations further require that a qualified foreign pension fund or qualified controlled entity will not be exempt from FIRPTA with respect to dispositions of U.S. real property interests or REIT distributions attributable to the same unless the qualified foreign pension fund or qualified controlled entity is a “qualified holder.” To be a qualified holder, a qualified foreign pension fund or qualified controlled entity must satisfy one of two alternative tests at the time of the disposition of the U.S. real property interest or the REIT distribution.

Under the first test, a qualified foreign pension fund or qualified controlled entity is a qualified holder if it owned no U.S. real property interests as of the earliest date during an uninterrupted period ending on the date of the disposition or distribution during which it qualified as a qualified foreign pension fund or qualified controlled entity.

Alternatively, if a qualified foreign pension fund or qualified controlled entity held U.S. real property interests as of the earliest date during the period described in the preceding sentence, it can be a qualified holder only if it satisfies certain testing period requirements.

Treasury Regulations also provide that a foreign partnership all of the interests of which are held by qualified holders, including through one or more partnerships, may certify its status as such and will not be treated as a foreign person for purposes of withholding under Section 1445 of the Code (and Section 1446 of the Code, as applicable). 9

The discontinuation of London Interbank Offered Rate (“LIBOR”) and the replacement of LIBOR with an alternative reference rate may adversely affect our borrowing costs and could impact our business and results of operations.

In the U.S., the Alternative Reference Rates Committee (“AARC”), which was convened by the Federal Reserve Board and the Federal Reserve Bank of New York, has recommended the Secured Overnight Financing Rate (“SOFR”) plus a recommended spread adjustment as its preferred alternative to USD-LIBOR-BBA.

There are significant differences between LIBOR and SOFR, such as LIBOR being an unsecured lending rate while SOFR is a secured rate, and SOFR is an overnight rate while LIBOR reflects term rates at different maturities. We expect that all LIBOR settings relevant to us will cease to be published or will no longer be representative after June 30, 2023.

As a result, any of our LIBOR-based borrowings and hedges that extend beyond such date have been amended to modify the index from LIBOR to SOFR. Concurrently, the related swaps were amended to reference SOFR rather than LIBOR.

While we expect LIBOR to be available in substantially its current form until June 30, 2023, 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 LIBOR administrator.

Pandemics, such as COVID-19, and mitigation efforts to control their spread may impact our business, financial condition, results of operations and cash flows .

The COVID-19 pandemic, including the ongoing emergence of viral variants, has caused and could continue to cause widespread disruptions to the U.S. and global economy and has contributed to significant volatility and negative pressure in financial markets.

Our financial condition, results of operations and cash flows are affected by our ability to lease our properties and collect rental revenues, renew our leases or lease vacant space on favorable terms, and the health and well-being of our customers, employees and other stakeholders, all of which could be adversely affected by COVID-19 or other pandemics.

In addition, to the extent the COVID-19 pandemic, its macroeconomic effects or the government responses thereto adversely affect our business, financial condition, results of operations and cash flows, they may also have the effect of heightening many of the other risks described in “Item 1A. Risk Factors” in this Annual Report on Form 10-K. ITEM 1B. UNRESOLVED STAFF COMMENTS. None.

ITEM 2. PROPERTIES. EastGroup owned 487 industrial properties and one office building at December 31, 2022. 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 14, 2023, EastGroup’s operating portfolio was 98.4% leased and 98.0% occupied by approximately 1,600 tenants, with no single tenant accounting for more than approximately 2.1% of the Company’s income from real estate operations.

The Company has developed approximately 48% of its total portfolio (on a square foot basis), which includes 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 (91% of the total portfolio) with the remainder in bulk distribution space (7%) and business service space (2%).

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, 2022, 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. 16 The Company’s lease expirations are detailed below: Years Ending December 31, Number of Leases Expiring (1) Total Area of Leases Expiring (in Square Feet) (1) Annualized Current Base Rent of Leases Expiring (1) (2) % of Total Base Rent of Leases Expiring (1) 2023 (3) 249 5,299,000 $ 38,289,000 10.3% 2024 297 7,905,000 $ 55,420,000 14.9% 2025 300 8,073,000 $ 60,176,000 16.2% 2026 279 8,800,000 $ 67,607,000 18.2% 2027 256 8,461,000 $ 66,376,000 17.9% 2028 98 3,728,000 $ 25,752,000 6.9% 2029 56 2,695,000 $ 19,518,000 5.3% 2030 30 1,592,000 $ 8,779,000 2.4% 2031 20 934,000 $ 8,559,000 2.3% 2032 and beyond 38 3,859,000 $ 20,602,000 5.6% (1) Does not include lease renewal options.

(2) Represents the monthly cash rental rates, excluding tenant expense reimbursements, as of December 31, 2022, multiplied by 12 months. (3) Includes month-to-month leases.