SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
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FORM 10-Q
Quarterly Report Under Section 13 or 15(d)
of the Securities Exchange Act of 1934
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For Quarter Ended September 30, 1995
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Commission File Number 1 - 7094
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EASTGROUP PROPERTIES
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(Exact name of Registrant specified in its charter)
Maryland 13-2711135
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(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
300 One Jackson Place
188 East Capitol Street
P.O. Box 22728
Jackson, Mississippi 39201-2195
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(Address of principal executive offices) Zip Code
Issuer's telephone number, including area code (601) 354-3555
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Former name, former address and former fiscal year,
if changed since last report
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
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4,226,656 shares of beneficial interest ($1.00 par value) were
outstanding at November 1, 1995.
EASTGROUP PROPERTIES
FORM 10-Q
TABLE OF CONTENTS
FOR THE QUARTER ENDED SEPTEMBER 30, 1995
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Pages
Part I. Financial Information
Item 1. Consolidated financial statements
Consolidated balance sheets, September 30,
1995 and December 31, 1994 3
Consolidated statements of income
for the three months ended
September 30, 1995 and 1994 4
Consolidate statements of income
for the nine months ended
September 30, 1995 and 1994 5
Consolidated statements of cash flow for the
nine months ended September 30, 1995
and 1994 6
Consolidated statements of changes in
shareholders' equity for the nine months
ended September 30, 1995 and 1994 8
Notes to consolidated financial statements 9
Item 2. Management's discussion and analysis of
financial condition and results of operations 10
Part II. Other Information
Item 4. Submission of Matters to a Vote of
Security Holders 19
Item 6. Exhibits and Reports on Form 8-K 19
Signatures
Authorized signatures 20
CONSOLIDATED BALANCE SHEETS
(In thousands, except per share data)
September 30, December 31,
1995 1994
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Assets
Real estate properties
Industrial $ 71,948 $ 69,214
Apartments 52,946 51,076
Office Buildings 33,603 35,500
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158,497 155,790
Less accumulated depreciation (19,226) (15,888)
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139,271 139,902
Mortgage loans 5,984 8,817
Land and land purchase-leasebacks 1,327 2,320
Investment in real estate
investment trusts 10,159 954
Cash and cash equivalents 159 301
Other assets 3,493 2,566
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$ 160,393 $ 154,860
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Liabilities and Shareholders' Equity
Liabilities
Mortgage notes payable 62,202 $ 39,558
Notes payable to banks 13,835 28,671
Accounts payable and accrued expenses 1,791 1,167
Minority interests in joint ventures 922 2,848
Other liabilities 398 440
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79,148 72,684
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Shareholders' Equity
Shares of beneficial interest, par value
$1.00 per share; authorized 10,000,000
shares; issued 4,226,656 shares in 1995
and 4,221,669 in 1994 4,227 4,222
Additional paid-in-capital 68,269 68,210
Unrealized gain (loss) on securities (2) 21
Undistributed earnings 8,751 9,723
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81,245 82,176
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$ 160,393 $ 154,860
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See accompanying notes to consolidated financial statements
CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
(In thousands, except per share data)
Three Months Ended
September 30,
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1995 1994
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Revenues
Income from real estate operations $ 7,299 5,991
Land rents 40 76
Equity in earnings of real estate
investment trust 14 3
Interest:
Mortgage loans 255 272
Other interest - 1
Other 124 30
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7,732 6,373
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Expenses
Operating expenses from
real estate operations 3,069 2,506
Interest expense 1,505 957
Depreciation and amortization 1,536 1,175
Minority interests in joint ventures 40 47
General and administrative expense 518 488
Stock appreciation rights
(recovery) expense - -
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6,668 5,173
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Income from operations 1,064 1,200
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Gain on investments
Real estate - -
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Net Income $ 1,064 1,200
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Per share of beneficial interest
Income from operations .25 .28
Gain on investments - -
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Net Income .25 .28
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Weighted average shares outstanding 4,227 4,211
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See accompanying notes to consolidated financial statements
CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
(In thousands, except per share data)
Nine Months Ended
September 30,
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1995 1994
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Revenues
Income from real estate operations 21,427 16,383
Land rents 177 308
Equity in earnings of real estate
investment trust 167 134
Interest:
Mortgage loans 800 791
Other interest - 13
Other 224 104
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22,795 17,733
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Expenses
Operating expenses from
real estate operations 8,762 6,896
Interest expense 4,508 2,392
Depreciation and amortization 4,371 3,149
Minority interests in joint ventures 185 112
General and administrative expense 1,604 1,495
Stock appreciation rights
(recovery) expense - (136)
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19,430 13,908
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Income from operations 3,365 3,825
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Gain on investments
Real estate 1,451 2,494
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Net Income 4,816 6,319
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Per share of beneficial interest
Income from operations .80 .94
Gain on investments .34 .61
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Net Income 1.14 1.55
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Weighted average shares outstanding 4,224 4,076
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See accompanying notes to consolidated financial statements
CONSOLIDATED STATEMENTS OF CASH FLOW (Unaudited)
(In thousands)
Nine Months Ended
September 30,
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1995 1994
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Operating Activities
Net Income $ 4,816 $ 6,319
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation and amortization 4,371 3,149
Stock appreciation rights - (136)
Gain on investments, net (1,451) (2,494)
Real estate investments trust:
Equity in earnings (167) (134)
Dividends received from operations 105 48
Other (95) (37)
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Funds from operations 7,579 6,715
Changes in operating assets
and liabilities:
Accrued income and other assets 588 206
Accounts payable, accrued expenses
and prepaid rent (1,276) 366
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Net cash provided by operating activities 6,891 7,287
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Investing Activities
Payments on mortgage loans receivable 1,975 567
Advances on mortgage loans receivable (150) (675)
Sale of real estate investments 3,843 3,491
Purchase of real estate (806) (39,694)
Purchase of real estate investment trusts
shares (9,263) -
Purchases of real estate improvements (2,869) (3,653)
Return of capital dividends 87 197
Change in other assets and
other liabilities (1,934) (626)
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Net cash used in investing activities (9,117) (40,393)
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Financing Activities
Proceeds from mortgage notes payables 26,800 7,800
Proceeds from bank borrowings 25,295 31,609
Principal payments on bank borrowings (40,131) (29,417)
Principal payments on mortgage notes
payable (4,156) (6,013)
Distributions paid to shareholders (5,788) (5,432)
Net proceeds from issuance of stock - 32,169
Proceeds on exercise of options 160 -
Purchases of shares of beneficial
interest (96) -
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Net cash provided by (used in)
financing activities 2,084 30,716
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Decrease in cash and cash equivalents (142) (2,390)
Cash and cash equivalents at
beginning of period 301 2,690
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Cash and cash equivalent at end of period 159 300
========== ==========
Supplemental Cash Flow Information:
Cash paid for interest 4,476 2,625
Debt assumed by Trust in purchase of
real estate - 4,813
See accompanying notes to consolidated financial statements
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
(Unaudited)
(In thousands, except for per share data)
Nine Months Ended
September 30,
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1995 1994
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Shares of beneficial interest,
$1.00 par value
Balance at beginning $ 4,222 2,461
Issuance of shares 5 1,750
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Balance at end of period 4,227 4,211
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Additional paid-in-capital
Balance at beginning 68,210 38,257
Issuance of shares 59 30,419
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Balance at end of period 68,269 68,676
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Undistributed earnings
Balance at beginning of period 9,723 8,083
Net income 4,816 6,319
Cash dividends declared:
$1.37 per share in 1995, and
$1.31 per share in 1994 (5,788) (5,517)
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Balance at end of period 8,751 8,885
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Unrealized gain on securities
Balance at beginning of period 21 -
Change in unrealized gain (23) 23
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Balance at end of period (2) 23
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Total shareholders' equity $ 81,245 81,795
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See accompanying notes to consolidated financial statements
Notes to Consolidated Financial Statements (Unaudited)
(1) Basis of Presentation
The accompanying unaudited financial statements have been
prepared in accordance with generally accepted accounting
principles for interim financial information and with the
instructions to Form 10-Q and Rule 10-01 of Regulation S-X.
Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles
for complete financial statements. In the opinion of management,
all adjustments (consisting of normal recurring accruals)
considered necessary for a fair presentation have been included.
The financial statements should be read in conjunction with the
annual report and the notes thereto.
(2) Reclassifications
Certain reclassifications have been made in the fiscal 1994
financial statements to conform to the fiscal 1995
classifications.
(3) Subsequent Events
On October 18, the Trust sold its 224 unit Sunchase
Apartments in Corpus Christi, Texas for a cash price of
$4,580,000. The Trust will record a gain of approximately
$1,895,000 ($.45 per share) in the fourth quarter of 1995.
The Trust has a contract for the sale of its 146 unit Garden
Villa Apartments in Seattle, Washington for a net sales price of
$4,137,000 which consists of cash of $1,002,000 and the
assumption of debt of $3,135,000. The contract is scheduled to
close November 25, 1995, but may be extended until December 25,
1995.
(4) Marketable Equity Securities
On January 1, 1995, the Trust adopted Statement of Financial
Accounting Standards No. 115, "Accounting for Certain Investments
in Debt and Equity Securities" and classified its investment in
cost securities as securities available-for-sale. Accordingly,
as of September 30, 1995, investment in cost securities are
carried at fair value with the unrealized loss presented as a
separate component of shareholders' equity.
EASTGROUP PROPERTIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FINANCIAL CONDITION
(Comments are for the balance sheet dated September 30, 1995,
compared to December 31, 1994.)
Real estate properties increased $2,707,000 during the first
nine months of 1995 as a result of capital improvements on
existing Trust properties of $1,916,000, development costs for
the construction of a 34,600 square foot distribution building at
the Phillips Distribution Center in southeastern Jacksonville of
$951,000, the acquisition of a 75% ownership interest in a 40,200
square multi-tenant building at the JetPort Commerce Park for
$806,000, and the acquisition by foreclosure of the leasehold
improvements at the 108 unit EastGate Apartments for $1,227,000.
In April 1995, the Trust accepted a deed in lieu of foreclosure
on the EastGate Apartments leasehold improvements in Wichita,
Kansas after the owners defaulted on payments to the Trust.
These increases were offset by the writedown of the Cascade VII
office building in Columbus, Ohio of $136,000 to its net
realizable value and the sale of the Cascade VII office building
of $2,057,000. Accumulated depreciation increased $3,909,000 due
to recent purchases of real estate properties, offset by the sale
of the Cascade VII office building with accumulated depreciation
of $571,000.
Mortgage loans receivable decreased $2,833,000 during the
first nine months of 1995. This decrease in mortgage loans
receivable was the result of scheduled principal payments
received of $106,000 and the acceptance of a deed in lieu of
foreclosure on the EastGate Apartments mortgage loan with a
carrying value of $1,009,000. Also contributing to this decrease
was the repayment of $591,000 in loans made to the Trust's joint
venture partner on the Exchange Distribution Center warehouse
("Exchange"), the repayment of $360,000 in a loan made to the
Trust's joint venture partner on the JetPort Commerce Park
Warehouse ("JetPort") and the repayment of $1,006,000 in a loan
made to the Trust's joint venture partner on the WestPort
Commerce Center Warehouse ("WestPort"). These decreases were
offset by amortization of loan discounts of $89,000 and the
$150,000 mortgage loan on the sale of the Cascade VII office
building. The terms of this loan provide for a 10% interest
rate, monthly principal and interest payments of $3,804 beginning
October 1, 1995 and a final maturity on September 1, 1999.
Land and land purchase-leaseback investments decreased
$993,000 during the first nine months of 1995, as a result of the
sale of the Winchester Ranch ("Winchester") land purchase-
leaseback investment, the sale of the Iroquois land purchase-
leaseback investment and the acceptance of a deed in lieu of
foreclosure on the EastGate Apartments leasehold improvements
(described above). In February 1995, the Trust sold its
Winchester land purchase-leaseback investment in Dallas, Texas
for $862,000 and recognized a gain for financial reporting
purposes of $412,000. In June 1995, the Trust sold its Iroquois
land purchase-leaseback investment in Nashville, Tennessee for
$1,495,000 and recognized a gain for financial reporting purposes
of $1,175,000.
Investments in real estate investment trusts increased
$9,205,000 from $954,000 at December 31, 1994 to $10,159,000 at
September 30, 1995. In April 1995, the Trust purchased 383,775
shares (17.4%) of LNH REIT, Inc. ("LNH") and the other 50% of LNH
REIT Managers, a partnership which provided management services
to LNH. These purchases were made from Walker Investments, L.P.,
and related entities for a total of $3,070,000. As a result of
this purchase, the Trust owns 515,200 shares (23.4%) of LNH.
Also, the Trust purchased 529,000 shares (14.76%) of Copley
Properties, Inc., ("Copley"), a real estate investment trust for
$6,193,000. During the first nine months of 1995, the Trust
recognized $167,000 of equity in earnings of LNH, $20,000 of
unrealized gains of LNH, offset by $191,000 of LNH dividends
received. The Trust also recognized an unrealized loss of
$43,000 recorded on the Trust's available-for-sale securities in
accordance with the implementation of Statement of Financial
Accounting Standards No. 115, "Accounting for Certain Investments
in Debt and Equity Securities".
Other assets increased $927,000 during the first nine months
of 1995. Major items recorded in other assets were capitalizing
leasing costs of $612,000 and capitalizing financing costs of
$633,000. These increases were offset by $461,000 in
amortization and the receipt of $422,000 from a bankruptcy
settlement related to the motel loans that was accrued at
December 31,1994.
Mortgage notes payable increased $22,644,000 during the
first nine months of 1995, primarily as a result of the following
new mortgages:
Interest Maturity Amount of
Date of loan Property Rate Date Mortgage
- ------------ -------- -------- -------- ----------
6-27-95 Exchange 8.375% 8-1-05 $2,500,000
7-27-95 WestPort 8.000% 8-1-05 3,350,000
8-01-95 LaVista 8.688% 9-1-05 5,950,000
9-12-95 JetPort 8.125% 10-1-05 4,000,000
9-29-95 LakePointe 8.125% 10-1-05 11,000,000
-----------
$26,800,000
===========
These increases were offset by scheduled principal repayments of
$1,324,000 and the repayment of the underlying first mortgage on
the Country Club Apartments wrap mortgage payable of $2,267,000
and the Exchange Drive Warehouse mortgage payable of $565,000.
Notes payable to banks decreased from $28,671,000 at
December 31, 1994 to $13,835,000 at September 30, 1995. On April
3, 1995, the Trust borrowed $3,000,000 from a bank to finance the
acquisition of the LNH shares and the other 50% of LNH REIT
Managers. The loan which matures April 5, 1996 was reduced from
the prime rate of interest (currently 8.75%) to the LIBOR plus
2.0% (currently 7.8125%).
The Trust's total working capital line available was
increased to $7,000,000 to acquire the additional shares of
Copley. The working capital line matures April 30, 1996 and was
reduced from the prime rate of interest (currently 8.75%) to
LIBOR plus 2% (currently 7.8125%). The line had a $4,624,000 net
reduction in the nine months ended September 30, 1995. The
acquisition line decreased $13,212,000 during the nine months
ended September 30, 1995. The interest rate was reduced from the
prime rate to LIBOR plus 2.0% on July 12, 1995.
Unrealized gain (loss) on securities decreased as a result
of $43,000 unrealized loss recorded on the Trust's available for
sale securities in accordance with the implementation of
Statement of Financial Accounting Standards No. 115 "Accounting
for Certain Investments in Debt and Equity Securities". Also,
the Trust recorded $20,000 in unrealized gains through equity in
earnings of LNH.
Undistributed earnings decreased from $9,723,000 at December
31, 1994 to $8,751,000 at September 30, 1995 as a result of
dividends declared of $5,788,000 exceeding net income for
financial reporting purposes of $4,816,000.
RESULTS OF OPERATIONS
(Comments are for the three months and nine months ended
September 30, 1995, compared to the three months and nine months
ended September 30, 1994.)
Property net operating income (PNOI) from real estate
properties, defined as income from real estate operations less
property operating expenses (before interest expense and
depreciation) increased by $745,000 or 21.4% for the three months
ended September 30, 1995 compared to the three months ended
September 30, 1994. For the nine months ended September 30,
1995, net operating income increased by $3,178,000 or 33.5%
compared to the nine months ended September 30, 1994.
Property net operating income (loss) and percentage leased
by property type were as follows:
PNOI PNOI Percent
Three Months Ended Nine Months Ended Leased
--------------- -------------- -------
1995 1994 1995 1994 9-30-95
------ ------ ----- ----- --------
(In thousands)
Industrial $ 1,907 1,308 5,592 3,391 97%
Apartments 1,404 1,217 4,340 3,248 96%
Office Buildings 927 967 2,757 2,871 91%
Other (8) (7) (24) (23) -
------- ------ ------ ------
Total PNOI $ 4,230 3,485 12,665 9,487
======= ====== ====== ======
PNOI from industrial properties increased $599,000 and
$2,201,000 for the three months and nine months ended September
30, 1995, compared to September 30, 1994. This is primarily the
result of the acquisition of Exchange in May 1994, Jetport 516
Commerce Park ("JetPort 516") in May 1994, Phillips Distribution
Center ("Phillips") in July 1994, Northwest Point Business Park
("Northwest") in September 1994, Westport in October 1994 and
Baxter Warehouse ("Baxter") in December 1994. Industrial
properties held throughout the three months and nine months ended
September 30, 1995 and 1994, showed an increase in PNOI of 20%
for the three months ended September 30, 1995 and 19% for the
nine months ended September 30, 1995. Contributing to this
increase in PNOI from industrial properties was improved
operations at Rampart Distribution Center ("Rampart"), Sunbelt
Distribution Center ("Sunbelt") and Lake Pointe Business Park
("Lake Pointe"). PNOI for the Trust's apartment properties
increased $187,000 and $1,092,000 for the three months and nine
months ended September 30, 1995 compared to the three months and
nine months ended September 30, 1994. This increase is primarily
attributable to the acquisition of Plantations at Killearn
("Plantations") in April 1994, Hampton House Apartments
("Hampton") in August 1994, Grande Pointe Apartments ("Grande
Pointe") in September 1994 and the deed in lieu of foreclosure on
the EastGate Apartments in April 1995. PNOI from the Trust's
office buildings decreased $40,000 and $114,000 for the three
months and nine months ended September 30, 1995 compared to
September 30, 1994. This is primarily the result of reduced
occupancy at 8150 Leesburg Pike ("Leesburg Pike"), offset by the
acquisition of the Santa Fe Energy Building ("Santa Fe") in
February 1994.
Land rents decreased $36,000 and $131,000 for the three
months and nine months ended September 30, 1995 compared to
September 30, 1994, primarily as a result of the sale of the
Parklane on Peachtree and Winchester Ranch land purchase-
leaseback investments and the deed in lieu of foreclosure on the
EastGate Apartments land purchase-leaseback investment. These
decreases were offset by the acquisition in 1994 of two small
parcels at a foreclosure sale. The Trust held mortgages on two
commercial parcels which were additional collateral for our
Madison Square land purchase-leaseback investment written off in
1992.
Equity in earnings from LNH of $14,000 and $167,000 was
recorded during the quarter and nine months ended September 30,
1995, compared to $3,000 and $134,000 for the same period of
1994.
Interest income on mortgage loans decreased $17,000 and
increased $9,000 for the three months and nine months ended
September 30, 1995 compared to 1994. The following is a
breakdown of interest income for the three months and nine months
ended September 30, 1995 compared to 1994:
Three Months Ended Nine Months Ended
September 30 September 30
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1995 1994 1995 1994
------- ------- ------- -------
(In thousands)
Interest income from:
25% joint venture
mortgage loans $ 23 31 146 90
Motel mortgage loans 106 62 255 167
Wrap mortgage loans 123 178 394 530
Other mortgage loans 3 1 5 4
------- ------- ------- -------
$ 255 272 800 791
======= ======= ======= =======
Interest income from the 25% joint venture mortgage loans
increased for the nine months ended September 30, 1995 as a
result of income from additional mortgage loans made by the Trust
to the co-owner of WestPort and Exchange in October 1994 and May
1994. On July 28, 1995, the Trust received a payment of $813,000
on the WestPort mortgage loan, on September 14, 1995 the Trust
received a payment of $360,000 on the JetPort mortgage loan and
on September 30, 1995, the Trust received a payment of $591,000
on the Exchange mortgage loans. Interest income from the motel
mortgage loans is recorded as received, and the notes have been
written down to their net realizable value. Interest income from
the wrap mortgage loans decreased as a result of the foreclosure
in April 1995 of the EastGate mortgage.
Interest expense increased $548,000 and $2,116,000 for the
three months and nine months ended September 30, 1995 compared to
September 30, 1994. This increase is primarily the result of
higher average bank borrowings on the Trust's credit line and
acquisition credit line, and the three million line of credit
used to acquire the LNH shares. Also, the prime rate of interest
increased from 6% at January 1, 1994 to 8.75% at September 30,
1995. Interest expense on real estate properties increased as a
result of the acquisition of Northwest in September 1994, with a
mortgage of $4,321,000 which was assumed, and the acquisition of
JetPort 516 in May 1994 with a mortgage of $657,000 which was
assumed. Also, contributing to this increase were the new
mortgages of $6,000,000 on Sutton House Apartments ("Sutton
House") on May 25, 1994, $2,400,000 on 56th Street on July 21,
1994, and new mortgages of $26,800,000 as discussed previously in
financial condition. These increases were offset by the
repayment of the Exchange Drive warehouse mortgage payable of
$565,000 and the JetPort mortgage payable of $636,000.
The Trust repaid the underlying first mortgage on the
Country Club wrap mortgage note of $2,267,000 on August 3, 1995.
The Trust used the proceeds from the new LaVista mortgage plus
borrowings on the bank line for this repayment.
At the Trust's annual meeting on December 16, 1994, the
shareholders voted to implement a new incentive compensation plan
which eliminated stock appreciation rights and incentive
compensation units. Stock appreciation rights expense
(recovery), which was adjusted quarterly based on fluctuations in
the Trust's quoted share price, was $0 for the three months ended
September 30, 1994 and ($136,500) for the nine months ended
September 30, 1994.
As discussed above, the Trust sold its Winchester Ranch land
purchase-leaseback investment in February 1995 and its Iroquois
land purchase-leaseback investment in June 1995. Also, the Trust
wrote down its investment in the Cascade VII office building in
Columbus, Ohio by $136,000 to its estimated net realizable value
and sold this investment in September 1995 for net cash of
$1,336,000 and a $150,000 mortgage loan. No gain or loss was
recognized on this transaction. In April 1994, the Trust sold
its Parklane on Peachtree land purchase-leaseback investment for
$3,500,000 and used the proceeds to acquire the Plantations at
Killearn Apartments through a tax deferred exchange. For
financial reporting purposes, the Trust recognized a gain of
$2,494,000 on the sale.
The Trust and the real estate investment trust industry
consider funds from operations, defined as net income (computed
in accordance with generally accepted accounting principles),
excluding gains (or losses) from debt restructuring and sales of
property, plus depreciation and amortization and after
adjustments for unconsolidated partnership and joint ventures, to
be an important measure of performance for an equity real estate
investment trust. The Trust acquires, evaluates and sells
properties based upon net operating income without taking into
account property depreciation and amortization charges and
utilizes funds from operations, together with other factors, in
setting shareholder distribution levels. Funds from operations
differ from cash flows from operating activities set forth in the
Statements of Cash Flows in the Trust's financial statements
primarily because funds from operations do not include changes in
operating assets and liabilities. Funds from operations is a
supplemental measure of performance that does not replace net
income as a measure of performance or net cash provided by
operating activities as a measure of liquidity. Funds from
operations for the three months and nine months ended September
30, 1995 were $2,597,000 and $7,579,000 compared to $2,367,000
and $6,715,000 in 1994. The increase in funds from operations is
due to improved property net operating income from the industrial
properties held in both 1994 and 1995 and to the Trust's
acquisitions in 1994. Property net operating income for the
industrial properties held in both 1994 and 1995 increased 20%
and 19% for the three months and nine months ended September 30,
1995 compared to 1994.
The real estate investment trust industry has recommended
supplemental disclosures to funds from operations concerning
capital expenditures, leasing costs, financing costs and straight-
line rents.
The Trust expenses apartment unit turnover cost such as
carpet, painting and small appliances. Capital expenditures in
the nine months ended September 30, 1995 by category are as
follows (in thousands):
Upgrades on acquisitions $ 713
New Development costs 951
Major Renovation 70
Tenant improvements:
New tenants 768
Renewal tenants 119
Other 248
-----------
$ 2,869
===========
For the three months and nine months ended September 30,
1995, the Trust capitalized $209,000 and $612,000 of leasing
costs, which included $117,000 and $399,000 related to new
tenants and $92,000 and $213,000 related to renewal tenants, and
$146,000 and $633,000 of financing costs and included these
amounts in other assets. For the three months and nine months
ended September 30, 1995, the Trust amortized $117,000 and
$266,000 related to capitalized leasing costs and $80,000 and
$195,000 related to financing costs and included these amounts in
depreciation and amortization expense. Leasing costs are
amortized over the life of the lease and financing costs are
amortized over the life of the loan.
Rental income included straight-line rent of $1,000 and
$44,000 for the three months and nine months ended September 30,
1995.
LIQUIDITY AND CAPITAL RESOURCES
Funds from operations were $7,579,000 for the nine months
ended September 30, 1995. The Trust distributed $5,788,000 of
this amount in dividends which left $1,791,000 for other
purposes. Other sources of funds were collections on mortgage
loan receivables, sale of real estate investments, mortgage
borrowings, and bank borrowings on the $7,000,000 working capital
line, the $3,000,000 line and the acquisition line. Primary uses
of these funds were for capital improvements at the various
properties, bank debt payments, mortgage note payments and
purchases of real estate investment trust shares. Total debt at
September 30, 1995 was as follows (in thousands):
Mortgage notes payable - fixed rate $ 62,202
Bank notes payable - floating rate 13,835
-----------
Total debt $ 76,037
===========
Effective July 12, 1995 the interest rates on the bank notes
payable were changed from the prime rate to LIBOR plus 2.0%,
currently 7.875%. There is also a .25% fee on the unused amount
of the $7 million credit line and the acquisition credit line.
The acquisition credit line available was reduced from $45
million to $27 million effective July 12, 1995 and reduced to $15
million effective September 1, 1995. The Trust owes $5,600,000
on the acquisition line as of November 7, 1995. The Trust is
currently in the process of obtaining an additional $5,300,000 of
nonrecourse, fixed rate financing.
On October 18,1995, the Trust sold its 224 unit SunChase
Apartments in Corpus Christi, Texas for a cash price of
$4,580,000. The Trust will record a gain of approximately
$1,895,000 ($.45 per share) in the fourth quarter of 1995.
The Trust has a contract for the sale of its 146 unit Garden
Villa Apartments in Seattle, Washington for a net sales price of
$4,137,000 which consists of cash of $1,002,000 and the
assumption of debt of $3,135,000. The contract is scheduled to
close November 25, 1995, but may be extended until December 25,
1995.
Budgeted capital expenditures for the year ending December
31, 1995 are as follows (in thousands):
Upgrades on acquisitions $ 819
New development costs 951
Major Renovation 482
Tenant Improvements:
New Tenants 1,260
Renewal Tenants 164
Other 316
-------------
$ 3,992
=============
The Trust anticipates that its current cash balance,
operating cash flow, proceeds from dispositions of properties and
borrowings (including borrowings under the revolving line of
credit) will be adequate to pay the Trust's (i) operating and
administrative expenses, (ii) debt service obligations, (iii)
distributions to shareholders, (iv) capital improvements, and (v)
normal repair and maintenance expenses at its properties both in
the short and long term.
EASTGROUP PROPERTIES
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
None
Item 6. Exhibits and reports on Form 8-K
(a) Exhibit 27 - Financial Data Schedule attached
hereto.
(b) Items reported Document Filed Date
--------------- ---------- ----------
None
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act
of 1934, the Registrant has duly caused this report to be signed
on its behalf by the undersigned thereunto duly authorized.
DATED: November 14, 1995 EASTGROUP PROPERTIES
BY:
/s/ Diane W. Hayman
----------------------
Diane W. Hayman, CPA
Controller
/s/ N. Keith McKey
---------------------
N. Keith McKey, CPA
Executive Vice President,
Chief Financial Officer
and Secretary