U.S. 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: June 30, 1996
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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
- ------------------------------- ---------------------------
(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
- ---------------------------------------- ------------------
(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
--------- ----------
7,022,923 shares of beneficial interest ($1.00 par value) were
outstanding at August 1, 1996.
EASTGROUP PROPERTIES
FORM 10-Q
TABLE OF CONTENTS
FOR THE QUARTER ENDED JUNE 30, 1996
- -----------------------------------------------------------------
Pages
Part I. Financial Information
Item 1. Consolidated financial statements
Consolidated balance sheets, June 30, 1996
and December 31, 1995 3
Consolidated statements of income for the
three months and six months ended
June 30, 1996 and 1995 4
Consolidated statements of cash flow for the
six months ended June 30, 1996 and 1995 5
Consolidated statements of changes in
shareholders' equity for the six months
ended June 30, 1996 and 1995 7
Notes to consolidated financial statements 8
Item 2. Management's discussion and analysis of
financial condition and results of operations 9
Part II. Other Information
Item 4. Submission of Matters to a Vote of
Security Holders 21
Item 6. Exhibits and Reports on Form 8-K 22
Signatures
Authorized signatures
CONSOLIDATED BALANCE SHEETS
(In thousands, except per
share data)
June 30, December 31,
1996 1995
------------ ------------
(Unaudited)
Assets
Real estate properties
Industrial $ 177,720 76,099
Office Buildings 49,897 29,847
Apartments 47,740 49,658
Other 3,396 -
------------ ------------
278,753 155,604
Less accumulated depreciation (20,859) (19,206)
------------ ------------
257,894 136,398
Investment in joint venture 4,331 -
Mortgage loans 12,464 6,008
Land and land purchase-leasebacks 1,725 1,327
Investment in real estate
investment trusts 852 10,787
Cash and cash equivalents 1,307 26
Other assets 8,684 3,409
------------ ------------
$ 287,257 157,955
============ ============
Liabilities and Shareholders' Equity
Liabilities
Mortgage notes payable $ 102,396 67,203
Notes payable to banks 28,273 4,359
Accounts payable and accrued expenses 4,917 2,096
Minority interests in joint ventures 7,063 909
Other liabilities 545 488
------------ ------------
143,194 75,055
------------ ------------
Shareholders' Equity
Shares of beneficial interest, par
value $1.00 per share; authorized
20,000,000 shares; issued 7,022,923
shares in 1996 and 4,231,656 in 1995 7,023 4,232
Additional paid-in-capital 127,102 68,344
Undistributed earnings 9,938 9,657
Unrealized gain on securities - 667
------------ ------------
144,063 82,900
------------ ------------
$ 287,257 157,955
============ ============
See accompanying notes to consolidated financial statements
CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
(In thousands, except per share data)
Three Months Six Months
Ended Ended
June 30, June 30,
---------------- ----------------
1996 1995 1996 1995
------- ------- ------- ------
Revenues
Income from real estate
operations $ 7,514 7,233 14,367 14,128
Land rents 32 57 84 137
Equity in earnings of real
estate investment trust 3 144 43 153
Interest:
Mortgage loans 312 269 558 545
Other interest 12 - 12 -
Other 238 77 459 100
------- ------- ------- ------
8,111 7,780 15,523 15,063
------- ------- ------- ------
Expenses
Operating expenses from
real estate operations 2,925 2,943 5,666 5,693
Interest expense 1,658 1,612 3,185 3,119
Depreciation and
amortization 1,578 1,382 3,002 2,719
Minority interests
in joint ventures 50 72 82 145
General and
administrative expense 522 560 1,034 1,086
------- ------- ------- ------
6,733 6,569 12,969 12,762
------- ------- ------- ------
Income before gain
on investments 1,378 1,211 2,554 2,301
------- ------- ------- ------
Gain on investments
Real estate 643 1,039 1,996 1,451
Real estate investment
trust securities 13 - 13 -
------- ------- ------- ------
656 1,039 2,009 1,451
------- ------- ------- ------
Net Income $ 2,034 2,250 4,563 3,752
======= ======= ======= ======
Net Income per share of
beneficial interest $ .42 .53 1.01 .89
======= ======= ======= ======
Weighted average shares
outstanding 4,825 4,225 4,530 4,223
======= ======= ======= ======
See accompanying notes to consolidated financial statements
CONSOLIDATED STATEMENTS OF CASH FLOW (Unaudited)
(In thousands)
Six Months Ended
June 30,
------------------
1996 1995
------- -------
Operating Activities
Net Income 4,563 3,752
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation and amortization 3,002 2,719
Gain on investments, net (2,009) (1,451)
Real estate investments trust:
Equity in earnings (43) (153)
Dividends received from operations 77 58
Other (62) (59)
Joint venture operations (59) -
Changes in operating assets
and liabilities:
Accrued income and other assets (65) 561
Accrued payable, accrued expenses
and prepaid rent (548) (16)
------- -------
Net cash provided by operating activities 4,856 5,411
------- -------
Investing Activities
Payments on mortgage loans receivable 38 616
Sale of real estate investments 4,912 2,357
Sale of real estate investment
trust shares 211 -
Purchase of real estate investment
trusts shares - (5,062)
Purchases of real estate improvements (3,547) (2,080)
Return of capital dividends - 87
Change in other assets and
other liabilities (240) (857)
------- -------
Net cash provided by (used in) investing
activities 1,374 (4,939)
------- -------
Financing Activities
Proceeds from mortgage notes payables - 2,500
Proceeds from bank borrowings 33,194 13,586
Principal payments on bank borrowings (9,280) (12,576)
Principal payments on mortgage notes
payable (24,679) (455)
Distributions paid to shareholders (4,282) (3,802)
Proceeds on exercise of stock options 108 160
Proceeds on dividend reinvestment plan 9 -
Purchases of shares of beneficial
interest - (96)
Proceeds from merger of LNH, net 903 -
Proceeds from merger of Copley, net (922) -
------- -------
Net cash used in financing activities (4,949) (683)
------- -------
Increase (decrease) in cash
and cash equivalents 1,281 (211)
Cash and cash equivalents at
beginning of period 26 301
------- -------
Cash and cash equivalent
at end of period 1,307 90
======= =======
Supplemental Cash Flow Information:
Cash paid for interest 2,968 3,011
See accompanying notes to consolidated financial statements
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
(Unaudited)
(In thousands, except for per share data)
Six Months Ended
June 30,
------------------
1996 1995
-------- -------
Shares of beneficial interest,
$1.00 par value
Balance at beginning 4,232 4,222
Exercise of stock options 7 5
Issuance of shares in payment
of incentive compensation 6 -
Issuance of shares in LNH merger 618 -
Issuance of shares in Copley merger 2,159 -
Issuance of shares in dividend
reinvestment plan 1 -
------- -------
Balance at end of period 7,023 4,227
------- -------
Additional paid-in-capital
Balance at beginning 68,344 68,210
Exercise of stock options 101 59
Issuance of shares in payment
of incentive compensation 122 -
Issuance of shares in LNH merger 13,022 -
Issuance of shares in Copley merger 45,504 -
Issuance of shares in dividend
reinvestment plan 9 -
------- -------
Balance at end of period 127,102 68,269
------- -------
Undistributed earnings
Balance at beginning of period 9,657 9,723
Net income 4,563 3,752
Cash dividends declared:
$.94 per share in 1996, and
$.90 per share in 1995 (4,282) (3,802)
------- -------
Balance at end of period 9,938 9,673
------- -------
Unrealized gain on securities
Balance at beginning of period 667 21
Change in unrealized gain (667) 84
------- -------
Balance at end of period - 105
------- -------
Total shareholders' equity 144,063 82,274
======= =======
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 1995
financial statements to conform to the fiscal 1996
classifications.
(3) Subsequent Events
On July 26, 1996, the Trust sold 32.76 acres of land in
Pompano Beach, Florida, acquired in the Copley Properties, Inc.
("Copley") merger, for a net sales price of $3,504,000.
On August 9, 1996, the Trust purchased the Walnut Business
Center, a two building industrial complex (234,070 square feet)
located in Fullerton, California, for a total investment of
$8,141,000($34.78 per square foot). This purchase was
funded with the bank lines of credit.
The Trust has a contract for the purchase of a two building
industrial complex (259,352 square feet) located in Tulsa,
Oklahoma for a total investment of $5,695,000 ($21.96 per square
foot). This purchase is scheduled to close September 16, 1996,
and will be funded with the bank lines of credit.
The Trust anticipates closing a $19,000,000 non-recourse
mortgage with an interest rate of 7.99%, in August 1996. These
proceeds will be used to repay bank lines of credit.
(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 June 30, 1996, investment in cost securities are carried at
fair value.
EASTGROUP PROPERTIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FINANCIAL CONDITION
(Comments are for the balance sheet dated June 30, 1996, compared
to December 31, 1995.)
Assets of EastGroup Properties ("EastGroup" or the "Trust")
were $287,257,000 at June 30, 1996, an increase of $129,302,000
from December 31, 1995. Liabilities increased $68,139,000 to
$143,194,000 during the same periods. Book value per share
increased from $19.61 at December 31, 1995 to $20.51 at June 30,
1996.
On May 14, 1996, the merger of LNH REIT, Inc. ("LNH") with
EGP-LNH Corporation, a wholly-owned subsidiary of the Trust, was
completed. Under the terms of the merger, each LNH share was
converted into the right to receive 0.3671 EastGroup shares. The
Trust issued approximately 618,244 shares as a result of the
merger. The following balance sheet items were recorded on May
14, 1996 (in thousands):
ASSETS
Real estate properties $ 6,243
Investment in joint venture 4,298
Mortgage loans 5,614
Land 521
Investment in real estate investment
trust 1,050
Cash 1,200
Accounts receivable and other assets 425
--------
Total $ 19,351
========
LIABILITIES
Minority interest payable $ 783
Accounts payable and other liabilities 713
-------
Total 1,496
-------
SHAREHOLDERS' EQUITY
Shares issued, 618,244 shares 17,855
-------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $ 19,351
========
On June 19, 1996, Copley was merged into the Trust. Under
the terms of the merger, each Copley share was converted into the
right to receive .70668 EastGroup shares. EastGroup issued
approximately 2,159,155 of its shares as a result of the merger.
The following balance sheet items were recorded on June 19, 1996
(in thousands):
ASSETS
Real estate properties $ 117,189
Mortgage loans 880
Cash 1,933
Accounts receivable and other assets 4,737
---------
Total $ 124,739
=========
LIABILITIES
Mortgage notes payable $ 59,872
Minority interest payable 5,663
Accounts payable and other liabilities 2,493
---------
Total 68,028
---------
SHAREHOLDERS' EQUITY
Shares issued, 2,159,155 shares 56,711
---------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $ 124,739
=========
Real estate properties increased $123,149,000 during the
first six months of 1996, primarily due to an increase of
$6,243,000 from real estate acquired in the LNH merger and an
increase of $117,189,000 from real estate acquired in the Copley
merger. Also, capital improvements of $3,547,000 on Trust
properties contributed to the increase in real estate properties.
These increases were partially offset by the sale of the Garden
Villa Apartments on January 31, 1996 with a basis of $3,830,000.
Accumulated depreciation increased $1,653,000 during the first
six months of 1996 due to depreciation expense of $2,767,000,
partially offset by the sale of the Garden Villa Apartments with
accumulated depreciation of $1,114,000.
The increase in investment in joint venture is due to the
joint venture acquired in the LNH merger of $4,298,000. The
Trust accounts for its 50% investment in the joint venture using
the equity method, under which the cost of the investment is
adjusted by the Trust's share of the joint venture's results of
operations.
Mortgage loans receivable increased $6,456,000 during the
first six months of 1996. The Trust acquired four loans in the
LNH merger which were recorded at $5,614,000, and two loans in
the Copley merger which were recorded at $880,000. At the date
of the mergers, the loans had a principal balance of $7,983,000.
The difference between the net realizable value of the loans and
the principal balances will be amortized over the life of the
loans based on principal payments received. Mortgage loans
decreased $153,000 due to principal payments received and
increased $76,000 due to the amortization of loan discounts and
$39,000 due to the advance on mortgage loans.
Investments in real estate investment trusts decreased from
$10,787,000 at December 31, 1995 to $852,000 at June 30, 1996.
This decrease was primarily due to the elimination of the
investment in LNH of $4,209,000, and the elimination of the
investment in Copley of $8,925,000, as a result of the mergers
discussed previously. The Trust incurred $292,000 in merger
costs for LNH and $2,732,000 in merger costs for Copley. Also,
the Trust's investment in real estate investment trusts increased
$1,050,000 as a result of the Liberte' stock received in the LNH
merger. The Trust sold 56,700 shares of this stock for $212,000
and recognized a gain of $13,000 for financial reporting
purposes. Prior to the May 14, 1996 merger of LNH, the Trust
recognized $43,000 of equity in earnings of LNH and $88,000 of
unrealized gains, offset by $77,000 of LNH dividends received.
Prior to the June 19, 1996 merger of Copley, the Trust
recognized unrealized gains of $1,322,000 recorded on the Trust's
available-for-sale securities (Copley) in accordance with
Statement of Financial Accounting Standards No. 115, "Accounting
for Certain Investments in Debt and Equity Securities." The
balance of unrealized gains on Copley of $1,940,000 and $138,000
of unrealized gains on LNH was offset against unrealized gains in
shareholders' equity.
Land and land purchase-leaseback investments increased
$398,000 during the six months ended June 30, 1996. This
increase is due to land of $521,000 acquired in the LNH merger.
This increase was offset by the sale of the Bellevue land
purchase-leaseback investment ("Bellevue"), the sale of the Taco
Bell land purchase-leaseback investment ("Taco Bell") and the
sale of the Southwyck parcel of land acquired in the LNH merger.
In April 1996, the Trust sold Bellevue in Bellevue, Nebraska for
$472,000 and recognized a gain of $472,000. The Trust wrote off
this investment in 1994, as a result of the loss of the
property's largest tenant. In May 1996, the Trust sold Taco Bell
in Madisonville, Kentucky for $143,000 and recognized a gain of
$131,000. Also, the Trust sold the Southwyck parcel of land in
Houston, Texas for $151,000 and recognized a gain of $40,000.
Mortgage notes payable increased $35,193,000 during the
first six months of 1996, including increases of $59,872,000 due
to the merger with Copley. These increases were offset by
regularly scheduled principal repayments of $818,000, the
repayment of the $3,132,000 first mortgage on the Garden Villa
Apartments sold January 31, 1996 and the repayment of $20,729,000
of Copley mortgages.
Notes payable to banks increased from $4,359,000 at December
31, 1995 to $28,273,000 at June 30, 1996. The increase was due
primarily to borrowings of $20,750,000 to pay off $16,700,000 of
Copley debt with interest rates of 9.875% and $2,300,000 with an
interest rate of LIBOR plus 3.25%, and repay $1,750,000 with an
interest rate of 9.37%. As of June 30, 1996, the acquisition
line had a balance of $10,854,000 and the working capital line
had a balance of $17,419,000. The working capital line matured
April 30, 1996 and was renewed with an interest rate of LIBOR
plus 2%, monthly interest and a maturity date of May 30, 1996.
The bank has increased the working capital line to $20,000,000
and changed the interest rates on both the working capital line
and the acquisition line to LIBOR plus 1.85%. Also, the working
capital line and the acquisition line mature April 30, 1997 and
April 30, 1999, respectively.
Accounts payable and accrued expenses increased $2,821,000
during the six months ended June 30, 1996, compared to December
31, 1995. Of this amount, $713,000 was recorded in the LNH
merger and $2,493,000 was recorded in the Copley merger. Also,
accounts payable and other liabilities decreased $385,000 as a
result of normal business operations.
Minority interests in joint ventures increased $6,154,000
during the six months ended June 30, 1996 compared to December
31, 1995. Of this amount, $783,000 was recorded in the LNH
merger and $5,663,000 was recorded in the Copley merger.
Shares of beneficial interest increased as a result of
618,244 shares issued in the LNH merger, 2,159,155 shares issued
in the Copley merger, 7,000 stock options exercised, 6,427 shares
issued in payment of incentive compensation and 441 shares issued
in the Trust's new dividend reinvestment plan.
Unrealized gain (loss) on securities decreased $667,000 as a
result of the LNH and Copley mergers.
Undistributed earnings increased from $9,657,000 at December
31, 1995 to $9,938,000 at June 30, 1996, as a result of net
income for financial reporting purposes of $4,563,000 exceeding
dividends of $4,282,000.
RESULTS OF OPERATIONS
(Comments are for the three months and six months ended June 30,
1996, compared to the three months and six months ended June 30,
1995.)
Net income for the three months and six months ended June
30, 1996 was $2,034,000 ($.42 per share) and $4,563,000 ($1.01
per share), compared to net income for the three months and six
months ended June 30, 1995 of $2,250,000 ($.53 per share) and
$3,752,000 ($.89 per share). Income before gain on investments
was $1,378,000 and $2,554,000 for the three months and six months
ended June 30, 1996, compared to $1,211,000 at $2,301,000 for the
three months and six months ended June 30, 1995. Gain on
investments was $656,000 and $2,009,000 for the three months and
six months ended June 30, 1996, compared to $1,039,000 and
$1,451,000 for the three months and six months ended June 30,
1995.
These results of operations include the results of
operations for LNH from May 14, 1996 through June 30, 1996, and
the results of operations for Copley from June 19, 1996 through
June 30, 1996.
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 $299,000 or 7.0% for the three months
ended June 30, 1996 compared to the three months ended June 30,
1995. For the six months ended June 30, 1996, PNOI increased by
$266,000 or 3.2% for the six months ended June 30, 1996 compared
to the six months ended June 30, 1995.
Property net operating income (loss) and percentage leased
by property type were as follows:
PNOI PNOI Percent
Three Months Ended Six Months Ended Leased
------------------ ---------------- -------
1996 1995 1996 1995 1996
------ ------ ----- ----- -------
(In thousands)
Industrial 2,505 1,971 4,639 3,873 96%
Office Buildings 884 829 1,588 1,642 96%
Apartments 1,157 1,498 2,438 2,936 95%
Other 43 (8) 36 (16)
----- ----- ------ -----
Total PNOI 4,589 4,290 8,701 8,435
===== ===== ====== =====
PNOI from industrial properties increased $534,000 and
$766,000 for the three months and six months ended June 30, 1996,
compared to June 30, 1995. Industrial properties held throughout
the three months and six months ended June 30, 1996 and 1995,
showed an increase in PNOI of 6.7% for the three months ended
June 30, 1996 and 8.7% for the six months ended June 30, 1996.
PNOI from industrial properties increased $375,000 as a result of
the industrial properties received in the mergers with LNH and
Copley discussed previously. Also contributing to this increase
in PNOI from industrial properties was the acquisition of Jetport
515 Commerce Park in September 1995, and the development of a
36,400 square foot distribution building at the Phillips
Distribution Center completed in August 1995. In addition, the
increase in PNOI from industrial properties was due to improved
operations at Rampart Distribution Center, Venture Distribution
Center, Lake Pointe Business Park, Deerwood Distribution Center,
JetPort Commerce Park and Northwest Distribution Center.
PNOI from the Trust's office buildings increased $55,000 and
decreased $54,000 for the three months and six months ended June
30, 1996 compared to the same period in 1995. The increase for
the three months ended June 30, 1996 is due primarily to the PNOI
from the office buildings received in the merger with Copley
discussed previously, and a slight improvement in operations from
office properties held throughout the three months ended June 30,
1996 compared to June 30, 1995. These increases were offset by
the sale of the Cascade VII office building in September 1995.
The decrease in PNOI from office buildings for the six months
ended June 30, 1996, compared to June 30, 1995 is due primarily
to the sale of the Cascade VII office building in September 1995,
lower operating income from the office building portfolio, offset
by the PNOI from the office buildings received in the merger with
Copley discussed previously. Office properties held throughout
the three months and six months ended June 30, 1996 and 1995,
showed an increase in PNOI of 3.5% for the three months ended
June 30, 1996 and a 2.8% decrease in PNOI for the six months
ended June 30, 1996.
PNOI from the Trust's apartment properties decreased
$341,000 and $498,000 for the three months and six months ended
June 30, 1996 compared to the same period in 1995. This decrease
is primarily attributable to the sale of the SunChase Apartments
in October 1995 and the Garden Villa Apartments in January 1996,
offset by the acceptance of a deed in lieu of foreclosure on the
EastGate Apartments in April 1995. Apartment properties held
throughout the three months and six months ended June 30, 1996
and 1995, showed an increase in PNOI of 8.6% and a decrease of
3.6%, respectively.
Land rents decreased $25,000 and $53,000 for the three
months and six months ended June 30, 1996 compared to June 30,
1995, primarily as a result of the sale of the Iroquois and
Bellevue land purchase-leaseback investments and the acceptance
of a deed in lieu of foreclosure on the EastGate Apartments land
purchase-leaseback investment.
Equity in earnings from LNH of $3,000 and $43,000 was
recorded during the quarter and six months ended June 30, 1996,
compared to $144,000 and $153,000 for the same period of 1995.
The LNH merger on May 14, 1996 accounts for the decrease in
equity in earnings of real estate investment trust.
Interest income on mortgage loans increased $43,000 and
$13,000 for the three months and six months ended June 30, 1996
compared to 1995. The following is a breakdown of interest income
for the three months and six months ended June 30, 1996 compared
to 1995:
Three Months Six Months
Ended Ended
June 30, June 30,
---------------- ----------------
1996 1995 1996 1995
------- ------- ------- -------
(In thousands)
Interest income from:
25% joint venture
mortgage loans 3 54 7 123
Motel mortgage loans 95 80 203 149
Wrap mortgage loans - 12 - 27
Other mortgage loans 214 123 348 246
----- ------ ----- -----
312 269 558 545
===== ====== ===== =====
Interest income from the 25% joint venture mortgage loans
decreased as a result of repayments of these notes. 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 income from other mortgage loans increased as a result
of interest income on loans received in the mergers with LNH and
Copley discussed previously.
Interest expense increased $46,000 and $66,000 for the three
months and six months ended June 30, 1996 compared to June 30,
1995. Average bank borrowings were $6,907,000 and $5,439,000 for
the three months and six months ended June 30, 1996, compared to
$31,506,000 and $29,434,000 for the same periods in 1995. Bank
interest rates at June 30, 1996 and June 30, 1995 were 7.33%
(LIBOR plus 1.85%) and 9.125% (Prime plus 1/8%). Interest
expense on real estate properties increased as a result of the
following new mortgages and mortgages assumed in the Copley
merger:
New Mortgages
Date of Interest Maturity Amount of
Loan Property Rate Date Mortgage
- -------- ---------------------------- ------ ------ -----------
(In
thousands)
6-27-95 Exchange Distribution Center 8.375% 8-1-05 $ 2,500
7-27-95 WestPort Commerce Center 8.000% 8-1-05 3,350
8-01-95 LaVista Crossing Apartments 8.688% 9-1-05 5,950
9-12-95 JetPort Commerce Park 8.125% 10-1-05 4,000
9-29-95 LakePointe Business Park 8.125% 10-1-05 11,000
12-15-95 Plantations Apartments 7.625% 12-1-05 5,300
--------
$32,100
========
Mortgages Assumed in Copley merger:
Date of
Assumption Interest Maturity Amount of
of Loan Property Rate Date Mortgage
- -------- ---------------------------- ------ ------ -----------
(In
thousands)
6-19-96 University Business Center 9.060% 4-01-00 $ 9,261
6-19-96 University Business Center 9.370% 1-01-97 8,250
6-19-96 Wiegman Associates 8.750% 10-01-97 973
6-19-96 Columbia Place 8.875% 12-31-09 10,157
6-19-96 Dominguez Properties 9.000% 1-01-97 5,175
6-19-96 Metro Business Park 9.250% 3-01-97 3,411
6-19-96 Metro Business Park 8.000% 4-01-98 1,757
--------
$38,984
========
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 in September 1995. Also, the Trust
repaid the underlying first mortgage on the Country Club wrap
mortgage note of $2,267,000 on August 3, 1995.
Gains on investments resulted from the following sales:
June 30, 1996
- -------------
Discounted
Date Net Sales Recognized
Sold Basis Price Gain (Loss)
- ----- ----- ----------- -----------
(In thousands)
Real Estate properties:
1-96 Garden Villa
Apartments $ 2,715 4,068 1,353
Land Purchase-leasebacks:
4-96 Bellevue - 472 472
5-96 Taco Bell 12 143 131
Land:
6-96 Southwyck parcel 111 151 40
Securities:
Various Liberte' stock 198 211 13
------ ----- -----
3,036 5,045 2,009
====== ===== =====
June 30, 1995
- -------------
Discounted
Date Net Sales Recognized
Sold Basis Price Gain (Loss)
- ----- ----- ----------- ----------
(In thousands)
Land Purchase-leasebacks:
2-95 Winchester Ranch $ 450 862 412
6-95 Iroquois 320 1,495 1,175
Real Estate properties:
6-95 Cascade Office
Building - writedown 136 - (136)
----- ----- -----
$ 906 2,357 1,451
===== ===== =====
The gain on the sale of the Liberte' stock and the Southwyck
parcel are gains on investments received in the LNH merger on May
14, 1996.
The real estate investment trust industry has recommended
supplemental disclosures 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 for the six months
ended June 30, 1996 and 1995 by category are as follows:
June 30
-------------------
1996 1995
-------- --------
( In thousands)
Upgrades on acquisitions $ 90 444
Major Renovation/New Development 1,668 813
Tenant improvements:
New tenants 739 554
Renewal tenants 308 89
Other 312 180
------- -------
$ 3,117 2,080
======= =======
For the three months and six months ended June 30, 1996, the
Trust capitalized $167,000 and $367,000 of leasing costs, which
included $113,000 and $220,000 related to new tenants and $53,000
and $147,000 related to renewal tenants, and $88,000 and $99,000
of financing costs and included these amounts in other assets.
For the three months and six months ended June 30, 1996, the
Trust amortized $104,000 and $235,000 related to capitalized
leasing costs and included these amounts in depreciation and
amortization expense, and $89,000 and $172,000 related to
financing costs and included these amounts in interest 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 $0 and $21,000
for the three months ended June 30, 1996 and 1995, and $0 and
$43,000 for the six months ended June 30, 1996 and 1995. This
resulted from income recorded on the straight line method as
compared to when cash was actually received.
LIQUIDITY AND CAPITAL RESOURCES
Net cash provided by operating activities was $4,856,000 for
the six months ended June 30,1996. The Trust distributed
$4,282,000 in dividends. Other sources of cash were collections
on mortgage loan receivables, sale of real estate investments and
bank borrowings. Primary uses of cash were for capital
improvements at the various properties, bank debt payments and
mortgage note payments. Total debt at June 30, 1996 is as
follows:
June 30,
-------------------
1996 1995
--------- -------
Mortgage notes payable - fixed rate $ 102,396 39,334
Mortgage notes payable - floating rate - 2,270
Bank notes payable - floating rate 28,273 29,681
--------- --------
Total debt $ 130,669 71,285
========= ========
At June 30, 1996, the LIBOR rate plus 1.85% was 7.33%. There
is also a .25% fee on the unused amount of the $20 million credit
line and the $15 million acquisition credit line. As of June 30,
1996, the acquisition line had a balance of $10,854,000 and the
working capital line had a balance of $17,419,000. The working
capital line matured April 30, 1996 and was renewed with an
interest rate of LIBOR plus 2%, monthly interest and a maturity
date of May 30, 1996. The bank has increased the working capital
line to $20,000,000 and changed the interest rates on both the
working capital line and the acquisition line to LIBOR plus
1.85%. Also, the working capital line and the acquisition line
mature April 30, 1997 and April 30, 1999, respectively.
Budgeted capital expenditures for the year ending December
31, 1996 are as follows:
(In thousands)
-------------
Upgrades on acquisitions $ 93
New development costs 6,045
Tenant Improvements:
New Tenants 1,647
Renewal Tenants 743
Other 940
-------------
$ 9,468
=============
The Trust anticipates that its current cash balance,
operating cash flow 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.
On May 14, 1996, LNH was merged with and into EastGroup-LNH
Corporation, a wholly-owned subsidiary of EastGroup. Under the
terms of the merger, each LNH share was converted into the right
to receive 0.3671 EastGroup shares. EastGroup issued
approximately 618,000 of its shares as a result of the merger.
On June 19, 1996, Copley Properties, Inc. was merged into
the Trust. Under the terms of the merger, each Copley share was
converted into the right to receive .70668 EastGroup shares.
EastGroup issued approximately 2,159,155 of its shares as a
result of the merger.
EASTGROUP PROPERTIES
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
On June 19, 1996, the Registrant held its Annual
Meeting of Shareholders. At the Annual Meeting, Alexander
G. Anagnos, H.C. Bailey, Jr., David H. Hoster, II, Harold
B. Judell, David M. Osnos, John N. Palmer and Leland R.
Speed were elected directors of the Registrant, each to
serve until the 1997 Annual Meeting. The following is a
summary of the voting for directors:
Vote Vote
Nominee For Withheld
--------------------- --------- --------
Alexander G. Anagnos 3,920,480 24,532
H.C. Bailey, Jr. 3,921,580 23,432
David H. Hoster II 3,922,630 22,382
Harold B. Judell 3,919,730 25,282
David M. Osnos 3,922,280 22,732
John N. Palmer 3,921,980 23,032
Leland R. Speed 3,922,630 22,382
The following items were also approved at the June 19, 1996
Annual Meeting as follows:
NON
FOR AGAINST ABSTAIN VOTE
--------- ------- ------- --------
(1)Approval of the Agreement
and Plan of Merger
between EastGroup
Properties and Copley
Properties, Inc. 2,887,458 24,180 30,154 1,003,220
(2)Approval of the amendment
EastGroup Properties
1994 Management
Incentive Plan 2,770,573 118,408 66,495 989,536
(3)Approval of the amendment
to EastGroup Properties
Restated Declaration of
Trust, as amended, to
increase the number of
beneficial interest
authorized 3,846,994 53,002 45,016 n/a
Item 6. Exhibits and reports on Form 8-K
(a) Exhibit 27 - Financial Data Schedule attached
hereto.
(b) Reports on Form 8-K
(1) Filed May 24, 1996
Reporting the May 14,1996 merger of LNH with
EastGroup-LNH Corporation, a wholly owned
subsidiary of the Trust, and the issuance of
approximately 618,244 shares as a result of the
merger.
(2) Filed July 2, 1996
Reporting the June 19, 1996 merger of Copley with
the Trust, and the issuance of approximately
2,159,155 shares as a result of the merger.
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: August 14, 1996
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