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REAL ESTATE PROPERTIES | 12 Months Ended
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Dec. 31, 2019
Real Estate [Abstract] |
REAL ESTATE PROPERTIES | REAL ESTATE PROPERTIES The Company’s Real estate properties and Development and value-add properties at December 31, 2019 and 2018 were as follows:
| December 31,
2019 |  | 2018
(In thousands)
Real estate properties: |  |  |
Land | $ | 452,698 |  |  | 380,684 |
Buildings and building improvements | 1,907,963 |  |  | 1,732,592 |
Tenant and other improvements | 471,909 |  |  | 440,205 |
Right of use assets — Ground leases (operating) (1) | 11,997 |  |  | — |
Development and value-add properties (2) | 419,999 |  |  | 263,664 |
| 3,264,566 |  |  | 2,817,145 |
Less accumulated depreciation | (871,139 | ) |  | (814,915 | )
| $ | 2,393,427 |  |  | 2,002,230 |
(1) | See Ground Leases discussion below and in Note 1(o) for information regarding the Company's right of use assets for ground leases.
(2) | Value-add properties are defined as properties that are either acquired but not stabilized or can be converted to a higher and better use. Acquired properties meeting either of the following two conditions are considered value-add properties: (1) Less than 75% occupied as of the acquisition date (or will be less than 75% occupied within one year of acquisition date based on near term lease roll), or (2) 20% or greater of the acquisition cost will be spent to redevelop the property.
EastGroup acquired operating properties during 2019, 2018 and 2017 as discussed in Note 1(j). The Company sold operating properties during 2019, 2018 and 2017 as shown in the table below. The results of operations and gains and losses on sales for the properties sold during the periods presented are reported in continuing operations on the Consolidated Statements of Income and Comprehensive Income. The gains and losses on sales are included in Gain on sales of real estate investments. The Company did not classify any properties as held for sale as of December 31, 2019 and 2018. Sales of Real Estate A summary of Gain on sales of real estate investments for the years ended December 31, 2019, 2018 and 2017 follows:
Real Estate Properties |  | Location |  | Size (in Square Feet) |  | Date Sold |  | Net Sales Price |  | Basis |  | Recognized Gain
|  |  |  |  |  |  |  | (In thousands)
2019 |  |  |  |  |  |  |  |  |  |  |  |
World Houston 5 |  | Houston, TX |  | 51,000 |  |  | 01/29/2019 |  | $ | 3,679 |  |  | 1,354 |  |  | 2,325 |
Altamonte Commerce Center |  | Orlando, FL |  | 186,000 |  |  | 05/20/2019 |  | 14,423 |  |  | 5,342 |  |  | 9,081 |
University Business Center 130 (1) |  | Santa Barbara, CA |  | 40,000 |  |  | 11/07/2019 |  | 11,083 |  |  | 2,729 |  |  | 8,354 |
Southpointe Distribution Center |  | Tucson, AZ |  | 207,000 |  |  | 12/03/2019 |  | 13,699 |  |  | 2,281 |  |  | 11,418 |
University Business Center 125 & 175 |  | Santa Barbara, CA |  | 133,000 |  |  | 12/11/2019 |  | 23,675 |  |  | 13,785 |  |  | 9,890 |
Total for 2019 |  |  |  |  |  |  |  | $ | 66,559 |  |  | 25,491 |  |  | 41,068 |
2018 |  |  |  |  |  |  |  |  |  |  |  |
World Houston 18 |  | Houston, TX |  | 33,000 |  |  | 01/26/2018 |  | $ | 2,289 |  |  | 1,211 |  |  | 1,078 |
56 Commerce Park |  | Tampa, FL |  | 181,000 |  |  | 03/20/2018 |  | 12,032 |  |  | 2,888 |  |  | 9,144 |
35th Avenue Distribution Center |  | Phoenix, AZ |  | 125,000 |  |  | 07/26/2018 |  | 7,683 |  |  | 3,632 |  |  | 4,051 |
Total for 2018 |  |  |  |  |  |  |  | $ | 22,004 |  |  | 7,731 |  |  | 14,273 |
2017 |  |  |  |  |  |  |  |  |  |  |  |
Stemmons Circle |  | Dallas, TX |  | 99,000 |  |  | 05/12/2017 |  | $ | 5,051 |  |  | 1,329 |  |  | 3,722 |
Techway Southwest I-IV |  | Houston, TX |  | 415,000 |  |  | 06/19/2017 |  | 32,506 |  |  | 14,373 |  |  | 18,133 |
Total for 2017 |  |  |  |  |  |  |  | $ | 37,557 |  |  | 15,702 |  |  | 21,855 |
(1) | EastGroup owned 80% of University Business Center 130 through a joint venture. The information shown for this transaction also includes the 20% attributable to the Company's noncontrolling interest partner.
The table above includes sales of operating properties; the Company also sold parcels of land during the years presented. During the year ended December 31, 2019, the Company sold (through eminent domain procedures) a small parcel of land (0.2 acres) in San Diego for $185,000 and recognized a gain on the sale of $83,000. During the year ended December 31, 2018, EastGroup sold a parcel of land in Houston for $2,577,000 and recognized a gain on the sale of $86,000. During the year ended December 31, 2017, EastGroup sold parcels of land in El Paso and Dallas for $3,778,000 and recognized net gains on the sales of $293,000. The net gains on sales of land are included in Other on the Consolidated Statements of Income and Comprehensive Income. Development and Value-Add Properties The Company’s development and value-add program as of December 31, 2019, was comprised of the properties detailed in the table below. Costs incurred include capitalization of interest costs during the period of construction. The interest costs capitalized on development projects for 2019 were $8,453,000 compared to $6,334,000 for 2018 and $5,765,000 for 2017. In addition, EastGroup capitalized internal development costs of $6,918,000 during the year ended December 31, 2019, compared to $4,696,000 during 2018 and $4,754,000 in 2017. Total capital invested for development and value-add properties during 2019 was $318,288,000, which primarily consisted of costs of $265,609,000 as detailed in the Development and Value-Add Properties Activity table below, $47,415,000 as detailed in the Development and Value-Add Properties Transferred to Real Estate Properties During 2019 table below and costs of $5,264,000 on projects subsequent to transfer to Real estate properties. The capitalized costs incurred on development projects subsequent to transfer to Real estate properties include capital improvements at the properties and do not include other capitalized costs associated with development (i.e., interest expense, property taxes and internal personnel costs).
DEVELOPMENT AND VALUE-ADD PROPERTIES ACTIVITY |  |  |  | Costs Incurred |  |  |  | Anticipated Building Conversion Date
|  |  | Costs Transferred in 2019 (1) |  | For the Year Ended 12/31/19 |  | Cumulative as of 12/31/19 |  | Projected Total Costs (2) |
|  |  |  | (In thousands) |  |
|  | (Unaudited) |  |  |  |  |  |  |  | (Unaudited) |  | (Unaudited)
LEASE-UP |  | Building Size (Square feet) |  |  |  |  |  |  |  |  |  |
Logistics Center 6 & 7, Dallas, TX (3) |  | 142,000 |  |  | $ | — |  |  | 15,735 |  |  | 15,735 |  |  | 16,400 |  |  | 01/20
Settlers Crossing 1, Austin, TX |  | 77,000 |  |  | — |  |  | 2,999 |  |  | 9,259 |  |  | 10,200 |  |  | 01/20
Settlers Crossing 2, Austin, TX |  | 83,000 |  |  | — |  |  | 1,360 |  |  | 8,475 |  |  | 9,200 |  |  | 01/20
Parc North 5, Dallas, TX |  | 100,000 |  |  | — |  |  | 1,736 |  |  | 8,689 |  |  | 9,200 |  |  | 02/20
Airport Commerce Center 3, Charlotte, NC |  | 96,000 |  |  | — |  |  | 2,763 |  |  | 8,556 |  |  | 9,100 |  |  | 03/20
Horizon VIII & IX, Orlando, FL |  | 216,000 |  |  | 4,967 |  |  | 11,634 |  |  | 16,601 |  |  | 18,800 |  |  | 04/20
Ten West Crossing 8, Houston, TX |  | 132,000 |  |  | — |  |  | 3,174 |  |  | 9,764 |  |  | 10,900 |  |  | 04/20
Tri-County Crossing 1 & 2, San Antonio, TX |  | 203,000 |  |  | — |  |  | 6,491 |  |  | 15,386 |  |  | 16,700 |  |  | 04/20
CreekView 121 5 & 6, Dallas, TX |  | 139,000 |  |  | — |  |  | 7,546 |  |  | 13,151 |  |  | 16,200 |  |  | 06/20
Parc North 6, Dallas, TX |  | 96,000 |  |  | 2,552 |  |  | 5,738 |  |  | 8,290 |  |  | 10,100 |  |  | 07/20
Arlington Tech Centre 1 & 2, Dallas, TX (3) |  | 151,000 |  |  | — |  |  | 13,277 |  |  | 13,277 |  |  | 15,100 |  |  | 08/20
Gateway 5, Miami, FL |  | 187,000 |  |  | 11,944 |  |  | 11,161 |  |  | 23,105 |  |  | 23,500 |  |  | 09/20
Grand Oaks 75 2, Tampa, FL (3) |  | 150,000 |  |  | — |  |  | 13,115 |  |  | 13,115 |  |  | 13,600 |  |  | 09/20
Southwest Commerce Center, Las Vegas, NV (3) |  | 196,000 |  |  | — |  |  | 26,613 |  |  | 26,613 |  |  | 30,100 |  |  | 10/20
SunCoast 6, Ft. Myers, FL |  | 81,000 |  |  | 3,915 |  |  | 4,019 |  |  | 7,934 |  |  | 9,200 |  |  | 10/20
Rocky Point 2, San Diego, CA (3) |  | 109,000 |  |  | — |  |  | 19,275 |  |  | 19,275 |  |  | 20,600 |  |  | 12/20
Steele Creek IX, Charlotte, NC |  | 125,000 |  |  | 1,766 |  |  | 7,354 |  |  | 9,120 |  |  | 9,800 |  |  | 12/20
Total Lease-Up |  | 2,283,000 |  |  | 25,144 |  |  | 153,990 |  |  | 226,345 |  |  | 248,700 |  |  |
UNDER CONSTRUCTION |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
SunCoast 8, Ft. Myers, FL |  | 77,000 |  |  | 4,361 |  |  | 123 |  |  | 4,484 |  |  | 9,000 |  |  | 05/20
Gilbert Crossroads A & B, Phoenix, AZ |  | 140,000 |  |  | 3,221 |  |  | 10,729 |  |  | 13,950 |  |  | 16,000 |  |  | 01/21
Hurricane Shoals 3, Atlanta, GA |  | 101,000 |  |  | 3,890 |  |  | 2,739 |  |  | 6,629 |  |  | 8,800 |  |  | 03/21
Interstate Commons 2, Phoenix, AZ (3) |  | 142,000 |  |  | — |  |  | 9,882 |  |  | 9,882 |  |  | 11,800 |  |  | 03/21
Tri-County Crossing 3 & 4, San Antonio, TX |  | 203,000 |  |  | 2,334 |  |  | 6,364 |  |  | 8,698 |  |  | 14,700 |  |  | 05/21
World Houston 44, Houston, TX |  | 134,000 |  |  | 1,546 |  |  | 3,244 |  |  | 4,790 |  |  | 9,100 |  |  | 05/21
Ridgeview 1 & 2, San Antonio, TX |  | 226,000 |  |  | 2,499 |  |  | 4,032 |  |  | 6,531 |  |  | 18,500 |  |  | 06/21
Creekview 121 7 & 8, Dallas, TX |  | 137,000 |  |  | 5,489 |  |  | 1,310 |  |  | 6,799 |  |  | 16,300 |  |  | 07/21
Northwest Crossing 1-3, Houston, TX |  | 278,000 |  |  | 6,109 |  |  | 5,426 |  |  | 11,535 |  |  | 25,700 |  |  | 07/21
Settlers Crossing 3 & 4, Austin, TX |  | 173,000 |  |  | 4,030 |  |  | 4,059 |  |  | 8,089 |  |  | 18,400 |  |  | 07/21
LakePort 1-3, Dallas, TX |  | 194,000 |  |  | 3,542 |  |  | 4,520 |  |  | 8,062 |  |  | 22,500 |  |  | 09/21
Total Under Construction |  | 1,805,000 |  |  | 37,021 |  |  | 52,428 |  |  | 89,449 |  |  | 170,800 |  |  |
PROSPECTIVE DEVELOPMENT (PRIMARILY LAND) |  | Estimated Building Size (Square feet) |  |  |  |  |  |  |  |  |  |  |  |  |  |
Phoenix, AZ |  | 178,000 |  |  | (3,221 | ) |  | 785 |  |  | 4,373 |  |  |  |  |
Ft. Myers, FL |  | 329,000 |  |  | (8,276 | ) |  | 2,457 |  |  | 7,503 |  |  |  |  |
Miami, FL |  | 463,000 |  |  | (11,944 | ) |  | 9,798 |  |  | 34,185 |  |  |  |  |
Orlando, FL |  | — |  |  | (4,967 | ) |  | 323 |  |  | 1,075 |  |  |  |  |
Tampa, FL |  | 349,000 |  |  | — |  |  | 4,241 |  |  | 5,801 |  |  |  |  |
Atlanta, GA |  | — |  |  | (3,890 | ) |  | 3,164 |  |  | — |  |  |  |  |
Jackson, MS |  | 28,000 |  |  | — |  |  | — |  |  | 706 |  |  |  |  |
Charlotte, NC |  | 475,000 |  |  | (1,766 | ) |  | 1,884 |  |  | 7,327 |  |  |  |  |
Austin, TX |  | — |  |  | (4,030 | ) |  | 288 |  |  | — |  |  |  |  |
Dallas, TX |  | 997,000 |  |  | (11,583 | ) |  | 18,979 |  |  | 19,588 |  |  |  |  |
Houston, TX |  | 1,223,000 |  |  | (13,126 | ) |  | 16,135 |  |  | 19,448 |  |  |  |  |
San Antonio, TX |  | 373,000 |  |  | (5,987 | ) |  | 1,137 |  |  | 4,199 |  |  |  |  |
Total Prospective Development |  | 4,415,000 |  |  | (68,790 | ) |  | 59,191 |  |  | 104,205 |  |  |  |  |
|  | 8,503,000 |  |  | $ | (6,625 | ) |  | 265,609 |  |  | 419,999 |  |  |  |  |
The Development and Value-Add Properties Activity table is continued on the following page.
DEVELOPMENT AND VALUE-ADD PROPERTIES TRANSFERRED TO REAL ESTATE PROPERTIES DURING 2019 |  |  |  | Costs Incurred |  |  |  |
|  |  | Costs Transferred in 2019 (1) |  | For the Year Ended 12/31/19 |  | Cumulative as of 12/31/19 |  |  |  |
|  | (Unaudited) |  | (In thousands) |  |  |  | (Unaudited)
|  | Building Size (Square feet) |  |  |  |  |  | Building Conversion Date
Siempre Viva I, San Diego, CA (3) |  | 115,000 |  |  | $ | — |  |  | — |  |  | 14,075 |  |  |  |  | 01/19
CreekView 121 3 & 4, Dallas, TX |  | 158,000 |  |  | — |  |  | 1,739 |  |  | 15,539 |  |  |  |  | 03/19
Horizon VI, Orlando, FL |  | 148,000 |  |  | — |  |  | 3,682 |  |  | 11,907 |  |  |  |  | 03/19
Horizon XI, Orlando, FL |  | 135,000 |  |  | — |  |  | 507 |  |  | 9,230 |  |  |  |  | 04/19
Falcon Field, Phoenix, AZ |  | 97,000 |  |  | — |  |  | 181 |  |  | 8,413 |  |  |  |  | 05/19
Gateway 1, Miami, FL |  | 200,000 |  |  | — |  |  | 3,402 |  |  | 23,643 |  |  |  |  | 05/19
SunCoast 5, Ft. Myers, FL |  | 81,000 |  |  | — |  |  | 1,335 |  |  | 7,870 |  |  |  |  | 05/19
Steele Creek V, Charlotte, NC |  | 54,000 |  |  | — |  |  | 2,223 |  |  | 5,537 |  |  |  |  | 07/19
Broadmoor 2, Atlanta, GA |  | 111,000 |  |  | — |  |  | 1,478 |  |  | 7,892 |  |  |  |  | 11/19
Eisenhauer Point 9, San Antonio, TX |  | 82,000 |  |  | 1,154 |  |  | 5,175 |  |  | 6,329 |  |  |  |  | 11/19
World Houston 43, Houston, TX |  | 86,000 |  |  | 1,041 |  |  | 5,381 |  |  | 6,422 |  |  |  |  | 11/19
Eisenhauer Point 7 & 8, San Antonio, TX |  | 336,000 |  |  | — |  |  | 9,790 |  |  | 22,880 |  |  |  |  | 12/19
World Houston 45, Houston, TX |  | 160,000 |  |  | 4,430 |  |  | 12,522 |  |  | 16,952 |  |  |  |  | 12/19
Total Transferred to Real Estate Properties |  | 1,763,000 |  |  | $ | 6,625 |  |  | 47,415 |  |  | 156,689 |  |  | (4) |  |
(1) | Represents costs transferred from Prospective Development (primarily land) to Under Construction during the period. Negative amounts represent land inventory costs transferred to Under Construction.
(2) | Included in these costs are development obligations of $59.3 million and tenant improvement obligations of $7.5 million on properties under development.
(3) | Represents value-add projects acquired by EastGroup.
(4) | Represents cumulative costs at the date of transfer.
Ground Leases On January 1, 2019, EastGroup adopted the principles of FASB Accounting Standards Codification (“ASC”) 842, Leases, as discussed in Note 1(o). In connection with the adoption, the Company recorded right of use assets for its ground leases, which are classified as operating leases, using the effective date transition option; under this option, prior years are not restated. As of January 1, 2019, the Company recorded right of use assets for its ground leases of $10,226,000. In April 2019, the Company acquired Logistics Center 6 & 7 in Dallas, which is located on land under a ground lease. The Company recorded a right of use asset of $2,679,000 in connection with this acquisition. As of December 31, 2019, the unamortized balance of the Company’s right of use assets for its ground leases was $11,997,000. The right of use assets for ground leases are included in Real estate properties on the Consolidated Balance Sheets. As of December 31, 2019, the Company owned two properties in Florida, three properties in Texas and one property in Arizona that are subject to ground leases. These leases have terms of 40 to 50 years, expiration dates of August 2031 to October 2058, and renewal options of 15 to 35 years, except for the one lease in Arizona which is automatically and perpetually renewed annually. The Company has included renewal options in the lease terms for calculating the ground lease assets and liabilities as the Company is reasonably certain it will exercise these options. Total ground lease expenditures for the years ended December 31, 2019, 2018 and 2017 were $966,000, $783,000 and $760,000, respectively. Payments are subject to increases at 3 to 10 year intervals based upon the agreed or appraised fair market value of the leased premises on the adjustment date or the Consumer Price Index percentage increase since the base rent date. These future changes in payments will be considered variable payments and will not impact the assessment of the asset or liability unless there is a significant event that triggers reassessment, such as amendment with a change in the terms of the lease. The weighted-average remaining lease term as of December 31, 2019, for the ground leases is 43 years. The following schedule indicates approximate future minimum ground lease payments for these properties by year as of December 31, 2019: Future Minimum Ground Lease Payments as of December 31, 2019
Years Ending December 31, |  | (In thousands)
2020 |  | $ | 970 |
2021 |  | 970 |
2022 |  | 970 |
2023 |  | 975 |
2024 |  | 999 |
Thereafter |  | 38,916 |
Total minimum payments |  | 43,800 |
Imputed interest (1) |  | (31,752 | )
Total ground leases |  | $ | 12,048 |
(1) | As the Company’s leases do not provide an implicit rate, in order to calculate the present value of the remaining ground lease payments, the Company used its incremental borrowing rate, adjusted for a number of factors, including the long-term nature of the ground leases, the Company’s estimated borrowing costs, and the estimated fair value of the underlying land, to determine the imputed interest for its ground leases. The Company elected to use the portfolio approach as all of its ground leases in place as of January 1, 2019, have similar characteristics and determined 7.3% as the appropriate rate as of January 1, 2019, for all leases in place at that time. For the ground lease obtained during April 2019, the Company used its incremental borrowing rate, adjusted for the factors discussed above, which was determined to be 8.0%.
As noted above, the Company adopted the new lease accounting guidance effective January 1, 2019. Since the Company has applied the provisions on a prospective basis, the following represents approximate future minimum ground lease payments by year as of December 31, 2018, as applicable under ASC 840, Leases, prior to the adoption of ASC 842. Future Minimum Ground Lease Payments as of December 31, 2018
Years Ending December 31, |  | (In thousands)
2019 |  | $ | 791 |
2020 |  | 791 |
2021 |  | 791 |
2022 |  | 791 |
2023 |  | 791 |
Thereafter |  | 30,751 |
|  | $ | 34,706 |
At December 31, 2018, the Company had the same ground leases in place as mentioned above, with the exception of the ground lease associated with Logistics Center 6 & 7 which was obtained in April 2019.

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