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REAL ESTATE PROPERTY ACQUISITIONS AND ACQUIRED INTANGIBLES | 6 Months Ended
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Jun. 30, 2022
Asset Acquisition [Abstract] |
Real Estate Property Acquisitions and Acquired Intangibles | REAL ESTATE PROPERTY ACQUISITIONS AND ACQUIRED INTANGIBLES Upon acquisition of real estate properties, EastGroup applies the principles of FASB ASC 805, Business Combinations. The FASB Codification provides a framework for determining whether transactions should be accounted for as acquisitions of assets or businesses. Under the guidance, companies are required to utilize an initial screening test to determine whether substantially all of the fair value of the gross assets acquired is concentrated in a single identifiable asset or a group of similar identifiable assets; if so, the set is not a business. Criteria considered in grouping similar assets include geographic location, market and operational risks and the physical characteristics of the assets. EastGroup determined that its real estate property acquisitions in 2021 and the first six months of 2022 are considered to be acquisitions of groups of similar identifiable assets; therefore, the acquisitions are not considered to be acquisitions of a business. As a result, the Company capitalized acquisition costs related to its 2021 and 2022 acquisitions. The FASB Codification also provides guidance on how to properly determine the allocation of the purchase price among the individual components of both the tangible and intangible assets based on their respective fair values. The allocation to tangible assets (land, building and improvements) is based upon management’s determination of the value of the property as if it were vacant using discounted cash flow models. Land is valued using comparable land sales specific to the applicable market, provided by a third party. The Company determines whether any financing assumed is above or below market based upon comparison to similar financing terms for similar properties. The cost of the properties acquired may be adjusted based on indebtedness assumed from the seller that is determined to be above or below market rates. The purchase price is also allocated among the following categories of intangible assets: the above or below market component of in-place leases, the value of in-place leases, and the value of customer relationships. The value allocable to the above or below market component of an acquired in-place lease is determined based upon the present value (using a discount rate reflecting the risks associated with the acquired leases) of the difference between (i) the contractual amounts to be paid pursuant to the lease over its remaining term and (ii) management’s estimate of the amounts that would be paid using current market rents over the remaining term of the lease. The amounts allocated to above and below market lease intangibles are included in Other assets and Other liabilities, respectively, on the Consolidated Balance Sheets and are amortized to rental income over the remaining terms of the respective leases. The total amount of intangible assets is further allocated to in-place lease values and customer relationship values based upon management’s assessment of their respective values. Factors considered by management in the allocation include an estimate of foregone rents and avoided leasing costs during the expected lease-up periods considering current market conditions and costs to execute similar leases. These intangible assets are included in Other assets on the Consolidated Balance Sheets and are amortized over the remaining term of the existing lease or the anticipated life of the customer relationship, as applicable. Amortization expense for in-place lease intangibles was $2,198,000 and $4,663,000 for the three and six months ended June 30, 2022, respectively, and $1,307,000 and $2,738,000 for the same periods in 2021. Amortization of above and below market lease intangibles increased rental income by $507,000 and $1,352,000 for the three and six months ended June 30, 2022, respectively, and $245,000 and $474,000 for the same periods in 2021. During the six months ended June 30, 2022, EastGroup acquired the following properties:
REAL ESTATE PROPERTIES ACQUIRED IN 2022 |  | Location |  | Size |  | Date Acquired |  | Cost (1)
|  |  |  | (Square feet) |  |  |  | (In thousands)
Operating properties acquired (2) |  |  |  |  |  |  |  |
Cebrian Distribution Center and Reed Distribution Center (3) |  | Sacramento, CA |  | 329,000 |  |  | 06/01/2022 |  | $ | 49,726 |
6 th Street Business Center, Benicia Distribution Center 1-5, Ettie Business Center, Laura Alice Business Center, Preston Distribution Center, Sinclair Distribution Center, Transit Distribution Center and Whipple Business Center (3) |  | San Francisco, CA |  | 1,377,000 |  |  | 06/01/2022 |  | 309,404 |
Total operating property acquisitions |  |  |  | 1,706,000 |  |  |  |  | 359,130 |
Value-add properties acquired (4) |  |  |  |  |  |  |  |
Cypress Preserve 1 & 2 |  | Houston, TX |  | 516,000 |  |  | 03/28/2022 |  | 54,462 |
Zephyr Distribution Center |  | San Francisco, CA |  | 82,000 |  |  | 04/08/2022 |  | 29,017 |
Mesa Gateway Commerce Center |  | Phoenix, AZ |  | 147,000 |  |  | 04/15/2022 |  | 18,315 |
Total value-add property acquisitions |  |  |  | 745,000 |  |  |  |  | 101,794 |
Total acquired assets |  |  |  | 2,451,000 |  |  |  |  | $ | 460,924 |
(1)Cost is calculated in accordance with FASB ASC 805, Business Combinations, and represents the sum of the purchase price, closing costs and capitalized acquisition costs. (2)Operating properties are defined as stabilized real estate properties (land including buildings and improvements) in the Company’s operating portfolio; included in Real estate properties on the Consolidated Balance Sheets. (3)The Company acquired these operating properties along with two land parcels, also in Sacramento, CA and San Francisco, CA, in connection with its acquisition of Tulloch Corporation in June 2022. Size and cost are presented on an aggregate basis for the properties located in Sacramento, CA and San Francisco, CA, respectively. In consideration for this acquisition, the Company assumed a $60,000,000 loan and issued 1,868,809 shares of the Company’s common stock. The acquisition date fair value of the loan assumed was $60,000,000, and the acquisition date fair value of the common shares, which was based on the closing share price on the acquisition date, was $303,756,000. (4)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. The following table summarizes the allocation of the total consideration for the acquired assets and assumed liabilities in connection with the acquisition identified in the table above which was acquired during the six months ended June 30, 2022.
ACQUIRED ASSETS AND ASSUMED LIABILITIES IN 2022 |  | Cost
|  | (In thousands)
Land |  | $ | 126,067 |
Buildings and building improvements |  | 315,996 |
Tenant and other improvements |  | 11,502 |
Total real estate properties acquired |  | 453,565 |
In-place lease intangibles (1) |  | 11,418 |
Below market lease intangibles (2) |  | (4,059) |
Total assets acquired, net of liabilities assumed |  | $ | 460,924 |
(1)In-place lease intangibles and above market lease intangibles are each included in Other assets on the Consolidated Balance Sheets. These costs are amortized over the remaining lives of the associated leases in place at the time of acquisition. (2)Below market lease intangibles are included in Other liabilities on the Consolidated Balance Sheets. These costs are amortized over the remaining lives of the associated leases in place at the time of acquisition. The leases in the properties acquired during the six months ended June 30, 2022 had a weighted average remaining lease term at acquisition of approximately 3.7 years. Also during the six months ended June 30, 2022, the Company acquired 177.5 acres of development land in Miami, Houston, Phoenix, San Francisco, Sacramento and Atlanta for $54,751,000. The land acquisitions in San Francisco and Sacramento were acquired in connection with the Company’s acquisition of Tulloch Corporation in June 2022. During 2021, EastGroup acquired the following properties:
REAL ESTATE PROPERTIES ACQUIRED IN 2021 |  | Location |  | Size |  | Date Acquired |  | Cost (1)
|  |  |  | (Square feet) |  |  |  | (In thousands)
Operating properties acquired (2) |  |  |  |  |  |  |  |
Southpark Distribution Center 2 |  | Phoenix, AZ |  | 79,000 |  |  | 06/10/2021 |  | $ | 9,177 |
DFW Global Logistics Centre |  | Dallas, TX |  | 611,000 |  |  | 08/26/2021 |  | 89,829 |
Progress Center 3 |  | Atlanta, GA |  | 50,000 |  |  | 09/23/2021 |  | 5,000 |
Texas Avenue |  | Austin, TX |  | 20,000 |  |  | 10/15/2021 |  | 4,143 |
Total operating property acquisitions |  |  |  | 760,000 |  |  |  |  | 108,149 |
Value-add properties acquired (3) |  |  |  |  |  |  |  |
Access Point 1 |  | Greenville, SC |  | 156,000 |  |  | 01/15/2021 |  | 10,501 |
Northpoint 200 |  | Atlanta, GA |  | 79,000 |  |  | 01/21/2021 |  | 6,516 |
Access Point 2 |  | Greenville, SC |  | 159,000 |  |  | 05/19/2021 |  | 10,743 |
Cherokee 75 Business Center 2 |  | Atlanta, GA |  | 105,000 |  |  | 06/17/2021 |  | 8,837 |
Siempre Viva Distribution Center 3-6 |  | San Diego, CA |  | 547,000 |  |  | 12/01/2021 |  | 134,479 |
Total value-add property acquisitions |  |  |  | 1,046,000 |  |  |  |  | 171,076 |
Total acquired assets |  |  |  | 1,806,000 |  |  |  |  | $ | 279,225 |
(1)Represents the sum of the purchase price, closing costs and capitalized acquisition costs. (2)Operating properties are defined as stabilized real estate properties (land including buildings and improvements) in the Company’s operating portfolio; included in Real estate properties on the Consolidated Balance Sheets. (3)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. The following table summarizes the allocation of the total consideration for the acquired assets and assumed liabilities in connection with the acquisitions identified in the table above which were acquired during the year ended December 31, 2021.
ACQUIRED ASSETS AND ASSUMED LIABILITIES IN 2021 |  | Cost
|  | (In thousands)
Land |  | $ | 42,554 |
Buildings and building improvements |  | 225,645 |
Tenant and other improvements |  | 4,907 |
Right of use assets — Ground leases (operating) |  | 12,708 |
Total real estate properties acquired |  | 285,814 |
In-place lease intangibles (1) |  | 9,949 |
Above market lease intangibles (1) |  | 6 |
Below market lease intangibles (2) |  | (3,836) |
Operating lease liabilities — Ground leases (3) |  | (12,708) |
Total assets acquired, net of liabilities assumed |  | $ | 279,225 |
(1)In-place lease intangibles and above market lease intangibles are each included in Other assets on the Consolidated Balance Sheets. These costs are amortized over the remaining lives of the associated leases in place at the time of acquisition. (2)Below market lease intangibles are included in Other liabilities on the Consolidated Balance Sheets. These costs are amortized over the remaining lives of the associated leases in place at the time of acquisition. (3)Operating lease liabilities - Ground leases are included in Other liabilities on the Consolidated Balance Sheets. The leases in the properties acquired during the year ended December 31, 2021 had a weighted average remaining lease term at acquisition of approximately 2.9 years. Also during 2021, the Company acquired 365.8 acres of development land in Austin, Houston, Charlotte, Greenville and Atlanta for $41,065,000. The Company periodically reviews the recoverability of goodwill (at least annually) and the recoverability of other intangibles (on a quarterly basis) for possible impairment. No impairment of goodwill or other intangibles existed during the three and six month periods ended June 30, 2022 and 2021.

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