EASTGROUP PROPERTIES INC - Annual Report: 2011 (Form 10-K)

form10k.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-K

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF

THE SECURITIES EXCHANGE ACT OF 1934

FOR THE FISCAL YEAR ENDED DECEMBER 31, 2011 COMMISSION FILE NUMBER 1-07094

EASTGROUP PROPERTIES, INC.

(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

		MARYLAND	13-2711135
		(State or other jurisdiction	(I.R.S. Employer
		of incorporation or organization)	Identification No.)

		190 EAST CAPITOL STREET
		SUITE 400
		JACKSON, MISSISSIPPI	39201
		(Address of principal executive offices)	(Zip code)

		Registrant’s telephone number: (601) 354-3555

SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:

SHARES OF COMMON STOCK, $.0001 PAR VALUE,

NEW YORK STOCK EXCHANGE

SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: NONE

Indicate by check mark if the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. YES (x) NO ( )

Indicate by check mark if the Registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act. YES ( ) NO (x)

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 ( )

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). YES (x) NO ( )

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. (x)

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Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large Accelerated Filer (x) Accelerated Filer ( ) Non-accelerated Filer ( ) Smaller Reporting Company ( )

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). YES ( ) NO (x)

State the aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was last sold, or the average bid and asked price of such common equity, as of June 30, 2011, the last business day of the Registrant's most recently completed second fiscal quarter: $1,104,183,000.

The number of shares of common stock, $.0001 par value, outstanding as of February 21, 2012 was 27,859,569.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the Registrant’s Proxy Statement for the 2012 Annual Meeting of Stockholders are incorporated by reference into Part III.

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PART I

ITEM 1. BUSINESS.

Organization

EastGroup Properties, Inc. (the Company or EastGroup) is an equity real estate investment trust (REIT) organized in 1969. The Company has elected to be taxed and intends to continue to qualify as a REIT under Sections 856-860 of the Internal Revenue Code (the Code), as amended.

Available Information

The Company maintains a website at www.eastgroup.net. The Company posts its annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) of the Securities Exchange Act of 1934, as amended, as soon as reasonably practicable after it electronically files or furnishes such materials to the Securities and Exchange Commission (SEC). In addition, the Company's website includes items related to corporate governance matters, including, among other things, the Company's corporate governance guidelines, charters of various committees of the Board of Directors, and the Company's code of business conduct and ethics applicable to all employees, officers and directors. The Company intends to disclose on its website any amendment to, or waiver of, any provision of this code of business conduct and ethics applicable to the Company's directors and executive officers that would otherwise be required to be disclosed under the rules of the SEC or the New York Stock Exchange. Copies of these reports and corporate governance documents may be obtained, free of charge, from the Company's website. Any shareholder also may obtain copies of these documents, free of charge, by sending a request in writing to: Investor Relations, EastGroup Properties, Inc., 190 East Capitol Street, Suite 400, Jackson, MS 39201-2152.

Administration

EastGroup maintains its principal executive office and headquarters in Jackson, Mississippi. The Company also has regional offices in Orlando, Houston and Phoenix and asset management offices in Charlotte and Dallas. EastGroup has property management offices in Jacksonville, Tampa, Fort Lauderdale and San Antonio. Offices at these locations allow the Company to provide property management services to all of its Florida (except Fort Myers), Arizona, Mississippi, North Carolina, and Houston and San Antonio, Texas properties, which together account for 71% of the Company’s total portfolio on a square foot basis. In addition, the Company currently provides property administration (accounting of operations) for its entire portfolio. The regional offices in Florida, Texas and Arizona also provide development capability and oversight in those states. As of February 21, 2012, EastGroup had 69 full-time employees and 3 part-time employees.

Operations

EastGroup is focused on the development, acquisition and operation of industrial properties in major Sunbelt markets throughout the United States with an emphasis in the states of Florida, Texas, Arizona, California and North Carolina. The Company’s goal is to maximize shareholder value by being a leading provider of functional, flexible and quality business distribution space for location sensitive tenants primarily in the 5,000 to 50,000 square foot range. EastGroup’s strategy for growth is based on the ownership of premier distribution facilities generally clustered near major transportation features in supply constrained submarkets. Over 99% of the Company’s revenue consists of rental income from real estate properties.

During 2011, EastGroup increased its holdings in real estate properties through its acquisition and development programs. The Company purchased five warehouse distribution complexes with a total of 21 buildings (1,770,000 square feet) and 164.6 acres of development land for a combined cost of $101.9 million. Also during 2011, EastGroup began construction of eight development projects (527,000 square feet) and transferred one property (20,000 square feet) with aggregate costs of $1.5 million at the date of transfer from development to real estate properties.

EastGroup incurs short-term floating rate bank debt in connection with the acquisition and development of real estate and, as market conditions permit, replaces floating rate debt with equity, including preferred equity, and/or fixed-rate term loans. EastGroup also may, in appropriate circumstances, acquire one or more properties in exchange for EastGroup securities.

EastGroup holds its properties as long-term investments but may determine to sell certain properties that no longer meet its investment criteria. The Company may provide financing in connection with such sales of property if market conditions require. In addition, the Company may provide financing to a partner or co-owner in connection with an acquisition of real estate in certain situations.

Subject to the requirements necessary to maintain EastGroup’s qualifications as a REIT, the Company may acquire securities of entities engaged in real estate activities or securities of other issuers, including for the purpose of exercising control over those entities.

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The Company intends to continue to qualify as a REIT under the Code. To maintain its status as a REIT, the Company is required to distribute at least 90% of its ordinary taxable income to its stockholders. If the Company has a capital gain, it has the option of (i) deferring recognition of the capital gain through a tax-deferred exchange, (ii) declaring and paying a capital gain dividend on any recognized net capital gain resulting in no corporate level tax, or (iii) retaining and paying corporate income tax on its net long-term capital gain, with the shareholders reporting their proportional share of the undistributed long-term capital gain and receiving a credit or refund of their share of the tax paid by the Company.

EastGroup has no present intention of acting as an underwriter of offerings of securities of other issuers. The strategies and policies set forth above were determined and are subject to review by EastGroup's Board of Directors, which may change such strategies or policies based upon its evaluation of the state of the real estate market, the performance of EastGroup's assets, capital and credit market conditions, and other relevant factors. EastGroup provides annual reports to its stockholders, which contain financial statements audited by the Company’s independent registered public accounting firm.

Environmental Matters

Under various federal, state and local laws, ordinances and regulations, an owner of real estate may be liable for the costs of removal or remediation of certain hazardous or toxic substances on or in such property. Many such laws impose liability without regard to whether the owner knows of, or was responsible for, the presence of such hazardous or toxic substances. The presence of such substances, or the failure to properly remediate such substances, may adversely affect the owner’s ability to sell or rent such property or to use such property as collateral in its borrowings. EastGroup’s properties have been subjected to Phase I Environmental Site Assessments (ESAs) by independent environmental consultants. These reports have not revealed any potential significant environmental liability. Management of EastGroup is not aware of any environmental liability that would have a material adverse effect on EastGroup’s business, assets, financial position or results of operations.

ITEM 1A. RISK FACTORS.

In addition to the other information contained or incorporated by reference in this document, readers should carefully consider the following risk factors. Any of these risks or the occurrence of any one or more of the uncertainties described below could have a material adverse effect on the Company's financial condition and the performance of its business. The Company refers to itself as "we" or "our" in the following risk factors.

Real Estate Industry Risks

We face risks associated with local real estate conditions in areas where we own properties. We may be adversely affected by general economic conditions and local real estate conditions. For example, an oversupply of industrial properties in a local area or a decline in the attractiveness of our properties to tenants would have a negative effect on us. Other factors that may affect general economic conditions or local real estate conditions include:

·	population and demographic trends;

·	employment and personal income trends;

·	income tax laws;

·	changes in interest rates and availability and costs of financing;

·	increased operating costs, including insurance premiums, utilities and real estate taxes, due to inflation and other factors which may not necessarily be offset by increased rents; and

·	construction costs.

We may be unable to compete for properties and tenants. The real estate business is highly competitive. We compete for interests in properties with other real estate investors and purchasers, some of whom have greater financial resources, revenues and geographical diversity than we have. Furthermore, we compete for tenants with other property owners. All of our industrial properties are subject to significant local competition. We also compete with a wide variety of institutions and other investors for capital funds necessary to support our investment activities and asset growth.

We are subject to significant regulation that constrains our activities. Local zoning and land use laws, environmental statutes and other governmental requirements restrict our expansion, rehabilitation and reconstruction activities. These regulations may prevent us from taking advantage of economic opportunities. Legislation such as the Americans with Disabilities Act may require us to modify our properties, and noncompliance could result in the imposition of fines or an award of damages to private litigants. Future legislation may impose additional requirements. We cannot predict what requirements may be enacted or what changes may be implemented to existing legislation.

Risks Associated with Our Properties

We may be unable to lease space. When a lease expires, a tenant may elect not to renew it. We may not be able to re-lease the property on similar terms, if we are able to re-lease the property at all. The terms of renewal or re-lease (including the cost of required renovations and/or concessions to tenants) may be less favorable to us than the prior lease. We also develop some properties with no pre-leasing. If we are unable to lease all or a substantial portion of our properties, or if the rental rates upon such leasing are significantly lower than expected rates, our cash generated before debt repayments and capital expenditures and our ability to make expected distributions to stockholders may be adversely affected.

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We have been and may continue to be affected negatively by tenant bankruptcies and leasing delays. At any time, a tenant may experience a downturn in its business that may weaken its financial condition. Similarly, a general decline in the economy may result in a decline in the demand for space at our industrial properties. As a result, our tenants may delay lease commencement, fail to make rental payments when due, or declare bankruptcy. Any such event could result in the termination of that tenant’s lease and losses to us, and distributions to investors may decrease. We receive a substantial portion of our income as rents under long-term leases. If tenants are unable to comply with the terms of their leases because of rising costs or falling sales, we may deem it advisable to modify lease terms to allow tenants to pay a lower rent or a smaller share of taxes, insurance and other operating costs. If a tenant becomes insolvent or bankrupt, we cannot be sure that we could recover the premises from the tenant promptly or from a trustee or debtor-in-possession in any bankruptcy proceeding relating to the tenant. We also cannot be sure that we would receive rent in the proceeding sufficient to cover our expenses with respect to the premises. If a tenant becomes bankrupt, the federal bankruptcy code will apply and, in some instances, may restrict the amount and recoverability of our claims against the tenant. A tenant’s default on its obligations to us could adversely affect our financial condition and the cash we have available for distribution.

We face risks associated with our property development. We intend to continue to develop properties where market conditions warrant such investment. Once made, our investments may not produce results in accordance with our expectations. Risks associated with our current and future development and construction activities include:

·	the availability of favorable financing alternatives;

·	the risk that we may not be able to obtain land on which to develop or that due to the increased cost of land, our activities may not be as profitable;

·	construction costs exceeding original estimates due to rising interest rates and increases in the costs of materials and labor;

·	construction and lease-up delays resulting in increased debt service, fixed expenses and construction costs;

·	expenditure of funds and devotion of management's time to projects that we do not complete;

·	fluctuations of occupancy and rental rates at newly completed properties, which depend on a number of factors, including market and economic conditions, resulting in lower than projected rental rates and a corresponding lower return on our investment; and

·	complications (including building moratoriums and anti-growth legislation) in obtaining necessary zoning, occupancy and other governmental permits.

We face risks associated with property acquisitions. We acquire individual properties and portfolios of properties and intend to continue to do so. Our acquisition activities and their success are subject to the following risks:

·	when we are able to locate a desired property, competition from other real estate investors may significantly increase the purchase price;

·	acquired properties may fail to perform as expected;

·	the actual costs of repositioning or redeveloping acquired properties may be higher than our estimates;

·	acquired properties may be located in new markets where we face risks associated with an incomplete knowledge or understanding of the local market, a limited number of established business relationships in the area and a relative unfamiliarity with local governmental and permitting procedures;

·	we may be unable to quickly and efficiently integrate new acquisitions, particularly acquisitions of portfolios of properties, into our existing operations, and as a result, our results of operations and financial condition could be adversely affected; and

we may acquire properties subject to liabilities and without any recourse, or with only limited recourse, to the transferor with respect to unknown liabilities. As a result, if a claim were asserted against us based upon ownership of those properties, we might have to pay substantial sums to settle it, which could adversely affect our cash flow.

Coverage under our existing insurance policies may be inadequate to cover losses. We generally maintain insurance policies related to our business, including casualty, general liability and other policies, covering our business operations, employees and assets as appropriate for the markets where our properties and business operations are located. However, we would be required to bear all losses that are not adequately covered by insurance. In addition, there may be certain losses that are not generally insured against or that are not generally fully insured against because it is not deemed economically feasible or prudent to do so, including losses due to floods, wind, earthquakes, acts of war, acts of terrorism or riots. If an uninsured loss or a loss in excess of insured limits occurs with respect to one or more of our properties, then we could lose the capital we invested in the properties, as well as the anticipated future revenue from the properties. In addition, if the damaged properties are subject to recourse indebtedness, we would continue to be liable for the indebtedness, even if these properties were irreparably damaged.

We face risks due to lack of geographic and real estate sector diversity. Substantially all of our properties are located in the Sunbelt region of the United States with an emphasis in the states of Florida, Texas, Arizona, California and North Carolina. A downturn in general economic conditions and local real estate conditions in these geographic regions, as a result of oversupply of or reduced demand for industrial properties, local business climate, business layoffs and changing demographics, would have a particularly strong adverse effect on us. Our investments in real estate assets are concentrated in the industrial distribution sector. This concentration may expose us to the risk of economic downturns in this sector to a greater extent than if our business activities included other sectors of the real estate industry.

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We face risks due to the illiquidity of real estate which may limit our ability to vary our portfolio. Real estate investments are relatively illiquid. Our ability to vary our portfolio in response to changes in economic and other conditions will therefore be limited. In addition, because of our status as a REIT, the Internal Revenue Code limits our ability to sell our properties. If we must sell an investment, we cannot ensure that we will be able to dispose of the investment on terms favorable to the Company.

We are subject to environmental laws and regulations. Current and previous real estate owners and operators may be required under various federal, state and local laws, ordinances and regulations to investigate and clean up hazardous substances released at the properties they own or operate. They may also be liable to the government or to third parties for substantial property or natural resource damage, investigation costs and cleanup costs. Such laws often impose liability without regard to whether the owner or operator knew of, or was responsible for, the release or presence of such hazardous substances. In addition, some environmental laws create a lien on the contaminated site in favor of the government for damages and costs the government incurs in connection with the contamination. Contamination may adversely affect the owner’s ability to use, sell or lease real estate or to borrow using the real estate as collateral. We have no way of determining at this time the magnitude of any potential liability to which we may be subject arising out of environmental conditions or violations with respect to the properties we currently or formerly owned. Environmental laws today can impose liability on a previous owner or operator of a property that owned or operated the property at a time when hazardous or toxic substances were disposed of, released from, or present at the property. A conveyance of the property, therefore, may not relieve the owner or operator from liability. Although ESAs have been conducted at our properties to identify potential sources of contamination at the properties, such ESAs do not reveal all environmental liabilities or compliance concerns that could arise from the properties. Moreover, material environmental liabilities or compliance concerns may exist, of which we are currently unaware, that in the future may have a material adverse effect on our business, assets or results of operations.

Compliance with new laws or regulations related to climate change, including compliance with “green” building codes, may require us to make improvements to our existing properties. Proposed legislation could also increase the costs of energy and utilities. The cost of the proposed legislation may adversely affect our financial position, results of operations and cash flows. We may be adversely affected by floods, hurricanes and other climate related events.

Financing Risks

We face risks associated with the use of debt to fund acquisitions and developments, including refinancing risk. We are subject to the risks normally associated with debt financing, including the risk that our cash flow will be insufficient to meet required payments of principal and interest. In addition, certain of our mortgages will have significant outstanding principal balances on their maturity dates, commonly known as “balloon payments.” Therefore, we will likely need to refinance at least a portion of our outstanding debt as it matures. There is a risk that we may not be able to refinance existing debt or that the terms of any refinancing will not be as favorable as the terms of the existing debt.

We face risks associated with our dependence on external sources of capital. In order to qualify as a REIT, we are required each year to distribute to our stockholders at least 90% of our ordinary taxable income, and we are subject to tax on our income to the extent it is not distributed. Because of this distribution requirement, we may not be able to fund all future capital needs from cash retained from operations. As a result, to fund capital needs, we rely on third-party sources of capital, which we may not be able to obtain on favorable terms, if at all. Our access to third-party sources of capital depends upon a number of factors, including (i) general market conditions; (ii) the market’s perception of our growth potential; (iii) our current and potential future earnings and cash distributions; and (iv) the market price of our capital stock. Additional debt financing may substantially increase our debt-to-total market capitalization ratio. Additional equity financing may dilute the holdings of our current stockholders.

Covenants in our credit agreements could limit our flexibility and adversely affect our financial condition. The terms of our various credit agreements and other indebtedness require us to comply with a number of customary financial and other covenants, such as maintaining debt service coverage and leverage ratios and maintaining insurance coverage. These covenants may limit our flexibility in our operations, and breaches of these covenants could result in defaults under the instruments governing the applicable indebtedness even if we had satisfied our payment obligations. If we are unable to refinance our indebtedness at maturity or meet our payment obligations, the amount of our distributable cash flow and our financial condition would be adversely affected.

Fluctuations in interest rates may adversely affect our operations and value of our stock. As of December 31, 2011, we had approximately $154.5 million of variable interest rate debt. As of December 31, 2011, the weighted average interest rate on our variable rate debt was 1.15%. We may incur additional indebtedness in the future that bears interest at a variable rate or we may be required to refinance our existing debt at higher rates. Accordingly, increases in interest rates could adversely affect our financial condition, our ability to pay expected distributions to stockholders and the value of our stock.

A lack of any limitation on our debt could result in our becoming more highly leveraged. Our governing documents do not limit the amount of indebtedness we may incur. Accordingly, our Board of Directors may incur additional debt and would do so, for example, if it were necessary to maintain our status as a REIT. We might become more highly leveraged as a result, and our financial condition and cash available for distribution to stockholders might be negatively affected and the risk of default on our indebtedness could increase.

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Other Risks

The market value of our common stock could decrease based on our performance and market perception and conditions. The market value of our common stock may be based primarily upon the market’s perception of our growth potential and current and future cash dividends and may be secondarily based upon the real estate market value of our underlying assets. The market price of our common stock is influenced by the dividend on our common stock relative to market interest rates. Rising interest rates may lead potential buyers of our common stock to expect a higher dividend rate, which would adversely affect the market price of our common stock. In addition, rising interest rates would result in increased expense, thereby adversely affecting cash flow and our ability to service our indebtedness and pay dividends.

The current economic situation may adversely affect our operating results and financial condition. The continuation or intensification of the turmoil in the global financial markets may have an adverse impact on the availability of credit to businesses generally and could lead to a further weakening of the U.S. and global economies. Currently these conditions have not impaired our ability to access credit markets and finance our operations. However, our ability to access the capital markets may be restricted at a time when we would like, or need, to raise financing, which could have an impact on our flexibility to react to changing economic and business conditions. Furthermore, deteriorating economic conditions including business layoffs, downsizing, industry slowdowns and other similar factors that affect our customers could continue to negatively impact commercial real estate fundamentals and result in lower occupancy, lower rental rates and declining values in our real estate portfolio and in the collateral securing any loan investments we may make. Additionally, the economic situation could have an impact on our lenders or customers, causing them to fail to meet their obligations to us. No assurances can be given that the effects of the current economic situation will not have a material adverse effect on our business, financial condition and results of operations.

We may fail to qualify as a REIT. If we fail to qualify as a REIT, we will not be allowed to deduct distributions to stockholders in computing our taxable income and will be subject to federal income tax, including any applicable alternative minimum tax, at regular corporate rates. In addition, we may be barred from qualification as a REIT for the four years following disqualification. The additional tax incurred at regular corporate rates would significantly reduce the cash flow available for distribution to stockholders and for debt service. Furthermore, we would no longer be required by the Internal Revenue Code to make any distributions to our stockholders as a condition of REIT qualification. Any distributions to stockholders would be taxable as ordinary income to the extent of our current and accumulated earnings and profits, although such dividend distributions would be subject to a top federal tax rate of 15% through 2012. Corporate distributees, however, may be eligible for the dividends received deduction on the distributions, subject to limitations under the Internal Revenue Code. To qualify as a REIT, we must comply with certain highly technical and complex requirements. We cannot be certain we have complied with these requirements because there are few judicial and administrative interpretations of these provisions. In addition, facts and circumstances that may be beyond our control may affect our ability to qualify as a REIT. We cannot assure you that new legislation, regulations, administrative interpretations or court decisions will not change the tax laws significantly with respect to our qualification as a REIT or with respect to the federal income tax consequences of qualification. We cannot assure you that we will remain qualified as a REIT.

There is a risk of changes in the tax law applicable to real estate investment trusts. Since the Internal Revenue Service, the United States Treasury Department and Congress frequently review federal income tax legislation, we cannot predict whether, when or to what extent new federal tax laws, regulations, interpretations or rulings will be adopted. Any such legislative action may prospectively or retroactively modify our tax treatment and, therefore, may adversely affect taxation of us and/or our investors.

We face possible adverse changes in tax laws. From time to time, changes in state and local tax laws or regulations are enacted which may result in an increase in our tax liability. A shortfall in tax revenues for states and municipalities in which we operate may lead to an increase in the frequency and size of such changes. If such changes occur, we may be required to pay additional taxes on our assets or income. These increased tax costs could adversely affect our financial condition, results of operations and the amount of cash available for the payment of dividends.

Our Charter contains provisions that may adversely affect the value of EastGroup stock. Our charter prohibits any holder from acquiring more than 9.8% (in value or in number, whichever is more restrictive) of our outstanding equity stock (defined as all of our classes of capital stock, except our excess stock (of which there is none outstanding)) unless our Board of Directors grants a waiver. The ownership limit may limit the opportunity for stockholders to receive a premium for their shares of common stock that might otherwise exist if an investor were attempting to assemble a block of shares in excess of 9.8% of the outstanding shares of equity stock or otherwise effect a change in control. Also, the request of the holders of a majority or more of our common stock is necessary for stockholders to call a special meeting. We also require advance notice by stockholders for the nomination of directors or the proposal of business to be considered at a meeting of stockholders.

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The Company faces risks in attracting and retaining key personnel. Many of our senior executives have strong industry reputations, which aid us in identifying acquisition and development opportunities and negotiating with tenants and sellers of properties. The loss of the services of these key personnel could affect our operations because of diminished relationships with existing and prospective tenants, property sellers and industry personnel. In addition, attracting new or replacement personnel may be difficult in a competitive market.

We have severance and change in control agreements with certain of our officers that may deter changes in control of the Company. If, within a certain time period (as set in the officer’s agreement) following a change in control, we terminate the officer's employment other than for cause, or if the officer elects to terminate his or her employment with us for reasons specified in the agreement, we will make a severance payment equal to the officer's average annual compensation times an amount specified in the officer's agreement, together with the officer's base salary and vacation pay that have accrued but are unpaid through the date of termination. These agreements may deter a change in control because of the increased cost for a third party to acquire control of us.

Our Board of Directors may authorize and issue securities without stockholder approval. Under our Charter, the Board has the power to classify and reclassify any of our unissued shares of capital stock into shares of capital stock with such preferences, rights, powers and restrictions as the Board of Directors may determine. The authorization and issuance of a new class of capital stock could have the effect of delaying or preventing someone from taking control of us, even if a change in control were in our stockholders' best interests.

Maryland business statutes may limit the ability of a third party to acquire control of us. Maryland law provides protection for Maryland corporations against unsolicited takeovers by limiting, among other things, the duties of the directors in unsolicited takeover situations. The duties of directors of Maryland corporations do not require them to (a) accept, recommend or respond to any proposal by a person seeking to acquire control of the corporation, (b) authorize the corporation to redeem any rights under, or modify or render inapplicable, any stockholders rights plan, (c) make a determination under the Maryland Business Combination Act or the Maryland Control Share Acquisition Act, or (d) act or fail to act solely because of the effect of the act or failure to act may have on an acquisition or potential acquisition of control of the corporation or the amount or type of consideration that may be offered or paid to the stockholders in an acquisition. Moreover, under Maryland law the act of a director of a Maryland corporation relating to or affecting an acquisition or potential acquisition of control is not subject to any higher duty or greater scrutiny than is applied to any other act of a director. Maryland law also contains a statutory presumption that an act of a director of a Maryland corporation satisfies the applicable standards of conduct for directors under Maryland law.

The Maryland Business Combination Act provides that unless exempted, a Maryland corporation may not engage in business combinations, including mergers, dispositions of 10 percent or more of its assets, certain issuances of shares of stock and other specified transactions, with an "interested stockholder" or an affiliate of an interested stockholder for five years after the most recent date on which the interested stockholder became an interested stockholder, and thereafter unless specified criteria are met. An interested stockholder is generally a person owning or controlling, directly or indirectly, 10 percent or more of the voting power of the outstanding stock of the Maryland corporation.

The Maryland Control Share Acquisition Act provides that "control shares" of a corporation acquired in a "control share acquisition" shall have no voting rights except to the extent approved by a vote of two-thirds of the votes eligible to cast on the matter. "Control Shares" means shares of stock that, if aggregated with all other shares of stock previously acquired by the acquirer, would entitle the acquirer to exercise voting power in electing directors within one of the following ranges of the voting power: one-tenth or more but less than one-third, one-third or more but less than a majority, or a majority or more of all voting power. A "control share acquisition" means the acquisition of control shares, subject to certain exceptions.

If voting rights of control shares acquired in a control share acquisition are not approved at a stockholders' meeting, then subject to certain conditions and limitations, the issuer may redeem any or all of the control shares for fair value. If voting rights of such control shares are approved at a stockholders' meeting and the acquirer becomes entitled to vote a majority of the shares of stock entitled to vote, all other stockholders may exercise appraisal rights.

ITEM 1B. UNRESOLVED STAFF COMMENTS.

None.

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ITEM 2. PROPERTIES.

EastGroup owned 268 industrial properties and one office building at December 31, 2011. These properties are located primarily in the Sunbelt states of Florida, Texas, Arizona, California and North Carolina, and the majority are clustered around major transportation features in supply constrained submarkets. As of February 21, 2012, EastGroup’s portfolio was 94.0% leased and 93.2% occupied. The Company has developed approximately 31% of its total portfolio, including real estate properties and development properties in lease-up and under construction. The Company’s focus is the ownership of business distribution space (77% of the total portfolio) with the remainder in bulk distribution space (18%) and business service space (5%). Business distribution space properties are typically multi-tenant buildings with a building depth of 200 feet or less, clear height of 20-24 feet, office finish of 10-25% and truck courts with a depth of 100-120 feet. See Consolidated Financial Statement Schedule III – Real Estate Properties and Accumulated Depreciation for a detailed listing of the Company’s properties.

At December 31, 2011, EastGroup did not own any single property with a book value that was 10% or more of total book value or with gross revenues that were 10% or more of total gross revenues.

ITEM 3. LEGAL PROCEEDINGS.

The Company is not presently involved in any material litigation nor, to its knowledge, is any material litigation threatened against the Company or its properties, other than routine litigation arising in the ordinary course of business or which is expected to be covered by the Company’s liability insurance.

PART II. OTHER INFORMATION

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES.

The Company’s shares of common stock are listed for trading on the New York Stock Exchange under the symbol “EGP.” The following table shows the high and low share prices for each quarter reported by the New York Stock Exchange during the past two years and the per share distributions paid for each quarter.

Shares of Common Stock Market Prices and Dividends

	Calendar Year 2011						Calendar Year 2010
Quarter	High		Low		Distributions		High		Low		Distributions
First	$	45.53		40.79	$	.52	$	39.09		33.65	$	.52
Second		46.91		41.36		.52		42.02		35.44		.52
Third		46.32		34.76		.52		37.97		33.39		.52
Fourth		44.71		36.01		.52		43.05		37.50		.52
					$	2.08					$	2.08

As of February 21, 2012, there were 660 holders of record of the Company’s 27,859,569 outstanding shares of common stock. The Company distributed all of its 2011 and 2010 taxable income to its stockholders. Accordingly, no provision for income taxes was necessary. The following table summarizes the federal income tax treatment for all distributions by the Company for the years 2011 and 2010.

Federal Income Tax Treatment of Share Distributions

	Years Ended December 31,
	2011		2010
Common Share Distributions:
Ordinary income	$	1.6852		1.4775
Return of capital		.3948		.6025
Total Common Distributions	$	2.0800		2.0800

Securities Authorized For Issuance Under Equity Compensation Plans

See Item 12 of this Annual Report on Form 10-K, “Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters,” for certain information regarding the Company’s equity compensation plans.

-9-

Purchases of Equity Securities by the Issuer and Affiliated Purchasers

Period

Total Number

of Shares

Purchased

Average Price

Paid Per

Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs

Maximum Number of Shares That May Yet Be Purchased Under the Plans or Programs

10/01/11 thru 10/31/11

–

672,300

11/01/11 thru 11/30/11

–

672,300

12/01/11 thru 12/31/11

–

672,300

(1)

Total

–

(1)

EastGroup's Board of Directors has authorized the repurchase of up to 1,500,000 shares of its outstanding common stock. The shares may be purchased from time to time in the open market or in privately negotiated transactions. Under the common stock repurchase plan, the Company has purchased a total of 827,700 shares for $14,170,000 (an average of $17.12 per share) with 672,300 shares still authorized for repurchase. The Company has not repurchased any shares under this plan since 2000.

Performance Graph

The following graph compares, over the five years ended December 31, 2011, the cumulative total shareholder return on EastGroup’s common stock with the cumulative total return of the Standard & Poor’s 500 Total Return Index (S&P 500 Total Return) and the FTSE Equity REIT index prepared by the National Association of Real Estate Investment Trusts (FTSE NAREIT Equity REITs).

The performance graph and related information shall not be deemed “soliciting material” or be deemed to be “filed” with the SEC, nor shall such information be incorporated by reference into any future filing, except to the extent that the Company specifically incorporates it by reference into such filing.

	Fiscal years ended December 31,
	2006		2007		2008		2009		2010		2011
EastGroup	$	100.00		81.66		72.86		82.65		96.46		104.13
FTSE NAREIT Equity REITs		100.00		84.31		52.50		67.19		85.98		93.11
S&P 500 Total Return		100.00		105.49		66.46		84.05		96.71		98.75

The information above assumes that the value of the investment in shares of EastGroup’s common stock and each index was $100 on December 31, 2006, and that all dividends were reinvested.

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ITEM 6. SELECTED FINANCIAL DATA.

The following table sets forth selected consolidated financial data for the Company derived from the audited consolidated financial statements and should be read in conjunction with the consolidated financial statements and notes thereto included elsewhere in this report.

	Years Ended December 31,
	2011			2010			2009			2008			2007
OPERATING DATA	(In thousands, except per share data)
Revenues
Income from real estate operations	$	174,484			173,002			172,273			168,255			150,038
Other income		147			124			81			248			92
		174,631			173,126			172,354			168,503			150,130
Expenses
Expenses from real estate operations		49,411			51,142			50,259			47,259			40,837
Depreciation and amortization		57,451			58,350			53,953			51,144			47,644
General and administrative		10,691			10,260			8,894			8,547			8,295
Acquisition costs		252			72			177			–			–
		117,805			119,824			113,283			106,950			96,776
Operating income		56,826			53,302			59,071			61,553			53,354
Other income (expense)
Equity in earnings of unconsolidated investment		347			335			320			316			285
Gain on sales of non-operating real estate		36			37			31			321			2,602
Gain on sales of securities		–			–			–			435			–
Other expense		–			(84	)		–			–			–
Interest income		334			336			302			293			306
Interest expense		(34,709	)		(35,171	)		(32,520	)		(30,192	)		(27,314	)
Income from continuing operations		22,834			18,755			27,204			32,726			29,233
Discontinued operations
Income (loss) from real estate operations		–			–			(139	)		10			150
Gain on sales of real estate investments		–			–			29			2,032			960
Income (loss) from discontinued operations		–			–			(110	)		2,042			1,110
Net income		22,834			18,755			27,094			34,768			30,343
Net income attributable to noncontrolling interest in joint ventures		(475	)		(430	)		(435	)		(626	)		(609	)
Net income attributable to EastGroup Properties, Inc.		22,359			18,325			26,659			34,142			29,734
Dividends on Series D preferred shares		–			–			–			1,326			2,624
Costs on redemption of Series D preferred shares		–			–			–			682			–
Net income attributable to EastGroup Properties, Inc. common stockholders	$	22,359			18,325			26,659			32,134			27,110
BASIC PER COMMON SHARE DATA FOR NET INCOME ATTRIBUTABLE TO EASTGROUP PROPERTIES, INC. COMMON STOCKHOLDERS
Income from continuing operations	$	.83			.68			1.04			1.23			1.10
Income (loss) from discontinued operations		.00			.00			.00			.08			.05
Net income attributable to common stockholders	$	.83			.68			1.04			1.31			1.15
Weighted average shares outstanding		26,897			26,752			25,590			24,503			23,562
DILUTED PER COMMON SHARE DATA FOR NET INCOME ATTRIBUTABLE TO EASTGROUP PROPERTIES, INC. COMMON STOCKHOLDERS
Income from continuing operations	$	.83			.68			1.04			1.22			1.09
Income (loss) from discontinued operations		.00			.00			.00			.08			.05
Net income attributable to common stockholders	$	.83			.68			1.04			1.30			1.14
Weighted average shares outstanding		26,971			26,824			25,690			24,653			23,781
AMOUNTS ATTRIBUTABLE TO EASTGROUP PROPERTIES, INC. COMMON STOCKHOLDERS
Income from continuing operations	$	22,359			18,325			26,769			30,092			26,000
Income (loss) from discontinued operations		–			–			(110	)		2,042			1,110
Net income attributable to common stockholders	$	22,359			18,325			26,659			32,134			27,110
OTHER PER SHARE DATA
Book value, at end of year	$	14.56			15.16			16.57			16.39			15.51
Common distributions declared		2.08			2.08			2.08			2.08			2.00
Common distributions paid		2.08			2.08			2.08			2.08			2.00
BALANCE SHEET DATA (AT END OF YEAR)
Real estate investments, at cost(1)	$	1,669,460			1,528,048			1,475,062			1,409,476			1,270,691
Real estate investments, net of accumulated depreciation(1)		1,217,655			1,124,861			1,120,317			1,099,125			1,001,559
Total assets		1,286,516			1,183,276			1,178,518			1,156,205			1,055,833
Mortgage, term and bank loans payable		832,686			735,718			692,105			695,692			600,804
Total liabilities		880,907			771,770			731,422			742,829			651,136
Noncontrolling interest in joint ventures		2,780			2,650			2,577			2,536			2,312
Total stockholders’ equity		402,829			408,856			444,519			410,840			402,385

(1) Includes mortgage loans receivable and unconsolidated investment. See Notes 4 and 5 in the Notes to Consolidated Financial Statements.

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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

OVERVIEW

EastGroup’s goal is to maximize shareholder value by being a leading provider in its markets of functional, flexible and quality business distribution space for location sensitive tenants primarily in the 5,000 to 50,000 square foot range. The Company acquires, develops and operates distribution facilities, the majority of which are clustered around major transportation features in supply constrained submarkets in major Sunbelt regions. The Company’s core markets are in the states of Florida, Texas, Arizona, California and North Carolina.

The operations of the Company improved during 2011 compared to 2010. Occupancy has stabilized and is currently improving, but the Company still experiences decreases in rental rates. The Company is able to obtain financing at attractive rates, but lenders’ underwriting standards have become stricter. The Company believes its current operating cash flow and lines of credit provide the capacity to fund the operations of the Company for 2012. The Company also believes it can issue common and/or preferred equity and obtain mortgage financing from insurance companies and financial institutions as evidenced by the closing of a $65 million, non-recourse first mortgage loan in May 2011; the closing of a $54 million, non-recourse first mortgage loan in January 2012; the closing of a $50 million unsecured term loan in December 2011; and the continuous common equity offering program, which provided net proceeds to the Company of $25.2 million during 2011, as described in Liquidity and Capital Resources.

The Company’s primary revenue is rental income; as such, EastGroup’s greatest challenge is leasing space. During 2011, leases expired on 4,433,000 square feet (14.8%) of EastGroup’s total square footage of 29,874,000, and the Company was successful in renewing or re-leasing 85% of the expiring square feet. In addition, EastGroup leased 2,500,000 square feet of other vacant space during the year. During 2011, average rental rates on new and renewal leases decreased by 11.3%. Property net operating income (PNOI) from same properties increased 1.2% for 2011 compared to 2010.

EastGroup’s total leased percentage was 94.7% at December 31, 2011 compared to 90.8% at December 31, 2010. Leases scheduled to expire in 2012 were 16.0% of the portfolio on a square foot basis at December 31, 2011. As of February 21, 2012, leases scheduled to expire in 2012 were 13.4% of the portfolio on a square foot basis.

The Company generates new sources of leasing revenue through its acquisition and development programs. During 2011, EastGroup purchased five warehouse distribution complexes (1,770,000 square feet) and 164.6 acres of development land for a total of $101.9 million. The operating properties are located in Tampa (1,147,000 square feet), Charlotte (427,000 square feet), San Antonio (172,000 square feet) and Tempe, Arizona (24,000 square feet). The development land is located adjacent to the Company’s existing World Houston International Business Center (133.1 acres) and near an existing EastGroup property in Chandler, Arizona (31.5 acres).

EastGroup continues to see targeted development as a contributor to the Company’s long-term growth. The Company mitigates risks associated with development through a Board-approved maximum level of land held for development and by adjusting development start dates according to leasing activity. During 2011, the Company began construction of eight development projects containing 527,000 square feet in Houston, San Antonio and Orlando. Also in 2011, EastGroup transferred one property (20,000 square feet) in San Antonio from its development program to real estate properties with costs of $1.5 million at the date of transfer. As of December 31, 2011, EastGroup’s development program consisted of nine buildings (571,000 square feet) located in Houston, San Antonio and Orlando. The projected total cost for the development projects, which were collectively 47% leased as of February 21, 2012, is $44.3 million, of which $13.6 million remained to be invested as of December 31, 2011.

During 2011, the Company initially funded its acquisition and development programs through its $225 million lines of credit (as discussed in Liquidity and Capital Resources). As market conditions permit, EastGroup issues equity, including preferred equity, and/or employs fixed-rate debt to replace short-term bank borrowings.

EastGroup has one reportable segment – industrial properties. These properties are primarily located in major Sunbelt regions of the United States, have similar economic characteristics and also meet the other criteria that permit the properties to be aggregated into one reportable segment. The Company’s chief decision makers use two primary measures of operating results in making decisions: (1) property net operating income (PNOI), defined as income from real estate operations less property operating expenses (before interest expense and depreciation and amortization), and (2) funds from operations attributable to common stockholders (FFO), defined as net income (loss) attributable to common stockholders computed in accordance with U.S. generally accepted accounting principles (GAAP), excluding gains or losses from sales of depreciable real estate property, plus real estate related depreciation and amortization, and after adjustments for unconsolidated partnerships and joint ventures. The Company calculates FFO based on the National Association of Real Estate Investment Trusts’ (NAREIT) definition.

-12-

PNOI is a supplemental industry reporting measurement used to evaluate the performance of the Company’s real estate investments. The Company believes the exclusion of depreciation and amortization in the industry’s calculation of PNOI provides a supplemental indicator of the properties’ performance since real estate values have historically risen or fallen with market conditions. PNOI as calculated by the Company may not be comparable to similarly titled but differently calculated measures for other real estate investment trusts (REITs). The major factors influencing PNOI are occupancy levels, acquisitions and sales, development properties that achieve stabilized operations, rental rate increases or decreases, and the recoverability of operating expenses. The Company’s success depends largely upon its ability to lease space and to recover from tenants the operating costs associated with those leases.

PNOI is comprised of Income from real estate operations, less Expenses from real estate operations. PNOI was calculated as follows for the three fiscal years ended December 31, 2011, 2010 and 2009.

	Years Ended December 31,
	2011			2010			2009
	(In thousands)

Income from real estate operations	$	174,484			173,002			172,273
Expenses from real estate operations		(49,411	)		(51,142	)		(50,259	)
PROPERTY NET OPERATING INCOME	$	125,073			121,860			122,014

Income from real estate operations is comprised of rental income, expense reimbursement pass-through income and other real estate income including lease termination fees. Expenses from real estate operations is comprised of property taxes, insurance, utilities, repair and maintenance expenses, management fees, other operating costs and bad debt expense. Generally, the Company’s most significant operating expenses are property taxes and insurance. Tenant leases may be net leases in which the total operating expenses are recoverable, modified gross leases in which some of the operating expenses are recoverable, or gross leases in which no expenses are recoverable (gross leases represent only a small portion of the Company’s total leases). Increases in property operating expenses are fully recoverable under net leases and recoverable to a high degree under modified gross leases. Modified gross leases often include base year amounts and expense increases over these amounts are recoverable. The Company’s exposure to property operating expenses is primarily due to vacancies and leases for occupied space that limit the amount of expenses that can be recovered.

The following table presents reconciliations of Net Income to PNOI for the three fiscal years ended December 31, 2011, 2010 and 2009.

	Years Ended December 31,
	2011			2010			2009
				(In thousands)

NET INCOME	$	22,834			18,755			27,094
Equity in earnings of unconsolidated investment		(347	)		(335	)		(320	)
Interest income		(334	)		(336	)		(302	)
Other income		(147	)		(124	)		(81	)
Gain on sales of non-operating real estate		(36	)		(37	)		(31	)
(Income) loss from discontinued operations		–			–			110
Depreciation and amortization from continuing operations		57,451			58,350			53,953
Interest expense		34,709			35,171			32,520
General and administrative expense		10,691			10,260			8,894
Acquisition costs		252			72			177
Other expense		–			84			–
PROPERTY NET OPERATING INCOME	$	125,073			121,860			122,014

The Company believes FFO is a meaningful supplemental measure of operating performance for equity REITs. The Company believes that excluding depreciation and amortization in the calculation of FFO is appropriate since real estate values have historically increased or decreased based on market conditions. FFO is not considered as an alternative to net income (determined in accordance with GAAP) as an indication of the Company’s financial performance, nor is it a measure of the Company’s liquidity or indicative of funds available to provide for the Company’s cash needs, including its ability to make distributions. In addition, FFO, as reported by the Company, may not be comparable to FFO by other REITs that do not define the term in accordance with the current NAREIT definition. The Company’s key drivers affecting FFO are changes in PNOI (as discussed above), interest rates, the amount of leverage the Company employs and general and administrative expense. The following table presents reconciliations of Net Income Attributable to EastGroup Properties, Inc. Common Stockholders to FFO Attributable to Common Stockholders for the three fiscal years ended December 31, 2011, 2010 and 2009.

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	Years Ended December 31,
	2011			2010			2009
	(In thousands, except per share data)

NET INCOME ATTRIBUTABLE TO EASTGROUP PROPERTIES, INC. COMMON STOCKHOLDERS	$	22,359			18,325			26,659
Depreciation and amortization from continuing operations		57,451			58,350			53,953
Depreciation and amortization from discontinued operations		–			–			51
Depreciation from unconsolidated investment		133			132			132
Noncontrolling interest depreciation and amortization		(219	)		(210	)		(206	)
Gain on sales of depreciable real estate investments		–			–			(29	)
FUNDS FROM OPERATIONS (FFO) ATTRIBUTABLE TO COMMON STOCKHOLDERS	$	79,724			76,597			80,560

Net income attributable to common stockholders per diluted share	$	.83			.68			1.04
Funds from operations attributable to common stockholders per diluted share		2.96			2.86			3.14
Diluted shares for earnings per share and funds from operations		26,971			26,824			25,690

The Company analyzes the following performance trends in evaluating the progress of the Company:

·	The FFO change per share represents the increase or decrease in FFO per share from the current year compared to the prior year. For the year 2011, FFO was $2.96 per share compared with $2.86 per share for 2010, an increase of 3.5% per share.

For the year ended December 31, 2011, PNOI increased by $3,213,000, or 2.6%, compared to 2010 mainly due to increases in PNOI of $1,447,000 from same property operations, $969,000 from newly developed properties, and $799,000 from 2010 and 2011 acquisitions.

·	Same property net operating income change represents the PNOI increase or decrease for the same operating properties owned during the entire current period and prior year reporting period. PNOI from same properties increased 1.2% for the year ended December 31, 2011, compared to 2010.

Occupancy is the percentage of leased square footage for which the lease term has commenced compared to the total leasable square footage as of the close of the reporting period. Occupancy at December 31, 2011 was 93.9%. Quarter-end occupancy ranged from 89.8% to 93.9% over the period from December 31, 2010 to December 31, 2011.

·	Rental rate change represents the rental rate increase or decrease on new and renewal leases compared to the prior leases on the same space. For the year 2011, rental rate decreases on new and renewal leases (20.9% of total square footage) averaged 11.3%.

·	For the year 2011, termination fee income was $565,000 compared to $2,853,000 for 2010. Bad debt expense was $550,000 for 2011 compared to $1,035,000 for 2010.

-14-

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

The Company’s management considers the following accounting policies and estimates to be critical to the reported operations of the Company.

Real Estate Properties

The Company allocates the purchase price of acquired properties to net tangible and identified intangible assets based on their respective fair values. Goodwill is recorded when the purchase price exceeds the fair value of the assets and liabilities acquired. Factors considered by management in allocating the cost of the properties acquired include an estimate of carrying costs during the expected lease-up periods considering current market conditions and costs to execute similar leases. 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. 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 which reflects 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 fair market rates over the remaining term of the lease. The amounts allocated to above and below market leases 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. 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.

During the period in which a property is under development, costs associated with development (i.e., land, construction costs, interest expense, property taxes, and other direct and indirect costs associated with development) are aggregated into the total capitalized costs of the property. Included in these costs are management’s estimates for the portions of internal costs (primarily personnel costs) that are deemed directly or indirectly related to such development activities.

The Company reviews its real estate investments for impairment of value whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. If any real estate investment is considered permanently impaired, a loss is recorded to reduce the carrying value of the property to its estimated fair value. Real estate assets to be sold are reported at the lower of the carrying amount or fair value less selling costs. The evaluation of real estate investments involves many subjective assumptions dependent upon future economic events that affect the ultimate value of the property. Currently, the Company’s management knows of no impairment issues nor has it experienced any impairment issues in recent years. EastGroup currently has the intent and ability to hold its real estate investments and to hold its land inventory for future development. In the event of impairment, the property’s basis would be reduced, and the impairment would be recognized as a current period charge on the Consolidated Statements of Income.

Valuation of Receivables

The Company is subject to tenant defaults and bankruptcies that could affect the collection of outstanding receivables. In order to mitigate these risks, the Company performs credit reviews and analyses on prospective tenants before significant leases are executed and on existing tenants before properties are acquired. On a quarterly basis, the Company evaluates outstanding receivables and estimates the allowance for doubtful accounts. Management specifically analyzes aged receivables, customer credit-worthiness, historical bad debts and current economic trends when evaluating the adequacy of the allowance for doubtful accounts. The Company believes its allowance for doubtful accounts is adequate for its outstanding receivables for the periods presented. In the event the allowance for doubtful accounts is insufficient for an account that is subsequently written off, additional bad debt expense would be recognized as a current period charge on the Consolidated Statements of Income.

Tax Status

EastGroup, a Maryland corporation, has qualified as a real estate investment trust under Sections 856-860 of the Internal Revenue Code and intends to continue to qualify as such. To maintain its status as a REIT, the Company is required to distribute at least 90% of its ordinary taxable income to its stockholders. If the Company has a capital gain, it has the option of (i) deferring recognition of the capital gain through a tax-deferred exchange, (ii) declaring and paying a capital gain dividend on any recognized net capital gain resulting in no corporate level tax, or (iii) retaining and paying corporate income tax on its net long-term capital gain, with the shareholders reporting their proportional share of the undistributed long-term capital gain and receiving a credit or refund of their share of the tax paid by the Company. The Company distributed all of its 2011, 2010 and 2009 taxable income to its stockholders. Accordingly, no provision for income taxes was necessary.

-15-

FINANCIAL CONDITION

EastGroup’s assets were $1,286,516,000 at December 31, 2011, an increase of $103,240,000 from December 31, 2010. Liabilities increased $109,137,000 to $880,907,000 and equity decreased $5,897,000 to $405,609,000 during the same period. The paragraphs that follow explain these changes in detail.

Assets

Real Estate Properties

Real Estate Properties increased $102,989,000 during the year ended December 31, 2011, primarily due to the purchase of the operating properties detailed below and the transfer of one property from Development, as detailed under Development below.

REAL ESTATE PROPERTIES ACQUIRED IN 2011	Location	Size		Date Acquired	Cost (1)
		(Square feet)			(In thousands)
Lakeview Business Center	Charlotte, NC		127,000	08/17/11	$	6,460
Ridge Creek Distribution Center II	Charlotte, NC		300,000	08/17/11		14,530
Broadway Industrial Park, Building VII	Tempe, AZ		24,000	09/26/11		1,100
Tampa Industrial Portfolio	Tampa, FL		1,147,000	12/19/11		50,802
Rittiman Distribution Center	San Antonio, TX		172,000	12/19/11		7,732
Total Acquisitions			1,770,000		$	80,624

(1)

Total cost of the properties acquired was $88,592,000, of which $80,624,000 was allocated to Real Estate Properties as indicated above. Intangibles associated with the purchases of real estate were allocated as follows: $6,949,000 to in-place lease intangibles, $1,693,000 to above market leases (both included in Other Assets on the Consolidated Balance Sheets) and $674,000 to below market leases (included in Other Liabilities on the Consolidated Balance Sheets). All of these costs are amortized over the remaining lives of the associated leases in place at the time of acquisition. During 2011, the Company expensed acquisition-related costs of $252,000.

The Company made capital improvements of $18,686,000 on existing and acquired properties (included in the Capital Expenditures table under Results of Operations). Also, the Company incurred costs of $2,238,000 on development properties subsequent to transfer to Real Estate Properties; the Company records these expenditures as development costs on the Consolidated Statements of Cash Flows.

Development

EastGroup’s investment in development at December 31, 2011 consisted of properties in lease-up and under construction of $30,694,000 and prospective development (primarily land) of $81,455,000. The Company’s total investment in development at December 31, 2011 was $112,149,000 compared to $73,722,000 at December 31, 2010. Total capital invested for development during 2011 was $42,148,000, which consisted of costs of $39,834,000 and $76,000 as detailed in the development activity table below and costs of $2,238,000 on development properties subsequent to transfer to Real Estate Properties.

During 2011, EastGroup purchased 164.6 acres of development land in Houston, Texas, and Chandler, Arizona, for $13,290,000. Costs associated with these acquisitions are included in the development activity table. The Company transferred one development property to Real Estate Properties during 2011 with a total investment of $1,483,000 as of the date of transfer.

-16-

			Costs Incurred
DEVELOPMENT	Size		Costs Transferred in 2011(1)			For the Year Ended 12/31/11		Cumulative as of 12/31/11			Estimated Total Costs(2)
	(Square feet)		(In thousands)
LEASE-UP
World Houston 31A, Houston, TX		44,000	$	–			2,788		3,843			4,600
Beltway Crossing VIII, Houston, TX		88,000		1,256			3,943		5,199			5,300
Total Lease-Up		132,000		1,256			6,731		9,042			9,900
UNDER CONSTRUCTION
World Houston 32, Houston, TX		96,000		1,834			4,376		6,210			6,800
Southridge IX, Orlando, FL		76,000		1,987			3,375		5,362			7,100
Thousand Oaks 1, San Antonio, TX		36,000		865			1,544		2,409			4,600
Thousand Oaks 2, San Antonio, TX		73,000		1,187			1,977		3,164			5,000
World Houston 31B, Houston, TX		35,000		930			430		1,360			3,900
Beltway Crossing IX, Houston, TX		45,000		674			467		1,141			2,500
Beltway Crossing X, Houston, TX		78,000		1,183			823		2,006			4,500
Total Under Construction		439,000		8,660			12,992		21,652			34,400
PROSPECTIVE DEVELOPMENT (PRIMARILY LAND)
Phoenix, AZ		432,000		–			3,461		3,461			30,800
Tucson, AZ		70,000		–			–		417			4,900
Tampa, FL		249,000		–			286		4,486			14,600
Orlando, FL		1,514,000		(1,987	)		3,552		24,597			99,200
Fort Myers, FL		659,000		–			649		17,203			48,100
Dallas, TX		70,000		–			62		764			4,100
El Paso, TX		251,000		–			–		2,444			9,600
Houston, TX		2,044,000		(5,877	)		11,594		21,115			129,600
San Antonio, TX		484,000		(2,052	)		436		5,016			32,200
Charlotte, NC		95,000		–			71		1,246			7,100
Jackson, MS		28,000		–			–		706			2,000
Total Prospective Development		5,896,000		(9,916	)		20,111		81,455			382,200
		6,467,000	$	–			39,834		112,149			426,500
DEVELOPMENTS COMPLETED AND TRANSFERRED TO REAL ESTATE PROPERTIES DURING 2011
Arion 8 Expansion, San Antonio, TX		20,000	$	–			76		1,483
Total Transferred to Real Estate Properties		20,000	$	–			76		1,483	(3)

(1) Represents costs transferred from Prospective Development (primarily land) to Under Construction during the period.

(2) Included in these costs are development obligations of $10.7 million and tenant improvement obligations of $2.0 million on properties under development.

(3) Represents cumulative costs at the date of transfer.

Accumulated depreciation on real estate and development properties increased $48,618,000 during 2011 due to depreciation expense on real estate properties.

-17-

The Company’s Other Assets increased $10,388,000 during 2011. A summary of Other Assets follows:

	December 31,
	2011		2010
	(In thousands)

Leasing costs (principally commissions), net of accumulated amortization of $16,603 and $18,566 for 2011 and 2010, respectively	$	22,694		22,274
Straight-line rents receivable, net of allowance for doubtful accounts of $351 and $282 for 2011 and 2010, respectively		20,608		18,694
Accounts receivable, net of allowance for doubtful accounts of $522 and $706 for 2011 and 2010, respectively		3,427		2,460
Acquired in-place lease intangibles, net of accumulated amortization of $4,478 and $6,443 for 2011 and 2010, respectively		7,679		3,046
Mortgage loans receivable, net of discount of $44 and $56 for 2011 and 2010, respectively		4,110		4,131
Loan costs, net of accumulated amortization of $4,433 and $4,129 for 2011 and 2010, respectively		3,229		3,358
Acquired above market lease intangibles, net of accumulated amortization of $929 and $1,123 for 2011 and 2010, respectively		1,975		776
Goodwill		990		990
Prepaid expenses and other assets		8,085		6,680
	$	72,797		62,409

The increase in acquired in-place lease intangibles and acquired above market lease intangibles resulted from the Company’s 2011 operating property acquisitions, as discussed under Real Estate Properties above.

Liabilities

Mortgage Notes Payable decreased $16,254,000 during the year ended December 31, 2011. The decrease resulted from the repayment of two mortgages of $58,897,000, regularly scheduled principal payments of $22,231,000 and mortgage loan premium amortization of $126,000, offset by a $65,000,000 mortgage loan executed by the Company during the second quarter of 2011.

Unsecured Term Loan Payable increased $50,000,000 during 2011 as a result of the closing of a term loan in December 2011.

Notes Payable to Banks increased $63,222,000 during 2011 as a result of advances of $336,575,000 exceeding repayments of $273,353,000. The Company’s credit facilities are described in greater detail under Liquidity and Capital Resources.

Accounts Payable and Accrued Expenses increased $10,236,000 during 2011. A summary of the Company’s Accounts Payable and Accrued Expenses follows:

	December 31,
	2011		2010
	(In thousands)

Property taxes payable	$	9,840		9,776
Development costs payable		5,928		673
Interest payable		2,736		2,625
Dividends payable on nonvested restricted stock		1,415		791
Other payables and accrued expenses		11,286		7,104
	$	31,205		20,969

Other Liabilities increased $1,933,000 during 2011. A summary of the Company’s Other Liabilities follows:

	December 31,
	2011		2010
	(In thousands)

Security deposits	$	9,184		8,299
Prepaid rent and other deferred income		6,373		6,440
Other liabilities		1,459		344
	$	17,016		15,083

-18-

Equity

During 2011, distributions in excess of earnings increased $34,307,000 as a result of dividends on common stock of $56,666,000 exceeding net income attributable to EastGroup Properties, Inc. common stockholders of $22,359,000.

Additional paid-in capital increased $28,280,000 during 2011. The increase primarily resulted from the issuance of 586,977 shares of common stock under EastGroup’s continuous common equity program with net proceeds to the Company of $25,181,000. See Note 11 in the Notes to Consolidated Financial Statements for information related to the changes in additional paid-in capital resulting from stock-based compensation.

RESULTS OF OPERATIONS

2011 Compared to 2010

Net income attributable to common stockholders for 2011 was $22,359,000 ($.83 per basic and diluted share) compared to $18,325,000 ($.68 per basic and diluted share) for 2010. PNOI increased by $3,213,000, or 2.6%, for 2011 compared to 2010, primarily due to increases in PNOI of $1,447,000 from same property operations, $969,000 from newly developed properties, and $799,000 from 2010 and 2011 acquisitions. Termination fee income, net of bad debt expense, was $15,000 for 2011 compared to $1,818,000 for 2010.

Property expense to revenue ratios, defined as expenses from real estate operations as a percentage of income from real estate operations, were 28.3% in 2011 compared to 29.6% in 2010. The Company’s percentage of leased square footage was 94.7% at December 31, 2011, compared to 90.8% at December 31, 2010. Occupancy at the end of 2011 was 93.9% compared to 89.8% at the end of 2010.

Interest expense decreased $462,000 for 2011 compared to 2010. The following table presents the components of interest expense for 2011 and 2010:

	Years Ended December 31,
	2011			2010			Increase (Decrease)
	(In thousands, except rates of interest)
Average bank borrowings	$	124,697			122,942			1,755
Weighted average variable interest rates (excluding loan cost amortization)		1.41	%		1.42	%

VARIABLE RATE INTEREST EXPENSE
Bank loan interest (excluding loan cost amortization)		1,762			1,750			12
Amortization of bank loan costs		300			314			(14	)
Total variable rate interest expense		2,062			2,064			(2	)

FIXED RATE INTEREST EXPENSE
Mortgage loan interest (excluding loan cost amortization)		35,606			35,978			(372	)
Unsecured term loan interest (excluding loan cost amortization)		59			–			59
Amortization of mortgage loan costs		752			742			10
Amortization of unsecured term loan costs		1			–			1
Total fixed rate interest expense		36,418			36,720			(302	)

Total interest		38,480			38,784			(304	)
Less capitalized interest		(3,771	)		(3,613	)		(158	)

TOTAL INTEREST EXPENSE	$	34,709			35,171			(462	)

Interest costs incurred during the period of construction of real estate properties are capitalized and offset against interest expense. Capitalized interest increased by $158,000 in 2011 compared to 2010 due to increased activity in the Company’s development program.

The Company’s weighted average variable interest rates in 2011 were slightly lower than in 2010. The slight decrease in interest rates was offset by higher average bank borrowings in 2011 compared to 2010. The net effect resulted in a decrease in variable rate interest expense of $2,000 in 2011 compared to 2010.

-19-

The decrease in fixed rate mortgage loan interest expense was primarily the result of lower interest rates on the refinancing of two mortgage loans in 2011, partially offset by higher average mortgage loan balances during 2011 compared to 2010. A summary of the Company’s weighted average interest rates on mortgage debt at year-end for the past several years is presented below:

MORTGAGE DEBT AS OF:	Weighted Average Interest Rate
December 31, 2007		6.06	%
December 31, 2008		5.96	%
December 31, 2009		6.09	%
December 31, 2010		5.90	%
December 31, 2011		5.63	%

Mortgage principal payments due in the amortization period were $22,231,000 in 2011 and $19,631,000 in 2010. In 2011, the Company repaid two mortgages with balloon payments totaling $58,897,000. In 2010, the Company repaid one mortgage loan with a balance of $8,770,000 and made principal paydowns on two mortgage loans totaling $4,000,000. The details of the mortgages repaid in 2010 and 2011 are shown in the following table:

MORTGAGE LOANS REPAID IN 2010 AND 2011	Interest Rate			Date Repaid	Payoff Amount
Tower Automotive Center		6.03	%	10/01/10	$	8,770,000
Butterfield Trail, Glenmont I & II, Interstate I, II & III, Rojas, Stemmons Circle, Venture and West Loop I & II		7.25	%	01/31/11		36,065,000
America Plaza, Central Green and World Houston 3-9		7.92	%	05/10/11		22,832,000
Weighted Average/Total Amount		7.32	%		$	67,667,000

During 2010 and 2011, EastGroup closed the new mortgages detailed in the table below.

NEW MORTGAGES IN 2010 AND 2011	Interest Rate			Date	Maturity Date	Amount

40th Avenue, Centennial Park, Executive Airport, Beltway V, Techway Southwest IV, Wetmore V-VIII, Ocean View and World Houston 26, 28, 29 & 30		4.39	%	12/28/10	01/05/21	$	74,000,000
America Plaza, Central Green, Glenmont I & II, Interstate I, II & III, Rojas, Stemmons Circle, Venture, West Loop I & II and World Houston 3-9		4.75	%	05/31/11	06/05/21		65,000,000
Weighted Average/Total Amount		4.56	%			$	139,000,000

In December 2011, EastGroup closed a $50,000,000 unsecured term loan with a fixed interest rate of 3.91%, a seven-year term and interest-only payments. During 2011, the Company recognized interest expense (including loan cost amortization) of $60,000 related to the term loan compared to zero in 2010.

Depreciation and amortization expense decreased $899,000 for 2011 compared to 2010. In 2010, there was a rise in tenant early vacates, resulting in the write-off of tenant-specific assets and therefore increased depreciation and amortization expense for 2010. In 2011, early vacates decreased significantly. Excluding the change resulting from early vacates, depreciation and amortization expense did not change significantly from 2010 to 2011.

Straight-lining of rent increased income by $2,006,000 in 2011 compared to $2,496,000 in 2010.

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Capital Expenditures

Capital expenditures for EastGroup’s operating properties for the years ended December 31, 2011 and 2010 were as follows:

		Years Ended December 31,
	Estimated Useful Life	2011		2010
		(In thousands)
Upgrade on Acquisitions	40 yrs	$	315		40
Tenant Improvements:
New Tenants	Lease Life		7,755		12,166
New Tenants (first generation) (1)	Lease Life		1,028		1,022
Renewal Tenants	Lease Life		2,588		2,023
Other:
Building Improvements	5-40 yrs		3,676		4,351
Roofs	5-15 yrs		2,089		2,725
Parking Lots	3-5 yrs		823		1,045
Other	5 yrs		412		581
Total Capital Expenditures		$	18,686		23,953

(1) First generation refers to space that has never been occupied under EastGroup’s ownership.

Capitalized Leasing Costs

The Company’s leasing costs (principally commissions) are capitalized and included in Other Assets. The costs are amortized over the terms of the associated leases and are included in depreciation and amortization expense. Capitalized leasing costs for the years ended December 31, 2011 and 2010 were as follows:

		Years Ended December 31,
	Estimated Useful Life	2011		2010
		(In thousands)
Development	Lease Life	$	1,087		350
New Tenants	Lease Life		3,140		3,701
New Tenants (first generation) (1)	Lease Life		187		174
Renewal Tenants	Lease Life		2,494		3,268
Total Capitalized Leasing Costs		$	6,908		7,493

Amortization of Leasing Costs		$	6,487		6,703

(1) First generation refers to space that has never been occupied under EastGroup’s ownership.

2010 Compared to 2009

Net income attributable to common stockholders for 2010 was $18,325,000 ($.68 per basic and diluted share) compared to $26,659,000 ($1.04 per basic and diluted share) for 2009. PNOI decreased by $154,000, or 0.1%, for 2010 compared to 2009, primarily due to a decrease in PNOI of $5,008,000 from same property operations, offset by an increase in PNOI of $2,472,000 from newly developed properties and an increase of $2,407,000 from 2009 and 2010 acquisitions. In 2010, termination fee income exceeded bad debt expense by $1,818,000; in 2009, bad debt expense exceeded termination fee income by $1,138,000.

Property expense to revenue ratios were 29.6% in 2010 compared to 29.2% in 2009. The Company’s percentage of leased square footage was 90.8% at December 31, 2010, compared to 90.0% at December 31, 2009. Occupancy at the end of 2010 was 89.8% compared to 89.4% at the end of 2009.

General and administrative expenses increased $1,366,000 for the year ended December 31, 2010, compared to 2009. The increase was primarily attributable to a decrease in capitalized development costs in 2010 due to a slowdown in the Company’s development program.

-21-

Interest expense increased $2,651,000 in 2010 compared to 2009. The following table presents the components of interest expense for 2010 and 2009:

	Years Ended December 31,
	2010			2009			Increase
	(In thousands, except rates of interest)
Average bank borrowings	$	122,942			107,341			15,601
Weighted average variable interest rates (excluding loan cost amortization)		1.42	%		1.48	%

VARIABLE RATE INTEREST EXPENSE
Bank loan interest (excluding loan cost amortization)		1,750			1,589			161
Amortization of bank loan costs		314			297			17
Total variable rate interest expense		2,064			1,886			178

FIXED RATE INTEREST EXPENSE
Mortgage loan interest (excluding loan cost amortization)		35,978			35,755			223
Amortization of mortgage loan costs		742			735			7
Total fixed rate interest expense		36,720			36,490			230

Total interest		38,784			38,376			408
Less capitalized interest		(3,613	)		(5,856	)		2,243

TOTAL INTEREST EXPENSE	$	35,171			32,520			2,651

Interest costs incurred during the period of construction of real estate properties are capitalized and offset against interest expense. Capitalized interest decreased $2,243,000 in 2010 compared to 2009 due to a slowdown in the Company’s development program.

The Company’s weighted average variable interest rates in 2010 were slightly lower than in 2009. The decrease in interest rates was offset by higher average bank borrowings in 2010 compared to 2009. The net effect resulted in an increase in variable rate interest expense of $178,000 in 2010 compared to 2009.

EastGroup’s fixed rate interest expense increased by $230,000 in 2010 compared to 2009. A summary of the Company’s weighted average interest rates on mortgage debt at year-end for the past several years is presented below:

MORTGAGE DEBT AS OF:	Weighted Average Interest Rate
December 31, 2006		6.21	%
December 31, 2007		6.06	%
December 31, 2008		5.96	%
December 31, 2009		6.09	%
December 31, 2010		5.90	%

The increase in mortgage interest expense in 2010 was primarily due to the new mortgages detailed in the table below.

NEW MORTGAGES IN 2009 AND 2010	Interest Rate			Date	Maturity Date	Amount

Tower Automotive Center (1)		6.030	%	01/02/09	01/15/11	$	9,365,000
Dominguez, Kingsview, Walnut, Washington, Industry I & III and Shaw		7.500	%	05/05/09	05/05/19		67,000,000
40th Avenue, Centennial Park, Executive Airport, Beltway V, Techway Southwest IV, Wetmore V-VIII, Ocean View and World Houston 26, 28, 29 & 30		4.390	%	12/28/10	01/05/21		74,000,000
Weighted Average/Total Amount		5.878	%			$	150,365,000

(1)	The Company repaid the previous mortgage note on the Tower Automotive Center and replaced it with this new mortgage note for the same amount. See the table below for details on the previous mortgage. The new mortgage obtained on January 2, 2009 was repaid on October 1, 2010.

Mortgage principal payments due in the amortization period were $19,631,000 in 2010 and $18,173,000 in 2009. In 2010, the Company repaid one mortgage loan with a balance of $8,770,000 and made principal paydowns on two mortgage notes totaling $4,000,000. In 2009, the Company repaid three mortgages with balloon payments totaling $40,927,000. The details of the mortgages repaid in 2009 and 2010 are shown in the following table:

-22-

MORTGAGE LOANS REPAID IN 2009 AND 2010	Interest Rate			Date Repaid	Payoff Amount
Tower Automotive Center (1)		8.020	%	01/02/09	$	9,365,000
Dominguez, Kingsview, Walnut, Washington, Industry Distribution Center I and Shaw		6.800	%	02/13/09		31,357,000
Oak Creek I		8.875	%	06/01/09		205,000
Tower Automotive Center		6.030	%	10/01/10		8,770,000
Weighted Average/Total Amount		6.903	%		$	49,697,000

(1)	The Tower Automotive Center mortgage was repaid and replaced with another mortgage note payable for the same amount. See the new mortgage detailed in the new mortgages table above. The new mortgage obtained on January 2, 2009 was repaid on October 1, 2010.

Depreciation and amortization expense for continuing operations increased $4,397,000 for 2010 compared to 2009. This increase was primarily due to properties acquired and transferred from development during 2009 and 2010. Operating property acquisitions and transferred developments were $54 million in 2010 and $100 million in 2009.

Straight-lining of rent for continuing operations increased income by $2,496,000 in 2010 compared to $1,606,000 in 2009.

Capital Expenditures

Capital expenditures for EastGroup’s operating properties for the years ended December 31, 2010 and 2009 were as follows:

		Years Ended December 31,
	Estimated Useful Life	2010		2009
		(In thousands)
Upgrade on Acquisitions	40 yrs	$	40		68
Tenant Improvements:
New Tenants	Lease Life		12,166		7,591
New Tenants (first generation) (1)	Lease Life		1,022		760
Renewal Tenants	Lease Life		2,023		1,099
Other:
Building Improvements	5-40 yrs		4,351		2,726
Roofs	5-15 yrs		2,725		2,987
Parking Lots	3-5 yrs		1,045		603
Other	5 yrs		581		378
Total Capital Expenditures		$	23,953		16,212

(1) First generation refers to space that has never been occupied under EastGroup’s ownership.

Capitalized Leasing Costs

		Years Ended December 31,
	Estimated Useful Life	2010		2009
		(In thousands)
Development	Lease Life	$	350		1,675
New Tenants	Lease Life		3,701		2,620
New Tenants (first generation) (1)	Lease Life		174		74
Renewal Tenants	Lease Life		3,268		2,618
Total Capitalized Leasing Costs		$	7,493		6,987

Amortization of Leasing Costs (2)		$	6,703		6,366

(1) First generation refers to space that has never been occupied under EastGroup’s ownership.

(2) Includes discontinued operations.

-23-

Discontinued Operations

The results of operations, including interest expense (if applicable), for the operating properties sold or held for sale during the periods reported are shown under Discontinued Operations on the Consolidated Statements of Income. During 2010, the Company did not sell any operating properties. During 2009, EastGroup sold one operating property, Butterfield Trail (Building G).

See Notes 1(f) and 2 in the Notes to Consolidated Financial Statements for more information related to discontinued operations and gain on sales of real estate investments. The following table presents the components of revenue and expense for the operating properties sold or held for sale during 2010 and 2009. There were no properties held for sale at December 31, 2010 or 2009.

	Years Ended December 31,
Discontinued Operations	2010		2009
	(In thousands)

Income from real estate operations	$	–		–
Expenses from real estate operations		–		(88	)
Property net operating loss from discontinued operations		–		(88	)

Depreciation and amortization		–		(51	)

Loss from real estate operations		–		(139	)
Gain on sales of real estate investments		–		29

Loss from discontinued operations	$	–		(110	)

NEW ACCOUNTING PRONOUNCEMENTS

EastGroup has evaluated all Accounting Standards Updates (ASUs) released by the FASB through the date the financial statements were issued and determined that the following ASUs apply to the Company.

In May 2011, the FASB issued ASU 2011-04, Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs, which provides guidance about how fair value should be applied where it is already required or permitted under U.S. GAAP. The ASU does not extend the use of fair value or require additional fair value measurements, but rather provides explanations about how to measure fair value. ASU 2011-04 requires prospective application and will be effective for interim and annual reporting periods beginning after December 15, 2011. The Company believes the adoption of this ASU will have an immaterial impact on the Company’s overall financial position and results of operations.

In June 2011, the FASB issued ASU 2011-05, Presentation of Comprehensive Income, which eliminates the option to present components of other comprehensive income as part of the statement of changes in equity and requires that all nonowner changes in equity be presented either in a single continuous statement of comprehensive income or in two separate but consecutive statements. ASU 2011-05 requires retrospective application and will be effective for interim and annual reporting periods beginning after December 15, 2011. The Company believes the adoption of ASU 2011-05 will have an immaterial impact on the Company’s disclosures of comprehensive income.

In September 2011, the FASB issued ASU 2011-08, Testing Goodwill for Impairment, which permits an entity to make a qualitative assessment of whether it is more likely than not that a reporting unit’s fair value is less than its carrying amount before applying the two-step goodwill impairment test. Under this ASU, an entity would not be required to calculate the fair value of a reporting unit unless the entity determines, based on a qualitative assessment, that it is more likely than not that its fair value is less than its carrying amount. ASU 2011-08 is effective for interim and annual goodwill impairment tests performed for fiscal years beginning after December 15, 2011. The Company believes the adoption of this ASU will have an immaterial impact on the Company.

-24-

LIQUIDITY AND CAPITAL RESOURCES

Net cash provided by operating activities was $86,547,000 for the year ended December 31, 2011. The primary other sources of cash were from bank borrowings, proceeds from mortgage notes, proceeds from unsecured term loan, and proceeds from common stock offerings. The Company distributed $56,042,000 in common stock dividends during 2011. Other primary uses of cash were for bank debt repayments, purchases of real estate, mortgage note repayments and paydowns, construction and development of properties, and capital improvements at various properties.

Total debt at December 31, 2011 and 2010 is detailed below. The Company’s bank credit facilities and unsecured term loan have certain restrictive covenants, such as maintaining debt service coverage and leverage ratios and maintaining insurance coverage, and the Company was in compliance with all of its debt covenants at December 31, 2011 and 2010.

	December 31,
	2011		2010
	(In thousands)

Mortgage notes payable – fixed rate	$	628,170		644,424
Unsecured term loan payable – fixed rate		50,000		–
Notes payable to banks –variable rate		154,516		91,294
Total debt	$	832,686		735,718

EastGroup has a $200 million unsecured revolving credit facility with a group of seven banks that matures in January 2013. The interest rate on the facility is based on the LIBOR index and varies according to total liability to total asset value ratios (as defined in the credit agreement), with an annual facility fee of 15 to 20 basis points. The interest rate on each tranche is usually reset on a monthly basis and as of December 31, 2011, was LIBOR plus 85 basis points with an annual facility fee of 20 basis points. At December 31, 2011, the weighted average interest rate was 1.148% on a balance of $147,000,000.

EastGroup also has a $25 million unsecured revolving credit facility with PNC Bank, N.A. that matures in January 2013. This credit facility is customarily used for working capital needs. The interest rate on this working capital line is based on the LIBOR index and varies according to total liability to total asset value ratios (as defined in the credit agreement), with no annual facility fee. The interest rate is reset on a daily basis and as of December 31, 2011, was LIBOR plus 90 basis points. At December 31, 2011, the interest rate was 1.195% on a balance of $7,516,000. Beginning January 3, 2012, the interest rate on this working capital line is LIBOR plus 165 basis points.

As market conditions permit, EastGroup issues equity, including preferred equity, and/or employs fixed-rate debt to replace the short-term bank borrowings. Even though mortgage loan proceeds as a percentage of property values have decreased and lenders’ underwriting standards have become stricter, the Company is able to obtain financing at attractive rates. The Company believes its current operating cash flow and lines of credit provide the capacity to fund the operations of the Company for 2012. The Company also believes it can obtain mortgage financing from insurance companies and financial institutions and issue common and/or preferred equity.

On January 31, 2011, the Company repaid a mortgage loan with a balance of $36.1 million and an interest rate of 7.25%. On May 10, 2011, the Company repaid a mortgage loan with a balance of $22.8 million and an interest rate of 7.92%.

On May 31, 2011, EastGroup closed a $65 million, non-recourse first mortgage loan with a fixed interest rate of 4.75%, a 10-year term and a 20-year amortization schedule. The loan is secured by properties containing 1.9 million square feet. The Company used the proceeds of this mortgage loan to reduce variable rate bank borrowings.

In October 2011, EastGroup executed an application for a $54 million, non-recourse first mortgage loan with a fixed interest rate of 4.09%, a 10-year term and a 20-year amortization schedule. The loan, which is secured by properties containing 1.4 million square feet, closed on January 4, 2012. The Company used the proceeds of this mortgage loan to reduce variable rate bank borrowings.

In March 2011, the Company entered into Sales Agency Financing Agreements (the “Agreements”) with BNY Mellon Capital Markets, LLC and Raymond James & Associates, Inc. pursuant to which the Company may issue and sell up to two million shares of its common stock from time to time. During 2011, EastGroup issued and sold 586,977 shares of common stock at an average price of $43.78 per share with gross proceeds to the Company of $25,696,000. The Company incurred offering-related costs of $515,000, resulting in net proceeds to the Company of $25,181,000 which were used to reduce variable rate bank borrowings.

-25-

As of February 23, 2012, EastGroup issued and sold an additional 213,390 shares of common stock during the first quarter of 2012 at an average price of $46.86 per share with net proceeds to the Company of $9.9 million which were used to reduce variable rate bank borrowings. As of February 23, 2012, the Company has 1,199,633 shares of common stock remaining to sell under the program.

Contractual Obligations

EastGroup’s fixed, non-cancelable obligations as of December 31, 2011 were as follows:

	Payments Due by Period
	Total		Less Than 1 Year		1-3 Years		3-5 Years		More Than 5 Years
	(In thousands)

Fixed Rate Mortgage Debt Obligations (1)	$	628,170		68,673		157,157		190,905		211,435
Interest on Fixed Rate Mortgage Debt		153,809		33,746		54,198		35,667		30,198
Fixed Rate Unsecured Term Loan Debt (1)		50,000		–		–		–		50,000
Interest on Fixed Rate Unsecured Term Loan Debt		13,685		2,014		3,910		3,910		3,851
Variable Rate Debt Obligations (1) (2)		154,516		–		154,516		–		–
Interest on Variable Rate Debt (3)		1,918		1,904		14		–		–
Operating Lease Obligations:
Office Leases		780		401		364		15		–
Ground Leases		16,850		707		1,414		1,414		13,315
Real Estate Property Obligations (4)		607		607		–		–		–
Development Obligations (5)		10,709		10,709		–		–		–
Tenant Improvements (6)		6,009		6,009		–		–		–
Purchase Obligations (7)		–		–		–		–		–
Total	$	1,037,053		124,770		371,573		231,911		308,799

(1)	These amounts are included on the Consolidated Balance Sheets.

(2)	The Company’s variable rate debt changes depending on the Company’s cash needs and, as such, both the principal amounts and the interest rates are subject to variability. At December 31, 2011, the weighted average interest rate was 1.15% on the variable rate debt due in January 2013.

(3)	Represents an estimate of interest due on variable rate debt based on the outstanding variable rate debt and interest rates on that debt as of December 31, 2011.

(4)	Represents commitments on real estate properties, except for tenant improvement obligations.

(5)	Represents commitments on properties under development, except for tenant improvement obligations.

(6)	Represents tenant improvement allowance obligations.

(7)	EastGroup had no purchase obligations as of December 31, 2011.

The Company anticipates that its current cash balance, operating cash flows, borrowings under its lines of credit, proceeds from debt and/or proceeds from the issuance of equity instruments will be adequate for (i) operating and administrative expenses, (ii) normal repair and maintenance expenses at its properties, (iii) debt service obligations, (iv) maintaining compliance with its debt covenants, (v) distributions to stockholders, (vi) capital improvements, (vii) purchases of properties, (viii) development, and (ix) any other normal business activities of the Company, both in the short- and long-term.

INFLATION AND OTHER ECONOMIC CONSIDERATIONS

Most of the Company's leases include scheduled rent increases. Additionally, most of the Company's leases require the tenants to pay their pro rata share of operating expenses, including real estate taxes, insurance and common area maintenance, thereby reducing the Company's exposure to increases in operating expenses resulting from inflation. In the event inflation causes increases in the Company’s general and administrative expenses or the level of interest rates, such increased costs would not be passed through to tenants and could adversely affect the Company’s results of operations.

EastGroup's financial results are affected by general economic conditions in the markets in which the Company's properties are located. The current state of the economy, or other adverse changes in general or local economic conditions, could result in the inability of some of the Company's existing tenants to make lease payments and may therefore increase bad debt expense. It may also impact the Company’s ability to (i) renew leases or re-lease space as leases expire, or (ii) lease development space. In addition, an economic downturn or recession could also lead to an increase in overall vacancy rates or decline in rents the Company can charge to re-lease properties upon expiration of current leases. In all of these cases, EastGroup’s cash flows would be adversely affected.

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ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

The Company is exposed to interest rate changes primarily as a result of its lines of credit and long-term debt maturities. This debt is used to maintain liquidity and fund capital expenditures and expansion of the Company’s real estate investment portfolio and operations. The Company’s objective for interest rate risk management is to limit the impact of interest rate changes on earnings and cash flows and to lower its overall borrowing costs. To achieve its objectives, the Company borrows at fixed rates but also has two variable rate bank lines as discussed under Liquidity and Capital Resources. The table below presents the principal payments due and weighted average interest rates for both the fixed rate and variable rate debt.

	2012			2013			2014			2015			2016			Thereafter			Total			Fair Value
Fixed rate mortgage debt (in thousands)	$	68,673			60,164			96,993			100,279			90,626			211,435			628,170			674,462	(1)
Weighted average interest rate		6.50	%		5.10	%		5.69	%		5.38	%		5.83	%		5.52	%		5.63	%

Fixed rate unsecured term loan (in thousands)	$	–			–			–			–			–			50,000			50,000			50,000	(1)
Weighted average interest rate		–			–			–			–			–			3.91	%		3.91	%

Variable rate debt (in thousands)	$	–			154,516	(2)		–			–			–			–			154,516			153,521	(3)
Weighted average interest rate		–			1.15	%		–			–			–			–			1.15	%

(1)	The fair value of the Company’s fixed rate debt is estimated by discounting expected cash flows at the rates currently offered to the Company for debt of the same remaining maturities, as advised by the Company’s bankers.

(2)	The variable rate debt matures in January 2013 and is comprised of two lines of credit with balances of $147,000,000 on the $200 million line of credit and $7,516,000 on the $25 million working capital line of credit as of December 31, 2011.

(3)	The fair value of the Company’s variable rate debt is estimated by discounting expected cash flows at current market rates.

As the table above incorporates only those exposures that existed as of December 31, 2011, it does not consider those exposures or positions that could arise after that date. If the weighted average interest rate on the variable rate bank debt as shown above changes by 10% or approximately 12 basis points, interest expense and cash flows would increase or decrease by approximately $178,000 annually.

EastGroup repaid its $8,770,000 mortgage loan on the Tower Automotive Center on October 1, 2010. Until the repayment, the Company had an interest rate swap agreement to hedge its exposure to the variable interest rate on this recourse mortgage. Under the swap agreement, the Company effectively paid a fixed rate of interest over the term of the agreement without the exchange of the underlying notional amount. This swap was designated as a cash flow hedge and was considered to be fully effective in hedging the variable rate risk associated with the Tower mortgage loan. Changes in the fair value of the swap were recognized in other comprehensive income (loss). Upon repayment in 2010, the $84,000 loss on the extinguishment of the swap was recorded in Other Expense on the Consolidated Statements of Income. The Company did not hold or issue this type of derivative contract for trading or speculative purposes.

FORWARD-LOOKING STATEMENTS

Certain statements contained in this report may be deemed “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Words such as “will,” “anticipates,” “expects,” “believes,” “intends,” “plans,” “seeks,” “estimates,” variations of such words and similar expressions are intended to identify such forward-looking statements, which generally are not historical in nature. All statements that address operating performance, events or developments that the Company expects or anticipates will occur in the future, including statements relating to rent and occupancy growth, development activity, the acquisition or sale of properties, general conditions in the geographic areas where the Company operates and the availability of capital, are forward-looking statements. Forward-looking statements are inherently subject to known and unknown risks and uncertainties, many of which the Company cannot predict, including, without limitation: changes in general economic conditions; the extent of tenant defaults or of any early lease terminations; the Company's ability to lease or re-lease space at current or anticipated rents; the availability of financing; changes in the supply of and demand for industrial/warehouse properties; increases in interest rate levels; increases in operating costs; natural disasters, terrorism, riots and acts of war, and the Company's ability to obtain adequate insurance; changes in governmental regulation, tax rates and similar matters; and other risks associated with the development and acquisition of properties, including risks that development projects may not be completed on schedule, development or operating costs may be greater than anticipated or acquisitions may not close as scheduled, and those additional factors discussed under “Item 1A. Risk Factors” in Part I of this report. Although the Company believes the expectations reflected in the forward-looking statements are based upon reasonable assumptions at the time made, the Company can give no assurance that such expectations will be achieved. The Company assumes no obligation whatsoever to publicly update or revise any forward-looking statements. See also the information contained in the Company’s reports filed or to be filed from time to time with the Securities and Exchange Commission pursuant to the Securities Exchange Act of 1934, as amended (the “Exchange Act”).

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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

The Registrant's Consolidated Balance Sheets as of December 31, 2011 and 2010, and its Consolidated Statements of Income, Changes in Equity and Cash Flows and Notes to Consolidated Financial Statements for the years ended December 31, 2011, 2010 and 2009 and the Report of Independent Registered Public Accounting Firm thereon are included under Item 15 of this report and are incorporated herein by reference. Unaudited quarterly results of operations included in the Notes to Consolidated Financial Statements are also incorporated herein by reference.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.

None.

ITEM 9A. CONTROLS AND PROCEDURES.

(i) Disclosure Controls and Procedures.

The Company carried out an evaluation, under the supervision and with the participation of the Company’s management, including the Company’s Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures pursuant to Exchange Act Rule 13a-15. Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that, as of December 31, 2011, the Company’s disclosure controls and procedures were effective in timely alerting them to material information relating to the Company (including its consolidated subsidiaries) required to be included in the Company’s periodic SEC filings.

(ii) Internal Control Over Financial Reporting.

(a) Management's annual report on internal control over financial reporting.

Management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rule 13a-15(f). EastGroup’s Management Report on Internal Control Over Financial Reporting is set forth in Part IV, Item 15 of this Form 10-K on page 34 and is incorporated herein by reference.

(b) Report of the independent registered public accounting firm.

The report of KPMG LLP, the Company's independent registered public accounting firm, on the Company's internal control over financial reporting is set forth in Part IV, Item 15 of this Form 10-K on page 34 and is incorporated herein by reference.

There was no change in the Company's internal control over financial reporting during the Company's fourth fiscal quarter ended December 31, 2011 that has materially affected, or is reasonably likely to materially affect, the Company's internal control over financial reporting.

ITEM 9B. OTHER INFORMATION.

Not applicable.

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PART III

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE.

The following table sets forth information regarding the Company’s executive officers and directors as of December 31, 2011.

Name	Position
D. Pike Aloian	Director since 1999; Partner in Almanac Realty Investors, LLC (real estate advisory and investment management services)
H.C. Bailey, Jr.	Director since 1980; Chairman and President of H.C. Bailey Company (real estate development and investment)
Hayden C. Eaves III	Director since 2002; President of Hayden Holdings, Inc. (real estate investment)
Fredric H. Gould	Director since 1998; Chairman of the General Partner of Gould Investors L.P., Chairman of BRT Realty Trust and Chairman of One Liberty Properties, Inc.
Mary E. McCormick	Director since 2005; Senior Advisor with Almanac Realty Investors, LLC (real estate advisory and investment management services)
David M. Osnos	Director since 1993; Of Counsel to the law firm of Arent Fox LLP
Leland R. Speed	Director since 1978; Chairman of the Board of the Company
David H. Hoster II	Director since 1993; President and Chief Executive Officer of the Company
N. Keith McKey	Executive Vice President, Chief Financial Officer, Secretary and Treasurer of the Company
John F. Coleman	Senior Vice President of the Company
Bruce Corkern	Senior Vice President, Chief Accounting Officer and Controller of the Company
William D. Petsas	Senior Vice President of the Company
Brent W. Wood	Senior Vice President of the Company

All other information required by Item 10 of Part III regarding the Company’s executive officers and directors is incorporated herein by reference from the sections entitled "Corporate Governance and Board Matters" and “Executive Officers” in the Company's definitive Proxy Statement ("2012 Proxy Statement") to be filed pursuant to Regulation 14A of the Securities Exchange Act of 1934, as amended, for EastGroup's Annual Meeting of Stockholders to be held on May 30, 2012. The 2012 Proxy Statement will be filed within 120 days after the end of the Company's fiscal year ended December 31, 2011.

The information regarding compliance with Section 16(a) of the Exchange Act is incorporated herein by reference from the subsection entitled "Section 16(a) Beneficial Ownership Reporting Compliance" in the Company's 2012 Proxy Statement.

Information regarding EastGroup's code of business conduct and ethics found in the subsection captioned "Available Information" in Item 1 of Part I hereof is also incorporated herein by reference into this Item 10.

The information regarding the Company's audit committee, its members and the audit committee financial experts is incorporated herein by reference from the subsection entitled "Committees and Meeting Data” in the Company's 2012 Proxy Statement.

ITEM 11. EXECUTIVE COMPENSATION.

The information included under the following captions in the Company's 2012 Proxy Statement is incorporated herein by reference: "Compensation Discussion and Analysis," "Summary Compensation Table," "Grants of Plan-Based Awards in 2011," "Outstanding Equity Awards at 2011 Fiscal Year-End," "Option Exercises and Stock Vested in 2011," "Potential Payments upon Termination or Change in Control," "Compensation of Directors" and "Compensation Committee Interlocks." The information included under the heading "Report of the Compensation Committee" in the Company's 2012 Proxy Statement is incorporated herein by reference; however, this information shall not be deemed to be "soliciting material" or to be "filed" with the SEC or subject to Regulation 14A or 14C, or to the liabilities of Section 18 of the Exchange Act.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS.

Information regarding security ownership of certain beneficial owners and management is incorporated herein by reference from the subsections entitled “Security Ownership of Certain Beneficial Owners” and “Security Ownership of Management and Directors” in the Company’s 2012 Proxy Statement.

The following table summarizes the Company’s equity compensation plan information as of December 31, 2011.

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Equity Compensation Plan Information

Plan category	(a) Number of securities to be issued upon exercise of outstanding options, warrants and rights		(b) Weighted-average exercise price of outstanding options, warrants and rights		(c) Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a))
Equity compensation plans approved by security holders		9,000	$	25.31		1,422,609
Equity compensation plans not approved by security holders		–		–		–
Total		9,000	$	25.31		1,422,609

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE.

The information regarding transactions with related parties and director independence is incorporated herein by reference from the subsection entitled "Independent Directors" and the section entitled “Certain Transactions and Relationships” in the Company's 2012 Proxy Statement.

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES.

The information regarding principal auditor fees and services is incorporated herein by reference from the section entitled "Auditor Fees and Services" in the Company's 2012 Proxy Statement.

PART IV

ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.

(a) The following documents are filed as part of this Annual Report on Form 10-K:

		Page
(1)	Consolidated Financial Statements:
	Report of Independent Registered Public Accounting Firm	33
	Management Report on Internal Control Over Financial Reporting	34
	Report of Independent Registered Public Accounting Firm	34
	Consolidated Balance Sheets – December 31, 2011 and 2010	35
	Consolidated Statements of Income – Years ended December 31, 2011, 2010 and 2009	36
	Consolidated Statements of Changes in Equity – Years ended December 31, 2011, 2010 and 2009	37
	Consolidated Statements of Cash Flows – Years ended December 31, 2011, 2010 and 2009	38
	Notes to Consolidated Financial Statements	39

(2)	Consolidated Financial Statement Schedules:
	Report of Independent Registered Public Accounting Firm on Financial Statement Schedules	55
	Schedule III – Real Estate Properties and Accumulated Depreciation	56
	Schedule IV – Mortgage Loans on Real Estate	63

	All other schedules for which provision is made in the applicable accounting regulations of the Securities and Exchange Commission are not required under the related instructions or are inapplicable, and therefore have been omitted, or the required information is included in the Notes to Consolidated Financial Statements.

(3)	Exhibits:
	The following exhibits are filed with this Form 10-K or incorporated by reference to the listed document previously filed with the SEC:

Number	Description
(3)	Articles of Incorporation and Bylaws
(a)	Articles of Incorporation (incorporated by reference to Appendix B to the Company's Proxy Statement for its Annual Meeting of Stockholders held on June 5, 1997).
(b)	Bylaws of the Company (incorporated by reference to Exhibit 3.1 to the Company’s Form 8-K filed December 10, 2008).

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(10)	Material Contracts (*Indicates management or compensatory agreement):
(a)	EastGroup Properties, Inc. 2000 Directors Stock Option Plan (incorporated by reference to Appendix A to the Company's Proxy Statement for its Annual Meeting of Stockholders held on June 1, 2000).*
(b)	EastGroup Properties, Inc. 2004 Equity Incentive Plan (incorporated by reference to Appendix D to the Company's Proxy Statement for its Annual Meeting of Stockholders held on May 27, 2004).*
(c)	Amendment No. 1 to the 2004 Equity Incentive Plan (incorporated by reference to Exhibit 10(f) to the Company’s Form 10-K for the year ended December 31, 2006). *
(d)	Amendment No. 2 to the 2004 Equity Incentive Plan (incorporated by reference to Exhibit 10(d) to the Company’s Form 8-K filed January 8, 2007).*
(e)	EastGroup Properties, Inc. 2005 Directors Equity Incentive Plan (incorporated by reference to Appendix B to the Company’s Proxy Statement for its Annual Meeting of Stockholders held on June 2, 2005).*
(f)	Amendment No. 1 to the 2005 Directors Equity Incentive Plan (incorporated by reference to Exhibit 10.1 to the Company’s Form 8-K filed June 6, 2006).*
(g)	Amendment No. 2 to the 2005 Directors Equity Incentive Plan (incorporated by reference to Exhibit 10.1 to the Company’s Form 8-K filed June 3, 2008).*
(h)	Amendment No. 3 to the 2005 Directors Equity Incentive Plan (incorporated by reference to Exhibit 10.1 to the Company’s Form 8-K filed June 1, 2011).*
(i)	Form of Severance and Change in Control Agreement that the Company has entered into with Leland R. Speed, David H. Hoster II and N. Keith McKey (incorporated by reference to Exhibit 10(a) to the Company's Form 8-K filed January 7, 2009).*
(j)	Form of Severance and Change in Control Agreement that the Company has entered into with John F. Coleman, William D. Petsas, Brent W. Wood and C. Bruce Corkern (incorporated by reference to Exhibit 10(b) to the Company's Form 8-K filed January 7, 2009).*
(k)	Compensation Program for Non-Employee Directors (a written description thereof is set forth in Item 5.02 of the Company’s Form 8-K filed June 1, 2011).*
(l)	Second Amended and Restated Credit Agreement Dated January 4, 2008 among EastGroup Properties, L.P.; EastGroup Properties, Inc.; PNC Bank, National Association, as Administrative Agent; Regions Bank and SunTrust Bank as Co-Syndication Agents; Wells Fargo Bank, National Association as Documentation Agent; and PNC Capital Markets LLC, as Sole Lead Arranger and Sole Bookrunner; and the Lenders thereunder (incorporated by reference to Exhibit 10.1 to the Company's Form 8-K filed January 10, 2008).
(m)	First Amendment, dated February 2, 2011, to the Second Amended and Restated Credit Agreement Dated January 4, 2008 (incorporated by reference to Exhibit 10(o) to the Company's Annual Report on Form 10-K filed February 28, 2011).
(n)	Sales Agency Financing Agreement dated March 21, 2011 between EastGroup Properties, Inc. and BNY Mellon Capital Markets, LLC (incorporated by reference to Exhibit 1.1 to the Company’s Form 8-K filed March 25, 2011).
(o)	Sales Agency Financing Agreement dated March 21, 2011 between EastGroup Properties, Inc. and Raymond James & Associates, Inc. (incorporated by reference to Exhibit 1.2 to the Company’s Form 8-K filed March 25, 2011).

(21)	Subsidiaries of EastGroup Properties, Inc. (filed herewith).

(23)	Consent of KPMG LLP (filed herewith).

(24)	Powers of attorney (filed herewith).

(31)	Rule 13a-14(a)/15d-14(a) Certifications (pursuant to Section 302 of the Sarbanes-Oxley Act of 2002)
(a)	David H. Hoster II, Chief Executive Officer
(b)	N. Keith McKey, Chief Financial Officer

(32)	Section 1350 Certifications (pursuant to Section 906 of the Sarbanes-Oxley Act of 2002)
(a)	David H. Hoster II, Chief Executive Officer
(b)	N. Keith McKey, Chief Financial Officer

(101)	The following materials from EastGroup Properties, Inc.’s Annual Report on Form 10-K for the year ended December 31, 2011, formatted in XBRL (eXtensible Business Reporting Language): (i) consolidated balance sheets, (ii) consolidated statements of income, (iii) consolidated statements of changes in equity, (iv) consolidated statements of cash flows, and (v) the notes to the consolidated financial statements.**

-31-

** Pursuant to Rule 406T of Regulation S-T, the Interactive Data Files on Exhibit 101 hereto are deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, are deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise are not subject to liability under those sections.

(b) Exhibits

The exhibits required to be filed with this Report pursuant to Item 601 of Regulation S-K are listed under “Exhibits” in Part IV, Item 15(a)(3) of this Report and are incorporated herein by reference.

The Financial Statement Schedules required to be filed with this Report are listed under “Consolidated Financial Statement Schedules” in Part IV, Item 15(a)(2) of this Report, and are incorporated herein by reference.

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

the board of directors and stockholders

eastgroup properties, inc.:

We have audited the accompanying consolidated balance sheets of EastGroup Properties, Inc. and subsidiaries (the Company) as of December 31, 2011 and 2010, and the related consolidated statements of income, changes in equity and cash flows for each of the years in the three-year period ended December 31, 2011. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of EastGroup Properties, Inc. and subsidiaries as of December 31, 2011 and 2010, and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 2011, in conformity with U.S. generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the Company’s internal control over financial reporting as of December 31, 2011, based on the criteria established in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO), and our report dated February 23, 2012, expressed an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting.

	(Signed) KPMG LLP
Jackson, Mississippi
February 23, 2012

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MANAGEMENT REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING

EastGroup’s management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rule 13a-15(f). Under the supervision and with the participation of management, including the Chief Executive Officer and Chief Financial Officer, EastGroup conducted an evaluation of the effectiveness of internal control over financial reporting based on the framework in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on EastGroup’s evaluation under the framework in Internal Control – Integrated Framework, management concluded that our internal control over financial reporting was effective as of December 31, 2011.

	/s/ EASTGROUP PROPERTIES, INC.
Jackson, Mississippi
February 23, 2012

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

the board of directors and stockholders

eastgroup properties, inc.:

We have audited EastGroup Properties, Inc. and subsidiaries’ (the Company) internal control over financial reporting as of December 31, 2011, based on the criteria established in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, EastGroup Properties, Inc. and subsidiaries maintained, in all material respects, effective internal control over financial reporting as of December 31, 2011, based on the criteria established in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of EastGroup Properties, Inc. and subsidiaries as of December 31, 2011 and 2010, and the related consolidated statements of income, changes in equity and cash flows for each of the years in the three-year period ended December 31, 2011, and our report dated February 23, 2012, expressed an unqualified opinion on those consolidated financial statements.

	(Signed) KPMG LLP
Jackson, Mississippi
February 23, 2012

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EASTGROUP PROPERTIES, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

	December 31,
	2011			2010
	(In thousands, except for share and per share data)
ASSETS
Real estate properties	$	1,550,444			1,447,455
Development		112,149			73,722
		1,662,593			1,521,177
Less accumulated depreciation		(451,805	)		(403,187	)
		1,210,788			1,117,990

Unconsolidated investment		2,757			2,740
Cash		174			137
Other assets		72,797			62,409
TOTAL ASSETS	$	1,286,516			1,183,276

LIABILITIES AND EQUITY

LIABILITIES
Mortgage notes payable	$	628,170			644,424
Unsecured term loan payable		50,000			–
Notes payable to banks		154,516			91,294
Accounts payable and accrued expenses		31,205			20,969
Other liabilities		17,016			15,083
Total Liabilities		880,907			771,770

EQUITY
Stockholders’ Equity:
Common shares; $.0001 par value; 70,000,000 shares authorized; 27,658,059 shares issued and outstanding at December 31, 2011 and 26,973,531 at December 31, 2010		3			3
Excess shares; $.0001 par value; 30,000,000 shares authorized; no shares issued		–			–
Additional paid-in capital on common shares		619,386			591,106
Distributions in excess of earnings		(216,560	)		(182,253	)
Total Stockholders’ Equity		402,829			408,856

Noncontrolling interest in joint ventures		2,780			2,650
Total Equity		405,609			411,506
TOTAL LIABILITIES AND EQUITY	$	1,286,516			1,183,276

See accompanying Notes to Consolidated Financial Statements.

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EASTGROUP PROPERTIES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

	Years Ended December 31,
	2011			2010			2009
	(In thousands, except per share data)
REVENUES
Income from real estate operations	$	174,484			173,002			172,273
Other income		147			124			81
		174,631			173,126			172,354
EXPENSES
Expenses from real estate operations		49,411			51,142			50,259
Depreciation and amortization		57,451			58,350			53,953
General and administrative		10,691			10,260			8,894
Acquisition costs		252			72			177
		117,805			119,824			113,283
OPERATING INCOME		56,826			53,302			59,071
OTHER INCOME (EXPENSE)
Equity in earnings of unconsolidated investment		347			335			320
Gain on sales of non-operating real estate		36			37			31
Other expense		–			(84	)		–
Interest income		334			336			302
Interest expense		(34,709	)		(35,171	)		(32,520	)
INCOME FROM CONTINUING OPERATIONS		22,834			18,755			27,204
DISCONTINUED OPERATIONS
Loss from real estate operations		–			–			(139	)
Gain on sales of real estate investments		–			–			29
LOSS FROM DISCONTINUED OPERATIONS		–			–			(110	)

NET INCOME		22,834			18,755			27,094
Net income attributable to noncontrolling interest in joint ventures		(475	)		(430	)		(435	)

NET INCOME ATTRIBUTABLE TO EASTGROUP PROPERTIES, INC. COMMON STOCKHOLDERS	$	22,359			18,325			26,659

BASIC PER COMMON SHARE DATA FOR NET INCOME ATTRIBUTABLE TO EASTGROUP PROPERTIES, INC. COMMON STOCKHOLDERS
Net income attributable to common stockholders	$	.83			.68			1.04

Weighted average shares outstanding		26,897			26,752			25,590

DILUTED PER COMMON SHARE DATA FOR NET INCOME ATTRIBUTABLE TO EASTGROUP PROPERTIES, INC. COMMON STOCKHOLDERS
Net income attributable to common stockholders	$	.83			.68			1.04

Weighted average shares outstanding		26,971			26,824			25,690

AMOUNTS ATTRIBUTABLE TO EASTGROUP PROPERTIES, INC. COMMON STOCKHOLDERS
Income from continuing operations	$	22,359			18,325			26,769
Loss from discontinued operations		–			–			(110	)
Net income attributable to common stockholders	$	22,359			18,325			26,659


See accompanying Notes to Consolidated Financial Statements.

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EASTGROUP PROPERTIES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

									Accumulated
			Additional			Distributions			Other			Noncontrolling
	Common		Paid-In			In Excess			Comprehensive			Interest in
	Stock		Capital			Of Earnings			Loss			Joint Ventures			Total

	(In thousands, except for share and per share data)

BALANCE, DECEMBER 31, 2008	$	3		528,452			(117,093	)		(522	)		2,536			413,376
Comprehensive income
Net income		–		–			26,659			–			435			27,094
Net unrealized change in fair value of interest rate swap		–		–			–			204			–			204
Total comprehensive income																27,298
Common dividends declared – $2.08 per share		–		–			(53,929	)		–			–			(53,929	)
Stock-based compensation, net of forfeitures		–		2,060			–			–			–			2,060
Issuance of 1,600,000 shares of common stock, common stock offering, net of expenses		–		57,553			–			–			–			57,553
Issuance of 57,436 shares of common stock, options exercised		–		1,180			–			–			–			1,180
Issuance of 7,938 shares of common stock, dividend reinvestment plan		–		268			–			–			–			268
Withheld 8,514 shares of common stock to satisfy tax withholding obligations in connection with the vesting of restricted stock		–		(316	)		–			–			–			(316	)
Distributions to noncontrolling interest		–		–			–			–			(394	)		(394	)
BALANCE, DECEMBER 31, 2009		3		589,197			(144,363	)		(318	)		2,577			447,096
Comprehensive income
Net income		–		–			18,325			–			430			18,755
Net unrealized change in fair value of interest rate swap		–		–			–			318			–			318
Total comprehensive income																19,073
Common dividends declared – $2.08 per share		–		–			(56,215	)		–			–			(56,215	)
Stock-based compensation, net of forfeitures		–		2,042			–			–			–			2,042
Issuance of 18,000 shares of common stock, options exercised		–		404			–			–			–			404
Issuance of 6,705 shares of common stock, dividend reinvestment plan		–		257			–			–			–			257
Withheld 19,668 shares of common stock to satisfy tax withholding obligations in connection with the vesting of restricted stock		–		(794	)		–			–			–			(794	)
Distributions to noncontrolling interest		–		–			–			–			(357	)		(357	)
BALANCE, DECEMBER 31, 2010		3		591,106			(182,253	)		–			2,650			411,506
Net income		–		–			22,359			–			475			22,834
Common dividends declared – $2.08 per share		–		–			(56,666	)		–			–			(56,666	)
Stock-based compensation, net of forfeitures		–		2,787			–			–			–			2,787
Issuance of 586,977 shares of common stock, common stock offering, net of expenses		–		25,181			–			–			–			25,181
Issuance of 9,250 shares of common stock, options exercised		–		217			–			–			–			217
Issuance of 5,989 shares of common stock, dividend reinvestment plan		–		252			–			–			–			252
Withheld 3,564 shares of common stock to satisfy tax withholding obligations in connection with the vesting of restricted stock		–		(157	)		–			–			–			(157	)
Distributions to noncontrolling interest		–		–			–			–			(345	)		(345	)
BALANCE, DECEMBER 31, 2011	$	3		619,386			(216,560	)		–			2,780			405,609

See accompanying Notes to Consolidated Financial Statements.

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EASTGROUP PROPERTIES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

	Years Ended December 31,
	2011			2010			2009
	(In thousands)
OPERATING ACTIVITIES
Net income	$	22,834			18,755			27,094
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization from continuing operations		57,451			58,350			53,953
Depreciation and amortization from discontinued operations		–			–			51
Stock-based compensation expense		2,452			1,998			1,827
Changes in operating assets and liabilities:
Accrued income and other assets		(1,425	)		212			1,258
Accounts payable, accrued expenses and prepaid rent		5,466			(2,268	)		(3,345	)
Other		(231	)		(189	)		(254	)
NET CASH PROVIDED BY OPERATING ACTIVITIES		86,547			76,858			80,584

INVESTING ACTIVITIES
Real estate development		(42,148	)		(9,145	)		(35,057	)
Purchases of real estate		(88,592	)		(23,906	)		(17,725	)
Real estate improvements		(19,048	)		(23,720	)		(14,474	)
Proceeds from sales of land and real estate investments		–			–			908
Repayments on mortgage loans receivable		33			37			31
Changes in accrued development costs		5,255			8			(6,462	)
Changes in other assets and other liabilities		(6,333	)		(6,775	)		(7,545	)
NET CASH USED IN INVESTING ACTIVITIES		(150,833	)		(63,501	)		(80,324	)

FINANCING ACTIVITIES
Proceeds from bank borrowings		336,575			211,041			225,314
Repayments on bank borrowings		(273,353	)		(208,903	)		(246,044	)
Proceeds from mortgage notes payable		65,000			74,000			76,365
Principal payments on mortgage notes payable		(81,128	)		(32,401	)		(59,100	)
Proceeds from unsecured term loan payable		50,000			–			–
Debt issuance costs		(925	)		(709	)		(492	)
Distributions paid to stockholders		(56,042	)		(56,294	)		(54,316	)
Proceeds from common stock offerings		25,181			303			57,181
Proceeds from exercise of stock options		217			404			1,180
Proceeds from dividend reinvestment plan		249			262			268
Other		(1,451	)		(1,985	)		153
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES		64,323			(14,282	)		509

INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS		37			(925	)		769
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR		137			1,062			293
CASH AND CASH EQUIVALENTS AT END OF YEAR	$	174			137			1,062

SUPPLEMENTAL CASH FLOW INFORMATION
Cash paid for interest, net of amount capitalized of $3,771, $3,613 and $5,856 for 2011, 2010 and 2009, respectively	$	33,671			34,380			31,297
Fair value of common stock awards issued to employees and directors, net of forfeitures		3,868			5,174			2,444

See accompanying Notes to Consolidated Financial Statements.

-38-

EASTGROUP PROPERTIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2011, 2010 and 2009

(1) SIGNIFICANT ACCOUNTING POLICIES

(a) Principles of Consolidation

The consolidated financial statements include the accounts of EastGroup Properties, Inc., its wholly owned subsidiaries and its investment in any joint ventures in which the Company has a controlling interest. At December 31, 2011, 2010 and 2009, the Company had a controlling interest in two joint ventures: the 80% owned University Business Center and the 80% owned Castilian Research Center. The Company records 100% of the joint ventures’ assets, liabilities, revenues and expenses with noncontrolling interests provided for in accordance with the joint venture agreements. The equity method of accounting is used for the Company’s 50% undivided tenant-in-common interest in Industry Distribution Center II. All significant intercompany transactions and accounts have been eliminated in consolidation.

(b) Income Taxes

EastGroup, a Maryland corporation, has qualified as a real estate investment trust (REIT) under Sections 856-860 of the Internal Revenue Code and intends to continue to qualify as such. To maintain its status as a REIT, the Company is required to distribute at least 90% of its ordinary taxable income to its stockholders. If the Company has a capital gain, it has the option of (i) deferring recognition of the capital gain through a tax-deferred exchange, (ii) declaring and paying a capital gain dividend on any recognized net capital gain resulting in no corporate level tax, or (iii) retaining and paying corporate income tax on its net long-term capital gain, with the shareholders reporting their proportional share of the undistributed long-term capital gain and receiving a credit or refund of their share of the tax paid by the Company. The Company distributed all of its 2011, 2010 and 2009 taxable income to its stockholders. Accordingly, no provision for income taxes was necessary. The following table summarizes the federal income tax treatment for all distributions by the Company for the years ended 2011, 2010 and 2009.

Federal Income Tax Treatment of Share Distributions

	Years Ended December 31,
	2011		2010		2009
Common Share Distributions:
Ordinary income	$	1.6852		1.4775		1.7534
Return of capital		.3948		.6025		.3266
Total Common Distributions	$	2.0800		2.0800		2.0800

EastGroup applies the principles of Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) 740, Income Taxes, when evaluating and accounting for uncertainty in income taxes. With few exceptions, the Company’s 2007 and earlier tax years are closed for examination by U.S. federal, state and local tax authorities. In accordance with the provisions of ASC 740, the Company had no significant uncertain tax positions as of December 31, 2011 and 2010.

The Company’s income may differ for tax and financial reporting purposes principally because of (1) the timing of the deduction for the provision for possible losses and losses on investments, (2) the timing of the recognition of gains or losses from the sale of investments, (3) different depreciation methods and lives, (4) real estate properties having a different basis for tax and financial reporting purposes, (5) mortgage loans having a different basis for tax and financial reporting purposes, thereby producing different gains upon collection of these loans, and (6) differences in book and tax allowances and timing for stock-based compensation expense.

Minimum rental income from real estate operations is recognized on a straight-line basis. The straight-line rent calculation on leases includes the effects of rent concessions and scheduled rent increases, and the calculated straight-line rent income is recognized over the lives of the individual leases. The Company maintains allowances for doubtful accounts receivable, including straight-line rents receivable, based upon estimates determined by management. Management specifically analyzes aged receivables, customer credit-worthiness, historical bad debts and current economic trends when evaluating the adequacy of the allowance for doubtful accounts.

Revenue is recognized on payments received from tenants for early terminations after all criteria have been met in accordance with ASC 840, Leases.

The Company recognizes gains on sales of real estate in accordance with the principles set forth in ASC 360, Property, Plant and Equipment. Upon closing of real estate transactions, the provisions of ASC 360 require consideration for the transfer of rights of ownership to the purchaser, receipt of an adequate cash down payment from the purchaser, adequate continuing investment by the purchaser and no substantial continuing involvement by the Company. If the requirements for recognizing gains have not been met, the sale and related costs are recorded, but the gain is deferred and recognized by a method other than the full accrual method.

The Company recognizes interest income on mortgage loans on the accrual method unless a significant uncertainty of collection exists. If a significant uncertainty exists, interest income is recognized as collected. Discounts on mortgage loans receivable are amortized over the lives of the loans using a method that does not differ materially from the interest method. The Company evaluates the collectibility of both interest and principal on each of its loans to determine whether the loans are impaired. A loan is considered to be impaired when, based on current information and events, it is probable that the Company will be unable to collect all amounts due according to the existing contractual terms. When a loan is considered to be impaired, the amount of loss is calculated by comparing the recorded investment to the value determined by discounting the expected future cash flows at the loan’s effective interest rate or to the fair value of the underlying collateral (if the loan is collateralized) less costs to sell. As of December 31, 2011 and 2010, there was no significant uncertainty of collection; therefore, interest income was recognized, and the discount on mortgage loans receivable was amortized. In addition, the Company determined that no allowance for collectibility of the mortgage loans receivable was necessary.

-39-

EASTGROUP PROPERTIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(d) Real Estate Properties

EastGroup has one reportable segment–industrial properties. These properties are concentrated in major Sunbelt markets of the United States, primarily in the states of Florida, Texas, Arizona, California and North Carolina, have similar economic characteristics and also meet the other criteria that permit the properties to be aggregated into one reportable segment.

The Company reviews long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to future undiscounted net cash flows (including estimated future expenditures necessary to substantially complete the asset) expected to be generated by the asset. If the carrying amount of an asset exceeds its estimated future cash flows, an impairment charge is recognized for the amount by which the carrying amount of the asset exceeds the fair value of the asset. As of December 31, 2011 and 2010, the Company determined that no impairment charges on the Company’s real estate properties were necessary.

Depreciation of buildings and other improvements, including personal property, is computed using the straight-line method over estimated useful lives of generally 40 years for buildings and 3 to 15 years for improvements and personal property. Building improvements are capitalized, while maintenance and repair expenses are charged to expense as incurred. Significant renovations and improvements that improve or extend the useful life of the assets are capitalized. Depreciation expense for continuing and discontinued operations was $48,648,000, $48,442,000 and $45,195,000 for 2011, 2010 and 2009, respectively.

(e) Development

During the period in which a property is under development, costs associated with development (i.e., land, construction costs, interest expense, property taxes and other direct and indirect costs associated with development) are aggregated into the total capitalized costs of the property. Included in these costs are management’s estimates for the portions of internal costs (primarily personnel costs) that are deemed directly or indirectly related to such development activities. As the property becomes occupied, depreciation commences on the occupied portion of the building, and costs are capitalized only for the portion of the building that remains vacant. When the property becomes 80% occupied or one year after completion of the shell construction (whichever comes first), capitalization of development costs ceases. The properties are then transferred to real estate properties, and depreciation commences on the entire property (excluding the land).

(f) Real Estate Held for Sale

The Company considers a real estate property to be held for sale when it meets the criteria established under ASC 360, Property, Plant and Equipment, including when it is probable that the property will be sold within a year. A key indicator of probability of sale is whether the buyer has a significant amount of earnest money at risk. Real estate properties held for sale are reported at the lower of the carrying amount or fair value less estimated costs to sell and are not depreciated while they are held for sale. In accordance with the guidelines established under the Codification, the results of operations for the operating properties sold or held for sale during the reported periods are shown under Discontinued Operations on the Consolidated Statements of Income. Interest expense is not generally allocated to the properties held for sale or whose operations are included under Discontinued Operations unless the mortgage is required to be paid in full upon the sale of the property.

(g) Derivative Instruments and Hedging Activities

EastGroup applies ASC 815, Derivatives and Hedging, which requires all entities with derivative instruments to disclose information regarding how and why the entity uses derivative instruments and how derivative instruments and related hedged items affect the entity’s financial position, financial performance and cash flows. On October 1, 2010, EastGroup repaid its $8,770,000 mortgage loan on the Tower Automotive Center. Until the repayment, the Company had an interest rate swap agreement, which is discussed in Note 17. Changes in the fair value of the swap were recognized in other comprehensive income (loss). At December 31, 2011 and 2010, the Company did not have any outstanding derivatives.

(h) Cash Equivalents

The Company considers all highly liquid investments with a maturity of three months or less when purchased to be cash equivalents.

-40-

EASTGROUP PROPERTIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(i) Amortization

Debt origination costs are deferred and amortized over the term of each loan using the effective interest method. Amortization of loan costs for continuing operations was $1,053,000, $1,056,000 and $1,032,000 for 2011, 2010 and 2009, respectively.

Leasing costs are deferred and amortized using the straight-line method over the term of the lease. Leasing costs paid during the period are included in Changes in other assets and other liabilities in the Investing section on the Consolidated Statements of Cash Flows. Leasing costs amortization expense for continuing and discontinued operations was $6,487,000, $6,703,000 and $6,366,000 for 2011, 2010 and 2009, respectively. Amortization expense for in-place lease intangibles is disclosed below in Business Combinations and Acquired Intangibles.

(j) Business Combinations and Acquired Intangibles

Upon acquisition of real estate properties, the Company applies the principles of ASC 805, Business Combinations, which requires that acquisition-related costs be recognized as expenses in the periods in which the costs are incurred and the services are received. The 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. Goodwill is recorded when the purchase price exceeds the fair value of the assets and liabilities acquired. 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. Factors considered by management in allocating the cost of the properties acquired include an estimate of carrying costs during the expected lease-up periods considering current market conditions and costs to execute similar leases. 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.

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 fair market rates over the remaining term of the lease. The amounts allocated to above and below market leases 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. 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 of above and below market leases decreased rental income by $341,000 in 2011, $478,000 in 2010 and $11,000 in 2009. Amortization expense for in-place lease intangibles was $2,316,000, $3,205,000 and $2,443,000 for 2011, 2010 and 2009, respectively. Projected amortization of in-place lease intangibles for the next five years as of December 31, 2011 is as follows:

Years Ending December 31,	(In thousands)

2012	$	3,485
2013		1,528
2014		919
2015		719
2016		1,028

During 2011, EastGroup acquired the following operating properties: Lakeview Business Center (127,000 square feet) and Ridge Creek Distribution Center II (300,000 square feet) in Charlotte, North Carolina; Broadway Industrial Park, Building VII (24,000 square feet) in Tempe, Arizona; the Tampa Industrial Portfolio (1,147,000 square feet) in Tampa, Florida; and Rittiman Distribution Center (172,000 square feet) in San Antonio, Texas. The Company purchased these properties for a total cost of $88,592,000, of which $80,624,000 was allocated to real estate properties. The Company allocated $13,872,000 of the total purchase price to land using third party land valuations for the Charlotte, Tempe, Tampa and San Antonio markets. The market values used are considered to be Level 3 inputs as defined by ASC 820, Fair Value Measurements and Disclosures (see Note 17 for additional information on ASC 820). Intangibles associated with the purchase of real estate were allocated as follows: $6,949,000 to in-place lease intangibles, $1,693,000 to above market leases (both included in Other Assets on the Consolidated Balance Sheets) and $674,000 to below market leases (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. During 2011, EastGroup expensed acquisition-related costs of $252,000 in connection with these acquisitions.

During 2010, EastGroup acquired the following operating properties: Commerce Park 2 & 3 (193,000 square feet) in Charlotte, North Carolina; Ocean View Corporate Center (274,000 square feet) in San Diego, California; and East University Distribution Center III (32,000 square feet) in Phoenix, Arizona. EastGroup purchased these operating properties for a total cost of $23,555,000, of which $19,545,000 was allocated to real estate properties. The Company allocated $7,914,000 of the total purchase price to land using third party land valuations for the Charlotte, San Diego and Phoenix markets. The market values are considered to be Level 3 inputs as defined by ASC 820. Intangibles associated with the purchase of real estate were allocated as follows: $3,118,000 to in-place lease intangibles, $923,000 to above market leases and $31,000 to below market leases. During 2010, the Company expensed acquisition-related costs of $72,000 in connection with these acquisitions.

-41-

EASTGROUP PROPERTIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The Company periodically reviews the recoverability of goodwill (at least annually) and the recoverability of other intangibles (on a quarterly basis) for possible impairment. In management’s opinion, no impairment of goodwill and other intangibles existed at December 31, 2011 and 2010.

(k) Stock-Based Compensation

The Company has a management incentive plan which was approved by the stockholders and adopted in 2004. The Plan was further amended by the Board of Directors in September 2005 and December 2006. This plan authorizes the issuance of common stock to employees in the form of options, stock appreciation rights, restricted stock, deferred stock units, performance shares, bonus stock or stock in lieu of cash compensation. Typically, the Company issues new shares to fulfill stock grants or upon the exercise of stock options.

EastGroup applies the provisions of ASC 718, Compensation – Stock Compensation, to account for its stock-based compensation plans. Under the modified prospective application method, the Company continues to recognize compensation cost on a straight-line basis over the service period for awards that precede January 1, 2006, when guidance was updated so that performance-based awards are determined using the graded vesting attribution method. The cost for performance-based awards after January 1, 2006, is determined using the graded vesting attribution method which recognizes each separate vesting portion of the award as a separate award on a straight-line basis over the requisite service period. This method accelerates the expensing of the award compared to the straight-line method. The cost for market-based awards after January 1, 2006, and awards that only require service are expensed on a straight-line basis over the requisite service periods.

The total compensation cost for service and performance based awards is based upon the fair market value of the shares on the grant date, adjusted for estimated forfeitures. The grant date fair value for awards that are subject to a market condition are determined using a simulation pricing model developed to specifically accommodate the unique features of the awards.

During the restricted period for awards not subject to contingencies, the Company accrues dividends and holds the certificates for the shares; however, the employee can vote the shares. For shares subject to contingencies, dividends are accrued based upon the number of shares expected to vest. Share certificates and dividends are delivered to the employee as they vest.

(l) Earnings Per Share

The Company applies ASC 260, Earnings Per Share, which requires companies to present basic earnings per share (EPS) and diluted EPS. Basic EPS represents the amount of earnings for the period attributable to each share of common stock outstanding during the reporting period. The Company’s basic EPS is calculated by dividing net income attributable to common stockholders by the weighted average number of common shares outstanding.

Diluted EPS represents the amount of earnings for the period attributable to each share of common stock outstanding during the reporting period and to each share that would have been outstanding assuming the issuance of common shares for all dilutive potential common shares outstanding during the reporting period. The Company calculates diluted EPS by dividing net income attributable to common stockholders by the weighted average number of common shares outstanding plus the dilutive effect of nonvested restricted stock and stock options had the options been exercised. The dilutive effect of stock options and their equivalents (such as nonvested restricted stock) was determined using the treasury stock method which assumes exercise of the options as of the beginning of the period or when issued, if later, and assumes proceeds from the exercise of options are used to purchase common stock at the average market price during the period.

(m) Use of Estimates

The preparation of financial statements in conformity with U.S. generally accepted accounting principles (GAAP) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and revenues and expenses during the reporting period and to disclose material contingent assets and liabilities at the date of the financial statements. Actual results could differ from those estimates.

(n) Risks and Uncertainties

The state of the overall economy can significantly impact the Company’s operational performance and thus impact its financial position. Should EastGroup experience a significant decline in operational performance, it may affect the Company’s ability to make distributions to its shareholders, service debt, or meet other financial obligations.

(o) New Accounting Pronouncements

EastGroup has evaluated all Accounting Standards Updates (ASUs) released by the FASB through the date the financial statements were issued and determined that the following ASUs apply to the Company.

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EASTGROUP PROPERTIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(p) Reclassifications

Certain reclassifications have been made in the 2010 and 2009 consolidated financial statements to conform to the 2011 presentation.

(2) REAL ESTATE PROPERTIES

The Company’s real estate properties at December 31, 2011 and 2010 were as follows:

	December 31,
	2011			2010
	(In thousands)

Real estate properties:
Land	$	235,394			221,523
Buildings and building improvements		1,056,783			985,798
Tenant and other improvements		258,267			240,134
Development		112,149			73,722
		1,662,593			1,521,177
Less accumulated depreciation		(451,805	)		(403,187	)
	$	1,210,788			1,117,990

EastGroup acquired operating properties during 2011and 2010 as discussed in Note 1(j). The Company did not sell any properties in 2011 or 2010. In 2009, one operating property, Butterfield Trail (Building G) in El Paso, was transferred to real estate held for sale and subsequently sold.

Real estate properties held for sale are reported at the lower of the carrying amount or fair value less estimated costs to sell and are not depreciated while they are held for sale. In accordance with the guidelines established under ASC 360, the results of operations for the properties sold or held for sale during the reported periods are shown under Discontinued Operations on the Consolidated Statements of Income. No interest expense was allocated to the properties held for sale or whose operations are included under Discontinued Operations. A summary of gain on sales of real estate for the years ended December 31, 2011, 2010 and 2009 follows:

-43-

EASTGROUP PROPERTIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Gain on Sales of Real Estate

Real Estate Properties	Location	Size	Date Sold	Net Sales Price		Basis		Recognized Gain
				(In thousands)
2011
Deferred gain recognized from previous sales				$	–		–		36
2010
Deferred gain recognized from previous sales				$	–		–		37
2009
Butterfield Trail (Building G)	El Paso, TX	62,000 SF	11/20/09	$	908		879		29
Deferred gain recognized from previous sales					–		–		31
				$	908		879		60

The Company’s development program as of December 31, 2011, 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 properties for 2011 were $3,771,000 compared to $3,613,000 for 2010 and $5,856,000 for 2009.

Total capital investment for development during 2011 was $42,148,000, which consisted of costs of $39,834,000 and $76,000 as detailed in the development activity table below and costs of $2,238,000 for improvements on developments transferred to Real Estate Properties.

			Costs Incurred
	Size		Costs Transferred in 2011(1)			For the Year Ended 12/31/11		Cumulative as of 12/31/11			Estimated Total Costs(2)
DEVELOPMENT	(Unaudited)										(Unaudited)
	(Square feet)		(In thousands)
LEASE-UP
World Houston 31A, Houston, TX		44,000	$	–			2,788		3,843			4,600
Beltway Crossing VIII, Houston, TX		88,000		1,256			3,943		5,199			5,300
Total Lease-Up		132,000		1,256			6,731		9,042			9,900
UNDER CONSTRUCTION
World Houston 32, Houston, TX		96,000		1,834			4,376		6,210			6,800
Southridge IX, Orlando, FL		76,000		1,987			3,375		5,362			7,100
Thousand Oaks 1, San Antonio, TX		36,000		865			1,544		2,409			4,600
Thousand Oaks 2, San Antonio, TX		73,000		1,187			1,977		3,164			5,000
World Houston 31B, Houston, TX		35,000		930			430		1,360			3,900
Beltway Crossing IX, Houston, TX		45,000		674			467		1,141			2,500
Beltway Crossing X, Houston, TX		78,000		1,183			823		2,006			4,500
Total Under Construction		439,000		8,660			12,992		21,652			34,400
PROSPECTIVE DEVELOPMENT (PRIMARILY LAND)
Phoenix, AZ		432,000		–			3,461		3,461			30,800
Tucson, AZ		70,000		–			–		417			4,900
Tampa, FL		249,000		–			286		4,486			14,600
Orlando, FL		1,514,000		(1,987	)		3,552		24,597			99,200
Fort Myers, FL		659,000		–			649		17,203			48,100
Dallas, TX		70,000		–			62		764			4,100
El Paso, TX		251,000		–			–		2,444			9,600
Houston, TX		2,044,000		(5,877	)		11,594		21,115			129,600
San Antonio, TX		484,000		(2,052	)		436		5,016			32,200
Charlotte, NC		95,000		–			71		1,246			7,100
Jackson, MS		28,000		–			–		706			2,000
Total Prospective Development		5,896,000		(9,916	)		20,111		81,455			382,200
		6,467,000	$	–			39,834		112,149			426,500
DEVELOPMENTS COMPLETED AND TRANSFERRED
TO REAL ESTATE PROPERTIES DURING 2011
Arion 8 Expansion, San Antonio, TX		20,000	$	–			76		1,483
Total Transferred to Real Estate Properties		20,000	$	–			76		1,483	(3)

(1) Represents costs transferred from Prospective Development (primarily land) to Under Construction during the period.

(2) Included in these costs are development obligations of $10.7 million and tenant improvement obligations of $2.0 million on properties under development.

(3) Represents cumulative costs at the date of transfer.

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EASTGROUP PROPERTIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The following schedule indicates approximate future minimum rental receipts under non-cancelable leases for real estate properties by year as of December 31, 2011:

Future Minimum Rental Receipts Under Non-Cancelable Leases

Years Ending December 31,	(In thousands)

2012	$	135,253
2013		105,237
2014		78,751
2015		54,516
2016		33,948
Thereafter		51,043
Total minimum receipts	$	458,748

Ground Leases

As of December 31, 2011, the Company owned two properties in Florida, two 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 November 2037, and renewal options of 15 to 35 years, except for the one lease in Arizona which is automatically and perpetually renewed annually. Total ground lease expenditures for continuing and discontinued operations for the years ended December 31, 2011, 2010 and 2009 were $705,000, $700,000 and $732,000, 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. The following schedule indicates approximate future minimum ground lease payments for these properties by year as of December 31, 2011:

Future Minimum Ground Lease Payments

Years Ending December 31,	(In thousands)

2012	$	707
2013		707
2014		707
2015		707
2016		707
Thereafter		13,315
Total minimum payments	$	16,850

(3) UNCONSOLIDATED INVESTMENT

In November 2004, the Company acquired a 50% undivided tenant-in-common interest in Industry Distribution Center II, a 309,000 square foot warehouse distribution building in the City of Industry (Los Angeles), California. The building was constructed in 1998 and is 100% leased through December 2014 to a single tenant who owns the other 50% interest in the property. This investment is accounted for under the equity method of accounting and had a carrying value of $2,757,000 at December 31, 2011, and $2,740,000 at December 31, 2010. At the end of May 2005, EastGroup and the property co-owner closed a non-recourse first mortgage loan secured by Industry Distribution Center II. The $13.3 million loan has a 25-year term and an interest rate of 5.31% through June 30, 2015, when the rate will adjust on an annual basis according to the “A” Moody’s Daily Long-Term Corporate Bond Yield Average. The lender has the option to call the note on June 30, 2015. EastGroup’s share of this mortgage was $5,660,000 at December 31, 2011, and $5,835,000 at December 31, 2010.

(4) MORTGAGE LOANS RECEIVABLE

In connection with the sale of a property in 2008, EastGroup advanced the buyer $4,994,000 in a first mortgage recourse loan. In September 2008, EastGroup received a principal payment of $844,000. In August 2011, the loan was amended; under the amended terms of the loan, the maturity date was extended to August 8, 2016. Monthly interest-only payments will continue to be due until August 1, 2013, when a principal payment of $550,000 is due. Beginning on August 1, 2013, monthly payments will include principal and interest with the final payment on August 8, 2016, including a balloon payment of $3,460,000 for the remaining principal balance.

At the inception of the loan, EastGroup recognized a discount on the loan of $198,000. EastGroup recognized amortization of the discount of $12,000 in 2011, $13,000 in 2010, and $12,000 in 2009. Mortgage loans receivable, net of discount, are included in Other Assets on the Consolidated Balance Sheets. See Note 5 for a summary of Other Assets.

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EASTGROUP PROPERTIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(5) OTHER ASSETS

A summary of the Company’s Other Assets follows:

	December 31,
	2011		2010
	(In thousands)

Leasing costs (principally commissions), net of accumulated amortization of $16,603 and $18,566 for 2011 and 2010, respectively	$	22,694		22,274
Straight-line rents receivable, net of allowance for doubtful accounts of $351 and $282 for 2011 and 2010, respectively		20,608		18,694
Accounts receivable, net of allowance for doubtful accounts of $522 and $706 for 2011 and 2010, respectively		3,427		2,460
Acquired in-place lease intangibles, net of accumulated amortization of $4,478 and $6,443 for 2011 and 2010, respectively		7,679		3,046
Mortgage loans receivable, net of discount of $44 and $56 for 2011 and 2010, respectively		4,110		4,131
Loan costs, net of accumulated amortization of $4,433 and $4,129 for 2011 and 2010, respectively		3,229		3,358
Acquired above market lease intangibles, net of accumulated amortization of $929 and $1,123 for 2011 and 2010, respectively		1,975		776
Goodwill		990		990
Prepaid expenses and other assets		8,085		6,680
	$	72,797		62,409

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EASTGROUP PROPERTIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(6) MORTGAGE NOTES PAYABLE AND UNSECURED TERM LOAN PAYABLE

A summary of Mortgage Notes Payable follows:

					Balance at December 31,
Property	Interest Rate	Monthly P&I Payment	Maturity Date	Carrying Amount of Securing Real Estate at December 31, 2011	2011	2010
				(In thousands)

Butterfield Trail, Glenmont I & II, Interstate I, II & III, Rojas, Stemmons Circle, Venture and West Loop I & II	7.25	%	$	325,263	Repaid	$	–	–	36,171
America Plaza, Central Green and World Houston 3-9	7.92	%		191,519	Repaid		–	–	22,993
University Business Center (120 & 130 Cremona)	6.43	%		81,856	05/15/12		8,513	2,193	3,006
University Business Center (125 & 175 Cremona)	7.98	%		88,607	06/01/12		11,685	8,771	9,119
Oak Creek Distribution Center IV	5.68	%		31,253	06/01/12		6,022	3,506	3,676
51st Avenue, Airport Distribution, Broadway I, III & IV, Chestnut, Interchange Business Park, Main Street, North Stemmons I land, Southpark, Southpointe, and World Houston 12 & 13	6.86	%		279,149	09/01/12		36,204	32,204	33,304
Interstate Distribution Center - Jacksonville	5.64	%		31,645	01/01/13		6,115	4,234	4,367
35th Avenue, Beltway I, Broadway V, Lockwood, Northwest Point, Sunbelt, Techway Southwest I and World Houston 10, 11 & 14	4.75	%		259,403	09/05/13		39,023	35,912	37,283
Airport Commerce Center I & II, Interchange Park, Ridge Creek Distribution Center I, Southridge XII, Waterford Distribution Center and World Houston 24, 25 & 27	5.75	%		414,229	01/05/14		66,489	54,001	55,810
Kyrene Distribution Center I	9.00	%		11,246	07/01/14		2,171	310	412
Americas Ten I, Kirby, Palm River North I, II & III, Shady Trail, Westlake I & II and World Houston 17	5.68	%		175,479	10/10/14		25,367	27,996	28,496
Beltway II, III & IV, Commerce Park 1, Eastlake, Fairgrounds I-IV, Nations Ford I-IV, Techway Southwest III, Wetmore I-IV and World Houston 15 & 22	5.50	%		536,552	04/05/15		68,917	67,188	69,844
Country Club I, Lake Pointe, Techway Southwest II and World Houston 19 & 20	4.98	%		256,952	12/05/15		21,108	31,039	32,536
Huntwood and Wiegman Distribution Centers	5.68	%		265,275	09/05/16		21,950	31,748	33,087
Alamo Downs, Arion 1-15 & 17, Rampart I, II & III, Santan 10 and World Houston 16	5.97	%		557,467	11/05/16		56,429	65,961	68,626
Arion 16, Broadway VI, Chino, East University I & II, Northpark I-IV, Santan 10 II, South 55th Avenue and World Houston 1 & 2, 21 & 23	5.57	%		518,885	09/05/17		56,848	63,093	65,718
Dominguez, Industry I & III, Kingsview, Shaw, Walnut and Washington (1)	7.50	%		539,747	05/05/19		49,588	62,875	64,567
Blue Heron Distribution Center II	5.39	%		16,176	02/29/20		4,701	1,288	1,409
40th Avenue, Beltway V, Centennial Park, Executive Airport, Ocean View, Techway Southwest IV, Wetmore V-VIII and World Houston 26, 28, 29 & 30	4.39	%		463,778	01/05/21		77,986	71,837	74,000
America Plaza, Central Green, Glenmont I & II, Interstate I, II & III, Rojas, Stemmons Circle, Venture, West Loop I & II and World Houston 3-9	4.75	%		420,045	06/05/21		47,250	64,014	–
						$	606,366	628,170	644,424

(1)	This mortgage loan has a recourse liability of $5 million which will be released based on the secured properties generating certain base rent amounts.

On December 21, 2011, EastGroup closed a $50 million unsecured term loan with a fixed interest rate of 3.91%, a seven-year term and interest-only payments. The Company used the proceeds of this loan to reduce variable rate bank borrowings. The Company’s unsecured term loan has certain restrictive covenants, such as maintaining debt service coverage and leverage ratios and maintaining insurance coverage, and the Company was in compliance with all of its debt covenants at December 31, 2011.

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EASTGROUP PROPERTIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The Company currently intends to repay its debt obligations, both in the short- and long-term, through its operating cash flows, borrowings under its lines of credit, proceeds from new mortgage debt and term debt, and/or proceeds from the issuance of equity instruments.

Principal payments on long-term debt, including mortgage notes payable and unsecured term loan payable, due during the next five years as of December 31, 2011 are as follows:

Years Ending December 31,	(In thousands)

2012	$	68,673
2013		60,164
2014		96,993
2015		100,279
2016		90,626

(7) NOTES PAYABLE TO BANKS

The Company has a $200 million unsecured revolving credit facility with a group of seven banks that matures in January 2013. The interest rate on the facility is based on the LIBOR index and varies according to total liability to total asset value ratios (as defined in the credit agreement), with an annual facility fee of 15 to 20 basis points. The interest rate on each tranche is usually reset on a monthly basis and as of December 31, 2011, was LIBOR plus 85 basis points with an annual facility fee of 20 basis points. At December 31, 2011, the weighted average interest rate was 1.148% on a balance of $147,000,000. The Company had an additional $53,000,000 remaining on the line of credit at that date.

The Company also has a $25 million unsecured revolving credit facility with PNC Bank, N.A. that matures in January 2013. This credit facility is customarily used for working capital needs. The interest rate on this working capital line is based on the LIBOR index and varies according to total liability to total asset value ratios (as defined in the credit agreement), with no annual facility fee. The interest rate is reset on a daily basis and as of December 31, 2011, was LIBOR plus 90 basis points. At December 31, 2011, the interest rate was 1.195% on a balance of $7,516,000. The Company had an additional $17,484,000 remaining on the line of credit at that date. Beginning January 3, 2012, the interest rate on this working capital line is LIBOR plus 165 basis points.

Average bank borrowings were $124,697,000 in 2011 compared to $122,942,000 in 2010 with weighted average interest rates of 1.41% in 2011 compared to 1.42% in 2010. Weighted average interest rates (including amortization of loan costs) were 1.65% for 2011 and 1.68% for 2010. Amortization of bank loan costs was $300,000, $314,000 and $297,000 for 2011, 2010 and 2009, respectively.

The Company’s bank credit facilities have certain restrictive covenants, such as maintaining debt service coverage and leverage ratios and maintaining insurance coverage, and the Company was in compliance with all of its debt covenants at December 31, 2011.

(8) ACCOUNTS PAYABLE AND ACCRUED EXPENSES

A summary of the Company’s Accounts Payable and Accrued Expenses follows:

	December 31,
	2011		2010
	(In thousands)

Property taxes payable	$	9,840		9,776
Development costs payable		5,928		673
Interest payable		2,736		2,625
Dividends payable on nonvested restricted stock		1,415		791
Other payables and accrued expenses		11,286		7,104
	$	31,205		20,969

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EASTGROUP PROPERTIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(9) OTHER LIABILITIES

A summary of the Company’s Other Liabilities follows:

	December 31,
	2011		2010
	(In thousands)

Security deposits	$	9,184		8,299
Prepaid rent and other deferred income		6,373		6,440
Other liabilities		1,459		344
	$	17,016		15,083

(10) COMMON STOCK ACTIVITY

The following table presents the common stock activity for the three years ended December 31, 2011:

	Years Ended December 31,
	2011			2010			2009
	Common Shares
Shares outstanding at beginning of year		26,973,531			26,826,100			25,070,401
Common stock offerings		586,977			–			1,600,000
Stock options exercised		9,250			18,000			57,436
Dividend reinvestment plan		5,989			6,705			7,938
Incentive restricted stock granted		79,491			135,704			92,555
Incentive restricted stock forfeited		(233	)		–			(790	)
Director common stock awarded		6,618			6,690			7,074
Restricted stock withheld for tax obligations		(3,564	)		(19,668	)		(8,514	)
Shares outstanding at end of year		27,658,059			26,973,531			26,826,100

Common Stock Issuances

During 2011, EastGroup issued 586,977 shares of its common stock through its continuous common equity program with net proceeds to the company of $25.2 million.

During 2009, EastGroup issued 1,600,000 shares of its common stock through its continuous common equity program with net proceeds to the Company of $57.6 million.

Dividend Reinvestment Plan

The Company has a dividend reinvestment plan that allows stockholders to reinvest cash distributions in new shares of the Company.

Common Stock Repurchase Plan

(11) STOCK-BASED COMPENSATION

The Company follows the provisions of ASC 718, Compensation – Stock Compensation, to account for its stock-based compensation plans. ASC 718 requires that the compensation cost relating to share-based payment transactions be recognized in the financial statements and that the cost be measured on the fair value of the equity or liability instruments issued.

Equity Incentive Plan

The Company has a management incentive plan which was approved by the stockholders and adopted in 2004. The Plan was further amended by the Board of Directors in September 2005 and December 2006. This plan authorizes the issuance of up to 1,900,000 shares of common stock to employees in the form of options, stock appreciation rights, restricted stock, deferred stock units, performance shares, bonus stock or stock in lieu of cash compensation. Total shares available for grant were 1,406,156 shares, 1,481,850 shares and 1,597,886 shares at December 31, 2011, 2010, and 2009, respectively. Typically, the Company issues new shares to fulfill stock grants or upon the exercise of stock options.

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EASTGROUP PROPERTIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Stock-based compensation was $2,486,000, $1,801,000 and $1,818,000 for 2011, 2010 and 2009, respectively, of which $304,000, $43,000 and $233,000 were capitalized as part of the Company’s development costs for the respective years.

Equity Awards

The purpose of the restricted stock plan is to act as a retention device since it allows participants to benefit from dividends on shares as well as potential stock appreciation. The vesting periods of the Company’s restricted stock plans vary; the vesting period begins on the date of grant and generally ranges from 2 ½ years to 9 years from the date of grant. Restricted stock is granted to executive officers subject to both continued service and the satisfaction of certain annual performance goals and multi-year market conditions as determined by the Compensation Committee. Restricted stock is granted to non-executive officers subject only to continued service. Under the modified prospective application method, the Company continues to recognize compensation cost on a straight-line basis over the service period for awards that precede January 1, 2006. The cost for performance-based awards after January 1, 2006 is amortized using the graded vesting attribution method which recognizes each separate vesting portion of the award as a separate award on a straight-line basis over the requisite service period. This method accelerates the expensing of the award compared to the straight-line method. The cost for market-based awards after January 1, 2006 and awards that only require service is amortized on a straight-line basis over the requisite service periods.

The total compensation expense for service and performance based awards is based upon the fair market value of the shares on the grant date, adjusted for estimated forfeitures. The grant date fair value for awards that have been granted and are subject to a future market condition (total shareholder return) is determined using a simulation pricing model developed to specifically accommodate the unique features of the awards.

In March 2011, the Compensation Committee evaluated the Company's performance compared to a variety of annual performance goals for the year ended December 31, 2010. Based on the evaluation, 44,739 shares were awarded to the Company’s executive officers at a grant date fair value of $45.05 per share. These shares vested 20% on March 3, 2011 (the grant date) and will vest 20% per year on January 1 of the subsequent four years. The shares will be expensed on a straight-line basis over the remaining service period.

Also in March 2011, the Committee evaluated the Company’s total shareholder return compared to a peer group, NAREIT and absolute returns. Based on the evaluation, 33,752 shares were awarded to the Company’s executive officers at a grant date fair value of $45.05 per share on March 3, 2011. These shares will vest 25% per year on January 1 in years 2014, 2015, 2016 and 2017. The shares will be expensed on a straight-line basis over the remaining service period.

In the second quarter of 2011, the Company’s Board of Directors approved an equity compensation plan for its executive officers based upon the attainment of certain annual performance goals. These goals are for the period ended December 31, 2011, and any shares issued upon attainment of these goals will be determined by the Compensation Committee in the first quarter of 2012. The number of shares to be issued on the grant date could range from zero to 50,705. These shares will vest 20% on the date shares are determined and awarded and 20% per year on each January 1 for the subsequent four years.

Also in the second quarter of 2011, EastGroup’s Board of Directors approved an equity compensation plan for the Company’s executive officers based on EastGroup’s absolute and relative total stockholder return for the five-year period ended December 31, 2011. Any shares issued pursuant to this equity compensation plan will be determined by the Compensation Committee in the first quarter of 2012. The number of shares to be issued on the grant date could range from zero to 53,680. These shares will vest 25% on the date shares are deteremined and awarded and 25% per year on January 1 in years 2013, 2014 and 2015.

Notwithstanding the foregoing, pursuant to a special vesting provision adopted by the Company’s Compensation Committee, shares issued to the Company’s Chief Executive Officer, David H. Hoster II, will become fully vested no later than January 1, 2014.

In November 2011, 1,000 shares were granted to non-executive officers at a grant date fair value of $40.46 per share, subject only to continued service as of the vesting date. These shares vest 37% on January 1, 2012 and the remainder vest on January 1, 2013.

During the restricted period for awards no longer subject to contingencies, the Company accrues dividends and holds the certificates for the shares; however, the employee can vote the shares. For shares subject to contingencies, dividends are accrued based upon the number of shares expected to be awarded. Share certificates and dividends are delivered to the employee as they vest. As of December 31, 2011, there was $5,929,000 of unrecognized compensation cost related to nonvested restricted stock compensation that is expected to be recognized over a weighted average period of 4.4 years.

Following is a summary of the total restricted shares granted, forfeited and delivered (vested) to employees with the related weighted average grant date fair value share prices for 2011, 2010 and 2009. Of the shares that vested in 2011, 2010 and 2009, 3,564 shares, 19,668 shares and 8,514 shares, respectively, were withheld by the Company to satisfy the tax obligations for those employees who elected this option as permitted under the applicable equity plan. As shown in the table below, the fair value of shares that were granted during 2011, 2010 and 2009 was $3,576,000, $5,002,000 and $3,116,000, respectively. As of the vesting date, the fair value of shares that vested during 2011, 2010 and 2009 was $613,000, $3,591,000 and $1,971,000, respectively.

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EASTGROUP PROPERTIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

	Years Ended December 31,
Restricted Stock Activity:	2011					2010					2009
	Shares			Weighted Average Grant Date Fair Value		Shares			Weighted Average Grant Date Fair Value		Shares			Weighted Average Grant Date Fair Value
Nonvested at beginning of year		170,575		$	36.29		124,080		$	36.93		87,685		$	36.95
Granted (1)		79,491			44.99		135,704			36.86		92,555			33.66
Forfeited		(233	)		35.85		–			–		(790	)		23.67
Vested		(13,904	)		41.77		(89,209	)		38.05		(55,370	)		31.68
Nonvested at end of year		235,929			38.90		170,575			36.29		124,080			36.93

(1) Includes shares granted in prior years for which performance conditions have been satisfied and the number of shares have been determined.

Following is a vesting schedule of the total nonvested shares as of December 31, 2011:

Nonvested Shares Vesting Schedule	Number of Shares
2012		50,061
2013		49,224
2014		46,575
2015		15,127
2016		13,645
2017		13,297
2018		12,000
2019		16,200
2020		19,800
Total Nonvested Shares		235,929

Employee Stock Options

The Company has not granted stock options to employees since 2002. Outstanding employee stock options vested equally over a two-year period; accordingly, all options are now vested. The intrinsic value realized by employees from the exercise of options during 2011, 2010 and 2009 was $5,000, $74,000 and $539,000, respectively. There were no employee stock options granted, forfeited, or expired during the years presented. Following is a summary of the total employee stock options exercised with related weighted average exercise share prices for 2011, 2010 and 2009.

	Years Ended December 31,
Stock Option Activity:	2011					2010					2009
	Shares			Weighted Average Exercise Price		Shares			Weighted Average Exercise Price		Shares			Weighted Average Exercise Price
Outstanding at beginning of year		250		$	25.30		4,750		$	21.80		55,436		$	20.51
Exercised		(250	)		25.30		(4,500	)		21.61		(50,686	)		20.39
Outstanding at end of year		–					250			25.30		4,750			21.80

Exercisable at end of year		–					250		$	25.30		4,750		$	21.80

Directors Equity Plan

The Company has a directors equity plan that was approved by stockholders and adopted in 2005 (the 2005 Plan), which authorizes the issuance of up to 50,000 shares of common stock through awards of shares and restricted shares granted to non-employee directors of the Company. The 2005 Plan replaced prior plans under which directors were granted stock option awards. Outstanding grants under prior plans will be fulfilled under those plans.

Directors were issued 6,618 shares, 6,690 shares and 7,074 shares of common stock for 2011, 2010 and 2009, respectively. There were 16,453 shares available for grant under the 2005 Plan at December 31, 2011.

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EASTGROUP PROPERTIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Stock-based compensation expense for directors was $270,000, $240,000 and $242,000 for 2011, 2010 and 2009, respectively. The intrinsic value realized by directors from the exercise of options was $183,000, $208,000 and $83,000 for 2011, 2010 and 2009, respectively.

There were no director stock options granted or expired during the years presented below. Following is a summary of the total director stock options exercised with related weighted average exercise share prices for 2011, 2010 and 2009.

	Years Ended December 31,
Stock Option Activity:	2011					2010					2009
	Shares			Weighted Average Exercise Price		Shares			Weighted Average Exercise Price		Shares			Weighted Average Exercise Price
Outstanding at beginning of year		18,000		$	24.33		31,500		$	23.65		38,250		$	23.29
Exercised		(9,000	)		23.36		(13,500	)		22.74		(6,750	)		21.64
Outstanding at end of year		9,000			25.31		18,000			24.33		31,500			23.65

Exercisable at end of year		9,000		$	25.31		18,000		$	24.33		31,500		$	23.65

Director outstanding stock options at December 31, 2011, all exercisable:
Exercise Price Range		Number		Weighted Average Remaining Contractual Life	Weighted Average Exercise Price		Intrinsic Value
$	24.02 - $26.60		9,000	0.9 years	$	25.31	$	164,000

(12) COMPREHENSIVE INCOME

Comprehensive income is comprised of net income plus all other changes in equity from non-owner sources. The components of Accumulated Other Comprehensive Loss for 2011, 2010 and 2009 are presented in the Company’s Consolidated Statements of Changes in Equity and are summarized below. See Note 17 for additional information on the Company’s interest rate swap.

	2011		2010			2009
ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS):	(In thousands)
Balance at beginning of year	$	–		(318	)		(522	)
Change in fair value of interest rate swap		–		318			204
Balance at end of year	$	–		–			(318	)

(13) EARNINGS PER SHARE

The Company applies ASC 260, Earnings Per Share, which requires companies to present basic EPS and diluted EPS. Reconciliation of the numerators and denominators in the basic and diluted EPS computations is as follows:

Reconciliation of Numerators and Denominators

	2011		2010		2009
	(In thousands)
BASIC EPS COMPUTATION FOR NET INCOME ATTRIBUTABLE TO EASTGROUP PROPERTIES, INC. COMMON STOCKHOLDERS
Numerator – net income attributable to common stockholders	$	22,359		18,325		26,659
Denominator – weighted average shares outstanding		26,897		26,752		25,590
DILUTED EPS COMPUTATION FOR NET INCOME ATTRIBUTABLE TO EASTGROUP PROPERTIES, INC. COMMON STOCKHOLDERS
Numerator – net income attributable to common stockholders	$	22,359		18,325		26,659
Denominator:
Weighted average shares outstanding		26,897		26,752		25,590
Common stock options		6		11		19
Nonvested restricted stock		68		61		81
Total Shares		26,971		26,824		25,690

-52-

EASTGROUP PROPERTIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(14) QUARTERLY RESULTS OF OPERATIONS – UNAUDITED

	2011 Quarter Ended												2010 Quarter Ended
	Mar 31			Jun 30			Sep 30			Dec 31			Mar 31			Jun 30			Sep 30			Dec 31
	(In thousands, except per share data)
Revenues	$	43,456			43,445			44,142			44,305			44,635			43,765			43,316			42,118
Expenses		(38,554	)		(37,830	)		(38,351	)		(37,779	)		(39,629	)		(39,187	)		(39,190	)		(37,073	)
Net income		4,902			5,615			5,791			6,526			5,006			4,578			4,126			5,045
Net income attributable to noncontrolling interest in joint ventures		(110	)		(123	)		(121	)		(121	)		(103	)		(101	)		(103	)		(123	)
Net income attributable to EastGroup Properties, Inc. common stockholders	$	4,792			5,492			5,670			6,405			4,903			4,477			4,023			4,922
BASIC PER SHARE DATA FOR NET INCOME ATTRIBUTABLE TO EASTGROUP PROPERTIES, INC. COMMON STOCKHOLDERS (1)
Net income attributable to common stockholders	$	.18			.20			.21			.24			.18			.17			.15			.18
Weighted average shares outstanding		26,809			26,820			26,839			27,116			26,735			26,748			26,758			26,769
DILUTED PER SHARE DATA FOR NET INCOME ATTRIBUTABLE TO EASTGROUP PROPERTIES, INC. COMMON STOCKHOLDERS (1)
Net income attributable to common stockholders	$	.18			.20			.21			.24			.18			.17			.15			.18
Weighted average shares outstanding		26,873			26,897			26,914			27,206			26,794			26,815			26,828			26,864

(1)

The above quarterly earnings per share calculations are based on the weighted average number of common shares outstanding during each quarter for basic earnings per share and the weighted average number of outstanding common shares and common share equivalents during each quarter for diluted earnings per share. The annual earnings per share calculations in the Consolidated Statements of Income are based on the weighted average number of common shares outstanding during each year for basic earnings per share and the weighted average number of outstanding common shares and common share equivalents during each year for diluted earnings per share. The sum of quarterly financial data may vary from the annual data due to rounding.

(15) DEFINED CONTRIBUTION PLAN

EastGroup maintains a 401(k) plan for its employees. The Company makes matching contributions of 50% of the employee’s contribution (limited to 10% of compensation as defined by the plan) and may also make annual discretionary contributions. The Company’s total expense for this plan was $382,000, $381,000 and $396,000 for 2011, 2010 and 2009, respectively.

(16) LEGAL MATTERS

(17) FAIR VALUE OF FINANCIAL INSTRUMENTS

ASC 820, Fair Value Measurements and Disclosures, defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. ASC 820 also provides guidance for using fair value to measure financial assets and liabilities. The Codification requires disclosure of the level within the fair value hierarchy in which the fair value measurements fall, including measurements using quoted prices in active markets for identical assets or liabilities (Level 1), quoted prices for similar instruments in active markets or quoted prices for identical or similar instruments in markets that are not active (Level 2), and significant valuation assumptions that are not readily observable in the market (Level 3).

The Company’s interest rate swap was reported at fair value and shown on the Consolidated Balance Sheets under Other Liabilities. The swap was settled on October 1, 2010, with the repayment of the Company’s $8,770,000 mortgage loan on the Tower Automotive Center. Until the repayment, the fair value of the interest rate swap was determined by estimating the expected cash flows over the life of the swap using the mid-market rate and price environment as of the last trading day of the reporting period. This market information is considered a Level 2 input as defined by ASC 820. Changes in the fair value of the swap were recognized in other comprehensive income (loss) (see Note 12). At December 31, 2011 and 2010, the Company did not have any outstanding derivatives.

-53-

EASTGROUP PROPERTIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The following table presents the carrying amounts and estimated fair values of the Company’s financial instruments in accordance with ASC 820 at December 31, 2011 and 2010.

	December 31,
	2011				2010
	Carrying Amount		Fair Value		Carrying Amount		Fair Value
	(In thousands)
Financial Assets
Cash and cash equivalents	$	174		174		137		137
Mortgage loans receivable, net of discount		4,110		4,317		4,131		4,199
Financial Liabilities
Mortgage notes payable		628,170		674,462		644,424		671,527
Unsecured term loan payable		50,000		50,000		–		–
Notes payable to banks		154,516		153,521		91,294		89,818

Carrying amounts shown in the table are included in the Consolidated Balance Sheets under the indicated captions, except as indicated in the notes below.

The following methods and assumptions were used to estimate the fair value of each class of financial instruments:

Cash and cash equivalents: The carrying amounts approximate fair value due to the short maturity of those instruments.

Mortgage loans receivable, net of discount (included in Other Assets on the Consolidated Balance Sheets): The fair value is estimated by discounting the future cash flows using the current rates at which similar loans would be made to borrowers with similar credit ratings and for the same remaining maturities (Level 2 input).

Mortgage notes payable: The fair value of the Company’s mortgage notes payable is estimated by discounting expected cash flows at the rates currently offered to the Company for debt of the same remaining maturities, as advised by the Company’s bankers (Level 2 input).

Unsecured term loan payable: The fair value of the Company’s unsecured term loan payable is estimated by discounting expected cash flows at the rates currently offered to the Company for debt of the same remaining maturities, as advised by the Company’s bankers (Level 2 input).

Notes payable to banks: The fair value of the Company’s notes payable to banks is estimated by discounting expected cash flows at current market rates (Level 2 input).

(18) SUBSEQUENT EVENTS

On January 4, 2012, EastGroup closed a $54 million, non-recourse first mortgage loan with a fixed interest rate of 4.09%, a 10-year term and a 20-year amortization schedule. The loan is secured by properties containing 1.4 million square feet. The Company used the proceeds of this mortgage loan to reduce variable rate bank borrowings.

On January 31, 2012, the Company acquired a 72,000 square foot distribution center and 18 acres of development land in Tampa for $4,653,000. The building and land are located near existing EastGroup assets in the Port of Tampa submarket. The Company has plans for the future development of approximately 270,000 square feet on the acquired land.

As of February 23, 2012, EastGroup issued and sold an additional 213,390 shares of common stock under its continuous common equity program during the first quarter of 2012 at an average price of $46.86 per share with net proceeds to the Company of $9.9 million which were used to reduce variable rate bank borrowings. As of February 23, 2012, the Company has 1,199,633 shares of common stock remaining to sell under the program.

-54-

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM ON FINANCIAL STATEMENT SCHEDULES

THE BOARD OF DIRECTORS AND STOCKHOLDERS

EASTGROUP PROPERTIES, INC.:

Under date of February 23, 2012, we reported on the consolidated balance sheets of EastGroup Properties, Inc. and subsidiaries as of December 31, 2011 and 2010, and the related consolidated statements of income, changes in equity and cash flows for each of the years in the three-year period ended December 31, 2011, which are included in the 2011 Annual Report on Form 10-K. In connection with our audits of the aforementioned consolidated financial statements, we also audited the related consolidated financial statement schedules as listed in Item 15(a)(2) of Form 10-K. These financial statement schedules are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statement schedules based on our audits.

In our opinion, such financial statement schedules, when considered in relation to the basic consolidated financial statements taken as a whole, present fairly, in all material respects, the information set forth therein.

	(Signed) KPMG LLP
Jackson, Mississippi
February 23, 2012

-55-

SCHEDULE III
REAL ESTATE PROPERTIES AND ACCUMULATED DEPRECIATION
DECEMBER 31, 2011 (In thousands, except footnotes)

			Initial Cost to the Company							Gross Amount at which Carried at Close of Period
Description	Encumbrances		Land		Buildings and Improvements		Costs Capitalized Subsequent to Acquisition			Land		Buildings and Improvements		Total		Accumulated Depreciation Dec. 31, 2011		Year Acquired		Year Constructed
Real Estate Properties (c):
Industrial:
FLORIDA
Tampa
56th Street Commerce Park	$	-		843		3,567		3,470			843		7,037		7,880		4,354		1993	1981/86/97
Jetport Commerce Park		-		1,575		6,591		3,704			1,575		10,295		11,870		6,011		1993-99		1974-85
Westport Commerce Center		-		980		3,800		2,350			980		6,150		7,130		3,547		1994		1983/87
Benjamin Distribution Center I & II		-		843		3,963		1,157			883		5,080		5,963		2,668		1997		1996
Benjamin Distribution Center III		-		407		1,503		453			407		1,956		2,363		1,297		1999		1988
Palm River Center		-		1,190		4,625		1,636			1,190		6,261		7,451		3,365		1997/98	1990/97/98
Palm River North I & III (j)		5,222		1,005		4,688		2,126			1,005		6,814		7,819		3,029		1998		2000
Palm River North II (j)		4,791		634		4,418		347			634		4,765		5,399		2,433		1997/98		1999
Palm River South I		-		655		3,187		510			655		3,697		4,352		1,218		2000		2005
Palm River South II		-		655		-		4,294			655		4,294		4,949		1,516		2000		2006
Walden Distribution Center I		-		337		3,318		434			337		3,752		4,089		1,511		1997/98		2001
Walden Distribution Center II		-		465		3,738		932			465		4,670		5,135		1,983		1998		1998
Oak Creek Distribution Center I		-		1,109		6,126		539			1,109		6,665		7,774		2,483		1998		1998
Oak Creek Distribution Center II		-		647		3,603		820			647		4,423		5,070		1,438		2003		2001
Oak Creek Distribution Center III		-		439		-		3,167			556		3,050		3,606		704		2005		2007
Oak Creek Distribution Center IV		3,506		805		6,472		235			805		6,707		7,512		1,490		2005		2001
Oak Creek Distribution Center V		-		724		-		5,683			916		5,491		6,407		1,127		2005		2007
Oak Creek Distribution Center VI		-		642		-		5,028			812		4,858		5,670		630		2005		2008
Oak Creek Distribution Center IX		-		618		-		4,912			781		4,749		5,530		288		2005		2009
Oak Creek Distribution Center A		-		185		-		1,428			185		1,428		1,613		148		2005		2008
Oak Creek Distribution Center B		-		227		-		1,485			227		1,485		1,712		163		2005		2008
Airport Commerce Center		-		1,257		4,012		817			1,257		4,829		6,086		1,959		1998		1998
Westlake Distribution Center (j)		6,653		1,333		6,998		1,314			1,333		8,312		9,645		3,813		1998		1998/99
Expressway Commerce Center I		-		915		5,346		981			915		6,327		7,242		2,006		2002		2004
Expressway Commerce Center II		-		1,013		3,247		310			1,013		3,557		4,570		1,314		2003		2001
Silo Bend Distribution Center		-		4,131		27,497		-			4,131		27,497		31,628		71		2011		1987/90
Tampa East Distribution Center		-		1,210		5,852		-			1,210		5,852		7,062		18		2011		1984/90
Tampa West Distribution Center		-		2,572		9,538		-			2,572		9,538		12,110		21		2011	1975/85/90/93/94
Orlando
Chancellor Center		-		291		1,711		172			291		1,883		2,174		896		1996/97		1996/97
Exchange Distribution Center I		-		603		2,414		1,668			603		4,082		4,685		2,564		1994		1975
Exchange Distribution Center II		-		300		945		84			300		1,029		1,329		472		2002		1976
Exchange Distribution Center III		-		320		997		345			320		1,342		1,662		511		2002		1980
Sunbelt Distribution Center (i)		6,791		1,474		5,745		5,112			1,474		10,857		12,331		6,152	1989/97/98		1974/87/97/98
John Young Commerce Center I		-		497		2,444		681			497		3,125		3,622		1,390		1997/98		1997/98
John Young Commerce Center II		-		512		3,613		165			512		3,778		4,290		1,950		1998		1999
Altamonte Commerce Center I		-		1,518		2,661		1,941			1,518		4,602		6,120		2,598		1999		1980/82
Altamonte Commerce Center II		-		745		2,618		953			745		3,571		4,316		1,309		2003		1975
Sunport Center I		-		555		1,977		612			555		2,589		3,144		1,111		1999		1999
Sunport Center II		-		597		3,271		1,334			597		4,605		5,202		2,683		1999		2001
Sunport Center III		-		642		3,121		452			642		3,573		4,215		1,539		1999		2002
Sunport Center IV		-		642		2,917		673			642		3,590		4,232		1,261		1999		2004
Sunport Center V		-		750		2,509		1,888			750		4,397		5,147		1,950		1999		2005
Sunport Center VI		-		672		-		3,344			672		3,344		4,016		831		1999		2006
Southridge Commerce Park I		-		373		-		4,453			373		4,453		4,826		1,891		2003		2006
Southridge Commerce Park II		-		342		-		4,284			342		4,284		4,626		1,409		2003		2007
Southridge Commerce Park III		-		547		-		5,278			547		5,278		5,825		940		2003		2007
Southridge Commerce Park IV		-		506		-		4,435			506		4,435		4,941		1,042		2003		2006
Southridge Commerce Park V		-		382		-		4,171			382		4,171		4,553		1,281		2003		2006
Southridge Commerce Park VI		-		571		-		4,772			571		4,772		5,343		845		2003		2007
Southridge Commerce Park VII		-		520		-		6,157			520		6,157		6,677		1,061		2003		2008
Southridge Commerce Park VIII		-		531		-		6,248			531		6,248		6,779		662		2003		2008
Southridge Commerce Park XII (o)		13,476		2,025		-		16,816			2,025		16,816		18,841		1,797		2005		2008
Jacksonville
Deerwood Distribution Center		-		1,147		1,799		1,479			1,147		3,278		4,425		1,832		1989		1978
Phillips Distribution Center		-		1,375		2,961		3,725			1,375		6,686		8,061		3,836		1994		1984/95
Lake Pointe Business Park (k)		14,315		3,442		6,450		6,088			3,442		12,538		15,980		7,586		1993		1986/87
Ellis Distribution Center		-		540		7,513		925			540		8,438		8,978		3,320		1997		1977
Westside Distribution Center		-		1,170		12,400		4,191			1,170		16,591		17,761		7,566		1997		1984
12th Street Distribution Center		-		841		2,974		1,368			841		4,342		5,183		521		2008		1985
Beach Commerce Center		-		476		1,899		602			476		2,501		2,977		985		2000		2000
Interstate Distribution Center		4,234		1,879		5,700		913			1,879		6,613		8,492		2,377		2005		1990
Fort Lauderdale/Palm Beach area
Linpro Commerce Center		-		613		2,243		1,498			616		3,738		4,354		2,400		1996		1986
Cypress Creek Business Park		-		-		2,465		1,500			-		3,965		3,965		2,138		1997		1986
Lockhart Distribution Center		-		-		3,489		2,270			-		5,759		5,759		2,926		1997		1986
Interstate Commerce Center		-		485		2,652		648			485		3,300		3,785		1,703		1998		1988
Executive Airport Commerce Ctr (p)		9,496		1,991		4,857		4,956			1,991		9,813		11,804		3,008		2001		2004/06
Sample 95 Business Park		-		2,202		8,785		2,358			2,202		11,143		13,345		5,593		1996/98		1990/99
Blue Heron Distribution Center		-		975		3,626		1,629			975		5,255		6,230		2,564		1999		1986
Blue Heron Distribution Center II		1,288		1,385		4,222		809			1,385		5,031		6,416		1,715		2004		1988
Blue Heron Distribution Center III		-		450		-		2,662			450		2,662		3,112		186		2004		2009
Fort Myers
SunCoast Commerce Center I		-		911		-		4,660			928		4,643		5,571		823		2005		2008
SunCoast Commerce Center II		-		911		-		4,731			928		4,714		5,642		1,025		2005		2007
SunCoast Commerce Center III		-		1,720		-		6,372			1,763		6,329		8,092		503		2006		2008
CALIFORNIA
San Francisco area
Wiegman Distribution Center (l)		11,906		2,197		8,788		1,647			2,308		10,324		12,632		4,264		1996		1986/87
Huntwood Distribution Center (l)		19,842		3,842		15,368		1,819			3,842		17,187		21,029		7,447		1996		1988
San Clemente Distribution Center		-		893		2,004		845			893		2,849		3,742		1,047		1997		1978
Yosemite Distribution Center		-		259		7,058		992			259		8,050		8,309		3,328		1999		1974/87
Los Angeles area
Kingsview Industrial Center (e)		3,006		643		2,573		418			643		2,991		3,634		1,310		1996		1980
Dominguez Distribution Center (e)		9,264		2,006		8,025		1,170			2,006		9,195		11,201		4,315		1996		1977
Main Street Distribution Center (h)		3,504		1,606		4,103		636			1,606		4,739		6,345		2,049		1999		1999
Walnut Business Center (e)		7,488		2,885		5,274		894			2,885		6,168		9,053		2,638		1996		1966/90
Washington Distribution Center (e)		5,879		1,636		4,900		572			1,636		5,472		7,108		2,255		1997		1996/97
Chino Distribution Center (f)		11,308		2,544		10,175		1,514			2,544		11,689		14,233		4,932		1998		1980
Industry Distribution Center I (e)		19,987		10,230		12,373		1,562			10,230		13,935		24,165		5,802		1998		1959
Industry Distribution Center III (e)		2,361		-		3,012		(157	)		-		2,855		2,855		2,813		2007		1992
Chestnut Business Center (h)		2,929		1,674		3,465		164			1,674		3,629		5,303		1,362		1998		1999
Los Angeles Corporate Center		-		1,363		5,453		2,627			1,363		8,080		9,443		3,807		1996		1986
Santa Barbara
University Business Center		10,964		5,517		22,067		4,259			5,520		26,323		31,843		11,645		1996		1987/88
Castilian Research Center		-		2,719		1,410		4,839			2,719		6,249		8,968		787		2005		2007
Fresno
Shaw Commerce Center (e)		14,890		2,465		11,627		3,911			2,465		15,538		18,003		7,298		1998	1978/81/87
San Diego
Eastlake Distribution Center (n)		8,339		3,046		6,888		1,500			3,046		8,388		11,434		3,757		1997		1989
Ocean View Corporate Center (p)		11,111		6,577		7,105		130			6,577		7,235		13,812		875		2010		2005
TEXAS
Dallas
Interstate Distribution Center I & II (g)		6,621		1,746		4,941		1,966			1,746		6,907		8,653		4,730		1988		1978
Interstate Distribution Center III (g)		2,454		519		2,008		680			519		2,688		3,207		1,305		2000		1979
Interstate Distribution Center IV		-		416		2,481		260			416		2,741		3,157		912		2004		2002
Interstate Distribution Center V, VI, & VII		-		1,824		4,106		563			1,824		4,669		6,493		1,207		2009	1979/80/81
Venture Warehouses (g)		5,481		1,452		3,762		1,949			1,452		5,711		7,163		3,697		1988		1979
Stemmons Circle (g)		2,217		363		2,014		521			363		2,535		2,898		1,342		1998		1977
Ambassador Row Warehouses		-		1,156		4,625		1,826			1,156		6,451		7,607		3,696		1998		1958/65
North Stemmons II		-		150		583		384			150		967		1,117		320		2002		1971
North Stemmons III		-		380		2,066		2			380		2,068		2,448		319		2007		1974
Shady Trail Distribution Center (j)		2,966		635		3,621		678			635		4,299		4,934		1,270		2003		1998
Houston
Northwest Point Business Park (i)		5,759		1,243		5,640		3,574			1,243		9,214		10,457		5,270		1994		1984/85
Lockwood Distribution Center (i)		4,503		749		5,444		1,983			749		7,427		8,176		3,249		1997		1968/69
West Loop Distribution Center (g)		5,623		905		4,383		2,061			905		6,444		7,349		3,220		1997/2000		1980
World Houston Int'l Business Ctr 1 & 2 (f)		6,090		660		5,893		1,113			660		7,006		7,666		3,494		1998		1996
World Houston Int'l Business Ctr 3, 4 & 5 (g)		6,195		1,025		6,413		659			1,025		7,072		8,097		3,241		1998		1998
World Houston Int'l Business Ctr 6 (g)		2,549		425		2,423		483			425		2,906		3,331		1,368		1998		1998
World Houston Int'l Business Ctr 7 & 8 (g)		6,781		680		4,584		3,597			680		8,181		8,861		3,731		1998		1998
World Houston Int'l Business Ctr 9 (g)		5,062		800		4,355		1,460			800		5,815		6,615		1,933		1998		1998
World Houston Int'l Business Ctr 10 (i)		3,305		933		4,779		289			933		5,068		6,001		1,677		2001		1999
World Houston Int'l Business Ctr 11 (i)		3,051		638		3,764		1,139			638		4,903		5,541		1,842		1999		1999
World Houston Int'l Business Ctr 12 (h)		1,634		340		2,419		199			340		2,618		2,958		1,225		2000		2002
World Houston Int'l Business Ctr 13 (h)		1,732		282		2,569		284			282		2,853		3,135		1,564		2000		2002
World Houston Int'l Business Ctr 14 (i)		2,126		722		2,629		509			722		3,138		3,860		1,316		2000		2003
World Houston Int'l Business Ctr 15 (n)		4,733		731		-		5,758			731		5,758		6,489		1,996		2000		2007
World Houston Int'l Business Ctr 16 (m)		4,410		519		4,248		786			519		5,034		5,553		1,739		2000		2005
World Houston Int'l Business Ctr 17 (j)		2,592		373		1,945		785			373		2,730		3,103		759		2000		2004
World Houston Int'l Business Ctr 18		-		323		1,512		211			323		1,723		2,046		483		2005		1995
World Houston Int'l Business Ctr 19 (k)		3,129		373		2,256		865			373		3,121		3,494		1,470		2000		2004
World Houston Int'l Business Ctr 20 (k)		3,675		1,008		1,948		1,147			1,008		3,095		4,103		1,330		2000		2004
World Houston Int'l Business Ctr 21 (f)		3,107		436		-		3,474			436		3,474		3,910		685		2000/03		2006
World Houston Int'l Business Ctr 22 (n)		3,389		436		-		4,210			436		4,210		4,646		927		2000		2007
World Houston Int'l Business Ctr 23 (f)		6,305		910		-		7,026			910		7,026		7,936		1,330		2000		2007
World Houston Int'l Business Ctr 24 (o)		4,471		837		-		5,414			837		5,414		6,251		1,126		2005		2008
World Houston Int'l Business Ctr 25 (o)		2,953		508		-		3,620			508		3,620		4,128		546		2005		2008
World Houston Int'l Business Ctr 26 (p)		2,890		445		-		3,147			445		3,147		3,592		436		2005		2008
World Houston Int'l Business Ctr 27 (o)		4,149		837		-		4,964			837		4,964		5,801		599		2005		2008
World Houston Int'l Business Ctr 28 (p)		3,698		550		-		4,047			550		4,047		4,597		451		2005		2009
World Houston Int'l Business Ctr 29 (p)		3,952		782		-		4,130			974		3,938		4,912		415		2007		2009
World Houston Int'l Business Ctr 30 (p)		5,334		981		-		5,650			1,222		5,409		6,631		547		2007		2009
America Plaza (g)		4,706		662		4,660		829			662		5,489		6,151		2,491		1998		1996
Central Green Distribution Center (g)		3,611		566		4,031		122			566		4,153		4,719		1,795		1999		1998
Glenmont Business Park (g)		7,323		936		6,161		2,474			936		8,635		9,571		3,588		1998		1999/2000
Techway Southwest I (i)		3,594		729		3,765		2,032			729		5,797		6,526		2,357		2000		2001
Techway Southwest II (k)		4,417		550		3,689		691			550		4,380		4,930		1,445		2000		2004
Techway Southwest III (n)		4,456		597		-		5,512			751		5,358		6,109		1,514		1999		2006
Techway Southwest IV (p)		4,967		535		-		5,639			674		5,500		6,174		712		1999		2008
Beltway Crossing I (i)		4,165		458		5,712		1,394			458		7,106		7,564		2,723		2002		2001
Beltway Crossing II (n)		2,306		415		-		2,747			415		2,747		3,162		659		2005		2007
Beltway Crossing III (n)		2,574		460		-		3,069			460		3,069		3,529		763		2005		2008
Beltway Crossing IV (n)		2,510		460		-		2,981			460		2,981		3,441		838		2005		2008
Beltway Crossing V (p)		4,350		701		-		4,706			701		4,706		5,407		871		2005		2008
Beltway Crossing VI		-		618		-		5,995			618		5,995		6,613		578		2005		2008
Beltway Crossing VII		-		765		-		5,705			765		5,705		6,470		614		2005		2009
Kirby Business Center (j)		2,910		530		3,153		332			530		3,485		4,015		951		2004		1980
Clay Campbell Distribution Center		-		742		2,998		370			742		3,368		4,110		1,160		2005		1982
El Paso
Butterfield Trail		-		-		20,725		6,003			-		26,728		26,728		13,643		1997/2000		1987/95
Rojas Commerce Park (g)		5,391		900		3,659		2,486			900		6,145		7,045		3,969		1999		1986
Americas Ten Business Center I (j)		2,862		526		2,778		1,107			526		3,885		4,411		1,704		2001		2003
San Antonio
Alamo Downs Distribution Center (m)		6,832		1,342		6,338		922			1,342		7,260		8,602		2,952		2004		1986/2002
Arion Business Park (m)		30,842		4,143		31,432		3,257			4,143		34,689		38,832		11,397		2005		1988-2000/06
Arion 14 (m)		2,941		423		-		3,280			423		3,280		3,703		774		2005		2006
Arion 16 (f)		3,108		427		-		3,485			427		3,485		3,912		576		2005		2007
Arion 17 (m)		3,452		616		-		3,731			616		3,731		4,347		1,059		2005		2007
Arion 18		-		418		-		2,316			418		2,316		2,734		536		2005		2008
Arion 8 expansion (m)		1,227		-		-		1,545			-		1,545		1,545		34		2005		2011
Wetmore Business Center (n)		10,735		1,494		10,804		2,420			1,494		13,224		14,718		4,360		2005		1998/99
Wetmore Phase II, Building A (p)		2,999		412		-		3,316			412		3,316		3,728		715		2006		2008
Wetmore Phase II, Building B (p)		3,269		505		-		3,559			505		3,559		4,064		547		2006		2008
Wetmore Phase II, Building C (p)		2,997		546		-		3,180			546		3,180		3,726		287		2006		2008
Wetmore Phase II, Building D (p)		6,720		1,056		-		7,297			1,056		7,297		8,353		936		2006		2008
Fairgrounds Business Park (n)		8,221		1,644		8,209		1,418			1,644		9,627		11,271		2,461		2007		1985/86
Rittiman Distribution Center		-		1,083		6,649		-			1,083		6,649		7,732		9		2011		2000
ARIZONA
Phoenix area
Broadway Industrial Park I (h)		2,728		837		3,349		753			837		4,102		4,939		2,021		1996		1971
Broadway Industrial Park II		-		455		482		161			455		643		1,098		349		1999		1971
Broadway Industrial Park III (h)		1,622		775		1,742		420			775		2,162		2,937		948		2000		1983
Broadway Industrial Park IV (h)		1,552		380		1,652		778			380		2,430		2,810		992		2000		1986
Broadway Industrial Park V (i)		854		353		1,090		107			353		1,197		1,550		514		2002		1980
Broadway Industrial Park VI (f)		2,348		599		1,855		502			599		2,357		2,956		1,019		2002		1979
Broadway Industrial Park VII		-		450		650		19			450		669		1,119		4		2011		1999
Kyrene Distribution Center		310		850		2,044		544			850		2,588		3,438		1,267		1999		1981
Kyrene Distribution Center II		-		640		2,409		706			640		3,115		3,755		1,464		1999		2001
Southpark Distribution Center (h)		2,342		918		2,738		585			918		3,323		4,241		1,156		2001		2000
Santan 10 Distribution Center I (m)		2,971		846		2,647		248			846		2,895		3,741		1,049		2001		2005
Santan 10 Distribution Center II (f)		4,907		1,088		-		5,089			1,088		5,089		6,177		1,232		2004		2007
Metro Business Park		-		1,927		7,708		5,271			1,927		12,979		14,906		6,892		1996		1977/79
35th Avenue Distribution Center (i)		1,764		418		2,381		405			418		2,786		3,204		1,087		1997		1967
Estrella Distribution Center		-		628		4,694		1,768			628		6,462		7,090		2,239		1998		1988
51st Avenue Distribution Center (h)		1,720		300		2,029		785			300		2,814		3,114		1,287		1998		1987
East University Distribution Center I and II (f)		5,057		1,120		4,482		763			1,120		5,245		6,365		2,496		1998		1987/89
East University Distribution Center III		-		444		698		47			444		745		1,189		55		2010		1981
55th Avenue Distribution Center (f)		4,258		912		3,717		730			917		4,442		5,359		2,141		1998		1987
Interstate Commons Dist Ctr I		-		798		3,632		819			798		4,451		5,249		1,894		1999		1988
Interstate Commons Dist Ctr II		-		320		2,448		359			320		2,807		3,127		1,063		1999		2000
Interstate Commons Dist Ctr III		-		242		-		2,882			242		2,882		3,124		477		2000		2008
Airport Commons		-		1,000		1,510		791			1,000		2,301		3,301		857		2003		1971
40th Avenue Distribution Center (p)		5,415		703		-		6,028			703		6,028		6,731		771		2004		2008
Sky Harbor Business Park		-		5,839		-		20,620			5,839		20,620		26,459		1,869		2006		2008
Tucson
Country Club I (k)		5,503		506		3,564		2,073			693		5,450		6,143		1,711		1997/2003		1994/2003
Country Club II		-		442		3,381		37			442		3,418		3,860		595		2007		2000
Country Club III & IV		-		1,407		-		11,076			1,575		10,908		12,483		951		2007		2009
Airport Distribution Center (h)		4,037		1,103		4,672		1,534			1,103		6,206		7,309		2,844		1998		1995
Southpointe Distribution Center (h)		3,829		-		3,982		2,950			-		6,932		6,932		2,993		1999		1989
Benan Distribution Center		-		707		1,842		602			707		2,444		3,151		995		2005		2001
NORTH CAROLINA
Charlotte
NorthPark Business Park (f)		16,605		2,758		15,932		2,209			2,758		18,141		20,899		4,660		2006		1987-89
Lindbergh Business Park		-		470		3,401		262			470		3,663		4,133		889		2007		2001/03
Commerce Park I (n)		4,159		765		4,303		635			765		4,938		5,703		1,089		2007		1983
Commerce Park II		-		335		1,603		142			335		1,745		2,080		194		2010		1987
Commerce Park III		-		558		2,225		177			558		2,402		2,960		259		2010		1981
Nations Ford Business Park (n)		15,766		3,924		16,171		1,523			3,924		17,694		21,618		4,839		2007		1989/94
Airport Commerce Center (o)		8,840		1,454		10,136		769			1,454		10,905		12,359		1,673		2008		2001/02
Interchange Park (o)		6,587		986		7,949		273			986		8,222		9,208		1,188		2008		1989
Ridge Creek Distribution Center I (o)		10,599		1,284		13,163		371			1,284		13,534		14,818		1,712		2008		2006
Ridge Creek Distribution Center II		-		3,033		11,497		12			3,033		11,509		14,542		156		2011		2003
Waterford Distribution Center (o)		2,926		654		3,392		45			654		3,437		4,091		367		2008		2000
Lakeview Business Center		-		1,392		5,068		39			1,392		5,107		6,499		97		2011		1996
LOUISIANA
New Orleans
Elmwood Business Park		-		2,861		6,337		3,377			2,861		9,714		12,575		5,821		1997		1979
Riverbend Business Park		-		2,592		17,623		3,262			2,592		20,885		23,477		9,601		1997		1984
COLORADO
Denver
Rampart Distribution Center I (m)		5,010		1,023		3,861		1,424			1,023		5,285		6,308		3,118		1988		1987
Rampart Distribution Center II (m)		3,274		230		2,977		916			230		3,893		4,123		2,274		1996/97		1996/97
Rampart Distribution Center III (m)		5,002		1,098		3,884		1,316			1,098		5,200		6,298		2,227		1997/98		1999
Concord Distribution Center		-		1,051		4,773		413			1,051		5,186		6,237		1,095		2007		2000
Centennial Park (p)		4,639		750		3,319		1,697			750		5,016		5,766		740		2007		1990
NEVADA
Las Vegas
Arville Distribution Center		-		4,933		5,094		197			4,933		5,291		10,224		844		2009		1997
MISSISSIPPI
Interchange Business Park (h)		4,153		343		5,007		2,171			343		7,178		7,521		3,663		1997		1981
Tower Automotive		-		-		9,958		1,190			17		11,131		11,148		3,156		2001		2002
Metro Airport Commerce Center I		-		303		1,479		956			303		2,435		2,738		1,143		2001		2003
TENNESSEE
Memphis
Air Park Distribution Center I		-		250		1,916		851			250		2,767		3,017		1,276		1998		1975
OKLAHOMA
Oklahoma City
Northpointe Commerce Center		-		777		3,113		788			998		3,680		4,678		1,499		1998		1996/97
Tulsa
Braniff Park West		-		1,066		4,641		3,425			1,066		8,066		9,132		4,070		1996		1974
		627,748		233,194		837,129		480,121			235,394		1,315,050		1,550,444		451,755
Industrial Development (d):
FLORIDA
Oak Creek land		-		1,946		-		2,540			2,374		2,112		4,486		-		2005		n/a
Southridge IX		-		468		-		4,894			468		4,894		5,362		-		2003		n/a
Southridge land		-		927		-		3,140			927		3,140		4,067		-		2003		n/a
Horizon land		-		14,072		-		6,458			14,157		6,373		20,530		-		2008/09		n/a
SunCoast land		-		10,926		-		6,277			11,105		6,098		17,203		-		2006		n/a
TEXAS
North Stemmons land (h)		422		537		-		227			537		227		764		-		2001		n/a
World Houston Int'l Business Ctr 31A		-		684		-		3,159			684		3,159		3,843		50		2008		n/a
World Houston Int'l Business Ctr 31B		-		546		-		814			546		814		1,360		-		2008		n/a
World Houston Int'l Business Ctr 32		-		1,146		-		5,064			1,427		4,783		6,210		-		2007		n/a
World Houston Int'l Business Ctr land		-		2,407		-		1,878			2,407		1,878		4,285		-	2000/05/06			n/a
World Houston Int'l Business Ctr land - expansion	-			10,071		-		536			10,071		536		10,607		-		2011		n/a
Beltway Crossing VIII		-		721		-		4,478			721		4,478		5,199		-		2005		n/a
Beltway Crossing IX		-		418		-		723			418		723		1,141		-		2007		n/a
Beltway Crossing X		-		733		-		1,273			733		1,273		2,006		-		2007		n/a
Beltway Crossing Phase II land		-		690		-		372			690		372		1,062		-		2007		n/a
Lee Road land		-		3,068		-		2,093			3,822		1,339		5,161		-		2007		n/a
Americas Ten Business Center II & III land		-		1,365		-		1,079			1,365		1,079		2,444		-		2001		n/a
Alamo Ridge land		-		2,288		-		1,666			2,288		1,666		3,954		-		2007		n/a
Thousand Oaks I		-		607		-		1,802			607		1,802		2,409		-		2008		n/a
Thousand Oaks II		-		794		-		2,370			794		2,370		3,164		-		2008		n/a
Thousand Oaks land		-		772		-		290			772		290		1,062		-		2008		n/a
ARIZONA
Airport Distribution Center II land		-		300		-		117			300		117		417		-		2000		n/a
Kyrene land		-		3,220		-		241			3,220		241		3,461		-		2011		n/a
NORTH CAROLINA
Airport Commerce Center III land		-		855		-		391			855		391		1,246		-		2008		n/a
MISSISSIPPI
Metro Airport Commerce Center II land		-		307		-		399			307		399		706		-		2001		n/a
		422		59,868		-		52,281			61,595		50,554		112,149		50

Total real estate owned (a)(b)	$	628,170		293,062		837,129		532,402			296,989		1,365,604		1,662,593		451,805

See accompanying Report of Independent Registered Public Accounting Firm on Financial Statement Schedules.

-60-

(a) Changes in Real Estate Properties follow:

Years Ended December 31,
2011	2010	2009
	(In thousands)


Balance at beginning of year	$	1,521,177		1,468,182	1,402,636
Purchases of real estate properties		80,624		19,897	15,957
Development of real estate properties		42,148		9,145	35,057
Improvements to real estate properties		18,686		23,953	16,212
Carrying amount of investments sold		–		–	(1,680	)
Write-off of improvements		(42	)	–	–
Balance at end of year (1)	$	1,662,593		1,521,177	1,468,182

(1)	Includes 20% noncontrolling interests in Castilian Research Center of $1,794,000 at December 31, 2011 and $1,793,000 at December 31, 2010 and in University Business Center of $6,369,000 and $6,342,000, respectively.

Changes in the accumulated depreciation on real estate properties follow:

Years Ended December 31,
2011	2010	2009
	(In thousands)


Balance at beginning of year	$	403,187		354,745	310,351
Depreciation expense		48,648		48,442	45,195
Accumulated depreciation on assets sold		–		–	(801	)
Other		(30	)	–	–
Balance at end of year	$	451,805		403,187	354,745

(b)	The estimated aggregate cost of real estate properties at December 31, 2011 for federal income tax purposes was approximately $1,618,749,000 before estimated accumulated tax depreciation of $284,908,000. The federal income tax return for the year ended December 31, 2011, has not been filed and accordingly, this estimate is based on preliminary data.

(c)	The Company computes depreciation using the straight-line method over the estimated useful lives of the buildings (generally 40 years) and improvements (generally 3 to 15 years).

(d)	The Company transfers development properties to real estate properties the earlier of 80% occupancy or one year after completion of the shell construction.

(e)	EastGroup has a $62,875,000 limited recourse first mortgage loan with an insurance company secured by Dominguez, Industry Distribution Center I & III, Kingsview, Shaw, Walnut, and Washington. The loan has a recourse liability of $5 million which will be released based on the secured properties generating certain base rent amounts.

(f)	EastGroup has a $63,093,000 non-recourse first mortgage loan with an insurance company secured by Arion 16, Broadway VI, Chino, East University I & II, Northpark I-IV, Santan 10 II, South 55th Avenue, and World Houston 1 & 2 and 21 & 23.

(g)	EastGroup has a $64,014,000 non-recourse first mortgage loan with an insurance company secured by America Plaza, Central Green, Glenmont I & II, Interstate I, II & III, Rojas, Stemmons Circle, Venture, West Loop I & II, and World Houston 3-9.

(h)	EastGroup has a $32,204,000 non-recourse first mortgage loan with an insurance company secured by 51st Avenue, Airport Distribution, Broadway I, III & IV, Chestnut, Interchange Business Park, Main Street, North Stemmons I land, Southpark, Southpointe, and World Houston 12 & 13.

(i)	EastGroup has a $35,912,000 non-recourse first mortgage loan with an insurance company secured by 35th Avenue, Beltway Crossing I, Broadway V, Lockwood, Northwest Point, Sunbelt, Techway Southwest I, and World Houston 10, 11 & 14.

(j)	EastGroup has a $27,996,000 non-recourse first mortgage loan with an insurance company secured by Americas Ten I, Kirby, Palm River North I, II & III, Shady Trail, Westlake I & II, and World Houston 17.

(k)	EastGroup has a $31,039,000 non-recourse first mortgage loan with an insurance company secured by Country Club I, Lake Pointe, Techway Southwest II, and World Houston 19 & 20.

(l)	EastGroup has a $31,748,000 non-recourse first mortgage loan with an insurance company secured by Huntwood and Wiegman.

(m)	EastGroup has a $65,961,000 non-recourse first mortgage loan with an insurance company secured by Alamo Downs, Arion 1-15 & 17, Rampart I, II & III, Santan 10, and World Houston 16.

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(n)	EastGroup has a $67,188,000 non-recourse first mortgage loan with an insurance company secured by Beltway II, III & IV, Commerce Park 1, Eastlake, Fairgrounds I-IV, Nations Ford I-IV, Techway Southwest III, Wetmore I-IV, and World Houston 15 & 22.

(o)	EastGroup has a $54,001,000 non-recourse first mortgage loan with an insurance company secured by Airport Commerce Center I & II, Interchange Park, Ridge Creek Distribution Center I, Southridge XII, Waterford Distribution Center, and World Houston 24, 25 & 27.

(p)	EastGroup has a $71,837,000 non-recourse first mortgage loan with an insurance company secured by 40th Avenue, Beltway V, Centennial Park, Executive Airport, Ocean View, Techway Southwest IV, Wetmore V-VIII, and World Houston 26, 28, 29 & 30.

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SCHEDULE IV

MORTGAGE LOANS ON REAL ESTATE

DECEMBER 31, 2011

Number of Loans

Interest

Rate

Maturity Date

Periodic

Payment Terms

First mortgage loan:

Sabal Park Building - Tampa, Florida

6.0

% (a)

08/2016

Interest accrued and due monthly (01/01/09

through 07/31/13); principal paydown of

$550,000 due on 08/01/13; principal and

interest due monthly (beginning 08/01/13);

balloon payment of $3,460,000 due at

maturity (08/08/16)

Second mortgage loan:

Madisonville land - Kentucky

7.0

01/2012

Principal and interest due monthly

Total mortgage loans (b)

	Face Amount of Mortgages Dec. 31, 2011		Carrying Amount of Mortgages			Principal Amount of Loans Subject to Delinquent Principal or Interest (c)
	(In thousands)

First mortgage loan: Sabal Park Building – Tampa, Florida	$	4,150		4,107			–

Second mortgage loan: Madisonville land - Kentucky		3		3			–
Total mortgage loans	$	4,153		4,110	(d)(e)		–

See accompanying Report of Independent Registered Public Accounting Firm on Financial Statement Schedules.

(a)	This mortgage loan has a stated interest rate of 6.0% and an effective interest rate of 6.4%. A discount on mortgage loan receivable of $198,000 was recognized at the inception of the loan and is shown in the table in footnote (d) below.

(b)	Reference is made to allowance for possible losses on mortgage loans receivable in the Notes to Consolidated Financial Statements.

(c)	Interest in arrears for three months or less is disregarded in computing principal amount of loans subject to delinquent interest.

(d)	Changes in mortgage loans follow:

	Years Ended December 31,
	2011			2010			2009
	(In thousands)

Balance at beginning of year	$	4,131			4,155			4,174
Payments on mortgage loans receivable		(33	)		(37	)		(31	)
Amortization of discount on mortgage loan receivable		12			13			12
Balance at end of year	$	4,110			4,131			4,155

(e) The aggregate cost for federal income tax purposes is approximately $4.10 million. The federal income tax return for the year ended December 31, 2011, has not been filed and, accordingly, the income tax basis of mortgage loans as of December 31, 2011, is based on preliminary data.

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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) 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.

	EASTGROUP PROPERTIES, INC.

	By: /s/ DAVID H. HOSTER II
	David H. Hoster II, Chief Executive Officer, President & Director
	February 23, 2012

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.

*		*
D. Pike Aloian, Director		H. C. Bailey, Jr., Director
February 23, 2012		February 23, 2012

*		*
Hayden C. Eaves III, Director		Fredric H. Gould, Director
February 23, 2012		February 23, 2012

*		*
Mary Elizabeth McCormick, Director		David M. Osnos, Director
February 23, 2012		February 23, 2012

*		/s/ N. KEITH MCKEY
Leland R. Speed, Chairman of the Board		* By N. Keith McKey, Attorney-in-fact
February 23, 2012		February 23, 2012

/s/ DAVID H. HOSTER II
David H. Hoster II, Chief Executive Officer,
President & Director
(Principal Executive Officer) February 23, 2012

/s/ BRUCE CORKERN
Bruce Corkern, Sr. Vice-President, Controller and
Chief Accounting Officer
(Principal Accounting Officer) February 23, 2012


/s/ N. KEITH MCKEY
N. Keith McKey, Executive Vice-President,
Chief Financial Officer, Treasurer and Secretary
(Principal Financial Officer) February 23, 2012

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EXHIBIT INDEX

(3)

Exhibits:

The following exhibits are filed with this Form 10-K or incorporated by reference to the listed document previously filed with the SEC:

Number	Description
(3)	Articles of Incorporation and Bylaws
(a)	Articles of Incorporation (incorporated by reference to Appendix B to the Company's Proxy Statement for its Annual Meeting of Stockholders held on June 5, 1997).
(b)	Bylaws of the Company (incorporated by reference to Exhibit 3.1 to the Company’s Form 8-K filed December 10, 2008).

(10)	Material Contracts (*Indicates management or compensatory agreement):
(a)	EastGroup Properties, Inc. 2000 Directors Stock Option Plan (incorporated by reference to Appendix A to the Company's Proxy Statement for its Annual Meeting of Stockholders held on June 1, 2000).*
(b)	EastGroup Properties, Inc. 2004 Equity Incentive Plan (incorporated by reference to Appendix D to the Company's Proxy Statement for its Annual Meeting of Stockholders held on May 27, 2004).*
(c)	Amendment No. 1 to the 2004 Equity Incentive Plan (incorporated by reference to Exhibit 10(f) to the Company’s Form 10-K for the year ended December 31, 2006). *
(d)	Amendment No. 2 to the 2004 Equity Incentive Plan (incorporated by reference to Exhibit 10(d) to the Company’s Form 8-K filed January 8, 2007).*
(e)	EastGroup Properties, Inc. 2005 Directors Equity Incentive Plan (incorporated by reference to Appendix B to the Company’s Proxy Statement for its Annual Meeting of Stockholders held on June 2, 2005).*
(f)	Amendment No. 1 to the 2005 Directors Equity Incentive Plan (incorporated by reference to Exhibit 10.1 to the Company’s Form 8-K filed June 6, 2006).*
(g)	Amendment No. 2 to the 2005 Directors Equity Incentive Plan (incorporated by reference to Exhibit 10.1 to the Company’s Form 8-K filed June 3, 2008).*
(h)	Amendment No. 3 to the 2005 Directors Equity Incentive Plan (incorporated by reference to Exhibit 10.1 to the Company’s Form 8-K filed June 1, 2011).*
(i)	Form of Severance and Change in Control Agreement that the Company has entered into with Leland R. Speed, David H. Hoster II and N. Keith McKey (incorporated by reference to Exhibit 10(a) to the Company's Form 8-K filed January 7, 2009).*
(j)	Form of Severance and Change in Control Agreement that the Company has entered into with John F. Coleman, William D. Petsas, Brent W. Wood and C. Bruce Corkern (incorporated by reference to Exhibit 10(b) to the Company's Form 8-K filed January 7, 2009).*
(k)	Compensation Program for Non-Employee Directors (a written description thereof is set forth in Item 5.02 of the Company’s Form 8-K filed June 1, 2011).*
(l)	Second Amended and Restated Credit Agreement Dated January 4, 2008 among EastGroup Properties, L.P.; EastGroup Properties, Inc.; PNC Bank, National Association, as Administrative Agent; Regions Bank and SunTrust Bank as Co-Syndication Agents; Wells Fargo Bank, National Association as Documentation Agent; and PNC Capital Markets LLC, as Sole Lead Arranger and Sole Bookrunner; and the Lenders thereunder (incorporated by reference to Exhibit 10.1 to the Company's Form 8-K filed January 10, 2008).
(m)	First Amendment, dated February 2, 2011, to the Second Amended and Restated Credit Agreement Dated January 4, 2008 (incorporated by reference to Exhibit 10(o) to the Company's Annual Report on Form 10-K filed February 28, 2011).
(n)	Sales Agency Financing Agreement dated March 21, 2011 between EastGroup Properties, Inc. and BNY Mellon Capital Markets, LLC (incorporated by reference to Exhibit 1.1 to the Company’s Form 8-K filed March 25, 2011).
(o)	Sales Agency Financing Agreement dated March 21, 2011 between EastGroup Properties, Inc. and Raymond James & Associates, Inc. (incorporated by reference to Exhibit 1.2 to the Company’s Form 8-K filed March 25, 2011).

(21)	Subsidiaries of EastGroup Properties, Inc. (filed herewith).

(23)	Consent of KPMG LLP (filed herewith).

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(24)	Powers of attorney (filed herewith).

(31)	Rule 13a-14(a)/15d-14(a) Certifications (pursuant to Section 302 of the Sarbanes-Oxley Act of 2002)
(a)	David H. Hoster II, Chief Executive Officer
(b)	N. Keith McKey, Chief Financial Officer

(32)	Section 1350 Certifications (pursuant to Section 906 of the Sarbanes-Oxley Act of 2002)
(a)	David H. Hoster II, Chief Executive Officer
(b)	N. Keith McKey, Chief Financial Officer

(101)	The following materials from EastGroup Properties, Inc.’s Annual Report on Form 10-K for the year ended December 31, 2011, formatted in XBRL (eXtensible Business Reporting Language): (i) consolidated balance sheets, (ii) consolidated statements of income, (iii) consolidated statements of changes in equity, (iv) consolidated statements of cash flows, and (v) the notes to the consolidated financial statements.**

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