DERIVATIVES AND HEDGING ACTIVITIES

9 Months Ended

Sep. 30, 2011

DERIVATIVES AND HEDGING ACTIVITIES [Abstract]

Derivatives and Hedging Activities

(12)  DERIVATIVES AND HEDGING ACTIVITIES

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).

ASC 815, Derivatives and Hedging, 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.  EastGroup does not currently have any derivatives or hedging instruments.

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 to hedge its exposure to the variable interest rate on this mortgage.  The Company's interest rate swap was reported at fair value and shown on the Consolidated Balance Sheets under Other Liabilities.  The fair value of the Company's 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.  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) (see Note 11).  The Company did not hold or issue this type of derivative contract for trading or speculative purposes.