REAL ESTATE PROPERTIES

The Company’s Real estate properties and Development and value-add properties at December 31, 2018 and 2017 were as follows:



	December 31,
	2018			2017
	(In thousands)
Real estate properties:
Land	$	380,684		345,424
Buildings and building improvements	1,732,592			1,587,130
Tenant and other improvements	440,205			404,180
Development and value-add properties ⁽¹⁾	263,664			242,014
	2,817,145			2,578,748
Less accumulated depreciation	(814,915		)	(749,601	)
	$	2,002,230		1,829,147

(1)

Value-add properties are defined as properties that are either acquired but not stabilized or can be converted to a higher and better use. Acquired properties meeting either of the following two conditions are considered value-add properties: (1) Less than 75% occupied as of the acquisition date (or will be less than 75% occupied within one year of acquisition date based on near term lease roll), or (2) 20% or greater of the acquisition cost will be spent to redevelop the property.

EastGroup acquired operating properties during 2018, 2017 and 2016 as discussed in Note 1(j).

The Company sold operating properties during 2018, 2017 and 2016 as shown in the table below. The results of operations and gains and losses on sales for the properties sold during the periods presented are reported in continuing operations on the Consolidated Statements of Income and Comprehensive Income. The gains and losses on sales are included in Gain, net of loss, on sales of real estate investments.

The Company did not classify any properties as held for sale as of December 31, 2018 and 2017.

Sales of Real Estate

A summary of Gain, net of loss, on sales of real estate investments for the years ended December 31, 2018, 2017 and 2016 follows:



Real Estate Properties	Location	Size (in Square Feet)	Date Sold	Net Sales Price		Basis	Recognized Gain (Loss)
				(In thousands)
2018
World Houston 18	Houston, TX	33,000	01/26/2018	$	2,289	1,211	1,078
56 Commerce Park	Tampa, FL	181,000	03/20/2018	12,032		2,888	9,144
35th Avenue Distribution Center	Phoenix, AZ	125,000	07/26/2018	7,683		3,632	4,051
Total for 2018				$	22,004	7,731	14,273
2017
Stemmons Circle	Dallas, TX	99,000	05/12/2017	$	5,051	1,329	3,722
Techway Southwest I-IV	Houston, TX	415,000	06/19/2017	32,506		14,373	18,133
Total for 2017				$	37,557	15,702	21,855
2016
Northwest Point Distribution and Service Centers	Houston, TX	232,000	02/12/2016	$	15,189	5,080	10,109
North Stemmons III	Dallas, TX	60,000	03/04/2016	3,131		1,908	1,223
North Stemmons II	Dallas, TX	26,000	04/12/2016	1,203		765	438
Lockwood Distribution Center	Houston, TX	392,000	04/18/2016	14,024		4,154	9,870
West Loop Distribution Center 1 & 2	Houston, TX	161,000	04/19/2016	13,154		3,564	9,590
America Plaza	Houston, TX	121,000	04/28/2016	7,938		3,378	4,560
Interstate Commons Distribution Center 1 & 2	Phoenix, AZ	142,000	05/31/2016	9,906		3,568	6,338
Castilian Research Center ⁽¹⁾	Santa Barbara, CA	30,000	06/28/2016	7,698		7,513	185
Memphis I	Memphis, TN	92,000	12/16/2016	1,482		1,625	(143	)
Total for 2016				$	73,725	31,555	42,170


(1)	EastGroup owned 80% of Castilian Research Center through a joint venture. The information shown for this transaction also includes the 20% attributable to the Company's noncontrolling interest partner.

The table above includes sales of operating properties; the Company also sold parcels of land during the years presented. During the year ended December 31, 2018, the Company sold a parcel of land in Houston generating gross proceeds of $2,577,000 and recognized a gain of $86,000. During the year ended December 31, 2017, EastGroup sold parcels of land in El Paso and Dallas for $3,778,000 and recognized a net gain of $293,000. During the year ended December 31, 2016, EastGroup sold parcels of land in Houston, Dallas and Orlando for $5,400,000 and recognized net gains of $733,000. The net gains on sales of land are included in Other on the Consolidated Statements of Income and Comprehensive Income.

Development and Value-Add Properties

The Company’s development and value-add program as of December 31, 2018, was comprised of the properties detailed in the table below. Costs incurred include capitalization of interest costs during the period of construction. The interest costs capitalized on development projects for 2018 were $6,334,000 compared to $5,765,000 for 2017 and $5,340,000 for 2016. In addition, EastGroup capitalized internal development costs of $4,696,000 during the year ended December 31, 2018, compared to $4,754,000 during 2017 and $3,789,000 in 2016.

Total capital invested for development and value-add properties during 2018 was $167,667,000, which primarily consisted of costs of $134,957,000 and $21,736,000 as detailed in the Development and Value-Add Properties Activity table below and costs of $8,556,000 on projects subsequent to transfer to Real estate properties. The capitalized costs incurred on development projects subsequent to transfer to Real estate properties include capital improvements at the properties and do not include other capitalized costs associated with development (i.e., interest expense, property taxes and internal personnel costs).



DEVELOPMENT AND VALUE-ADD PROPERTIES ACTIVITY		Costs Incurred							Anticipated Building Conversion Date
DEVELOPMENT AND VALUE-ADD PROPERTIES ACTIVITY		Costs Transferred in 2018 ⁽¹⁾			For the Year Ended 12/31/18		Cumulative as of 12/31/18	Estimated Total Costs ⁽²⁾	Anticipated Building Conversion Date
		(In thousands)
	(Unaudited)							(Unaudited)	(Unaudited)
LEASE-UP	Building Size (Square feet)
Siempre Viva, San Diego, CA	115,000	$	—		14,075		14,075	14,400	01/19
CreekView 121 3 & 4, Dallas, TX	158,000	—			3,489		13,800	16,200	03/19
Falcon Field, Phoenix, AZ	96,000	—			5,285		8,232	9,400	05/19
Gateway 1, Miami, FL	200,000	9,110			11,131		20,241	25,000	05/19
Broadmoor 2, Atlanta, GA	111,000	705			5,709		6,414	7,400	11/19
Total Lease-Up	680,000	9,815			39,689		62,762	72,400
UNDER CONSTRUCTION
Horizon XI, Orlando, FL	135,000	3,171			5,552		8,723	10,400	01/20
Settlers Crossing 1, Austin, TX	77,000	—			4,704		6,260	7,400	01/20
Settlers Crossing 2, Austin, TX	83,000	—			5,442		7,115	8,400	01/20
SunCoast 5, Ft. Myers, FL	81,000	2,704			3,831		6,535	7,700	01/20
Airport Commerce Center 3, Charlotte, NC	96,000	—			4,060		5,793	7,300	02/20
Parc North 5, Dallas, TX	100,000	1,683			5,270		6,953	9,200	02/20
Steele Creek V, Charlotte, NC	54,000	1,366			1,948		3,314	5,800	03/20
Horizon VI, Orlando, FL	148,000	3,418			4,807		8,225	12,700	04/20
Ten West Crossing 8, Houston, TX	132,000	1,947			4,643		6,590	10,900	04/20
Tri-County Crossing 1 & 2, San Antonio, TX	203,000	2,012			6,883		8,895	14,600	04/20
Eisenhauer Point 7 & 8, San Antonio, TX	336,000	4,916			8,174		13,090	24,500	05/20
CreekView 121 5 & 6, Dallas, TX	139,000	3,675			1,930		5,605	14,900	07/20
Total Under Construction	1,584,000	24,892			57,244		87,098	133,800
PROSPECTIVE DEVELOPMENT (PRIMARILY LAND)	Estimated Building Size (Square feet)
Phoenix, AZ	315,000	—			6,809		6,809
Ft. Myers, FL	488,000	(2,704		)	1,914		13,322
Miami, FL	650,000	(9,110		)	14,565		36,331
Orlando, FL	214,000	(6,589		)	1,188		5,719
Tampa, FL	32,000	—			—		1,560
Atlanta, GA	100,000	(705		)	224		726
Jackson, MS	28,000	—			—		706
Charlotte, NC	600,000	(1,366		)	1,846		7,209
Austin, TX	180,000	—			722		3,742
Dallas, TX	612,000	(5,358		)	7,954		12,192
Houston, TX ⁽³⁾	1,123,000	(2,969		)	(1,782	)	16,439
San Antonio, TX	908,000	(6,928		)	4,584		9,049
Total Prospective Development	5,250,000	(35,729		)	38,024		113,804
	7,514,000	$	(1,022	)	134,957		263,664
DEVELOPMENT AND VALUE-ADD PROPERTIES TRANSFERRED TO REAL ESTATE PROPERTIES DURING 2018	Building Size (Square feet)								Building Conversion Date
Alamo Ridge IV, San Antonio, TX	97,000	$	—		320		7,417		03/18
Oak Creek VII, Tampa, FL	116,000	—			601		6,732		03/18
Weston, Ft. Lauderdale, FL	134,000	—			222		15,742		03/18
Progress Center 1 & 2, Atlanta, GA	132,000	—			143		10,476		04/18
Horizon X, Orlando, FL	104,000	—			3,352		6,902		05/18
SunCoast 4, Ft. Myers, FL	93,000	—			71		9,191		05/18
Country Club V, Tucson, AZ	305,000	—			7,078		21,029		06/18
Eisenhauer Point 3, San Antonio, TX	71,000	—			231		6,390		06/18
Kyrene 202 III, IV & V, Phoenix, AZ	166,000	—			1,146		12,689		09/18
Steele Creek VII, Charlotte, NC	120,000	—			795		8,592		09/18
Eisenhauer Point 6, San Antonio, TX	85,000	—			1,356		5,406		10/18
Horizon XII, Orlando, FL	140,000	—			653		11,883		10/18
Eisenhauer Point 5, San Antonio, TX	98,000	—			2,012		7,816		11/18
West Road 5, Houston, TX	58,000	1,022			3,756		4,778		11/18
Total Transferred to Real Estate Properties	1,719,000	$	1,022		21,736		135,043	⁽⁴⁾

Footnotes for the Development and Value-Add Properties Activity table are on the following page.


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


(2)	Included in these costs are development obligations of $52.4 million and tenant improvement obligations of $13.6 million on properties under development.


(3)	Negative amount represents land inventory costs transferred to Under Construction and land sold on 3/28/18.


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

Future Minimum Rental Receipts Under Non-Cancelable Leases

The following schedule indicates approximate future minimum rental receipts under non-cancelable leases for real estate properties by year as of December 31, 2018:



Years Ending December 31,	(In thousands)
2019	$	226,330
2020	195,850
2021	151,564
2022	112,007
2023	82,262
Thereafter	163,499
Total minimum receipts	$	931,512

Ground Leases

As of December 31, 2018, 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 the years ended December 31, 2018, 2017 and 2016 were $783,000, $760,000 and $756,000, 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, 2018:

Future Minimum Ground Lease Payments



Years Ending December 31,	(In thousands)
2019	$	791
2020	791
2021	791
2022	791
2023	791
Thereafter	9,343
Total minimum payments	$	13,298