Edgar Filing: EASTGROUP PROPERTIES INC

PROSPECTUS SUPPLEMENT

(TO PROSPECTUS DATED NOVEMBER 3, 2003)
Filed Pursuant To Rule 424(b)(5)
Registration No. 333-109769

[EASTGROUP PROPERTIES LOGO]
800,000 SHARES

EASTGROUP PROPERTIES, INC.

COMMON STOCK
$37.65 PER SHARE
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We are selling 800,000 shares of our common stock, par value $0.0001 per
share. We have granted the underwriter an option to purchase up to 120,000
additional shares of common stock to cover over-allotments.

Our common stock is listed on the New York Stock Exchange under the symbol
"EGP." The last reported sale price of our common stock on the New York Stock
Exchange on March 28, 2005, was $38.40 per share.
------------------

INVESTING IN OUR COMMON STOCK INVOLVES RISKS. SEE "RISK FACTORS"
BEGINNING ON PAGE S-2 OF THIS PROSPECTUS SUPPLEMENT AND PAGE 6 OF THE
ACCOMPANYING PROSPECTUS.

Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if this
prospectus supplement or the related prospectus is truthful or complete. Any
representation to the contrary is a criminal offense.
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PER SHARE TOTAL
--------- -----------

Public Offering Price $37.65 $30,120,000
Underwriting Discount $ 0.75 $ 600,000
Proceeds to Us (before expenses) $36.90 $29,520,000

In addition to the underwriting discount, the underwriter will receive a
commission equivalent from investors in the amount of $0.05 for each share of
common stock sold to those investors in the offering.

The underwriter expects to deliver the shares to purchasers on or about
March 31, 2005.
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CITIGROUP
March 28, 2005

YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN OR INCORPORATED BY
REFERENCE INTO THIS PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS. WE
HAVE NOT, AND THE UNDERWRITER HAS NOT, AUTHORIZED ANYONE TO PROVIDE YOU WITH
DIFFERENT INFORMATION. WE ARE NOT, AND THE UNDERWRITER IS NOT, MAKING AN OFFER
OF THESE SECURITIES IN ANY STATE WHERE THE OFFER IS NOT PERMITTED. THE
INFORMATION CONTAINED IN THIS PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING
PROSPECTUS IS ACCURATE ONLY AS OF THE DATE OF THIS PROSPECTUS SUPPLEMENT AND THE
DATE OF THE PROSPECTUS, RESPECTIVELY.

TABLE OF CONTENTS

PROSPECTUS SUPPLEMENT

PAGE
----

About This Prospectus Supplement............................ ii
Cautionary Statements Concerning Forward-Looking
Information............................................... ii
EastGroup Properties, Inc. ................................. S-1
The Offering................................................ S-1
Risk Factors................................................ S-2
Use of Proceeds............................................. S-3
Material United States Federal Income Tax Consequences...... S-3
Underwriting................................................ S-18
Experts..................................................... S-19
Legal Matters............................................... S-19
Where You Can Find More Information......................... S-19
Incorporation of Certain Documents by Reference............. S-20

PROSPECTUS DATED NOVEMBER 3, 2003

About This Prospectus....................................... 3
Forward-Looking Information................................. 3
Where You Can Find More Information......................... 3
Incorporation of Certain Documents by Reference............. 3
About Eastgroup Properties, Inc............................. 5
Risk Factors................................................ 6
Use of Proceeds............................................. 12
Ratio of Earnings to Fixed Charges.......................... 12
Description of Capital Stock................................ 13
Description of Common Stock................................. 14
Description of Preferred Stock.............................. 15
Description of Stockholder Rights Plan...................... 16
Description of Warrants..................................... 16
Material Provisions of Maryland Law......................... 17
Material United States Federal Income Tax Consequences...... 19
Plan of Distribution........................................ 32
Legal Matters............................................... 33
Experts..................................................... 33

ABOUT THIS PROSPECTUS SUPPLEMENT

This document has two parts. The first part is the prospectus supplement,
which describes the specific terms of this offering and also adds to and updates
information contained in the accompanying prospectus and the documents
incorporated by reference. The second part is the accompanying prospectus, which
gives more general information, some of which may not apply to this offering.

All references to "we," "our" and "us" in this prospectus supplement means
EastGroup Properties, Inc. and all entities owned or controlled by us except
where it is made clear that the term means only the parent company. The term
"you" refers to a prospective investor.

To the extent that any subject matter is addressed in both this prospectus
supplement and the accompanying prospectus, the information contained in or
incorporated by reference to this prospectus supplement updates or supersedes
the information contained in the accompanying prospectus.

CAUTIONARY STATEMENTS CONCERNING
FORWARD-LOOKING INFORMATION

We have made forward-looking statements with respect to our financial
condition, results of operations and business and on the possible impact of this
offering on our financial performance. Words such as "anticipates," "expects,"
"intends," "plans," "believes," "seeks," "estimates" and similar expressions as
they relate to us or our management, are intended to identify forward-looking
statements. These forward-looking statements are not guarantees of future
performance and are subject to risks and uncertainties, including those
described in our filings with the SEC and under "Risk Factors" in this
prospectus supplement, that could cause actual results to differ materially from
the results contemplated by the forward-looking statements.

In evaluating the securities offered by this prospectus supplement, you
should carefully consider the discussion of risks and uncertainties in the
section entitled "Risk Factors" on pages S-2 to S-3 of this prospectus
supplement and on pages 6 to 12 of the accompanying prospectus.

EASTGROUP PROPERTIES, INC.

We are an equity real estate investment trust, or REIT, focused on the
development, acquisition and operation of industrial properties in major Sunbelt
markets throughout the United States with a special emphasis in the states of
Florida, Texas, California and Arizona. We are a self-administered REIT in that
we provide our own investment and administrative services internally through our
own employees. Our strategy for growth is based on ownership of premier
distribution facilities generally clustered near major transportation features
in supply constrained submarkets. As of December 31, 2004, our portfolio
included 21 million square feet of real estate properties with an additional
521,000 square feet under development. As of December 31, 2004, our properties
were, on average, approximately 94.4% leased. Our 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.

We are a corporation organized under the laws of the State of Maryland. Our
principal executive offices are located at 300 One Jackson Place, 188 East
Capitol Street, Jackson, Mississippi 39201-2195, and our telephone number is
(601) 354-3555. We also have a Web site at www.eastgroup.net. Information
contained on our Web site is not and should not be considered a part of this
prospectus supplement or the accompanying prospectus.

THE OFFERING

Issuer........................ EastGroup Properties, Inc.

New York Stock Exchange
Symbol........................ EGP

Shares of common stock being
offered by us................. 800,000

Shares of common stock to be
outstanding after the
offering...................... 21,919,659(1)(2)

Use of proceeds............... We intend to use the net proceeds from this
offering for general corporate purposes,
including the possible payment of costs of
acquisition or development of industrial
properties and to repay fixed-rate mortgage
debt maturing in 2005. See "Use of Proceeds."
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(1) Excludes 1,953,998 shares reserved for issuance under our 2004 Equity
Incentive Plan, our 1994 Management Incentive Plan, our 1991 Directors'
Stock Option Plan and our 2000 Directors' Stock Option Plan. Of the shares
reserved for issuance, options to purchase an aggregate of 350,375 shares
are outstanding as of March 25, 2005.

(2) Number of shares assumes the underwriter's over-allotment option to purchase
120,000 additional shares of our common stock is not exercised.

S-1

RISK FACTORS

Investing in our securities involves risks that could affect us and our
business as well as the real estate industry generally. Please see the risk
factors below as well as those discussed in the accompanying prospectus.
Although we have tried to discuss key factors, please be aware that other risks
may prove to be important in the future. New risks may emerge at any time and we
cannot predict such risks or estimate the extent to which they may affect our
financial performance. Before purchasing our securities, you should carefully
consider the risks discussed below and the other information in this prospectus
supplement and the accompanying prospectus, as well as the documents
incorporated by reference herein. Each of the risks described could result in a
decrease in the value of our securities and your investment therein.

FINANCING RISKS

FLUCTUATIONS IN INTEREST RATES MAY ADVERSELY AFFECT OUR OPERATIONS AND THE
VALUE OF OUR STOCK. As of December 31, 2004, we had approximately $86.4 million
of variable interest rate debt. As of December 31, 2004, the weighted average
interest rate on our variable rate debt was 3.38%. We may also incur
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.

WE COULD DEFAULT ON CROSS-COLLATERALIZED AND CROSS-DEFAULTED DEBT. As of
December 31, 2004, we had eight secured loans that are cross-collateralized by
68 properties, totaling $235.1 million. If we default on any of these loans,
then we could be required to repay the aggregate of all indebtedness, together
with applicable prepayment charges, to avoid foreclosure on all the
cross-collateralized properties within the applicable pool. In addition, our
credit facilities contain cross-default provisions, which may be triggered in
the event that our other material indebtedness is in default. These
cross-default provisions may require us to repay or restructure the credit
facilities.

A LACK OF ANY LIMITATION ON OUR DEBT COULD RESULT IN OUR BECOMING MORE
HIGHLY LEVERAGED. As of December 31, 2004, we had approximately $390.1 million
of total debt. 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.

RISKS RELATED TO OUR PROPERTIES

OUR INVESTMENT IN PROPERTY DEVELOPMENT MAY BE MORE COSTLY THAN WE
ANTICIPATE. We intend to continue to develop properties where market conditions
warrant such investment. As of December 31, 2004, we had seven projects in lease
up and under development.

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 unavailability of favorable financing alternatives;

- 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;

- occupancy rates and rents at newly completed properties may fluctuate
depending 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

S-2

- 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, with respect to unknown
liabilities. As a result, if a liability 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.

USE OF PROCEEDS

The net proceeds to us from the offering of the shares by us will be
approximately $29.4 million after deducting the underwriting discount and other
offering expenses. We intend to use the net proceeds from this offering for
general corporate purposes, including the possible payment of costs of
acquisition or development of industrial properties and to repay fixed-rate
mortgage debt maturing in 2005. As of March 25, 2005, the mortgage debt maturing
in 2005 (including principal amortization and balloon payments) was $16.8
million and bears interest at fixed rates ranging from 8.000% to 8.375%. Pending
such use, the net proceeds will be used to reduce our outstanding variable rate
debt. The weighted average interest rate on our variable rate debt was 3.64% as
of March 25, 2005.

MATERIAL UNITED STATES FEDERAL INCOME TAX CONSEQUENCES

INTRODUCTORY NOTES

The following discussion describes the material federal income tax
considerations relating to our taxation as a REIT, and the ownership and
disposition of the securities offered under this prospectus supplement. This
discussion replaces in its entirety the discussion under the heading "Material
United States Federal Income Tax Consequences" in the accompanying prospectus.

The following discussion is not exhaustive of all possible tax
considerations and does not provide a detailed discussion of any state, local or
foreign tax considerations, nor does it discuss all of the aspects of federal
income taxation that may be relevant to a prospective stockholder in light of
his or her particular circumstances or to stockholders (including insurance
companies, tax-exempt entities, financial institutions or broker-dealers,
foreign corporations, persons holding common stock as part of a hedging or
conversion transaction or a straddle, and persons who are not citizens or
residents of the United States) who are subject to special treatment under the
federal income tax laws.

S-3

fairly summarizes in all material respects the federal income tax laws referred
to herein. This opinion, however, does not purport to address the actual tax
consequences of the purchase, ownership and disposition of our capital stock to
any particular holder. The opinion and the information in this section are based
on the Internal Revenue Code of 1986, as amended (the "Code"), current,
temporary and proposed Treasury regulations, the legislative history of the
Code, current administrative interpretations and practices of the Internal
Revenue Service, and court decisions. The reference to Internal Revenue Service
interpretations and practices includes Internal Revenue Service practices and
policies as endorsed in private letter rulings, which are not binding on the
Internal Revenue Service except with respect to the taxpayer that receives the
ruling. In each case, these sources are relied upon as they exist on the date of
this prospectus supplement. No assurance can be given that future legislation,
regulations, administrative interpretations and court decisions will not
significantly change current law, or adversely affect existing interpretations
of existing law, on which the opinion and information in this section are based.
Any change of this kind could apply retroactively to transactions preceding the
date of the change. Moreover, opinions of counsel merely represent counsel's
best judgment with respect to the probable outcome on the merits and are not
binding on the Internal Revenue Service or the courts. Accordingly, even if
there is no change in applicable law, no assurance can be provided that such
opinion, or the statements made in the following discussion, will not be
challenged by the Internal Revenue Service or will be sustained by a court if so
challenged.

EACH PROSPECTIVE INVESTOR IS ADVISED TO CONSULT WITH HIS OR HER OWN TAX
ADVISOR TO DETERMINE THE IMPACT OF HIS OR HER PERSONAL TAX SITUATION ON THE
ANTICIPATED TAX CONSEQUENCES OF THE OWNERSHIP AND SALE OF THE SECURITIES OFFERED
UNDER THIS PROSPECTUS SUPPLEMENT. THIS INCLUDES THE FEDERAL, STATE, LOCAL,
FOREIGN AND OTHER TAX CONSEQUENCES OF THE OWNERSHIP AND SALE OF THE SECURITIES
OFFERED UNDER THIS PROSPECTUS SUPPLEMENT AND THE POTENTIAL CHANGES IN APPLICABLE
TAX LAWS.

TAXATION OF OUR COMPANY AS A REIT

We have elected to be taxed as a REIT under Sections 856 through 859 of the
Code, commencing with our initial taxable year. Our qualification and taxation
as a REIT depends upon our ability to meet on a continuing basis, through actual
annual operating results, distribution levels and diversity of stock ownership,
the various qualification tests and organizational requirements imposed under
the Code, as discussed below. We believe that we are organized and have operated
in such a manner as to qualify under the Code for taxation as a REIT since the
effective date of our election, and we intend to continue to operate in such a
manner. No assurances, however, can be given that we will operate in a manner so
as to qualify or remain qualified as a REIT. See "-- Failure to Qualify" below.

The following is a general summary of the material Code provisions that
govern the federal income tax treatment of a REIT and its stockholders. These
provisions of the Code are highly technical and complex. This summary is
qualified in its entirety by the applicable Code provisions, the regulations
promulgated thereunder ("Treasury Regulations"), and administrative and judicial
interpretations thereof.

Jaeckle Fleischmann & Mugel, LLP has provided to us an opinion to the
effect that we have been organized and have operated in conformity with the
requirements for qualification and taxation as a REIT, effective for each of our
taxable years ended December 31, 1997 through December 31, 2004, and our current
and proposed organization and method of operation will enable us to continue to
meet the requirements for qualification and taxation as a REIT for taxable year
2005 and thereafter. It must be emphasized that this opinion is conditioned upon
certain assumptions and representations made by us to Jaeckle Fleischmann &
Mugel, LLP as to factual matters relating to our organization and operation and
that of our subsidiaries. In addition, this opinion is based upon our factual
representations concerning our business and properties as described in the
reports filed by us under the federal securities laws.

Qualification and taxation as a REIT depends upon our ability to meet on a
continuing basis, through actual annual operating results, the various
requirements under the Code described in this prospectus supplement with regard
to, among other things, the sources of our gross income, the composition of our

S-4

assets, our distribution levels, and our diversity of stock ownership. While we
intend to operate so that we continue to qualify as a REIT, given the highly
complex nature of the rules governing REITs, the ongoing importance of factual
determinations, and the possibility of future changes in our circumstances, no
assurance can be given that we satisfy all of the tests for REIT qualification
or will continue to do so.

If we qualify for taxation as a REIT, we generally will not be subject to
federal corporate income taxes on net income that we currently distribute to
stockholders. This treatment substantially eliminates the "double taxation" (at
the corporate and stockholder levels) that generally results from investment in
a corporation.

Notwithstanding our REIT election, however, we will be subject to federal
income tax in the following circumstances. First, we will be taxed at regular
corporate rates on any undistributed taxable income, including undistributed net
capital gains. (However, we can elect to "pass-through" any of our taxes paid on
its undistributed net capital gains income to our stockholders on a pro rata
basis.) Second, under certain circumstances, we may be subject to the
"alternative minimum tax" on any items of tax preference and alternative minimum
tax adjustments. Third, if we have (i) net income from the sale or other
disposition of "foreclosure property" (which is, in general, property acquired
by foreclosure or otherwise on default of a loan secured by the property) that
is held primarily for sale to customers in the ordinary course of business or
(ii) other nonqualifying income from foreclosure property, we will be subject to
tax at the highest corporate rate on such income. Fourth, if we have net income
from prohibited transactions (which are, in general, certain sales or other
dispositions of property (other than foreclosure property) held primarily for
sale to customers in the ordinary course of business), such income will be
subject to a 100% tax on prohibited transactions. Fifth, if we should fail to
satisfy the 75% gross income test or the 95% gross income test (as discussed
below), and have nonetheless maintained our qualification as a REIT because
certain other requirements have been met, we will be subject to a 100% tax equal
to the gross income attributable to the greater of either (i) the amount by
which 75% of our gross income exceeds the amount qualifying under the 75% test
for the taxable year or (ii) the amount by which 90% of our gross income (95% in
the case of a failure occurring for our tax year beginning January 1, 2005 and
thereafter) exceeds the amount of our income qualifying under the 95% test for
the taxable year, multiplied in either case by a fraction intended to reflect
our profitability. Sixth, if we should fail to distribute during each calendar
year at least the sum of (i) 85% of our REIT ordinary income for such year; (ii)
95% of our REIT capital gain net income for such year (for this purpose such
term includes capital gains which we elect to retain but which we report as
distributed to our stockholders; (see "-- Annual Distribution Requirements"
below); and (iii) any undistributed taxable income from prior years, we would be
subject to a 4% excise tax on the excess of such required distribution over the
amounts actually distributed. Seventh, if we acquire any asset from a C
corporation (i.e., a corporation generally subject to full corporate level tax)
in a transaction in which the basis of the asset in our hands is determined by
reference to the basis of the asset (or any other property) in the hands of the
C corporation, and we recognize gain on the disposition of such asset during the
10 year period beginning on the date on which such asset was acquired by us,
then, to the extent of such property's built in gain (the excess of the fair
market value of such property at the time of acquisition by us over the adjusted
basis of such property at such time), such gain generally will be subject to tax
at the highest regular corporate rate then applicable. Eighth, we will be
subject to a 100% penalty tax on amounts received (or on certain expenses
deducted by a taxable REIT subsidiary) if arrangements among us, our tenants and
a taxable REIT subsidiary are not comparable to similar arrangements among
unrelated parties. Ninth, beginning in 2005, if we fail to satisfy the 5% or the
10% assets tests, and the failure qualifies under the Non De Minimis Exception,
as described below under "-- Asset Tests," then we will have to pay an excise
tax equal to the greater of (i) $50,000; or (ii) an amount determined by
multiplying the net income generated during a specified period by the assets
that caused the failure by the highest federal income tax applicable to
corporations. Tenth, beginning in 2005, if we fail to satisfy any REIT
requirements other than the income test or asset test requirements, described
below under "-- Income Test" and "-- Asset Tests," respectively, and would
qualify for a reasonable cause exception, then we will have to pay a penalty
equal to $50,000 for each such failure.

S-5

REQUIREMENTS FOR QUALIFICATION

The Code defines a REIT as a corporation, trust or association (i) which is
managed by one or more trustees or directors; (ii) the beneficial ownership of
which is evidenced by transferable shares or by transferable certificates of
beneficial interest; (iii) which would be taxable as a domestic corporation but
for Sections 856 through 859 of the Code; (iv) which is neither a financial
institution nor an insurance company subject to certain provisions of the Code;
(v) the beneficial ownership of which is held by 100 or more persons; (vi) of
which not more than 50% in value of the outstanding capital stock is owned,
directly or indirectly, by five or fewer individuals (as defined in the Code to
include certain entities) during the last half of each taxable year after
applying certain attribution rules; (vii) that makes an election to be treated
as a REIT for the current taxable year or has made an election for a previous
taxable year which has not been revoked; and (viii) which meets certain other
tests, described below, regarding the nature of its income and assets. The Code
provides that conditions (i) through (iv), inclusive, must be met during the
entire taxable year and that condition (v) must be met during at least 335 days
of a taxable year of 12 months, or during a proportionate part of a taxable year
of less than 12 months. Condition (vi) must be met during the last half of each
taxable year other than the first taxable year for which an election to become a
REIT is made. For purposes of determining stock ownership under condition (vi),
a supplemental unemployment compensation benefits plan, a private foundation or
a portion of a trust permanently set aside or used exclusively for charitable
purposes generally is considered an individual. However, a trust that is a
qualified trust under Section 401(a) of the Code generally is not considered an
individual, and beneficiaries of a qualified trust are treated as holding shares
of a REIT in proportion to their actuarial interests in the trust for purposes
of condition (vi). Conditions (v) and (vi) do not apply until after the first
taxable year for which an election is made to be taxed as a REIT. We have issued
sufficient common stock with sufficient diversity of ownership to allow us to
satisfy requirements (v) and (vi). In addition, our charter contains
restrictions regarding the transfer of our shares intended to assist us in
continuing to satisfy the share ownership requirements described in (v) and (vi)
above. See "Description of Capital Stock" in the accompanying prospectus. These
restrictions, however, may not ensure that we will be able to satisfy these
share ownership requirements. If we fail to satisfy these share ownership
requirements and do not qualify for certain statutory relief provisions, we will
fail to qualify as a REIT.

In addition, a corporation may not elect to become a REIT unless its
taxable year is the calendar year. Our taxable year is the calendar year.

To qualify as a REIT, we cannot have at the end of any taxable year any
undistributed earnings and profits that are attributable to a non-REIT taxable
year. We believe that we have complied with this requirement.

For our tax years beginning prior to January 1, 1998, pursuant to
applicable Treasury Regulations, to be taxed as a REIT, we were required to
maintain certain records and request on an annual basis certain information from
our stockholders designed to disclose the actual ownership of our outstanding
shares. We have complied with such requirements. For our tax years beginning on
or after January 1, 1998, these records and informational requirements are no
longer a condition to REIT qualification. Instead, a monetary penalty will be
imposed for failure to comply with these requirements. If we comply with these
regulatory rules, and we do not know, or exercising reasonable diligence would
not have known, whether we failed to meet requirement (vi) above, we will be
treated as having met the requirement.

QUALIFIED REIT SUBSIDIARIES

If a REIT owns a corporate subsidiary that is a "qualified REIT
subsidiary," the separate existence of that subsidiary will be disregarded for
federal income tax purposes. Generally, a qualified REIT subsidiary is a
corporation, other than a taxable REIT subsidiary, all of the capital stock of
which is owned by the REIT. All assets, liabilities and items of income,
deduction and credit of the qualified REIT subsidiary will be treated as assets,
liabilities and items of income, deduction and credit of the REIT itself. A
qualified REIT subsidiary of ours will not be subject to federal corporate
income taxation, although it may be subject to state and local taxation in some
states.

S-6

TAXABLE REIT SUBSIDIARIES

A "taxable REIT subsidiary" is a corporation in which we directly or
indirectly own stock and that elects with us to be treated as a taxable REIT
subsidiary under Section 856(l) of the Code. In addition, if one of our taxable
REIT subsidiaries owns, directly or indirectly, securities representing more
than 35% of the vote or value of a subsidiary corporation, that subsidiary will
automatically be treated as a taxable REIT subsidiary of ours. A taxable REIT
subsidiary is a corporation subject to federal income tax, and state and local
income tax where applicable, as a regular "C" corporation. No more than 20% of
our assets may consist of the securities of one or more taxable REIT
subsidiaries.

Generally, a taxable REIT subsidiary can perform impermissible tenant
services without causing us to receive impermissible tenant services income
under the REIT income tests. However, several provisions regarding the
arrangements between a REIT and its taxable REIT subsidiaries ensure that a
taxable REIT subsidiary will be subject to an appropriate level of federal
income taxation. For example, a taxable REIT subsidiary is limited in its
ability to deduct interest payments made to us. In addition, we will be
obligated to pay a 100% penalty tax on some payments that we receive or on
certain expenses deducted by the taxable REIT subsidiary if the economic
arrangements among us, our tenants and the taxable REIT subsidiary are not
comparable to similar arrangements among unrelated parties.

We have established a wholly owned taxable REIT subsidiary, EastGroup TRS,
Inc., for the purpose of developing and selling certain real property located in
Houston, Texas and we may establish other taxable REIT subsidiaries in the
future.

INCOME TESTS

In order for us to maintain qualification as a REIT, two percentage tests
relating to the source of our gross income must be satisfied annually. First, at
least 75% of our gross income for a taxable year must be "qualifying income."
Qualifying income generally includes (1) rents from real property (except as
modified below); (2) interest on obligations collateralized by mortgages on, or
interests in, real property; (3) gains from the sale or other disposition of
interests in real property and real estate mortgages, other than gain from
property held primarily for sale to customers in the ordinary course of its
trade or business ("dealer property"); (4) dividends or other distributions on
shares in other REITs, as well as gain from the sale of such shares; (5)
abatements and refunds of real property taxes; (6) income from the operation,
and gain from the sale, of property acquired at or in lieu of a foreclosure of
the mortgage collateralized by such property ("foreclosure property"); (7)
commitment fees received for agreeing to make loans collateralized by mortgages
on real property or to purchase or lease real property; and (8) income from
temporary investments in stock or debt instruments purchased with the proceeds
of new capital raised by us. Second, at least 95% of our gross income (excluding
gross income from prohibited transactions) for each taxable year must be derived
from such real property investments described above, dividends, interest and
gain from the sale or disposition of stock or other securities that are not
dealer property, or from any combination of the foregoing. Moreover, beginning
in 2005, gross income from certain transactions entered into by us to hedge
indebtedness we incur to acquire or carry real estate assets and that are
properly and timely identified as hedging transactions is not included in gross
income for purposes of the 95% income test, but will be continued to be taken
into account as nonqualifying income for purposes of the 75% income test. To the
extent that we hedge with other types of financial instruments, or in other
situations, it is not entirely clear how the income from those transactions will
be treated for purposes of the income tests. We intend to structure any hedging
transactions in a manner that does not jeopardize our status as a REIT.

Rents received by us will qualify as "rents from real property" in
satisfying the above gross income tests only if several conditions are met.
First, the amount of rent must not be based in whole or in part on the income or
profits of any person. However, amounts received or accrued generally will not
be excluded from "rents from real property" solely by reason of being based on a
fixed percentage or percentages of receipts or sales.

may, however, lease our properties to a taxable REIT subsidiary and rents
received from that subsidiary will not be disqualified from being "rents from
real property" by reason of our ownership interest in the subsidiary if at least
90% of the property in question is leased to unrelated tenants and the rent paid
by the taxable REIT subsidiary is substantially comparable to the rent paid by
the unrelated tenants for comparable space. However, if we own more than 50% of
the vote or value of the taxable REIT subsidiary, and the rent payable is
increased pursuant to a lease renegotiation, then the increase in rent will not
be treated as qualifying rent.

Third, if rent attributable to personal property that is leased in
connection with a lease of real property is greater than 15% of the total rent
received under the lease, then the portion of rent attributable to such personal
property will not qualify as "rents from real property." Under prior law, this
15% test was based on the relative adjusted tax basis of both the real and
personal property. For taxable years beginning after December 31, 2000, the test
is based on the relative fair market value of the real and personal property.

Generally, for rents to qualify as "rents from real property" for the
purposes of the gross income tests, we are only allowed to provide services that
are both "usually or customarily rendered" in connection with the rental of real
property and not otherwise considered "rendered to the occupant." Income
received from any other service will be treated as "impermissible tenant service
income" unless the service is provided through an independent contractor that
bears the expenses of providing the services and from whom we derive no revenue
or through a taxable REIT subsidiary, subject to specified limitations. The
amount of impermissible tenant service income we receive is deemed to be the
greater of the amount actually received by us or 150% of our direct cost of
providing the service. If the impermissible tenant service income exceeds 1% of
our total income from a property, then all of the income from that property will
fail to qualify as rents from real property. If the total amount of
impermissible tenant service income from a property does not exceed 1% of our
total income from that property, the income will not cause the rent paid by
tenants of that property to fail to qualify as rents from real property, but the
impermissible tenant service income itself will not qualify as rents from real
property.

Our investment in commercial and industrial properties generally gives rise
to rental income that is qualifying income for purposes of the 75% and 95% gross
income tests. We do not receive any rent that is based on the income or profits
of any person. In addition, we do not own, directly or indirectly, 10% or more
of any tenant (other than, perhaps, a tenant that is a taxable REIT subsidiary
where other requirements are satisfied). Furthermore, we believe that any
personal property rented in connection with our facilities is well within the
15% restriction. Moreover, we do not provide services, other than within the 1%
de minimis exception described above, to our tenants that are not customarily
furnished or rendered in connection with the rental of property, other than
through an independent contractor or a taxable REIT subsidiary. Finally, we
anticipate that income on our other investments will not result in our failing
the 75% or 95% gross income test for any year.

Beginning in 2005, if we fail to satisfy one or both of the 75% or 95%
gross income tests, we may nevertheless qualify as a REIT for such year if we
are entitled to relief under certain provisions of the Code. These relief
provisions generally will be available if our failure to meet such tests was due
to reasonable cause and not due to willful neglect, and if we timely file a
schedule describing each item of our gross income in accordance with Treasury
Regulations. It is not possible, however, to state whether in all circumstances
we would be entitled to the benefit of these relief provisions. As discussed
above in "--Taxation of Our Company as a REIT," even if these relief provisions
were to apply, a tax would be imposed with respect to the excess net income.

Beginning in 2005, if we fail to satisfy one or both of the gross income
tests, we nevertheless may qualify as a REIT for that year if we qualify for
relief under certain provisions of the federal income tax laws. Those relieve
provisions generally will be available if:

- our failure to meet such tests was due to reasonable cause and not due to
willful neglect;

- we attach a schedule of the sources of our gross income to our tax
return; and

- any incorrect information on the schedule was not due to fraud with
intent to evade tax.
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We cannot predict, however, whether in all circumstances we would qualify
for the relief provisions. In addition, as discussed above in "-- Taxation of
Our Company as a REIT," even if the relief provisions were to apply, we would
incur a 100% tax on the gross income attributable to the greater of (i) the
amount by which we fail the 75% gross income test and (ii) the amount by which
90% (95% for 2005 and later taxable years), in each case, of our gross income
exceeds the amount of qualifying income under the 95% gross income test,
multiplied in either case by a fraction intended to reflect our profitability.

ASSET TESTS

At the close of each quarter of our taxable year, we must satisfy six tests
relating to the nature of our assets.

1. At least 75% of the value of our total assets must be represented by
"real estate assets," cash, cash items and government securities. Our real
estate assets include, for this purpose, our allocable share of real estate
assets held by the partnerships in which we own an interest, and the
noncorporate subsidiaries of these partnerships, as well as stock or debt
instruments held for less than one year purchased with the proceeds of an
offering of our shares or a public offering of our long-term debt.

2. Not more than 25% of our total assets may be represented by securities,
other than those in the 75% asset class.

3. The value of any one nongovernment issuer's securities owned by us may
not exceed 5% of the value of our total assets.

4. We may not own more than 10% of any one issuer's outstanding voting
securities.

5. We may not own more than 10% of the total value of the outstanding
securities of any one issuer.

6. Not more than 20% of our total assets may be represented by the
securities of one or more taxable REIT subsidiaries.

For purposes of these asset tests, the securities of qualified REIT
subsidiaries are not taken into account, and any assets owned by our qualified
REIT subsidiaries are treated as owned directly by us.

For purposes of these asset tests, the term "securities" does not include
stock in another REIT, equity or debt securities of a qualified REIT subsidiary
or taxable REIT subsidiary, mortgage loans that constitute real estate assets or
equity interests in a partnership or any entity that is disregarded for federal
income tax purposes. For purposes of the 10% value test, debt instruments issued
by a partnership are not classified as "securities" to the extent of our
interest as a partner in such partnership (based on our proportionate share of
the partnership's equity interests and certain debt securities) or if at least
75% of the partnership's gross income, excluding income from prohibited
transactions, is qualifying income for purposes of the 75% gross income test.
For purposes of the 10% value test, the term "securities" also does not include
securities issued by another REIT, certain "straight debt" securities (for
example, qualifying debt securities of a corporation of which we own no equity
interest), loans to individuals or estates, and accrued obligations to pay rent.

With respect to each issuer in which we currently own an interest that does
not qualify as a REIT, a qualified REIT subsidiary or a taxable REIT subsidiary,
we believe that our pro rata share of the value of the securities, including
unsecured debt, of any such issuer does not exceed 5% of the total value of our
assets and that we comply with the 10% voting securities limitation and 10%
value limitation (taking into account the "straight debt" exceptions with
respect to certain issuers). In addition, we believe that our securities of
taxable REIT subsidiaries do not exceed 20% of the value of our total assets.
With respect to our compliance with each of these asset tests, however, we
cannot provide any assurance that the Internal Revenue Service might not
disagree with our determination.

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We will monitor the status of our assets for purposes of the various asset
tests and will manage our portfolio in order to comply at all times with such
tests. If we fail to satisfy the asset tests at the end of a calendar quarter,
we will not lose our REIT status if one of the following exceptions applies:

- we satisfied the asset tests at the end of the preceding calendar
quarter, and the discrepancy between the value of our assets and the
asset test requirements arose from changes in the market values of our
assets and was not wholly or partly caused by the acquisition of one or
more non qualifying assets; or

- we eliminate any discrepancy within 30 days after the close of the
calendar quarter in which it arose.

Moreover, if we fail to satisfy the asset tests at the end of a calendar
quarter during a taxable year beginning in 2005, we will not lose our REIT
status if one of the following additional exceptions applies:

- De Minimis Exception. The failure is due to a violation of the 5% or 10%
asset tests referenced above and is "de minimis" (for this purpose, a "de
minimis" failure is one that arises from our ownership of assets the
total value of which does not exceed the lesser of 1% of the total value
of our assets at the end of the quarter in which the failure occurred and
$10 million), and we either dispose of the assets that caused the failure
or otherwise satisfy the asset tests within 6 months after our
identification of the failure; or

- Non De Minimis Exception. All of the following requirements are
satisfied: (i) the failure is not "de minimis" as defined above, (ii) the
failure is due to reasonable cause and not willful neglect, (iii) we file
a schedule in accordance with Treasury Regulations providing a
description of each asset that caused the failure, (iv) we either dispose
of the assets that caused the failure or otherwise satisfy the asset
tests within 6 months after our identification of the failure, and (v) we
pay an excise tax as described in "-- Taxation of Our Company as a REIT."

ANNUAL DISTRIBUTION REQUIREMENTS

In order to qualify as a REIT, we are required to distribute dividends
(other than capital gain dividends) to our stockholders in an amount at least
equal to (i) the sum of (a) 90% of our "REIT taxable income" (computed without
regard to the dividends paid deduction and our net capital gain) and (b) 90% of
the net income (after tax), if any, from foreclosure property, minus (ii) the
sum of certain items of noncash income over 5% of our REIT taxable income. Such
distributions generally must be paid in the taxable year to which they relate.
Dividends may be paid in the following year in two circumstances. First,
dividends may be declared in the following year if the dividends are declared
before we timely file our tax return for the year and if made before the first
regular dividend payment after such declaration. Second, if we declare a
dividend in October, November or December of any year with a record date in one
of these months and pay the dividend on or before January 31 of the following
year, we will be treated as having paid the dividend on December 31 of the year
in which the dividend was declared. To the extent that we do not distribute all
of our net capital gain or distribute at least 90%, but less than 100%, of our
"REIT taxable income," as adjusted, we will be subject to tax on the
nondistributed amount at regular capital gains and ordinary corporate tax rates.
Furthermore, if we should fail to distribute during each calendar year at least
the sum of (i) 85% of our REIT ordinary income for such year; (ii) 95% of our
REIT capital gain net income for such year; and (iii) any undistributed taxable
income from prior periods, we will be subject to a 4% excise tax on the excess
of such required distribution over the amounts actually distributed.

We may elect to retain and pay tax on our net long-term capital gains and
require our stockholders to include their proportionate share of such
undistributed net capital gains in their income. If we make such election, our
stockholders would receive a tax credit attributable to their share of the
capital gains tax paid by us, and would receive an increase in the basis of
their shares in us in an amount equal to the stockholder's share of the
undistributed net long-term capital gain reduced by the amount of the credit.
Further, any undistributed net long-term capital gains that are included in the
income of our stockholders pursuant to this rule will be treated as distributed
for purposes of the 4% excise tax.

liquid assets to meet the distribution requirements due to timing differences
between the actual receipt of income and actual payment of deductible expenses
and the inclusion of such income and deduction of such expenses in arriving at
our taxable income, or if the amount of nondeductible expenses such as principal
amortization or capital expenditures exceeds the amount of noncash deductions.
In the event that such timing differences occur, in order to meet the
distribution requirements, we may arrange for short term, or possibly long term,
borrowing to permit the payment of required dividends. If the amount of
nondeductible expenses exceeds noncash deductions, we may refinance our
indebtedness to reduce principal payments and may borrow funds for capital
expenditures.

Under certain circumstances, we may be able to rectify a failure to meet
the distribution requirement for a year by paying "deficiency dividends" to
stockholders in a later year that may be included in our deduction for dividends
paid for the earlier year. Thus, we may avoid being taxed on amounts distributed
as deficiency dividends; however, we will be required to pay interest to the
Internal Revenue Service based upon the amount of any deduction taken for
deficiency dividends.

PROHIBITED TRANSACTION RULES

A REIT will incur a 100% penalty tax on the net income derived from a sale
or other disposition of property, other than foreclosure property, that the REIT
holds primarily for sale to customers in the ordinary course of a trade or
business (a "prohibited transaction"). Under a safe harbor provision in the
Internal Revenue Code, however, income from certain sales of real property held
by the REIT for at least four years at the time of the disposition will not be
treated as income from a prohibited transaction. We believe that none of our
assets is held for sale to customers and that a sale of any of our assets would
not be in the ordinary course of its business. Whether a REIT holds an asset
"primarily for sale to customers in the ordinary course of a trade or business"
depends, however, on the facts and circumstances in effect from time to time,
including those related to a particular asset. Although we will attempt to
ensure that none of our sales of property will constitute a prohibited
transaction, we cannot assure investors that none of such sales will be so
treated.

FAILURE TO QUALIFY

Beginning in 2005, if we fail to qualify as a REIT and such failure is not
an asset test or income test failure, we generally will be eligible for a relief
provision if the failure is due to reasonable cause and not willful neglect and
we pay a penalty of $50,000 with respect to such failure.

If we fail to qualify for taxation as a REIT in any taxable year and no
relief provisions apply, we will be subject to tax (including any applicable
alternative minimum tax) on our taxable income at regular corporate rates.
Distributions to stockholders in any year in which we fail to qualify will not
be deductible by us, nor will such distributions be required to be made. In such
event, to the extent of our current and accumulated earnings and profits, all
distributions to stockholders will be taxable as ordinary income, and, subject
to certain limitations in the Code, corporate distributees may be eligible for
the dividends received deduction. Unless entitled to relief under specific
statutory provisions, we will also be disqualified from taxation as a REIT for
the four taxable years following the year during which qualification was lost.
It is not possible to state whether in all circumstances we would be entitled to
such statutory relief.

TAX ASPECTS OF OUR INVESTMENTS IN PARTNERSHIPS

General. Many of our investments are held through subsidiary partnerships
and limited liability companies. This structure may involve special tax
considerations. These tax considerations include the following:

1. the status of each subsidiary partnership and limited liability company
taxed as a partnership (as opposed to an association taxable as a corporation)
for income tax purposes; and

2. the taking of actions by any of the subsidiary partnerships or limited
liability companies that could adversely affect our qualification as a REIT.

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We believe that each of the subsidiary partnerships and each of the limited
liability companies that are not disregarded entities for federal income tax
purposes will be treated for tax purposes as partnerships (and not as
associations taxable as corporations). If any of the partnerships were to be
treated as a corporation, it would be subject to an entity level tax on its
income. In such a situation, the character of our assets and items of gross
income would change, which could preclude us from satisfying the asset tests and
possibly the income tests, and in turn prevent us from qualifying as a REIT. In
addition, if any of the partnerships were treated as a corporation, it is likely
that we would hold more than 10% of the voting power or value of the entity and
would fail to qualify as a REIT. See "-- Asset Tests."

A REIT that is a partner in a partnership will be deemed to own its
proportionate share of the assets of the partnership and will be deemed to earn
its proportionate share of the partnership's income. In addition, the assets and
gross income of the partnership retain the same character in the hands of the
REIT for purposes of the gross income and asset tests applicable to REITs. Thus,
our proportionate share of the assets and items of income of each subsidiary
partnership and limited liability company that is treated as a partnership for
federal income tax purposes is treated as our assets and items of income for
purposes of applying the asset and income tests. We have sufficient control over
all of the subsidiaries that are treated as partnerships for federal income tax
purposes to protect our REIT status and intend to operate them in a manner that
is consistent with the requirements for our qualification as a REIT.

TAXATION OF STOCKHOLDERS

Taxation of Taxable U.S. Stockholders. As used in the remainder of this
discussion, the term "U.S. Stockholder" means a beneficial owner of equity stock
that is for United States federal income tax purposes:

1. a citizen or resident, as defined in Section 7701(b) of the Code,
of the United States;

2. a corporation or partnership, or other entity treated as a
corporation or partnership for federal income tax purposes, created or
organized in or under the laws of the United States or any state or the
District of Columbia;

3. an estate the income of which is subject to United States federal
income taxation regardless of its source; or

4. in general, a trust subject to the primary supervision of a United
States court and the control of one or more United States persons.

If an entity treated as a partnership for U.S. federal income tax purposes
holds common stock, the tax treatment of a partner in the partnership will
generally depend upon the status of the partner and the activities of the
partnership. If the investor is a partner of a partnership holding common stock,
the investor should consult his or her tax advisor regarding the tax
consequences of the ownership and disposition of common stock. Generally, in the
case of a partnership that holds our stock, any partner that would be a U.S.
Stockholder if it held the stock directly is also a U.S. Stockholder.

As long as we qualify as a REIT, distributions made to our taxable U.S.
Stockholders out of current or accumulated earnings and profits (and not
designated as capital gain dividends or retained capital gains) will be taken
into account by them as ordinary income, and corporate stockholders will not be
eligible for the dividends received deduction as to such amounts. Distributions
in excess of current and accumulated earnings and profits will not be taxable to
a stockholder to the extent that they do not exceed the adjusted basis of such
stockholder's stock, but rather will reduce the adjusted basis of such shares
(but not below zero) as a return of capital. To the extent that such
distributions exceed the adjusted basis of a stockholder's stock, they will be
included in income as long-term capital gain (or short-term capital gain if the
shares have been held for one year or less), assuming the shares are a capital
asset in the hands of the stockholder. In addition, any dividend declared by us
in October, November or December of any year payable to a stockholder of record
on a specific date in any such month shall be treated as both paid by us and
received by the stockholder on December 31 of such year, provided that the
dividend is actually paid by us during January of the following calendar year.
For purposes of determining what portion of a distribution is attributable to
current or accumulated earnings and profits, earnings and profits will first be
allocated to distributions made to holders
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of the shares of preferred stock. Stockholders may not include in their
individual income tax returns any net operating losses or capital losses of
ours.

In general, any gain or loss realized upon a taxable disposition of shares
by a stockholder who is not a dealer in securities will be treated as a
long-term capital gain or loss if the shares have been held for more than one
year, otherwise as short-term capital gain or loss. However, any loss upon a
sale or exchange of stock by a stockholder who has held such shares for six
months or less (after applying certain holding period rules) will be treated as
long-term capital loss to the extent of distributions from us required to be
treated by such stockholder as long-term capital gain.

Distributions that we properly designate as capital gain dividends will be
taxable to stockholders as gains (to the extent that they do not exceed our
actual net capital gain for the taxable year) from the sale or disposition of a
capital asset held for greater than one year. If we designate any portion of a
dividend as a capital gain dividend, a U.S. Stockholder will receive an Internal
Revenue Service Form 1099-DIV indicating the amount that will be taxable to the
stockholder as capital gain. However, stockholders that are corporations may be
required to treat up to 20% of certain capital gain dividends as ordinary
income. A portion of capital gain dividends received by noncorporate taxpayers
may be subject to tax at a 25% rate to the extent attributable to certain gains
realized on the sale of real property. In addition, noncorporate taxpayers are
generally taxed at a maximum rate of 15% on net long-term capital gain
(generally, the excess of net long-term capital gain over net short-term capital
loss) attributable to gains realized on the sale of property held for greater
than one year.

Distributions we make and gain arising from the sale or exchange by a
stockholder of shares of our stock will not be treated as passive activity
income, and, as a result, stockholders generally will not be able to apply any
"passive losses" against such income or gain. Distributions we make (to the
extent they do not constitute a return of capital) generally will be treated as
investment income for purposes of computing the investment interest limitation.
Gain arising from the sale or other disposition of our stock (or distributions
treated as such) will not be treated as investment income under certain
circumstances.

Upon any taxable sale or other disposition of our stock, a U.S. Stockholder
will recognize gain or loss for federal income tax purposes on the disposition
of our stock in an amount equal to the difference between

- the amount of cash and the fair market value of any property received on
such disposition; and

- the U.S. Stockholder's adjusted basis in such stock for tax purposes.

Gain or loss will be capital gain or loss if the stock has been held by the
U.S. Stockholder as a capital asset. The applicable tax rate will depend on the
stockholder's holding period in the asset (generally, if an asset has been held
for more than one year it will produce long-term capital gain) and the
stockholder's tax bracket. A U.S. Stockholder who is an individual or an estate
or trust and who has long-term capital gain or loss will be subject to a maximum
capital gain rate of 15%. U.S. Stockholders that acquire, or are deemed to
acquire, stock after December 31, 2000 and who hold the stock for more than five
years and certain low income taxpayers may be eligible for a lower long-term
capital gains rate. However, to the extent that the capital gain realized by a
noncorporate stockholder on the sale of REIT stock corresponds to the REIT's
"unrecaptured Section 1250 gain," such gain would be subject to tax at a rate of
25%. Stockholders are advised to consult with their own tax advisors with
respect to their capital gain tax liability.

The Jobs and Growth Tax Relief Reconciliation Act of 2003 reduced the
maximum individual tax rate for long-term capital gains generally from 20% to
15% (for sales occurring after May 6, 2003 through December 31, 2008) and for
dividends generally from 38.6% to 15% (for tax years from 2003 through 2008).
Without future congressional action, the maximum tax rate on long-term capital
gains will return to 20% in 2009, and the maximum rate on dividends will move to
35% in 2009 and 39.6% in 2011. Because we are not generally subject to federal
income tax on the portion of our REIT taxable income or capital gains
distributed to our stockholders, our dividends will generally not be eligible
for the new 15% tax rate on dividends. As a

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result, our ordinary REIT dividends will continue to be taxed at the higher tax
rates applicable to ordinary income. However, the 15% tax rate for long-term
capital gains and dividends will generally apply to:

1. your long-term capital gains, if any, recognized on the disposition
of our shares;

2. our distributions designated as long-term capital gain dividends
(except to the extent attributable to "unrecaptured Section 1250 gain," in
which case such distributions would continue to be subject to a 25% tax
rate);

3. our dividends attributable to dividends received by us from
non-REIT corporations, such as taxable REIT subsidiaries; and

4. our dividends to the extent attributable to income upon which we
have paid corporate income tax (e.g., to the extent that we distribute less
than 100% of our taxable income).

Economic Accrual of Redemption Premium on Preferred Stock. For federal
income tax purposes, if a corporation issues preferred stock that may be
redeemed at a price that is more than a de minimis amount higher than its issue
price, the difference is treated as a "redemption premium" that is taxable to
the holder on an annual economic accrual basis. If a U.S. Stockholder recognizes
income as a result of redemption premium on the preferred stock, the holder's
tax basis in the preferred stock will increase by the amount included in the
holder's gross income.

Taxation of Tax-Exempt Stockholders. Provided that a tax-exempt
stockholder has not held its stock as "debt financed property" within the
meaning of the Code, the dividend income from us will not be unrelated business
taxable income, referred to as UBTI, to a tax-exempt stockholder. Similarly,
income from the sale of stock will not constitute UBTI unless the tax-exempt
stockholder has held its stock as debt financed property within the meaning of
the Code or has used the stock in a trade or business. However, for a tax-exempt
stockholder that is a social club, voluntary employee benefit association,
supplemental unemployment benefit trust, or qualified group legal services plan
exempt from federal income taxation under Sections 501(c)(7), (c)(9), (c)(17)
and (c)(20) of the Code, respectively, or a single parent title-holding
corporation exempt under Section 501(c)(2) of the Code the income of which is
payable to any of the aforementioned tax-exempt organizations, income from an
investment in us will constitute UBTI unless the organization properly sets
aside or reserves such amounts for purposes specified in the Code. These tax
exempt stockholders should consult their own tax advisors concerning these "set
aside" and reserve requirements.

A "qualified trust" (defined to be any trust described in Section 401(a) of
the Code and exempt from tax under Section 501(a) of the Code) that holds more
than 10% of the value of the shares of a REIT may be required, under certain
circumstances, to treat a portion of distributions from the REIT as UBTI. This
requirement will apply for a taxable year only if (i) the REIT satisfies the
requirement that not more than 50% of the value of its shares be held by five or
fewer individuals (the "five or fewer requirement") only by relying on a special
"look through" rule under which shares held by qualified trust stockholders are
treated as held by the beneficiaries of such trusts in proportion to their
actuarial interests therein; and (ii) the REIT is "predominantly held" by
qualified trusts. A REIT is "predominantly held" by qualified trusts if either
(i) a single qualified trust holds more than 25% of the value of the REIT
shares, or (ii) one or more qualified trusts, each owning more than 10% of the
value of the REIT shares, hold in the aggregate more than 50% of the value of
the REIT shares. If the foregoing requirements are met, the percentage of any
REIT dividend treated as UBTI to a qualified trust that owns more than 10% of
the value of the REIT shares is equal to the ratio of (i) the UBTI earned by the
REIT (computed as if the REIT were a qualified trust and therefore subject to
tax on its UBTI) to (ii) the total gross income (less certain associated
expenses) of the REIT for the year in which the dividends are paid. A de minimis
exception applies where the ratio set forth in the preceding sentence is less
than 5% for any year.

The provisions requiring qualified trusts to treat a portion of REIT
distributions as UBTI will not apply if the REIT is able to satisfy the five or
fewer requirement without relying on the look through rule. The restrictions on
ownership of stock in our charter should prevent application of the foregoing
provisions to qualified trusts purchasing our stock, absent a waiver of the
restrictions by the board of directors.

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Taxation of Non-U.S. Stockholders. The rules governing U.S. federal income
taxation of nonresident alien individuals, foreign corporations, foreign
partnerships and other foreign stockholders (collectively, "Non-U.S.
Stockholders") are complex, and no attempt will be made herein to provide more
than a limited summary of such rules. The discussion does not consider any
specific facts or circumstances that may apply to a particular Non-U.S.
Stockholder. Prospective Non-U.S. Stockholders should consult with their own tax
advisors to determine the impact of U.S. federal, state and local income tax
laws with regard to an investment in our common stock, including any reporting
requirements.

Distributions that are not attributable to gain from sales or exchanges by
us of U.S. real property interests and not designated by us as capital gain
dividends or retained capital gains will be treated as dividends of ordinary
income to the extent that they are made out of our current or accumulated
earnings and profits. Such distributions ordinarily will be subject to a
withholding tax equal to 30% of the gross amount of the distribution unless an
applicable tax treaty reduces such rate. However, if income from the investment
in our stock is treated as effectively connected with the Non-U.S. Stockholder's
conduct of a U.S. trade or business, the Non-U.S. Stockholder generally will be
subject to a tax at graduated rates in the same manner as U.S. Stockholders are
taxed with respect to such dividends (and may also be subject to a branch
profits tax of up to 30% if the stockholder is a foreign corporation). We expect
to withhold U.S. federal income tax at the rate of 30% on the gross amount of
any dividends paid to a Non-U.S. Stockholder that are not designated as capital
gain dividends, unless (i) a lower treaty rate applies and the Non-U.S.
Stockholder files an IRS Form W-8BEN evidencing eligibility for that reduced
rate with us or (ii) the Non-U.S. Stockholder files an IRS Form W-8ECI with us
claiming that the distribution is income treated as effectively connected to a
U.S. trade or business.

Distributions in excess of our current and accumulated earnings and profits
will not be taxable to a stockholder to the extent that they do not exceed the
adjusted basis of the stockholder's stock, but rather will reduce the adjusted
basis of such shares. To the extent that such distributions exceed the adjusted
basis of a Non-U.S. Stockholder's shares, they will give rise to tax liability
if the Non-U.S. Stockholder would otherwise be subject to tax on any gain from
the sale or disposition of his or her stock as described below. We may be
required to withhold U.S. federal income tax at the rate of at least 10% on
distributions to Non-U.S. Stockholders that are not paid out of current or
accumulated earnings and profits unless the Non-U.S. Stockholders provide us
with withholding certificates evidencing their exemption from withholding tax.
If it cannot be determined at the time that such a distribution is made whether
or not such distribution will be in excess of current and accumulated earnings
and profits, the distribution will be subject to withholding at the rate
applicable to dividends. However, the Non-U.S. Stockholder may seek a refund of
such amounts from the Service if it is subsequently determined that such
distribution was, in fact, in excess of our current and accumulated earnings and
profits.

Distributions that are attributable to gain from sales or exchanges by us
of U.S. real property interests will be taxed to a Non-U.S. Stockholder under
the provisions of the Foreign Investment in Real Property Tax Act of 1980
("FIRPTA"). Under FIRPTA, these distributions are taxed to a Non-U.S.
Stockholder as if such gain were effectively connected with a U.S. business.
Thus, Non-U.S. Stockholders will be taxed on such distributions at the normal
capital gain rates applicable to U.S. Stockholders (subject to applicable
alternative minimum tax and a special alternative minimum tax in the case of
nonresident alien individuals). Also, distributions subject to FIRPTA may be
subject to a 30% branch profits tax in the hands of a corporate Non-U.S.
Stockholder not entitled to treaty relief or exemption. We are required by
applicable Treasury Regulations to withhold 35% of any distribution that could
be designated by us as a capital gain dividend. This amount is creditable
against the Non-U.S. Stockholder's FIRPTA tax liability.

Beginning in 2005, a Non-U.S. stockholder that owns no more than 5% of our
common stock at all times during such taxable year will not be subject to 35%
FIRPTA withholding with respect to distributions that are attributable to gain
from our sale or exchange of U.S. real property interests, provided that our
common stock continues to be regularly traded on an established securities
market. Instead, any distributions made to such Non-U.S. Stockholder will be
subject to the general withholding rules discussed above in "-- Taxation of
Non-U.S. Stockholders," which generally impose a withholding tax equal to 30% of
the gross amount of each distribution (unless reduced by treaty).
S-15

Gain recognized by a Non-U.S. Stockholder upon the sale or exchange of our
stock generally would not be subject to United States taxation unless:

- the investment in our stock is effectively connected with the Non-U.S.
Stockholder's U.S. trade or business, in which case the Non-U.S.
Stockholder will be subject to the same treatment as domestic
stockholders with respect to any gain;

- the Non-U.S. Stockholder is a non-resident alien individual who is
present in the United States for 183 days or more during the taxable year
and has a tax home in the United States, in which case the non-resident
alien individual will be subject to a 30% tax on the individual's net
capital gains for the taxable year; or

- our stock constitutes a U.S. real property interest within the meaning of
FIRPTA, as described below.

Our stock will not constitute a U.S. real property interest if we are a
domestically-controlled REIT. We will be a domestically-controlled REIT if, at
all times during a specified testing period, less than 50% in value of our stock
is held directly or indirectly by Non-U.S. Stockholders.

We believe that, currently, we are a domestically controlled REIT and,
therefore, that the sale of our stock would not be subject to taxation under
FIRPTA. Because our stock is publicly traded, however, we cannot guarantee that
we are or will continue to be a domestically-controlled REIT.

Even if we do not qualify as a domestically-controlled REIT at the time a
Non-U.S. Stockholder sells our stock, gain arising from the sale still would not
be subject to FIRPTA tax if:

- the class or series of shares sold is considered regularly traded under
applicable Treasury Regulations on an established securities market, such
as the NYSE; and

- the selling Non-U.S. Stockholder owned, actually or constructively, 5% or
less in value of the outstanding class or series of stock being sold
throughout the five-year period ending on the date of the sale or
exchange.

If gain on the sale or exchange of our stock were subject to taxation under
FIRPTA, the Non-U.S. Stockholder would be subject to regular U.S. federal income
tax with respect to any gain in the same manner as a taxable U.S. Stockholder,
subject to any applicable alternative minimum tax and special alternative
minimum tax in the case of non-resident alien individuals.

State and Local Taxes. We and our stockholders may be subject to state or
local taxation in various state or local jurisdictions, including those in which
we or they transact business or reside (although U.S. Stockholders who are
individuals generally should not be required to file state income tax returns
outside of their state of residence with respect to our operations and
distributions). The state and local tax treatment of us and our stockholders may
not conform to the federal income tax consequences discussed above.
Consequently, prospective stockholders should consult their own tax advisors
regarding the effect of state and local tax laws on an investment in the common
stock.

BACKUP WITHHOLDING TAX AND INFORMATION REPORTING

U.S. Stockholders. In general, information-reporting requirements will
apply to certain U.S. Stockholders with regard to payments of dividends on our
stock and payments of the proceeds of the sale of our stock, unless an exception
applies.

The payor will be required to withhold tax on such payments at the rate of
28% if (i) the payee fails to furnish a taxpayer identification number, or TIN,
to the payor or to establish an exemption from backup withholding, or (ii) the
Internal Revenue Service notifies the payor that the TIN furnished by the payor
is incorrect.

S-16

discount described in Section 3406(c) of the Code, or (ii) there has been a
failure of the payee to certify under the penalty of perjury that the payee is
not subject to backup withholding under the Code.

Some holders, including corporations, may be exempt from backup
withholding. Any amounts withheld under the backup withholding rules from a
payment to a holder will be allowed as a credit against the holder's U.S.
federal income tax and may entitle the holder to a refund, provided that the
required information is furnished to the Internal Revenue Service.

Non-U.S. Stockholders. Generally, information reporting will apply to
payments of dividends on our stock, interest, including original issue discount,
and backup withholding as described above for a U.S. Stockholder, unless the
payee certifies that it is not a U.S. person or otherwise establishes an
exemption.

The payment of the proceeds from the disposition of our stock to or through
the U.S. office of a U.S. or foreign broker will be subject to information
reporting and backup withholding as described above for U.S. Stockholders unless
the Non-U.S. Stockholder satisfies the requirements necessary to be an exempt
Non-U.S. Stockholder or otherwise qualifies for an exemption. The proceeds of a
disposition by a Non-U.S. Stockholder of our stock to or through a foreign
office of a broker generally will not be subject to information reporting or
backup withholding. However, if the broker is a U.S. person, a controlled
foreign corporation for U.S. tax purposes, a foreign person 50% or more of whose
gross income from all sources for specified periods is from activities that are
effectively connected with a U.S. trade or business, a foreign partnership if
partners who hold more than 50% of the interests in the partnership are U.S.
persons, or a foreign partnership that is engaged in the conduct of a trade or
business in the U.S., then information reporting generally will apply as though
the payment was made through a U.S. office of a U.S. or foreign broker.

Applicable Treasury Regulations provide presumptions regarding the status
of holders when payments to the holders cannot be reliably associated with
appropriate documentation provided to the payor. Under these Treasury
Regulations, some holders are required to provide new certifications with
respect to payments made after December 31, 2000. Because the application of
these Treasury Regulations varies depending on the stockholder's particular
circumstances, you are advised to consult your tax advisor regarding the
information reporting requirements applicable to you.

SUNSET OF TAX PROVISIONS AND POSSIBLE LEGISLATIVE OR OTHER ACTIONS AFFECTING TAX
CONSIDERATIONS

Several of the tax considerations described herein are subject to a sunset
provision. The sunset provision generally provides that for taxable years
beginning after December 31, 2008, certain provisions that are currently in the
Code will revert back to a prior version of those provisions. These provisions
include provisions related to qualified dividend income, the application of the
15% capital gains rate to qualified dividend income and other tax rates
described herein. The impact of this reversion is not discussed herein.
Consequently, prospective security holders should consult their own tax advisors
regarding the effect of sunset provisions on an investment in our stock.

In addition, prospective investors should recognize that the present U.S.
federal income tax treatment of an investment in our stock may be modified by
legislative, judicial or administrative action at any time, and that any such
action may affect investments and commitments previously made. The rules dealing
with U.S. federal income taxation are constantly under review by persons
involved in the legislative process and by the Internal Revenue Service and the
U.S. Treasury Department, resulting in revisions of Treasury Regulations and
revised interpretations of established concepts as well as statutory changes.
Revisions in U.S. federal tax laws and interpretations thereof could adversely
affect the tax consequences of an investment in our stock.

S-17

UNDERWRITING

Citigroup Global Markets Inc. is acting as sole underwriter of this
offering. Subject to the terms and conditions stated in the underwriting
agreement dated March 28, 2005, the underwriter has agreed to purchase, and we
have agreed to sell to the underwriter, an aggregate of 800,000 shares of our
common stock.

The underwriting agreement provides that the obligations of the underwriter
to purchase the shares included in this offering are subject to approval of
legal matters by counsel and to other conditions. The underwriter is obligated
to purchase all the shares (other than those covered by the over-allotment
option described below) if it purchases any of the shares.

We have granted to the underwriter an option, exercisable for 30 days from
the date of this prospectus supplement, to purchase up to an aggregate of
120,000 additional shares of our common stock at the public offering price less
the underwriting discount. The underwriter may exercise the option solely for
the purpose of covering over-allotments, if any, in connection with this
offering.

For a period of 45 days from the date of this prospectus supplement, we,
our executive officers and our directors have agreed that we and they will not,
without the prior written consent of the underwriter, dispose of or hedge any of
our shares of common stock or any securities convertible into or exchangeable
for our common stock. The underwriter in its sole discretion may release any of
the securities subject to these lock-up agreements at any time without notice.

Shares of our common stock are listed on the New York Stock Exchange under
the symbol "EGP."

The following table shows the underwriting discounts that we are to pay to
the underwriter in connection with this offering. These amounts are shown
assuming both no exercise and full exercise of the underwriter's option to
purchase additional shares of our common stock.

NO EXERCISE FULL EXERCISE
----------- -------------

Per Share................................................... $ 0.75 $ 0.75
Total....................................................... $600,000 $690,000

In connection with the offering, the underwriter may purchase and sell
shares of our common stock in the open market. These transactions may include
short sales, syndicate covering transactions and stabilizing transactions. Short
sales involve syndicate sales of shares of common stock in excess of the number
of shares to be purchased by the underwriter in the offering, which creates a
syndicate short position. "Covered" short sales are sales of shares made in an
amount up to the number of shares represented by the underwriter's
over-allotment option. In determining the source of shares to close out the
covered syndicate short position, the underwriter will consider, among other
things, the price of shares available for purchase in the open market as
compared to the price at which it may purchase shares through the over-allotment
option. Transactions to close out the covered syndicate short position involve
either purchases of our common stock in the open market after the distribution
has been completed or the exercise of the over-allotment option. The underwriter
may also make "naked" short sales of shares in excess of the over-allotment
option. The underwriter must close out any naked short position by purchasing
our common stock in the open market. A naked short position is more likely to be
created if the underwriter is concerned that there may be downward pressure on
the price of the shares in the open market after pricing that could adversely
affect investors who purchase in the offering. Stabilizing transactions consist
of bids for or purchases of shares of our common stock in the open market while
the offering is in progress.

Any of these activities may have the effect of preventing or retarding a
decline in the market price of our common stock. They may also cause the price
of our common stock to be higher than the price that would otherwise exist in
the open market in the absence of these transactions. The underwriter may
conduct these transactions on the New York Stock Exchange or in the
over-the-counter market, or otherwise. If the

S-18

underwriter commences any of these transactions, it may discontinue them at any
time. We estimate that our total expenses for this offering will be
approximately $100,000.

The underwriter has performed commercial and investment banking and
advisory services for us from time to time for which it has received customary
fees and expenses. The underwriter may, from time to time, engage in
transactions with and perform services for us in the ordinary course of its
business.

A prospectus and prospectus supplement in electronic format may be made
available on the website maintained by the underwriter.

We have agreed to indemnify the underwriter against certain liabilities,
including liabilities under the Securities Act of 1933, or to contribute to
payments the underwriter may be required to make because of any of those
liabilities.

EXPERTS

The consolidated financial statements and schedules of EastGroup
Properties, Inc. as of December 31, 2004 and 2003, and for each of the years in
the three-year period ended December 31, 2004, and management's assessment of
the effectiveness of internal control over financial reporting as of December
31, 2004, have been incorporated by reference herein and in the registration
statement in reliance upon the reports of KPMG LLP, independent registered
public accounting firm, incorporated by reference herein, and upon the authority
of said firm as experts in accounting and auditing.

LEGAL MATTERS

The legality of the securities offered hereby will be passed upon for us by
Jaeckle Fleischmann & Mugel, LLP, Buffalo, New York who may rely upon an opinion
of DLA Piper Rudnick Gray Cary US LLP, Baltimore, Maryland as to certain
Maryland law matters. Certain legal matters will be passed upon for the
underwriter by Morrison & Foerster LLP, Palo Alto, California.

WHERE YOU CAN FIND MORE INFORMATION

We have filed with the SEC a registration statement on Form S-3 (Reg. No.
333-109769) with respect to the securities offered hereunder. As permitted by
the SEC's rules and regulations, this prospectus supplement and the accompanying
prospectus, do not contain all the information set forth in the registration
statement. For further information regarding our company and our equity stock,
please refer to the registration statement and the contracts, agreements and
other documents filed as exhibits to the registration statement. Additionally,
we file annual, quarterly and special reports, proxy statements and other
information with the SEC.

You may read and copy all or any portion of the registration statement or
any other materials that we file with the SEC at the SEC public reference room
at 450 Fifth Street, Washington, D.C., 20549. Please call the SEC at
1-800-SEC-0330 for further information on the operation of the public reference
rooms. Our SEC filings, including the registration statement, are also available
to you on the SEC's Web site (www.sec.gov). We also have a Web site
(www.eastgroup.net) through which you may access our SEC filings. In addition,
you may view our SEC filings at the offices of the New York Stock Exchange,
Inc., which is located at 20 Broad Street, New York, New York 10005. Our SEC
filings are available at the NYSE because our common stock is listed and traded
on the NYSE under the symbol "EGP."

Information contained on our Web site is not and should not be deemed a
part of this prospectus supplement or the accompanying prospectus.

S-19

INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE

The SEC allows us to incorporate by reference the information contained in
documents that we file with them. The information incorporated by reference is
considered to be part of this prospectus supplement and accompanying prospectus,
and information that we file later with the SEC will automatically update and
supersede this information.

We incorporate by reference the documents listed below and any future
filings we make with the SEC pursuant to Sections 13(a), 13(c), 14 or 15(d) of
the Securities Exchange Act prior to the completion of this offering:

- Annual Report on Form 10-K for the year ended December 31, 2004;

- Current Report on Form 8-K filed with the SEC on February 14, 2005; and

- Registration Statement on Form 8-B dated June 5, 1997 registering our
common stock under Section 12(b) of the Exchange Act.

You may request a free copy of these filings (other than exhibits, unless
they are specifically incorporated by reference in the documents) by writing or
telephoning us at the following address and telephone number:

EASTGROUP PROPERTIES, INC.
ATTENTION: CHIEF FINANCIAL OFFICER
300 ONE JACKSON PLACE
188 EAST CAPITOL STREET
JACKSON, MISSISSIPPI 39201-2195
(601) 354-3555

S-20

PROSPECTUS

$250,000,000

EASTGROUP PROPERTIES, INC.

COMMON STOCK, PREFERRED STOCK, WARRANTS

We may use this prospectus to offer and sell securities from time to time.
The types of securities we may sell include:

- shares of common stock;

- shares of preferred stock; or

- warrants to purchase preferred stock or common stock.

We will provide the specific terms of these securities in supplements to
this prospectus in connection with each offering. These terms may include:

In the case of any securities: In the case of preferred In the case of warrants:
stock:

- offering price; - dividends rights; - the types of securities that
- size of offering; - liquidation preferences; may be acquired upon exercise;
- underwriting discounts; - redemption provisions; - expiration date;
- limitations on direct or - conversion privileges; and - exercise price; and
beneficial ownership; and - voting and other rights. - terms of exercisability.
- restrictions on transfer

The securities offered will contain other significant terms and conditions.
Please read this prospectus and the applicable prospectus supplement carefully
before you invest.

Shares of our common stock are listed on the New York Stock Exchange under
the symbol "EGP."

AN INVESTMENT IN SECURITIES INVOLVES A HIGH DEGREE OF RISK. SEE "RISK
FACTORS "BEGINNING ON PAGE 6 OF THIS PROSPECTUS FOR A DISCUSSION OF RISK FACTORS
THAT YOU SHOULD CONSIDER IN CONNECTION WITH AN INVESTMENT IN THE SECURITIES.

---------------------

Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of the securities or passed upon the
accuracy or adequacy of this prospectus. Any representation to the contrary is a
criminal offense.

---------------------

The date of this prospectus is November 3, 2003.

YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN OR INCORPORATED BY
REFERENCE INTO THIS PROSPECTUS AND ANY RELATED PROSPECTUS SUPPLEMENT. WE HAVE
NOT AUTHORIZED ANY OTHER PERSON TO PROVIDE YOU WITH DIFFERENT INFORMATION. IF
ANYONE PROVIDES YOU WITH DIFFERENT OR INCONSISTENT INFORMATION, YOU SHOULD NOT
RELY ON IT. WE ARE NOT MAKING AN OFFER TO SELL THESE SECURITIES IN ANY
JURISDICTION WHERE THE OFFER OR SALE IS NOT PERMITTED. YOU SHOULD ASSUME THAT
THE INFORMATION APPEARING IN THIS PROSPECTUS, THE RELATED PROSPECTUS SUPPLEMENT
AND THE DOCUMENTS INCORPORATED BY REFERENCE HEREIN IS ACCURATE ONLY AS OF ITS
RESPECTIVE DATE OR DATES OR ON THE DATE OR DATES WHICH ARE SPECIFIED IN THESE
DOCUMENTS. OUR BUSINESS, FINANCIAL CONDITION, RESULTS OF OPERATIONS AND
PROSPECTS MAY HAVE CHANGED SINCE THOSE DATES.

TABLE OF CONTENTS

PAGE
----

ABOUT THIS PROSPECTUS

This prospectus is part of a registration statement that we filed with the
Securities and Exchange Commission, or SEC, using a "shelf" registration
process, which enables us, from time to time, to offer and sell in one or more
offerings common shares, preferred shares and warrants to purchase common shares
and/or preferred shares or any combination of these securities. The aggregate
public offering price of the securities we sell in these offerings will not
exceed $250,000,000. This prospectus contains a general description of the
securities that we may offer. Each time we sell any securities pursuant to this
prospectus, we will provide a prospectus supplement that will contain specific
information about the terms of that offering. The prospectus supplement also may
add, update or change information contained in this prospectus. You should read
this prospectus and the applicable prospectus supplement, together with the
additional information described below under the heading "Where You Can Find
More Information," before you decide whether to invest in the securities.

FORWARD-LOOKING INFORMATION

We have made forward-looking statements with respect to our financial
condition, results of operations and business and on the possible impact of this
offering on our financial performance. Words such as "anticipates," "expects,"
"intends," "plans," "believes," "seeks," "estimates" and similar expressions as
they relate to us or our management, are intended to identify forward-looking
statements. These forward-looking statements are not guarantees of future
performance and are subject to risks and uncertainties, including those
described in our filing with the SEC and under "Risk Factors" in this
prospectus, that could cause actual results to differ materially from the
results contemplated by the forward-looking statements.

In evaluating the securities offered by this prospectus, you should
carefully consider the discussion of risks and uncertainties in the section
entitled "Risk Factors" on pages 6 to 15 of this prospectus.

WHERE YOU CAN FIND MORE INFORMATION

We have filed with the Securities and Exchange Commission, or the SEC, a
registration statement under the Securities Act with respect to the securities
offered hereunder. As permitted by the SEC's rules and regulations, this
prospectus does not contain all of the information set forth in the registration
statement. For further information regarding our company and our equity stock,
please refer to the registration statement and the contracts, agreements and
other documents filed as exhibits to the registration statement. Additionally,
we file annual, quarterly and special reports, proxy statements and other
information with the SEC.

You may read and copy all or any portion of the registration statement or
any other materials that we file with the SEC at the SEC public reference room
at 450 Fifth Street, Washington, D.C., 20549. Please call the SEC at
1-800-SEC-0330 for further information on the operation of the public reference
rooms. Our SEC filings, including the registration statement, are also available
to you on the SEC's web site (www.sec.gov). We also have a web site
(www.eastgroup.net) through which you may access our SEC filings. In addition,
you may view our SEC filings at the offices of the New York Stock Exchange,
Inc., which is located at 20 Broad Street, New York, New York 10005. Our SEC
filings are available at the NYSE because our common stock is listed and traded
on the NYSE under the symbol "EGP."

Information contained on our web site is not and should not be considered a
part of this prospectus.

INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE

The SEC allows us to incorporate by reference the information contained in
documents that we file with them. The information incorporated by reference is
considered to be part of this prospectus, and information that we file later
with the SEC will automatically update and supersede this information.

- Our Annual Report on Form 10-K for the year ended December 31, 2002;

- Amendment No. 1 to our Annual Report on Form 10-K for the year ended
December 31, 2002;

- Our Quarterly Report on Form 10-Q for the three months ended March 31,
2003;

- Our Quarterly Report on Form 10-Q for the three months ended June 30,
2003;

- Our Current Reports on Form 8-K filed on May 22, 2003, June 2, 2003, June
4, 2003 and July 17, 2003; and

- The description of our common stock contained in our registration
statement on Form 8-B, filed on June 5, 1997, and all amendments and
reports updating that description.

EASTGROUP PROPERTIES, INC.
ATTENTION: CHIEF FINANCIAL OFFICER
300 ONE JACKSON PLACE
188 EAST CAPITOL STREET
JACKSON, MS 39201-2195
(601) 354-3555

ABOUT EASTGROUP PROPERTIES, INC.

We are an equity real estate investment trust, or REIT, focused on the
acquisition, ownership and development of industrial properties in major Sunbelt
markets throughout the United States with a special emphasis in the states of
California, Florida, Texas and Arizona. We are a self-administered REIT in that
we provide our own investment and administrative services internally through our
own employees. Our strategy for growth is based on property portfolio
orientation toward premier distribution facilities located near major
transportation centers. As of June 30, 2003, our portfolio included 18.9 million
square feet with an additional 510,000 square feet of properties under
development. As of June 30, 2003, our industrial properties were, on average,
approximately 92.4% leased. Our mission is to maximize stockholder value by
being the leading provider of highly functional, flexible and quality business
distribution space for location sensitive tenants in the 5,000 to 50,000 square
foot range.

We are a corporation organized under the laws of the State of Maryland. Our
principal executive offices are located at 300 One Jackson Place, 188 East
Capitol Street, Jackson, MS 39201-2195, and our telephone number is (601)
354-3555. We also have a web site at www.eastgroup.net. Information contained on
our web site is not and should not be considered a part of this prospectus.

Additional information regarding EastGroup, including our audited financial
statements, is contained in the documents incorporated by reference in this
prospectus. See "Where You Can Find More Information" on page 3.

RISK FACTORS

You should carefully consider the risks and uncertainties described below
before purchasing our securities. Although our most significant risks and
uncertainties are described below, these are not the only risks that we may
face. If any of the following actually occurs, our business, financial condition
or operating results could be materially harmed and the trading price of our
securities, to the extent such securities are listed on any exchange,
inter-dealer quotation system or over-the-counter market, could decline and you
may lose all or part of your investment. In addition to the risks and
uncertainties described below, you should carefully consider all of the
information in this prospectus and the documents we refer you to in the section
in this prospectus called "Where You Can Find More Information."

REAL ESTATE INDUSTRY RISKS

We face risks associated with local real estate conditions in areas where
we own properties. We may be affected adversely 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;

- construction costs; and

- weather conditions that may increase or decrease energy costs.

We may be unable to compete with our larger competitors and other
alternatives available to tenants or potential tenants of our properties. The
real estate business is highly competitive. We compete for interests in
properties with other real estate investors and purchasers, many 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. In
addition, our portfolio of retail properties faces competition from other
properties within each submarket where they are located.

We are subject to significant regulation that inhibits our
activities. Local zoning and 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 renew leases or relet space as leases expire. When a
lease expires, a tenant may elect not to renew it. We may not be able to relet
the property on similar terms, if we are able to relet the property at all. The
terms of renewal or re-lease (including the cost of required renovations or
concessions to tenants) may be less favorable to us than the prior lease. If we
are unable to relet all or a substantial portion of our properties, or if the
rental rates upon such reletting 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.

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 operating costs,
taxes and insurance.

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.

Development and acquisition risks could impact our profitability. We
intend to continue to develop and acquire industrial properties. Such activities
may be conducted through wholly-owned affiliated companies or through joint
ventures with unaffiliated parties. We cannot be sure that properties will be
available for acquisition or development or, if available, that we will be able
to acquire or develop those properties upon favorable terms or that favorable
financing will be available for acquisitions or development. The unavailability
of properties could limit our growth. In addition, acquisitions and the
development of new properties may fail to perform in accordance with our
expectations, and our cost estimates for marketing, acquisition, development and
operation may be inaccurate. Our acquisition and development activities may also
be exposed to the following risks:

- we may not be able to acquire a desired property because of competition
from other real estate investors with greater capital and resources;

- we may overpay for new acquisitions;

- we may be unable to obtain, or face delays in obtaining, necessary
zoning, land-use, building, occupancy and other required governmental
permits and authorizations, which could result in increased development
costs;

- we may incur construction costs for a property that exceed original
estimates due to increased materials, labor or other costs, which could
make completion of the property uneconomical, and we may not be able to
increase rents to compensate for the increase in construction costs;

- we may abandon development opportunities that we have already begun to
explore, and we may fail to recover expenses already incurred in
connection with exploring those opportunities;

- we have been and may continue to be unable to complete construction and
lease-up of a property on schedule and meet financial goals for
development projects;

- new development activities, regardless of their ultimate success,
typically require a substantial portion of our management's time and
attention, diverting their attention from our day-to-day operations; and

- because occupancy rates and rents at a newly developed property may
fluctuate depending on a number of factors, including market and economic
conditions, we may be unable to meet our profitability goals for that
property.

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. However, we would be required to bear all
losses
7

that are not adequately covered by insurance. In addition, there are certain
losses that are not generally insured because it is not economically feasible to
insure against them, including losses due to riots or acts of war. 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 and,
in the case of debt, which is with recourse to us, we would remain obligated for
any mortgage debt or other financial obligations related to the properties.
Moreover, as a number of our properties are located in California, an area known
for seismic activity, we may incur material losses in the future in excess of
insurance proceeds from our earthquake insurance. Although we believe that our
insurance programs are adequate, we cannot assure you that we will not incur
losses in excess of our insurance coverage, or that we will be able to obtain
insurance in the future at acceptable levels and reasonable costs.

Increased operating costs may reduce our profitability and have an adverse
effect on our cash flow and our ability to make distributions to our
stockholders. In general, under our leases with tenants, we pass on a portion
of our operating costs to them. However, we cannot assure you that tenants will
actually bear the full burden of any higher operating costs, or that such
increased costs will not lead them, or other prospective tenants, to seek space
elsewhere. Also, lower occupancy rates of our properties affect our ability to
pass on our operating costs to our tenants. Moreover, the availability of other
comparable industrial space in our specific geographic markets may limit our
ability to increase rents.

We face risks due to lack of geographic diversity. Substantially all of
our properties are located in the Sunbelt region of the United States with a
special emphasis in the states of California, Florida, Texas and Arizona, which
in the aggregate represent 82.7% of the total square footage of our operating
properties and 82.7% of our annualized base rent as of June 30, 2003. 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.

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, 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 in the time
period we desire or that the sales price of the investment will recoup or exceed
our cost for the investment.

We face possible environmental liabilities. Current and former real estate
owners and operators may be required by law 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. 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 affect adversely 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, does not relieve the owner or operator
from liability. Although we have conducted Phase I environmental site
assessments ("ESAs") at most of our properties to identify potential sources of
contamination at those properties, such ESAs do not reveal all environmental
liabilities or compliance concerns that could arise from those 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.

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. We anticipate
that a portion of the principal of our debt will not be repaid prior to
maturity. 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 related to "balloon payments." Certain of our mortgages will
have significant outstanding principal balances on their maturity dates,
commonly known as "balloon payments." There can be no assurance whether we will
be able to refinance such balloon payments on the maturity of the loans, which
may force disposition of properties on disadvantageous terms or require
replacement with debt with higher interest rates, either of which would have an
adverse impact on our financial performance and ability to pay dividends to
investors.

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 REIT 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
capitalization ratio. Additional equity financing will dilute the holdings of
our current stockholders.

Fluctuations in interest rates may adversely affect our operations and
value of our stock. As of June 30, 2003, we had approximately $77 million of
variable interest rate debt. As of June 30, 2003, the weighted average interest
rate on our variable rate debt was 2.4%. We may also incur 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.

We could default on cross-collateralized and cross-defaulted debt. As of
June 30, 2003, we had six secured loans that are cross-collateralized by 56
properties, totaling $165,973,000. If we default on any of these loans, then we
could be required to repay the aggregate of all indebtedness, together with
applicable prepayment charges, to avoid foreclosure on all the
cross-collateralized properties within the applicable pool. In addition, our
credit facilities contain cross-default provisions, which may be triggered in
the event that our other material indebtedness is in default. These
cross-default provisions may require us to repay or restructure the credit
facilities.

We may amend our investment strategy and business policies without your
approval. Our Board of Directors determines our growth, investment, financing,
capitalization, borrowing, REIT status, operating and distribution policies.
Although the Board of Directors has no present intention to amend or revise any
of these policies, these policies may be amended or revised without notice to
stockholders. Accordingly, stockholders may not have control over changes in our
policies. We cannot assure you that changes in our policies will fully serve the
interests of all stockholders.

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.

U.S. Federal income tax law developments could affect the desirability of
investing in our common stock because of our REIT status. In May 2003,
legislation was enacted that reduces the maximum tax rate of noncorporate
taxpayers for capital gains generally from 20% to 15% (from May 6, 2003 through
2008) and for dividends payable to noncorporate taxpayers generally from 38.6%
to 15% (from January 1, 2003 through 2008). In general, dividends payable by
REITs are not eligible for such treatment except in limited circumstances which
we do not contemplate. However, the recent legislation reduces the maximum tax
rate of noncorporate taxpayers on ordinary income from 38.6% to 35%.

Although this legislation does not adversely affect the taxation of REITs
or dividends paid by REITs, the more favorable treatment of regular corporate
dividends could cause investors who are individuals to consider stocks of other
corporations that pay dividends as more attractive relative to stocks of REITs.
It is not possible to predict whether this change in perceived relative value
will occur, or what the effect will be on the market price of our stock.

There are limits on the ownership of our capital stock as a result of which
a stockholder may lose beneficial ownership of its shares. The Internal Revenue
Code provides that, in order for us to maintain our REIT status, not more than
50% of the value of our outstanding capital stock may be owned, directly or
constructively, by five or fewer individuals or entities. In addition, our
charter prohibits, with limited exceptions, direct or constructive ownership of
more than 9.8% in value or in number of our outstanding equity stock (defined as
all of our classes of capital stock, except our excess stock), whichever is more
restrictive, by any individual or entity. The constructive ownership rules are
complex and may cause shares of our capital stock owned directly or
constructively by a group of related individuals or entities to be
constructively owned by one individual or entity. An acquisition of shares by a
person, or a transfer of shares to a person, as a result of which the ownership
limits set forth above are violated, may be void or may be deemed to be made to
a trust designated by us, or the shares of capital stock to be purchased or
transferred may be converted into another form of our securities.

We are subject to restrictions that may impede our ability to effect a
change in control. Certain provisions contained in our charter and bylaws, our
stockholder rights plan and severance agreements with our executive officers may
have the effect of discouraging a third party from making an acquisition
proposal for us and thereby inhibit a change in control.

Our Charter contains provisions that may adversely affect the value of
shareholders' stock. Our charter generally limits 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). 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
proposal of business to be considered at a meeting of stockholders.

We have adopted a stockholder rights plan that may make a change in control
difficult. We have a stockholder rights plan. Under the terms of the plan, we
declared a dividend of rights on our common stock and Series B preferred stock.
The rights issued under the plan will be triggered, with certain exceptions, if
and when any person or group acquires, or commences a tender offer to acquire,
15% or more of our shares, our Board of Directors determines that a substantial
stockholder's ownership may be adverse to the interests of our other
stockholders or our qualification as a REIT, or other similar events. The plan
could have the effect of deterring or preventing our acquisition, even if a
majority of our stockholders were in favor of such acquisition, and could have
the effect of making it more difficult for a person or group to gain control of
us or to change existing management.
10

We have change of control agreements with our executives that may deter
changes of control of the Company. We have entered into change of control
agreements with each of our executives providing for the payment of money to
these executives upon the occurrence of our change of control as defined in
these agreements. If, within a certain time period (as set in the executive's
agreement) following a change of control, we terminate the executive's
employment other than for cause, or if the executive elects to terminate his or
her employment with us for reasons specified in the agreement, we will make a
severance payment equal to the executive's average annual compensation times an
amount specified in the executive's agreement, together with the executive's
base salary and vacation pay that have accrued but are unpaid through the date
of termination. These agreements may deter our change of 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. As a Maryland corporation, we are subject to various
Maryland laws which may have the effect of discouraging offers to acquire our
company and of increasing the difficulty of consummating any such offers, even
if our acquisition would be in our stockholders' best interests. The Maryland
General Corporation Law restricts mergers and other business combination
transactions between us and any person who acquires beneficial ownership of
shares of our stock representing 10% or more of the voting power without our
Board of Directors' prior approval. Any such business combination transaction
could not be completed until five years after the person acquired such voting
power, and generally only with the approval of stockholders representing 80% of
all votes entitled to be cast and 66 2/3% of the votes entitled to be cast,
excluding the interested stockholder, or upon payment of a fair price. Maryland
law also provides generally that a person who acquires shares of our equity
stock that represent 10% or more of the voting power in electing directors will
have no voting rights unless approved by a vote of two-thirds of the shares
eligible to vote.

Additionally, Maryland law provides, among other things, that our Board of
Directors has broad discretion in adopting stockholders' rights plans and has
the sole power to fix the record date, time and place for special meetings of
the stockholders. Furthermore, Maryland corporations that:

- have three independent directors who are not officers or employees of the
entity or related to an acquiring person; and

- are subject to the reporting requirements of the Securities Exchange Act
of 1934, may elect in their charter or bylaws or by resolution of the
board of directors to be subject to all or part of a special subtitle
that provides that:

- the corporation will have a staggered board of directors;

- any director generally may be removed only for cause and by the vote of
two-thirds of the votes entitled to be cast in the election of directors,
even if a lesser proportion is provided in the charter or bylaws;

- the number of directors may only be set by the board of directors, even
if the procedure is contrary to the charter or bylaws;

- vacancies may be filled by the affirmative vote of a majority of the
remaining directors, even if the procedure is contrary to the charter or
bylaws; and

- the Secretary of the corporation may call a special meeting of
stockholders at the request of stockholders only upon the written request
of the stockholders entitled to cast at least a majority of all the votes
entitled to be cast at the meeting, even if the procedure is contrary to
the charter or bylaws.

To date, we have not made any of the elections described above although our
charter and bylaws contain some of these provisions independent of these
elections.

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
2008. 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 are qualified or will remain qualified as a REIT.

We may be unable to comply with the strict income distribution requirements
applicable to REITs. To obtain the favorable tax treatment associated with
qualifying as a REIT, among other requirements, we are required each year to
distribute to our stockholders at least 90% of our REIT taxable income (other
than our net capital gain). We will be subject to corporate income tax on any
undistributed REIT taxable income. In addition, we will incur a 4% nondeductible
excise tax on the amount by which our distributions (including any capital gains
we elect to retain) in any calendar year are less than the sum of: (i) 85% of
our ordinary income for the year; (ii) 95% of our capital gain net income for
the year; and (iii) any undistributed taxable income from prior years. We could
be required to borrow funds on a short-term basis to meet the distribution
requirements that are necessary to achieve the tax benefits associated with
qualifying as a REIT (and to avoid corporate income tax and the 4% excise tax),
even if conditions were not favorable for borrowing.

Notwithstanding our status as a REIT, we are subject to various federal,
state, local and foreign taxes on our income and property. For example, as
described above, we will be taxed at regular corporate rates on any
undistributed taxable income, including undistributed net capital gains,
provided, however, that properly designated undistributed capital gains will
effectively avoid taxation at the stockholder level. We may be subject to other
federal income taxes as more fully described in "Material United States Federal
Income Tax Consequences -- Taxation of Us as a REIT." We may also have to pay
some state income or franchise taxes because not all states treat REITs in the
same manner as they are treated for federal income tax purposes.

USE OF PROCEEDS

As will be more fully described in any applicable prospectus supplement, we
intend to use the net proceeds of any sale of securities for general corporate
purposes, including, without limitation, the repayment of debt and the
development and acquisition of additional properties.

RATIO OF EARNINGS TO FIXED CHARGES

Our ratio of earnings to combined fixed charges and preferred stock
dividends for the six months ended June 30, 2003 and the years ended December
31, 2002, 2001, 2000, 1999 and 1998 was 1.32, 1.33, 1.48, 1.44, 1.57 and 1.83,
respectively.

For purposes of calculating these ratios, earnings represent net income
from continuing operations plus interest expense and an interest component of
rental expense. Fixed charges represent interest expense and preferred stock
dividends from our consolidated statements of operations plus capitalized
interest and an estimated interest component of rental expense. The ratios are
based solely on historical financial information and no pro forma adjustments
have been made thereto.

DESCRIPTION OF CAPITAL STOCK

The following description is only a summary of certain terms and provisions
of our capital stock. You should refer to our charter and bylaws for the
complete provisions thereof.

The total number of shares of capital stock of all classes that we are
authorized to issue is 100,000,000. Our charter authorizes the issuance of
65,280,000 shares of common stock, par value $.0001 per share; 2,800,000 shares
of Series B Cumulative Convertible Preferred Stock, par value $.0001 per share;
600,000 shares of Series C Preferred Stock, par value $.0001 per share;
1,320,000 shares of 7.95% Series D Cumulative Redeemable Preferred Stock, par
value $.0001 per share; and 30,000,000 shares of Excess Stock, par value $.0001
per share. As of September 30, 2003, 19,369,471 shares of common stock, 550,000
shares of Series B preferred stock, 1,320,000 shares of Series D preferred
stock, no shares of Series C preferred stock and no shares of Excess Stock were
issued and outstanding. The common stock and the Series D preferred stock are
currently listed on the New York Stock Exchange under the symbols "EGP" and "EGP
PrD," respectively. There is no public market for our Series B preferred stock.

Our Board of Directors is authorized by the charter, to classify and
reclassify any of our unissued shares of capital stock, by, among other
alternatives, setting, altering or eliminating the designation, preferences,
conversion or other rights, voting powers, qualifications and terms and
conditions of redemption of, limitations as to dividends and any other
restrictions on, our capital stock. The power of the Board of Directors to
classify and reclassify any of the shares of capital stock includes the
authority to classify or reclassify such shares into a class or classes of
preferred stock or other stock.

Pursuant to the provisions of our charter, if a transfer of stock occurs
such that any person would own, beneficially or constructively (applying the
applicable attribution rules of the Code), more than 9.8% (in value or in
number, whichever is more restrictive) of our outstanding equity stock
(excluding shares of Excess Stock), then the amount in excess of the 9.8% limit
will automatically be converted into shares of Excess Stock, any such transfer
will be void from the beginning, and we will have the right to redeem such
stock. These restrictions also apply to any transfer of stock that would result
in our being "closely held" within the meaning of Section 856(h) of the Code, or
otherwise failing to qualify as a REIT for federal income tax purposes. Upon any
transfer that results in Excess Stock, such Excess Stock shall be held in trust
for the exclusive benefit of one or more charitable beneficiaries designated by
us. Upon the satisfaction of certain conditions, the person who would have been
the recordholder of the equity stock if the transfer had not resulted in Excess
Stock may designate a beneficiary of an interest in the trust. Upon such
transfer of an interest in the trust, the corresponding shares of Excess Stock
in the trust shall be automatically exchanged for an equal number of shares of
equity stock of the same class as such stock had been prior to it becoming
Excess Stock and shall be transferred of record to the designated beneficiary.
Excess Stock has no voting rights, except as required by law, and any vote cast
by a purported transferee in respect of shares of Excess Stock prior to the
discovery that shares of equity stock had been converted into Excess Stock shall
be void from the beginning. Excess Stock shall not be entitled to dividends. Any
dividend paid prior to our discovery that equity stock has been converted into
Excess Stock shall be repaid to us upon demand. In the event of our liquidation,
each holder of Excess Stock shall be entitled to receive that portion of our
assets that would have been distributed to the holder of equity stock in respect
of which such Excess Stock was issued. The trustee of the trust holding Excess
Stock shall distribute such assets to the beneficiaries of such trust. These
restrictions will not prevent the settlement of a transaction entered into
through the facilities of any interdealer quotation system or national
securities exchange upon which shares of our capital stock are traded.
Notwithstanding the prior sentence, certain transactions may be settled by
providing shares of Excess Stock.

Our Board of Directors, upon receipt of a ruling from the Internal Revenue
Service or an opinion of counsel or other evidence satisfactory to the Board of
Directors and upon at least 15 days written notice from a transferee prior to a
proposed transfer that, if consummated, would result in the intended transferee
"beneficially owning" (as defined in our charter, and determined after the
application of the applicable attribution rules of the Code) equity stock in
excess of the 9.8% ownership limit and the satisfaction of such other conditions
as the Board may direct, may in its sole and absolute discretion exempt a person
from the 9.8% ownership limit. Additionally, our Board of Directors, upon
receipt of a ruling from the Internal Revenue Service or an opinion of counsel
or other evidence satisfactory to our Board, may in its sole and absolute
discretion exempt a person from the limitation on a person "constructively
owning" (as defined in our charter, and determined after the application of the
applicable attribution rules of the Code) equity stock in excess of the 9.8%
ownership limit if (x) such person does not and represents that it will not
directly or "constructively own" (after the application of the applicable
attribution rules of the Code) more than a 9.8% interest in a tenant of ours;
(y) we obtain such representations and undertakings as are reasonably necessary
to ascertain this fact; and (z) such person agrees that any violation or
attempted violation of such representations, undertakings and agreements will
result in such equity stock in excess of the ownership limit being converted
into and exchanged for Excess Stock. Our Board of Directors may from time to
time increase or decrease the 9.8% limit, provided that the 9.8% limit may be
increased only if five individuals could not "beneficially own" or
"constructively own" (applying the applicable attribution rules of the Internal
Revenue Code) more than 50.0% in value of the shares of equity stock then
outstanding.

DESCRIPTION OF COMMON STOCK

Distributions. Subject to the preferential rights of any shares of
preferred stock currently outstanding or subsequently classified and to the
provisions of our charter regarding restrictions on transfer and ownership of
shares of common stock, a holder of our common stock is entitled to receive
distributions, if, as and when declared by our Board of Directors, out of our
assets that we may legally use for distributions to stockholders and to share
ratably in our assets that we may legally distribute to our stockholders in the
event of our liquidation, dissolution or winding up after payment of, or
adequate provision for, all of our known debts and liabilities. We currently pay
regular quarterly distributions on our common stock.

Relationship to Preferred Stock and Other Shares of Common Stock. The
rights of a holder of shares of common stock will be subject to, and may be
adversely affected by, the rights of holders of preferred stock that have been
issued and that may be issued in the future. Our Board of Directors may cause
preferred stock to be issued to obtain additional capital, in connection with
acquisitions, to our officers, directors and employees pursuant to benefit plans
or otherwise and for other corporate purposes.

A holder of our common stock has no preferences, conversion rights, sinking
fund, redemption rights or preemptive rights to subscribe for any of our
securities. Subject to the provisions of our charter regarding restrictions on
ownership and transfer, all shares of common stock have equal distribution,
liquidation, voting and other rights.

Voting Rights. Subject to the provisions of our charter regarding
restrictions on transfer and ownership of shares of common stock, a holder of
common stock has one vote per share on all matters submitted to a vote of
stockholders, including the election of directors.

There is no cumulative voting in the election of directors, which means
that the holders of a plurality of the outstanding shares of common stock voting
can elect all of the directors then standing for election and the holders of the
remaining shares of common stock, if any, will not be able to elect any
directors, except as otherwise provided for any series of our preferred stock.

Stockholder Liability. Under Maryland law applicable to Maryland
corporations, holders of common stock will not be liable as stockholders for our
obligations solely as a result of their status as stockholders.

Transfer Agent. The registrar and transfer agent for shares of our common
stock is Equiserve Trust Company, N.A.

DESCRIPTION OF PREFERRED STOCK

General. Shares of preferred stock may be issued from time to time, in one
or more series, as authorized by our Board of Directors. Before issuance of
shares of each series, the Board of Directors is required to fix for each such
series, subject to the provisions of Maryland law and our charter, the powers,
designations, preferences and relative, participating, optional or other special
rights of such series and qualifications, limitations or restrictions thereof,
including such provisions as may be desired concerning voting, redemption,
dividends, dissolution or the distribution of assets, conversion or exchange,
and such other matters as may be fixed by resolution of the Board of Directors
or a duly authorized committee thereof. The Board of Directors could authorize
the issuance of shares of preferred stock with terms and conditions which could
have the effect of discouraging a takeover or other transaction which holders of
some, or a majority of, shares of common stock might believe to be in their best
interests, or in which holders of some, or a majority of, shares of common stock
might receive a premium for their shares of common stock over the then market
price of such shares. The shares of preferred stock will, when issued, be fully
paid and nonassessable and will have no preemptive rights.

The prospectus supplement relating to any shares of preferred stock offered
thereby will contain the specific terms, including:

(i) The title and stated value of such shares of preferred stock;

(ii) The number of such shares of preferred stock offered, the
liquidation preference per share and the offering price of such
shares of preferred stock;

(iii) The voting rights of such shares of preferred stock;

(iv) The dividend rate(s), period(s) and/or payment date(s) or
method(s) of calculation thereof applicable to such shares of
preferred stock;

(v) The date from which dividends on such shares of preferred stock
will accumulate, if applicable;

(vi) The procedures for any auction or remarketing, if any, for such
shares of preferred stock;

(vii) The provision for a sinking fund, if any, for such shares of
preferred stock;

(viii) The provisions for redemption, if applicable, of such shares of
preferred stock;

(ix) Any listing of the shares of preferred stock on any securities
exchange;

(x) The terms and conditions, if applicable, upon which the shares
of preferred stock will be convertible into shares of our common
stock, including the conversion price (or manner of calculation
thereof);

(xi) A discussion of federal income tax considerations applicable to
such shares of preferred stock;

(xii) The relative ranking and preferences of such shares of
preferred stock as to dividend rights and rights upon
liquidation, dissolution or winding up of our affairs;

(xiii) Any limitations on issuance of any series of shares of
preferred stock ranking senior to or on a parity with such
series of shares of preferred stock as to dividend rights and
rights upon liquidation, dissolution or winding up of our
affairs;

(xiv) Any limitations on direct or beneficial ownership and
restrictions on transfer of such shares of preferred stock, in
each case as may be appropriate to preserve our status as a
REIT; and

(xv) Any other specific terms, preferences, rights, limitations or
restrictions of such shares of preferred stock.

The registrar and transfer agent for the shares of preferred stock will be
set forth in the applicable prospectus supplement.

The description of the provisions of the shares of preferred stock set
forth in this prospectus and in the related prospectus supplement is only a
summary, does not purport to be complete and is subject to, and is qualified in
its entirety by, reference to the definitive Articles Supplementary to our
Charter relating to such series of shares of preferred stock. You should read
these documents carefully to fully understand the terms of the shares of
preferred stock. In connection with any offering of shares of preferred stock,
Articles Supplementary will be filed with the Securities and Exchange Commission
as an exhibit or incorporated by reference in the Registration Statement.

DESCRIPTION OF STOCKHOLDER RIGHTS PLAN

Our Board of Directors has adopted a stockholder rights plan. As a result,
we issued one right for each outstanding share of common stock and 1.1364 rights
(subject to adjustments) for each share of Series B preferred stock outstanding.
One right and 1.1364 rights (subject to adjustments) will be issued for each
additional share of common stock or Series B preferred stock, respectively, that
we issue. Each right entitles the holder to purchase one one-thousandth of a
share of our Series C preferred stock at an exercise price of $70.00 (subject to
adjustments). The rights become exercisable 10 business days after any party
acquires or announces an offer to acquire 15% or more of our common stock, our
Board of Directors determines that a substantial stockholder's ownership may be
adverse to the interests of our other stockholders or our qualification as a
REIT, or certain similar event. The rights expire on December 3, 2008, unless
earlier redeemed. The rights are redeemable at $0.0001 per right at any time
before 10 business days following the time that any party acquires, or obtains
the right to acquire, beneficial ownership of 15% or more of our outstanding
common stock, or our Board of Directors determines that a substantial
stockholder's ownership may be adverse to the interests of our other
stockholders or our qualification as a REIT.

DESCRIPTION OF WARRANTS

We may issue warrants for the purchase of shares of preferred stock or
shares of common stock. Warrants may be issued independently or together with
any other securities offered by any prospectus supplement and may be attached to
or separate from such securities. Each series of warrants will be issued under a
separate warrant agreement to be entered into between us and a warrant agent
specified in the applicable prospectus supplement. The warrant agent will act
solely as our agent in connection with the warrants of such series and will not
assume any obligation or relationship of agency or trust for or with any holders
or beneficial owners of warrants. The following summary of certain provisions of
the securities warrant agreement and the warrants does not purport to be
complete and is subject to, and is qualified in its entirety by reference to,
all the provisions of the securities warrant agreement and the securities
warrant certificates relating to each series of warrants, which will be filed
with the Securities and Exchange Commission and incorporated by reference as an
exhibit to the registration statement, of which this prospectus is a part, at or
before the time of the issuance of that series of warrants.

In the case of warrants for the purchase of shares of preferred stock or
shares of common stock, the applicable prospectus supplement will describe the
terms of those warrants, including the following where applicable:

- the offering price;

- the type and aggregate number of shares purchasable upon exercise of the
warrants, the exercise price, and in the case of warrants for shares of
preferred stock, the designation, aggregate number and terms of the
series of shares of preferred stock with which the warrants are being
offered, if any, and the number of such warrants being offered with the
shares of preferred stock;

- the date, if any, on and after which the warrants and the related series
of shares of preferred stock, if any, or shares of common stock will be
transferable separately;

- the date on which the right to exercise such warrants will commence and
the date on which such right will expire;

- any special United States federal income tax consequences; and

- any other material terms of the warrants.

Warrant certificates may be exchanged for new warrant certificates of
different denominations, may (if in registered form) be presented for
registration of transfer, and may be exercised at the corporate trust office of
the warrant agent or any other office indicated in the applicable prospectus
supplement. Before the exercise of any warrants to purchase shares of preferred
stock or shares of common stock, holders of such warrants will not have any
rights of holders of such shares of preferred stock or shares of common stock,
including the right to receive payments of dividends, if any, on such shares of
preferred stock or shares of common stock, or to exercise any applicable right
to vote.

Each warrant will entitle the holder thereof to purchase such number of
shares of preferred stock or shares of common stock, as the case may be, at such
exercise price as shall in each case be set forth in, or calculable from, the
prospectus supplement relating to the offered warrants. After the close of
business on the expiration date (or such later date to which such expiration
date may be extended by us), unexercised warrants will become void.

Warrants may be exercised by delivering to the warrant agent payment, as
provided in the applicable prospectus supplement, of the amount required to
purchase the shares of preferred stock or shares of common stock purchasable
upon such exercise, together with certain information set forth on the reverse
side of the securities warrant certificate. Warrants will be deemed to have been
exercised upon receipt of payment of the exercise price, subject to the receipt
within five business days, of the securities warrant certificate evidencing such
warrants. Upon receipt of such payment and the securities warrant certificate
properly completed and duly executed at the corporate trust office of the
securities warrant agent or any other office indicated in the applicable
prospectus supplement, we will, as soon as practicable, issue and deliver the
shares of common stock purchasable upon such exercise. If fewer than all of the
warrants represented by such securities warrant certificate are exercised, a new
securities warrant certificate will be issued for the remaining amount of
warrants.

The warrant agreements may be amended or supplemented without the consent
of the holders of the warrants issued under the warrant agreements to effect
changes that are not inconsistent with the provisions of the warrants and that
do not adversely affect the interests of the holders of the warrants.

MATERIAL PROVISIONS OF MARYLAND LAW

The following paragraphs summarize the material provisions of Maryland law
applicable to Maryland corporations. The summary does not purport to be complete
and is subject to and qualified in its entirety by reference to Maryland law,
our charter, including any articles supplementary, and bylaws. You should read
these documents carefully to fully understand the terms of Maryland law, our
charter and our bylaws.

Maryland, the state of our incorporation, has certain anti-takeover
statutes, including the "business combination" provisions and "control share
acquisition" provisions, which may also have the effect of making it difficult
to gain control of us or to change existing management. To date, we have not
opted out of the business combination provisions or the control share
acquisition provisions of the Maryland General Corporation Law (the "MGCL").

BUSINESS COMBINATIONS

Maryland corporations are subject to certain restrictions under the MGCL
concerning certain "business combinations" (including a merger, consolidation,
share exchange or, in certain circumstances, an asset transfer or issuance or
reclassification of equity securities) between a Maryland corporation and an
"interested stockholder." An interested stockholder is: (i) a person who
beneficially owns 10% or more of the voting power of the outstanding voting
stock of the corporation, or (ii) an affiliate or associate of the corporation
who, at any time within the two-year period prior to the date in question, was
the beneficial owner, directly or indirectly, of 10% or more of the voting power
of the then-outstanding voting stock of the corporation.

Such business combinations are prohibited for five years after the most recent
date on which the interested stockholder became an interested stockholder.
Thereafter, in addition to any other required vote, any such business
combination must be recommended by the board of directors of such corporation
and approved by the affirmative vote of at least (i) 80% of the votes entitled
to be cast by holders of outstanding shares of voting stock of the corporation,
voting together as a single voting group, and (ii) two-thirds of the votes
entitled to be cast by holders of voting stock of the corporation (other than
voting stock held by the interested stockholder who will, or whose affiliate
will, be a party to the business combination or by an affiliate or associate of
the interested stockholder) voting together as a single voting group. The
extraordinary voting provisions do not apply if, among other things, the
corporation's stockholders receive a minimum price for their shares determined
in accordance with the MGCL and the consideration is received in cash or in the
same form as previously paid by the Interested Stockholder for its shares. These
provisions of the MGCL do not apply, however, to business combinations that are
approved or exempted by the board of directors of the corporation prior to the
time that the interested stockholder becomes an interested stockholder.

CONTROL SHARE ACQUISITIONS

The MGCL also provides that "control shares" of a Maryland corporation
acquired in a "control share acquisition" have no voting rights except to the
extent approved by the affirmative vote of two-thirds of the votes entitled to
be cast on the matter excluding "interested shares" (shares of stock in respect
of which any of the following persons is entitled to exercise or direct the
exercise of the voting power of shares of stock of the corporation in the
election of directors: an "acquiring person," an officer of the corporation or
an employee of the corporation who is also a director). "Control shares" are
shares of stock which, if aggregated with all other such shares of stock owned
by the acquiring person, or in respect of which such person is entitled to
exercise or direct the exercise of voting power of shares of stock of the
corporation in electing directors within one of the following ranges of voting
power: (i) one-tenth or more but less than one-third, (ii) one-third or more but
less than a majority, or (iii) a majority or more of all voting power. Control
shares do not include shares the acquiring person is entitled to vote as a
result of having previously obtained stockholder approval. The control share
acquisition statute does not apply to shares acquired in a merger, consolidation
or share exchange if the corporation is a party to the transaction, or to
acquisitions approved or exempted by the charter or bylaws of the corporation.

A person who has made or proposes to make a control share acquisition,
under certain conditions (including an undertaking to pay expenses), may compel
the board of directors to call a special meeting of stockholders to be held
within 50 days of demand to consider the voting rights of the control shares
upon delivery of an acquiring person statement containing certain information
required by the MGCL, including a representation that the acquiring person has
the financial capacity to make the proposed control share acquisition, and a
written undertaking to pay the corporation's expenses of the special meeting
(other than the expenses of those opposing approval of the voting rights). If no
request for a meeting is made, the corporation may itself present the question
at a stockholders' meeting.

If voting rights are not approved at the meeting or if the acquiring person
does not deliver an acquiring person statement as required by the MGCL, then,
subject to certain conditions and limitations, the corporation may redeem any or
all of the control shares (except those for which voting rights have previously
been approved) for fair value, determined without regard to the absence of
voting rights for control shares, as of the date of the last control share
acquisition or, if a meeting of stockholders is held, as of the date of such
meeting at which the voting rights of such shares are considered and not
approved. If voting rights for control shares are approved at a stockholders'
meeting before the control share acquisition and the acquiring person becomes
entitled to exercise or direct the exercise of a majority or more of all voting
power, all other stockholders may exercise rights of objecting stockholders
under Maryland law to receive the fair value of their shares. The fair value of
the shares for such purposes may not be less than the highest price per share
paid by the acquiring person in the control share acquisition. Certain
limitations and restrictions otherwise applicable to the exercise of the
objecting stockholders' rights do not apply in the context of a control share
acquisition.

CERTAIN ELECTIVE PROVISIONS OF MARYLAND LAW

Maryland law provides, among other things, that the board of directors has
broad discretion in adopting stockholders' rights plans and has the sole power
to fix the record date, time and place for special meetings of the stockholders.
Furthermore, Maryland corporations that:

- have three independent directors who are not officers or employees of the
entity or related to an acquiring person; and

- are subject to the reporting requirements of the Securities Exchange Act,

may elect in their charter or bylaws or by resolution of the board of directors
to be subject to all or part of a special subtitle which provides that:

- the corporation will have a staggered board of directors;

- any director may be removed only for cause and by the vote of two-thirds
of the votes entitled to be cast in the election of directors generally,
even if a lesser proportion is provided in the charter or bylaws;

- the number of directors may only be set by the board of directors, even
if the procedure is contrary to the charter or bylaws;

- vacancies may be filled by the affirmative vote of a majority of the
remaining directors, even if the procedure is contrary to the charter or
bylaws; and

- the secretary of the corporation may call a special meeting of
stockholders only on the written request of the stockholders entitled to
cast at least a majority of all the votes entitled to be cast at the
meeting, even if the procedure is contrary to the charter or bylaws.

To date, we have not made any of the elections described above, although our
charter and bylaws contain some of these provisions independent of these
elections.

MATERIAL UNITED STATES FEDERAL INCOME TAX CONSEQUENCES

INTRODUCTORY NOTES

The following discussion describes the material federal income tax
considerations relating to the taxation of the Company as a REIT, and the
ownership and disposition of the securities offered under this Prospectus. A
prospectus supplement will contain information about additional federal income
tax considerations, if any, relating to a particular offering.

The following discussion is not exhaustive of all possible tax
considerations and does not provide a detailed discussion of any state, local or
foreign tax considerations, nor does it discuss all of the aspects of federal
income taxation that may be relevant to a prospective stockholder in light of
his or her particular circumstances or to stockholders (including insurance
companies, tax-exempt entities, financial institutions or broker-dealers,
foreign corporations, and persons who are not citizens or residents of the
United States) who are subject to special treatment under the federal income tax
laws.

Jaeckle Fleischmann & Mugel, LLP has provided an opinion to the effect that
this discussion, to the extent that it contains descriptions of applicable
federal income tax law, is correct in all material respects and fairly
summarizes in all material respects the federal income tax laws referred to
herein. This opinion, however, does not purport to address the actual tax
consequences of the purchase, ownership and disposition of our capital stock to
any particular holder. The opinion and the information in this section are based
on the Code, current, temporary and proposed Treasury regulations, the
legislative history of the Code, current administrative interpretations and
practices of the Internal Revenue Service, and court decisions. The reference to
Internal Revenue Service interpretations and practices includes Internal Revenue
Service practices and policies as endorsed in private letter rulings, which are
not binding on the Internal Revenue Service except with respect to the taxpayer
that receives the ruling. In each case, these sources are relied upon as
19

they exist on the date of this prospectus. No assurance can be given that future
legislation, regulations, administrative interpretations and court decisions
will not significantly change current law, or adversely affect existing
interpretations of existing law, on which the opinion and information in this
section are based. Any change of this kind could apply retroactively to
transactions preceding the date of the change. Moreover, opinions of counsel
merely represent counsel's best judgment with respect to the probable outcome on
the merits and are not binding on the Internal Revenue Service or the courts.
Accordingly, even if there is no change in applicable law, no assurance can be
provided that such opinion, or the statements made in the following discussion,
will not be challenged by the Internal Revenue Service or will be sustained by a
court if so challenged.

EACH PROSPECTIVE INVESTOR IS ADVISED TO CONSULT WITH HIS OR HER OWN TAX
ADVISOR TO DETERMINE THE IMPACT OF HIS OR HER PERSONAL TAX SITUATION ON THE
ANTICIPATED TAX CONSEQUENCES OF THE PURCHASE, OWNERSHIP AND SALE OF THE
SECURITIES OFFERED UNDER THIS PROSPECTUS. THIS INCLUDES THE FEDERAL, STATE,
LOCAL, FOREIGN AND OTHER TAX CONSEQUENCES OF THE PURCHASE, OWNERSHIP AND SALE OF
THE SECURITIES OFFERED UNDER THIS PROSPECTUS AND THE POTENTIAL CHANGES IN
APPLICABLE TAX LAWS.

TAXATION OF US AS A REIT

We have elected to be taxed as a REIT under Sections 856 through 859 of the
Code, commencing with our initial taxable year. Our qualification and taxation
as a REIT depends upon our ability to meet on a continuing basis, through actual
annual (or in some cases quarterly) operating results, distribution levels and
diversity of stock ownership, the various qualification tests and organizational
requirements imposed under the Code, as discussed below. We believe that we are
organized and have operated in such a manner as to qualify under the Code for
taxation as a REIT since the effective date of our election, and we intend to
continue to operate in such a manner. No assurances, however, can be given that
we will operate in a manner so as to qualify or remain qualified as a REIT. See
"-- Failure to Qualify" below.

Jaeckle Fleischmann & Mugel, LLP has provided to us an opinion to the
effect that we have been organized and have operated in conformity with the
requirements for qualification and taxation as a REIT, effective for each of our
taxable years ended December 31, 1997 through December 31, 2002, and our current
and proposed organization and method of operation will enable us to continue to
meet the requirements for qualification and taxation as a REIT for taxable year
2003 and thereafter. It must be emphasized that this opinion is conditioned upon
certain assumptions and representations made by us to Jaeckle Fleischmann &
Mugel, LLP as to factual matters relating to our organization and operation and
that of our subsidiaries. In addition, this opinion is based upon our factual
representations concerning our business and properties as described in the
reports filed by us under the federal securities laws.

Qualification and taxation as a REIT depends upon our ability to meet on a
continuing basis, through actual annual (or in some cases quarterly) operating
results, the various requirements under the Code described in this prospectus
with regard to, among other things, the sources of our gross income, the
composition of our assets, our distribution levels, and our diversity of stock
ownership. While we intend to operate so that we continue to qualify as a REIT,
given the highly complex nature of the rules governing REITs, the ongoing
importance of factual determinations, and the possibility of future changes in
our circumstances, no assurance can be given that we satisfy all of the tests
for REIT qualification or will continue to do so.

Notwithstanding our REIT election, however, we will be subject to federal
income tax in the following circumstances. First, we will be taxed at regular
corporate rates on any undistributed taxable income, including undistributed net
capital gains. Second, under certain circumstances, we may be subject to the
"alternative minimum tax" on any items of tax preference and alternative minimum
tax adjustments. Third, if we have (i) net income from the sale or other
disposition of "foreclosure property" (which is, in general, property acquired
by foreclosure or otherwise on default of a loan secured by the property) that
is held primarily for sale to customers in the ordinary course of business or
(ii) other nonqualifying income from foreclosure property, we will be subject to
tax at the highest corporate rate on such income. Fourth, if we have net income
from prohibited transactions (which are, in general, certain sales or other
dispositions of property (other than foreclosure property) held primarily for
sale to customers in the ordinary course of business), such income will be
subject to a 100% tax on prohibited transactions. Fifth, if we should fail to
satisfy the 75% gross income test or the 95% gross income test (as discussed
below), and have nonetheless maintained our qualification as a REIT because
certain other requirements have been met, we will be subject to a 100% tax equal
to the gross income which caused us to fail the income tests. Sixth, if we
should fail to distribute during each calendar year at least the sum of (i) 85%
of our REIT ordinary income for such year; (ii) 95% of our REIT capital gain net
income for such year (for this purpose such term includes capital gains which we
elect to retain but which we report as distributed to our stockholders. See
"-- Annual Distribution Requirements" below); and (iii) any undistributed
taxable income from prior years, we would be subject to a 4% excise tax on the
excess of such required distribution over the amounts actually distributed.
Seventh, if we acquire any asset from a C corporation (i.e., a corporation
generally subject to full corporate level tax) in a transaction in which the
basis of the asset in our hands is determined by reference to the basis of the
asset (or any other property) in the hands of the C corporation, and we
recognize gain on the disposition of such asset during the 10-year period
beginning on the date on which such asset was acquired by us, then, to the
extent of such property's built-in gain (the excess of the fair market value of
such property at the time of acquisition by us over the adjusted basis of such
property at such time), such gain will be subject to tax at the highest regular
corporate rate then applicable. Eighth, we will be subject to a 100% penalty tax
on amounts received (or on certain expenses deducted by a taxable REIT
subsidiary) if arrangements among us, our tenants and a taxable REIT subsidiary
are not comparable to similar arrangements among unrelated parties.

REQUIREMENTS FOR QUALIFICATION

to allow us to satisfy requirements (v) and (vi). In addition, our charter
contains restrictions regarding the transfer of our shares intended to assist us
in continuing to satisfy the share ownership requirements described in (v) and
(vi) above. See "Description of Capital Stock" above. These restrictions,
however, may not ensure that we will be able to satisfy these share ownership
requirements. If we fail to satisfy these share ownership requirements, we will
fail to qualify as a REIT.

In addition, a corporation may not elect to become a REIT unless its
taxable year is the calendar year. Our taxable year is the calendar year.

QUALIFIED REIT SUBSIDIARIES

TAXABLE REIT SUBSIDIARIES

A "taxable REIT subsidiary" is a corporation in which we directly or
indirectly own stock and that elects with us to be treated as a taxable REIT
subsidiary under Section 856(l) of the Code. In addition, if one of our taxable
REIT subsidiaries owns, directly or indirectly, securities representing more
than 35% of the vote or value of a subsidiary corporation, that subsidiary will
automatically be treated as a taxable REIT subsidiary of ours. A taxable REIT
subsidiary is a corporation subject to federal income tax, and state and local
income tax where applicable, as a regular C corporation. As a result, our
earnings derived through a taxable REIT subsidiary are effectively subject to a
corporate level tax notwithstanding our status as a REIT. No more than 20% of
our assets may consist of the securities of one or more taxable REIT
subsidiaries.

Generally, a taxable REIT subsidiary can perform impermissible tenant
services without causing us to receive impermissible tenant services income
under the REIT income tests. However, several provisions regarding the
arrangements between a REIT and its taxable REIT subsidiaries ensure that a
taxable REIT subsidiary will be subject to an appropriate level of federal
income taxation. For example, a taxable REIT subsidiary may be limited in its
ability to deduct interest payments made to us. In addition, we will be
obligated to pay a 100% penalty tax on some payments that we receive or on
certain expenses deducted by the taxable REIT subsidiary if the economic
arrangements among us, our tenants and the taxable REIT subsidiary are not
comparable to similar arrangements among unrelated parties.

INCOME TESTS

In order for us to maintain qualification as a REIT, two percentage tests
relating to the source of our gross income must be satisfied annually. First, at
least 75% of our gross income (excluding gross income from prohibited
transactions) for each taxable year must be derived directly or indirectly from
investments relating to real property or mortgages on real property (including
"rents from real property" and, in certain circumstances, interest) or from
certain types of temporary investments. Second, at least 95% of our gross income
(excluding gross income from prohibited transactions) for each taxable year must
be derived from such real property investments described above, dividends,
interest and gain from the sale or disposition of stock or securities, some
payments under hedging instruments, or from any combination of the foregoing.

Second, rents received from a tenant will not qualify as "rents from real
property" if we, or a direct or indirect owner of 10% or more of our stock,
actually or constructively owns 10% or more of such tenant. We may, however,
lease our properties to a taxable REIT subsidiary and rents received from that
subsidiary will not be disqualified from being "rents from real property" by
reason of our ownership interest in the subsidiary if at least 90% of the
property in question is leased to unrelated tenants and the rent paid by the
taxable REIT subsidiary is substantially comparable to the rent paid by the
unrelated tenants for comparable space.

Generally, for rents to qualify as "rents from real property" for the
purposes of the gross income tests, we are only allowed to provide services that
are both "usually or customarily rendered" in connection with the rental of real
property for occupancy only and not otherwise considered "rendered to the
occupant." Income received from any other service will be treated as
"impermissible tenant service income" unless the service is provided through an
independent contractor that bears the expenses of providing the services and
from whom we derive no revenue or through a taxable REIT subsidiary, subject to
specified limitations. The amount of impermissible tenant service income we
receive is deemed to be the greater of the amount actually received by us or
150% of our direct cost of providing the service. If the impermissible tenant
service income exceeds 1% of our total income from a property, then all of the
income from that property will fail to qualify as rents from real property. If
the total amount of impermissible tenant service income from a property does not
exceed 1% of our total income from that property, the income will not cause the
rent paid by tenants of that property to fail to qualify as rents from real
property, but the impermissible tenant service income itself will not qualify as
rents from real property.

If we fail to satisfy one or both of the 75% or 95% gross income tests for
any taxable year, we may nevertheless qualify as a REIT for such year if we are
entitled to relief under certain provisions of the Code. These relief provisions
generally will be available if our failure to meet such tests was due to
reasonable cause and not due to willful neglect, if we attach a schedule of the
sources of our income to our federal income tax return for such years, and if
any incorrect information on the schedules was not due to fraud with intent to
evade tax. It is not possible, however, to state whether in all circumstances we
would be entitled to the benefit of these relief provisions. As discussed above
in "-- Taxation of Us as a REIT," even if these relief provisions were to apply,
a tax would be imposed with respect to the excess net income.

ASSET TESTS

At the close of each quarter of our taxable year, we must satisfy six tests
relating to the nature of our assets.

2. Not more than 25% of our total assets may be represented by securities,
other than those in the 75% asset class.

3. Except for equity investments in REITs and equity and debt investments
in qualified REIT subsidiaries and taxable REIT subsidiaries, the value of any
one issuer's securities owned by us may not exceed 5% of the value of our total
assets.

4. Except for equity investments in REITs and equity and debt investments
in qualified REIT subsidiaries and taxable REIT subsidiaries, we may not own
more than 10% of any one issuer's outstanding voting securities.

5. Except for equity investments in REITs and equity and debt investments
in qualified REIT subsidiaries and taxable REIT subsidiaries, we may not own
more than 10% of the total value of the outstanding securities of any one
issuer, other than securities that qualify as "straight debt" under the Code.

6. Not more than 20% of our total assets may be represented by the
securities of one or more taxable REIT subsidiaries.

For purposes of these asset tests, any shares of qualified REIT
subsidiaries are not taken into account, and any assets owned by our qualified
REIT subsidiaries are treated as owned directly by us.

Securities, for purposes of the assets tests, may include debt we hold.
However, debt we hold in an issuer will not be taken into account for purposes
of the 10% value test if the debt securities meet the "straight debt" safe
harbor and either (1) the issuer is an individual, (2) the only securities of
the issuer that we hold are straight debt, or (3) if the issuer is a
partnership, we hold at least a 20% profits interest in the partnership. Debt
will meet the "straight debt" safe harbor if the debt is a written unconditional
promise to pay on demand or on a specified date a sum certain in money (1) which
is not convertible, directly or indirectly, into stock and (2) the interest rate
(or the interest payment dates) of which is not contingent on profits, the
borrower's discretion or similar factors.

After initially meeting the asset tests after the close of any quarter, we
will not lose our status as a REIT if we fail to satisfy the 25%, 20% or 5%
asset test or the 10% value limitation at the end of a later quarter solely by
reason of changes in the relative values of our assets. If the failure to
satisfy the 25%, 20% or 5% asset test or the 10% value limitation results from
an increase in the value of our assets after the acquisition of securities or
other property during a quarter, the failure can be cured by a disposition of
sufficient nonqualifying assets within 30 days after the close of that quarter.
We have maintained and intend to continue to maintain adequate records of the
value of our assets to ensure compliance with the asset tests and to take any
available actions within 30 days after the close of any quarter as may be
required to cure any noncompliance with the 25%, 20% or 5% asset test or the 10%
value limitation. We cannot ensure that these steps always will be successful.
If we were to fail to cure the noncompliance with the asset tests within this 30
day period, we could fail to qualify as a REIT.

ANNUAL DISTRIBUTION REQUIREMENTS

We, in order to qualify as a REIT, are required to distribute dividends
(other than capital gain dividends) to our stockholders in an amount at least
equal to (i) the sum of (a) 90% of our "REIT taxable income" (computed without
regard to the dividends paid deduction and our net capital gain) and (b) 90% of
the net income (after tax), if any, from foreclosure property, minus (ii) the
sum of certain items of noncash income. Such distributions generally must be
paid in the taxable year to which they relate. Dividends may be paid in the
following year in two circumstances. First, dividends may be declared in the
following year if the dividends are declared before we timely file our tax
return for the year and if made before the first regular dividend payment made
after such declaration. Second, if we declare a dividend in October, November or
December of any year with a record date in one of these months and pay the
dividend on or before January 31 of the following year, we will be treated as
having paid the dividend on December 31 of the year in which the dividend was
declared. To the extent that we do not distribute all of our net capital gain or
distribute at least 90%, but less than 100%, of our "REIT taxable income," as
adjusted, we will be subject to tax on the nondistributed amount at regular
capital gains and ordinary corporate tax rates. Furthermore, if we should fail
to distribute during each calendar year at least the sum of (i) 85% of our REIT
ordinary income for such year; (ii) 95% of our REIT capital gain net income for
such year; and (iii) any undistributed taxable income from prior periods, we
will be subject to a 4% excise tax on the excess of such required distribution
over the amounts actually distributed.

We have made and intend to continue to make timely distributions sufficient
to satisfy the annual distribution requirements. It is possible, however, that
we, from time to time, may not have sufficient cash or liquid assets to meet the
distribution requirements due to timing differences between the actual receipt
of income and actual payment of deductible expenses and the inclusion of such
income and deduction of such expenses in arriving at our taxable income, or if
the amount of nondeductible expenses such as principal amortization or capital
expenditures exceeds the amount of noncash deductions. In the event that such
timing differences occur, in order to meet the distribution requirements, we may
arrange for short-term, or possibly long-term, borrowing to permit the payment
of required dividends. If the amount of nondeductible expenses exceeds noncash
deductions, we may refinance our indebtedness to reduce principal payments and
may borrow funds for capital expenditures.

dividends; however, we will be required to pay interest to the Internal Revenue
Service based upon the amount of any deduction taken for deficiency dividends.

FAILURE TO QUALIFY

TAX ASPECTS OF OUR INVESTMENTS IN PARTNERSHIPS

1. the status of each subsidiary partnership and limited liability
company as a partnership (as opposed to an association taxable as a
corporation) for income tax purposes; and

2. the taking of actions by any of the subsidiary partnerships or
limited liability companies that could adversely affect our qualification
as a REIT.

TAXATION OF STOCKHOLDERS

1. a citizen or resident, as defined in Section 7701(b) of the Code,
of the United States;

3. an estate the income of which is subject to United States federal
income taxation regardless of its source; or

4. in general, a trust subject to the primary supervision of a United
States court and the control of one or more United States persons.

Generally, in the case of a partnership that holds our stock, any partner
that would be a U.S. Stockholder if it held the stock directly is also a U.S.
Stockholder. As long as we qualify as a REIT, distributions made to our taxable
U.S. Stockholders out of current or accumulated earnings and profits (and not
designated as capital gain dividends or retained capital gains) will be taken
into account by them as ordinary income, and corporate stockholders will not be
eligible for the dividends received deduction as to such amounts. Distributions
in excess of current and accumulated earnings and profits will not be taxable to
a stockholder to the extent that they do not exceed the adjusted basis of such
stockholder's stock, but rather will reduce the adjusted basis of such shares as
a return of capital. To the extent that such distributions exceed the adjusted
basis of a stockholder's stock, they will be included in income as long-term
capital gain (or short-term capital gain if the shares have been held for one
year or less), assuming the shares are a capital asset in the hands of the
stockholder. In addition, any dividend declared by us in October, November or
December of any year payable to a stockholder of record on a specific date in
any such month shall be treated as both paid by us and received by the
stockholder on December 31 of such year, provided that the dividend is actually
paid by us during January of the following calendar year. For purposes of
determining what portion of a distribution is attributable to current or
accumulated earnings and profits, earnings and profits will first be allocated
to distributions made to holders of the shares of preferred stock. Stockholders
may not include in their individual income tax returns any net operating losses
or capital losses of ours.

In general, any gain or loss realized upon a taxable disposition of shares
by a stockholder who is not a dealer in securities will be treated as a
long-term capital gain or loss if the shares have been held for more than one
year, otherwise as a short-term capital gain or loss. However, any loss upon a
sale or exchange of stock by a stockholder who has held such shares for six
months or less (after applying certain holding period rules) will be treated as
long-term capital loss to the extent of distributions from us required to be
treated by such stockholder as long-term capital gain.

- the amount of cash and the fair market value of any property received on
such disposition; and

- the U.S. Stockholder's adjusted basis in such stock for tax purposes.

On May 28, 2003, the President signed into law the Jobs and Growth Tax
Relief Reconciliation Act of 2003. This new tax law will reduce the maximum
individual tax rate for long-term capital gains generally from 20% to 15% (for
sales occurring after May 6, 2003 through December 31, 2008) and for dividends
generally from 38.6% to 15% (for tax years from 2003 through 2008). Without
future congressional action, the maximum tax rate on long-term capital gains
will return to 20% in 2009, and the maximum rate on dividends will move to 35%
in 2009 and 39.6% in 2011. Because we are not generally subject to federal
income tax on the portion of our REIT taxable income or capital gains
distributed to our stockholders, our dividends will generally not be eligible
for the new 15% tax rate on dividends. As a result, our ordinary REIT dividends
will continue to be taxed at the higher tax rates applicable to ordinary income.
However, the 15% tax rate for long-term capital gains and dividends will
generally apply to:

1. your long-term capital gains, if any, recognized on the disposition
of our shares;

3. our dividends attributable to dividends received by us from
non-REIT corporations, such as taxable REIT subsidiaries; and

4. our dividends to the extent attributable to income upon which we
have paid corporate income tax (e.g., to the extent that we distribute less
than 100% of our taxable income).

Taxation of Tax-Exempt Stockholders. Provided that a tax-exempt
stockholder has not held its stock as "debt financed property" within the
meaning of the Code, the dividend income from us will not be unrelated business
taxable income, referred to as UBTI, to a tax-exempt stockholder. Similarly,
income from the sale of stock will not constitute UBTI unless the tax-exempt
stockholder has held its stock as debt financed property within the meaning of
the Code or has used the stock in a trade or business. However, for a tax-exempt
stockholder that is a social club, voluntary employee benefit association,
supplemental unemployment benefit trust, or qualified group legal services plan
exempt from federal income taxation under Sections 501(c)(7), (c)(9), (c)(17)
and (c)(20) of the Code, respectively, or a single parent title-holding
corporation exempt under Section 501(c)(2) of the Code the income of which is
payable to any of the aforementioned tax-exempt organizations, income from an
investment in us will constitute UBTI unless the organization properly sets
aside or reserves such amounts for purposes specified in the Code. These
tax-exempt stockholders should consult their own tax advisors concerning these
"set aside" and reserve requirements.

requirement will apply for a taxable year only if (i) the REIT satisfies the
requirement that not more than 50% of the value of its shares be held by five or
fewer individuals (the "five or fewer requirement") only by relying on a special
"look-through" rule under which shares held by qualified trust stockholders are
treated as held by the beneficiaries of such trusts in proportion to their
actuarial interests therein; and (ii) the REIT is "predominantly held" by
qualified trusts. A REIT is "predominantly held" by qualified trusts if either
(i) a single qualified trust holds more than 25% of the value of the REIT
shares, or (ii) one or more qualified trusts, each owning more than 10% of the
value of the REIT shares, hold in the aggregate more than 50% of the value of
the REIT shares. If the foregoing requirements are met, the percentage of any
REIT dividend treated as UBTI to a qualified trust that owns more than 10% of
the value of the REIT shares is equal to the ratio of (i) the UBTI earned by the
REIT (computed as if the REIT were a qualified trust and therefore subject to
tax on its UBTI) to (ii) the total gross income (less certain associated
expenses) of the REIT for the year in which the dividends are paid. A de minimis
exception applies where the ratio set forth in the preceding sentence is less
than 5% for any year.

The provisions requiring qualified trusts to treat a portion of REIT
distributions as UBTI will not apply if the REIT is able to satisfy the five or
fewer requirement without relying on the "look-through" rule. The restrictions
on ownership of stock in our charter should prevent application of the foregoing
provisions to qualified trusts purchasing our stock, absent a waiver of the
restrictions by the board of directors.

Distributions that are not attributable to gain from sales or exchanges by
us of U.S. real property interests and not designated by us as capital gain
dividends or retained capital gains will be treated as dividends of ordinary
income to the extent that they are made out of our current or accumulated
earnings and profits. Such distributions ordinarily will be subject to a
withholding tax equal to 30% of the gross amount of the distribution unless an
applicable tax treaty reduces such rate. However, if income from the investment
in our stock is treated as effectively connected with the Non-U.S. Stockholder's
conduct of a U.S. trade or business (or, if a treaty applies, attributable to a
U.S. permanent establishment of the Non-U.S. Stockholder), the Non-U.S.
Stockholder generally will be subject to a tax at graduated rates in the same
manner as U.S. Stockholders are taxed with respect to such dividends (and may
also be subject to a branch profits tax of up to 30% if the stockholder is a
foreign corporation). We expect to withhold U.S. income tax at the rate of 30%
on the gross amount of any dividends paid to a Non-U.S. Stockholder that are not
designated as capital gain dividends, unless (i) a lower treaty rate applies and
the Non-U.S. Stockholder files an IRS Form W-8BEN evidencing eligibility for
that reduced rate with us or (ii) the Non-U.S. Stockholder files an IRS Form
W-8ECI with us claiming that the distribution is income treated as effectively
connected to a U.S. trade or business.

Distributions in excess of our current and accumulated earnings and profits
will not be taxable to a stockholder to the extent that they do not exceed the
adjusted basis of the stockholder's stock, but rather will reduce the adjusted
basis of such shares. To the extent that such distributions exceed the adjusted
basis of a Non-U.S. Stockholder's shares, they will give rise to tax liability
if the Non-U.S. Stockholder would otherwise be subject to tax on any gain from
the sale or disposition of his or her stock as described below. We may be
required to withhold U.S. federal income tax at the rate of at least 10% on
distributions to Non-U.S. Stockholders that are not paid out of current or
accumulated earnings and profits unless the Non-U.S. Stockholders provide us
with withholding certificates evidencing their exemption from withholding tax.
If it cannot be determined at the time that such a distribution is made, whether
or not such distribution will be in excess of current and accumulated earnings
and profits, the distribution will be subject to withholding at the rate
applicable to dividends. However, the Non-U.S. Stockholder may seek a refund of

such amounts from the Internal Revenue Service if it is subsequently determined
that such distribution was, in fact, in excess of our current and accumulated
earnings and profits.

For any year in which we qualify as a REIT, distributions that are
attributable to gain from sales or exchanges by us of U.S. real property
interests will be taxed to a Non-U.S. Stockholder under the provisions of the
Foreign Investment in Real Property Tax Act of 1980 ("FIRPTA"). Under FIRPTA,
these distributions are taxed to a Non-U.S. Stockholder as if such gain were
effectively connected with a U.S. business. Thus, Non-U.S. Stockholders will be
taxed on such distributions at the normal capital gain rates applicable to U.S.
Stockholders (subject to applicable alternative minimum tax and a special
alternative minimum tax in the case of nonresident alien individuals). Also,
distributions subject to FIRPTA may be subject to a 30% branch profits tax in
the hands of a corporate Non-U.S. Stockholder not entitled to treaty relief or
exemption. We are required by applicable Treasury Regulations to withhold 35% of
any distribution that could be designated by us as a capital gain dividend. This
amount is creditable against the Non-U.S. Stockholder's FIRPTA tax liability.

Gain recognized by a Non-U.S. Stockholder upon the sale or exchange of our
stock generally would not be subject to United States taxation unless:

- the investment in our stock is effectively connected with the Non-U.S.
Stockholder's U.S. trade or business (or, if a treaty applies,
attributable to a U.S. permanent establishment of the Non-U.S.
Stockholder), in which case the Non-U.S. Stockholder will be subject to
the same treatment as domestic stockholders with respect to any gain (and
in the case of a corporate Non-U.S. Stockholder, may also be subject to
the branch profits tax discussed above);

- the Non-U.S. Stockholder is a non-resident alien individual who is
present in the United States for 183 days or more during the taxable year
and certain other conditions are present, in which case the non-resident
alien individual will be subject to a 30% tax on the individual's net
capital gains for the taxable year; or

- our stock constitutes a United States real property interest within the
meaning of FIRPTA and certain other conditions are present, as described
below.

Our stock will not constitute a United States real property interest if we
are a domestically-controlled REIT. We will be a domestically-controlled REIT
if, at all times during a specified testing period, less than 50% in value of
our stock is held directly or indirectly by Non-U.S. Stockholders.

Even if we do not qualify as a domestically-controlled REIT at the time a
Non-U.S. Stockholder sells our stock, gain arising from the sale still would not
be subject to FIRPTA tax if:

- the class or series of shares sold is considered regularly traded under
applicable Treasury Regulations on an established securities market, such
as the NYSE; and

treatment of us and our stockholders may not conform to the federal income tax
consequences discussed above. Consequently, prospective stockholders should
consult their own tax advisors regarding the effect of state and local tax laws
on an investment in the common stock.

BACKUP WITHHOLDING TAX AND INFORMATION REPORTING

U.S. Stockholders. In general, information reporting requirements will
apply to certain U.S. Stockholders with regard to payments of dividends on our
stock and payments of the proceeds of the sale of our stock, unless an exception
applies.

In addition, a payor of dividends on our stock will be required to withhold
tax at a rate of 28% if (i) there has been a notified payee under-reporting with
respect to interest, dividends or original issue discount described in Section
3406(c) of the Code, or (ii) there has been a failure of the payee to certify
under the penalty of perjury that the payee is not subject to backup withholding
under the Code.

Non-U.S. Stockholders. Generally, information reporting will apply to
payments of dividends on our stock, interest, and backup withholding will also
apply as described above for a U.S. Stockholder, unless the payee certifies that
it is not a U.S. person or otherwise establishes an exemption.

SUNSET OF TAX PROVISIONS

Several of the tax considerations described herein are subject to a sunset
provision. The sunset provision generally provides that, for taxable years
beginning after December 31, 2008, certain provisions that are currently in the
Code will revert back to a prior version of those provisions. These provisions
include provisions related to qualified dividend income, the application of the
15% capital gains rate to qualified dividend income and other tax rates
described herein. The impact of this reversion is not discussed herein.

Consequently, prospective security holders should consult their own tax advisors
regarding the effect of sunset provisions on an investment in our stock.

PLAN OF DISTRIBUTION

We may sell securities to one or more underwriters for public offer and
sale by them or may sell securities offered hereby to the public directly or
through agents. Any underwriter or agent involved in the offer and sale of the
securities will be named in the applicable prospectus supplement. In addition,
the terms of any agreement, arrangement or understanding entered into with any
brokers or dealers after the effective date of the registration statement, of
which this prospectus is a part, will be described in the applicable prospectus
supplement. All participating underwriters, dealers and agents will be
registered broker-dealers or associated persons of registered broker-dealers.

The distribution of the securities may be effected from time to time in one
or more transactions at a fixed price or prices, which may be changed, related
to the prevailing market prices at the time of sale or at negotiated prices (any
of which may represent a discount from the prevailing market prices). We also
may, from time to time, authorize underwriters acting as our agents to offer and
sell the securities upon the terms and conditions as are set forth in the
applicable prospectus supplement. In connection with the sale of securities,
underwriters may be deemed to have received compensation from us in the form of
underwriting discounts or commissions and may also receive commissions from
purchasers of securities for whom they may act as agent. Underwriters may sell
securities to or through dealers, and such dealers may receive compensation in
the form of discounts, concessions or commissions from the underwriters and/or
commissions from the purchasers for whom they may act as agent.

Any underwriting compensation paid by us to underwriters or agents in
connection with the offering of securities and any discounts, concessions or
commissions allowed by underwriters to participating dealers, will be set forth
in the applicable prospectus supplement. Underwriters, dealers and agents
participating in the distribution of the securities may be deemed to be
underwriters, and any discounts and commissions received by them and any profit
realized by them on resale of the securities may be deemed to be underwriting
discounts and commissions, under the Securities Act. Underwriters, dealers and
agents may be entitled, under agreements entered into with us, to
indemnification against and contribution toward certain civil liabilities,
including liabilities under the Securities Act.

Some of the underwriters and their affiliates may be customers of, engage
in transactions with and perform services for us and our subsidiaries in the
ordinary course of business.

The maximum commission or discount to be received by any NASD member or
independent broker-dealer in connection with any offering of securities under
this prospectus will not exceed 8.0% of the gross proceeds of the offering.

In connection with the offering, the underwriters may purchase and sell our
securities in the open market. These transactions may include short sales,
syndicate covering transactions and stabilizing transactions. Short sales
involve syndicate sales of our securities in excess of the number of shares to
be purchased by the underwriters in the offering, which creates a syndicate
short position. The underwriters must close out any short position by purchasing
our securities in the open market. A short position is more likely to be created
if the underwriters are concerned that there may be downward pressure on the
price of the shares in the open market after pricing that could adversely affect
investors who purchase in the offering. Stabilizing transactions consist of bids
for, or purchases of, shares in the open market while the offering is in
progress. The underwriters also may impose a penalty bid. Penalty bids permit
the underwriters to reclaim a selling concession from a syndicate member when
the underwriters repurchase shares originally sold by that syndicate member in
order to cover syndicate short positions or to make stabilizing purchases. Any
of these activities may have the effect of preventing or retarding a decline in
the market price of our securities. They may also cause the price of our
securities to be higher than the price that would otherwise exist in the open
market in the absence of these transactions. The underwriters may conduct these
transactions on the

New York Stock Exchange or in the over-the-counter market, or otherwise. If the
underwriters commence any of these transactions, they may discontinue them at
any time.

LEGAL MATTERS

Certain legal matters, including the validity of the securities offered by
this prospectus, will be passed upon for us by Jaeckle Fleischmann & Mugel, LLP,
Buffalo, New York.

EXPERTS

The consolidated financial statements and schedules of EastGroup
Properties, Inc. as of December 31, 2002 and 2001, and for each of the years in
the three-year period ended December 31, 2002, have been incorporated by
reference herein in reliance upon the reports of KPMG LLP, independent
accountants, incorporated by reference herein, and upon the authority of said
firm as experts in accounting and auditing. The audit report covering the
December 31, 2002 consolidated financial statements refers to a change in the
methods of accounting for the impairment or disposal of long-lived assets and
stock-based compensation.

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800,000 SHARES

EASTGROUP PROPERTIES, INC.

COMMON STOCK

[EASTGROUP PROPERTIES LOGO]

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PROSPECTUS SUPPLEMENT

MARCH 28, 2005

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CITIGROUP

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