Filed Pursuant To Rule 424(b)(3)
                                                     Registration No. 333-134959



                         CALCULATION OF REGISTRATION FEE



Title of Each Class of           Amount to be              Proposed Maximum                  Amount of
 Securitites Offered            Registered (1)        Aggregate Offering Price (1)      Registration Fee (2)
-------------------------------------------------------------------------------------------------------------
                                                                                       
    Common Stock              1,207,500 shares                $59,469,375                   $2,337.15 (3)


(1)  Includes  shares of Common Stock that may be purchased by the  underwriters
     pursuant  to  their   option  to  purchase   additional   shares  to  cover
     over-allotments.
(2)  Calculated in accordance with Rule 457(r) of the Securities Act of 1933, as
     amended (the "Securities Act").  Payment of registration fee at the time of
     the filing of the  registration  statement  on June 12,  2006 was  deferred
     pursuant to Rule 456(b).
(3)  Pursuant to Rule 457 (p) under the  Securities  Act,  unused filing fees of
     $8,283.06  have already been paid with  respect to unsold  securities  that
     were previously registered pursuant to a Registration Statement on Form S-3
     (No. 333-109769) filed by the Registrant on October 17, 2003, and have been
     carried forward, of which $2,337.15 offset against the registration fee due
     for this  offering  and of which  $5,945.91  remains  available  for future
     registration  fees.  No  additional  registration  fee has been  paid  with
     respect to this offering.


PROSPECTUS SUPPLEMENT
(To Prospectus dated June 12, 2006)

                                1,050,000 Shares

                        [EASTGROUP PROPERTIES, INC. LOGO]

                           EastGroup Properties, Inc.

                                  Common Stock
                                 --------------

     We are selling  1,050,000 shares of our common stock, par value $0.0001 per
share.  We will  receive  all of the net  proceeds  from the sale of our  common
stock.  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 April 23, 2008, was $49.75 per share.

Investing in our common stock involves risks.  See "Risk Factors" on page S-4 of
this  prospectus  supplement  and "Risk  Factors" on page 3 of the  accompanying
prospectus.

                                                                               
                                                                 Per Share          Total
                                                                -----------------------------
Public offering price.......................................      $49.25         $51,712,500
Underwriting discount.......................................       $1.44          $1,512,000
Proceeds, before expenses, to us............................      $47.81         $50,200,500


     The underwriter  proposes to offer the shares of common stock to the public
at the public  offering price set forth above. If all of the shares are not sold
at the initial  offering  price,  the underwriter may change the public offering
price and the other selling terms.

     We have granted the  underwriter the option to purchase up to an additional
157,500 shares of common stock from us at the public  offering  price,  less the
underwriting discount, to cover over-allotments, if any, within 30 days from the
date of this prospectus supplement.

     The  underwriters  are offering the shares of our common stock as described
in  "Underwriting."  Delivery  of the shares  will be made on or about April 29,
2008.

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

                        ---------------------------------
                               Merrill Lynch & Co.
                        ---------------------------------

            The date of this prospectus supplement is April 24, 2008



     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.  If anyone  provides you with different or  inconsistent
information,  you should not rely on it. 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.

                              Prospectus Supplement
                                                                            Page
ABOUT THIS PROSPECTUS SUPPLEMENT.............................................S-2
INCORPORATION BY REFERENCE...................................................S-2
EASTGROUP PROPERTIES, INC....................................................S-3
THE OFFERING.................................................................S-4
RISK FACTORS.................................................................S-4
USE OF PROCEEDS..............................................................S-4
UNDERWRITING.................................................................S-5
EXPERTS......................................................................S-7
LEGAL MATTERS................................................................S-7

                         Prospectus Dated June 12, 2006
                                                                            Page
RISK FACTORS...................................................................3
FORWARD-LOOKING INFORMATION....................................................3
RATIO OF EARNINGS TO FIXED CHARGES.............................................4
USE OF PROCEEDS................................................................4
DESCRIPTION OF CAPITAL STOCK...................................................4
DESCRIPTION OF COMMON STOCK....................................................5
DESCRIPTION OF PREFERRED STOCK.................................................6
DESCRIPTION OF SHAREHOLDER RIGHTS PLAN.........................................7
DESCRIPTION OF WARRANTS........................................................8
CERTAIN PROVISIONS OF MARYLAND LAW AND OUR CHARTER AND BYLAWS..................8
MATERIAL UNITED STATES FEDERAL INCOME TAX CONSEQUENCES........................11
PLAN OF DISTRIBUTION..........................................................25
LEGAL MATTERS.................................................................25
EXPERTS.......................................................................25
WHERE YOU CAN FIND MORE INFORMATION...........................................25
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE...............................26




                        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.


                           INCORPORATION BY REFERENCE

     The Securities and Exchange  Commission,  or SEC, allows us to "incorporate
by reference"  information into this prospectus  supplement and the accompanying
prospectus.  This means that we can  disclose  important  information  to you by
referring  you to another  document that we have filed  separately  with the SEC
that contains that  information.  The  information  incorporated by reference is
considered  to be part  of  this  prospectus  supplement  and  the  accompanying
prospectus.  Information  that  we file  with  the SEC  after  the  date of this
prospectus  supplement will  automatically  modify and supersede the information
included or  incorporated  by reference in this  prospectus  supplement  and the
accompanying  prospectus to the extent that the subsequently  filed  information
modifies or supersedes  the existing  information.  We  incorporate by reference
(other than any portions of any such documents that are not deemed "filed" under
the Securities  Exchange Act of 1934 in accordance with the Securities  Exchange
Act of 1934 and applicable SEC rules):

     o    our Annual Report on Form 10-K for the fiscal year ended  December 31,
          2007;

     o    our Current Report on Form 8-K filed with the SEC on January 10, 2008;

     o    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; and

     o    any future filings we make with the SEC under Sections  13(a),  13(c),
          14 or 15(d) of the  Securities  Exchange Act of 1934 until we sell all
          of the securities offered by this prospectus supplement.

     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:

                                      S-2




                           EastGroup Properties, Inc.
                       Attention: Chief Financial Officer
                              300 One Jackson Place
                             188 East Capitol Street
                             Jackson, MS 39201-2195
                                 (601) 354-3555


                           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 an emphasis in the states of Florida,
Texas,  Arizona and  California.  Our goal is to maximize  shareholder  value by
being the  leading  provider  of  functional,  flexible,  and  quality  business
distribution  space for location sensitive  customers  primarily in the 5,000 to
50,000  square foot range.  Our  strategy  for growth is based on  ownership  of
premier  distribution  facilities  generally clustered near major transportation
features in supply-constrained  submarkets.  As of March 31, 2008, our portfolio
included 24.9 million square feet of real estate  properties  with an additional
1.8 million square feet under development.  As of March 31, 2008, our properties
were approximately 94.9% leased.

     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.

     Additional  information  regarding  us,  including  our  audited  financial
statements,  is contained  in the  documents  incorporated  by reference in this
prospectus supplement and the accompanying prospectus.  Please also refer to the
section  entitled  "Where  You  Can  Find  More  Information"  contained  in the
accompanying prospectus.

                                      S-3




                                  THE OFFERING

                                                      
Issuer ............................................   EastGroup Properties, Inc.
New York Stock Exchange Symbol ....................   EGP
Shares of common stock being offered by us ........   1,050,000
Shares of common stock to be outstanding
     after the offering ...........................   24,889,840 (1)(2)
Use of proceeds....................................   We intend to use the net proceeds from this
                                                      offering for general corporate purposes,
                                                      including the payment of costs of acquisition
                                                      or development of industrial properties.
                                                      Pending such use, we will use the proceeds to
                                                      reduce variable rate debt. See "Use of
                                                      Proceeds."


---------------
(1)  Excludes  1,770,413  shares  reserved  for  issuance  under our 2004 Equity
     Incentive  Plan, our 1994  Management  Incentive  Plan, our 1991 Directors'
     Stock  Option  Plan,  our 2000  Directors'  Stock  Option Plan and our 2005
     Directors'  Equity  Incentive  Plan.  Of the shares  reserved for issuance,
     options to purchase an aggregate of 118,186  shares are  outstanding  as of
     April 23, 2008.
(2)  Number  of  shares  assumes  the  underwriter's  over-allotment  option  to
     purchase 157,500 additional shares of our common stock is not exercised.

                                  RISK FACTORS

     Before  you  invest  in any of our  securities,  in  addition  to the other
information in this prospectus supplement and the accompanying  prospectus,  you
should  carefully  consider the risk factors  under the heading  "Risk  Factors"
contained  in Part I, Item 1A in our most  recent  Annual  Report on Form  10-K,
which is  incorporated  by reference  into this  prospectus  supplement  and the
accompanying  prospectus,  as the same may be  updated  from time to time by our
future filings under the Securities Exchange Act of 1934.

                                 USE OF PROCEEDS

     The net  proceeds  to us from  the  offering  of the  shares  by us will be
approximately  $50,075,000  after deducting the underwriting  discount and other
offering  expenses.  We expect to use the net  proceeds  from this  offering for
general  corporate  purposes,  including the payment of costs of  acquisition or
development of industrial properties. 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 3.409% as of April 23, 2008.

                                      S-4



                                  UNDERWRITING

     We intend  to offer our  shares of  common  stock  through  Merrill  Lynch,
Pierce, Fenner & Smith Incorporated ("Merrill Lynch").  Subject to the terms and
conditions described in an underwriting  agreement between us and Merrill Lynch,
we have  agreed to sell to  Merrill  Lynch,  and  Merrill  Lynch  has  agreed to
purchase  from us, all of the shares being offered  pursuant to this  prospectus
supplement. Merrill Lynch is committed to purchase all of such shares if any are
purchased.

     We have agreed to indemnify  Merrill  Lynch  against  certain  liabilities,
including  liabilities  under the  Securities  Act, or to contribute to payments
Merrill Lynch may be required to make in respect of those liabilities.

     Merrill  Lynch is  offering  the shares of common  stock,  subject to prior
sale, when, as and if issued to and accepted by it, subject to approval of legal
matters  by its  counsel,  including  the  validity  of the  shares,  and  other
conditions  contained  in the  underwriting  agreement,  such as the  receipt by
Merrill  Lynch of  officer's  certificates  and legal  opinions.  Merrill  Lynch
reserves  the right to  withdraw,  cancel or modify  offers to the public and to
reject orders in whole or in part.

     Merrill Lynch proposes to offer the shares of common stock to the public at
the  public  offering  price  set  forth on the  cover  page of this  prospectus
supplement.  If all of the shares are not sold at the  initial  offering  price,
Merrill Lynch may change the public offering price and the other selling terms.

Commissions and Discounts
     Merrill Lynch has advised us that it proposes initially to offer the shares
to the public at the public  offering price on the cover page of this prospectus
supplement and to dealers at that price less a concession not in excess of $0.75
per share. Merrill Lynch may allow, and the dealers may re-allow, a discount not
in  excess  of $0.10  per  share to other  dealers.  There is a sales  charge or
underwriting  discount of $1.44 per share, which is equal to 2.9% of the initial
public offering price per share.  After the initial public offering,  the public
offering price,  concession and discount may be changed.  Investors must pay for
the shares of common  stock  purchased  in the  offering on or before  April 29,
2008.

     The following  table shows the per share and total public  offering  price,
underwriting   discount  and  proceeds  before  offering  expenses  to  us.  The
information  assumes either no exercise or full exercise by Merrill Lynch of the
overallotment option.


                                                                                                     With
                                                         Per Share          Without Option          Option
                                                        ------------------------------------------------------
                                                                                             
Public offering price.............................        $49.25             $51,712,500          $59,469,375
Underwriting discount.............................        $ 1.44             $ 1,512,000          $ 1,738,800
Proceeds, before expenses, to us..................        $47.81             $50,200,500          $57,730,575


     The  expenses of the offering  are  estimated to be $125,000,  all of which
will be borne by us.

Overallotment Option
     We have  granted  an option to  Merrill  Lynch to  purchase  up to  157,500
additional  shares at the public offering price less the underwriting  discount.
Merrill  Lynch  may  exercise  this  option  for 30 days  from  the date of this
prospectus supplement solely to cover any overallotments.

                                      S-5



Lock-Up Agreement
     We have  agreed  not to offer or sell any  additional  common  stock  for a
period of 60 days after the date of the  underwriting  agreement  without  first
obtaining the written  consent of Merrill  Lynch,  except for the sale of common
stock to Merrill Lynch pursuant to the underwriting agreement.  Specifically, we
have agreed,  with certain  limited  exceptions,  not to directly or  indirectly
offer,  sell,  contract to sell, pledge, or otherwise dispose of, (or enter into
any transaction which is designed to, or might reasonably be expected to, result
in  the  disposition  (whether  by  actual  disposition  or  effective  economic
disposition  due to cash settlement or otherwise) by us or any of our affiliates
or  any  person  in  privity  with  us or any of  our  affiliates)  directly  or
indirectly,  including  the  filing  (or  participation  in  the  filing)  of  a
registration  statement with the  Securities and Exchange  Commission in respect
of, or establish or increase a put equivalent  position or liquidate or decrease
a call equivalent position within the meaning of Section 16 of the Exchange Act,
any  other  shares  of  Common  Stock or any  securities  convertible  into,  or
exercisable,  or exchangeable  for, shares of Common Stock; or publicly announce
an intention to effect any such  transaction,  for a period of 60 days after the
date of the underwriting  agreement,  provided,  however,  that we may issue and
sell Common Stock pursuant to any director or employee stock option plan,  stock
ownership  plan or dividend  reinvestment  plan  currently  in effect and we may
issue Common Stock issuable upon the conversion of securities or the exercise of
warrants currently outstanding.

New York Stock Exchange Listing
     Our  currently  outstanding  shares of common  stock are, and the shares of
common stock sold pursuant to this  prospectus  supplement and the  accompanying
prospectus, subject to notice of issuance, will be, listed on the NYSE under the
symbol "EGP."

Price Stabilization and Short Positions
     Until the  distribution  of the  shares is  completed,  SEC rules may limit
Merrill  Lynch and selling  group  members from bidding for and  purchasing  our
common stock.  However,  Merrill Lynch may engage in transactions that stabilize
the price of the common stock, such as bids or purchases to peg, fix or maintain
that price.

     If Merrill Lynch creates a short position in the shares in connection  with
the  offering,  i.e.,  if they sell more  shares than are listed on the cover of
this  prospectus  supplement,  Merrill  Lynch may reduce that short  position by
purchasing shares in the open market. Merrill Lynch also may elect to reduce any
short position by exercising all or part of the  overallotment  option described
above.  Purchases  of the  shares  to  stabilize  its price or to reduce a short
position  may cause the price of the shares to be higher than it might be in the
absence of such purchases.

     Neither we nor Merrill Lynch makes any  representation  or prediction as to
the direction or magnitude of any effect that the  transactions  described above
may have on the price of the common stock.  In addition,  neither we nor Merrill
Lynch  makes  any  representation  that  Merrill  Lynch  will  engage  in  these
transactions  or  that  these   transactions,   once  commenced,   will  not  be
discontinued without notice.

Electronic Offer, Sale and Distribution of Shares
     In connection  with the offering,  Merrill Lynch or securities  dealers may
distribute this prospectus supplement and accompanying  prospectus by electronic
means, such as e-mail. In

                                      S-6



addition,  Merrill Lynch will be  facilitating  Internet  distribution  for this
offering  to certain  of its  Internet  subscription  customers.  Merrill  Lynch
intends to allocate a limited number of shares for sale to its online  brokerage
customers.  An electronic prospectus  supplement and accompanying  prospectus is
available on the Internet web site  maintained by Merrill Lynch.  Other than the
prospectus  supplement and  accompanying  prospectus in electronic  format,  the
information  on the  Merrill  Lynch  web  site is not  part  of this  prospectus
supplement and accompanying prospectus.

Other Relationships
     Merrill  Lynch and its  affiliates  may in the future  engage in investment
banking and other  commercial  dealings in the ordinary  course of business with
us.

     The address of Merrill Lynch is 4 World Financial Center, 250 Vesey Street,
New York, New York 10080.

                                     EXPERTS

     The   consolidated   financial   statements   and  schedules  of  EastGroup
Properties,  Inc. as of December 31, 2007 and 2006, and for each of the years in
the three-year  period ended December 31, 2007, and  management's  assessment of
the  effectiveness of internal  control over financial  reporting as of December
31, 2007,  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 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.

                                      S-7



                        [EASTGROUP PROPERTIES, INC. LOGO]

                     COMMON STOCK, PREFERRED STOCK, WARRANTS



     From time to time, we may offer to sell common stock,  preferred stock, and
warrants to purchase  preferred stock or common stock covered by this prospectus
independently,  or together in any combination that may include other securities
set forth in an accompanying  prospectus  supplement,  in one or more offerings,
for sale directly to purchasers or through underwriters, dealers or agents to be
designated at a future date. Our outstanding common shares are listed on the New
York Stock Exchange under the symbol "EGP." This prospectus  provides you with a
general description of the securities we may offer.

     Each time  securities  are sold using this  prospectus,  we will  provide a
supplement to this  prospectus or possibly  other offering  material  containing
specific  information  about the  offering.  The  supplement  or other  offering
material  may  also  add,  update  or  change  information   contained  in  this
prospectus.  This  prospectus  may not be used to offer  or sell any  securities
unless accompanied by a prospectus  supplement.  You should read this prospectus
and any supplement and/or other offering material carefully before you invest.

     We may sell securities to or through  underwriters,  dealers or agents. For
additional  information  on the method of sale,  you should refer to the section
entitled  "Plan of  Distribution."  The names of any  underwriters,  dealers  or
agents  involved in the sale of any securities and the specific  manner in which
they may be offered will be set forth in the prospectus  supplement covering the
sale of those securities.

     This prospectus contains summaries of certain provisions  contained in some
of the documents described herein, but reference is made to the actual documents
for complete  information.  All of the summaries are qualified in their entirety
by the actual documents. Copies of some of the documents referred to herein have
been filed or will be filed or  incorporated  by  reference  as  exhibits to the
registration  statement of which this  prospectus is a part,  and you may obtain
copies of those  documents  as  described  below under  "Where You Can Find More
Information."

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

     Neither the  Securities and Exchange  Commission  nor any other  regulatory
body 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 June 12, 2006.



                                TABLE OF CONTENTS

                                                                            Page
RISK FACTORS...................................................................3
FORWARD-LOOKING INFORMATION....................................................3
RATIO OF EARNINGS TO FIXED CHARGES.............................................4
USE OF PROCEEDS................................................................4
DESCRIPTION OF CAPITAL STOCK...................................................4
DESCRIPTION OF COMMON STOCK....................................................5
DESCRIPTION OF PREFERRED STOCK.................................................6
DESCRIPTION OF SHAREHOLDER RIGHTS PLAN.........................................7
DESCRIPTION OF WARRANTS........................................................7
CERTAIN PROVISIONS OF MARYLAND LAW AND OUR CHARTER AND BYLAWS..................8
MATERIAL UNITED STATES FEDERAL INCOME TAX CONSEQUENCES........................10
PLAN OF DISTRIBUTION..........................................................23
LEGAL MATTERS.................................................................23
EXPERTS.......................................................................23
WHERE YOU CAN FIND MORE INFORMATION...........................................24
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE...............................24


     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.

                                       2



                                  RISK FACTORS

     Investment  in  our  securities   involves  risks.   Before  acquiring  any
securities  offered pursuant to this prospectus,  you should carefully  consider
the information  contained or incorporated by reference in this prospectus or in
any accompanying prospectus supplement, including, without limitation, the risks
of an  investment  in our company set forth  under the  captions  "Item 1A. Risk
Factors"  and  "Item  7.  Management's  Discussion  and  Analysis  of  Financial
Condition and Results of  Operations"  (or similar  captions) in our most recent
annual  report  on Form  10-K  and  under  the  caption  "Item  2.  Management's
Discussion and Analysis of Financial Condition and Results of Operations" in our
quarterly  reports on Form 10-Q,  and as described in our other filings with the
Securities and Exchange Commission, or SEC. The occurrence of any of these risks
might  cause  you to  lose  all or a part  of  your  investment  in the  offered
securities.  Please also refer to the section  below  entitled  "Forward-Looking
Information."



                           FORWARD-LOOKING INFORMATION

     This prospectus,  the prospectus supplement,  the documents incorporated by
reference in this  prospectus and other written reports and oral statements made
from time to time by the company may contain  forward-looking  statements within
the  meaning of the  Private  Securities  Litigation  Reform  Act of 1995.  Such
forward-looking  statements may include 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.

     Because  such  statements  are subject to risks and  uncertainties,  actual
results  may  differ   materially  from  those  expressed  or  implied  by  such
forward-looking statements.  Investors are cautioned not to place undue reliance
on such statements, which speak only as of the date the statements were made.

     Among the factors that could cause actual results to differ materially are:
national,  regional and local economic  climates,  changes in financial markets,
interest rates, increased or unanticipated competition for our properties, risks
associated with  acquisitions,  maintenance of our REIT status,  availability of
financing  and capital,  changes in demand for developed  properties,  and other
risks detailed from time to time in the reports filed with the SEC by us.

     Except for ongoing obligations to disclose material information as required
by the federal  securities  laws, we do not undertake any  obligation to release
publicly any revisions to any  forward-looking  statements to reflect  events or
circumstances  after the date of the filing of this prospectus or to reflect the
occurrence of unanticipated events.



                        ABOUT 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 an emphasis in the states of Florida,
Texas,  California  and Arizona.  Our goal is to maximize  shareholder  value by
being the  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.  Our  strategy  for growth is based on  ownership  of
premier  distribution  facilities  generally clustered near major transportation
features in supply constrained  submarkets.  Substantially all of our revenue is
generated from renting warehouse distribution space.

     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.  Please also refer to the section below entitled "Where You Can Find
More Information."

                                       3



                       RATIO OF EARNINGS TO FIXED CHARGES

     Our ratio of  earnings  to  combined  fixed  charges  and  preferred  stock
dividends for the three months ended March 31, 2006 and the years ended December
31, 2005,  2004,  2003, 2002 and 2001 was 1.45, 1.53, 1.70, 1.45, 1.40 and 1.70,
respectively.

     For purposes of calculating  these ratios,  earnings  represent income from
continuing  operations before  adjustments for minority interest in consolidated
subsidiary and income from equity investee, plus fixed charges, plus distributed
income of equity investee,  minus  capitalized  interest,  minus preferred stock
dividends.   Fixed  charges  represent  interest  expense  and  preferred  stock
dividends  from our  consolidated  statements  of  operations  plus  capitalized
interest,  amortization of mortgage premiums 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.



                                 USE OF PROCEEDS

     Unless otherwise  specified in a prospectus  supplement  accompanying  this
prospectus,  the net  proceeds  from the sales of the  securities  to which this
prospectus  relates  will  be  used  for  general  corporate  purposes.  General
corporate purposes may include,  without  limitation,  the repayment of debt and
the development and acquisition of additional properties.



                          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
68,080,000 shares of common 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 May 31,
2006, 22,212,695 shares of common 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.

     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.

                                       4



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 (i) 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;
(ii) we obtain such representations and undertakings as are reasonably necessary
to  ascertain  this fact;  and (iii) 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  authorized  and  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,  appraisal 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.

     Under Maryland law, a Maryland corporation generally cannot dissolve, amend
its charter,  merge,  sell all or substantially  all of its assets,  engage in a
share exchange or engage in similar  transactions outside the

                                       5



ordinary  course  of  business,  unless  approved  by the  affirmative  vote  of
stockholders  holding at least two thirds of the shares  entitled to vote on the
matter.  However, a Maryland corporation may provide in its charter for approval
of these matters by a lesser percentage,  but not less than a majority of all of
the votes  entitled to be cast on the matter.  Our  charter  provides  that such
actions  need to be approved  by a majority of the votes  entitled to be cast on
the   matter.    However,   any   merger,    consolidation,    share   exchange,
recapitalization, dissolution, sale of all or substantially all of our assets or
any amendment to the provisions of our charter regarding the Board of Directors,
indemnification  of our  directors and officers or amendment of the charter must
be approved by at least two-thirds of our Board of Directors.  Additionally,  no
amendment to our charter may be made that would, (i) in the determination of our
Board of Directors, cause us not to qualify as a REIT, (ii) amend the provisions
of our charter  regarding  removal of  directors,  (iii) amend our Bylaws,  (iv)
amend the provisions of our charter regarding the  indemnification  of directors
and officers,  (v) amend our charter,  or (vi) impose  cumulative  voting in the
election of directors,  in each case, unless approved by the holders of not less
than 80% of the votes entitled to be cast on the matter.

     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 Computershare Limited.



                         DESCRIPTION OF PREFERRED STOCK

     General.  Our charter  authorizes  our Board of  Directors  to classify and
reclassify  any  unissued  shares of our stock into  other  classes or series of
stock, including classes or series of preferred stock. 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;

                                       6



     (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 SHAREHOLDER RIGHTS PLAN

     Our Board of Directors  has adopted a rights plan.  As a result,  we issued
one right for each outstanding share of common stock outstanding. One right will
be issued for each  additional  share of common stock 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.

                                       7



Further terms of the warrants and the applicable  warrant agreements will be set
forth in the applicable prospectus supplement.

     The  applicable  prospectus  supplement  will  describe  the  terms  of the
warrants  in respect of which this  prospectus  is being  delivered,  including,
where  applicable,  the  following:  (1) the  title  of such  warrants;  (2) the
aggregate  number  of such  warrants;  (3) the  price or  prices  at which  such
warrants will be issued; (4) the designation,  terms and number of shares of our
preferred stock or common stock purchasable upon exercise of such warrants;  (5)
the  designation  and terms of the offered  securities,  if any, with which such
warrants  are  issued  and the  number of such  warrants  issued  with each such
offered security; (6) the date, if any, on and after which such warrants and the
related  preferred  stock  or  common  stock  will be  separately  transferable,
including any  limitations  on ownership and transfer of such warrants as may be
appropriate  to preserve our status as a REIT; (7) the price at which each share
of preferred  stock or common stock  purchasable  upon exercise of such warrants
may be  purchased;  (8) the date on which the right to  exercise  such  warrants
shall commence and the date on which such right shall expire; (9) the minimum or
maximum  amount of such  warrants  which may be exercised at any one time;  (10)
information with respect to book-entry procedures,  if any; (11) a discussion of
certain  federal  income  tax  consequences;  and (12) any  other  terms of such
warrants,  including terms,  procedures and limitations relating to the exchange
and exercise of such warrants.



          CERTAIN PROVISIONS OF MARYLAND LAW AND OUR CHARTER AND BYLAWS

     The following  paragraphs summarize certain 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

     Under Maryland law, "business  combinations" between a Maryland corporation
and an interested  stockholder or an affiliate of an interested  stockholder are
prohibited  for five years after the most  recent  date on which the  interested
stockholder  becomes an  interested  stockholder.  These  business  combinations
include a merger, consolidation,  share exchange, or, in circumstances specified
in the  statute,  an asset  transfer or issuance or  reclassification  of equity
securities. An interested stockholder is defined as:

          o    any  person  who  beneficially  owns ten  percent  or more of the
               voting power of the corporation's shares; or

          o    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 of ten  percent or more of the voting  power of
               the then outstanding voting stock of the corporation.

     A person is not an interested stockholder under the statute if the Board of
Directors  approved in advance the  transaction by which he otherwise would have
become an interested stockholder. However, in approving a transaction, the Board
of Directors may provide that its approval is subject to compliance, at or after
the time of approval, with any terms and conditions determined by the Board.

     After the  five-year  prohibition,  any  business  combination  between the
Maryland corporation and an interested stockholder generally must be recommended
by the Board of Directors  of the  corporation  and approved by the  affirmative
vote of at least:

          o    80% of the votes  entitled  to be cast by holders of  outstanding
               shares of voting stock of the corporation; and

                                       8



          o    two-thirds of the votes  entitled to be cast by holders of voting
               stock of the corporation other than shares held by the interested
               stockholders  with  whom or with  whose  affiliate  the  business
               combination  is  to be  effected  or  held  by  an  affiliate  or
               associate of the interested stockholder.

          o    These  super-majority  vote  requirements  do  not  apply  if the
               corporation's  common  stockholders  receive a minimum price,  as
               defined under  Maryland law, for their shares in the form of cash
               or other consideration in the same form as previously paid by the
               interested stockholder for its shares.

     The statute  permits  various  exemptions  from its  provisions,  including
business  combinations  that are exempted by the Board of  Directors  before the
time that the interested stockholder becomes an interested stockholder.

Control Share Acquisitions

     Maryland  law  provides  that  control  shares  of a  Maryland  corporation
acquired in a control  share  acquisition  have no voting  rights  except to the
extent  approved by a vote of two-thirds of the votes entitled to be cast on the
matter.  Shares  owned by the  acquiror,  by  officers or by  directors  who are
employees of the  corporation  are excluded from shares  entitled to vote on the
matter.  Control shares are voting shares of stock which, if aggregated with all
other  shares of stock owned by the acquiror or in respect of which the acquiror
is able to exercise or direct the  exercise of voting  power  (except  solely by
virtue of a revocable  proxy),  would  entitle the  acquiror to exercise  voting
power in electing directors within one of the following ranges of voting power:

          o    one-fifth or more but less than one-third,

          o    one-third or more but less than a majority, or

          o    a majority or more of all voting power.

Control  shares do not include  shares the acquiring  person is then entitled to
vote as a result of having previously obtained  stockholder  approval. A control
share  acquisition  means the acquisition of control shares,  subject to certain
exceptions.

     A person who has made or proposes to make a control share  acquisition  may
compel the Board of Directors of the  corporation  to call a special  meeting of
stockholders  to be held within 50 days of demand to consider the voting  rights
of the shares.  The right to compel the calling of a special  meeting is subject
to the satisfaction of certain  conditions,  including an undertaking to pay the
expenses of the meeting.  If no request for a meeting is made,  the  corporation
may itself present the question at any 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 statute,  then
the  corporation  may redeem for fair  value any or all of the  control  shares,
except those for which voting rights have previously been approved. The right of
the  corporation to redeem  control shares is subject to certain  conditions and
limitations.  Fair value is determined,  without regard to the absence of voting
rights  for the  control  shares,  as of the  date  of the  last  control  share
acquisition  by the  acquiror  or of any  meeting of  stockholders  at which the
voting rights of the shares are  considered  and not approved.  If voting rights
for control  shares are  approved  at a  stockholders  meeting and the  acquiror
becomes  entitled to vote a majority of the shares  entitled to vote,  all other
stockholders  may  exercise  appraisal  rights.  The fair value of the shares as
determined  for  purposes of  appraisal  rights may not be less than the highest
price per share paid by the acquiror in the control share acquisition.

     The control share acquisition statute does not apply (i) to shares acquired
in a merger,  consolidation  or share exchange if the  corporation is a party to
the transaction,  or (ii) to acquisitions approved or exempted by the charter or
bylaws of the corporation.

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:

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

                                       9



          o    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:

          o    the corporation will have a staggered board of directors;

          o    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;

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

          o    vacancies may only be filled by the remaining directors,  even if
               the procedure is contrary to the charter or bylaws; and

          o    the  secretary of the  corporation  is required to 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,
independent of these elections,  our charter and bylaws contain  provisions that
special  meetings of stockholders  are only required to be held upon the request
of a majority of the stockholders,  that directors may be removed only for cause
and by the  vote  of  two-thirds  of the  votes  entitled  to be cast  and  that
vacancies may be filled only by our Board of Directors.

Consideration of "All Relevant Factors"

     In addition,  as permitted by the  Maryland  General  Corporation  Law, our
charter  includes a provision  that  requires our Board of  Directors,  in their
evaluation  of any  potential  business  combination  or any actual or  proposed
transaction  that could result in a change of control,  to consider all relevant
factors,  including,  the economic  effect on our  stockholders,  the social and
economic  effect on our  employees,  suppliers,  customers and creditors and the
communities in which we have offices or other operations.



             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.

     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.

     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  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. No assurance can be given that future legislation, regulations,
administrative

                                       10



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.  THIS INCLUDES THE FEDERAL,  STATE,  LOCAL,  FOREIGN AND
OTHER TAX CONSEQUENCES OF THE OWNERSHIP AND SALE OF THE SECURITIES OFFERED UNDER
THIS PROSPECTUS 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, 2005, 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
2006 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 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.

     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

                                       11



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  Tests" 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.

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

                                       12



"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.

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 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

                                       13



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.

     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.  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.

                                       14



     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 relief
provisions generally will be available if:

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

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

          o    any  incorrect  information  on the schedule was not due to fraud
               with intent to evade tax.

     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.

                                       15



     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.

     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:

     o 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 nonqualifying  assets;
or

     o 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:

     o 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

     o  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-

                                       16



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.

     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.

     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.

     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

                                       17



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 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

                                       18



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

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

          o    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).
The Tax Increase  Prevention and  Reconciliation  Act of 2005 extended the lower
capital gains and dividend  rates through  taxable years  beginning on or before
December 31, 2010. In 2011, the maximum tax rate on long-term capital gains will
return to 20% and the maximum  rate on dividends  will be 39.6%.  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 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;

     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

                                       19



     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.

     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

                                       20



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.  Such forms shall be filed every three years unless the information on
the form changes before that date.

     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).

     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:

     o 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;

     o 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

     o 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.

                                       21



     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:

     o 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

     o 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.

     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.

     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

                                       22



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, 2010,  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.

State and local taxes

     Our Company and our  stockholders may be subject to state or local taxation
in various jurisdictions,  including those in which we or they transact business
or reside.  The state and local tax treatment of us and our stockholders may not
conform  to  the  U.S.   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 offered
securities.



                              PLAN OF DISTRIBUTION

     We may sell the offered securities on a delayed or continuous basis through
agents,  underwriters or dealers, directly to one or more purchasers,  through a
combination of any of these methods of sale, or in any other manner, as provided
in the applicable prospectus  supplement.  We will identify the specific plan of
distribution,  including any underwriters,  dealers, agents or direct purchasers
and their compensation, in the applicable prospectus supplement.



                                  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.



                                     EXPERTS

     The consolidated financial statements and schedule of EastGroup Properties,
Inc.,  as of  December  31,  2005 and  2004,  and for  each of the  years in the
three-year  period ended December 31, 2005, and  management's  assessment of the
effectiveness  of internal  control over financial  reporting as of December 31,
2005, have been incorporated by reference herein in reliance upon the reports of
KPMG  LLP,  independent  registered  public

                                       23



accounting  firm,  incorporated by reference  herein,  and upon the authority of
said firm as experts in accounting and auditing.



                       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  100 F  Street,  N.E.,  Washington,  D.C.,  20549.  Please  call  the  SEC at
1-800-SEC-0330  for further  information on the public  reference  room. 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.

     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:

          o    Our Annual  Report on Form 10-K for the year ended  December  31,
               2005;

          o    Our  Quarterly  Report on Form 10-Q for the  three  months  ended
               March 31, 2006;

          o    Our  Current  Reports  on Form 8-K filed June 6, 2006 and June 8,
               2006; and

          o    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.

     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, MS 39201-2195
                                 (601) 354-3555

                                       24



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                                1,050,000 Shares


                        [EASTGROUP PROPERTIES, INC. LOGO]

                           EastGroup Properties, Inc.


                                  Common Stock



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

                              PROSPECTUS SUPPLEMENT

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





                               Merrill Lynch & Co.







                                 April 24, 2008

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