-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, LGeHhPJPFx23eTbPBZ22ei083vER8sJ6KsfO2TrJFyIG9y4fsY41D/ddMfyjfWlp 7NfCwXiLNbUlOak5VlBMcA== 0000025232-00-000007.txt : 20000331 0000025232-00-000007.hdr.sgml : 20000331 ACCESSION NUMBER: 0000025232-00-000007 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 6 CONFORMED PERIOD OF REPORT: 19991231 FILED AS OF DATE: 20000330 FILER: COMPANY DATA: COMPANY CONFORMED NAME: COUSINS PROPERTIES INC CENTRAL INDEX KEY: 0000025232 STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE INVESTMENT TRUSTS [6798] IRS NUMBER: 580869052 STATE OF INCORPORATION: GA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: SEC FILE NUMBER: 000-03576 FILM NUMBER: 585241 BUSINESS ADDRESS: STREET 1: 2500 WINDY RIDGE PKWY STE 1600 CITY: ATLANTA STATE: GA ZIP: 30339-5683 BUSINESS PHONE: 7709552200 MAIL ADDRESS: STREET 1: 2500 WINDY RIDGE PARKWAY STREET 2: SUITE 1600 CITY: ATLANTA STATE: GA ZIP: 30339-5683 10-K 1 ANNUAL REPORT FOR COUSINS PROPERTIES INCORPORATED SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-K ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 1999 Commission file number 2-20111 COUSINS PROPERTIES INCORPORATED A GEORGIA CORPORATION I.R.S. EMPLOYER IDENTIFICATION NO. 58-0869052 2500 WINDY RIDGE PARKWAY ATLANTA, GEORGIA 30339 TELEPHONE: 770-955-2200 Name of exchange on which registered: New York Stock Exchange Securities registered pursuant to Section 12(b) of the Act: Common Stock ($1 Par Value) Securities registered pursuant to Section 12(g) of the Act: None Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months, and (2) has been subject to such filing requirements for the past 90 days. Yes X No Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. Yes X As of March 10, 2000, 32,325,859 common shares were outstanding; and the aggregate market value of the common shares of Cousins Properties Incorporated held by nonaffiliates was $874,194,537. DOCUMENTS INCORPORATED BY REFERENCE Portions of the following documents have been incorporated by reference into the designated Part of this Form 10-K: Registrant's Proxy Statement Part III, Items 10, 11, 12 and 13 dated March 27, 2000 Registrant's Annual Report to Part II, Items 5, 6, 7 and 8 Stockholders for the year ended December 31, 1999 PART I ------ Item 1. Business - -------------------- Corporate Profile Cousins Properties Incorporated (the "Registrant" or "Cousins") is a Georgia corporation, which since 1987 has elected to be taxed as a real estate investment trust ("REIT"). Cousins Real Estate Corporation and its subsidiaries ("CREC") is a taxable entity consolidated with the Registrant, which owns, develops, and manages a portion of the Registrant's real estate portfolio. CREC II Inc. and its subsidiaries ("CREC II") is another taxable entity which owns a 50% interest in Cousins Stone LP, an unconsolidated joint venture which is a full-service real estate company headquartered in Dallas, Texas that specializes in third party property management and leasing of Class A office buildings. The Registrant, together with CREC and CREC II, is hereafter referred to as the "Company." Cousins is an Atlanta-based, fully integrated, self administered equity real estate investment trust. The Company has extensive experience in the real estate industry, including the acquisition, financing, development, management and leasing of properties. Cousins has been a public company since 1962, and its common stock trades on the New York Stock Exchange. The Company owns a portfolio of well-located, high-quality retail, office, medical office and land development projects and holds several tracts of strategically located undeveloped land. The strategies employed to achieve the Company's investment goals include the development of properties which are substantially precommitted to quality tenants; maintaining high levels of occupancy within owned properties; the selective sale of assets; the creation of joint venture arrangements and the acquisition of quality income-producing properties at attractive prices. The Company also seeks to be opportunistic and take advantage of normal real estate business cycles. Unless otherwise indicated, the notes referenced in the discussion below are the "Notes to Consolidated Financial Statements" included in the financial section of the Registrant's 1999 Annual Report to Stockholders. Brief Description of Company Investments Office. As of March 15, 2000, the Company's office portfolio included ------- the following thirty-two commercial office buildings:
Company's Metropolitan Rentable Ownership Percent Property Description Area Square Feet Interest Leased -------------------- ------------ ----------- -------- ------ Inforum Atlanta, GA 987,000 100% 97% 101 Independence Center Charlotte, NC 525,000 100% 97% 101 Second Street San Francisco, CA 388,000 100% (b) 98% (a) One Second Street San Francisco, CA 374,000 100% (b) (a) AT&T Wireless Services Headquarters Los Angeles, CA 222,000 100% (b) 100% Lakeshore Park Plaza Birmingham, AL 193,000 100% (b) 98% 3100 Windy Hill Road Atlanta, GA 188,000 100% 100% 333 John Carlyle Washington, D.C. 153,000 100% 87% 555 North Point Center East Atlanta, GA 152,000 100% 79% (a) 615 Peachtree Street Atlanta, GA 145,000 100% 84% 333 North Point Center East Atlanta, GA 129,000 100% 100% 600 University Park Place Birmingham, AL 123,000 100% (b) 69% (a) 3301 Windy Ridge Parkway Atlanta, GA 106,000 100% 100% 1900 Duke Street Washington, D.C. 97,000 100% (a) Bank of America Plaza Atlanta, GA 1,260,000 50% 99% Gateway Village Charlotte, NC 1,076,000 50% 100% (a) 3200 Windy Hill Road Atlanta, GA 687,000 50% 100% 2300 Windy Ridge Parkway Atlanta, GA 634,000 50% 99% The Pinnacle Atlanta, GA 423,000 50% 97% 1155 Perimeter Center West Atlanta, GA 361,000 50% 66% (a) 2500 Windy Ridge Parkway Atlanta, GA 314,000 50% 100% Two Live Oak Center Atlanta, GA 278,000 50% 99% 4200 Wildwood Parkway Atlanta, GA 260,000 50% 100% Ten Peachtree Place Atlanta, GA 259,000 50% 100% John Marshall-II Washington, D.C. 224,000 50% 100% 4300 Wildwood Parkway Atlanta, GA 150,000 50% 100% 4100 Wildwood Parkway Atlanta, GA 100,000 50% 100% First Union Tower Greensboro, NC 320,000 11.50% 90% Grandview II Birmingham, AL 149,000 11.50% 100% 200 North Point Center East Atlanta, GA 130,000 11.50% 100% 100 North Point Center East Atlanta, GA 128,000 11.50% 100% One Ninety One Peachtree Tower Atlanta, GA 1,215,000 9.80% 97% ---------- 11,750,000 ==========
(a) Under construction and/or in lease-up. (b) These projects are actually owned in ventures in which a portion of the upside is shared with the other venturer. See "Major Properties" - "Cousins/Daniel LLC," "101 Second Street," "One Second Street" and "CommonWealth/Cousins I, LLC" where discussed. The weighted average leased percentage of these office buildings (excluding all non-operational properties currently under construction and/or in lease-up and One Ninety One Peachtree Tower, as it is less than 10% owned by the Company) was approximately 98% as of March 15, 2000 and the leases expire as follows:
2009 & 2000 2001 2002 2003 2004 2005 2006 2007 2008 Thereafter Total ---- ---- ---- ---- ---- ---- ---- ---- ---- ---------- ----- OFFICE - ------ Consolidated: - ------------- Square Feet Expiring (d) 173,108 123,796 155,488 368,125 101,007 154,796 270,214 13,301 287,829 894,664 2,542,328 (b) % of Leased Space 7% 5% 6% 14% 4% 6% 11% 1% 11% 35% 100% Annual Base Rent (a) 2,617,010 2,225,079 2,836,481 4,833,989 1,496,588 2,359,805 4,497,365 279,321 6,365,949 20,191,952 47,703,539 Annual Base Rent/ Sq. Ft. (a) 15.12 17.97 18.24 13.13 14.82 15.24 16.64 21.00 22.12 22.57 18.76 Joint Venture: - -------------- Square Feet Expiring (d) 163,709 572,572 487,332 321,536 244,789 643,443 415,184 605,118 39,005 1,694,792 5,187,480 (c) % of Leased Space 3% 11% 9% 6% 5% 12% 8% 12% 1% 33% 100% Annual Base Rent (a) 3,301,315 8,422,998 10,112,357 5,872,687 5,002,956 13,018,665 7,493,929 15,722,509 832,714 41,090,014 110,870,144 Annual Base Rent/ Sq. Ft.(a) 20.17 14.71 20.75 18.26 20.44 20.23 18.05 25.98 21.35 24.24 21.37 Total (including only Company's % share of Joint Venture Properties): - --------------------------------------------------------------------- Square Feet Expiring (d) 226,305 343,812 385,592 525,267 201,716 434,993 469,369 315,860 292,315 1,684,909 4,880,138 % of Leased Space 5% 7% 8% 11% 4% 9% 10% 6% 6% 34% 100% Annual Base Rent (a) 3,768,435 5,246,885 7,627,430 7,691,923 3,568,087 7,974,613 8,103,602 8,140,575 6,461,711 39,487,910 98,071,171 Annual Base Rent/ Sq. Ft. (a) 16.65 15.26 19.78 14.64 17.69 18.33 17.26 25.77 22.11 23.44 20.10
(a) Annual base rent excludes the operating expense reimbursement portion of the rent payable. If the lease does not provide for pass through of such operating expense reimbursements, an estimate of operating expenses is deducted from the rental rate shown. The base rental rate shown is the estimated rate in the year of expiration. Amounts disclosed are in dollars. (b) Rentable square feet leased as of March 15, 2000 out of approximately 2,648,000 total rentable square feet. (c) Rentable square feet leased as of March 15, 2000 out of approximately 5,316,000 total rentable square feet. (d) Where a tenant has the option to cancel its lease without penalty, the lease expiration date used in the table above reflects the cancellation option date rather than the lease expiration date. The weighted average remaining lease term of these twenty-five office buildings was approximately 7 years as of March 15, 2000. Most of the Company's leases in these buildings provide for pass through of operating expenses and base rents which escalate over time. Retail. As of March 15, 2000, the Company's retail portfolio included ------- the following fourteen properties:
Rentable Company's Metropolitan Square Feet Ownership Percent Property Description Area (Company Owned) Interest Leased ------------------------------ ------------------------- --------------- -------- ------- Colonial Plaza MarketCenter Orlando, FL 480,000 100% 96% Presidential MarketCenter Atlanta, GA 376,000 (b) 100% 86% The Avenue of the Peninsula Rolling Hills Estates, CA 374,000 100% 61% (a) The Avenue East Cobb Atlanta, GA 225,000 100% 94% (a) Perimeter Expo Atlanta, GA 176,000 100% 100% The Avenue Peachtree City Atlanta, GA 168,000 100% (a) Laguna Niguel Promenade Laguna Niguel, CA 154,000 100% 94% Salem Road Station Atlanta, GA 67,000 100% 68% (a) Mira Mesa MarketCenter San Diego, CA 453,000 88.50% 87% (a) The Shops at World Golf Village St. Augustine, FL 80,000 50% 60% Greenbrier MarketCenter Chesapeake, VA 493,000 11.50% 100% North Point MarketCenter Atlanta, GA 401,000 11.50% 98% Los Altos MarketCenter Long Beach, CA 157,000 11.50% 100% Mansell Crossing Phase II Atlanta, GA 103,000 11.50% 100% --------- 3,707,000 ========= (a) Under construction, redevelopment and/or in lease-up. (b) Includes 22,000 square feet not yet constructed - excluded for percentage leased calculation.
The weighted average leased percentage of these retail properties (excluding all non-operational properties currently under construction, redevelopment and/or in lease-up) was approximately 93% as of March 15, 2000, and the leases expire as follows: 2009 & 2000 2001 2002 2003 2004 2005 2006 2007 2008 Thereafter Total ---- ---- ---- ---- ---- ---- ---- ---- ---- ---------- ----- RETAIL - ------ Consolidated: - ------------- Square Feet Expiring 10,839 28,356 59,202 34,193 76,839 31,129 85,845 39,147 6,280 638,497 1,010,327 (b) % of Leased Space 1% 3% 6% 3% 8% 3% 8% 4% 1% 63% 100% Annual Base Rent (a) 136,549 504,414 890,494 927,224 1,249,318 478,877 749,128 500,933 236,250 9,373,281 15,046,468 Annual Base Rent/ Sq. Ft.(a) 12.60 17.79 15.04 27.12 16.26 15.38 8.73 12.80 37.62 14.68 14.89 Joint Venture: - -------------- Square Feet Expiring 5,111 44,243 56,398 12,800 34,322 35,000 113,000 9,553 4,718 894,757 1,209,902(c) % of Leased Space 1% 3% 4% 1% 3% 3% 9% 1% 1% 74% 100% Annual Base Rent (a) 109,063 602,526 872,060 149,524 691,433 350,000 1,386,120 299,730 75,504 11,799,356 16,335,316 Annual Base Rent/ Sq. Ft. (a) 21.34 13.62 15.46 11.68 20.15 10.00 12.27 31.38 16.00 13.19 13.50 Total (including only Company's % share of Joint Venture Properties): - --------------------------------------------------------------------- Square Feet Expiring 11,427 33,448 65,688 35,665 82,579 35,154 98,840 40,246 6,823 757,131 1,167,001 % of Leased Space 1% 3% 6% 3% 7% 3% 8% 3% 1% 65% 100% Annual Base Rent (a) 149,091 573,704 990,782 944,419 1,373,495 519,127 908,532 542,223 244,888 10,755,627 17,001,888 Annual Base Rent/ Sq. Ft.(a) 13.05 17.15 15.08 26.48 16.63 14.77 9.19 13.47 35.89 14.21 14.57
(a) Annual base rent excludes the operating expense reimbursement portion of the rent payable and any percentage rents due. If the lease does not provide for pass through of such operating expense reimbursements, an estimate of operating expenses is deducted from the rental rate shown. The base rental rate shown is the estimated rate in the year of expiration. Amounts disclosed are in dollars. (b) Gross leasable area leased as of March 15, 2000 out of approximately 1,186,000 total gross leasable area. (c) Gross leasable area leased as of March 15, 2000 out of approximately 1,234,000 total gross leasable area. The weighted average remaining lease term of these nine retail properties was approximately 12 years as of March 15, 2000. All of the major tenant leases in these retail properties provide for pass through of operating expenses and base rents which escalate over time. Medical Office. As of March 15, 2000, the Company's medical office ---------------- portfolio included the following six medical office properties:
Company's Metropolitan Rentable Ownership Percent Property Description Area Square Feet Interest Leased -------------------------- ------------- ----------- -------- ------ Northside/Alpharetta II Atlanta, GA 198,000 100% 63% (a) Meridian Mark Plaza Atlanta, GA 159,000 100% 94% Northside/Alpharetta I Atlanta, GA 106,000 100% 100% AtheroGenics Atlanta, GA 50,000 100% 100% Crawford Long Medical Office Building Atlanta, GA 408,000 50% (b) Presbyterian Medical Plaza at University Charlotte, NC 69,000 11.50% 100% ------- 990,000 =======
(a) Under construction and/or in lease-up. (b) This project is in a stage of predevelopment, is not yet under construction, and may not go forward if all criteria for proceeding with development are not satisfied. The weighted average leased percentage of these medical office buildings (excluding all properties currently under construction and/or in lease-up) was 97% as of March 15, 2000 and the leases expire as follows:
2009 & 2000 2001 2002 2003 2004 2005 2006 2007 2008 Thereafter Total ---- ---- ---- ---- ---- ---- ---- ---- ---- ---------- ----- MEDICAL OFFICE - -------------- Consolidated: - ------------- Square Feet Expiring 21,777 0 4,290 32,005 33,374 4,677 0 13,000 38,836 152,041 300,000 (b) % of Leased Space 7% 0% 1% 11% 11% 2% 0% 4% 13% 51% 100% Annual Base Rent (a) 378,897 0 72,415 617,637 639,386 74,598 0 265,470 883,344 3,437,399 6,369,146 Annual Base Rent/ Sq. Ft. (a) 17.40 0 16.88 19.30 19.16 15.95 0 20.42 22.75 22.61 21.23 Joint Venture: - -------------- Square Feet Expiring 0 0 1,397 0 0 3,445 0 23,359 0 40,799 69,000 (c) % of Leased Space 0% 0% 2% 0% 0% 5% 0% 34% 0% 59% 100% Annual Base Rent (a) 0 0 21,095 0 0 56,498 0 390,329 0 772,392 1,240,314 Annual Base Rent/ Sq. Ft. (a) 0 0 15.10 0 0 16.40 0 16.71 0 18.93 17.98 Total (including only Company's % share of Joint Venture Properties): - --------------------------------------------------------------------- Square Feet Expiring 21,777 0 4,451 32,005 33,374 5,073 0 15,686 38,836 156,690 307,892 % of Leased Space 7% 0% 1% 10% 11% 2% 0% 5% 13% 51% 100% Annual Base Rent (a) 378,897 0 74,841 617,637 639,386 81,095 0 310,358 883,344 3,526,224 6,511,782 Annual Base Rent/ Sq. Ft.(a) 17.40 0 16.81 19.30 19.16 15.99 0 19.79 22.75 22.50 21.15
(a) Annual base rent excludes the operating expense reimbursement portion of the rent payable. If the lease does not provide for pass through of such operating expense reimbursements, an estimate of operating expenses is deducted from the rental rate shown. The base rental rate shown is the estimated rate in the year of expiration. Amounts disclosed are in dollars. (b) Rentable square feet leased as of March 15, 2000 out of approximately 315,000 total rentable square feet. (c) Rentable square feet leased as of March 15, 2000 out of approximately 69,000 total rentable square feet. The weighted average remaining lease term of these four medical office buildings was approximately 9 years as of March 15, 2000. The Company's leases in these medical office buildings provide for pass through of operating expenses and base rents which escalate over time. Other. The Company's other real estate holdings include equity ------ interests in approximately 410 acres of strategically located land held for investment and future development at North Point and Wildwood Office Park, the option to acquire the fee simple interest in approximately 10,300 acres of land through its Temco Associates joint venture, and two mortgage notes for approximately $24 million which are secured by a 250,000 square foot office building in Washington, D.C. The terms of these two notes have some of the characteristics of an equity investment, and should provide a comparable return on investment (see Note 3). The Company's joint venture partners include either the company a named or an affiliate of the company named and are as follows: IBM, The Coca- Cola Company ("Coca-Cola"), Bank of America Corporation ("Bank of America"), The Prudential Insurance Company of America ("Prudential"), Temple-Inland Inc., Cornerstone Properties, Inc., and CarrAmerica Realty Corporation. The success of the Company's operations is dependent upon such unpredictable factors as the availability of satisfactory financing; general and local economic conditions; the activity of others developing competitive projects; the cyclical nature of the real estate industry; and zoning, environmental impact, and other government regulations. Refer to Item 2 hereof for a more detailed description of the Company's real estate properties. Significant Changes in 1999 Significant changes in the Company's business and properties during the year ended December 31, 1999 were as follows: Office Division. In January 1999, the Company purchased the land for ----------------- and commenced construction of 1900 Duke Street, an approximately 97,000 rentable square foot office building in suburban Washington, D.C. In March 1999, 285 Venture, Ltd. began construction of 1155 Perimeter Center West, an approximately 361,000 rentable square foot office building in Atlanta, Georgia (see Note 5). In May 1999, 333 John Carlyle, an approximately 153,000 rentable square foot office building in suburban Washington, D.C., became partially operational for financial reporting purposes. In June 1999, the Company acquired Inforum, a 987,000 rentable square foot office building in downtown Atlanta, Georgia, for $71 million by completing a tax-deferred exchange with the proceeds ($69 million) from the sale of the Company's 50% interest in Haywood Mall. In September 1999, AT&T Wireless Services Headquarters, an approximately 222,000 rentable square foot office building in suburban Los Angeles, California, became partially operational for financial reporting purposes. Retail Division. On February 1, 1999, CREC sold Abbotts Bridge Station, ---------------- an approximately 83,000 square foot neighborhood retail center in suburban Atlanta, Georgia for $15.7 million, which was approximately $5.2 million over the cost of the center. Including depreciation recapture of approximately $.3 million and net of an income tax provision of approximately $2.0 million, the net gain on the sale was approximately $3.5 million. In April 1999, The Shops at World Golf Village, an approximately 80,000 square foot retail center owned by Brad Cous (see Note 5), became partially operational for financial reporting purposes. In June 1999, CP Venture Three LLC purchased the land for and commenced construction of Mira Mesa MarketCenter, an approximately 453,000 square foot retail center in San Diego, California (see Note 5). In September 1999, The Avenue East Cobb, an approximately 225,000 square foot retail specialty center in suburban Atlanta, Georgia, became partially operational for financial reporting purposes. Also in September 1999, the Company purchased the land for and commenced construction of Salem Road Station, an approximately 67,000 square foot neighborhood retail center in suburban Atlanta, Georgia. Medical Office Division. In March 1999, AtheroGenics, an approximately ------------------------ 50,000 rentable square foot office building and laboratory in suburban Atlanta, Georgia, became fully operational for financial reporting purposes. In April 1999, Meridian Mark Plaza, an approximately 159,000 rentable square foot medical office building in Atlanta, Georgia, became partially operational for financial reporting purposes. In September 1999, Northside/Alpharetta II, an approximately 198,000 rentable square foot medical office building in suburban Atlanta, Georgia, became partially operational for financial reporting purposes. Land Division. The Company is currently developing five residential -------------- communities in suburban Atlanta, Georgia, including three in which development commenced in 1994, one in 1995 and one in 1996. These developments currently include land on which approximately 1,632 lots are being or were developed, of which 292, 344 and 260 lots were sold in 1999, 1998 and 1997, respectively. In November 1998, Temco Associates began development of the Bentwater residential community, which will consist of approximately 1,750 lots on approximately 1,083 acres (see Note 5). Temco Associates sold 106 lots in 1999. Financings. In August 1999, the Company renewed and modified its $150 ----------- million unsecured credit facility which matures August 27, 2002. On December 31, 1999, the credit facility was temporarily increased to $225 million, which increase expires April 27, 2000 (see Note 4). In December 1998, Charlotte Gateway Village, LLC completed construction financing of up to $190 million for Gateway Village. The note bears an interest rate of LIBOR (adjusted for certain reserve requirements) plus .50% and matures January 2, 2002. No amounts were drawn on the note until 1999. Environmental Matters Under various federal, state and local laws, ordinances and regulations, an owner or operator of real estate is generally liable for the costs of removal or remediation of certain hazardous or toxic substances on or in such property. Such laws often impose liability without regard to whether the owner knew of, or was responsible for, the presence of such hazardous or toxic substances. The presence of such substances, or the failure to remediate such substances properly, may subject the owner to substantial liability and may adversely affect the owner's ability to develop the property or to borrow using such real estate as collateral. The Company is not aware of any environmental liability that the Company's management believes would have a material adverse effect on the Company's business, assets or results of operations. Certain environmental laws impose liability on a previous owner of property to the extent that hazardous or toxic substances were present during the prior ownership period. A transfer of the property does not relieve an owner of such liability. Thus, although the Company is not aware of any such situation, the Company may be liable in respect of properties previously sold. In connection with the development or acquisition of certain properties, the Company obtained Phase One environmental audits (which generally involve inspection without soil sampling or ground water analysis) from independent environmental consultants. The remaining properties (including most of the Company's land held for investment) have not been so examined. No assurance can be given that no environmental liabilities exist, that the reports reviewed all environmental liabilities, or that no prior owner created any material environmental condition not known to the Company. The Company believes that it and its properties are in compliance in all material respects with all federal, state and local laws, ordinances and regulations regarding hazardous or toxic substances. Competition Our properties compete for tenants with similar properties located in our markets primarily on the basis of location, rent charged, services provided and the design and condition of the facilities. We also compete with other REITs, financial institutions, pension funds, partnerships, individual investors and others when attempting to acquire and develop properties. Subsequent Events Financings. On February 24, 2000, the Company received a commitment for ----------- the financing of the 101 Second Street office building which should fund no later than April 30, 2000. The $90 million non-recourse mortgage note payable has an interest rate of 8.33% and term of 10 years. Dispositions. On March 28, 2000, the Company sold Laguna Niguel ------------- Promenade, an approximately 154,000 square foot retail center located in Laguna Niguel, California for $ 26.7 million, which was approximately $6.4 million over the cost of the center. Including depreciation recapture of approximately $.8 million, the net gain on the sale was approximately $7.2 million. The net proceeds from the sale were placed in escrow pending a tax-deferred exchange by the Company. Executive Offices; Employees The Registrant's executive offices are located at 2500 Windy Ridge Parkway, Suite 1600, Atlanta, Georgia 30339-5683. At December 31, 1999, the Company employed approximately 430 people. Item 2. Properties - ---------------------- Table of Major Properties The following tables set forth certain information relating to major office, retail and medical office properties, stand alone retail lease sites, and land held for investment and future development in which the Company has a 10% or greater ownership interest. All information presented is as of December 31, 1999, except leasing information which is as of March 15, 2000. Dollars are stated in thousands.
Percentage Description, Year Rentable Leased Average Location Development Company's Square Feet as of 1999 and Completed Joint Venture Ownership and Acres March 15, Economic Zip Code or Acquired Partner Interest as Noted 2000 Occupancy - ----------- ----------- ------------- --------- ----------- ---------- --------- Office - ------ Inforum Atlanta, GA 30303-1032 1999 N/A 100% 987,000 97% 79% 4 Acres (2) 101 Independence Center Charlotte, NC 28246-1000 1996 N/A 100% 525,000 97% 97% 2 Acres 101 Second Street San Francisco, CA 94105-3601 (5) Myers Second 100%(6) 388,000 98%(5) (5) Street Company 1 Acre LLC One Second Street San Francisco, CA 94105-3601 (5) Myers Bay 100%(6) 374,000 (5) (5) Area Company LLC 1 Acre AT&T Wireless Services Headquarters Suburban Los Angeles, CA 90703-8573 1999 CommonWealth 100%(6) 222,000 100% 29%(8) Pacific, LLC 9 Acres (7)
Adjusted Cost and Adjusted Cost Less Debt Description, Major Depreciation Maturity Location Major Tenants (lease) Tenants' and and and expiration/options Rentable Amortization Debt Interest Zip Code expirations) Sq. Feet (1) Balance Rate - ----------- --------------------- -------- ------------ ------- --------- Office - ------ Inforum Atlanta, GA 30303-1032 BellSouth Corporation (3)(2009) 277,744 $ 72,596 $ 0 N/A Georgia Lottery Corp. (2003/2013) 127,827 $ 69,327 Lockwood Greene Engineers, Inc. 122,860 (2002/2102) Co Space Services, LLC 110,797 (2020/2025) Sapient Corporation (2009/2019) 57,689 Turner Broadcasting (2006/2016) 50,724 101 Independence Center Charlotte, NC 28246-1000 Bank of America (3) 359,796 $ 75,439 $ 47,522 12/1/07 (2008/2028)(4) $ 66,407 8.22% Robinson Bradshaw & Hinson, 82,218 P.A. (2004/2009) Ernst & Young LLP (2001/2006) 45,060 101 Second Street San Francisco, CA 94105-3601 Arthur Andersen LLP 147,986 $ 85,175 $ 0 N/A (2009/2014) (5) Thelen, Reid & Priest 120,629 (2012/2022) One Second Street San Francisco, CA 94105-3601 (5) (5) $ 22,375 $ 0 N/A (5) AT&T Wireless Services Headquarters Suburban Los Angeles, CA 90703-8573 AT&T Wireless Services 222,000 $ 51,603 $ 0 N/A (2014/2029) $ 50,931
Percentage Description, Year Rentable Leased Average Location Development Company's Square Feet as of 1999 and Completed Joint Venture Ownership and Acres March 15, Economic Zip Code or Acquired Partner Interest as Noted 2000 Occupancy - ----------- ----------- ------------- --------- ----------- ---------- --------- Office (Continued) - ------ Lakeshore Park Plaza Birmingham, AL 35209-6719 1998 Daniel Realty 100%(6) 193,000 98% 100% Company 12 Acres 600 University Park Place Birmingham, AL 35209-6774 (5) Daniel Realty 100%(6) 123,000 69%(5) (5) Company 10 Acres 333 North Point Center East Suburban Atlanta, GA 30022-8274 1998 N/A 100% 129,000 100% 97% 9 Acres 555 North Point Center East Suburban Atlanta, GA 30022-8274 (5) N/A 100% 152,000 79%(5) (5) 10 Acres 615 Peachtree Street Atlanta, GA 30308-2312 1996 N/A 100% 145,000 84% 66% 2 Acres 333 John Carlyle Suburban Washington, D.C. 22314-9998 1999 N/A 100% 153,000 87% 52%(10) 1 Acre 1900 Duke Street Suburban Washington, D.C. 22314-9998 (5) N/A 100% 97,000 (5) (5) 1 Acre Wildwood Office Park: Atlanta, GA 2300 Windy Ridge Parkway 30339-5671 1987 IBM 50% 634,000 99% 100% 12 Acres
Adjusted Cost and Adjusted Cost Less Debt Description, Major Depreciation Maturity Location Major Tenants (lease) Tenants' and and and expiration/options Rentable Amortization Debt Interest Zip Code expirations) Sq. Feet (1) Balance Rate - ----------- --------------------- -------- ------------ ------- --------- Office (Continued) - ------------------ Lakeshore Park Plaza Birmingham, AL 35209-6719 Infinity Insurance (2005/2015) 95,459 $ 15,902 $ 10,683 11/1/08 TCI Southeast (2003/2008) 20,625 $ 15,267 6.78% 600 University Park Place Birmingham, AL 35209-6774 Southern Company, Inc. (3) 41,000 (5) $ 16,884 $ 0 N/A (2005/2011)(5) (5) 333 North Point Center East Suburban Atlanta, GA 30022-8274 Alltel Telecom Information 48,559 $ 13,289 $ 0 N/A Services, Inc. (2003) $ 11,909 J.C. Bradford (2005/2010) 22,222 555 North Point Center East Suburban Atlanta, GA 30022-8274 Regus Business Centre 89,688 (5) $ 14,158 $ 0 N/A (2011/2016)(5)(9) (5) 615 Peachtree Street Atlanta, GA 30308-2312 Wachovia (3)(2001/2007) 50,073 $ 12,393 $ 0 N/A $ 10,614 333 John Carlyle Suburban Washington, D.C. 22314-9998 A.T. Kearney (2009/2019) 94,115 $ 28,075 $ 0 N/A $ 27,521 1900 Duke Street Suburban Washington, D.C. 22314-9998 American Society of Clinical 28,700 (5) $ 6,750 $ 0 N/A Oncology (2010/2015)(5) (5) Wildwood Office Park: Atlanta, GA 2300 Windy Ridge Parkway 30339-5671 IBM (2002/2012) 240,430 $ 77,282 $ 65,611 12/1/05 Profit Recovery Group 73,626 $ 50,472 7.56% (2005/2010)(11) Manhattan Associates, LLC 63,296 (2002/2007) Computer Associates 62,445 (2005/2010) Financial Services Corporation 56,932 (2006/2011)(11) Chevron USA (2005) 51,415
Percentage Description, Year Rentable Leased Average Location Development Company's Square Feet as of 1999 and Completed Joint Venture Ownership and Acres March 15, Economic Zip Code or Acquired Partner Interest as Noted 2000 Occupancy - ----------- ----------- ------------- --------- ----------- ---------- --------- Office (Continued) - ------ 2500 Windy Ridge Parkway 30339-5683 1985 IBM 50% 314,000 100% 95% 8 Acres 3200 Windy Hill Road 30339-5609 1991 IBM 50% 687,000 100% 90% 15 Acres 4100 and 4300 Wildwood Parkway 30339-8400 1996 IBM 50% 250,000 100% 100% 13 Acres 4200 Wildwood Parkway 30339-8402 1997 IBM 50% 260,000 100% 90%(15) 8 Acres 3301 Windy Ridge Parkway 30339-5685 1984 N/A 100% 106,000 100% 100% 10 Acres 3100 Windy Hill Road 30339-5605 1983 N/A 100%(16) 188,000 100% 100% 13 Acres Bank of America Plaza Atlanta, GA 30308-2214 1992 Bank of America (3) 50% 1,260,000 99% 97% 4 Acres
Adjusted Cost and Adjusted Cost Less Debt Description, Major Depreciation Maturity Location Major Tenants (lease) Tenants' and and and expiration/options Rentable Amortization Debt Interest Zip Code expirations) Sq. Feet (1) Balance Rate - ----------- --------------------- -------- ------------ ------- --------- Office (Continued) - ------------------ 2500 Windy Ridge Parkway 30339-5683 Coca-Cola Enterprises Inc. 165,180 $ 29,931 $ 23,368 12/15/05 (2003/2008) $ 18,270 7.45% Cousins Properties Incorporated 43,888 (2000) 3200 Windy Hill Road 30339-5609 IBM (2001/2011)(12) 440,139 $ 84,464 $ 67,884 1/1/07 PriceWaterhouseCoopers 69,108 $ 60,425 8.23% (2009/2014) W.H. Smith Inc. 41,858 (2002/2007) 4100 and 4300 Wildwood Parkway 30339-8400 Georgia-Pacific 250,000 $ 29,914 $ 28,783 4/1/12 Corporation (2012/2017) $ 26,493 7.65% (13)(14) 4200 Wildwood Parkway 30339-8402 General Electric (3)(2014/2024) 260,000 $ 36,341 $ 43,534 3/31/14 $ 34,844 6.78% 3301 Windy Ridge Parkway 30339-5685 Indus International, Inc. 106,000 $ 10,543 $ 0 N/A (2003/2008) $ 5,842 3100 Windy Hill Road 30339-5605 IBM (2006) 188,000 $ 17,005 (16) $ 0 N/A $ 14,965 (16) Bank of America Plaza Atlanta, GA 30308-2214 Bank of America (3) 572,742 $222,436 $ 0(18) N/A (18) (2012/2042) $170,422 Troutman Sanders 224,181 (2007/2017) Ernst & Young LLP 211,211 (2007/2017)(17) Hunton & Williams 93,489 (2004/2009) Paul Hastings (2012/2017)(17) 92,224
Percentage Description, Year Rentable Leased Average Location Development Company's Square Feet as of 1999 and Completed Joint Venture Ownership and Acres March 15, Economic Zip Code or Acquired Partner Interest as Noted 2000 Occupancy - ----------- ----------- ------------- --------- ----------- ---------- --------- Office (Continued) - ------ Gateway Village Charlotte, NC 28202-1125 (5) Bank of America (3) 50% 1,076,000 100% (5) 8 Acres The Pinnacle Atlanta, GA 30326-1234 1999 LORET 50% 423,000 97% 69%(19) Holdings, L.L.L.P. 4 Acres Two Live Oak Center Atlanta, GA 30326-1234 1997 LORET 50% 278,000 99% 98% Holdings, L.L.L.P. 2 Acres 1155 Perimeter Center West Atlanta, GA 30338-5416 (5) J. P. Morgan (3) 50% 361,000 66% (5) (5) 6 Acres Ten Peachtree Place Atlanta, GA 30309-3814 1991 Coca-Cola (3) 50%(6) 259,000 100% 100% 5 Acres John Marshall-II Suburban Washington, D.C. 22102-3802 1996 CarrAmerica Realty 50% 224,000 100% 100% Corporation (3) 3 Acres First Union Tower Greensboro, NC 27401-2167 1990 Prudential 11.50%(6) 320,000 90% 95% 1 Acre
Adjusted Cost and Adjusted Cost Less Debt Description, Major Depreciation Maturity Location Major Tenants (lease) Tenants' and and and expiration/options Rentable Amortization Debt Interest Zip Code expirations) Sq. Feet (1) Balance Rate - ----------- --------------------- -------- ------------ ------- --------- Office (Continued) - ------------------ Gateway Village Charlotte, NC 28202-1125 Bank of America (2015/2035)(5) 1,076,000 $ 86,652 $ 57,008 1/2/02 (5) LIBOR (as defined) +.50% The Pinnacle Atlanta, GA 30326-1234 Merrill Lynch (2010/2011) 72,866 $ 90,128 $ 70,000 12/31/09 A.T. Kearney (2009/2019) 47,866 $ 87,172 7.11% PaineWebber (2013/2018)(13) 47,631 Two Live Oak Center Atlanta, GA 30326-1234 IMS Health Incorporated 75,484 $ 48,430 $ 29,492 12/31/09 (2007/2017) $ 43,117 7.90% Chubb & Son, Inc. (3) 48,520 (2007/2017) 1155 Perimeter Center West Atlanta, GA 30338-5416 Southern Energy, Inc. 236,606 $ 33,880 $ 0 N/A (2010/2015) (5) Ten Peachtree Place Atlanta, GA 30309-3814 Coca-Cola (3)(2001/2006) 259,000 $ 22,902 $ 17,456 11/30/01(20) $ 18,590 8.00% John Marshall-II Suburban Washington, D.C. 22102-3802 Booz-Allen & Hamilton 224,000 $ 29,212 $ 23,307 4/1/13 (2011/2016) $ 24,978 7.00% First Union Tower Greensboro, NC 27401-2167 Smith Helms Mullis & 70,360 $ 53,155 $ 0 N/A Moore (2010/2015) $ 44,999 First Union Bank (3) 62,622 (2009/2019)
Percentage Description, Year Rentable Leased Average Location Development Company's Square Feet as of 1999 and Completed Joint Venture Ownership and Acres March 15, Economic Zip Code or Acquired Partner Interest as Noted 2000 Occupancy - ----------- ----------- ------------- --------- ----------- ---------- --------- Office (Continued) - ------ 100 North Point Center East Suburban Atlanta, GA 30022-4885 1995 Prudential 11.50%(6) 128,000 100% 100% 7 Acres 200 North Point Center East Suburban Atlanta, GA 30022-4885 1996 Prudential 11.50%(6) 130,000 100% 100% 9 Acres Grandview II Birmingham, AL 35243-1930 1998 Prudential 11.50%(6) 149,000 100% 97% 8 Acres Retail Centers - -------------- Colonial Plaza MarketCenter Orlando, FL 32803-5029 1996 N/A 100% 480,000 96% 93% 49 Acres
Adjusted Cost and Adjusted Cost Less Debt Description, Major Depreciation Maturity Location Major Tenants (lease) Tenants' and and and expiration/options Rentable Amortization Debt Interest Zip Code expirations) Sq. Feet (1) Balance Rate - ----------- --------------------- -------- ------------ ------- --------- Office (Continued) - ------------------ 100 North Point Center East Suburban Atlanta, GA 30022-4885 Schweitzer-Mauduit 39,739 $ 24,327 $ 12,089(21) 8/1/07 International, Inc. $ 21,112 7.86% (2001/2007) Green Tree Financial 21,914 (2006/2011)(13) 200 North Point Center East Suburban Atlanta, GA 30022-4885 Alltel Telecom Information 60,029 $ 21,716 $ 12,089(21) 8/1/07 Services, Inc. (2000/2001) $ 19,114 7.86% Motorola, Inc. (2001/2011) 26,897 APAC Teleservices, Inc. 22,409 (2004/2009) Grandview II Birmingham, AL 35243-1930 Protective Life (2005/2011)(22) 65,164 $ 23,094 $ 0 N/A Daniel Realty Company (2008) 23,440 $ 21,460 Retail Centers - -------------- Colonial Plaza MarketCenter Orlando, FL 32803-5029 Circuit City (2017/2037) 43,936 $ 41,578 $ 0 N/A Rhodes (2012/2027) 42,376 $ 36,946 Babies "R" Us (2006/2021) 40,000 Stein Mart, Inc. (2006/2026) 36,000 Barnes & Noble Superstores, Inc. 35,131 (2012/2022) Linens `N Things 35,000 (2012/2027) Marshalls (2012/2027) 30,400 Ross Stores (2007/2022) 28,000 Staples (2015/2030) 26,781 Just For Feet, Inc. (2012/2027)(23) 26,667 Gap's Old Navy Store 17,920 (2002/2012)
Percentage Description, Year Rentable Leased Average Location Development Company's Square Feet as of 1999 and Completed Joint Venture Ownership and Acres March 15, Economic Zip Code or Acquired Partner Interest as Noted 2000 Occupancy - ----------- ----------- ------------- --------- ----------- ---------- --------- Retail Centers (Continued) - -------------------------- Presidential MarketCenter Suburban Atlanta, GA 30278-2149 1994/1996 N/A 100% 493,000 (24) 89% (24) 92% (24) 66 acres overall of of which 86% (24) Company 376,000 (24) of Company owned and 49 acres owned are owned by the Company The Avenue of the Peninsula Rolling Hills Estates, CA 90274-3664 (5) N/A 100% 374,000 61%(5) (5) 14 Acres Perimeter Expo Atlanta, GA 30338-1519 1993 N/A 100% 291,000 100% 100% 19 acres overall of of which 100% of Company 176,000 and Company owned 10 acres are owned owned by the Company The Avenue East Cobb Suburban Atlanta, GA 30062-8197 1999 N/A 100% 225,000 94%(5) 25%(26) 30 Acres The Avenue Peachtree City Suburban Atlanta, GA 30269-9999 (5) N/A 100% 168,000 (5) (5) 18 Acres
Adjusted Cost and Adjusted Cost Less Debt Description, Major Depreciation Maturity Location Major Tenants (lease) Tenants' and and and expiration/options Rentable Amortization Debt Interest Zip Code expirations) Sq. Feet (1) Balance Rate - ----------- --------------------- -------- ------------ ------- --------- Retail Centers (Continued) - -------------------------- Presidential MarketCenter Suburban Atlanta, GA 30278-2149 Target (25) N/A $ 25,957 $ 0 N/A Publix Super Market 56,146 $ 22,828 (2019/2044) Carmike Cinemas (3)(2023/2033) 44,565 Bed, Bath & Beyond (2008/2024) 35,127 T.J. Maxx (2004/2014) 32,000 Office Depot, Inc. 31,628 (2011/2026) Marshalls (2010/2025) 30,000 The Avenue of the Peninsula Rolling Hills Estates, CA 90274-3664 Regal Cinema (2015/2030) 56,815 $ 65,672 $ 0 N/A Saks & Company (2019/2055) 42,404 Ice Chalet (2001) 14,068 Restoration Hardware (2010/2020) 11,000 Banana Republic (3)(2005/2015) 9,705 Gap (2005/2015) 9,000 Perimeter Expo Atlanta, GA 30338-1519 The Home Depot Expo (25) N/A $ 19,756 $ 20,613 8/15/05 Marshalls (2014/2029) 36,598 $ 17,304 8.04% Best Buy (2014/2029) 36,000 Linens `N Things (2014/2024) 30,351 Office Max (2013/2033) 23,500 The Sport Shoe (2004/2014) 14,348 Gap's Old Navy Store 13,939 (2002/2012) The Avenue East Cobb Suburban Atlanta, GA 30062-8197 Borders, Inc. (2015/2030) 24,882 $ 35,682 $ 0 N/A Bed, Bath & Beyond (2010/2025) 21,007 $ 35,126 Gap (2005/2015) 19,434 Talbot's (2010/2020) 12,905 Pottery Barn (3)(2006/2012) 10,000 Banana Republic (3)(2005/2015) 8,009 The Avenue Peachtree City Suburban Atlanta, GA 30269-9999 (5) (5) (5) $ 0 N/A 18 Acres
Percentage Description, Year Rentable Leased Average Location Development Company's Square Feet as of 1999 and Completed Joint Venture Ownership and Acres March 15, Economic Zip Code or Acquired Partner Interest as Noted 2000 Occupancy - ----------- ----------- ------------- --------- ----------- ---------- --------- Retail Centers (Continued) - -------------------------- Laguna Niguel Promenade Laguna Niguel, CA 92677-3920 (27) 1998 N/A 100% 154,000 94% 93% 13 Acres Salem Road Station Suburban Atlanta, GA 30016-9999 (5) N/A 100% 67,000 68%(5) (5) 13 Acres Mira Mesa MarketCenter Suburban San Diego, CA 92126-9999 (5) Prudential 88.50%(6) 453,000 87%(5) (5) 40 Acres The Shops at World Golf Village St. Augustine, FL 32092-2724 1999 W.C. Bradley Co. 50% 80,000 60% 48% 3 Acres North Point MarketCenter Suburban Atlanta, GA 30202-4889 1994/1995 Prudential 11.50%(6) 517,000 98% 100% 60 Acres (28) of which 401,000 and 49 acres are owned by the Venture
Adjusted Cost and Adjusted Cost Less Debt Description, Major Depreciation Maturity Location Major Tenants (lease) Tenants' and and and expiration/options Rentable Amortization Debt Interest Zip Code expirations) Sq. Feet (1) Balance Rate - ----------- --------------------- -------- ------------ ------- --------- Retail Centers (Continued) - -------------------------- Laguna Niguel Promenade Laguna Niguel, CA 92677-3920 (27) Orchard's Supply Hardware (3) 63,811 $ 19,091 $ 0 N/A (2018/2033) $ 18,394 Ralph's Grocery Company 51,028 (2018/2043) Salem Road Station Suburban Atlanta, GA 30016-9999 Publix Super Market 44,270(5) (5) $ 0 N/A (2020/2040)(5) Mira Mesa MarketCenter Suburban San Diego, CA 92126-9999 Home Depot (2020/2045)(5) 105,764(5) $ 28,977 $ 0 N/A Edwards Theaters (2020/2035)(5) 94,041(5) (5) Albertsons (2020/2060)(5) 55,489(5) Ross (2010/2025)(5) 30,187(5) Barnes & Noble Superstores, Inc. 26,566(5) (2015/2030)(5) The Shops at World Golf Village St. Augustine, FL 32092-2724 Bradley Specialty Retailing, 31,044 $ 10,773 $ 0 N/A Inc. (2013/2023) $ 10,578 North Point MarketCenter Suburban Atlanta, GA 30202-4889 Target (25) N/A $ 56,787 $ 28,138 7/15/05 Babies "R" Us (2011/2031) 50,275 $ 53,853 8.50% Media Play (2010/2025) 48,884 Marshalls (2010/2025) 40,000 Rhodes (2011/2021) 40,000 Linens `N Things 35,000 (2005/2025) United Artists (2014/2034) 34,733 Circuit City (2015/2030) 33,420 PETsMART (2009/2029) 25,465 Gap's Old Navy Store 20,000 (2001/2011)
Percentage Description, Year Rentable Leased Average Location Development Company's Square Feet as of 1999 and Completed Joint Venture Ownership and Acres March 15, Economic Zip Code or Acquired Partner Interest as Noted 2000 Occupancy - ----------- ----------- ------------- --------- ----------- ---------- --------- Retail Centers (Continued) - -------------------------- Greenbrier MarketCenter Chesapeake, VA 23327-2840 1996 Prudential 11.50%(6) 493,000 100% 96% 44 Acres Los Altos MarketCenter Long Beach, CA 90815-3126 1996 Prudential 11.50%(6) 258,000 100% 100% 19 Acres of which 157,000 and 17 Acres are owned by the Venture Mansell Crossing Phase II Suburban Atlanta, GA 30202-4822 1996 Prudential 11.50%(6) 103,000 100% 100% 13 Acres Medical Office - -------------- Northside/Alpharetta I Atlanta, GA 30005-3707 1998 N/A 100% 106,000 100% 100% 1 Acre (29) Northside/Alpharetta II Atlanta, GA 30005-3707 1999 N/A 100% 198,000 63%(5) 14%(30) 2 Acres (29)
Adjusted Cost and Adjusted Cost Less Debt Description, Major Depreciation Maturity Location Major Tenants (lease) Tenants' and and and expiration/options Rentable Amortization Debt Interest Zip Code expirations) Sq. Feet (1) Balance Rate - ----------- --------------------- -------- ------------ ------- --------- Retail Centers (Continued) - -------------------------- Greenbrier MarketCenter Chesapeake, VA 23327-2840 Target (2016/2046) 117,220 $ 51,208 $ 0 N/A Harris Teeter, Inc. 51,806 $ 49,027 (2016/2036) Best Buy (2015/2030) 45,106 Bed, Bath & Beyond 40,484 (2012/2027) Babies "R" Us (2006/2021) 40,000 Stein Mart, Inc. (2006/2026) 36,000 Barnes & Noble Superstores, 29,974 Inc. (2011/2026) PETsMART (2011/2031) 26,040 Office Max (2011/2026) 23,484 Gap's Old Navy Store 14,000 (2002/2012) Los Altos MarketCenter Long Beach, CA 90815-3126 Sears (25) N/A $ 32,806 $ 0 N/A Circuit City (3)(2017/2037) 38,541 $ 31,493 Borders, Inc. (2017/2037) 30,000 Bristol Farms (3)(2012/2032) 28,200 CompUSA, Inc. (2011/2021) 25,620 Sav-on Drugs (3)(2016/2026) 16,914 Mansell Crossing Phase II Suburban Atlanta, GA 30202-4822 Bed Bath & Beyond 40,787 $ 12,350 $ 0 N/A (2012/2027) $ 11,897 Goody's Family Clothing, 32,144 Inc. (2009/2027) Rooms To Go (2016/2036) 21,000 Medical Office - -------------- Northside/Alpharetta I Atlanta, GA 30005-3707 Northside Hospital (3)(2013) 37,387 $ 15,577 $ 10,401 1/1/06 $ 14,619 7.70% Northside/Alpharetta II Atlanta, GA 30005-3707 Northside Hospital (3)(2019) 63,321 $ 15,997 $ 0 N/A $ 15,896
Percentage Description, Year Rentable Leased Average Location Development Company's Square Feet as of 1999 and Completed Joint Venture Ownership and Acres March 15, Economic Zip Code or Acquired Partner Interest as Noted 2000 Occupancy - ----------- ----------- ------------- --------- ----------- ---------- --------- Medical Office (Continued) - -------------------------- Meridian Mark Plaza Atlanta, GA 30342-1613 1999 N/A 100% 159,000 94% 65%(31) 3 Acres AtheroGenics Suburban Atlanta, GA 30004-2148 1999 N/A 100% 50,000 100% 83%(32) 4 Acres Crawford Long Medical Office Building Atlanta, GA 30308-9999 (33) Emory University 50% 408,000 (33) (33) (34) Presbyterian Medical Plaza at University Charlotte, NC 28233-3549 1997 Prudential 11.50%(6) 69,000 100% 100% 1 Acre (35) Stand Alone Retail Sites Adjacent to Company's Office and Retail Projects - ------------------------------------------------------------------------- Wildwood Office Park Suburban Atlanta, GA 30339-5671 1985-1993 IBM 50% 14 Acres 100% 100% North Point Suburban Atlanta, GA 30202-4885 1993 N/A 100% 24 Acres 100% 100%
Adjusted Cost and Adjusted Cost Less Debt Description, Major Depreciation Maturity Location Major Tenants (lease) Tenants' and and and expiration/options Rentable Amortization Debt Interest Zip Code expirations) Sq. Feet (1) Balance Rate - ----------- --------------------- -------- ------------ ------- --------- Medical Office (Continued) - --------------------------- Meridian Mark Plaza Atlanta, GA 30342-1613 Northside Hospital (3) 39,071 $ 23,357 $ 0 N/A (2013/2023) $ 22,936 Scottish Rite Hospital for 22,035 Crippled Children, Inc. (2003/2008) AtheroGenics Suburban Atlanta, GA 30004-2148 AtheroGenics (2019/2029) 50,000 $ 7,316 $ 0 N/A $ 7,011 Crawford Long Medical Office Building Atlanta, GA 30308-9999 (33) (33) (33) $ 0 N/A Presbyterian Medical Plaza at University Charlotte, NC 28233-3549 Novant Health, Inc. 63,862 $ 8,600 $ 0 N/A (2012/2027)(36) $ 8,132 Stand Alone Retail Sites Adjacent to Company's Office and Retail Projects - ------------------------------------------------------------------------- Wildwood Office Park Suburban Atlanta, GA 30339-5671 N/A N/A $ 8,723 $ 0 N/A $ 7,158 North Point Suburban Atlanta, GA 30202-4885 N/A N/A $ 3,716 $ 0 N/A $ 3,591
(1) Cost as shown in the accompanying table includes deferred leasing and financing costs and other related assets. For each of the following projects: 2300 and 2500 Windy Ridge Parkway, 3200 Windy Hill Road, 4100 and 4300 Wildwood Parkway, 4200 Wildwood Parkway and Wildwood Stand Alone Retail Lease Sites, the cost shown is what the cost would be if the venture's land cost were adjusted downward to the Company's lower basis in the land it contributed to the venture. (2) Approximately .18 acres of the total 4 acres of land at Inforum is under a ground lease expiring 2068. (3) Actual tenant or venture partner is affiliate of entity shown. (4) 103,656 square feet of this lease of 101 Independence Center expires in November 2000. The renewal of this lease is currently being negotiated. (5) Project was under construction, redevelopment and/or lease-up as of December 31, 1999. In certain situations, lease expiration dates are based upon estimated commencement dates and square footage is estimated. (6) See "Major Properties" - "Ten Peachtree Place," "Cousins/Daniel, LLC," "CommonWealth/Cousins I, LLC ," "CP Venture Two LLC," "CP Venture Two LLC and CP Venture Three LLC," "101 Second Street" and "One Second Street" where these ventures' preferences and terms are discussed. (7) AT&T Wireless Services Headquarters is located on 9 acres which are subject to a ground lease expiring in 2034, with an option to renew through 2087. (8) AT&T Wireless Services Headquarters became partially operational in September 1999 and fully operational in October 1999. Thus, economic occupancy for AT&T Wireless Services Headquarters does not include a full year of operations. (9) 44,844 square feet of this lease at 555 North Point Center East expires in 2009, with an option to extend the lease to 2014. (10) 333 John Carlyle became partially operational in May 1999. Thus, economic occupancy for 333 John Carlyle does not include a full year of operations. (11) 11,050 square feet of the Profit Recovery Group lease of 2300 Windy Ridge Parkway expires in 2002 and 1,556 square feet of the Financial Services Corporation lease of 2300 Windy Ridge Parkway expires in 2001. (12) 119,544 square feet of this lease of 3200 Windy Hill Road expires in 2001, and the balance expires in 2006. (13) Georgia-Pacific Corporation, PaineWebber and Green Tree Financial have the right to terminate their leases in 2007, 2008 and 2001, respectively, upon payment of significant cancellation penalties. (14) Georgia-Pacific Corporation has the option to purchase the building on its lease expiration date for a price of $33,750,000. (15) 4200 Wildwood Parkway became partially operational in June 1998 and fully operational in April 1999. Thus economic occupancy for 4200 Wildwood Parkway does not include a full year of operations. (16) See "Major Properties" - "Wildwood Office Park" where the accounting for the 3100 Windy Hill Road Building is discussed. (17) Ernst & Young LLP has a cancellation right on 23,036 square feet of this lease of Bank of America Plaza in 2003, if notice is received in 2002, and Paul Hastings has a cancellation right on 12,812 square feet and 20,574 square feet in 2005 and 2006, respectively. (18) See "Major Properties" - "Bank of America Plaza" where debt on Bank of America Plaza is discussed. (19) The Pinnacle became partially operational in November 1998 and remained so during a portion of 1999. Thus, economic occupancy for The Pinnacle does not include a full year of operations. (20) Maturity of the Ten Peachtree Place mortgage debt is extendible to December 31, 2008. Rate becomes floating after November 30, 2001. (21) 100 North Point Center East and 200 North Point Center East were financed together with one non-recourse mortgage note payable. For purposes of this schedule the total debt has been allocated 50% to each building. (22) Protective Life has the right to cancel 13,052 square feet of this lease of Grandview II in 2003. (23) Just For Feet, Inc. was acquired by Foot Star, Inc.subsequent to year-end but its stores will continue to operate under the Just For Feet name. (24) Includes 22,000 square feet not yet constructed as of March 15, 2000 which was excluded from the calculation of percentage leased and average 1999 economic occupancy. (25) This anchor tenant owns its own space. (26) The Avenue East Cobb became partially operational in September 1999. Thus, economic occupancy for The Avenue East Cobb does not include a full year of operations. (27) Laguna Niguel Promenade was sold on March 28, 2000. See "Major Properties- Other Retail Properties" where the sale is discussed. (28) North Point MarketCenter includes approximately 4 outparcels which are ground leased to freestanding users. (29) Northside/Alpharetta I and II are located on 1 acre and 2 acres subject to ground leases, which expire in 2058 and 2060, respectively. (30) Northside/Alpharetta II became partially operational in September 1999. Thus, economic occupancy for Northside/Alpharetta II does not include a full year of operations. (31) Meridian Mark Plaza became partially operational in April 1999. Thus, economic occupancy for Meridian Mark Plaza does not include a full year of operations. (32) The AtheroGenics building became fully operational in March 1999. Thus, economic occupancy for AtheroGenics does not include a full year of operations. (33) This project is in a stage of predevelopment, is not yet under construction, and may not go forward if all criteria for proceeding with development are not satisfied. (34) The Crawford Long Medical Office Building will be developed on top of a building within the rawford Long Hospital campus. The Company has received a fee simple interest in the air rights above this building in order to develop the medical office building. (35) Presbyterian Medical Plaza at University is located on 1 acre which is subject to a ground lease expiring in 2057. (36) Novant Health, Inc. has the option to renew 23,359 rentable square feet through 2027 of this lease of Presbyterian Medical Plaza at University, with the option to renew the balance through 2022. Land Held for Investment and Future Development (excluding Retail Outparcels)
Developable Company's Land Area Joint Venture Ownership Adjusted Debt Description, Location and Zoned Use Year Acquired (Acres)(1) Partner Interest Cost Balances - ----------------------------------- ------------- ----------- ------------- --------- -------- -------- Wildwood Office Park Suburban Atlanta, Georgia Office and Commercial 1971-1987 146 N/A 100% $ 7,157 $ 0 Office and Commercial 1971-1982 34 IBM 50% $10,082(2) $ 0 North Point Land (Georgia Highway 400 & Haynes Bridge Road) (3) Suburban Atlanta, Georgia Office and Commercial - East 1970-1985 13 N/A 100% $ 1,020 $ 0 Office and Commercial - West 1970-1985 217 N/A 100% $ 4,535 $ 0 Temco Associates (Paulding County) Suburban Atlanta, Georgia 1991 (5) Temple-Inland 50% $ 6,464(5) $ 0 Inc. (4)
(1) Based upon management's estimates. (2) For the portion of the Wildwood Office Park land owned by a joint venture, the cost shown is what the cost would be if the venture's land cost were adjusted downward to the Company's lower basis in the land it contributed to the venture. The adjusted cost excludes building predevelopment costs, net, of $1,113,000. (3) The North Point property is located both east and west of Georgia Highway 400. Development had been mainly concentrated on the land located east of Georgia Highway 400, until July 1998 when the Company commenced construction of the first building, AtheroGenics, on the west side. The land located east of Georgia Highway 400 surrounds North Point Mall, a 1.3 million square foot regional mall on a 100 acre site which the Company sold in 1988. (4) Joint venture partner is an affiliate of the entity shown. (5) Temco Associates has an option through March 2006, with no carrying costs, to acquire the fee simple interest in approximately 10,300 acres in Paulding County, Georgia (northwest of Atlanta, Georgia). The partnership also has an option to acquire interests in a timber rights only lease covering approximately 22,000 acres. This option also expires in March 2006, with the underlying lease expiring in 2025. The options may be exercised in whole or in part over the option period and the option price on the fee simple land is $929 per acre on January 1, 2000, escalating at 6% on January 1 of each succeeding year during the term of the option. During 1999, approximately 640 acres of the option related to the fee simple interest was exercised. Approximately 466 acres were simultaneously sold for gross profits of $2,458,000. Approximately 174 acres were acquired for development of the Bentwater residential community. Approximately 1,750 lots will be developed ithin Bentwater on an approximate total of 1,083 acres, the remainder of which will be acquired as needed through exercises of the option related to the fee simple interest. During 1998, approximately 328 acres of the option related to the fee simple interest was exercised. Approximately 83 acres were simultaneously sold for gross profits of approximately $192,000. The Cobb County, Georgia YMCA had a three year option to purchase approximately 38 acres out of the options exercised in 1998, which they exercised in December 1999. The remaining acreage (approximately 207 acres) was deeded in early 1999 to a golf course developer who is developing the golf course within Bentwater. None of the option was exercised in 1997. Major Properties - ---------------- General - ------- This section describes the major operating properties in which the Company has an interest either directly or indirectly through joint venture arrangements. A "negative investment" in a joint venture results from distributions of capital to the Company, if any, exceeding the sum of (i) the Company's contributions of capital and (ii) reported earnings (losses) of the joint venture allocated to the Company. "Investment" in a joint venture means the book value of the Company's investment in the joint venture. Wildwood Office Park - -------------------- Wildwood Office Park is a 285 acre Class A commercial development in Atlanta master planned by I.M. Pei, including 8 office buildings containing 2,439,000 rentable square feet. The property is zoned for office, institutional, commercial and residential use. Approximately 105 acres in the park are owned by, or committed to be contributed to, Wildwood Associates (see below), including approximately 34 acres of land held for future development. The Company owns 100% of the 146 acre balance of the land available for future development. Located in Atlanta's northwest commercial district, just north of the Interstate 285/Interstate 75 intersection, Wildwood features convenient access to all of Atlanta's major office, commercial and residential districts. The Wildwood complex overlooks the Chattahoochee River and borders 1,200 acres of national forest, thus providing an urban office facility in a forest setting. Wildwood Associates. Wildwood Associates is a joint venture formed in 1985 between the Company and IBM. The Company and IBM each have a 50% interest in Wildwood Associates. At December 31, 1999, the Company's investment in Wildwood Associates and a related partnership, which included the cost of the land the Company is committed to contribute to Wildwood Associates, was a negative investment of approximately $36,900,000 due to partnership distributions. Wildwood Associates owns the 3200 Windy Hill Road Building (687,000 rentable square feet), the 2300 Windy Ridge Parkway Building (634,000 rentable square feet), the 2500 Windy Ridge Parkway Building (314,000 rentable square feet), the 4100 and 4300 Wildwood Parkway Buildings (250,000 rentable square feet in total) and the 4200 Wildwood Parkway Building (260,000 rentable square feet). As of March 15, 2000, these buildings were all 100% leased, with the exception of the 2300 Windy Ridge Parkway Building which was 99% leased. Wildwood Associates also owns 14 acres leased to two banking facilities and five restaurants. Wildwood Associates has a $2 million bank line of credit (the Company severally guarantees one-half) under which $0 was drawn as of December 31, 1999. Other Buildings in Wildwood Office Park. Wildwood Office Park also contains the 3301 Windy Ridge Parkway Building, a 106,000 rentable square foot office building located on approximately 10 acres which is wholly owned by the Company. The 3301 Windy Ridge Parkway Building was 100% leased as of March 15, 2000. In addition, the 3100 Windy Hill Road Building, a 188,000 rentable square foot corporate training facility occupies a 13-acre parcel of land which is wholly owned by the Company. The training facility improvements were sold in 1983 to a limited partnership of private investors, at which time the Company received a leasehold mortgage note. The training facility land was simultaneously leased to the partnership for thirty years, along with certain equipment for varying periods. The training facility had been leased by the partnership to IBM through November 30, 1998. Effective January 1, 1997, the IBM lease was extended eight years beyond its previous expiration, to November 30, 2006. Based on the economics of the lease, the Company will receive substantially all of the economic risks and rewards from the property through the term of the IBM lease. In addition, the Company will receive substantially all of the future economic risks and rewards from the property beyond the IBM lease because of the short term remaining on the land lease (7 years) and the large mortgage note balance ($25.9 million) that would have to be paid off, with interest, in that 7 year period before the limited partnership would receive any significant benefit. Therefore, effective January 1, 1997, the $17,005,000 balance of the mortgage note and land was reclassified to Operating Properties, and revenues and expenses (including depreciation) from that point forward have been recorded as if the building were owned by the Company. North Point - ----------- North Point is a mixed-use commercial development located in north central suburban Atlanta, Georgia, off of Georgia Highway 400, a six lane state highway that runs from downtown Atlanta to the northern Atlanta suburbs. The Company owns either directly or through a joint venture approximately 134 and 221 acres located on the east and west sides of Georgia Highway 400, respectively. Development had been mainly concentrated on the land located east of Georgia Highway 400 until July 1998 when the Company commenced construction of the first building, AtheroGenics, on the west side. Planning and infrastructure work has also begun for additional development on the west side property. The east side land surrounds North Point Mall, a 1.3 million square foot regional mall on a 100-acre site which the Company sold in 1988. The following describes the various components of North Point. North Point MarketCenter and Mansell Crossing Phase II. North Point MarketCenter, which is 98% leased as of March 15, 2000, is a 517,000 square foot retail power center (of which 401,000 square feet are owned by Cousins) located adjacent to North Point Mall. Mansell Crossing Phase II, which was 100% leased as of March 15, 2000, is an approximately 103,000 square foot expansion of an existing retail power center, previously developed by the Company for a third party. These two centers are located on 49 and 13 acres of land, respectively, at North Point. Both of these properties were contributed to the Prudential venture in November 1998 (see Note 5). North Point Center East. The Company owns either directly or indirectly through a joint venture four Class A office buildings located adjacent to North Point Mall and the retail properties discussed above. 100 North Point Center East, 200 North Point Center East and 333 North Point Center East which were completed in 1995, 1996 and 1998, are 128,000, 130,000 and 129,000 rentable square feet, respectively. Construction commenced in May 1998 on the fourth office building, 555 North Point Center East, a 152,000 rentable square foot building also adjacent to the other buildings. These four office buildings are located on 35 acres of land at North Point and 100, 200 and 333 North Point Center East were all 100% leased as of March 15, 2000 and 555 North Point Center East was 79% leased as of March 15, 2000. 100 and 200 North Point Center East were contributed to the Prudential venture in November 1998 (see Note 5). AtheroGenics. In July 1998, the Company commenced construction of AtheroGenics, an approximately 50,000 rentable square foot office and laboratory building. This building is located on a 4 acre site on the west side of Georgia Highway 400. AtheroGenics is 100% leased as of March 15, 2000 and became fully operational for financial reporting purposes in March 1999. Other North Point Property. Approximately 24 acres of the North Point land are ground leased in 1 to 5 acre sites to freestanding users. These 24 acres were 100% leased as of March 15, 2000. The remaining approximately 230 developable acres at North Point are 100% owned by the Company. Approximately 13 acres of this land are located on the east side of Georgia Highway 400 and are zoned for office use. Approximately 217 acres of the land are located on the west side of Georgia Highway 400 and are zoned for office, institutional and light industrial use. Other Office Properties - ------------------------ Bank of America Plaza. Bank of America Plaza is a Class A, 55-story, approximately 1.3 million rentable square foot office tower designed by Kevin Roche and is located on approximately 4 acres of land between the midtown and downtown districts of Atlanta, Georgia. The building, which was completed in 1992, was 99% leased as of March 15, 2000. An affiliate of Bank of America leases approximately 45% of the rentable square feet. Bank of America Plaza was developed by CSC Associates, L.P. ("CSC"), a joint venture formed by the Company and a wholly owned subsidiary of Bank of America, each as 50% partners. CSC's net income or loss and cash distributions are allocated to the partners based on their percentage interests (50% each). At December 31, 1999, the Company's investment in CSC was approximately $94,347,000. Cousins LORET Venture, L.L.C.("Cousins LORET"). Effective July 31, 1997, Cousins LORET was formed between the Company and LORET Holdings, L.L.L.P. ("LORET"), each as 50% members. LORET contributed Two Live Oak Center, a 278,000 rentable square foot office building located in Atlanta, Georgia, which was renovated in 1997, and was 99% leased as of March 15, 2000. Two Live Oak Center was contributed subject to a 7.90% $30 million non-recourse ten year mortgage note payable. LORET also contributed an adjacent 4 acre site on which construction of The Pinnacle, a 423,000 rentable square foot Class A office building, commenced in August 1997 and was completed in November 1998. The Pinnacle became partially operational for financial reporting purposes in March 1999 and as of March 15, 2000 was 97% leased. In May 1998, Cousins LORET completed the $70 million non-recourse financing of The Pinnacle at an interest rate of 7.11% and a term of twelve years. This financing was completely funded on December 30, 1998. The Company contributed $25 million of cash to Cousins LORET to match the value of LORET's agreed-upon equity. At December 31, 1999, the Company had an investment in Cousins LORET of approximately $16,222,000. Ten Peachtree Place. Ten Peachtree Place is a 20-story, 259,000 rentable square foot Class A office building located in midtown Atlanta, Georgia. Completed in 1991, this structure was designed by Michael Graves and is currently 100% leased to Coca-Cola. Approximately four acres of adjacent land, currently used for surface parking, are available for future development. Ten Peachtree Place is owned by Ten Peachtree Place Associates, a general partnership between the Company (50%) and a wholly owned subsidiary of Coca-Cola (50%). The partnership acquired the property in 1991 for a nominal cash investment, subject to a ten-year purchase money note. This 8% purchase money note had an outstanding balance of $17,456,000 at December 31, 1999. If the purchase money note is paid in accordance with its terms, it will amortize to approximately $15.3 million ($59 per rentable square foot) over the ten-year term of the Coca-Cola lease, at which time Coca-Cola is entitled to receive the preferred return described below, and the property may be sold, released, or returned to the lender under the purchase money note for $1.00 without penalty or any further liability to the Company for the indebtedness. At December 31, 1999, the Company had an investment in Ten Peachtree Place Associates of approximately $175,000. The Company anticipates that Ten Peachtree Place Associates will generate approximately $400,000 per year of cash flows from operating activities net of note principal amortization during the ten-year lease. The partnership agreement generally provides that each of the partners is entitled to receive 50% of cash flows from operating activities net of note principal amortization (excluding any sale proceeds) for ten years, after which time the Company is entitled to 15% of cash flows (including any sale proceeds) and its partner is entitled to receive 85% of cash flows (including any sale proceeds), until the two partners have received a combined distribution of $15.3 million, after which time each partner is entitled to receive 50% of cash flows (including any sale proceeds). CC-JM II Associates. This joint venture was formed in 1994 between the Company and an affiliate of CarrAmerica Realty Corporation, each as 50% general partners, to develop and own John Marshall-II, a 224,000 square foot Class A office building in suburban Washington, D.C. The building is 100% leased for 15 years to Booz-Allen & Hamilton, an international consulting firm, as a part of its corporate headquarters campus. Rent commenced on January 21, 1996. At December 31, 1999, the Company had an investment in CC-JM II Associates of approximately $2,215,000. Cousins/Daniel, LLC. Cousins/Daniel, LLC ("Cousins/Daniel") was formed in 1997 between Cousins, Inc. (a wholly owned subsidiary of Cousins) and Daniel Realty Company ("Daniel"). The purpose of this venture is to develop certain projects proposed by Daniel and selected by the Company. Daniel's economic rights are limited to development fees, leasing fees, management fees and certain incentive interests. These incentive interests include a residual interest in the cash flow and a residual interest in capital proceeds. All projects undertaken within the venture are pooled for purposes of calculating the aforementioned residuals. This venture is treated as a consolidated entity in the Company's financial statements. In June 1998, Cousins/Daniel acquired Lakeshore Park Plaza, an approximately 193,000 rentable square foot office building and also purchased the land for and commenced construction of, 600 University Park Place, an approximately 123,000 rentable square foot Class A office building, which is still under construction and lease-up as of March 15, 2000. Both of these office buildings are located in Birmingham, Alabama, and are 98% and 69% leased as of March 15, 2000, respectively. CommonWealth/Cousins I, LLC. On November 18, 1998, the Company entered into Commonwealth/Cousins I, LLC (the "Venture") with CommonWealth Pacific, LLC ("CommonWealth") for the purposes of developing AT&T Wireless Services Headquarters, a 222,000 rentable square foot Class A office building in suburban Los Angeles, California, which was 100% leased as of March 15, 2000. CommonWealth transferred all rights in the project and in exchange received an initial credit to its capital account of $4,980,039, which is equal to a 49.9% interest in the Venture. The Company contributed $5,000,000 as its capital contribution for a 50.1% interest in the Venture. The Venture entered into a put and call agreement which the Company intends to exercise to buy out CommonWealth's interest in the Venture for approximately $7.5 million. The Venture is treated as a consolidated entity in the Company's financial statements. CP Venture Two LLC. On November 12, 1998, the Company entered into a venture agreement with Prudential. On such date the Company contributed its interest in nine properties to the venture and Prudential contributed cash (see Note 5). The nine properties contributed included four office properties, 100 and 200 North Point Center East as discussed above, First Union Tower and Grandview II. First Union Tower is a Class A office building containing approximately 320,000 rentable square feet, located on one acre of land in downtown Greensboro, North Carolina. First Union Tower was 90% leased as of March 15, 2000. Grandview II is an approximately 149,000 rentable square foot Class A office building in Birmingham, Alabama, which was owned by Cousins/Daniel, LLC prior to being contributed. Grandview II was approximately 100% leased as of March 15, 2000. See Other Retail Properties and Medical Office Properties sections where retail and medical office properties contributed to the Prudential venture are discussed. 333 John Carlyle. In January 1998, the Company purchased the land for and commenced construction of 333 John Carlyle, an approximately 153,000 rentable square foot Class A office building in suburban Washington, D.C. 333 John Carlyle became partially operational for financial reporting purposes in May 1999 and was 87% leased as of March 15, 2000. Inforum. In June 1999, the Company acquired Inforum, a 987,000 rentable square foot office building in downtown Atlanta, Georgia, for $71 million by completing a tax-deferred exchange with the proceeds ($69 million) from the sale of the Company's 50% interest in Haywood Mall. Inforum was 97% leased as of March 15, 2000. 101 Independence Center. In December 1996, the Company acquired 101 Independence Center, a 525,000 rentable square foot Class A office building (including an underground parking garage and an adjacent parking deck) located at the intersection of Trade and Tryon Streets in the central business district of Charlotte, North Carolina. 101 Independence Center was 97% leased as of March 15, 2000. 615 Peachtree Street. In August 1996, the Company acquired 615 Peachtree Street, a 145,000 rentable square foot 12-story downtown Atlanta office building, located across from Bank of America Plaza. 615 Peachtree Street was 84% leased as of March 15, 2000. One Ninety One Peachtree Tower. One Ninety One Peachtree Tower is a 50-story, Class A office tower located in downtown Atlanta, Georgia that was completed in December 1990. One Ninety One Peachtree Tower, which contains 1.2 million rentable square feet, was designed by John Burgee Architects, with Phillip Johnson as design consultant. One Ninety One Peachtree Tower was developed on approximately 2 acres of land, of which approximately 1.5 acres is owned and approximately one-half acre under the parking facility is leased for a 99-year term expiring in 2087 with a 99-year renewal option. One Ninety One Peachtree Tower was approximately 97% leased at March 15, 2000. C-H Associates, Ltd. ("C-H Associates"), a partnership formed in 1988 between CREC (49%), Hines Peachtree Associates Limited Partnership (49%) and Peachtree Palace Hotel, Ltd. (2%), owns a 20% interest in the partnership that owns One Ninety One Peachtree Tower. C-H Associates' 20% ownership of One Ninety One Peachtree Tower results in an effective 9.8% ownership interest by CREC, subject to a preference in favor of the majority partner, in the One Ninety One Peachtree Tower project. The balance of the One Ninety One Peachtree Tower project was owned by DIHC Peachtree Associates, which was an affiliate of Dutch Institutional Holding Company, but was acquired by Cornerstone Properties, Inc. in October 1997. Through C-H Associates, CREC received 50% of the development fees from the One Ninety One Peachtree Tower project. In addition, CREC owns a 50% interest in two general partnerships which receive fees from leasing and managing the One Ninety One Peachtree Tower project. The One Ninety One Peachtree Tower project was funded substantially by debt until March 1993, at which time DIHC Peachtree Associates (now Cornerstone Properties, Inc. as discussed above) contributed equity in the amount of $145,000,000 which repaid approximately one-half of the debt. Subsequent to the equity contribution, C-H Associates is entitled to a priority distribution of $250,000 per year (of which the Company is entitled to receive $112,500) for seven years beginning in 1993. The equity contributed is entitled to a preferred return at a rate increasing over the first 14 years from 5.5% to 11.5% (payable after the Company's priority return); at December 31, 1999, the cumulative undistributed preferred return was $13,235,783. After Cornerstone Properties, Inc. recovers its preferred return, the partners share in any operating cash flow distributions in accordance with their percentage interests. The project is subject to long-term debt of approximately $143,336,000 at December 31, 1999. At December 31, 1999, the Company had a negative investment of approximately $91,000 in the One Ninety One Peachtree Tower project. Office Properties Under Development - ----------------------------------- 101 Second Street. Cousins/Myers Second Street Partners, L.L.C., a venture formed in 1997 between the Company and Myers Second Street Company LLC ("Myers"), purchased approximately 1 acre of undeveloped land in downtown San Francisco, California upon which 101 Second Street, an approximately 388,000 rentable square foot Class A office building was developed. 101 Second Street was 98% leased as of March 15, 2000. Myers' economic rights are limited to development fees and certain incentive interests, which include a residual interest in the cash flow and capital proceeds. This venture is treated as a consolidated entity in the Company's financial statements. One Second Street. In November 1999, the Company formed Cousins/Myers II, LLC, a venture with Myers Bay Area Company LLC ("Myers Bay"), which purchased approximately 1 acre of fully entitled undeveloped land in downtown San Francisco, California for the development of One Second Street, an approximately 374,000 rentable square foot Class A office building. Myers Bay's economic rights are limited to development fees and certain incentive interests, which include a residual interest in the cash flow and capital proceeds. The venture is treated as a consolidated entity in the Company's financial statements. Charlotte Gateway Village, LLC ("Gateway"). On December 14, 1998, the Company and a wholly owned subsidiary of Bank of America Corporation formed Gateway for the purpose of developing and owning Gateway Village, a 1,076,000 rentable square foot Class A office building and parking deck in downtown Charlotte, North Carolina. Construction of Gateway Village commenced in July 1998, and the project is 100% leased to Bank of America Corporation. In December 1998, Gateway completed construction financing of up to $190 million for Gateway Village. The note bears an interest rate of LIBOR (adjusted for certain reserve requirements) plus .50% and matures January 2, 2002. No amounts were drawn on the note until 1999. This note is fully exculpated and is supported by a lease to Bank of America Corporation with a term of 15 years. Pursuant to the Gateway operating agreement, this construction financing will be replaced with permanent long-term financing which will be fully amortized at the end of the Bank of America Corporation lease. At December 31, 1999, the Company had an investment in Gateway of approximately $21,221,000. Gateway's net income or loss and cash distributions are allocated to the members as follows: first to the Company so that it receives a cumulative compound return equal to 11.46% on its capital contributions, second to a wholly owned subsidiary of Bank of America Corporation until it has received an amount equal to the aggregate amount distributed to the Company and then to each member, 50%. 285 Venture, Ltd. In March 1999, the Company and a commingled trust fund advised by J.P. Morgan Investment Management Inc. (the "J.P. Morgan Fund") formed 285 Venture, Ltd., each as 50% partners, for the purpose of developing 1155 Perimeter Center West, an approximately 361,000 rentable square foot Class A office building complex in Atlanta, Georgia. 1155 Perimeter Center West wa 66% leased as of March 15, 2000. The J.P. Morgan Fund contributed the approximately 6 acre site upon which 1155 Perimeter Center West is being developed. The land had an agreed-upon value of approximately $5.4 million which the Company matched with a cash contribution. At December 31, 1999, the Company's investment in 285 Venture, Ltd. was approximately $16,888,000. 1900 Duke Street. In January 1999, the Company purchased the land for and commenced construction of 1900 Duke Street, an approximately 97,000 rentable square foot Class A office building in suburban Washington, D.C. Other Retail Properties - ----------------------- Fully Operational Retail Properties. The Company owns three retail centers which were fully operational for financial reporting purposes as of December 31, 1999. Perimeter Expo is a 291,000 square foot retail power center (of which the Company owns 176,000 square feet) which is located in Atlanta, Georgia and was 100% leased (Company owned) as of March 15, 2000. Presidential MarketCenter is a 493,000 square foot retail power center (of which the Company owns 376,000 square feet) which is located in suburban Atlanta, Georgia and was 86% leased (Company owned) as of March 15, 2000. Colonial Plaza MarketCenter is a 480,000 square foot retail power center which is located in Orlando, Florida and was 96% leased as of March 15, 2000. Laguna Niguel Promenade is a 154,000 square foot retail center located in Laguna Niguel, California and was 94% leased as of March 15, 2000. CP Venture Two LLC and CP Venture Three LLC. In November 1998, the Company contributed both Greenbrier MarketCenter and Los Altos MarketCenter in addition to North Point MarketCenter and Mansell Crossing II (see North Point discussion) to the aforementioned Prudential venture (see Note 5). Greenbrier MarketCenter is a 493,000 square foot retail power center which is located in Chesapeake, Virginia and was 100% leased as of March 15, 2000. Los Altos MarketCenter is a 258,000 square foot retail power center (of which the Prudential venture owns 157,000 square feet) which is located in Long Beach, California and was 100% leased as of March 15, 2000. The Company is currently developing Mira Mesa MarketCenter, an approximately 453,000 square foot retail power center in suburban San Diego, California, which was 87% leased as of March 15, 2000. Mira Mesa MarketCenter is owned by CP Venture Three LLC (see Note 5). This venture is treated as a consolidated entity in the Company's financial statements. Brad Cous Golf Venture, Ltd. Effective January 31, 1998, the Company formed the Brad Cous Golf Venture, Ltd. with the W.C. Bradley Co., each as 50% partners, for the purpose of developing and owning The Shops at World Golf Village, an approximately 80,000 square foot retail center located adjacent to the PGA Hall of Fame in St. Augustine, Florida. The Shops at World Golf Village became partially operational for financial reporting purposes in April 1999 and was 60% leased as of March 15, 2000. At December 31, 1999, the Company had an investment in Brad Cous Golf Venture, Ltd. of approximately $5,257,000. Other Retail Properties Under Development. In February 1998, the Company purchased The Shops at Palos Verdes, located in Rolling Hills Estates, California, in the greater Los Angeles metropolitan area. This 355,000 square foot center included existing retail space and a parking deck. The Company is redeveloping and remerchandising the project into The Avenue of the Peninsula, an approximately 374,000 square foot open-air, retail specialty center which was 61% leased as of March 15, 2000. In April 1998, the Company purchased the land for and commenced construction of The Avenue East Cobb, an approximately 225,000 square foot open-air, retail specialty center in suburban Atlanta, Georgia. The Avenue East Cobb became partially operational in September 1999 and was 94% leased as of March 15, 2000. In September 1999, the Company purchased the land for and commenced construction of Salem Road Station, an approximately 67,000 square foot neighborhood retail center in suburban Atlanta, Georgia. Salem Road Station was 68% leased as of March 15, 2000. In September and October 1999, the Company purchased the land for The Avenue Peachtree City, an approximately 168,000 square foot retail specialty center in suburban Atlanta, Georgia. Retail Properties Sold. On February 1, 1999, CREC sold Abbotts Bridge Station, an approximately 83,000 square foot neighborhood retail center in suburban Atlanta, Georgia for $15.7 million, which was approximately $5.2 million over the cost of the center. Including depreciation recapture of approximately $.3 million and net of an income tax provision of approximately $2.0 million, the net gain on the sale was approximately $3.5 million. On March 28, 2000, the Company sold Laguna Niguel Promenade, an approximately 154,000 square foot retail center located in Laguna Niguel, California for $26.7 million, which was approximately $6.4 million over the cost of the center. Including depreciation recapture of approximately $.8 million, the net gain on the sale was approximately $7.2 million. The net proceeds from the sale were placed in escrow pending a tax-deferred exchang to be identified by the Company. Medical Office Properties - ------------------------- Operational Medical Office Properties. In June 1998, the Company acquired Northside/Alpharetta I, an approximately 106,000 rentable square foot medical office building in suburban Atlanta, Georgia. Northside/Alpharetta I was 100% leased as of March 15, 2000. Medical Office Properties Under Development. Construction commenced in June 1998 on Northside/Alpharetta II, an approximately 198,000 rentable square foot medical office building. Northside/Alpharetta II became partially operational in September 1999 and was 63% leased as of March 15, 2000. Additionally, Meridian Mark Plaza, a 159,000 rentable square foot medical office building, became partially operational for financial reporting purposes in April 1999. Meridian Mark Plaza was 94% leased at March 15, 2000. CP Venture Two LLC. In November 1998, the Company contributed Presbyterian Medical Plaza at University, an approximately 69,000 rentable square foot medical office building in Charlotte, North Carolina, to the Prudential venture (see Note 5). Presbyterian Medical Plaza at University was approximately 100% leased as of March 15, 2000. Residential Lots Under Development - ---------------------------------- As of December 31, 1999, CREC and Temco Associates owned the following parcels of land which are being developed into residential communities ($ in thousands):
Estimated Total Lots Initial on Land Year Currently Lots Remaining Carrying Description Acquired Owned (1) Sold to Date Lots Value ----------- -------- --------- ------------ --------- -------- CREC ---- Brown's Farm 1993 213 196 17 $ 367 West Cobb County Suburban Atlanta, GA Apalachee River Club 1994 186 157 29 867 Gwinnett County Suburban Atlanta, GA Echo Mill 1994 539 372 167 2,137 West Cobb County Suburban Atlanta, GA Barrett Downs 1994 144 143 1 0 Forsyth County Suburban Atlanta, GA Bradshaw Farm 1994 532 514 18 (1,876) Cherokee County Suburban Atlanta, GA Alcovy Woods Gwinnett County Suburban Atlanta, GA 1996 162 40 122 3,192 ----- ----- --- ------ Total 1,776 1,422 354 $4,687 ===== ===== === ====== Temco Associates Bentwater Paulding County Suburban Atlanta, GA 1998 1,750(2) 106 1,644 $6,464 ======= ===== ===== ====== (1) Includes lots sold to date. (2) See discussion of Temco Associates below.
Land Held for Investment and Future Development - ----------------------------------------------- In addition to the various land parcels located adjacent to operating properties or projects under construction discussed above, the Company owns or controls the following significant land holdings either directly or indirectly through joint venture arrangements. The Company intends to convert these land holdings to income-producing usage or to sell portions of land holdings as opportunities arise over time. Temco Associates. Temco Associates was formed in March 1991 as a partnership between CREC (50%) and a subsidiary of Temple-Inland Inc. (50%). Temco Associates has an option through March 2006, with no carrying costs, to acquire the fee simple interest in approximately 10,300 acres in Paulding County, Georgia (northwest of Atlanta, Georgia). The partnership also has an option to acquire interests in a timber rights only lease covering approximately 22,000 acres. This option also expires in March 2006, with the underlying lease expiring in 2025. The options may be exercised in whole or in part over the option period and the option price on the fee simple land is $929 per acre on January 1, 2000, escalating at 6% on January 1 of each succeeding year during the term of the option. During 1999, approximately 640 acres of the option related to the fee simple interest was exercised. Approximately 466 acres were simultaneously sold for gross profits of $2,458,000. Approximately 174 acres were acquired for development of the Bentwater residential community. Approximately 1,750 lots will be developed within Bentwater on an approximate total of 1,083 acres, the remainder of which will be acquired as needed through exercises of the option related to the fee simple interest. During 1998, approximately 328 acres of the option related to the fee simple interest was exercised. Approximately 83 acres were simultaneously sold for gross profits of approximately $192,000. The Cobb County, Georgia YMCA had a three year option to purchase approximately 38 acres out of the options exercised in 1998, which they exercised in December 1999. The remaining acreage (approximately 207 acres) was deeded in early 1999 to a golf course developer who is developing the golf course within Bentwater. None of the option was exercised in 1997. At December 31, 1999, the Company had an investment in Temco Associates of approximately $6,600,000. Other Investments - ----------------- Air Rights Near the CNN Center. The Company owns a leasehold interest in the air rights over the approximately 365,000 square foot CNN Center parking facility in Atlanta, Georgia, adjoining the headquarters of Turner Broadcasting System, Inc. and Cable News Network. The air rights are developable for additional parking or office use. The Company's net carrying value of this property is $0. Cousins Stone LP. Cousins Stone LP was formed on June 1, 1999 when CREC II's subsidiaries acquired Faison's 50% interest in Faison-Stone. Cousins Stone LP is a full-service real estate company headquartered in Dallas, Texas that specializes in third party property management and leasing of Class A office properties. At December 31, 1999, the Company had an investment in Cousins Stone LP of approximately $7,131,000. Warrants to Purchase Stock in Other Companies - --------------------------------------------- Cypress Communications, Inc. In December 1999, the Company executed a Master Communications License Agreement (the "Agreement") with Cypress Communications, Inc. ("Cypress") that provides Cypress a non-exclusive right to access the risers and certain areas of certain of the Company's office and medical office buildings. The Agreement allows Cypress to install equipment and wiring, at Cypress' sole cost and expense, and to offer a variety of telecommunication services to each of the applicable building's tenants. The Agreement has a term of 5 years with an automatic renewal for another 5 years unless Cypress elects not to renew or Cypress fails to equip the applicable building with a server within 18 months of the execution of the Agreement. Pursuant to the Agreement, the Company will receive a percentage of the revenue earned by Cypress from tenants and third parties who use the telecommunication services. In addition, the Company has entered into a Stock Warrant Agreement with Cypress which provides that Cypress issue to the Company 12,000 warrants per one million gross leasable square feet in the buildings subject to the agreement or approximately 88,234 warrants to purchase Cypress' common stock at an exercise price of $4.22 per share. Certain provisions of the Stock Warrant Agreement result in the return from the transfer of said warrants or stock upon the sale of the buildings. On February 10, 2000, Cypress completed its initial public offering of 10 million shares of common stock. AtheroGenics, Inc. In July 1998, the Company received 50,000 warrants at an exercise price of $5.00 per share for the purchase of Series C Convertible Preferred Stock of AtheroGenics, Inc. ("AtheroGenics"), a tenant which leases 100% of a 50,000 rentable square foot office and laboratory building the Company developed and owns. On March 1, 2000, the Company received notice from AtheroGenics of its pending registration of its common stock for sale under the Securities Act of 1933. Supplemental Financial and Leasing Information Depreciation and amortization expense, net of minority interest's share, include the following components for the years ended December 31, 1999 and 1998 ($ in thousands):
1999 1998 --------------------------------------- --------------------------------------- Share of Share of Unconsolidated Unconsolidated Consolidated Joint Ventures Total Consolidated Joint Ventures Total ------------ -------------- ------- ------------ -------------- ------- Furniture, fixtures and equipment $ 640 $ 101 $ 741 $ 505 $ 2 $ 507 Deferred financing costs -- 17 17 -- 17 17 Goodwill and related business acquisition costs 300 19 319 342 228 570 Building (including tenant first generation) 6,476 11,229 17,705 5,300 6,330 11,630 Tenant second generation 9,108 8,847 17,955 9,026 7,160 16,186 ------- ------- ------- ------- ------- ------- $16,524 $20,213 $36,737 $15,173 $13,737 $28,910 ======= ======= ======= ======= ======= =======
Exclusive of new developments and purchases of furniture, fixtures and equipment, the Company had the following capital expenditures for the years ended December 31, 1999 and 1998, including its share of unconsolidated joint ventures ($ in thousands):
1999 1998 ---------------------------------- ---------------------------------- Office Retail Medical Total Office Retail Medical Total ------ ------ ------- ----- ------ ------ ------- ----- Second generation related costs $1,224 $208 $ -- $1,432 $1,442 $46 $ -- $1,488 Building improvements 220 -- -- 220 -- 1 -- 1 ------ ---- ---- ------ ------ --- ---- ------ Total $1,444 $208 $ -- $1,652 $1,442 $47 $ -- $1,489 ====== ==== ==== ====== ====== === ==== ======
Item 3. Legal Proceedings - ----------------------------- No material legal proceedings are presently pending by or against the Company. Item 4. Submission of Matters to a Vote of Security Holders - --------------------------------------------------------------- No matter was submitted to a vote of security holders during the fourth quarter of the Registrant's fiscal year ended December 31, 1999. Item X. Executive Officers of the Registrant - ------------------------------------------------ The Executive Officers of the Registrant as of the date hereof are as follows: Name Age Office Held ---- --- ----------- Thomas G. Cousins 68 Chairman of the Board of Directors and Chief Executive Officer Daniel M. DuPree 53 President and Chief Operating Officer Kelly H. Barrett 35 Senior Vice President - Finance George J. Berry 62 Senior Vice President Tom G. Charlesworth 50 Senior Vice President, Secretary and General Counsel Craig B. Jones 49 Senior Vice President and President of the Office Division John S. McColl 37 Senior Vice President - Medical Office Division Joel T. Murphy 41 Senior Vice President and President of the Retail Division John L. Murphy 54 Senior Vice President - Office Division W. James Overton 53 Senior Vice President - Development Lea Richmond III 52 Senior Vice President and President of the Medical Office Division Relationships: - -------------- Lillian C. Giornelli, Mr. Cousins' daughter, is a director of the Company. There are no other family relationships among the current Executive Officers or Directors. Term of Office: - --------------- The term of office for all officers expires at the annual directors' meeting, but the Board has the power to remove any officer at any time. Business Experience: - -------------------- Mr. Cousins has been the Chief Executive Officer of the Company since its inception. Mr. DuPree joined the Company in October 1992, became Senior Vice President in April 1993, Senior Executive Vice President in April 1995 and President and Chief Operating Officer in November 1995. Prior to that he was President of New Market Companies, Inc. and affiliates since 1984. Ms. Barrett joined the Company in October 1992 as Vice President and Controller and became Senior Vice President - Finance of the Company in August 1997. Prior to that she was employed by Arthur Andersen LLP as an Audit Manager. Mr. Berry has been Senior Vice President since joining the Company in September 1990. Prior to that he was Commissioner of the State of Georgia's Department of Industry, Trade and Tourism from 1983 to 1990. Mr. Charlesworth joined the Company in October 1992 and became Senior Vice President, Secretary and General Counsel in November 1992. Prior to that he worked for certain affiliates of Thomas G. Cousins as Chief Financial Officer and Legal Counsel. Mr. Jones joined the Company in October 1992 and became Senior Vice President in November 1995 and President of the Office Division in September 1998. From 1987 until joining the Company, he was Executive Vice President of New Market Companies, Inc. and affiliates. Mr. McColl joined the Company in April 1996 as Vice President of the Office Division. He was promoted in May 1997 to Senior Vice President of the Medical Office Division. Prior to that he was President of Hutchinson Capital Group, Inc. and an officer of Quest Capital Corp. Mr. Joel Murphy joined the Company in October 1992 and became Senior Vice President of the Company and President of the Retail Division in November 1995. From 1988 until joining the Company, he was Senior Vice President of New Market Companies, Inc. and affiliates. Mr. John Murphy has been Senior Vice President since joining the Company in December 1987. Mr. Overton has been Senior Vice President since joining the Company in September 1989. Prior to that he was employed by Hardin Construction Group, Inc. from 1972 to 1989, where he served as President from 1985 to 1989. Mr. Richmond has been Senior Vice President and President of the Medical Office Division since he joined the Company in July 1996. Prior to that he was President of The Lea Richmond Company and The Richmond Development Company from 1975 to 1996. PART II Item 5. Market for Registrant's Common Stock and Related Security Holder Matters - -------------------------------------------------------------------------------- The information concerning the market prices for the Registrant's common stock and related stockholder matters appearing under the caption "Market and Dividend Information" on page 54 of the Registrant's 1999 Annual Report to Stockholders is incorporated herein by reference. Item 6. Selected Financial Data - ------------------------------- The information appearing under the caption "Five Year Summary of Selected Financial Data" on page 46 of the Registrant's 1999 Annual Report to Stockholders is incorporated herein by reference. Item 7. Management's Discussion and Analysis of Financial Condition and Results - ------------------------------------------------------------------------------- of Operations ------------- Management's Discussion and Analysis of Financial Condition and Results of Operations which appears on pages 47 through 53 of the Registrant's 1999 Annual Report to Stockholders is incorporated herein by reference. Item 7a. Quantitative and Qualitative Disclosure about Market Risk - ------------------------------------------------------------------ Quantitative and Qualitative Disclosures about Market Risk, which appears on page 53 of the Registrant's 1999 Annual Report to Stockholders, is incorporated herein by reference. Item 8. Financial Statements and Supplementary Data - --------------------------------------------------- The Consolidated Financial Statements and Notes to Consolidated Financial Statements of the Registrant and Report of Independent Public Accountants which appear on pages 25 through 46 of the Registrant's 1999 Annual Report to Stockholders are incorporated herein by reference. The information appearing under the caption "Selected Quarterly Financial Information (Unaudited)" on page 55 of the Registrant's 1999 Annual Report to Stockholders is incorporated herein by reference. Other financial statements and financial statement schedules required under Regulation S-X are filed pursuant to Item 14 of Part IV of this report. Item 9. Changes in and Disagreements with Accountants on Accounting and - ------------------------------------------------------------------------------- Financial Disclosure -------------------- Not applicable. PART III -------- Item 10. Directors and Executive Officers of the Registrant - -------------------------------------------------------------- The information concerning the Directors and Executive Officers of the Registrant that is required by this Item 10, except that which is presented in Item X in Part I above, is included under the captions "Directors and Executive Officers of the Company" on pages 2 through 7 and "Section 16(A) Beneficial Ownership Reporting Compliance" on page 13 of the Proxy Statement dated March 27, 2000 relating to the 1999 Annual Meeting of the Registrant's Stockholders, and is incorporated herein by reference. Item 11. Executive Compensation - ---------------------------------- The information appearing under the caption "Executive Compensation" on pages 7 through 9 (other than the Committee Report on Compensation) and "Compensation of Directors" on page 13 of the Proxy Statement dated March 27, 2000 relating to the 1999 Annual Meeting of the Registrant's Stockholders is incorporated herein by reference. Item 12. Security Ownership of Certain Beneficial Owners and Management - -------------------------------------------------------------------------- The information concerning security ownership of certain beneficial owners and management required by this Item 12 is included under the captions "Directors and Executive Officers of the Company" on pages 2 through 7 and "Principal Stockholders" on pages 14 and 15 of the Proxy Statement dated March 27, 2000 relating to the 1999 Annual Meeting of the Registrant's Stockholders, and is incorporated herein by reference. Item 13. Certain Relationships and Related Transactions - ---------------------------------------------------------- The information concerning certain transactions required by this Item 13 is included under the caption "Certain Transactions" on pages 13 and 14 of the Proxy Statement dated March 27, 2000 relating to the 1999 Annual Meeting of the Registrant's Stockholders, and is incorporated herein by reference. PART IV
------- Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K - ---------------------------------------------------------------------------- (a) 1. Financial Statements -------------------------- A. The following Consolidated Financial Statements of the Registrant, together with the applicable Report of Independent Public Accountants, are contained on pages 25 through 47 of the Registrant's 1999 Annual Report to Stockholders and are incorporated herein by reference: Page Number in Annual Report ---------------- Consolidated Balance Sheets - December 31, 1999 and 1998 25 Consolidated Statements of Income for the Years Ended December 31, 1999, 1998 and 1997 26 Consolidated Statements of Stockholders' Investment for the Years Ended December 31, 1999, 1998 and 1997 27 Consolidated Statements of Cash Flows for the Years Ended December 31, 1999, 1998 and 1997 28 Notes to Consolidated Financial Statements December 31, 1999, 1998 and 1997 29 through 45 Report of Independent Public Accountants 46 B. The following Combined Financial Statements, together with the applicable Report of Independent Public Accountants, of Wildwood Associates and Green Valley Associates II, joint ventures of the Registrant meeting the criteria for significant subsidiaries under the rules and regulations of the Securities and Exchange Commission, are filed as a part of this report. Page Number in Form l0-K ------------ Report of Independent Public Accountants F-1 Combined Balance Sheets - December 31, 1999 and 1998 F-2 Combined Statements of Income for the Years Ended December 31, 1999, 1998 and 1997 F-3 Combined Statements of Partners' Capital for the Years Ended December 31, 1999, 1998 and 1997 F-4 Combined Statements of Cash Flows for the Years Ended December 31, 1999, 1998 and 1997 F-5 Notes to Combined Financial Statements December 31, 1999, 1998 and 1997 F-6 through F-11
Item 14. Continued - --------------------- C. The following Financial Statements, together with the applicable Report of Independent Auditors, of CSC Associates, L.P., a joint venture of the Registrant meeting the criteria for a significant subsidiary under the rules and regulations of the Securities and Exchange Commission, are filed as a part of this report. Page Number in Form l0-K ------------ Report of Independent Auditors G-1 Balance Sheets - December 31, 1999 and 1998 G-2 Statements of Operations for the Years Ended December 31, 1999, 1998 and 1997 G-3 Statements of Partners' Capital for the Years Ended December 31, 1999, 1998 and 1997 G-4 Statements of Cash Flows for the Years Ended December 31, 1999, 1998 and 1997 G-5 Notes to Financial Statements G-6 through December 31, 1999, 1998 and 1997 G-9
2. Financial Statement Schedules ----------------------------------- The following financial statement schedules, together with the applicable report of independent public accountants are filed as a part of this report. Page Number in Form l0-K ------------ A. Cousins Properties Incorporated and Consolidated Entities: Report of Independent Public Accountants on Schedule S-7 Schedule III- Real Estate and Accumulated Depreciation - December 31, 1999 S-8 through S-12 B. Wildwood Associates and Green Valley Associates II Schedule III - Real Estate and Accumulated Depreciation - December 31, 1999 F-12 C. CSC Associates, L.P. Schedule III- Real Estate and Accumulated Depreciation - December 31, 1999 G-10 NOTE: Other schedules are omitted because of the absence of conditions under which they are required or because the required information is given in the financial statements or notes thereto.
Item 14. Continued - --------------------- 3. Exhibits -------------- 3(a)(i) Articles of Incorporation of Registrant, as approved by the Stockholders on April 29, 1997, filed as Exhibit B to the Registrant's Proxy Statement dated April 29, 1997, and as amended by the Stockholders on April 21, 1998 as filed in the Registrant's Proxy Statement dated March 27, 1998, and incorporated herein by reference. 3(b) By-laws of Registrant, as approved by the Stockholders on April 30, 1990, and as further amended by the Stockholders on April 29, 1993, filed as Exhibit 4(b) to the Registrant's Form S-3 dated September 28, 1993, and incorporated herein by reference. 4(a) Dividend Reinvestment Plan as restated as of March 27, 1995, filed in the Registrant's Form S-3 dated March 27, 1995, and incorporated herein by reference. 10(a)(i) Cousins Properties Incorporated 1989 Stock Option Plan, as renamed the 1995 Stock Incentive Plan and approved by the Stockholders on May 6, 1996, filed as Exhibit A to the Registrant's Proxy Statement dated May 6, 1996, and as amended by the Stockholders on April 21, 1998, as filed in the Registrant's Proxy Statement dated March 27, 1998, and incorporated herein by reference. 10(a)(ii) Cousins Real Estate Corporation Stock Appreciation Right Plan, amended and restated as of March 15, 1993, filed as Exhibit 10(a)(ii) to the Registrant's Form 10-K for the year ended December 31, 1992, and incorporated herein by reference. 10(a)(iii) Cousins Properties Incorporated Stock Appreciation Right Plan, dated as of March 15, 1993, filed as Exhibit 10(a)(iii) to the Registrant's Form 10-K for the year ended December 31, 1992, and incorporated herein by reference. 10(a)(iv) Cousins Properties Incorporated 1999 Stock Incentive Plan, as approved by the Stockholders on May 4, 1999, filed as Exhibit A to the Registrant's Proxy Statement dated March 29, 1999, and incorporated herein by reference. 10(b)(i) Cousins Properties Incorporated Profit Sharing Plan as amended and restated effective as of January 1, 1996. 10(b)(ii) Cousins Properties Incorporated Profit Sharing Trust Agreement as effective as of January 1, 1991, filed as Exhibit 10(b)(ii) to the Registrant's Form 10-K for the year ended December 31, 1991, and incorporated herein by reference. Item 14. Continued - --------------------- 10(c) Land lease (Kennesaw) dated December 17, 1969, and an amendment thereto dated December 15, 1977, filed as Exhibit l0(d) to the Registrant's Form 10-K for the year ended December 31, 1980, and incorporated herein by reference. 10(d) Cousins Properties Incorporated Stock Plan for Outside Directors, as approved by the Stockholders on April 29, 1997, filed as Exhibit B to the Registrant's Proxy Statement dated April 29, 1997, and incorporated herein by reference. 13 Annual Report to Stockholders for the year ended December 31, 1999. 21 Subsidiaries of the Registrant. 23(a) Consent of Independent Public Accountants (Arthur Andersen LLP). 23(b) Consent of Independent Auditors (Ernst & Young LLP). 27 Financial Data Schedule. (b) Reports on Form 8-K. -------------------------- There were no reports filed on Form 8-K in the quarter ended December 31, 1999. SIGNATURES ---------- Pursuant to the requirements of Section 13 or 15 (d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. Cousins Properties Incorporated ------------------------------- (Registrant) Dated: March 20, 2000 BY: /s/ Kelly H. Barret ------------------------------- Kelly H. Barrett Senior Vice President - Finance (Principal Financial and Accounting Officer) Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the date indicated. Signature Capacity Date - --------- -------- ---- Principal Executive Officer: Chairman of the Board, March 20, 2000 Chief Executive Officer /s/ T.G. Cousins and Director - --------------------------- T. G. Cousins Principal Financial and Accounting Officer: Senior Vice President - Finance March 20, 2000 /s/ Kelly H. Barrett - --------------------------- Kelly H. Barrett Additional Directors: /s/ Richard W. Courts Director March 20, 2000 - --------------------------- Richard W. Courts, II /s/ Boone A. Knox Director March 20, 2000 - --------------------------- Boone A. Knox /s/ William Porter Payne Director March 20, 2000 - --------------------------- William Porter Payne REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS ON SCHEDULE ---------------------------------------------------- To Cousins Properties Incorporated: We have audited in accordance with generally accepted auditing standards, the financial statements included in the Cousins Properties Incorporated annual report to stockholders incorporated by reference in this Form l0-K, and have issued our report thereon dated February 8, 2000. Our audit was made for the purpose of forming an opinion on those statements taken as a whole. The schedule listed in Item 14, Part (a) 2.A. is the responsibility of the Company's management and is presented for purposes of complying with the Securities and Exchange Commission's rules and is not part of the basic financial statements. This schedule has been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, fairly states in all material respects the financial data required to be set forth therein in relation to the basic financial statements taken as a whole. ARTHUR ANDERSEN LLP Atlanta, Georgia February 8, 2000
SCHEDULE III (Page 1 of 5) COUSINS PROPERTIES INCORPORATED AND CONSOLIDATED ENTITIES REAL ESTATE AND ACCUMULATED DEPRECIATION DECEMBER 31, 1999 ($ in thousands) Column A Column B Column C Column D Column E -------- -------- -------- -------- -------- Costs Capitalized Gross Amount at Which Initial Cost Subsequent Carried at to Company to Acquisition December 31, 1999 ------------------- -------------------- ----------------------------------- Carrying Costs Buildings Less Cost Land Buildings and Improve- of Sales and Land and Total Description Encumbrances Land Improvements ments and Other Improvements Improvements (a) - ----------- ------------ ---- ------------ -------- --------- ------------ ------------ ----- LAND HELD FOR INVESTMENT OR FUTURE DEVELOPMENT Wildwood - Atlanta, GA $ -- $ 11,156 $ -- $ 4,889 $ (8,888) $ 7,157 $ -- $ 7,157 North Point Property - Fulton Co., GA -- 10,294 -- 12,298 (17,037) 5,555 -- 5,555 Lawrenceville - Gwinnett Co., GA -- 5,543 -- 715 (5,863) 395 -- 395 Greenbrier MarketCenter Outparcels - Chesapeake, VA -- 3,191 -- 204 (2,987) 408 -- 408 Salem Road Station Outparcels - Newton Co., GA -- 611 -- -- -- 611 -- 611 ---------------------------------------------------------------------------------------------- -- 30,795 -- 18,106 (34,775) 14,126 -- 14,126 ----------------------------------------------------------------------------------------------
Column F Column G Column H Column I -------- -------- -------- -------- Life on Which De- preciation Accumu- In 1999 lated Date of Income Deprecia- Construc- Date Statement tion (a) tion Acquired Is Computed --------- --------- -------- ----------- LAND HELD FOR INVESTMENT OR FUTURE DEVELOPMENT Wildwood - Atlanta, GA $ -- -- 1971-1982,1989 -- North Point Property - Fulton Co., GA -- -- 1970-1985 -- Lawrenceville - Gwinnett Co., GA -- -- 1994 -- Greenbrier MarketCenter Outparcels - Chesapeake, VA -- -- 1995 -- Salem Road Station Outparcels - Newton Co., GA -- -- 1999 -- ------- -- -------
SCHEDULE III (Page 2 of 5) COUSINS PROPERTIES INCORPORATED AND CONSOLIDATED ENTITIES REAL ESTATE AND ACCUMULATED DEPRECIATION DECEMBER 31, 1999 ($ in thousands) Column A Column B Column C Column D Column E -------- -------- -------- -------- -------- Costs Capitalized Gross Amount at Which Initial Cost Subsequent Carried at to Company to Acquisition December 31, 1999 ------------------- -------------------- ----------------------------------- Carrying Costs Buildings Less Cost Land Buildings and Improve- of Sales and Land and Total Description Encumbrances Land Improvements ments and Other Improvements Improvements (a) - ----------- ------------ ---- ------------ -------- --------- ------------ ------------ ----- OPERATING PROPERTIES - -------------------- Wildwood - 3301 Windy Ridge Parkway - Atlanta, GA $ -- $ 20 $ -- $ 9,007 $ 1,516 $ 1,237 $ 9,306 $ 10,543 Wildwood - 3100 Windy Hill Road - Atlanta, GA -- -- 17,005 -- -- -- 17,005 17,005 Atlanta, GA -- 4,740 7,229 424 -- 4,740 7,653 12,393 333 North Point Center East - Fulton Co., GA -- 551 -- 11,929 809 551 12,738 13,289 Lakeshore Park Plaza - Birmingham, AL 10,683 3,362 12,261 279 -- 3,362 12,540 15,902 101 Independence Center - Charlotte, NC 47,522 11,096 62,824 1,519 -- 11,096 64,343 75,439 Perimeter Expo - Atlanta, GA 20,613 8,564 -- 11,121 71 8,564 11,192 19,756 North Point - Stand Alone Retail Sites - Fulton Co., GA -- 4,559 -- 451 (1,294) 3,716 -- 3,716 Northside/Alpharetta I - Fulton Co., GA 10,401 -- 15,577 -- -- -- 15,577 15,577 Presidential MarketCenter - Gwinnett Co., GA -- 3,956 -- 21,184 817 3,956 22,001 25,957 Inforum - Atlanta, GA -- 5,226 67,370 -- -- 5,226 67,370 72,596
Column F Column G Column H Column I -------- -------- -------- -------- Life on Which De- preciation Accumu- In 1999 lated Date of Income Deprecia- Construc- Date Statement tion (a) tion Acquired Is Computed --------- --------- -------- ----------- OPERATING PROPERTIES - -------------------- Wildwood - 3301 Windy Ridge Parkway - Atlanta, GA $ 4,700 1984 1984 30 Years Wildwood - 3100 Windy Hill Road - Atlanta, GA 2,041 1997 1997 25 Years 615 Peachtree Street - Atlanta, GA 1,779 -- 1996 15 Years 333 North Point Center East - Fulton Co., GA 1,380 1996 1996 30 Years Lakeshore Park Plaza - Birmingham, AL 635 -- 1998 30 Years 101 Independence Center - Charlotte, NC 9,032 -- 1996 25 Years Perimeter Expo - Atlanta, GA 2,452 1993 1993 30 Years North Point - Stand Alone Retail Sites - Fulton Co., GA 125 -- 1970-1985 Various Northside/Alpharetta I - Fulton Co., GA 958 -- 1998 25 Years Presidential MarketCenter - Gwinnett Co., GA 3,129 1993-1995 1993 30 Years Inforum - Atlanta, GA 3,269 -- 1999 25 Years
SCHEDULE III (Page 3 of 5) COUSINS PROPERTIES INCORPORATED AND CONSOLIDATED ENTITIES REAL ESTATE AND ACCUMULATED DEPRECIATION DECEMBER 31, 1999 ($ in thousands) Column A Column B Column C Column D Column E -------- -------- -------- -------- -------- Costs Capitalized Gross Amount at Which Initial Cost Subsequent Carried at to Company to Acquisition December 31, 1999 ------------------- -------------------- ----------------------------------- Carrying Costs Buildings Less Cost Land Buildings and Improve- of Sales and Land and Total Description Encumbrances Land Improvements ments and Other Improvements Improvements (a) - ----------- ------------ ---- ------------ -------- --------- ------------ ------------ ----- OPERATING PROPERTIES (continued) - -------------------------------- Colonial Plaza MarketCenter - Orlando, FL -- 8,500 -- 31,173 1,905 8,500 33,078 41,578 AtheroGenics - Fulton Co., GA -- 200 -- 7,035 80 200 7,115 7,315 Laguna Niguel Promenade - Laguna Niguel, CA -- 5,578 -- 12,774 739 5,578 13,513 19,091 AT&T Wireless Services Headquarters - Los Angeles, CA -- -- -- 50,260 1,343 -- 51,603 51,603 Miscellaneous -- 398 145 76 (474) -- 145 145 ---------------------------------------------------------------------------------------------- 89,219 56,750 182,411 157,232 5,512 56,726 345,179 401,905 ============================================================================================== PROJECTS UNDER CONSTRUCTION - --------------------------- 101 Second Street - San Francisco, CA $ -- $ 11,698 $ -- $ 68,035 $ 5,331 $ 11,698 $ 73,366 $ 85,064 The Avenue East Cobb - Cobb Co., GA -- 7,205 -- 26,246 1,675 7,205 27,921 35,126 333 John Carlyle - Washington, D.C. -- 5,371 -- 20,692 1,458 5,371 22,150 27,521 1900 Duke Street - Washington, D.C. -- 3,469 -- 2,999 298 3,469 3,297 6,766 Meridian Mark Plaza - Atlanta, GA -- 2,200 -- 19,582 1,712 2,200 21,294 23,494 600 University Park Place - Birmingham, AL -- 1,899 -- 13,788 1,197 1,899 14,985 16,884 555 North Point Center East - Fulton Co., GA -- 368 -- 12,814 976 368 13,790 14,158
Column F Column G Column H Column I -------- -------- -------- -------- Life on Which De- preciation Accumu- In 1999 lated Date of Income Deprecia- Construc- Date Statement tion (a) tion Acquired Is Computed --------- --------- -------- ----------- OPERATING PROPERTIES - -------------------- OPERATING PROPERTIES (continued) - -------------------------------- Colonial Plaza MarketCenter - Orlando, FL 4,632 1995 1995 30 Years AtheroGenics - Fulton Co., GA 305 1998 1998 30 Years Laguna Niguel Promenade - Laguna Niguel, CA 696 1997 1997 30 Years AT&T Wireless Services Headquarters - Los Angeles, CA 672 1998 1998 30 Years Miscellaneous 124 -- 1977-1984 Various ------- 35,929 ======= PROJECTS UNDER CONSTRUCTION - --------------------------- 101 Second Street - San Francisco, CA $ -- 1998 1997 -- The Avenue East Cobb - Cobb Co., GA -- 1998 1998 -- 333 John Carlyle - Washington, D.C. -- 1998 1998 -- 1900 Duke Street - Washington, D.C. -- 1998 1998 -- Meridian Mark Plaza - Atlanta, GA -- 1997 1997 -- 600 University Park Place - Birmingham, AL -- 1998 1998 -- 555 North Point Center East - Fulton Co., GA -- 1998 1998 --
SCHEDULE III (Page 4 of 5) COUSINS PROPERTIES INCORPORATED AND CONSOLIDATED ENTITIES REAL ESTATE AND ACCUMULATED DEPRECIATION DECEMBER 31, 1999 ($ in thousands) Column A Column B Column C Column D Column E -------- -------- -------- -------- -------- Costs Capitalized Gross Amount at Which Initial Cost Subsequent Carried at to Company to Acquisition December 31, 1999 ------------------- -------------------- ----------------------------------- Carrying Costs Buildings Less Cost Land Buildings and Improve- of Sales and Land and Total Description Encumbrances Land Improvements ments and Other Improvements Improvements (a) - ----------- ------------ ---- ------------ -------- --------- ------------ ------------ ----- PROJECTS UNDER CONSTRUCTION (continued) - --------------------------------------- The Avenue of the Peninsula - Rolling Hills Estates, CA $ -- $ 4,338 $ 17,152 $ 40,034 $ 4,148 $ 4,338 $ 61,334 $ 65,672 Northside/Alpharetta II - Fulton Co., GA -- -- -- 15,195 702 -- 15,897 15,897 The Avenue Peachtree City - Fayette Co., GA -- 3,510 -- 1,179 78 3,510 1,257 4,767 One Second Street - San Francisco, CA -- 22,141 -- 23 211 22,141 234 22,375 Salem Road Station - Newton Co., GA -- 396 -- 942 33 396 975 1,371 Mira Mesa MarketCenter - San Diego, CA -- 14,465 -- 13,519 993 14,465 14,512 28,977 ---------------------------------------------------------------------------------------------- -- 77,060 17,152 235,048 18,812 77,060 271,012 348,072 ============================================================================================== RESIDENTIAL LOTS UNDER DEVELOPMENT - ---------------------------------- Browns Farm - Cobb Co., GA $ -- $ 3,154 $ -- $ 5,823 $ (8,610) $ 367 $ -- $ 367 Apalachee River Club - Gwinnett Co., GA -- 1,820 -- 4,265 (5,218) 867 -- 867 Echo Mill - Cobb Co., GA -- 5,298 -- 8,467 (11,628) 2,137 -- 2,137 Bradshaw Farm - Cherokee Co., GA -- 5,100 -- 14,820 (21,796) (1,876) -- (1,876) Alcovy Woods - Gwinnett Co., GA -- 1,142 -- 2,719 (669) 3,192 -- 3,192 ---------------------------------------------------------------------------------------------- -- 16,514 -- 36,094 (47,921) 4,687 -- 4,687 ---------------------------------------------------------------------------------------------- $ 89,219 $ 181,119 $199,563 $446,480 $(58,372) $152,599 $616,191 $768,790 ==============================================================================================
Column F Column G Column H Column I -------- -------- -------- -------- Life on Which De- preciation Accumu- In 1999 lated Date of Income Deprecia- Construc- Date Statement tion (a) tion Acquired Is Computed --------- --------- -------- ----------- PROJECTS UNDER CONSTRUCTION (continued) - --------------------------------------- The Avenue of the Peninsula - Rolling Hills Estates, CA $ -- 1998 1998 -- Northside/Alpharetta II - Fulton Co., GA -- 1998 1998 -- The Avenue Peachtree City - Fayette Co., GA -- 1999 1999 -- One Second Street - San Francisco, CA -- 1999 1999 -- Salem Road Station - Newton Co., GA -- 1999 1999 -- Mira Mesa MarketCenter - San Diego, CA -- 1999 1999 -- ------- -- ======= RESIDENTIAL LOTS UNDER DEVELOPMENT - ---------------------------------- Browns Farm - Cobb Co., GA $ -- 1993-1994 1993-1994 -- Apalachee River Club - Gwinnett Co., GA -- 1994 1994 -- Echo Mill - Cobb Co., GA -- 1994 1994 -- Bradshaw Farm - Cherokee Co., GA -- 1994 1994 -- Alcovy Woods - Gwinnett Co., GA -- 1996 1996 -- ------- -- ------- $35,929 =======
SCHEDULE III (Page 5 of 5) COUSINS PROPERTIES INCORPORATED AND CONSOLIDATED ENTITIES REAL ESTATE AND ACCUMULATED DEPRECIATION DECEMBER 31, 1999 ($ in thousands) NOTES: (a) Reconciliations of total real estate carrying value and accumulated depreciation for the three years ended December 31, 1999 are as follows: Real Estate Accumulated Depreciation ------------------------------ --------------------------- 1999 1998 1997 1999 1998 1997 ---- ---- ---- ---- ---- ---- Balance at beginning of period $462,047 $449,619 $377,663 $23,422 $33,617 $20,339 Additions during the period: Improvements and other capitalized costs 350,121 213,495 100,395 -- -- -- Provision for depreciation -- -- -- 12,507 13,648 13,278 ------------------------------ --------------------------- 350,121 213,495 100,395 12,507 13,648 13,278 ------------------------------ --------------------------- Deductions during the period: Cost of real estate contributed -- (185,044) -- -- (23,843) -- Cost of real estate sold (43,378) (16,023) (28,439) -- -- -- ------------------------------ --------------------------- (43,378) (201,067) (28,439) -- (23,843) -- ------------------------------ --------------------------- Balance at close of period $768,790 $462,047 $449,619 $35,929 $23,422 $33,617 ============================== ===========================
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS ---------------------------------------- To Wildwood Associates and Green Valley Associates II: We have audited the accompanying combined balance sheets of WILDWOOD ASSOCIATES (a Georgia general partnership) and GREEN VALLEY ASSOCIATES II (a North Carolina general partnership) as of December 31, 1999 and 1998, and the related combined statements of income, partners' capital and cash flows for each of the three years in the period ended December 31, 1999. These financial statements are the responsibility of the management of the partnerships. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Wildwood Associates and Green Valley Associates II as of December 31, 1999 and 1998, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 1999 in conformity with generally accepted accounting principles. Our audit was made for the purpose of forming an opinion on the basic financial statements taken as a whole. The schedule listed in Item 14 is presented for purposes of complying with the Securities and Exchange Commission's rules and is not part of the basic financial statements. This schedule has been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, fairly states in all material respects the financial data required to be set forth therein in relation to the basic financial statements taken as a whole. ARTHUR ANDERSEN LLP Atlanta, Georgia February 8, 2000
WILDWOOD ASSOCIATES AND GREEN VALLEY ASSOCIATES II -------------------------------------------------- COMBINED BALANCE SHEETS ----------------------- DECEMBER 31, 1999 AND 1998 -------------------------- ($ in thousands) 1999 1998 -------- -------- ASSETS - ------ REAL ESTATE ASSETS: Income producing properties, including land of $49,457 in 1999 and 1998 (Note 7) $279,994 $276,137 Accumulated depreciation and amortization (72,702) (64,254) ------------------- 207,292 211,883 Land committed to be contributed (Note 3) 8,301 8,301 Land and property predevelopment costs, net of accumulated depreciation of $277 and $242 in 1999 and 1998, respectively 11,759 11,794 ------------------- Total real estate assets 227,352 231,978 ------------------- CASH AND CASH EQUIVALENTS 3,422 3,945 ------------------- OTHER ASSETS: Deferred expenses, net of accumulated amortization of $9,421 and $7,896 in 1999 and 1998, respectively 8,162 8,867 Receivables (Note 6) 9,385 7,805 Allowance for possible losses (Note 1) (1,950) (2,250) Furniture, fixtures and equipment, net of accumulated depreciation of $706 and $426 in 1999 and 1998, respectively 1,399 1,192 Other 64 8 ------------------- 17,060 15,622 ------------------- $247,834 $251,545 =================== LIABILITIES AND PARTNERS' CAPITAL - --------------------------------- NOTES PAYABLE (Note 7) $229,182 $233,914 RETAINAGE, ACCOUNTS PAYABLE AND ACCRUED LIABILITIES 9,560 7,445 ------------------- Total liabilities 238,742 241,359 ------------------- PARTNERS' CAPITAL (Notes 3 and 4): International Business Machines Corporation 4,546 5,093 Cousins Properties Incorporated 4,546 5,093 ------------------- Total partners' capital 9,092 10,186 ------------------- $247,834 $251,545 =================== The accompanying notes are an integral part of these combined balance sheets.
WILDWOOD ASSOCIATES AND GREEN VALLEY ASSOCIATES II -------------------------------------------------- COMBINED STATEMENTS OF INCOME ----------------------------- FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997 ---------------------------------------------------- ($ in thousands) 1999 1998 1997 ------ ------- ------- REVENUES: Rental income and recovery of expenses charged directly to specific tenants $47,721 $41,897 $38,507 Interest 116 208 474 Other 182 179 134 --------------------------- Total revenues 48,019 42,284 39,115 --------------------------- EXPENSES: Real estate taxes 3,436 3,317 3,471 Cleaning, maintenance and repairs 3,432 3,069 2,791 Utilities 2,699 2,409 2,031 Management and personnel costs 2,805 2,522 2,262 Contract security 1,306 1,183 1,051 Grounds maintenance 854 888 823 Expenses charged directly to specific tenants 481 375 444 Insurance 103 95 93 Interest expense 17,858 15,215 12,972 Depreciation and amortization 9,867 9,161 8,798 Real estate taxes on undeveloped land (Note 3) 82 87 143 Other expense 190 27 430 --------------------------- Total expenses 43,113 38,348 35,309 --------------------------- INCOME BEFORE GAIN ON CONDEMNATION AWARD 4,906 3,936 3,806 Gain on condemnation award -- 220 -- --------------------------- NET INCOME $ 4,906 $ 4,156 $ 3,806 =========================== The accompanying notes are an integral part of these combined statements.
WILDWOOD ASSOCIATES AND GREEN VALLEY ASSOCIATES II -------------------------------------------------- COMBINED STATEMENTS OF PARTNERS' CAPITAL ---------------------------------------- FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997 ---------------------------------------------------- ($ in thousands) International Business Cousins Machines Properties Corporation Incorporated Total ----------- ------------ ----- BALANCE, December 31, 1996 $45,329 $45,329 $90,658 Distributions (17,000) (17,000) (34,000) Net income 1,903 1,903 3,806 --------------------------------------- BALANCE, December 31, 1997 30,232 30,232 60,464 Distributions (27,217) (27,217) (54,434) Net income 2,078 2,078 4,156 --------------------------------------- BALANCE, December 31, 1998, 5,093 5,093 10,186 Distributions (3,000) (3,000) (6,000) Net income 2,453 2,453 4,906 --------------------------------------- BALANCE, December 31, 1999 $ 4,546 $ 4,546 $ 9,092 ======================================= The accompanying notes are an integral part of these combined statements.
WILDWOOD ASSOCIATES AND GREEN VALLEY ASSOCIATES II -------------------------------------------------- COMBINED STATEMENTS OF CASH FLOWS (Note 9) ------------------------------------------ FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997 ($ in thousands) 1999 1998 1997 ------- ------- ------- CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 4,906 $ 4,156 $ 3,806 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 9,867 9,161 8,798 Effect of recognizing rental revenues on a straight-line basis 1,529 3,780 3,311 Change in tenant rental receivables and other assets (3,465) (434) 297 Change in accounts payable and accrued liabilities related to operations 2,115 2 (423) --------------------------- Net cash provided by operating activities 14,952 16,665 15,789 --------------------------- CASH FLOWS FROM INVESTING ACTIVITIES: Proceeds from condemnation -- 2,246 -- Property acquisition and development expenditures (3,857) (6,112) (15,501) Payment for deferred expenses and furniture, fixtures and equipment (886) (3,886) (757) --------------------------- Net cash used in investing activities (4,743) (7,752) (16,258) --------------------------- CASH FLOWS FROM FINANCING ACTIVITIES: Repayment of notes payable (4,732) (3,947) (2,629) Proceeds from long term financing -- 44,000 30,000 Proceeds from line of credit 5,771 -- -- Repayments under line of credit (5,771) -- -- Partnership distributions (6,000) (54,434) (34,000) --------------------------- Net cash used in financing activities (10,732) (14,381) (6,629) --------------------------- NET DECREASE IN CASH AND CASH EQUIVALENTS (523) (5,468) (7,098) CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 3,945 9,413 16,511 --------------------------- CASH AND CASH EQUIVALENTS AT END OF YEAR $ 3,422 $ 3,945 $ 9,413 =========================== The accompanying notes are an integral part of these combined statements.
WILDWOOD ASSOCIATES AND GREEN VALLEY ASSOCIATES II -------------------------------------------------- NOTES TO COMBINED FINANCIAL STATEMENTS -------------------------------------- DECEMBER 31, 1999, 1998 AND 1997 -------------------------------- 1. SIGNIFICANT ACCOUNTING POLICIES Basis of Presentation: The combined financial statements include the accounts of Wildwood Associates ("WWA") and Green Valley Associates II ("GVA II"), both of which are general partnerships. Cousins Properties Incorporated (together with its other consolidated entities hereinafter referred to as "Cousins") and International Business Machines Corporation ("IBM") each have a 50% general partnership interest in both partnerships. The financial statements of the partnerships have been combined because of the common ownership. The combined entities are hereinafter referred to as the "Partnerships." All transactions between WWA and GVA II have been eliminated in the combined financial statements. Cost of Property Contributed by Cousins: The cost of property contributed or committed to be contributed by Cousins was recorded by WWA based upon the procedure described in Note 3. Such cost was, in the opinion of the partners, at or below estimated fair market value at the time of such contribution or commitment, but was in excess of Cousins' historical cost basis. Cost Capitalization: All costs related to planning, development and construction of buildings, and expenses of buildings prior to the date they become operational for financial statement purposes, are capitalized. Interest and real estate taxes are also capitalized to property under development. Depreciation and Amortization: Real estate assets are stated at depreciated cost. Buildings are depreciated over 25 to 40 years. Furniture, fixtures, and equipment are depreciated over 3 to 5 years. Leasehold improvements and tenant improvements are amortized over the life of the leases or useful life of the assets, whichever is shorter. Deferred expenses - which include certain marketing and leasing costs, loan acquisition costs and deferred operating expenses which are being passed through to tenants - are amortized over the period of estimated benefit. The straight-line method is used for all depreciation and amortization. Allowance for Possible Losses: The allowance for possible losses provides for potential writeoffs of certain tenant receivables and other tenant related assets on WWA's books. The allowance reflects management's evaluation of the exposure to WWA based on a specific review of its properties and the impact of current economic conditions on those properties. Allocation of Operating Expenses: In accordance with certain lease agreements, certain management and maintenance costs incurred by WWA are allocated to individual buildings or tenants, including buildings not owned by WWA. Income Taxes: No provision has been made for federal or state income taxes because each partner's proportionate share of income or loss from the Partnerships is passed through to be included on each partner's separate tax return. Cash and Cash Equivalents: Cash and Cash Equivalents includes all cash and highly liquid money market instruments. Highly liquid money market instruments include securities and repurchase agreements with original maturities of three months or less, money market mutual funds, and securities on which the interest rate is adjusted to market rate at least every three months. Rental Income: In accordance with Statement of Financial Accounting Standards ("SFAS") No. 13, income on leases which include scheduled increases in rental rates over the lease term (other than scheduled increases based on the Consumer Price Index) is recognized on a straight-line basis. Use of Estimates: The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. 2. FORMATION AND PURPOSE OF THE PARTNERSHIPS WWA and GVA II were formed under the terms of partnership agreements effective May 30, 1985 and March 31, 1988, respectively. The purpose of the Partnerships is, among other things, to develop and operate selected property within Wildwood Office Park ("Wildwood"), located in Atlanta, Georgia and the Summit Green project located in Greensboro, North Carolina (see Note 8). Wildwood is an office park containing a total of approximately 285 acres, of which approximately 92 acres are owned by WWA, and an estimated 13 acres are committed to be contributed to WWA by Cousins (see Note 3). Cousins owns the balance of the developable acreage in the park. At December 31, 1999, WWA's income producing real estate assets in Wildwood consisted of: six office buildings totaling 2,132,000 rentable square feet (including land under such buildings totaling approximately 56 acres); land parcels totaling approximately 14 acres leased to two banking facilities and five restaurants; and a 2 acre site on which a child care facility is constructed. In addition, WWA's assets include 34 acres of land held for future development, which is composed of a 4 acre site with approximately 58,000 square feet of office space which was purchased in 1986 for future development (classified with income producing properties in the accompanying financial statements), and 30 acres of other land to be developed (including additional land committed to be contributed by Cousins) (see Note 3). 3. CONTRIBUTIONS TO THE PARTNERSHIPS IBM and Cousins have each contributed or committed to contribute $62,857,000 in cash or properties to the Partnerships. The value of property contributed by IBM was agreed to by the partners at the time of formation of WWA and was recorded at the cash amount IBM paid for the property just prior to contributing it to the Partnership. The value of the property contributed and to be contributed by Cousins was recorded on the Partnership's books at an amount equal to the cash and property contributed by IBM for an equal (50%) partnership interest. The status of contributions at December 31, 1999, was as follows ($ in thousands): IBM COUSINS TOTAL ------- ------- ------- Cash contributed $46,590 $ 84 $ 46,674 Property contributed 16,267 54,472 70,739 Land committed to be contributed -- 8,301 8,301 -------------------------------- Total $62,857 $ 62,857 $125,714 ================================ WWA has elected not to take title to the remaining land committed to be contributed by Cousins until such land is needed for development. However, Cousins' capital account was previously credited with the amount originally required to bring it equal to IBM's, and a like amount, plus preacquisition costs paid by WWA, were set up as an asset entitled "Land Committed To Be Contributed." This asset account subsequently has been reduced as land actually has been contributed, or as land yet to be contributed became associated with a particular building. At December 31, 1999, Cousins was committed to contribute land on which an additional 598,493 GSF are developable, provided that regardless of planned use or density, 38,333 GSF shall be the minimum GSF attributed to each developable acre contributed. Cousins has also agreed to contribute infrastructure land in Wildwood, as defined, at no cost to WWA, in order to provide the necessary land for development of roads and utilities. The ultimate acreage remaining to be contributed by Cousins will depend upon the actual density achieved, but would be approximately 13 acres if the density were similar to that achieved on land contributed to date. WWA pays all of the expenses related to the Land Committed to be Contributed which were approximately $82,000, $87,000 and $143,000 in 1999, 1998 and 1997, respectively. 4. OTHER PROVISIONS OF THE PARTNERSHIP AGREEMENTS Net income or loss and net cash flow, as defined, shall be allocated to the partners based on their percentage interests (50% each, subject to adjustment as provided in the partnership agreements). In the event of dissolution of the Partnerships, the assets will be distributed as follows: o First, to repay all debts to third parties, including any secured loans with the partners. o Second, to each partner until each capital account is reduced to zero. o The balance to each partner in accordance with its percentage interest. 5. FEES TO RELATED PARTIES The Partnerships engaged Cousins to manage, develop and lease the Partnerships' property. Fees to Cousins incurred by the Partnerships during 1999, 1998 and 1997 were as follows ($ in thousands): 1999 1998 1997 ------ ------ ------ Development and tenant construction fees $ 246 $ 123 $ 406 Management fees 1,227 1,139 1,047 Leasing and procurement fees 246 1,224 223 ---------------------------- $1,719 $2,486 $1,676 ============================ 6. RENTAL REVENUES WWA leases property to the partners, as well as to unrelated third parties. The leases with partners are at rates comparable to those quoted to third parties. The leases typically contain escalation provisions and provisions requiring tenants to pay a pro rata share of operating expenses. The leases typically include renewal options and all are classified and accounted for as operating leases. At December 31, 1999, future minimum rentals to be received under existing non-cancelable leases, including tenants' current pro rata share of operating expenses are as follows ($ in thousands): Leases Leases With With Third Partners Parties Total -------- ------- ----- 2000 $ 9,946 $ 36,755 $ 46,701 2001 8,271 34,458 42,729 2002 8,555 34,388 42,943 2003 5,771 27,116 32,887 2004 5,771 23,428 29,199 Thereafter 6,732 106,649 113,381 --------------------------------- $45,046 $262,794 $307,840 ================================= At December 31, 1999 and 1998, receivables which related to the cumulative excess of revenues recognized in accordance with SFAS No. 13 over revenues which accrued in accordance with the actual lease agreements totaled $5,711,000 and $7,240,000, respectively. Of the 1999 amount, 41% was related to leases with IBM.
7. NOTES PAYABLE At December 31, 1999, notes payable included the following ($ in thousands): Term/ Amortization Balance at Period Final December 31, Description Rate (Years) Maturity 1999 ----------- ------------ ------------ -------- ------------ Line of credit ($2 million maximum) LIBOR + .75% 1/ N/A 9/1/00 $ -- 2300 Windy Ridge Parkway Building mortgage note 7.56% 10/25 12/1/05 65,612 3200 Windy Hill Road Building mortgage note 8.23% 10/28 1/1/07 67,884 4200 Wildwood Parkway Building mortgage note 6.78% 15.75/18 3/31/14 43,534 4100/4300 Wildwood Parkway Buildings mortgage note 7.65% 15/25 4/1/12 26,784 2500 Windy Ridge Parkway Building mortgage note 7.45% 10/20 12/15/05 23,368 -------- $229,182 ========
The 2300 Windy Ridge Parkway Building, the 3200 Windy Hill Road Building, the 4100/4300 Wildwood Parkway Buildings, and 4200 Wildwood Parkway mortgage notes provide for additional amortization in the later years of the notes (over that required by the amortization periods shown above) concurrent with scheduled rent increases. The line of credit matures September 1, 2000, but will automatically be renewed from year to year unless the lender provides a notice of non-renewal at least three months in advance of the annual renewal date. The line generally prohibits new borrowings other than those under the line, or the pledging of any assets not pledged as of August 1, 1990, without the Lender's prior approval. The line bears a floating interest rate equal to the daily London Interbank Offering Rate ("LIBOR") plus 3/4%, and there are no fees or compensating balance arrangements required under the line. Cousins and IBM have each severally guaranteed one-half of the line of credit. Assets with net carrying values of approximately $190,504,000 were pledged as security on the Partnerships' debt. The aggregate maturities of the indebtedness at December 31, 1999 summarized above are as follows ($ in thousands): 2000 $ 5,352 2001 6,037 2002 6,746 2003 7,412 Thereafter 203,635 -------- $229,182 ======== The Partnerships capitalize interest expense to property under development as required by SFAS No. 34. In the year ended December 31, 1998, the Partnerships capitalized interest totaling $1,463,000. No interest was capitalized in 1999. The estimated fair value of the notes payable at December 31, 1999 was approximately $221 million, which was calculated by discounting future cash flows under the notes at estimated rates at which similar notes would be made currently. 8. DISPOSITION OF SUMMIT GREEN Effective December 1, 1996, WWA disposed of its interest in a 144,000 GSF office building at Summit Green in exchange for cancellation of the related mortgage debt. In connection with this disposition, the Partnerships also may dispose of their leasehold interest in land adjacent to the office building. The Partnerships anticipate no material gain or loss will result from their disposition of the Summit Green project. The land adjacent to the formerly owned office building is subject to a non-subordinated ground lease expiring October 31, 2084. Lease payments effective December 1, 1996 are approximately $256,000 per year, and escalate at ten year intervals based on the cumulative increase in the Index over the prior ten year period (subject to a 5% annual cap on the increase in such Index in any one year). The next escalation date is December 1, 2006. 9. COMBINED STATEMENTS OF CASH FLOWS-SUPPLEMENTAL INFORMATION Interest paid (net of amounts capitalized) was as follows ($ in thousands): 1999 1998 1997 ---- ---- ---- Interest paid $17,861 $14,987 $12,700 In 1997, one building with a total cost of $29,807,000 was transferred from Projects Under Construction to Income Producing Properties.
SCHEDULE III WILDWOOD ASSOCIATES AND GREEN VALLEY ASSOCIATES II REAL ESTATE AND ACCUMULATED DEPRECIATION DECEMBER 31, 1999 ($ in thousands) Column A Column B Column C Column D Column E -------- -------- -------- -------- -------- Costs Capitalized Gross Amount at Which Initial Cost Subsequent Carried at to Company to Acquisition December 31, 1999 ------------------- -------------------- ----------------------------------- Carrying Costs Buildings Less Cost Land Buildings and Improve- of Sales and Land and Total Description Encumbrances Land Improvements ments and Other Improvements Improvements (a) - ----------- ------------ ---- ------------ -------- --------- ------------ ------------ ----- Wildwood Office Park - Cobb Co., GA 2500 Windy Ridge $ 23,368 $ 4,414 $ 14,814 $ 10,562 $ 141 $ 4,414 $ 25,517 $ 29,931 2300 Windy Ridge 65,612 8,927 -- 62,926 5,429 8,927 68,355 77,282 Parkside -- 3,161 2,553 (610) (45) 2,440 2,619 5,059 3200 Windy Hill 67,884 10,503 -- 68,491 5,470 10,503 73,961 84,464 4100/4300 Wildwood Parkway 28,784 6,689 -- 22,975 251 6,689 23,226 29,915 4200 Wildwood Parkway 43,534 4,347 -- 31,619 375 4,347 31,994 36,341 Stand Alone Retail Sites -- 8,752 1,234 2,372 123 9,344 3,137 12,481 Land committed to be contributed -- 7,919 -- -- 382 8,301 -- 8,301 Other land and property -- 11,547 -- 4,524 209 13,415 2,865 16,557 -------------------------------------------------------------------------------------------- $229,182 $66,259 $ 18,601 $202,859 $ 12,335 $68,380 $231,674 $300,331 ============================================================================================
Column F Column G Column H Column I -------- -------- -------- -------- Life on Which De- preciation Accumu- In 1999 lated Date of Income Deprecia- Construc- Date Statement tion (a) tion Acquired Is Computed --------- --------- -------- ----------- OPERATING PROPERTIES - -------------------- Wildwood Office Park - Cobb Co., GA 2500 Windy Ridge $11,662 1985 1985 40 Years 2300 Windy Ridge 26,810 1986 1986 40 Years Parkside 2,606 1980 1986 25 Years 3200 Windy Hill 24,039 1989 1989 40 Years 4100/4300 Wildwood Parkway 3,422 1995 1986 30 Years 4200 Wildwood Parkway 1,496 1996 1986 30 Years Stand Alone Retail Sites 1,486 Various 1985-1995 Various Land committed to be contributed -- -- 1985-1986 -- Other land and property 1,458 Various 1985-1986 Various ------- $72,979 =======
NOTE: (a) Reconciliations of total real estate carrying value and accumulated depreciation for the three years ended December 31, 1999 are as follows: Real Estate Accumulated Depreciation ---------------------------------- ------------------------------- 1999 1998 1997 1999 1998 1997 -------- -------- -------- ------- ------- ------- Balance at beginning of period $296,474 $292,666 $280,790 $64,496 $56,560 $48,905 Additions during the period: Improvements, and other capitalized costs 3,857 5,834 11,876 -- -- -- Provisions for depreciation -- -- -- 8,483 7,936 7,655 Deductions during the period: Condemnation of land -- (2,026) -- -- -- -- ---------------------------------- ------------------------------- Balance at close of period $300,331 $296,474 $292,666 $72,979 $64,496 $56,560 ================================== ===============================
REPORT OF INDEPENDENT AUDITORS ------------------------------ To the Partners of CSC Associates, L.P. (A Limited Partnership) We have audited the accompanying balance sheets of CSC Associates, L.P. (the Partnership) as of December 31, 1999 and 1998, and the related statements of operations, partners' capital, and cash flows for each of the three years in the period ended December 31, 1999. Our audits also include the financial statement schedule of CSC Associates, L.P. listed in the Index at Item 14(a). These financial statements and schedule are the responsibility of the Partnership's management. Our responsibility is to express an opinion on these financial statements and schedule based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of CSC Associates, L.P. as of December 31, 1999 and 1998, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 1999, in conformity with accounting principles generally accepted in the United States. Also, in our opinion, the related financial statement schedule, when considered in relation to the basic financial statements taken as a whole, presents fairly in all material respects the information set forth therein. ERNST & YOUNG LLP Atlanta, Georgia February 4, 2000
CSC ASSOCIATES, L.P. -------------------- BALANCE SHEETS -------------- DECEMBER 31, 1999 AND 1998 -------------------------- ($ in thousands) ASSETS ------ 1999 1998 -------- -------- REAL ESTATE ASSETS: Building and improvements, including land and land improvements of $22,818 in 1999 and 1998 $212,308 $212,334 Accumulated depreciation (46,795) (40,033) --------------------- 165,513 172,301 --------------------- CASH 2,269 1,741 --------------------- NOTE RECEIVABLE (Note 4) 71,399 73,849 --------------------- OTHER ASSETS: Deferred expenses, net of accumulated amortization of $5,156 and $4,280 in 1999 and 1998, respectively 6,418 6,789 Straight-line rent, interest and other receivables (Note 3) 11,674 11,518 Furniture, fixtures and equipment, net of accumulated depreciation of $63 and $40 in 1999 and 1998, respectively 76 56 Other, net of accumulated amortization of $139 and $97 in 1999 and 1998 (Note 6) 884 927 --------------------- Total other assets 19,052 19,290 --------------------- $258,233 $267,181 ===================== LIABILITIES AND PARTNERS' CAPITAL --------------------------------- NOTE PAYABLE (Note 4) $ 71,399 $ 73,849 ACCOUNTS PAYABLE AND ACCRUED LIABILITIES 3,149 3,122 --------------------- Total liabilities 74,548 76,971 --------------------- PARTNERS' CAPITAL (Note 1) 183,685 190,210 --------------------- $258,233 $267,181 ===================== The accompanying notes are an integral part of these balance sheets.
CSC ASSOCIATES, L.P. -------------------- STATEMENTS OF OPERATIONS ------------------------ FOR THE YEARS ENDED DECEMBER 31, 1999, 1998, AND 1997 ----------------------------------------------------- ($ in thousands) 1999 1998 1997 ------- ------- ------- REVENUES: Rental income and recovery of expenses charged directly to specific tenants $38,585 $36,956 $35,159 Interest income (Note 4) 4,639 4,790 4,931 ----------------------------- Total revenues 43,224 41,746 40,090 ----------------------------- EXPENSES: Real estate taxes 3,856 3,407 3,349 Management and personnel costs 1,762 1,686 1,546 Cleaning 1,453 1,352 1,253 Utilities 874 811 887 Contract security 536 485 474 Repairs and maintenance 465 512 461 Elevator 340 309 325 Parking 286 299 260 Grounds maintenance 138 164 129 Insurance 103 106 106 General and administrative expenses 80 73 77 Marketing and other expenses 43 114 37 Interest expense (Note 4) 4,639 4,790 4,931 Depreciation and amortization 7,694 7,444 7,535 ----------------------------- Total expenses 22,269 21,552 21,370 ----------------------------- NET INCOME $20,955 $20,194 $18,720 ============================= The accompanying notes are an integral part of these statements.
CSC ASSOCIATES, L.P. --------------------- STATEMENTS OF PARTNERS' CAPITAL ------------------------------- FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997 ---------------------------------------------------- ($ in thousands) BALANCE, December 31, 1996 $200,346 Net income 18,720 Distributions (25,350) -------- BALANCE, December 31, 1997 193,716 Net income 20,194 Distributions (23,700) -------- BALANCE, December 31, 1998 190,210 Net income 20,955 Distributions (27,480) -------- BALANCE, December 31, 1999 $183,685 ======== The accompanying notes are an integral part of these statements.
CSC ASSOCIATES, L.P. -------------------- STATEMENTS OF CASH FLOWS ------------------------ FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997 ---------------------------------------------------- ($ in thousands) 1999 1998 1997 ------- ------- ------- CASH FLOWS FROM OPERATING ACTIVITIES: Net income $20,955 $20,194 $18,720 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 7,694 7,444 7,535 Rental revenue recognized on straight-line basis different from rental revenue specified in the lease agreements 15 (164) (238) Change in other receivables and other assets (170) (207) (90) Change in accounts payable and accr ued accrued liabilities related to operations 27 1,640 454 ------------------------- Net cash provided by operating activities 28,521 28,907 6,381 ------------------------- CASH FLOWS FROM INVESTING ACTIVITIES: Additions to building and improvements (99) (3,480) (433) Payments for deferred expenses (371) (458) (112) Collection of note receivable 2,450 2,298 2,157 Payments for furniture, fixtures and equipment (43) (15) (30) ------------------------- Net cash provided by (used in) investing activities 1,937 (1,655) 1,582 ------------------------- CASH FLOWS FROM FINANCING ACTIVITIES: Repayment of note payable (2,450) (2,298) (2,157) Partnership distributions (27,480) (23,700) (25,350) ------------------------- Net cash used in financing activities (29,930) (25,998) 27,507) ------------------------- NET INCREASE IN CASH 528 1,254 456 CASH AT BEGINNING OF YEAR 1,741 487 31 ------------------------- CASH AT END OF YEAR $ 2,269 $ 1,741 $ 487 ========================= SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Cash paid during the year for interest $ 4,646 $ 4,802 $ 4,937 ========================= The accompanying notes are an integral part of these statements.
CSC ASSOCIATES, L.P. -------------------- NOTES TO FINANCIAL STATEMENTS ----------------------------- DECEMBER 31, 1999, 1998 AND 1997 -------------------------------- 1. FORMATION OF THE PARTNERSHIP AND TERMS OF THE PARTNERSHIP AGREEMENT ------------------------------------------------------------------- CSC Associates, L.P. ("CSC" or the "Partnership") was formed under the terms of a Limited Partnership Agreement dated September 29, 1989 and by the filing of its Certificate of Limited Partnership on October 27, 1989. C&S Premises, Inc. ("Premises") and Cousins Properties Incorporated ("CPI") each own a 1% general partnership and a 49% limited partnership interest in the Partnership. Premises is a wholly owned subsidiary of NB Holdings Corporation which is a wholly owned subsidiary of Bank of America. In 1996 Premises transferred its 1% general partnership interest in the partnership to C&S Premises-SPE, Inc., a wholly owned subsidiary of Premises. The Partnership was formed for the purpose of developing and owning a 1.4 million gross square foot office tower in downtown Atlanta, Georgia (the "Building"), which is the Atlanta headquarters of Bank of America Corporation. The Partnership Agreement and related documents (the "Agreements") contain among other provisions, the following: a. CPI is the Managing Partner. b. CPI is obligated to contribute a total of $18.2 million cash to the Partnership, all of which has been contributed. Premises is obligated to contribute land parcels to the Partnership having an aggregate agreed upon value of $18.2 million, all of which has been contributed, which property value, in the opinion of the partners, was equal to the estimated fair market value of the land at the time of formation of the Partnership. The value of the property contributed by Premises was recorded on the Partnership's books at an amount equal to the cash contributed by CPI for an equal (50%) partnership interest. In October 1993, the partners each contributed an additional $86.7 million. c. No interest is earned on partnership capital. d. Net income or loss and cash distributions are allocated to the partners based on their percentage interests (50% each). 2. SIGNIFICANT ACCOUNTING POLICIES ------------------------------- Capitalization Policies - ----------------------- All costs related to planning, developing and constructing the Building plus expenditures for the Building prior to the date it became operational for financial statement purposes have been capitalized. Interest expense, amortization of financing costs, and real estate taxes were also capitalized while the Building was under development. Depreciation and Amortization - ----------------------------- Real estate assets are carried at cost. Depreciation of the Building commenced on the date the Building became operational for financial statement purposes and the Building is being depreciated over 40 years. Leasehold and tenant improvements are amortized over the life of the related lease or the useful life of the asset, whichever is shorter. Furniture, fixtures, and equipment are depreciated over 5 years. Deferred expenses, which include certain marketing and leasing costs and deferred operating expenses which are being passed through to the tenants, are amortized over the period of estimated benefit. The straight line method is used for all depreciation and amortization. Income Taxes - ------------ No provision has been made for federal or state income taxes because each partner's proportionate share of income or loss from the Partnership will be passed through to be included on each partner's separate tax return. Rental Income - ------------- In accordance with Statement of Financial Accounting Standards No. 13 ("SFAS No. 13"), income on leases which include increases in rental rates over the lease term (other than scheduled increases based on the Consumer Price Index) is recognized on a straight-line basis. Allowance for Doubtful Accounts - ------------------------------- From time to time, the Partnership evaluates the need to establish an allowance for doubtful accounts based on a review of specific receivables. As of December 31, 1999 and 1998, there is no allowance for doubtful accounts included in the accompanying balance sheets. Use of Estimates - ---------------- The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from these estimates. Reclassifications - ----------------- Certain 1998 amounts have been reclassified to conform with 1999 presentation. 3. LEASES ------ The Partnership has leased office space to NB Holdings Corporation, as well as to unrelated third parties. The lease with NB Holdings Corporation was negotiated at rates comparable to those quoted to third parties. The leases contain escalation provisions and provisions requiring tenants to pay a pro rata share of operating expenses. The leases typically include renewal options and all are classified and accounted for as operating leases. At December 31, 1999, future minimum rentals to be received under existing non-cancelable leases, including tenants' current pro rata share of operating expenses, are as follows ($ in thousands): Lease Leases With With NB Holdings Third Corporation Parties Total ----------- -------- -------- 2000 $ 16,762 $ 19,829 $ 36,591 2001 16,762 20,032 36,794 2002 16,785 20,678 37,463 2003 16,788 21,040 37,828 2004 16,788 19,332 36,120 Subsequent to 2004 124,598 57,334 181,932 --------------------------------------- $208,483 $158,245 $366,728 ======================================= In the year ended December 31, 1999, income which would have accrued in accordance with the lease terms exceeded income recognized on a straight-line basis by $15,000. In the year ended December 31, 1998, income recognized on a straight-line basis exceeded income which would have accrued in accordance with the lease terms by approximately $164,000. At December 31, 1999 and 1998, receivables which related to the cumulative excess of revenues recognized in accordance with SFAS No. 13 over revenues which accrued in accordance with the actual lease agreements totaled approximately $10,819,000 and $10,834,000, respectively. Of that amount, 16% was related to leases with NB Holdings Corporation and approximately 37% and 33% was related to each of two professional services firms, respectively. At December 31, 1999 NB Holdings Corporation leased approximately 46% and two professional services firms leased approximately 17% and 16%, respectively, of the net rentable space of the Building. 4. NOTE PAYABLE AND NOTE RECEIVABLE -------------------------------- On February 6, 1996, the Partnership issued $80 million of 6.377% collateralized notes (the "Notes"). The Notes amortize in equal monthly installments of $590,680 based on a 20 year amortization schedule, and mature February 15, 2011. The Notes are non-recourse obligations of the Partnership and are secured by a Deed to Secure Debt, Assignment of Rents and Security Agreement covering the Partnership's interest in the Building. The Partnership has loaned the $80 million proceeds of the Notes to CPI under a non-recourse loan (the "CPI Loan") secured by CPI's Partnership interests under the same payment terms as those of the Notes. CPI paid all costs of issuing the Notes and the CPI Loan, including a $400,000 fee to an affiliate of Bank of America. In addition, CPI pays a monthly fee to an affiliate of Bank of America of .025% of the outstanding principal balance of the Notes. These fees totaled approximately $218,000 and $225,000 in 1999 and 1998, respectively. The estimated fair value of both the note payable and related note receivable at December 31, 1999 was $64 million which was calculated by discounting future cash flows under the notes at estimated rates at which similar notes would be made currently. The maturities of the Notes at December 31, 1999 are as follows (in thousands): 2000 $ 2,610 2001 2,782 2002 2,965 2003 3,159 2004 3,367 Subsequent to 2004 56,516 ------- $71,399 ======= 5. RELATED PARTIES --------------- The Partnership engaged CPI and an affiliate of CPI to manage, develop and lease the Building. During 1999, 1998 and 1997, fees to CPI and its affiliate incurred by the Partnership were as follows ($ in thousands): 1999 1998 1997 ------ ------ ---- Development and tenant construction fees $ 27 $ 38 $ 17 Leasing and procurement fees 63 399 32 Management fees 959 917 870 --------------------------- $1,049 $1,354 $919 =========================== 6. PARKING AGREEMENT ----------------- On February 7, 1996, CSC entered into a 25 year Cross Parking License Agreement ("Parking Agreement") with the North Avenue Presbyterian Church ("NAPC") which allows CSC the use of 200 parking spaces in NAPC's parking deck which is located adjacent to NAPC. The agreement commenced on October 1, 1996. CSC paid a $1,000,000 contribution toward the construction cost of the parking deck as consideration for the Parking Agreement. The $1,000,000 contribution plus additional costs of approximately $23,000 are included in Other Assets and are being amortized over the 25 year life of the Parking Agreement. NAPC may reduce the number of parking spaces available to the Partnership or may terminate the Parking Agreement under certain conditions after the sixth year, at which time a partial refund of the $1,000,000 would be due to CSC. In addition, CSC is responsible for the maintenance of the parking deck and the payment of the related operating expenses.
SCHEDULE III CSC ASSOCIATES, L.P REAL ESTATE AND ACCUMULATED DEPRECIATION DECEMBER 31, 1999 ($ in thousands) Column A Column B Column C Column D Column E -------- -------- -------- -------- -------- Costs Capitalized Gross Amount at Which Initial Cost Subsequent Carried at to Company to Acquisition December 31, 1999 ------------------- -------------------- ----------------------------------- Carrying Costs Buildings Less Cost Land Buildings and Improve- of Sales and Land and Total Description Encumbrances Land Improvements ments and Other Improvements Improvements (a) - ----------- ------------ ---- ------------ -------- --------- ------------ ------------ ----- Bank of America Plaza Atlanta, Georgia $ -- $ 18,200 $ -- $183,659 $ 10,449 $ 22,818 $189,490 $212,308
Column F Column G Column H Column I -------- -------- -------- -------- Life on Which De- preciation Accumu- In 1999 lated Date of Income Deprecia- Construc- Date Statement tion (a) tion Acquired Is Computed --------- --------- -------- ----------- Bank of America Plaza Atlanta, Georgia $46,795 1990-1992 1990 5-40
NOTE: (a) Reconciliations of total real estate carrying value and accumulated depreciation for the three years ended December 31, 1999 are as follows: Real Estate Accumulated Depreciation ----------------------------------- ------------------------------- 1999 1998 1997 1999 1998 1997 -------- -------- -------- ------- ------- ------- Balance at beginning of period $212,334 $209,120 $209,141 $40,033 $33,621 $27,621 Improvements and other capitalized costs 99 3,480 420 -- -- -- Write offs of improvements and other capitalized costs (125) (266) (441) (125) (266) (441) Provision for depreciation -- -- -- 6,887 6,678 6,441 ----------------------------------- ------------------------------- Balance at close of period $212,308 $212,334 $209,120 $46,795 $40,033 $33,621 =================================== ===============================
EX-13 2 Cousins Properties Incorporated and Consolidated Entities FUNDS FROM OPERATIONS - -------------------------------------------------------------------------------- The table below shows Funds From Operations ("FFO") for Cousins Properties Incorporated and Consolidated Entities and its unconsolidated joint ventures. On a consolidated basis, FFO includes the Company's FFO and the Company's share of FFO of its unconsolidated joint ventures, but excludes the Company's share of distributions from such ventures. The Company calculates its FFO using the National Association of Real Estate Investment Trusts ("NAREIT") definition of FFO adjusted to (i) eliminate the recognition of rental revenues on a straight-line basis, (ii) reflect stock appreciation right expense on a cash basis and (iii) recognize certain fee income as cash is received rather than when recognized in the financial statements. The Company believes its FFO presentation more properly reflects its operating results. Management believes the Company's FFO is not directly comparable to other REITs which own a portfolio of mature income-producing properties because the Company develops projects through a development and lease-up phase before they reach their targeted cash flow returns. Furthermore, the Company eliminates in consolidation fee income for developing and leasing projects owned by consolidated entities, while capitalizing related internal costs. In addition, unlike many REITs, the Company has considerable land holdings which provide a strong base for future FFO growth as land is developed or sold in future years. Property taxes on the land, which are expensed currently, reduce current FFO. As indicated above, the Company does not include straight-lined rents in its FFO, as it could under the NAREIT definition of FFO. Furthermore, most of the Company's leases are also escalated periodically based on the Consumer Price Index, which unlike fixed escalations, do not require rent to be straight-lined; under NAREIT's definition straight-lining of rents produces higher FFO in the early years of a lease and lower FFO in the later years of a lease. FFO is used by industry analysts as a supplemental measure of an equity REIT's performance. FFO should not be considered an alternative to net income or other measurements under generally accepted accounting principles as an indicator of operating performance, or to cash flows from operating, investing, or financing activities as a measure of liquidity. - --------------------------------------------------------------------------------
($ in thousands, except per share amounts) Years Ended December 31, -------------------------------- 1999 1998 1997 ---- ---- ---- Income before gain on sale of investment properties $45,315 $41,355 $31,305 Depreciation and amortization 36,737 28,910 24,397 Amortization of deferred financing costs and depreciation of furniture, fixtures and equipment (758) (524) (452) Elimination of the recognition of rental revenues on a straight-line basis (142) 1,119 998 Adjustment to reflect stock appreciation right expense on a cash basis (101) (8) (702) Consolidated Funds From Operations $81,051 $70,852 $55,546 Weighted Average Shares 32,092 31,602 29,267 Consolidated Funds From Operations Per Share - Basic $ 2.53 $ 2.24 $ 1.90 Adjusted Weighted Average Shares 32,687 32,040 29,693 Consolidated Funds From Operations Per Share - Diluted $ 2.48 $ 2.21 $ 1.87
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Cousins Properties Incorporated and Consolidated Entities CONSOLIDATED BALANCE SHEETS - -------------------------------------------------------------------------------- ($ in thousands, except share and per share amounts) December 31, --------------------- 1999 1998 -------- -------- ASSETS - ------ PROPERTIES (Notes 4 and 8): Operating properties, net of accumulated depreciation of $35,929 in 1999 and $23,422 in 1998 $365,976 $235,588 Land held for investment or future development 14,126 15,530 Projects under construction 348,072 178,736 Residential lots under development 4,687 8,771 --------------------- Total properties 732,861 438,625 CASH AND CASH EQUIVALENTS, at cost, which approximates market 1,473 1,349 NOTES AND OTHER RECEIVABLES (Note 3) 37,303 39,470 INVESTMENT IN UNCONSOLIDATED JOINT VENTURES (Notes 4 and 5) 151,737 264,648 OTHER ASSETS 9,558 8,766 --------------------- TOTAL ASSETS $932,932 $752,858 ===================== LIABILITIES AND STOCKHOLDERS' INVESTMENT - ---------------------------------------- NOTES PAYABLE (Note 4) $312,257 $198,858 ACCOUNTS PAYABLE AND ACCRUED LIABILITIES 34,827 36,104 DEPOSITS AND DEFERRED INCOME 861 928 --------------------- TOTAL LIABILITIES 347,945 235,890 --------------------- DEFERRED GAIN (Note 5) 115,576 120,038 MINORITY INTERESTS 31,689 17,065 COMMITMENTS AND CONTINGENT LIABILITIES (Note 4) STOCKHOLDERS' INVESTMENT (Note 6): Common stock, $1 par value; authorized 50,000,000 shares, issued 32,328,135 in 1999 and 31,887,298 in 1998 32,328 31,887 Additional paid-in capital 256,988 244,778 Treasury stock at cost, 153,600 shares in 1999 (4,990) -- Cumulative undistributed net income 153,396 103,200 --------------------- TOTAL STOCKHOLDERS' INVESTMENT 437,722 379,865 --------------------- TOTAL LIABILITIES AND STOCKHOLDERS' INVESTMENT $932,932 $752,858 ===================== The accompanying notes are an integral part of these consolidated balance sheets.
Cousins Properties Incorporated and Consolidated Entities CONSOLIDATED STATEMENTS OF INCOME - -------------------------------------------------------------------------------- ($ in thousands, except per share amounts) Years Ended December 31, ------------------------------ 1999 1998 1997 -------- ------- ------- REVENUES: Rental property revenues (Note 10) $ 62,480 $67,726 $62,252 Development income 6,165 3,007 3,123 Management fees 4,743 3,761 3,448 Leasing and other fees 2,991 2,810 720 Residential lot and outparcel sales 17,857 16,732 12,847 Interest and other 3,588 4,275 3,609 ------------------------------ 97,824 98,311 85,999 ------------------------------ INCOME FROM UNCONSOLIDATED JOINT VENTURES (Note 5) 19,637 18,423 15,461 COSTS AND EXPENSES: Rental property operating expenses 19,087 17,702 15,371 General and administrative expenses 14,961 13,087 12,717 Depreciation and amortization 16,859 15,173 14,046 Stock appreciation right expense (Note 6) 108 330 204 Residential lot and outparcel cost of sales 14,897 15,514 11,917 Interest expense (Note 4) 600 11,558 14,126 Property taxes on undeveloped land 811 900 606 Other 2,381 1,263 2,695 ------------------------------ 69,704 75,527 71,682 ------------------------------ INCOME FROM OPERATIONS BEFORE INCOME TAXES AND GAIN ON SALE OF INVESTMENT PROPERTIES 47,757 41,207 29,778 PROVISION (BENEFIT) FOR INCOME TAXES FROM OPERATIONS (Note 7) 2,442 (148) (1,527) ------------------------------ INCOME BEFORE GAIN ON SALE OF INVESTMENT PROPERTIES 45,315 41,355 31,305 ------------------------------ GAIN ON SALE OF INVESTMENT PROPERTIES, NET OF APPLICABLE INCOME TAX PROVISION (Note 7) 58,767 3,944 5,972 ------------------------------ NET INCOME $104,082 $45,299 $37,277 ============================== WEIGHTED AVERAGE SHARES 32,092 31,602 29,267 ============================== BASIC NET INCOME PER SHARE $ 3.24 $ 1.43 $ 1.27 ============================== ADJUSTED WEIGHTED AVERAGE SHARES 32,687 32,040 29,693 ============================== DILUTED NET INCOME PER SHARE $ 3.18 $ 1.41 $ 1.26 ============================== CASH DIVIDENDS DECLARED PER SHARE (Note 6) $ 1.68 $ 1.49 $ 1.29 ============================== The accompanying notes are an integral part of these consolidated statements.
Cousins Properties Incorporated and Consolidated Entities CONSOLIDATED STATEMENTS OF STOCKHOLDERS' INVESTMENT - -------------------------------------------------------------------------------- Years Ended December 31, 1999, 1998 and 1997 ($ in thousands) Additional Cumulative Common Paid-In Treasury Undistributed Stock Capital Stock Net Income Total ----- ---------- -------- ------------- -------- BALANCE, December 31, 1996 $28,920 $164,970 $ -- $105,294 $299,184 Net income, 1997 -- -- -- 37,277 37,277 Common stock issued pursuant to: 2,150,000 share stock offering, net of expenses 2,150 61,993 -- -- 64,143 Exercise of options and director stock plan 223 2,946 -- -- 3,169 Dividend reinvestment plan 179 4,328 -- -- 4,507 Dividends declared -- -- -- (37,606) (37,606) -------------------------------------------------------------- BALANCE, December 31, 1997 31,472 234,237 -- 104,965 370,674 Net income, 1998 -- -- -- 45,299 45,299 Common stock issued pursuant to: Exercise of options and director stock plan 43 506 -- -- 549 Dividend reinvestment plan 372 10,035 -- -- 10,407 Dividends declared -- -- -- (47,064) (47,064) -------------------------------------------------------------- BALANCE, December 31, 1998 31,887 244,778 -- 103,200 379,865 Net income, 1999 -- -- -- 104,082 104,082 Common stock issued pursuant to: Exercise of options and director stock plan 78 1,269 -- -- 1,347 Dividend reinvestment plan 363 10,941 -- -- 11,304 Dividends declared -- -- -- (53,886) (53,886) Purchase of treasury stock -- -- (4,990) -- (4,990) -------------------------------------------------------------- BALANCE, December 31, 1999 $32,328 $256,988 $(4,990) $153,396 $437,722 ============================================================== The accompanying notes are an integral part of these consolidated statements.
Cousins Properties Incorporated and Consolidated Entities CONSOLIDATED STATEMENTS OF CASH FLOWS (Note 9) - -------------------------------------------------------------------------------- ($ in thousands) Years Ended December 31, -------------------------------- 1999 1998 1997 -------- -------- -------- CASH FLOWS FROM OPERATING ACTIVITIES: Income before gain on sale of investment properties $ 45,315 $ 41,355 $ 31,305 Adjustments to reconcile income before gain on sale of investment properties to net cash provided by operating activities: Depreciation and amortization, net of minority interest's share 16,658 15,173 14,046 Stock appreciation right expense 108 330 204 Cash charges to expense accrual for stock appreciation rights (209) (338) (906) Effect of recognizing rental revenues on a straight-line basis (1,064) (347) (440) Income from unconsolidated joint ventures (19,637) (18,423) (15,461) Operating distributions from unconsolidated joint ventures 36,051 23,612 21,707 Residential lot and outparcel cost of sales 13,802 14,759 11,398 Changes in other operating assets and liabilities: Change in other receivables (1,903) (1,986) 2,592 Change in accounts payable and accrued liabilities 2,706 15,939 (6,492) -------------------------------- Net cash provided by operating activities 91,827 90,074 57,953 -------------------------------- CASH FLOWS FROM INVESTING ACTIVITIES: Gain on sale of investment properties, net of applicable income tax provision 58,767 3,944 5,972 Adjustments to reconcile gain on sale of investment properties to net cash provided by sales activities: Cost of sales 29,576 1,264 17,041 Deferred income recognized (4,123) (536) -- Property acquisition and development expenditures (337,961) (194,253) (80,628) Non-operating distributions from unconsolidated joint ventures 3,635 22,617 14,681 Investment in unconsolidated joint ventures, including interest capitalized to equity investments (36,195) (34,712) (8,863) Investment in notes receivable (1,191) (33,345) (5,593) Collection of notes receivable 6,258 30,528 3,472 Change in other assets, net (3,112) 976 (1,645) Net cash received in formation of venture 125,469 103,025 -- -------------------------------- Net cash used in investing activities (158,877) (100,492) (55,563) -------------------------------- CASH FLOWS FROM FINANCING ACTIVITIES: Repayment of credit facility (253,023) (231,115) (138,430) Proceeds from credit facility 372,554 242,235 114,631 Common stock sold, net of expenses 12,651 10,956 71,795 Purchase of treasury stock (4,990) -- -- Dividends paid (53,886) (47,064) (37,606) Proceeds from other notes payable -- 10,870 25,000 Repayment of other notes payable (6,132) (6,809) (6,684) -------------------------------- Net cash provided by (used in) financing activities 67,174 (20,927) 28,706 -------------------------------- NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 124 (31,345) 31,096 CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 1,349 32,694 1,598 -------------------------------- CASH AND CASH EQUIVALENTS AT END OF YEAR $ 1,473 $ 1,349 $ 32,694 ================================ The accompanying notes are an integral part of these consolidated statements.
Cousins Properties Incorporated and Consolidated Entities NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- December 31, 1999, 1998 and 1997 1. SIGNIFICANT ACCOUNTING POLICIES Consolidation and Presentation: The Consolidated Financial Statements include the accounts of Cousins Properties Incorporated ("Cousins"), its majority owned partnerships and wholly owned subsidiary, Cousins Real Estate Corporation ("CREC") and its subsidiaries and CREC II Inc. ("CREC II") and its subsidiaries. All of the entities included in the Consolidated Financial Statements are hereinafter referred to collectively as the "Company." The Company's investments in its non-majority owned joint ventures are recorded using the equity method of accounting. However, the recognition of losses is limited to the amount of direct or implied financial support. Information regarding the non-majority owned joint ventures is included in Note 5. Income Taxes: Since 1987, Cousins has elected to be taxed as a real estate investment trust ("REIT"). As a REIT, Cousins is not subject to corporate federal income taxes to the extent that it distributes 100% of its taxable income (excluding the consolidated taxable income of CREC and its wholly owned subsidiaries and CREC II and its wholly owned subsidiaries) to stockholders, which is Cousins' current intention. The Company computes taxable income on a basis different from that used for financial reporting purposes (see Note 7). CREC and its wholly owned subsidiaries and CREC II and its wholly owned subsidiaries each file a consolidated federal income tax return. Depreciation and Amortization: Real estate assets are stated at depreciated cost. Buildings are depreciated over 30 to 40 years. Buildings that were acquired are depreciated over 15, 25 and 30 years. Furniture, fixtures and equipment are depreciated over 3 to 5 years. Leasehold improvements and tenant improvements are amortized over the life of the applicable leases or the estimated useful life of the assets, whichever is shorter. Deferred expenses are amortized over the period of estimated benefit. The straight-line method is used for all depreciation and amortization. Fee Income and Cost Capitalization: Development, construction, management and leasing fees received from unconsolidated joint ventures are recognized as earned. A portion of these fees may be capitalized by the joint ventures; however, the Company expenses salaries and other direct costs related to this income. The Company classifies its share of fee income earned by unconsolidated joint ventures as fee income rather than joint venture income for those ventures where the related expense is borne primarily by the Company rather than the venture. Development, construction, and leasing fees between consolidated entities are eliminated in consolidation. These fees totaled $4,676,000, $3,104,000 and $1,510,000 in 1999, 1998 and 1997, respectively. Management fees received from consolidated entities are shown as a reduction in rental property operating expenses. Costs related to planning, development, leasing and construction of properties (including related general and administrative expenses) are capitalized. Interest, real estate taxes, and rental property revenues and expenses of properties prior to the date they become operational for financial reporting purposes are also capitalized. Interest is capitalized to investments accounted for by the equity method when the investee has property under development with a carrying value in excess of the investee's borrowings. Deferred leasing and other capitalized costs associated with a particular property are classified with Properties in the Consolidated Balance Sheets. Cash and Cash Equivalents: Cash and cash equivalents include cash and highly liquid money market instruments. Highly liquid money market instruments include securities and repurchase agreements with original maturities of three months or less, money market mutual funds, and securities on which the interest or dividend rate is adjusted to market rate at least every three months. At December 31, 1999, cash and cash equivalents included $379,000 which is restricted under a municipal bond indenture. Rental Property Revenues: In accordance with Statement of Financial Accounting Standards ("SFAS") No. 13, income on leases which include scheduled increases in rental rates over the lease term (other than scheduled increases based on the Consumer Price Index) is recognized on a straight-line basis. Use of Estimates: The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. Derivative Instruments and Hedging Activities: In June 1998, the Financial Accounting Standards Board issued SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities," (the "Statement") which establishes accounting and reporting standards for derivative instruments, including certain derivative instruments embedded in other contracts, and for hedging activities. The Statement, as amended in June 1999 by SFAS No. 137, "Accounting for Derivative Instruments and Hedging Activities - Deferral of the Effective Date of FASB Statement No. 133," is effective for fiscal years beginning after June 15, 2000. The Statement requires companies to record derivatives on the balance sheet as assets and liabilities at fair value. The Statement also requires that changes in the derivative's fair value be recognized currently in earnings unless specific hedge accounting criteria are met. The Company does not expect the adoption of this statement will have a material impact on the financial statements or results of operations of the Company. Reclassifications: Certain 1998 amounts have been reclassified to conform with the 1999 presentation. 2. CREC AND CREC II CREC conducts certain development and leasing activities for real estate projects. CREC also manages a joint venture property in which it has an ownership interest. At December 31, 1999, 1998 and 1997, Cousins owned 100% of CREC's $5,025,000 par value 8% cumulative preferred stock and 100% of CREC's nonvoting common stock, which is entitled to 95% of any dividends of CREC after preferred dividend requirements. Thomas G. Cousins, Chairman of the Board of Cousins, owns 100% of the voting common stock of CREC, which voting common stock is entitled to 5% of any dividends of CREC after preferred dividend requirements. CREC is included in the Company's Consolidated Financial Statements, but is taxed as a regular corporation. CREC has paid no common dividends to date, and for financial reporting purposes, none of CREC's income is attributable to Mr. Cousins' minority interest because the face amount of CREC's preferred stock plus accumulated dividends thereon ($9,849,000 in aggregate) exceeds CREC's $7,804,625 of equity. CREC II owns the Company's investment in Cousins Stone LP (see Note 5). Cousins owns 100% of CREC II's $835,000 par value, 10% cumulative preferred stock and 100% of CREC II's non-voting common stock, which is entitled to 95% of any dividends of CREC II after preferred dividend requirements. Mr. Cousins owns 100% of the voting common stock of CREC II, which voting common stock is entitled to 5% of any dividends of CREC II after preferred dividend requirements. CREC II is included in the Company's Consolidated Financial Statements, but is taxed as a regular corporation. CREC II has paid no preferred or common dividends to date and as of December 31, 1999 undistributed cumulative preferred dividends are $49,636. Minority interest expense has been recognized for Mr. Cousins' ownership.
3. NOTES AND OTHER RECEIVABLES At December 31, 1999 and 1998, notes and other receivables included the following ($ in thousands): 1999 1998 ------- ------- 650 Massachusetts Avenue Mortgage Notes $24,332 $25,053 Daniel Realty Company Note Receivable 2,610 3,336 Miscellaneous Notes 1,342 608 Cumulative rental revenue recognized on a straight- line basis in excess of revenue accrued in accordance with lease terms (see Note 1) 2,135 1,071 Other Receivables 6,884 9,402 ----------------- Total Notes and Other Receivables $37,303 $39,470 =================
650 Massachusetts Avenue Mortgage Notes - On March 10, 1994, the Company purchased from the Resolution Trust Corporation ("RTC") two notes aggregating $37 million at a total cost of approximately $28 million. The two notes, which resulted from the RTC's restructuring in December 1993 of a $53 million note, are secured by a first deed of trust on an office building containing approximately 250,000 square feet located at 650 Massachusetts Avenue, NW, in Washington, D.C. The notes mature December 31, 2003, at which time their unamortized balance will be a maximum of approximately $28.9 million. The notes require minimum monthly payments totaling $2,818,000 annually, which, through the year 2000, are supported by a U.S. government agency lease. For financial reporting purposes, the discounted notes are treated as non-amortizing notes to the extent of the minimum required payments, with the minimum required payments treated as interest income. Amounts in excess of the minimum required payments ($721,000 and $908,000 in 1999 and 1998, respectively) are treated as a reduction of principal. Daniel Realty Company Note Receivable - On December 27, 1996, the Company entered into a venture with Daniel Realty Company ("Daniel"), a privately-held real estate company headquartered in Birmingham, Alabama, which focuses on the development and acquisition of commercial office properties. The arrangement with Daniel included a loan to Daniel of up to $9.5 million which had an interest rate of 11%, required semiannual principal payments commencing February 1, 1998 and matured on December 31, 2003. The Company also obtained an option to acquire certain segments of Daniel's business. On December 31, 1997, upon paydown of the outstanding balance of the note receivable to $4 million, the Company amended the note, which reduced the interest rate to 9% and requires quarterly payments of principal and interest, which commenced April 1, 1998, in the amount of $250,568. The loan will fully amortize over 5 years. Fair Value - The estimated fair value of the Company's $28.3 million and $29.0 million of notes receivable at December 31, 1999 and 1998, respectively, was $35.2 million and $35.9 million, respectively, calculated by discounting future cash flows from the notes receivable at estimated rates at which similar loans would be made currently.
4. NOTES PAYABLE, COMMITMENTS, AND CONTINGENT LIABILITIES At December 31, 1999 and 1998, notes payable included the following ($ in thousands): December 31, 1999 December 31, 1998 ------------------------------------ ------------------------------------- Share of Share of Unconsolidated Unconsolidated Company Joint Ventures Total Company Joint Ventures Total -------- -------------- -------- -------- -------------- -------- Floating Rate Lines of Credit and Construction Loans $130,651 $ 28,504 $159,155 $ 11,120 $ -- $ 11,120 Other Debt (primarily non-recourse fixed rate mortgages) 181,606 190,235 371,841 187,738 221,498 409,236 ----------------------------------------------------------------------------- $312,257 $218,739 $530,996 $198,858 $221,498 $420,356 =============================================================================
The following table summarizes the terms of the debt outstanding at December 31, 1999 ($ in thousands): Term/ Amortization Balance at Period Final December 31, Description Rate (Years) Maturity 1999 ----------- -------------- ------------ -------- ------------ Company Debt: - ------------- Credit facility (a maximum of $225 million Floating based through 4/27/00 and $150 million through on LIBOR 3/N/A 8/27/02 $130,651 8/27/02), unsecured Note secured by Company's interest in CSC Associates, L.P. 6.677% 15/20 2/15/11 71,399 Perimeter Expo mortgage note 8.04% 10/30 8/15/05 20,613 Note secured by Company's interest in 650 Massachusetts Avenue mortgage notes (see Note 3) 6.53% 5/N/A 10/01/00 20,571 101 Independence Center mortgage note 8.22% 11/25 12/1/07 47,522 Lakeshore Park Plaza mortgage note 6.78% 10/30 11/1/08 10,683 Northside/Alpharetta I mortgage note 7.70% 8/28 1/1/06 10,401 Other miscellaneous notes Various Various Various 417 -------- 312,257 -------- Share of Unconsolidated Joint Venture Debt: - ------------------------------------------- Wildwood Associates: Line of credit ($2 million maximum) LIBOR + .75% 1/N/A 9/30/00 -- 2300 Windy Ridge Parkway mortgage note 7.56% 10/25 12/01/05 32,806 2500 Windy Ridge Parkway mortgage note 7.45% 10/20 12/15/05 11,684 3200 Windy Hill Road mortgage note 8.23% 10/28 1/1/07 33,942 4100/4300 Wildwood Parkway mortgage note 7.65% 15/25 4/1/12 14,392 4200 Wildwood Parkway mortgage note 6.78% 15.75/18 3/31/14 21,767 Cousins LORET Venture, L.L.C.: Two Live Oak Center mortgage note 7.90% 12/30 12/31/09 14,746 The Pinnacle mortgage note 7.11% 12/30 12/31/09 35,000 CP Venture Two LLC: North Point MarketCenter mortgage note 8.50% 10/25 7/15/05 3,236 100/200 North Point Center East mortgage note 7.86% 10/25 8/1/07 2,780 Ten Peachtree Place Associates mortgage note 8.00% 10/18 11/30/01 8,728 CC-JM II Associates mortgage note 7.00% 17/17 4/1/13 11,154 Charlotte Gateway Village, LLC construction loan LIBOR + .50% 3/N/A 1/2/02 28,504 -------- 218,739 -------- $530,996 ========
In 1996, CSC Associates, L.P. ("CSC") issued $80 million of 6.377% collateralized non-recourse mortgage notes (the "Notes") secured by CSC's interest in the Bank of America Plaza building and related leases and agreements. CSC loaned the $80 million proceeds of the Notes to the Company under a non-recourse loan (the "Cousins Loan") secured by the Company's interest in CSC under the same payment terms as those of the Notes. The Company paid all costs of issuing the Notes and the Cousins Loan, including a $400,000 fee to an affiliate of Bank of America Corporation. In addition, the Company pays a fee to an affiliate of Bank of America Corporation of .3% per annum of the outstanding principal balance of the Notes. Because CSC has loaned the $80 million proceeds of the Notes to the Company, the Notes and their related interest expense and maturities are disclosed as an obligation of the Company and are not included in the unconsolidated joint venture balances disclosed in the above table or in Note 5. (The related note receivable and interest income are also not included in Note 5.) In August 1999, the Company renewed and modified its $150 million credit facility which matures August 27, 2002. On December 31, 1999, the credit facility was temporarily increased to $225 million, which increase expires April 27, 2000. The credit facility is unsecured and bears an interest rate equal to the London Interbank Offering Rate ("LIBOR") plus a spread which is based on the ratio of total debt to total assets according to the following table: Ratio of Total Debt To Total Assets Basis Points ------------------- ------------ <=35% 90 >35% <= 45% 100 >45% <= 50% 110 >50% <= 55% 125 In December 1998, Charlotte Gateway Village, LLC completed construction financing of up to $190 million for Gateway Village. The note bears an interest rate of LIBOR (adjusted for certain reserve requirements) plus .50% and matures January 2, 2002. No amounts were drawn on the note until 1999. The Wildwood Associates 2300 Windy Ridge Parkway, 3200 Windy Hill Road, 4100/4300 Wildwood Parkway and 4200 Wildwood Parkway mortgage notes and the CC-JM II Associates mortgage note provide for additional amortization in the later years of the notes (over that required by the amortization periods disclosed in the table) concurrent with scheduled rent increases. The Company has entered into an interest rate swap in order to hedge its exposure to fluctuations in the interest rate on the note secured by the Company's interest in the 650 Massachusetts Avenue mortgage notes. The note actually floats at LIBOR + 1%, but as of January 10, 1996 was effectively fixed at the 6.53% rate disclosed in the table. The difference between fixed and variable interest amounts calculated by reference to the principal notional amount (which was $19,275,000 at December 31, 1999) is recognized as an adjustment to interest expense over the life of the swap. If the Company settled the swap as of December 31, 1999, it would receive $86,000. At December 31, 1999, the Company had outstanding letters of credit totaling $9,683,000, and assets, including the Company's share of joint venture assets, with carrying values of $479,666,000 were pledged as security on the debt of the Company and its share of unconsolidated joint venture debt. The fixed rate long-term mortgage debt of the Company and its unconsolidated joint ventures is non-recourse to the Company. As of December 31, 1999, the weighted average maturity of the Company's debt, including its share of unconsolidated joint ventures, was 9 years. The aggregate maturities of the indebtedness at December 31, 1999 summarized above are as follows ($ in thousands):
Share of Unconsolidated Company Joint Ventures Total ------- -------------- -------- 2000 $ 24,756 $ 4,252 $ 29,008 2001 4,298 12,369 16,667 2002 135,256 33,591 168,847 2003 4,937 5,078 10,015 2004 5,291 5,594 10,885 Thereafter 137,719 157,855 295,574 -------------------------------------- $312,257 $218,739 $530,996 ======================================
For each of the years ended December 31, 1999, 1998 and 1997, interest expense was recorded as follows ($ in thousands): Share of Unconsolidated Company Joint Ventures Total ------------------------------- ------------------------------- ------------------------------- Year Expensed Capitalized Total Expensed Capitalized Total Expensed Capitalized Total - ---- -------- ----------- ------- -------- ----------- ------- -------- ----------- ------- 1999 $ 600 $16,155 $16,755 $14,473 $ 1,513 $15,986 $15,073 $17,668 $32,741 1998 11,558 7,470 19,028 9,902 2,173 12,075 21,460 9,643 31,103 1997 14,126 3,167 17,293 8,281 1,123 9,404 22,407 4,290 26,697
The Company has future lease commitments under land leases aggregating $48.0 million over an average remaining term of 60 years. The Company has entered into construction and design contracts for real estate projects, of which approximately $191 million remains committed at December 31, 1999. At December 31, 1999 and 1998, the estimated fair value of the Company's notes payable, including its share of unconsolidated joint ventures, was $517 million and $445 million, respectively.
5. INVESTMENT IN UNCONSOLIDATED JOINT VENTURES The following information summarizes financial data and principal activities of unconsolidated joint ventures in which the Company had ownership interests ($ in thousands). Audited financial statements for Wildwood Associates and CSC Associates, L.P. are included in the Company's Form 10-K. Company's Total Assets Total Debt Total Equity Investment ---------------------- ------------------ ------------------ ------------------ 1999 1998 1999 1998 1999 1998 1999 1998 ---------- ---------- -------- -------- -------- -------- -------- -------- SUMMARY OF FINANCIAL POSITION: Wildwood Associates $ 247,834 $ 251,545 $229,182 $233,914 $ 9,092 $ 10,186 $(36,913) $(36,364) CSC Associates, L.P. 186,638 193,129 -- -- 183,685 190,210 94,347 97,685 Ten Peachtree Place Associates 19,077 19,718 17,456 18,444 1,375 936 175 104 Haywood Mall -- 39,792 -- -- -- 37,937 -- 19,656 CC-JM II Associates 26,779 29,231 22,308 23,014 3,758 4,841 2,215 2,660 Cousins LORET Venture, L.L.C. 134,732 163,320 99,492 104,196 32,730 50,374 16,222 25,202 Brad Cous Golf Venture, Ltd. 10,661 10,687 -- -- 10,514 9,924 5,257 4,962 Charlotte Gateway Village, LLC 86,933 15,433 57,008 -- 6,400 15,000 21,221 11,781 CP Venture LLC -- -- -- -- -- -- 16,259 135,519 CP Venture Two LLC 263,450 285,372 52,313 53,141 208,130 230,468 2,090 2,308 285 Venture, Ltd. 34,254 -- -- -- 32,448 -- 16,888 -- Cousins Stone LP 14,733 -- -- -- 14,562 -- 7,131 -- Temco Associates 13,854 2,397 -- -- 12,975 2,164 6,600 1,082 Other 722 163 -- -- 1,234 151 245 53 ---------------------- ------------------ ------------------ ------------------ $1,039,667 $1,010,787 $477,759 $432,709 $516,903 $552,191 $151,737 $264,648 ====================== ================== ================== ==================
Company's Share Total Revenues Net Income of Net Income --------------------------- ------------------------- ------------------------- 1999 1998 1997 1999 1998 1997 1999 1998 1997 -------- -------- ------- ------- ------- ------- ------- ------- ------- SUMMARY OF OPERATIONS: Wildwood Associates $ 48,019 $ 42,284 $39,115 $ 4,906 $ 4,156 $ 3,806 $ 2,453 $ 1,968 $ 1,903 CSC Associates, L.P. 38,585 36,956 35,159 20,955 20,194 18,720 10,402 10,021 9,284 Ten Peachtree Place Associates 4,356 4,396 4,295 872 803 718 271 261 248 Haywood Mall 8,730 17,049 13,820 4,910 9,465 7,382 2,433 4,614 3,648 CC-JM II Associates 4,161 4,070 3,860 420 469 261 248 213 113 Cousins LORET Venture, L.L.C. 16,673 6,810 1,885 106 1,747 135 53 672 68 Brad Cous Golf Venture, Ltd. 779 -- -- 168 -- -- 84 -- -- CP Venture LLC -- -- -- -- -- -- 82 280 -- CP Venture Two LLC 33,856 4,384 -- 893 335 -- 9 4 -- Cousins Stone LP 5,071 -- -- 2,562 -- -- 1,892 -- -- Temco Associates 7,087 361 104 2,540 194 23 1,270 97 11 Other 1,124 813 439 878 589 388 440 293 186 --------------------------- ------------------------- ------------------------- $168,441 $117,123 $98,677 $39,210 $37,952 $31,433 $19,637 $18,423 $15,461 =========================== ========================= =========================
Company's Share Of ---------------------------------------------------- Cash Flows From Cash Flows From Operating Operating Activities Operating Activities Cash Distributions ------------------------- ------------------------- ------------------------- 1999 1998 1997 1999 1998 1997 1999 1998 1997 ------- ------- ------- ------- ------- ------- ------- ------- ------- SUMMARY OF OPERATING CASH FLOWS: Wildwood Associates $14,952 $16,665 $15,789 $ 7,476 $ 8,333 $ 7,894 $ 1,000 $ 4,600 $ 4,500 CSC Associates, L.P. 28,521 28,907 26,381 14,260 14,454 13,191 13,740 11,850 12,675 Ten Peachtree Place Associates 1,027 1,358 1,205 354 343 321 200 200 200 Haywood Mall 6,158 11,571 9,795 3,079 5,786 4,897 4,068 5,585 3,895 CC-JM II Associates 1,666 1,551 1,222 833 775 611 693 324 324 Cousins LORET Venture, L.L.C. 5,442 3,968 768 2,721 1,984 384 7,240 703 -- Brad Cous Golf Venture, Ltd. 362 -- -- 181 -- -- 50 -- -- CP Venture LLC -- -- -- -- -- -- 8,303 -- -- CP Venture Two LLC 21,239 2,576 -- 6,989 2,154 -- 226 -- -- Cousins Stone LP 1,631 -- -- -- -- -- -- -- -- Temco Associates 2,540 194 28 1,270 97 16 -- -- -- Other 882 589 339 441 294 168 531 350 113 ------------------------- ------------------------- ------------------------- $84,420 $67,379 $55,527 $37,604 $34,220 $27,482 $36,051 $23,612 $21,707 ========================= ========================= =========================
Wildwood Associates - Wildwood Associates was formed in 1985 between the Company and IBM, each as 50% partners. The partnership owns six office buildings totaling 2.1 million rentable square feet, other income-producing commercial properties, and additional developable land in Wildwood Office Park ("Wildwood") in Atlanta, Georgia. Wildwood is an office park containing a total of approximately 285 acres, of which approximately 92 acres are owned by Wildwood Associates and an estimated 13 acres are committed to be contributed to Wildwood Associates by the Company; the Company owns the balance of the developable acreage in the office park. The 13 acres of land which are committed to be contributed to Wildwood Associates by the Company are included in Wildwood Associates' financial statements under the caption "Land Committed to be Contributed" and are not included in "Land Held for Investment or Future Development" in the Company's financial statements. All costs associated with the land are borne by Wildwood Associates. Through December 31, 1999, IBM had contributed $46.6 million in cash plus properties having an agreed value of $16.3 million for its one-half interest in Wildwood Associates. The Company has contributed $84,000 in cash plus properties having an agreed value of $49.3 million for its one-half interest in the partnership, and is obligated to contribute the aforesaid estimated 13 acres of additional land with an agreed value of $8.3 million. The Company and IBM each lease office space from the partnership at rates comparable to those charged to third parties. The Company's investment as recorded in the Consolidated Balance Sheets, which was a negative investment of $36.9 million at December 31, 1999 due to partnership distributions, is based upon the Company's historical cost of the properties at the time they were contributed or committed to be contributed to the partnership, whereas its investment as recorded on Wildwood Associates' books ($4.5 million at December 31, 1999) is based on the agreed-upon values at the time the partnership was formed. CSC Associates, L.P. ("CSC") - CSC was formed in 1989 between the Company and a wholly owned subsidiary of Bank of America Corporation, each as 50% partners. CSC owns the 1.3 million rentable square foot Bank of America Plaza in Atlanta, Georgia. CSC's net income or loss and cash distributions are allocated to the partners based on their percentage interests (50% each). See Note 4 for a discussion of the presentation of certain CSC assets, liabilities and revenues. Ten Peachtree Place Associates ("TPPA") - TPPA is a general partnership between the Company (50%) and a wholly owned subsidiary of The Coca-Cola Company ("Coca-Cola") (50%). The venture owns Ten Peachtree Place, a 259,000 rentable square foot building located in midtown Atlanta, Georgia. The building is 100% leased to Coca-Cola through November 30, 2001. The TPPA partnership agreement generally provides that each of the partners is entitled to receive 50% of cash flows from operating activities net of note principal amortization through the term of the Coca-Cola lease, after which the Company and its partner are entitled to receive 15% and 85% of the cash flows (including any sales proceeds), respectively, until the two partners have received a combined distribution of $15.3 million. Thereafter, each partner is entitled to receive 50% of cash flows. Haywood Mall - Haywood Mall, a regional shopping center on 86 acres 5 miles southeast of downtown Greenville, South Carolina, was owned by the Company and Simon Property Group. The mall has 1,256,000 gross leaseable square feet ("GLA") (of which approximately 330,000 GLA was owned). The balance of the mall is owned by the mall's five major department stores. The Company sold its 50% interest to Simon Property Group in June 1999 for $69 million, resulting in a gain of $50.1 million which is included in Gain on Sale of Investment Properties in the accompanying Consolidated Statements of Income. The proceeds from the sale were re-deployed through a tax-deferred exchange into Inforum, a 987,000 rentable square foot office building located in downtown Atlanta, Georgia. CC-JM II Associates - This joint venture was formed in 1994 between the Company and an affiliate of CarrAmerica Realty Corporation, each as 50% general partners, to develop and own a 224,000 rentable square foot office building in suburban Washington, D.C. The building is 100% leased until January 2011 to Booz-Allen & Hamilton, an international consulting firm, as a part of its corporate headquarters campus. Cousins LORET Venture, L.L.C. ("Cousins LORET") - Effective July 31, 1997, Cousins LORET was formed between the Company and LORET Holdings, L.L.L.P. ("LORET"), each as 50% members. LORET contributed Two Live Oak Center, a 278,000 rentable square foot office building located in Atlanta, Georgia, which was renovated in 1997. Two Live Oak Center became partially operational for financial reporting purposes in October 1997. Two Live Oak Center was contributed subject to a 7.90% $30 million non-recourse ten year mortgage note payable (see Note 4). LORET also contributed an adjacent 4 acre site on which construction of The Pinnacle, a 423,000 rentable square foot office building, commenced in August 1997 and was completed in November 1998. The Pinnacle became partially operational for financial reporting purposes in March 1999. The Company contributed $25 million of cash to Cousins LORET to match the value of LORET's agreed-upon equity. In May 1998, Cousins LORET completed the $70 million non-recourse financing of The Pinnacle at an interest rate of 7.11% and a term of twelve years, which was completely funded on December 30, 1998. Brad Cous Golf Venture, Ltd. ("Brad Cous") - Effective January 31, 1998, the Company formed the Brad Cous Golf Venture, Ltd. with the W.C. Bradley Co., each as 50% partners, for the purpose of developing and owning The Shops at World Golf Village, an approximately 80,000 square foot retail center located adjacent to the PGA Hall of Fame in St. Augustine, Florida. The Shops at World Golf Village became partially operational for financial reporting purposes in April 1999. Charlotte Gateway Village, LLC ("Gateway") - On December 14, 1998, the Company and a wholly owned subsidiary of Bank of America Corporation formed Gateway for the purpose of developing and owning Gateway Village, a 1,076,000 rentable square foot office building and parking deck in downtown Charlotte, North Carolina. Construction of Gateway Village commenced in July 1998. The project is 100% leased to Bank of America Corporation. Gateway's net income or loss and cash distributions are allocated to the members as follows: first to the Company so that it receives a cumulative compounded return equal to 11.46% on its capital contributions, second to a wholly owned subsidiary of Bank of America Corporation until it has received an amount equal to the aggregate amount distributed to the Company and then to each member, 50%. In December 1998, Gateway completed construction financing of up to $190 million for Gateway Village. The note bears an interest rate of LIBOR (adjusted for certain reserve requirements) plus .50% and matures January 2, 2002. No amounts were drawn on the note until 1999. This note is fully exculpated and is supported by a lease to Bank of America Corporation with a term of 15 years. Pursuant to the Gateway operating agreement, this construction financing will be replaced with permanent long-term financing which will be fully amortized at the end of the Bank of America Corporation lease. CP Venture LLC, CP Venture Two LLC and CP Venture Three LLC - On November 12, 1998 (the "Closing Date"), the Company entered into a venture arrangement (the "Venture") with The Prudential Insurance Company of America ("Prudential"). On such date the Company contributed its interest in nine properties (the "Properties") to the Venture. At the time of contribution, the Properties were valued by the Company and Prudential based on arm's length negotiations at a total gross value of $283,750,000 subject to mortgages in the principal amount of $53,281,219. The following table details the values allocated to each of the Properties and the mortgages to which certain Properties were subject:
Allocated Value Mortgage Net Value --------------- ----------- ------------ First Union Tower $ 53,000,000 $ -- $ 53,000,000 Grandview II 23,000,000 -- 23,000,000 100 North Point Center East and 200 North Point Center East 46,050,000 24,581,670 21,468,330 Presbyterian Medical Plaza 8,600,000 -- 8,600,000 North Point MarketCenter 56,750,000 28,699,549 28,050,451 Mansell Crossing II 12,350,000 -- 12,350,000 Greenbrier MarketCenter 51,200,000 -- 51,200,000 Los Altos MarketCenter 32,800,000 -- 32,800,000 ------------ ----------- ------------ $283,750,000 $53,281,219 $230,468,781 ============ =========== ============
Under the Venture arrangements, Prudential committed to contribute cash to the Venture equal to the agreed upon net value of the Properties ($230,468,781) at dates specified in the agreements, although Prudential could have accelerated such funding had the Company so requested. The following table details the dates on which the cash was contributed and the percentages (including both direct and indirect interests) the Company and Prudential had, respectively, in the economics of the Properties following each contribution:
Total Cumulative Cousins Prudential Date Cash Contribution Percentage Percentage - ------------ ----------------- ---------- ---------- Closing Date $ 40 million 84.64% 15.36% 12/30/98 $105 million 59.68% 40.32% 3/30/99 $155 million 40.48% 59.52% 6/29/99 $205 million 21.28% 78.72% 9/29/99 $230.469 million 11.50% 88.50%
The structure of the Venture is as follows: CP Venture LLC, the parent entity, owns a 99% interest in each of CP Venture Two LLC ("Property Activity LLC") and CP Venture Three LLC ("Development Activity LLC"). The Company owns a 1% direct interest in Property Activity LLC and Prudential owns a 1% direct interest in Development Activity LLC. The contributed properties are owned and operated by Property Activity LLC. The Company has a 10.6061% interest in CP Venture LLC's 99% interest in Property Activity LLC, which, combined with its 1% direct interest, gives it a net interest of 11.5% in the economics of Property Activity LLC. Prudential has the remaining net interest of 88.5% in the economics of Property Activity LLC. Unless both parties agree otherwise, Property Activity LLC may not sell the contributed properties until the end of lock-out periods (generally three years for retail properties and four years for office and medical office properties). The cash contributed by Prudential was contributed to Development Activity LLC. To the extent such funds are not yet needed for development activity, Development Activity LLC can temporarily invest such funds; such potential investments may include temporary loans to the Company. As of December 31, 1999, the Venture had a note receivable from the Company of approximately $211 million. The Venture earns interest on the outstanding balance at the same rate of the Company's credit facility. Prudential is entitled to 10.6061% of CP Venture LLC's 99% share of the economics of Development Activity LLC, which combined with its 1% direct interest, entitles it to an overall net interest of 11.5% in the economics of Development Activity LLC. Prudential first receives a priority current return of 9.5% per annum on its share (11.5%) of the initial capital ($230.469 million) ("Initial Capital") of Development Activity LLC. Prudential also receives a liquidation preference whereby it is first entitled to, subject to capital account limitations, sufficient proceeds to allow it to achieve an overall 11.5% internal rate of return on its share of the Initial Capital of Development Activity LLC. After these preferences to Prudential, the Company has certain preferences, with the residual interests in the development activity being shared according to the interests of the parties. All Prudential priority current returns have been distributed to Prudential during the year. The cumulative priority current return of approximately $15.2 million to the Company has not been distributed as of December 31, 1999. CP Venture LLC has appointed the Company to serve as Development Manager and in such capacity to act for it in connection with its ownership of Development Activity LLC. CP Venture LLC has also appointed Prudential to serve as Property Manager and in such capacity to act for it in connection with its ownership of Property Activity LLC. Prudential appointed the Company to serve as property manager of the Properties for Property Activity LLC. The Company also serves as Administrative Manager of CP Venture LLC. Property Activity LLC is expected to continue to operate the contributed Properties. Development Activity LLC is expected to develop commercial real estate projects over time, as selected by the Development Manager. Development Activity LLC may also make acquisitions, which are anticipated to be redevelopment or value-added opportunities. Development Activity LLC is currently developing Mira Mesa MarketCenter, a 453,000 square foot retail center in San Diego, California. The parties anticipate that some of the projects currently under consideration by the Company will be undertaken by Development Activity LLC, although the Company has no obligation to make any particular opportunity available to Development Activity LLC. For financial reporting purposes, the Properties were deconsolidated and contributed to Property Activity LLC. Both Property Activity LLC and CP Venture LLC are being treated as unconsolidated joint ventures. Development Activity LLC is treated as a consolidated entity in the Company's financial statements. The Company has deferred the net gain on the contributed Properties and is recognizing this net gain as Gain on Sale of Investment Properties, Net of Applicable Income Tax Provision in the accompanying Consolidated Statements of Income as capital distributions of cash are made from Development Activity LLC to the Company or when the Properties initially contributed to Property Activity LLC are liquidated by Property Activity LLC. The liquidation of the Properties may be in the form of actual sales of the Properties or in the form of the depreciation of the Properties which have an average remaining life of 30 years. The total net deferred gain on the contributed Properties on the Closing Date was approximately $96.8 million over the cost of the Properties. Including depreciation recapture of $23.8 million, the total net deferred gain on the Closing Date was approximately $120.6 million which has been reduced by $4,123,000 and $536,000 in 1999 and 1998, respectively, and is included in Deferred Gain in the accompanying Consolidated Balance Sheets. 285 Venture, Ltd. - In March 1999, the Company and a commingled trust fund advised by J.P. Morgan Investment Management Inc. (the "J.P. Morgan Fund") formed 285 Venture, Ltd., each as 50% partners, for the purpose of developing 1155 Perimeter Center West, an approximately 361,000 rentable square foot office building complex in Atlanta, Georgia. The J.P. Morgan Fund contributed the approximately 6 acre site upon which 1155 Perimeter Center West is being developed. The land had an agreed-upon value of approximately $5.4 million which the Company matched with a cash contribution. Cousins Stone LP - Cousins Stone LP was formed on June 1, 1999 when CREC II's subsidiaries acquired Faison's 50% interest in Faison-Stone. Cousins Stone LP is a full-service real estate company headquartered in Dallas, Texas that specializes in third party property management and leasing of Class "A" office properties. Temco Associates - Temco Associates was formed in 1991 as a partnership between the Company (50%) and a subsidiary of Temple-Inland Inc. (50%). Temco Associates has an option through March 2006, with no carrying costs, to acquire the fee simple interest in approximately 10,300 acres in Paulding County, Georgia (northwest of Atlanta, Georgia). The partnership also has an option to acquire a timber rights interest only in approximately 22,000 acres. The options may be exercised in whole or in part over the option period, and the option price of the fee simple land was $929 per acre at January 1, 2000, escalating at 6% on January 1 of each succeeding year during the term of the option. During 1999, approximately 640 acres of the option related to the fee simple interest was exercised. Approximately 466 acres were simultaneously sold for gross profits of $2,458,000. Approximately 174 acres were acquired for development of the Bentwater residential community. Approximately 1,750 lots will be developed within Bentwater on an approximate total of 1,083 acres, the remainder of which will be acquired as needed through exercises of the option related to the fee simple interest. During 1998, approximately 328 acres of the option related to the fee simple interest was exercised. Approximately 83 acres were simultaneously sold for gross profits of approximately $192,000. The Cobb County YMCA had a three year option to purchase approximately 38 acres out of the total acres of the options exercised in 1998, which they exercised in December 1999. The remaining 207 acres were deeded in early 1999 to a golf course developer who is developing the golf course within Bentwater. Other - This category consists of several other joint ventures including: Cousins-Hines Partnerships - Through the Cousins-Hines partnerships, CREC effectively owns 9.8% of the One Ninety One Peachtree Tower in Atlanta, Georgia, subject to a preference in favor of the majority partner. This 1.2 million rentable square foot office building, which opened in December 1990, was developed in partnership with the Hines Interests Limited Partnership and the Dutch Institutional Holding Company ("DIHC"). In October 1997, Cornerstone Properties, Inc. purchased DIHC's interest in the partnership. Because CREC's effective ownership of this building is less than 20%, the Company accounts for its investment using the cost method of accounting, and therefore the above tables do not include the Company's share of One Ninety One Peachtree Tower. Additional Information - The Company recognized $9,362,000, $7,426,000 and $4,398,000 of development, construction, leasing, and management fees from unconsolidated joint ventures in 1999, 1998 and 1997, respectively. 6. STOCKHOLDERS' INVESTMENT 1999 Incentive Stock Plan: In May 1999, the stockholders of the Company approved the adoption of the 1999 Incentive Stock Plan (the "1999 Plan"), which plan, upon adoption, covered the issuance of 895,525 shares of common stock, all of which shares had been available for use under the 1995 Stock Incentive Plan, the Stock Plan for Outside Directors and the Stock Appreciation Right Plan (collectively the "Predecessor Plans"). As of December 31, 1999, 183,335 of these shares remain authorized to be awarded pursuant to the 1999 Plan, which allows awards of stock options, restricted stock ("stock grants") or stock appreciation rights ("SARs"). Upon adoption of the 1999 Plan, no additional shares of common stock can be issued under the Predecessor Plans. Stock Options - At December 31, 1999, 2,979,349 of stock options awarded to key employees and outside directors pursuant to both the 1999 Plan and the Predecessor Plans were outstanding. All stock options have a term of 10 years. Key employee stock options have a vesting period of 5 years under both the 1999 Plan and the Predecessor Plans. Outside director stock options are fully vested on the grant date under the 1999 Plan, but have a vesting period of 1 year under the Predecessor Plans. SARs - The Company has issued SARs to certain employees under one of the Predecessor Plans and the CREC Stock Appreciation Plan (the "SAR plans"). At December 31, 1999, 86,650 SARs were outstanding, and the Company is authorized to award an additional 1,110,354 SARs. Included in the Consolidated Statements of Income under the heading "stock appreciation right expense" are increases or decreases in accrued compensation expense to reflect the issuance of new SARs, vesting, changes in the market value of the common stock between periods, and forfeiture of non-vested SARs of terminated employees. At December 31, 1999 and 1998, the total amount accrued for SARs was $1,637,000 and $1,738,000, respectively. The following is a summary of stock option activity under the 1999 Plan, the Predecessor Plans and the SAR plans (in thousands, except per share amounts):
Number of Weighted Average Shares Exercise Price Per Share --------------------------- --------------------------------- 1999 1998 1997 1999 1998 1997 ---- ---- ---- ---- ---- ---- 1999 Plan and Predecessor Plans - ------------------------------- Outstanding, beginning of year 2,419 1,841 1,507 $ 24.56 $ 22.23 $ 17.95 Granted 697 678 580 $ 34.14 $ 30.31 $ 30.15 Exercised (83) (52) (231) $ 18.40 $ 17.12 $ 14.67 Forfeited (54) (48) (15) $ 25.15 $ 24.26 $ 19.01 --------------------------- Outstanding, end of year 2,979 2,419 1,841 $ 26.97 $ 24.56 $ 22.23 =========================== Shares exercisable at end of year 1,275 918 630 $ 21.74 $ 19.20 $ 17.04 =========================== SARs - ---- Outstanding, beginning of year 98 121 184 $ 14.88 $ 15.05 $ 14.74 Exercised (10) (23) (62) $ 13.52 $ 15.81 $ 14.09 Forfeited (1) -- (1) $ 13.72 $ -- $ 16.88 --------------------------- Outstanding, end of year 87 98 121 $ 15.05 $ 14.88 $ 15.05 =========================== Shares exercisable at end of year 87 98 103 $ 15.05 $ 14.88 $ 14.74 ===========================
The following table provides a breakdown by exercise price range of the number of shares, weighted average exercise price, and remaining contractual lives for all stock options and SARs outstanding at December 31, 1999 (in thousands, except per share amounts and option life):
For Outstanding Options/SARs Exercise Weighted Weighted Average Price Average Contractual Life Range Outstanding Exercisable Exercise Price (in years) ----- ----------- ----------- -------------- ---------------- 1999 Plan and Predecessor Plans - ------------------------------- $13.25 to $16.30 446 446 $ 15.50 4.0 $16.31 to $23.00 627 432 $ 20.82 6.5 $23.01 to $30.375 1,229 393 $ 30.22 8.4 $30.376 to $35.00 677 4 $ 34.29 9.9 ---------------------------------------------------- Total 2,979 1,275 $ 26.97 7.7 ==================================================== SARs - ---- $10.78 to $13.75 33 33 $ 12.74 1.7 $13.76 to $16.875 54 54 $ 16.47 3.0 ---------------------------------------------------- Total 87 87 $ 15.05 2.5 ====================================================
Stock Grants - As indicated above, the 1999 Plan provides for stock grants in addition to awards of stock options and SARs. The stock grants may be subject to specified performance and vesting requirements. As of December 31, 1999, 125,190 stock grants have been awarded, of which 10,400 shares were awarded in lieu of 1995 cash bonuses, 100,000 shares were awarded in 1995 subject to specified performance and vesting requirements, and 14,790 shares were awarded in 1999 subject to specified vesting requirements. The estimated cost of the 100,000 shares, which will not be issued until all requirements have been met, is being accrued over the five year performance and vesting period, and at December 31, 1999 and 1998, $2,618,000 and $1,914,000 was accrued, respectively. The estimated cost of the 14,790 shares is being accrued over the 3 year vesting period, and at December 31, 1999, $83,000 was accrued. Outside directors can elect to receive any portion of their director fees in stock, based on 95% of the market price. Outside directors elected to receive 3,526, 3,882 and 4,638 shares of stock in lieu of cash for director fees in 1999, 1998 and 1997, respectively. SFAS No. 123 Pro Forma Disclosures: The Company has elected to account for its stock-based compensation plans under Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees," which requires the recording of compensation expense for some, but not all, stock-based compensation, rather than the alternative accounting permitted by SFAS No. 123, "Accounting for Stock-Based Compensation." For purposes of the pro forma disclosures required by SFAS No. 123, the Company has computed the value of all stock and stock option awards granted during 1999, 1998 and 1997 using the Black-Scholes option pricing model with the following weighted-average assumptions and results: 1999 1998 1997 ------- ------- ------- Assumptions - ----------- Risk-free interest rate 6.36% 4.96% 5.93% Assumed dividend yield 5.28% 5.36% 4.80% Assumed lives of option awards 8 years 8 years 8 years Assumed volatility 0.201 0.191 0.202 Results - ------- Weighted average fair value of options granted $ 5.49 $ 3.75 $ 5.12 The Black-Scholes option valuation model was developed for use in estimating the fair value of traded options which have no vesting restrictions and are fully transferable. In addition, option valuation models require the input of highly subjective assumptions. In the Company's opinion, because the Company's stock-based compensation awards have characteristics significantly different from traded options, and because changes in the subjective assumptions can materially affect the fair value estimate, the results obtained from the valuation model do not necessarily provide a reliable single measure of the value of its stock-based compensation awards. If the Company had accounted for its stock-based compensation awards in 1999, 1998 and 1997 in accordance with SFAS No. 123, pro forma results would have been as follows ($ in thousands, except per share amounts): 1999 1998 1997 ---- ---- ---- Pro forma net income $102,577 $43,834 $36,769 Pro forma basic net income per share $ 3.20 $ 1.39 $ 1.26 Pro forma diluted net income per share $ 3.14 $ 1.37 $ 1.24 Because the SFAS No. 123 method of accounting has not been applied to awards granted prior to January 1, 1995, the pro forma compensation adjustments used to derive the above results are not likely to be representative of the pro forma compensation adjustments to be reported in future years. Purchase of Treasury Stock: In February 1999, the Board of Directors of the Company authorized the Company to repurchase up to 1 million shares of common stock prior to January 1, 2001. During 1999, the Company repurchased 153,600 shares of common stock for $4,990,000.
Per Share Data: 1999 1998 1997 ------ ------ ------ Weighted average shares 32,092 31,602 29,267 Dilutive potential common shares 595 438 426 ------------------------ Adjusted weighted average shares 32,687 32,040 29,693 ======================== Anti-dilutive options not included 677 1,207 565 ========================
Ownership Limitations: In order to maintain Cousins' qualification as a REIT, Cousins' Articles of Incorporation include certain restrictions on the ownership of more than 3.9% of the Company's common stock.
Distribution of REIT Taxable Income: The following is a reconciliation between dividends declared and dividends applied in 1998 and 1997 and estimated to be applied in 1999 to meet REIT distribution requirements ($ in thousands): 1999 1998 1997 ------- ------- ------- Dividends declared $53,886 $47,064 $37,606 Additional dividends paid deduction due to 5% discount on dividends reinvested 570 549 257 That portion of dividends declared in current year, and paid in current year, which was applied to the prior year distribution requirements (10,146) (7,644) (4,816) That portion of dividends declared in subsequent year, and paid in subsequent year, which will apply to current year 6,238 10,146 7,644 --------------------------- Dividends applied to meet current year REIT distribution requirements $50,548 $50,115 $40,691 ===========================
Tax Status of Dividends: Dividends applied to meet REIT distribution requirements were equal to Cousins' taxable income (see Note 7). Since electing to qualify as a REIT in 1987, Cousins has had no accumulated undistributed taxable income. In 1999, the Company designated as 20% capital gain dividends 1% of the dividend paid December 22, 1999. In 1998, the Company designated as 20% capital gain dividends 5% of the dividend paid December 22, 1998. In 1997, the Company designated as 28% capital gain dividends 49% of the dividend paid February 10, 1997. All other dividends paid in 1999, 1998 and 1997 were taxable as ordinary income dividends. In addition, in 1999, 1998 and 1997 an amount calculated as 1.54%, 1.74% and 1.91% of total dividends, respectively, was an "adjustment attributed to depreciation of tangible property placed in service after 1986" for alternative minimum tax purposes. This amount was passed through to stockholders and must be used as an item of adjustment in determining each stockholder's alternative minimum taxable income.
7. INCOME TAXES In 1999, 1998 and 1997, because Cousins qualified as a REIT and distributed all of its taxable income (see Note 6), it incurred no federal income tax liability. The differences between taxable income as reported on Cousins' tax return (estimated 1999 and actual 1998 and 1997) and Consolidated Net Income as reported herein are as follows ($ in thousands): 1999 1998 1997 -------- ------- ------- Consolidated net income $104,082 $45,299 $37,277 Consolidating adjustments (24,231) (2,759) (1,218) Less CREC net (income) loss (6,485) 540 (482) Less CREC II net income (937) -- -- -------------------------------- Cousins net income for financial reporting purposes 72,429 43,080 35,577 Adjustments arising from: Sales of investment properties (56,315) (3,940) 1,606 Income from unconsolidated joint ventures (principally depreciation, revenue recognition, and operational timing differences) 12,656 (453) 1,112 Rental income recognition 731 209 438 Interest income recognition 359 372 566 Property taxes deferred 1,060 1,096 -- Interest expense 11,447 4,934 1,401 Compensation expense under stock option and SAR plans (538) 19 (2,578) Depreciation 6,650 4,913 4,809 Other 2,069 (115) (2,240) -------------------------------- Cousins taxable income $ 50,548 $50,115 $40,691 ================================ The consolidated provision (benefit) for income taxes is composed of the following ($ in thousands): 1999 1998 1997 -------- ------- ------- CREC and CREC II and their wholly owned subsidiaries: Currently payable: Federal $ 2,778 $ 33 $ 46 State 282 -- -- -------------------------------- 3,060 33 46 -------------------------------- Adjustments arising from: Income from unconsolidated joint ventures (298) 356 304 Operating loss carryforward 1,405 574 751 Stock appreciation right expense 4 (132) 119 Other 340 (1,347) (922) -------------------------------- 1,451 (549) 252 -------------------------------- CREC and CREC II provision (benefit) for income taxes 4,511 (516) 298 Cousins (benefit) provision for state income taxes (40) 379 72 Less provision applicable to gain on sale of investment properties (2,029) (11) (1,897) -------------------------------- Consolidated provision (benefit) applicable to income from operations $ 2,442 $ (148) $(1,527) ================================
The net income tax provision (benefit) differs from the amount computed by applying the statutory federal income tax rate to CREC's and CREC II's income (loss) before taxes as follows ($ in thousands): 1999 1998 1997 --------------- --------------- --------------- Amount Rate Amount Rate Amount Rate ------ ---- ------ ---- ------ ---- Federal income tax provision (benefit) $4,058 34% $(359) 34% $ 265 34% State income tax provision (benefit), net of federal income tax effect 477 4 (42) 4 31 4 Other (24) -- (115) 11 2 -- ------------------------------------------------------- CREC and CREC II provision (benefit) for income taxes 4,511 38% (516) 49% 298 38% === === === Cousins (benefit) provision for state income taxes (40) 379 72 Less provision applicable to gain on sale of investment properties (2,029) (11) (1,897) ------ ----- ------- Consolidated provision (benefit) applicable to income from operations $2,442 $(148) $(1,527) ====== ===== =======
The components of CREC and CREC II's net deferred tax liability are as follows ($ in thousands): CREC and CREC II ----------------- 1999 1998 ------- ------ Deferred tax assets $ 4,112 $5,638 Deferred tax liabilities (6,206) (5,819) ----------------- Net deferred tax liability $(2,094) $ (181) ================= The tax effect of significant temporary differences representing CREC and CREC II's deferred tax assets and liabilities are as follows ($ in thousands): CREC and CREC II ---------------- 1999 1998 ------- ------ Operating loss carryforward $ - $1,877 Income from unconsolidated joint ventures (3,759) (4,058) Stock appreciation right expense 949 952 Residential lot sales, net 2,198 1,674 Interest capitalization (1,510) (1,464) Other 28 838 ----------------- $(2,094) $ (181) ================= 8. PROPERTY TRANSACTIONS Office Division In January 1999, the Company purchased the land for and commenced construction of 1900 Duke Street, an approximately 97,000 rentable square foot office building in suburban Washington, D.C. In March 1999, 285 Venture, Ltd. began construction of 1155 Perimeter Center West, an approximately 361,000 rentable square foot office building in Atlanta, Georgia (see Note 5). In May 1999, 333 John Carlyle, an approximately 153,000 rentable square foot office building in suburban Washington, D.C., became partially operational for financial reporting purposes. In June 1999, the Company acquired Inforum, a 987,000 rentable square foot office building in downtown Atlanta, Georgia, for $71 million by completing a tax-deferred exchange with the proceeds ($69 million) from the sale of the Company's 50% interest in Haywood Mall. In September 1999, AT&T Wireless Services Headquarters, an approximately 222,000 rentable square foot office building in suburban Los Angeles, California, became partially operational for financial reporting purposes. Retail Division On February 1, 1999, CREC sold Abbotts Bridge Station, an approximately 83,000 square foot neighborhood retail center in suburban Atlanta, Georgia for $15.7 million, which was approximately $5.2 million over the cost of the center. Including depreciation recapture of approximately $.3 million and net of an income tax provision of approximately $2.0 million, the net gain on the sale was approximately $3.5 million. In April 1999, The Shops at World Golf Village, an approximately 80,000 square foot retail center owned by Brad Cous (see Note 5), became partially operational for financial reporting purposes. In June 1999, CP Venture Three LLC purchased the land for and commenced construction of Mira Mesa MarketCenter, an approximately 453,000 square foot retail center in San Diego, California (see Note 5). In September 1999, The Avenue East Cobb, an approximately 225,000 square foot retail specialty center in suburban Atlanta, Georgia, became partially operational for financial reporting purposes. Also in September 1999, the Company purchased the land for and commenced construction of Salem Road Station, an approximately 67,000 square foot neighborhood retail center in suburban Atlanta, Georgia. Medical Office Division In March 1999, AtheroGenics, an approximately 50,000 rentable square foot office building and laboratory in suburban Atlanta, Georgia, became fully operational for financial reporting purposes. In April 1999, Meridian Mark Plaza, an approximately 159,000 rentable square foot medical office building in Atlanta, Georgia, became partially operational for financial reporting purposes. In September 1999, Northside/Alpharetta II, an approximately 198,000 rentable square foot medical office building in suburban Atlanta, Georgia, became partially operational for financial reporting purposes. Land Division The Company is currently developing five residential communities in suburban Atlanta, Georgia, including three in which development commenced in 1994, one in 1995 and one in 1996. These developments currently include land on which approximately 1,632 lots are being or were developed, of which 292, 344 and 260 lots were sold in 1999, 1998 and 1997, respectively. In November 1998, Temco Associates began development of the Bentwater residential community, which will consist of approximately 1,750 lots on approximately 1,083 acres (see Note 5). Temco Associates sold 106 lots in 1999. 9. CONSOLIDATED STATEMENTS OF CASH FLOWS -SUPPLEMENTAL INFORMATION Interest paid (net of amounts capitalized) (see Note 4) and income taxes paid (net of refunds) were as follows ($ in thousands): 1999 1998 1997 ------ ------- ------- Interest paid $1,147 $11,258 $14,118 Income taxes paid, net of $110 and $5 refunded in 1999 and 1998, respectively $1 ,245 $ 110 $ 46 Significant non-cash financing and investing activities included the following: a. In 1999, 1998 and 1997, approximately $65,798,000, $29,939,000 and $87,658,000, respectively, were transferred from Projects Under Construction to Operating Properties. b. In 1998 and 1997, approximately $1,229,000 and $1,553,000, respectively, were transferred from Land Held for Investment or Future Development to Operating Properties. In 1998 approximately $14,115,000 was transferred from Land Held for Investment or Future Development to Projects Under Construction. c. In 1999, approximately $611,000 was transferred from Projects Under Construction to Land Held for Investment or Future Development. d. In June 1998, in conjunction with the acquisition of Northside/Alpharetta I, a mortgage note payable of approximately $10,610,000 was assumed. e. In November 1998, in conjunction with the formation of the Venture with Prudential (see Note 5), the Company contributed nine properties, certain of which were subject to mortgages, and received net cash of approximately $125,469,000 and $103,025,000 in 1999 and 1998, respectively. The non-cash activities related to the formation of the Venture are as follows: 1999 1998 ----------- ------------ Decrease in: Operating properties, net $ -- $137,746,000 Projects under construction -- 19,684,000 Notes and other receivables -- 3,771,000 Notes payable -- (53,281,000) (Increase) decrease in: Investment in unconsolidated joint ventures 111,040,000 (137,544,000) Minority interests 14,429,000 12,075,000 Deferred gain -- 120,574,000 --------------------------------- Net cash received in formation of venture $125,469,000 $103,025,000 ================================= 10. RENTAL PROPERTY REVENUES The Company's leases typically contain escalation provisions and provisions requiring tenants to pay a pro rata share of operating expenses. The leases typically include renewal options and are classified and accounted for as operating leases. At December 31, 1999, future minimum rentals to be received by consolidated entities under existing non-cancelable leases, excluding tenants' current pro rata share of operating expenses, are as follows ($ in thousands): Office and Medical Retail Office Total -------- ---------- ---------- 2000 $ 24,609 $ 63,176 $ 87,785 2001 29,037 64,472 93,509 2002 28,348 62,639 90,987 2003 28,343 61,207 89,550 2004 27,017 57,487 84,504 Subsequent to 2004 249,536 328,313 577,849 ---------------------------------- $386,890 $637,294 $1,024,184 ================================== 11. REPORTABLE SEGMENTS The Company has four reportable segments: Office Division, Retail Division, Medical Office Division and Land Division. The Office Division, Retail Division and Medical Office Division develop, lease and manage office buildings, retail centers and medical office buildings, respectively. The Land Division owns various tracts of strategically located land which are being held for future development. The Land Division also develops single-family residential communities which are parceled into lots and sold to various home builders. The accounting policies of the segments are the same as those described in Significant Accounting Policies (see Note 1). The management of the Company evaluates performance of its reportable segments based on Funds From Operations ("FFO"). The Company calculates its FFO using the National Association of Real Estate Investment Trusts definition of FFO adjusted to (i) eliminate the recognition of rental revenues on a straight-line basis, (ii) reflect stock appreciation right expense on a cash basis and (iii) recognize certain fee income as cash is received rather than when recognized in the financial statements. The Company believes its FFO presentation more properly reflects its operating results. The Company's reportable segments are broken down based on what type of product the division provides. The divisions are managed separately because each product they provide has separate and distinct development issues, leasing and/or sales strategies and management issues. The notations (100%) and (JV) used in the following tables indicate wholly-owned and unconsolidated joint ventures, respectively, and all amounts are in thousands.
Office Retail Medical Land Unallocated 1999 Division Division Office Division Division and Other Total - ---- -------- -------- --------------- -------- ----------- -------- Rental property revenues (100%) $ 35,318 $ 19,836 $ 6,450 $ -- $ 233 $ 61,837 Rental property revenues (JV) 61,996 10,001 444 -- -- 72,441 Development income, management fees and leasing and other fees (100%) 10,305 1,112 2,113 369 -- 13,899 Development income, management fees and leasing and other fees (JV) 3,858 -- -- -- -- 3,858 Other income (100%) -- 4,077 -- 13,780 3,588 21,445 Other income (JV) -- -- -- 3,545 474 4,019 ----------------------------------------------------------------------------- Total revenues 111,477 35,026 9,007 17,694 4,295 177,499 ----------------------------------------------------------------------------- Rental property operating expenses (100%) 13,279 4,285 1,859 -- (23) 19,400 Rental property operating expenses (JV) 17,612 2,374 150 -- -- 20,136 Other expenses (100%) -- 3,366 -- 12,342 21,267 36,975 Other expenses (JV) 1,968 -- -- 2,274 15,695 19,937 ----------------------------------------------------------------------------- Total expenses 32,859 10,025 2,009 14,616 36,939 96,448 ----------------------------------------------------------------------------- Consolidated funds from operations 78,618 25,001 6,998 3,078 (32,644) 81,051 ----------------------------------------------------------------------------- Depreciation and amortization (100%) (10,154) (3,818) (1,638) -- (157) (15,767) Depreciation and amortization (JV) (17,078) (2,997) (137) -- -- (20,212) Effect of the recognition of rental revenues on a straight-line basis (100%) 643 -- -- -- -- 643 Effect of the recognition of rental revenues on a straight-line basis (JV) (440) (61) -- -- -- (501) Adjustment to reflect stock appreciation right expense on an accrual basis -- -- -- -- 101 101 Gain on sale of investment properties, net of applicable income tax provision -- -- -- -- 58,767 58,767 ----------------------------------------------------------------------------- Net income 51,589 18,125 5,223 3,078 26,067 104,082 ----------------------------------------------------------------------------- Provision for income taxes from operations -- -- -- -- 2,442 2,442 ----------------------------------------------------------------------------- Income from operations before income taxes $ 51,589 $ 18,125 $ 5,223 $ 3,078 $28,509 $106,524 ============================================================================= Total assets $557,473 $240,258 $78,857 $11,496 $44,848 $932,932 ============================================================================= Investment in unconsolidated joint ventures $126,843 $ 17,179 $ 1,111 $ 6,600 $ 4 $151,737 ============================================================================= Capital expenditures $210,828 $ 23,663 $97,535 $ 5,935 $ -- $337,961 =============================================================================
Reconciliation to Consolidated Revenues - --------------------------------------- 1999 1998 1997 ------- ------- ------- Rental property revenues (100%) $61,837 $67,378 $61,812 Effect of the recognition of rental revenues on a straight-line basis (100%) 643 348 440 Development income, management fees and leasing and other fees 13,899 9,578 7,291 Residential lot and outparcel sales 17,857 16,732 12,847 Interest and other 3,588 4,275 3,609 --------------------------------- Total consolidated revenues $97,824 $98,311 $85,999 =================================
Office Retail Medical Land Unallocated 1998 Division Division Office Division Division and Other Total - ---- -------- -------- --------------- -------- ----------- -------- Rental property revenues (100%) $ 33,011 $ 31,315 $ 2,579 $ -- $ 473 $ 67,378 Rental property revenues (JV) 49,129 10,168 149 -- -- 59,446 Development income, management fees and leasing and other fees 7,867 692 1,019 -- -- 9,578 Other income (100%) -- -- -- 16,732 4,275 21,007 Other income (JV) -- -- -- 181 294 475 ----------------------------------------------------------------------------- Total revenues 90,007 42,175 3,747 16,913 5,042 157,884 ----------------------------------------------------------------------------- Rental property operating expenses (100%) 10,319 6,308 913 -- 162 17,702 Rental property operating expenses (JV) 14,111 2,933 52 -- -- 17,096 Other expenses (100%) -- -- -- 16,414 26,602 43,016 Other expenses (JV) -- -- -- 80 9,138 9,218 ----------------------------------------------------------------------------- Total expenses 24,430 9,241 965 16,494 35,902 87,032 ----------------------------------------------------------------------------- Consolidated funds from operations 65,577 32,934 2,782 419 (30,860) 70,852 ----------------------------------------------------------------------------- Depreciation and amortization (100%) (8,040) (5,742) (457) -- (430) (14,669) Depreciation and amortization (JV) (12,000) (1,670) (47) -- -- (13,717) Effect of the recognition of rental revenues on a straight-line basis (100%) 348 -- -- -- -- 348 Effect of the recognition of rental revenues on a straight-line basis (JV) (1,578) 111 -- -- -- (1,467) Adjustment to reflect stock appreciation right expense on an accrual basis -- -- -- -- 8 8 Gain on sale of investment properties, net of applicable income tax provision -- -- -- -- 3,944 3,944 ----------------------------------------------------------------------------- Net income 44,307 25,633 2,278 419 (27,338) 45,299 ----------------------------------------------------------------------------- Benefit for income taxes from operations -- -- -- -- (148) (148) ----------------------------------------------------------------------------- Income from operations before income taxes $ 44,307 $ 25,633 $ 2,278 $ 419 $(27,486) $ 45,151 ============================================================================= Total assets $386,414 $255,207 $49,437 $ 9,912 $ 51,888 $752,858 ============================================================================= Investment in unconsolidated joint ventures $158,720 $ 99,661 $ 5,183 $ 1,082 $ 2 $264,648 ============================================================================= Capital expenditures $104,266 $ 55,161 $ 25,811 $ 9,015 $ -- $194,253 =============================================================================
Office Retail Medical Land Unallocated 1997 Division Division Office Division Division and Other Total - ---- -------- -------- --------------- -------- ----------- -------- Rental property revenues (100%) $ 30,353 $ 30,514 $ 476 $ -- $ 469 $ 61,812 Rental property revenues (JV) 44,318 6,892 -- -- -- 51,210 Development income, management fees and leasing and other fees 5,081 1,310 887 -- 13 7,291 Other income (100%) -- -- -- 12,847 3,609 16,456 Other income (JV) -- -- -- 52 217 269 ----------------------------------------------------------------------------- Total revenues 79,752 38,716 1,363 12,899 4,308 137,038 ----------------------------------------------------------------------------- Rental property operating expenses (100%) 9,286 5,766 145 -- 174 15,371 Rental property operating expenses (JV) 12,143 2,103 -- -- -- 14,246 Other expenses (100%) -- -- -- 12,523 29,352 41,875 Other expenses (JV) -- -- -- 41 9,959 10,000 ----------------------------------------------------------------------------- Total expenses 21,429 7,869 145 12,564 39,485 81,492 ----------------------------------------------------------------------------- Consolidated funds from operations 58,323 30,847 1,218 335 (35,177) 55,546 ----------------------------------------------------------------------------- Depreciation and amortization (100%) (7,465) (5,456) (104) -- (586) (13,611) Depreciation and amortization (JV) (9,168) (1,159) -- -- (7) (10,334) Effect of the recognition of rental revenues on a straight-line basis (100%) 440 -- -- -- -- 440 Effect of the recognition of rental revenues on a straight-line basis (JV) (1,438) -- -- -- -- (1,438) Adjustment to reflect stock appreciation right expense on an accrual basis -- -- -- -- 702 702 Gain on sale of investment properties, net of applicable income tax provision -- -- -- -- 5,972 5,972 ----------------------------------------------------------------------------- Net income 40,692 24,232 1,114 335 (29,096) 37,277 ----------------------------------------------------------------------------- Benefit for income taxes from operations -- -- -- -- (1,527) (1,527) ----------------------------------------------------------------------------- Income from operations before income taxes $ 40,692 $ 24,232 $ 1,114 $ 335 $(30,623) $ 35,750 ============================================================================= Total assets $294,306 $212,876 $13,143 $16,407 $ 81,007 $617,739 ============================================================================= Investment in unconsolidated joint ventures $ 98,425 $ 20,784 $ -- $ 985 $ 4 $120,198 ============================================================================= Capital expenditures $ 34,395 $ 29,635 $ 7,516 $ 9,068 $ 14 $ 80,628 =============================================================================
FIVE YEAR SUMMARY OF SELECTED FINANCIAL DATA - ------------------------------------------------------------------------------- ($ in thousands, except per share amounts) 1999 1998 1997 1996 1995 -------- -------- -------- -------- -------- Rental property revenues $ 62,480 $ 67,726 $ 62,252 $ 33,112 $ 19,348 Fees 13,899 9,578 7,291 6,019 7,884 Residential lot and outparcel sales 17,857 16,732 12,847 14,145 9,040 Interest and other 3,588 4,275 3,609 5,256 4,764 ---------------------------------------------------------------------- Total revenues 97,824 98,311 85,999 58,532 41,036 ---------------------------------------------------------------------- Income from unconsolidated joint ventures 19,637 18,423 15,461 17,204 14,113 ---------------------------------------------------------------------- Rental property operating expenses 19,087 17,702 15,371 7,616 4,681 Depreciation and amortization 16,859 15,173 14,046 7,219 4,516 Stock appreciation right expense 108 330 204 2,154 1,298 Residential lot and outparcel cost of sales 14,897 15,514 11,917 13,676 8,407 Interest expense 600 11,558 14,126 6,546 687 General, administrative, and other expenses 18,153 15,250 16,018 12,016 10,333 ---------------------------------------------------------------------- Total expenses 69,704 75,527 71,682 49,227 29,922 Provision (benefit) for income taxes from operations 2,442 (148) (1,527) (1,703) 747 Gain on sale of investment properties, net of applicable income tax provision 58,767 3,944 5,972 12,804 1,862 ---------------------------------------------------------------------- Net income $104,082 $ 45,299 $ 37,277 $ 41,016 $ 26,342 ====================================================================== Basic net income per share $ 3.24 $ 1.43 $ 1.27 $ 1.44 $ .94 ====================================================================== Diluted net income per share $ 3.18 $ 1.41 $ 1.26 $ 1.43 $ .94 ====================================================================== Cash dividends declared per share $ 1.68 $ 1.49 $ 1.29 $ 1.12 $ .99 ====================================================================== Total assets $932,932 $752,858 $617,739 $556,644 $418,006 Notes payable 312,257 198,858 226,348 231,831 113,434 Stockholders' investment 437,722 379,865 370,674 299,184 277,678 Shares outstanding at year-end 32,175 31,887 31,472 28,920 28,223
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS - -------------------------------------------------------------------------------- To Cousins Properties Incorporated: We have audited the accompanying consolidated balance sheets of Cousins Properties Incorporated (a Georgia corporation) and consolidated entities as of December 31, 1999 and 1998, and the related consolidated statements of income, stockholders' investment and cash flows for each of the three years in the period ended December 31, 1999. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We did not audit the financial statements of CSC Associates, L.P. as of December 31, 1999 and 1998 and for each of the three years in the period ended December 31, 1999 and Haywood Mall as of December 31, 1998 and for each of the two years in the period ended December 31, 1998 which statements combined reflect assets of 18% and 23%, respectively, of the joint venture totals as of December 31, 1999 and 1998 and revenues of 23%, 46% and 50% of the 1999, 1998 and 1997 joint venture totals, respectively. Those statements were audited by other auditors whose reports have been furnished to us and our opinion, insofar as it relates to the amounts included for those entities as of December 31, 1999 and 1998 and for each of the three years in the period ended December 31, 1999, is based solely on the reports of the other auditors. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits and the reports of other auditors provide a reasonable basis for our opinion. In our opinion, based on our audits and the reports of other auditors, the financial statements referred to above present fairly, in all material respects, the financial position of Cousins Properties Incorporated and consolidated entities as of December 31, 1999 and 1998 and the results of their operations and their cash flows for each of the three years in the period ended December 31, 1999 in conformity with generally accepted accounting principles. ARTHUR ANDERSEN LLP Atlanta, Georgia February 8, 2000 Cousins Properties Incorporated and Consolidated Entities MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - -------------------------------------------------------------------------------- Results of Operations For The Three Years Ended December 31, 1999 General. Historically, the Company's financial results have been significantly affected by sale transactions and the fees generated by, and start-up operations of, major real estate developments, which transactions and developments do not necessarily recur. Accordingly, the Company's historical financial statements may not be indicative of future operating results. The notes referenced in the discussion below are the "Notes to Consolidated Financial Statements" included in this annual report. Rental Property Revenues and Operating Expenses. Rental property revenues increased from $62,252,000 in 1997 to $67,726,000 in 1998 and decreased to $62,480,000 in 1999. Rental property revenues increased approximately $2,602,000 in 1999 from the Company's office division. The June 1999 acquisition of Inforum, a 987,000 rentable square foot office building located in downtown Atlanta, Georgia, increased rental property revenues by approximately $5,656,000. Two office buildings, 333 John Carlyle and AT&T Wireless Services Headquarters, became partially operational for financial reporting purposes in May 1999 and September 1999, respectively, which contributed approximately $2,178,000 and $2,506,000, respectively, to the increase. 333 North Point Center East became partially operational in June 1998 which contributed approximately $1,468,000 to the 1999 increase. The June 1998 acquisition of Lakeshore Park Plaza increased rental property revenues approximately $1,273,000 in 1999. The increase in office rental property revenues was partially offset by decreases of approximately $5,602,000, $2,474,000, $2,528,000 and $499,000, respectively, due to the contribution of First Union Tower, 100 North Point Center East, 200 North Point Center East and Grandview II to CP Venture Two LLC in November 1998, which revenue is included in Income from Unconsolidated Joint Ventures from the date of contribution (see Note 5). Rental property revenues from the Company's retail division decreased approximately $11,479,000 in 1999. The decrease was mainly due to the contribution of North Point MarketCenter, Greenbrier MarketCenter, Los Altos MarketCenter and Mansell Crossing Phase II to CP Venture Two LLC in November 1998 (see Note 5), which decreased rental property revenues by approximately $4,904,000, $4,502,000, $2,990,000 and $1,190,000, respectively, in 1999. Rental property revenues from these properties are included in Income from Unconsolidated Joint Ventures from the date of contribution. The sale of Abbotts Bridge Station in February 1999 also contributed approximately $1,305,000 to the decrease in 1999. The decrease was partially offset by an increase of approximately $1,681,000 in rental property revenues from Laguna Niguel Promenade, which became partially operational for financial reporting purposes in July 1998, and by approximately $1,431,000 from The Avenue East Cobb, which became partially operational for financial reporting purposes in September 1999. Rental property revenues from the Company's medical office division increased approximately $3,871,000 in 1999. Meridian Mark Plaza became partially operational for financial reporting purposes in April 1999 which contributed approximately $2,441,000 to the increase. AtheroGenics and Northside/Alpharetta II became partially operational for financial reporting purposes in March 1999 and September 1999, respectively, which contributed approximately $780,000 and $636,000, respectively, to the increase. Northside/Alpharetta I, acquired in June 1998, contributed approximately $1,152,000 to the increase in 1999. The increase was partially offset by approximately $1,141,000 due to the contribution of Presbyterian Medical Plaza at University to CP Venture Two LLC in November 1998 (see Note 5). Rental property revenues from the Company's office division increased approximately $2,566,000 in 1998. The aforementioned June 1998 acquisition of Lakeshore Park Plaza increased rental property revenues approximately $1,354,000 in 1998. Two office buildings, 333 North Point Center East and Grandview II, became partially operational for financial reporting purposes in June 1998 and August 1998, respectively, which contributed approximately $1,499,000 and $499,000, respectively, to the increase. The increase from Grandview II would have been higher by approximately $296,000, but this property was contributed to CP Venture Two LLC in November 1998. Rental property revenues also increased approximately $242,000 due to increased occupancy during 1998 at 101 Independence Center, which was 94% leased at December 31, 1997 and 98% leased at December 31, 1998. Partially offsetting the increase in 1998 were decreases in rental property revenues of approximately $935,000, $266,000 and $97,000 from the contribution of the other office properties, First Union Tower, 100 North Point Center East and 200 North Point Center East, respectively, to CP Venture Two LLC in November 1998. Rental property revenues from the Company's retail division increased approximately $801,000 in 1998. Two retail centers, Abbotts Bridge Station and Laguna Niguel Promenade, which became partially operational for financial reporting purposes in January 1998 and July 1998, respectively, increased rental property revenues in 1998 approximately $1,462,000 and $788,000, respectively. Rental property revenues increased approximately $362,000 from Presidential MarketCenter in 1998 due to the second expansion of the center in April 1997. The increase in rental property revenues from the retail division was partially offset (a decrease of approximately $990,000) by the aforementioned contribution of four retail properties to CP Venture Two LLC in November 1998. The increase in rental property revenues was also partially offset by decreases in rental property revenues of approximately $644,000 and $449,000 from Rivermont Station and Lovejoy Station, respectively, both of which were sold in July 1997. Rental property revenues from the Company's medical office division increased approximately $2,103,000 in 1998 due to the June 1998 acquisition of Northside/Alpharetta I ($1,438,000) and to Presbyterian Medical Plaza at University ($665,000), which became partially operational in August 1997. The increase from Presbyterian Medical Plaza at University would have been higher by $178,000, but the property was contributed to CP Venture Two LLC in November 1998. Rental property operating expenses increased from $15,731,000 in 1997 to $17,702,000 and $19,087,000 in 1998 and 1999, respectively. The increase in 1999 was due primarily to the aforementioned office buildings, medical office buildings and retail centers becoming partially operational, as well as the acquisition of Inforum in June 1999. The increase in 1999 was partially offset by approximately $183,000 due to the February 1999 sale of Abbotts Bridge Station. The increase in 1998 was primarily related to the aforementioned retail centers and office buildings becoming operational, as well as the acquisitions of Lakeshore Park Plaza and Northside/Alpharetta I. The increases in both 1998 and 1999 were partially offset by the contribution of nine properties to CP Venture Two LLC in November 1998, which rental property operating expenses from these nine properties was recognized by the Company through Income from Unconsolidated Joint Ventures from the date of contribution (see Note 5). Development Income. Development income decreased from $3,123,000 in 1997 to $3,007,000 in 1998 and then increased in 1999 to $6,165,000. The increase in development income in 1999 was partially due to development fees recognized from three of the Company's ventures which are developing Gateway Village ($978,000), 1155 Perimeter Center West ($939,000) and the Bentwater residential development ($369,000). Additionally, development income increased approximately $908,000 from the Crawford Long Hospital campus redevelopment and joint venture medical office building. The Company also recognized development income of approximately $706,000 for a build-to-suit for Walgreens on an outparcel at Colonial Plaza MarketCenter and approximately $323,000 from the third party development of Cox Enterprises' corporate headquarters. This increase was partially offset by approximately $605,000 which was recognized in 1998 from Brad Cous for the development of The Shops at World Golf Village. Development fees from Cousins LORET for the development of The Pinnacle also decreased by approximately $310,000, which also partially offset the increase in 1999. Management Fees. Management fees increased from $3,448,000 in 1997 to $3,761,000 and $4,743,000 in 1998 and 1999, respectively. Management fees increased in both 1998 and 1999 due to lease-up of certain properties at several joint ventures from which management fees are received and from the formation of CP Venture Two LLC (see Note 5). Leasing and Other Fees. Leasing and other fees increased from $720,000 in 1997 to $2,810,000 and $2,991,000 in 1998 and 1999, respectively. Leasing fees increased in 1999 by approximately $987,000 due to a lease signed by CREC for a lease at the Inforum office building executed prior to the Company's acquisition of the building. Approximately $616,000 of leasing fees were also recognized in 1999 from 285 Venture, Ltd. for leasing the 1155 Perimeter Center West office building. Partially offsetting the increase in 1999 was a decrease of approximately $976,000 from Wildwood Associates, primarily due to leasing fees recognized in 1998 mainly related to the lease-up of the 4200 Wildwood Parkway Building. Leasing fees also decreased approximately $367,000 from CSC due to a higher level of leasing fees recognized in 1998 due to increased occupancy at Bank of America Plaza. The increase in 1998 was partially due to an increase of approximately $1,065,000 of leasing fees related to Wildwood Office Park, primarily due to the lease-up of the 4200 Wildwood Parkway Building. Leasing fees from Cousins LORET increased $560,000 in 1998, primarily due to the lease-up of The Pinnacle, which was under development and in the early stages of lease-up in 1998. Leasing fees from CSC increased approximately $367,000 primarily due to increased occupancy at Bank of America Plaza. Residential Lot and Outparcel Sales and Cost of Sales. Residential lot and outparcel sales increased from $12,847,000 in 1997 to $16,732,000 and $17,857,000 in 1998 and 1999, respectively. Residential lot sales decreased from $15,932,000 in 1998 to $13,779,000 in 1999 due to a decrease in the number of residential lots sold from 344 lots in 1998 to 292 lots in 1999. This decrease was more than offset by an increase in outparcel sales by CREC and one of its subsidiaries from $800,000 in 1998 to $4,078,000 in 1999, mainly due to one outparcel sale in 1999 for $3,477,000. Residential lot sales increased from $10,228,000 in 1997 to $15,932,000 in 1998 due to an increase in the number of residential lots sold from 260 lots in 1997 to 344 lots in 1998. The increase was partially offset by a decrease in outparcel sales by CREC and one of its subsidiaries from $2,619,000 in 1997 to $800,000 in 1998, resulting from the sale of five outparcels in 1997 and two outparcels in 1998. Residential lot and outparcel cost of sales decreased from $15,514,000 in 1998 to $14,897,000 in 1999 partially due to the aforementioned decrease in lot sales and partially due to an increase in gross profit percentages used to calculate the cost of sales for residential lot sales in certain of the residential developments in 1999. The decrease was partially offset by the increase in outparcel cost of sales mainly due to the aforementioned outparcel sale, which increased cost of sales approximately $2,857,000. Residential lot and outparcel cost of sales increased from $11,917,000 in 1997 to $15,514,000 in 1998. The increase in 1998 was due to the aforementioned increase in the number of residential lot and outparcel sales. The increase in 1998 was also due to a $500,000 writedown of one of the residential developments due to a change in lot sales price assumptions. Interest and Other Income. Interest and other income increased from $3,609,000 in 1997 to $4,275,000 in 1998 and then decreased to $3,588,000 in 1999. The increase in 1998 and decrease in 1999 were both due to interest income of approximately $714,000 recognized in 1998 from a note receivable from Cousins LORET. The Company lent funds beginning in June 1998 to Cousins LORET at a slightly higher rate than its borrowing costs, until December 1998 when Cousins LORET drew down funds from its $70 million non-recourse financing of The Pinnacle. Income From Unconsolidated Joint Ventures. (All amounts reflect the Company's share of joint venture income.) Income from unconsolidated joint ventures increased from $15,461,000 in 1997 to $18,423,000 and $19,637,000 in 1998 and 1999, respectively. Income from CSC increased from $9,284,000 in 1997 to $10,021,000 and $10,402,000 in 1998 and 1999, respectively. The increases in both 1998 and 1999 were due to the continued lease-up of Bank of America Plaza. The increase in 1998 was also due to the increase in rental revenue from a tenant whose increase in rental rate did not require straight-lining under Statement of Financial Accounting Standards No. 13. Income from Wildwood Associates increased from $1,903,000 in 1997 to $1,968,000 and $2,453,000 in 1998 and 1999, respectively. Income before depreciation, amortization and interest expense from the 4200 Wildwood Parkway Building increased approximately $1,571,000 in 1999 due to the building becoming partially operational in June 1998. Income before depreciation, amortization and interest expense from the 2300 and 2500 Windy Ridge Parkway Buildings favorably impacted results in 1999 by approximately $189,000 and $175,000, respectively, due to increased average economic occupancy of both of these properties in 1999. Income before depreciation, amortization and interest expense from the 3200 Windy Hill Road Building favorably impacted results in 1999 by approximately $415,000 primarily due to an adjustment to straight-line rental revenue in accordance with SFAS No. 13 which caused a reduction in rental property revenues. The increase in 1999 was partially offset by an increase in interest expense of approximately $732,000 due to the June 1998 non-recourse financing of the 4200 Wildwood Parkway Building. Capitalized interest decreased (which increases interest expense) approximately $731,000 due to interest expense no longer being capitalized to the 4200 Wildwood Parkway Building effective October 1998. Also partially offsetting the increase in 1999 was an increase in depreciation and amortization of approximately $569,000 due to the 4200 Wildwood Parkway Building becoming operational in 1998. Income before depreciation, amortization and interest expense from the 2300 and 2500 Windy Ridge Parkway Buildings favorably impacted results in 1998 by approximately $215,000 and $184,000, respectively, due to increased average economic occupancy of both properties in 1998. Income before depreciation, amortization and interest expense from the aforementioned 4200 Wildwood Parkway Building increased approximately $581,000 due to the building becoming partially operational in June 1998. Also favorably impacting 1998 results was the October 1998 condemnation gain of approximately $110,000 related to the proceeds received due to certain of Wildwood Associates' land being condemned for the widening of a road. Results in 1998 were negatively impacted by an increase in interest expense of approximately $1,121,000. The increase was primarily due to the June 1998 non-recourse financing of the 4200 Wildwood Parkway Building. This financing increased interest expense approximately $756,000 in 1998. Interest expense on the 4100 and 4300 Wildwood Parkway Buildings increased approximately $230,000 as the non-recourse financing of these buildings was completed in March 1997. Capitalized interest decreased approximately $258,000 due to interest expense no longer being capitalized to the 4200 Wildwood Parkway Building effective October 1998. Income from Haywood Mall increased from $3,648,000 in 1997 to $4,614,000 in 1998 and then decreased to $2,433,000 in 1999. The decrease in 1999 was due to the sale of the Company's 50% interest in the mall in June 1999. The increase in 1998 was due to the lease-up of the expansion of Haywood Mall. Income from Cousins LORET increased from $68,000 in 1997 to $672,000 in 1998 and then decreased to $53,000 in 1999. The decrease in 1999 was partially due to an increase in interest expense before capitalization of approximately $2,123,000 due to the funding of the $70 million non-recourse financing of The Pinnacle office building on December 30, 1998. Capitalized interest decreased approximately $369,000 due to The Pinnacle becoming partially operational in March 1999. Additionally, depreciation and amortization increased approximately $1,572,000 mainly due to The Pinnacle becoming partially operational. Income before depreciation, amortization and interest expense from The Pinnacle partially offset the decrease by approximately $2,672,000, and the decrease was also partially offset by an increase of approximately $281,000 from the lease-up of Two Live Oak Center. Also partially offsetting the decrease was an increase of $485,000 in interest income in 1999. The increase in 1998 was due to the Two Live Oak Center office building becoming partially operational in October 1997. Income from Temco Associates increased from $11,000 in 1997 to $97,000 and $1,270,000 in 1998 and 1999, respectively. During 1999, approximately 466 acres of the option related to the fee simple interest was exercised and simultaneously sold. CREC's share of the gain on these sales was approximately $1,229,000. During 1998, approximately 83 acres of the option related to the fee simple interest was exercised and simultaneously sold. CREC's share of the gain on these sales was approximately $96,000. There were no similar sales in 1997. Income from Cousins Stone LP was $1,892,000 in 1999. This venture was formed in June 1999 when the Company purchased Faison's 50% interest in Faison-Stone (see Note 5). General and Administrative Expenses. General and administrative expenses increased from $12,717,000 in 1997 to $13,087,000 and $14,961,000 in 1998 and 1999, respectively. General and administrative expenses increased approximately $2,070,000 and $2,825,000 in 1998 and 1999 due to the Company's continued expansion. The increases were partially offset by increases in costs capitalized to projects under development of approximately $1,700,000 and $951,000 in 1998 and 1999, respectively, as the level of projects under development increased in both years from 1997. Depreciation and Amortization. Depreciation and amortization increased from $14,046,000 in 1997 to $15,173,000 and $16,859,000 in 1998 and 1999, respectively. The increases in both 1998 and 1999 were mainly due to the aforementioned office buildings, medical office buildings and retail centers becoming operational. The increase in 1999 was also due to the acquisition of Inforum in June 1999. The increases in both 1998 and 1999 were also due to the June 1998 acquisitions of Lakeshore Park Plaza and Northside/Alpharetta I. The increases in both 1998 and 1999 were partially offset by decreases in depreciation and amortization due to the contribution of nine properties in November 1998 to CP Venture Two LLC, which expenses are included in Income from Unconsolidated Joint Ventures from the date of contribution (see Note 5). Stock Appreciation Right Expense. Stock appreciation right expense increased from $204,000 in 1997 to $330,000 in 1998 and then decreased to $108,000 in 1999. This non-cash item is primarily related to the number of stock appreciation rights outstanding and the Company's stock price. A reduction in the number of stock appreciation rights outstanding due to exercises contributed to the decrease in the stock appreciation right expense in 1999. The Company's stock price was $33.9375, $32.25 and $29.3125 per share at December 31, 1999, 1998 and 1997, respectively. Interest Expense. Interest expense decreased from $14,126,000 in 1997 to $11,558,000 and $600,000 in 1998 and 1999, respectively. Interest expense before capitalization increased from $17,293,000 in 1997 to $19,028,000 in 1998 and then decreased to $16,755,000 in 1999. Interest expense before capitalization decreased in 1999 mainly due to the contributions of North Point MarketCenter and 100 and 200 North Point Center East, subject to the related mortgage notes payable, to CP Venture Two LLC in November 1998 (see Note 5). The decrease was partially offset by increased interest expense from higher amounts outstanding on the Company's credit facility in 1999. Additionally, the Company assumed the mortgage note payable of Northside/Alpharetta I when it acquired the property in June 1998 and completed the financing of Lakeshore Park Plaza in October 1998, both of which increased interest expense before capitalization in 1998 and 1999. The amount of interest capitalization (a reduction of interest expense), which changes parallel to the amount of projects under development, increased from $3,167,000 in 1997 to $7,470,000 and $16,155,000 in 1998 and 1999, respectively, which more than offset the increases in interest expense and resulted in net decreases in interest expense in 1998 and 1999. Property Taxes on Undeveloped Land. Property taxes on undeveloped land increased from $606,000 in 1997 to $900,000 in 1998 and then decreased to $811,000 in 1999. The increase in 1998 from 1997 was primarily due to favorable settlements of property taxes in 1997 on the Company's land related to 1994, 1995 and 1996 tax years, which had been under appeal. Other Expenses. Other expenses decreased from $2,695,000 in 1997 to $1,263,000 in 1998 and then increased to $2,381,000 in 1999. The increase in 1999 was mainly due to an increase of approximately $1,912,000 in Prudential's minority interest in CP Venture Three LLC (see Note 5). The increase was partially offset by a decrease in predevelopment expense of approximately $869,000 in 1999. The decrease in 1998 was due to a decrease in predevelopment expense. Provision (Benefit) for Income Taxes From Operations. The benefit for income taxes from operations decreased from a benefit of $1,527,000 in 1997 to a benefit of $148,000 in 1998. The benefit for income taxes from operations increased to a provision for income taxes from operations of $2,442,000 in 1999. The increase from a benefit in 1998 to a provision in 1999 was due to an increase of approximately $6,183,000 from a loss before income taxes and gain on sale of investment properties to income before income taxes and gain on sale of investment properties of $5,118,000 in 1999 from CREC and its subsidiaries. Such increase was related to increases in residential lot sales, net of cost of sales, leasing fees, and income from Temco Associates. A decrease in general and administrative expenses and a reduction in predevelopment expense also contributed to the increase in income before income taxes and gain on sale of investment properties. Additionally, CREC II and its subsidiaries had a provision for income taxes from operations of approximately $574,000 in 1999 related to the income recognized from Cousins Stone LP which was formed in June 1999. The decrease in the benefit for income taxes from operations in 1998 was due to a decrease of approximately $3,148,000 in CREC and its subsidiaries' loss before income taxes and gain on sale of investment properties, which decrease was due to the increases in leasing fees and residential lot sales and the decrease in predevelopment expense. Gain on Sale of Investment Properties. Gain on sale of investment properties, net of applicable income tax provision was $5,972,000, $3,944,000 and $58,767,000 in 1997, 1998 and 1999, respectively. The 1999 gain mainly consists of the January 1999 sale of 3 acres of McMurray land ($.1 million), the February 1999 sale of Abbotts Bridge Station ($3.5 million), the March 1999 sale of Kennesaw Crossings shopping center ($.9 million), the May 1999 sale of 2 acres at Hidden Hills ($.1 million), the June 1999 sale of the Company's 50% interest in Haywood Mall ($50.1 million) (see Note 5), and the amortization of net deferred gain from the Prudential transaction ($4.1 million) (see Note 5). The 1998 gain included the March 1998 sale of 6 acres of North Point land ($.6 million), the April 1998 sale of 23 acres of North Point land ($1.0 million), the October 1998 condemnation of land at Wildwood Office Park ($1.5 million), the December 1998 sale of 5 acres of McMurray land ($.2 million) and the amortization of the net deferred gain from the Prudential transaction ($.5 million). Liquidity and Capital Resources: Financial Condition. The Company's adjusted debt (including its pro rata share of unconsolidated joint venture debt) was 32% of total market capitalization at December 31, 1999. Adjusted debt is defined as the Company's debt and the Company's pro rata share of unconsolidated joint venture debt as disclosed in Note 4, excluding the Charlotte Gateway Village, LLC debt as it is fully exculpated debt which is supported by a long-term lease to Bank of America Corporation. As discussed in Note 4, in August 1999, the Company renewed and modified its $150 million credit facility which matures on April 27, 2002. On December 31, 1999, the credit facility was temporarily increased to $225 million, which increase expires April 27, 2000. The Company had $130.7 million drawn on this credit facility as of December 31, 1999. The Company has development and acquisition projects in various planning stages. The Company currently intends to finance these projects and projects currently under construction discussed in Note 8, by using its existing credit facilities (increasing those credit facilities as required), long-term non-recourse financing on the Company's unleveraged projects, joint ventures, project sales and other financings as market conditions warrant. In September 1996, the Company filed a shelf registration statement with the Securities and Exchange Commission ("SEC") for the offering from time to time of up to $200 million of common stock, warrants to purchase common stock and debt securities, of which approximately $132 million remains available at December 31, 1999. Cash Flows. Net cash provided by operating activities increased from $58.0 million in 1997 to $90.1 million and $91.8 million in 1998 and 1999, respectively. The increases resulted partially from an improvement in income before gain on sale of investment properties of $10.1 million and $4.0 million in 1998 and 1999, respectively. Additionally, depreciation and amortization increased $1.1 million and $1.5 million in 1998 and 1999, respectively. Residential lot and outparcel cost of sales, which contributed approximately $3.4 million of the increase in 1998, partially offset the increase in 1999 by decreasing approximately $1.0 million. Operating distributions from unconsolidated joint ventures also favorably impacted 1998 and 1999 with increases of $1.9 million and $12.4 million, respectively. The increase in 1999 was due to approximately $8.3 million of distributions from CP Venture LLC. Additionally, distributions from CSC and Cousins LORET increased $1.9 million and $6.5 million, respectively, in 1999. These increases were partially offset by a decrease of distributions from Wildwood Associates of $4 million in 1999. Changes in other operating assets and liabilities, which increased net cash provided by operating activities in 1998 by approximately $17.9 million, decreased approximately $13.2 million in 1999, which decrease partially offset the increase in net cash provided by operating activities in 1999. Increases in income from unconsolidated joint ventures of approximately $3.0 million and $1.2 million partially offset the increases in net cash provided by operating activities in 1998 and 1999, respectively. Net cash used in investing activities increased from $55.6 million in 1997 to $100.5 million in 1998 and $158.9 million in 1999. Property acquisition and development expenditures increased approximately $143.7 million due to a higher level of projects under development in 1999. Investment in unconsolidated joint ventures increased approximately $1.5 million which further increased net cash used in investing activities. Non-operating distributions from unconsolidated joint ventures, which reduce net cash used in investing activities, decreased approximately $19.0 million. The decrease in non-operating distributions from unconsolidated joint ventures was mainly due to a decrease of distributions of approximately $21.6 million from Wildwood Associates. The decrease was partially offset by an increase of approximately $1.6 million of non-operating distributions from Cousins LORET. Other assets, net, decreased $4.1 million which further contributed to the increase in net cash used in investing activities. Net cash provided by sales activities increased $79.5 million mainly due to the June 1999 sale of the Company's 50% interest in Haywood Mall and to the February 1999 sale of Abbotts Bridge Station, which partially offset the increase in net cash used in investing activities. The increase in net cash provided by sales activities was partially offset by deferred income recognized, which increased approximately $3.6 million, as the net deferred gain from the Prudential transaction was amortized into income for the full year of 1999 (see Note 5). Partially offsetting the increase in net cash used in investing activities was an increase in net cash received of $22.4 million from the formation of the Prudential venture as Prudential contributed its remaining amounts owed (see Notes 5 and 9). Net investment in notes receivable increased $7.9 million which also partially offset net cash used in investing activities. The increase in property acquisition and development expenditures of $113.6 million in 1998 was due to the Company having a higher level of projects under development in 1998. Investment in unconsolidated joint ventures increased by $25.8 million in 1998 due to the formation of several new ventures, which contributed to the increase in net cash used in investing activities. Net cash provided by sales activities decreased $18.3 million in 1998. The 1997 net cash provided by sales activities was due to the 1997 sales of Rivermont Station and Lovejoy Station. There were no such significant sales in 1998. Partially offsetting the 1998 increase in net cash used in investing activities was the net cash received of $103 million in the formation of the Prudential ventures. Additionally, non-operating distributions from unconsolidated joint ventures increased $7.9 million in 1998, primarily due to Wildwood Associates distributing $22.6 million to each partner from the proceeds of its $44 million financing of the 4200 Wildwood Parkway Building. In 1997, Wildwood Associates made non-operating distributions to the partners from the proceeds of the 3200 Wildwood Plaza and the 4100 and 4300 Wildwood Parkway Buildings financings, which totaled $12.5 million. An increase in the change in other assets of $2.6 million in 1998 also partially offset the increase in the net cash used in investing activities. Net cash provided by financing activities decreased from $28.7 million in 1997 to net cash used in financing activities of $20.9 million in 1998, and then increased to net cash provided by financing activities of $67.2 million in 1999. The increase in 1999 was mainly due to an increase of $108.4 million in net amounts drawn on the Company's credit facility. Common stock sold, net of expenses, increased $1.7 million which further contributed to the change to net cash provided by financing activities. Partially offsetting the increase in net cash provided by financing activities was an increase in dividends paid of $6.8 million. Dividends paid per share increased from $1.49 in 1998 to $1.68 in 1999 and the number of shares outstanding increased. The $5.0 million purchase of treasury stock in 1999 also partially offset the increase in net cash provided by financing activities. The Company completed one financing in 1998 as compared to none in 1999. Therefore, proceeds from other notes payable decreased $10.9 million which partially offset the increase in net cash provided by financing activities. The decrease in net cash used in financing activities in 1998 was mainly due to common stock sold, net of expenses, decreasing by $60.8 million in 1998. The Company sold 2,150,000 shares of stock which raised net proceeds of approximately $64.1 million in 1997. Further contributing to the decrease was $14.1 million less proceeds from other notes payable due to the Company completing one financing for $10.9 million in 1998, as compared to one financing for $25 million in 1997. Dividends paid increased $9.5 million due to an increase in dividends paid per share from $1.29 in 1997 to $1.49 in 1998 and an increase in the number of shares outstanding. Partially offsetting this increase was an increase in the net amount drawn on the Company's credit facility of approximately $34.9 million. Effects of Inflation The Company attempts to minimize the effect of inflation on income from operating properties by the use of rents tied to tenants' sales, periodic fixed-rent increases and increases based on cost-of-living adjustments, and/or pass-through of operating cost increases to tenants. Year 2000 The "Year 2000 issue" is the result of certain computer systems, software, electronic equipment or embedded chips (collectively known as "computer systems") being written using two digits rather than four to define the applicable year. Therefore, certain computer systems may not distinguish between a year that begins with a "20" rather than a "19." This could have resulted in system failures which could have disrupted operations. No significant delays in processing or interruption of business have occurred to date due to the start of the Year 2000. The Company assessed the impact of the Year 2000 issue on its business and operations and attempted to identify the areas which rely on computer systems and could have been potentially impacted, which mainly included the systems utilized in the operations of its real estate properties and in the processing of its accounting data. The Company completed an inventory of the material computer systems being utilized in its existing operating real estate properties which could have been adversely affected by the Year 2000 issue. Such systems included, but not limited to, building control systems, heating and air conditioning controls, elevator controls, fire alarms and security devices. Certain of these systems were replaced, upgraded or modified as deemed necessary, the cost of which was not material. The Company upgraded its accounting software to a version that its software vendor has represented to be Year 2000 compliant, as they define it. The hardware and operating system used to run the accounting software has been represented to be Year 2000 compliant. The Company has also assessed its non-financial computer systems, and replaced, upgraded or modified such systems as needed. The cost of the upgrades to the accounting software and non-financial computer systems was not material. The Company completed its survey of all material third party vendors to determine their Year 2000 compliance status and has received certificates, where possible, as to their compliancy. No estimates can be made as to any potential adverse impact resulting from the failure of any third party vendor or service provider to be Year 2000 compliant. To the extent the Year 2000 issue has a material adverse effect on the business operations or financial condition of third parties with which the Company has material relationships, such as vendors, suppliers, tenants and financial institutions, the Year 2000 issue could also have a material adverse effect on the Company's business, results of operations and financial condition. To date, there have been no significant issues or interruptions of business and, based upon an assessment of the current compliance by third parties, there appears to be no material business risk posed by any such non-compliance as a result of a vendor not being Year 2000 compliant. To date, the cost to analyze and prepare for the Year 2000 issue has not been material. The Company does not expect to incur any additional costs to address the Year 2000 issue. There can be no assurance that the Company will be able to identify and correct all aspects of the effect of the Year 2000 issue on the Company. However, the Company does not currently expect the Year 2000 issue will have a material impact on the Company's business, operations or financial condition. Quantitative and Qualitative Disclosure about Market Risk The Company has one mortgage note payable which has a floating interest rate. The Company mitigates this exposure through the use of an interest rate swap which effectively fixes the interest rate on this debt. This mortgage note payable is included in the fixed rate category for purposes of the following table. The variable rate debt is from the Company's credit facility, which is drawn on as needed and was renewed and modified on August 27, 1999 (see Note 4), a construction loan at an unconsolidated joint venture, Charlotte Gateway Village, LLC, and from a variable rate municipal bond indenture, which is included with "other miscellaneous notes" in the debt outstanding table in Note 4. Since these rates are floating, the Company is exposed to the impact of interest rate changes. None of the Company's notes receivable have variable interest rates. The Company does not enter into contracts for trading purposes and does not use leveraged instruments. The following table summarizes the Company's market risk associated with notes payable and notes receivable as of December 31, 1999. The information presented below should be read in conjunction with Notes 3 and 4. The table presents principal cash flows and related weighted average interest rates by expected year of maturity. Variable rate represents the floating interest rate calculated at December 31, 1999. For the interest rate swap, the table presents the notional amount and related interest rate by year of maturity.
Expected Year of Maturity --------------------------------------------------------------------------------- Fair 2000 2001 2002 2003 2004 Thereafter Total Value --------------------------------------------------------------------------------- ($ in thousands) Notes Payable (including share of unconsolidated joint ventures): Fixed Rate $28,833 $16,667 $ 9,692 $10,015 $10,885 $295,574 $371,666 $357,256 Average Interest Rate 6.76% 7.65% 7.35% 7.34% 7.34% 7.48% 7.42% -- Variable Rate $ 175 $ -- $159,155 $ -- $ -- $ -- $159,330 $159,330 Average Interest Rate 5.52% -- 6.71% -- -- -- 6.71% -- Interest Rate Swaps: Notional Amount $19,275 $ -- $ -- $ -- $ -- $ -- $ 19,275 $ 86 Average Interest Rate 6.53% -- -- -- -- -- 6.53% -- Notes Receivable: Fixed Rate $ 2,630 $ 1,442 $ 1,173 $23,039 $ -- $ -- $ 28,284 $ 35,150 Average Interest Rate 7.88% 9.41% 9.00% 10.00% -- -- 9.73% --
Cousins Properties Incorporated and Consolidated Entities MARKET AND DIVIDEND INFORMATION - -------------------------------------------------------------------------------- The high and low sales prices for the Company's common stock and cash dividends declared per share were as follows: 1999 Quarters 1998 Quarters -------------------------------------------- --------------------------------------------- First Second Third Fourth First Second Third Fourth -------- --------- ------- -------- -------- --------- -------- -------- High $32-5/16 $36-1/2 $38-1/4 $35-1/2 $30-7/8 $31-3/4 $32-3/16 $32-9/16 Low 28-7/8 28-15/16 33-1/2 30-5/8 28-3/16 28-11/16 26 24-5/16 Dividends Declared . 41 .41 .41 .45 .36 .36 .36 .41 Payment Date 2/23/99 5/28/99 8/26/99 12/22/99 2/23/98 5/29/98 8/26/98 12/22/98 The Company's stock trades on the New York Stock Exchange (ticker symbol CUZ). At December 31, 1999, there were 1,564 stockholders of record.
ABOUT YOUR DIVIDENDS - -------------------------------------------------------------------------------- Timing of Dividends - Cousins normally pays regular dividends four times each year in February, May, August and December. Differences Between Net Income and Cash Dividends Declared - Cousins' current intention is to distribute 100% of its taxable income and thus incur no corporate income taxes. However, Consolidated Net Income for financial reporting purposes and Cash Dividends Declared will generally not be equal for the following reasons: a. There will continue to be considerable differences between Consolidated Net Income as reported to stockholders (which includes the income of consolidated non-REIT entities that pay corporate income taxes) and Cousins' taxable income. The differences are enumerated in Note 7 of "Notes to Consolidated Financial Statements." b. For purposes of meeting REIT distribution requirements, dividends may be applied to the calendar year before or after the one in which they are declared. The differences between dividends declared in the current year and dividends applied to meet current year REIT distribution requirements are enumerated in Note 6 of "Notes to Consolidated Financial Statements." Capital Gains Dividends - In some years, as it did in 1999, 1998 and 1997, Cousins will have taxable capital gains, and Cousins currently intends to distribute 100% of such gains to stockholders. The Form 1099-DIV sent by Cousins to stockholders of record each January shows total dividends paid (including the capital gains dividends) as well as that which should be reported as a capital gain (see Note 6 of "Notes to Consolidated Financial Statements"). For individuals, the capital gain portion of the dividends is subtracted from total dividends on Schedule B of IRS Form 1040 and reported separately on Schedule D of IRS Form 1040 as a capital gain. Tax Preference Items and "Differently Treated Items" - Internal Revenue Code Section 59(d) requires that certain corporate tax preference items and "differently treated items" be passed through to a REIT's stockholders and treated as tax preference items and items of adjustment in determining the stockholder's alternative minimum taxable income. The amount of this adjustment is included in Note 6 of "Notes to Consolidated Financial Statements." Tax preference items and adjustments are includable in a stockholder's income only for purposes of computing the alternative minimum tax. These adjustments will not affect a stockholder's tax filing unless that stockholder's alternative minimum tax is higher than that stockholder's regular tax. Stockholders should consult their tax advisors to determine if the adjustment reported by Cousins affects their tax filing. Many stockholders will find that the adjustment reported by Cousins will have no effect on their tax filing unless they have other large sources of alternative minimum tax adjustments or tax preference items.
Cousins Properties Incorporated and Consolidated Entities SELECTED QUARTERLY FINANCIAL INFORMATION (UNAUDITED) - -------------------------------------------------------------------------------- Selected quarterly information for the two years ended December 31, 1999 ($ in thousands, except per share amounts): Quarters ---------------------------------------- First Second Third Fourth ------- ------- ------- ------- 1999: Revenues $18,684 $23,087 $26,437 $29,616 Income from unconsolidated joint ventures 4,107 5,392 4,647 5,491 Gain on sale of investment properties, net of applicable income tax provision 5,508 51,198 1,029 1,032 Net income 15,002 63,566 12,887 12,627 Basic net income per share .47 1.98 .40 .39 Diluted net income per share .46 1.94 .39 .39 1998: Revenues $23,854 $ 24,214 $ 27,663 $ 22,580 Income from unconsolidated joint ventures 4,581 4,547 4,406 4,889 Gain on sale of investment properties, net of applicable income tax provision 771 886 -- 2,287 Net income 11,294 11,777 10,737 11,491 Basic net income per share .36 .37 .34 .36 Diluted net income per share .35 .37 .33 .36
INDEPENDENT PUBLIC ACCOUNTANTS Arthur Andersen LLP COUNSEL King & Spalding Troutman Sanders TRANSFER AGENT AND REGISTRAR First Union National Bank Corporate Trust Operations Shareholder Services Administration 1525 West W.T. Harris Blvd., Building 3C3 Charlotte, North Carolina 28262-1153 Telephone Number: 1-800-829-8432 FAX Number: 1-704-590-7618 DIVIDEND REINVESTMENT PLAN The Company offers its stockholders the opportunity to purchase additional shares of common stock through the Dividend Reinvestment Plan with purchases at 95% of current market value. A copy of the Plan prospectus and an enrollment card may also be obtained by calling or writing to the Company. FORM 10-K AVAILABLE The Company's annual report on Form 10-K and interim reports on Form 10-Q are filed with the Securities and Exchange Commission. Copies are available without exhibits free of charge to any person who is a record or beneficial owner of common stock upon written request to the Company at 2500 Windy Ridge Parkway, Suite 1600, Atlanta, Georgia 30339-5683. These items are also posted on the Company's website at www.cousinsproperties.com. INVESTOR RELATIONS CONTACT Carl Y. Dickson, Director of Investor Relations Cousins Properties Incorporated and Consolidated Entities DIRECTORS T. G. Cousins Chairman of the Board and Chief Executive Officer Richard W. Courts, II Chairman Atlantic Investment Company Lillian C. Giornelli Chairman and Chief Executive Officer The Cousins Foundation, Inc. Terence C. Golden President, Chief Executive Officer and Director Host Marriott Corporation Boone A. Knox Chairman Regions Bank of Central Georgia William Porter Payne Vice Chairman and Director PTEK Holdings, Inc. Richard E. Salomon Managing Director Spears, Benzak, Salomon & Farrell - --------------------------------- Henry C. Goodrich Director Emeritus - --------------------------------- CORPORATE T. G. Cousins Chairman of the Board and Chief Executive Officer Daniel M. DuPree President and Chief Operating Officer Kelly H. Barrett Senior Vice President - Finance George J. Berry Senior Vice President Tom G. Charlesworth Senior Vice President, General Counsel and Secretary Dan G. Arnold Vice President - Director Information Systems Patricia A. Isaacs Vice President and Controller Kristin R. Myers Vice President and Director of Tax Mark A. Russell Vice President and Senior Financial Analyst Lisa R. Simmons Director of Corporate Communications OFFICE DIVISION Craig B. Jones President John L. Murphy Senior Vice President W. Henry Atkins Senior Vice President - Charlotte Jack A. LaHue Senior Vice President - Asset Management Dara J. Nicholson Senior Vice President - Office Property Management C. David Atkins Vice President - Charlotte Alexander H. Chambers Vice President John S. Durham Vice President - Leasing Walter L. Fish Vice President - Leasing Ronald C. Sturgis Vice President - Office Property Management MEDICAL OFFICE DIVISION (Cousins/Richmond) Lea Richmond III President John S. McColl Senior Vice President S. Rox Green Vice President - Asset Management Thomas H. Kirbo Vice President - Leasing Michael J. Lant Vice President - Development RETAIL DIVISION Joel T. Murphy President John D. Hopkins Senior Vice President - Western Region Craig N. Kaser Senior Vice President - Leasing Thomas D. Lenny Senior Vice President - Western Region Robert A. Manarino Senior Vice President - Western Region Robert S. Wordes Senior Vice President - Asset Management William I. Bassett Vice President - Development Michael I. Cohn Vice President - Development Keven D. Doherty Vice President - Development Western Region Terry M. Hampel Vice President - Asset Management Michael J. Quinley Vice President - Development DEVELOPMENT AND CONSTRUCTION DIVISION W. James Overton Senior Vice President - Development James D. Dean Vice President - Development James F. George Vice President - Development John N. Goff Vice President - Development Lloyd P. Thompson, Jr. Vice President - Development LAND DIVISION* (Cousins Neighborhoods) Bruce E. Smith President Craig A. Lacey Vice President - Development COUSINS STONE LP** R. Dary Stone President * Officers of Cousins Real Estate Corporation only. ** Officer of CREC II Inc. subsidiary only. EX-21 3 EXHIBIT 21 COUSINS PROPERTIES INCORPORATED AND CONSOLIDATED ENTITIES SUBSIDIARIES OF THE REGISTRANT DECEMBER 31, 1999 At December 31, 1999, the Registrant had the following 100% owned subsidiary: Cousins, Inc.; subsidiary includes Cousins/Daniel, LLC* At December 31, 1999, the financial statements of the following entities were consolidated with those of the Registrant in the Consolidated Financial Statements incorporated herein: CommonWealth/Cousins I, LLC (50.10% owned by Registrant and 49.90% owned by CommonWealth Pacific, LLC) Cousins/Myers Second Street Partners, L.L.C.* Cousins/Myers II, LLC* Cousins Real Estate Corporation and subsidiaries (100% of non-voting common stock and 100% of preferred stock owned by Registrant); subsidiaries include Cousins MarketCenters, Inc. (100% owned by Cousins Real Estate Corporation) CP Venture Three LLC (88.50% owned by Registrant and 11.50% owned by Prudential) CREC II Inc. and subsidiaries (100% of non-voting commo stock and 100% of preferred stock owned by Registrant); subsidiaries include Cousins Stone Texas, Inc. and CS Texas, Inc. Perimeter Expo Associates, L.P. (90% owned by Registrant and 10% owned by Cousins MarketCenters, Inc.) Rocky Creek Properties, Inc. & MT&E - Macon-Harris (75% owned b Registrant) * Minority member receives a portion of residual cash flow and capital proceeds after a preferred return to Registrant. At December 31, 1999, the Registrant and its consolidated entities had the following significant unconsolidated subsidiaries which were not 100% owned: 285 Venture, Ltd. (50% owned by Registrant) Brad Cous Golf Venture, Ltd. (50% owned by Registrant) CC-JM II Associates (50% owned by Registrant) Charlotte Gateway Village, LLC (50% owned by Registrant) C-H Associates, Ltd. (49% owned by Cousins Real Estate Corporation) C-H Leasing Associates (50% owned by Cousins Real Estate Corporation) C-H Management Associates (50% owned by Cousins Real Estate Corporation) Cousins LORET Venture, L.L.C. (50% owned by Registrant) Cousins Stone LP (50% owned by CREC II Inc.'s subsidiaries) CP Venture LLC (50% owned by Registrant) CP Venture Two LLC (11.50% owned by Registrant) Crawford Long-CPI, LLC (50% owned by Registrant) CSC Associates, L.P. (50% owned by Registrant) Green Valley Associates II (50% owned by Registrant) Hickory Hollow Associates (50% owned by Cousins Real Estate Corporation) MC Dusseldorf Holding B.V. (10% voting interest owned by Registrant and 40% voting interest owned by Cousins Real Estate Corporation) Ten Peachtree Place Associates (50% owned by Registrant) Temco Associates (50% owned by Cousins Real Estate Corporation) Wildwood Associates (50% owned by Registrant) EX-23 4 EXHIBIT 23(a) CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS ----------------------------------------- As independent public accountants, we hereby consent to the incorporation of our reports included in and incorporated by reference in this Form 10-K, into Cousins Properties Incorporated's previously filed Registration Statements File No. 33-41927, 33-56787, 33-60350, 333-48841, 333-42007, 333-12031, 333-67887 and 333-92089. ARTHUR ANDERSEN LLP Atlanta, Georgia March 28, 2000 EX-23 5 EXHIBIT 23(b) CONSENT OF INDEPENDENT AUDITORS We consent to the incorporation by reference in Amendment No. 1 to the Registration Statement (Form S-3 No. 333-12031) and related Prospectus of Cousins Properties Incorporated, in Amendment No. 1 to the Registration Statement (Form S-3 No. 33-60350) and related Prospectus pertaining to the Dividend Reinvestment Plan of Cousins Properties Incorporated, in the Registration Statement (Form S-8 No. 33-56787) and related Prospectus pertaining to the 1989 Stock Option Plan of Cousins Properties Incorporated, in the Registration Statement (Form S-8 No. 33-41927) and related Prospectus pertaining to the 1989 Stock Option Plan, 1987 Restricted Stock Plan for Outside Directors and Incentive Stock Option Plan of Cousins Properties Incorporated, in the Registration Statement (Form S-8 No. 333-67887) and related Prospectus pertaining to the 1995 Stock Incentive Plan of Cousins Properties Incorporated, in the Registration Statement (Form S-8 No. 333-42007) and related Prospectus pertaining to the 1995 Stock Incentive Plan of Cousins Properties Incorporated, in the Registration Statement (Form S-3 No. 333-48841) and related Prospectus pertaining to the Dividend Reinvestment Plan of Cousins Properties Incorporated, and in the Registration Statement (Form S-8 No. 333-92089) and related Prospectus pertaining to the 1999 Incentive Stock Plan of Cousins Properties Incorporated of our report dated February 4, 2000 with respect to the financial statements and schedule of CSC Associates, L.P., included in the Form 10-K of Cousins Properties Incorporated for the year ended December 31, 1999. ERNST & YOUNG LLP Atlanta, Georgia March 28, 2000 EX-27 6 FDS --
5 YEAR DEC-31-1999 DEC-31-1999 1,473 0 37,303 0 0 9,558 768,790 35,929 932,932 35,688 312,257 0 0 32,328 405,394 932,932 0 117,461 0 69,704 0 0 600 47,757 2,442 0 0 0 0 104,082 3.24 3.18
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