-----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, A/uKtgv86aIIimYYp6/nzZRC36mEouOFMPAKqR01kbvlMR0mT54YTaCu9sgHN71M Jb/R3ubTfBWohx+Iqi32yQ== 0000025232-98-000007.txt : 19980330 0000025232-98-000007.hdr.sgml : 19980330 ACCESSION NUMBER: 0000025232-98-000007 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 12 CONFORMED PERIOD OF REPORT: 19971231 FILED AS OF DATE: 19980327 SROS: NYSE 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: 98575259 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 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, 1997 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 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. As of March 11, 1998, 31,528,348 common shares were outstanding; and the aggregate market value of the common shares of Cousins Properties Incorporated held by nonaffiliates was $691,462,109. [OBJECT OMITTED]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, 1998 Registrant's Annual Report to Part II, Items 5, 6, 7 and 8 Stockholders for the year ended December 31, 1997 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 ("CREC"), a taxable entity consolidated with the Registrant, owns, develops, and manages a portion of the Company's real estate portfolio. Cousins MarketCenters, Inc. ("CMC") is a subsidiary of CREC which develops retail shopping centers. The Registrant, together with CREC, CMC and their other consolidated entities, 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 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 1997 Annual Report to Stockholders. Brief Description of Company Investments Office. As of March 15, 1998, the Company owns, directly and indirectly, equity interests of at least 50% (excluding One Ninety One Peachtree Tower) in the following twenty-two commercial office buildings:
Company's Metropolitan Rentable Ownership Percent Property Description Area Square Feet Interest Leased -------------------- ------------ ----------- -------- ------- 101 Independence Center Charlotte, NC 522,000 100% 93% First Union Tower Greensboro, NC 319,000 100% 93% 3100 Windy Hill Road Atlanta, GA 188,000 100% 100% Grandview II Birmingham, AL 150,000 100% (b) 64% (a) Carlyle I Alexandria, VA 150,000 100% 58% (a) 615 Peachtree Street Atlanta, GA 147,000 100% 73% 333 North Point Center East Atlanta, GA 129,000 100% 41% (a) 200 North Point Center East Atlanta, GA 129,000 100% 100% 100 North Point Center East Atlanta, GA 128,000 100% 100% 3301 Windy Ridge Parkway Atlanta, GA 106,000 100% 100% NationsBank Plaza Atlanta, GA 1,260,000 50% 95% 3200 Windy Hill Road Atlanta, GA 685,000 50% 98% 2300 Windy Ridge Parkway Atlanta, GA 634,000 50% 98% The Pinnacle Atlanta, GA 424,000 50% 33% (a) 2500 Windy Ridge Parkway Atlanta, GA 313,000 50% 98% Two Live Oak Center Atlanta, GA 278,000 50% 88% (a) 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% One Ninety One Peachtree Tower Atlanta, GA 1,215,000 9.8% 93% --------- 7,770,000 =========
(a) Under construction or in lease-up. (b) This project is actually owned in a venture in which a portion of the upside is shared with the other venturer. See "Major Properties" - "Office Properties Under Construction" - "Grandview II" where discussed. The weighted average leased percentage of these office buildings (excluding all properties currently under construction or in lease-up and One Ninety One Peachtree Tower as it is less than 50% owned by the Company) was approximately 97% as of March 15, 1998 and the leases expire as follows:
2007 & 1998 1999 2000 2001 2002 2003 2004 2005 2006 Thereafter Total ---- ---- ---- ---- ---- ---- ---- ---- ---- ---------- ----- OFFICE - ------ Consolidated: - ------------- Square Feet Expiring (d) 57,641 68,621 271,192 260,923 31,287 121,574 96,477 0 209,869 322,592 1,440,176(b) % of Leased Space 4% 5% 19% 18% 2% 8% 7% 0% 15% 22% 100% Annual Base Rent (a) 625,859 1,136,727 3,448,141 3,913,709 471,674 1,111,963 1,518,170 0 3,312,660 6,758,530 22,297,433 Annual Base Rent/Sq. Ft. (a) 10.86 16.57 12.71 15.00 15.08 9.15 15.74 0 5.78 20.95 15.48 Joint Venture: - -------------- Square Feet Expiring (d) 115,957 28,586 165,283 450,062 353,285 235,906 88,732 363,770 375,971 1,618,894 3,796,446(c) % of Leased Space 3% 1% 4% 12% 9% 6% 2% 10% 10% 43% 100% Annual Base Rent (a) 1,799,176 473,739 3,344,293 6,010,569 5,118,825 4,251,138 1,647,306 6,958,204 6,854,418 40,621,535 77,079,203 Annual Base Rent/Sq. Ft.(a) 15.52 16.57 20.23 13.35 14.49 18.02 18.56 19.13 18.23 25.09 20.30 Total (including only Company's 50% share of Joint Venture Properties): - ----------------------------------------------------------------------- Square Feet Expiring (d) 115,620 82,914 353,834 485,954 207,930 239,527 140,843 181,885 397,855 1,132,037 3,338,399 % of Leased Space 3% 2% 11% 15% 6% 7% 4% 5% 12% 35% 100% Annual Base Rent (a) 1,525,447 1,373,597 5,120,288 6,918,994 3,031,087 3,237,532 2,341,823 3,479,102 6,739,869 27,069,296 60,837,035 Annual Base Rent/Sq. Ft.(a) 13.19 16.57 14.47 14.24 14.58 13.52 16.63 19.13 16.94 23.91 18.22 (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, 1998 out of 1,539,000 total rentable square feet. (c) Rentable square feet leased as of March 15, 1998 out of 3,885,000 total rentable square feet. (d) Except as follows, 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. One of the joint venture leases (50,242 square feet) has the right to terminate effective March 31, 2001, if notice is given by April 1, 2000. The weighted average remaining lease term of these sixteen office buildings was approximately 8 years as of March 15, 1998. 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, 1998, the Company's retail portfolio includes the following eleven properties:
Rentable Company's Metropolitan Square Feet Ownership Percent Property Description Area (Company Owned) Interest Leased -------------------- ------------ --------------- --------- ------- Colonial Plaza MarketCenter Orlando, FL 493,000 (a) 100% 91% Greenbrier MarketCenter Chesapeake, VA 478,000 100% 100% North Point MarketCenter Atlanta, GA 398,000 100% 100% The Shops at Palos Verdes Rolling Hills Estates, CA 380,000 100% (b) Presidential MarketCenter Atlanta, GA 361,000 (c) 100% 99% Perimeter Expo Atlanta, GA 171,000 100% 99% Los Altos MarketCenter Long Beach, CA 157,000 100% 100% Laguna Niguel Promenade Laguna Niguel, CA 153,000 100% 75% (b) Mansell Crossing Phase II Atlanta, GA 103,000 100% 100% Abbotts Bridge Station Atlanta, GA 83,000 100% 95% (b) Haywood Mall Greenville, SC 330,000 50% 84% --------- 3,107,000 ========= (a) Includes 16,000 square feet not yet under construction. (b) Under renovation, construction or lease-up. (c) Includes 21,000 square feet not yet under construction.
The weighted average leased percentage of these retail properties (excluding the properties currently under renovation, construction or lease-up and Haywood Mall) was approximately 97% as of March 15, 1998, and the leases of these retail properties (excluding Haywood Mall and The Shops at Palos Verdes) expire as follows:
2007 & 1998 1999 2000 2001 2002 2003 2004 2005 2006 Thereafter Total ---- ---- ---- ---- ---- ---- ---- ---- ---- ---------- ----- RETAIL - ------ Square Feet Expiring 2,580 51,321 47,626 90,079 111,475 10,360 51,267 46,097 175,845 1,501,042 2,087,692(b) % of Leased Space 0% 3% 2% 5% 5% 1% 2% 2% 8% 72% 100% Annual Base Rent (a) 54,180 949,919 656,185 1,446,889 1,676,985 152,874 638,291 532,730 1,589,098 19,178,050 26,875,201 Annual Base Rent/Sq. Ft. (a) 21.00 18.51 13.78 16.06 15.04 14.76 12.45 11.56 9.04 12.78 12.87 (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, 1998 out of 2,159,000 total gross leasable area. The weighted average remaining lease term of these seven retail properties was approximately 13 years as of March 15, 1998. All of the major tenant leases in these retail properties have lease terms of 10 years or more from the date of initial occupancy and provide for pass through of operating expenses and base rents which escalate over time.
Medical Office. As of March 15, 1998, the Company owned the following medical office properties:
Company's Metropolitan Rentable Ownership Percent Property Description Area Square Feet Interest Leased -------------------- ------------ ----------- --------- ------- Meridian Mark Plaza Atlanta, GA 159,000 100% 66% (a) Presbyterian Medical Plaza at University Charlotte, NC 69,000 100% 100% ------- 228,000 ======= (a) Under construction and lease-up.
The weighted average leased percentage of the one medical office building (excluding the building currently under construction and lease-up) was approximately 100% as of March 15, 1998 and the leases of this property expire as follows:
2007 & 1998 1999 2000 2001 2002 2003 2004 2005 2006 Thereafter Total ---- ---- ---- ---- ---- ---- ---- ---- ---- ---------- ----- MEDICAL OFFICE - -------------- Square Feet Expiring 0 0 0 0 1,397 0 0 3,445 0 63,862 68,704 % of Leased Space 0% 0% 0% 0% 2% 0% 0% 5% 0% 93% 100% Annual Base Rent (a) 0 0 0 0 27,242 0 0 67,178 0 1,213,378 1,307,798 Annual Base Rent/Sq. Ft.(a) 0 0 0 0 19.50 0 0 19.50 0 19.00 19.04 (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.
The weighted average remaining lease term of the one medical office building (excluding the building currently under construction and lease-up) was approximately 13 years as of March 15, 1998. The Company's leases in this building 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 445 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 11,300 acres of land through its Temco Associates joint venture, and two mortgage notes for $28 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 IBM and affiliates of The Coca-Cola Company ("Coca-Cola"), NationsBank Corporation ("NationsBank"), Corporate Property Investors, Temple-Inland Inc., Cornerstone Properties, Inc., American General Corporation, 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 1997 Significant changes in the Company's business and properties during the year ended December 31, 1997 were as follows: Office Properties. In April 1997, the Company purchased the land on which construction commenced on Grandview II, a 150,000 rentable square foot office building in Birmingham, Alabama. Effective July 31, 1997, Cousins LORET Venture, L.L.C. ("the Venture") 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 recently renovated and is in the process of being leased up. Two Live Oak Center became partially operational for financial reporting purposes in October 1997. In August 1997, Cousins LORET Venture, L.L.C. commenced construction on The Pinnacle, a 424,000 rentable square foot office building located adjacent to Two Live Oak Center (see Note 5). In November 1997, the Company purchased approximately .6 acres of undeveloped land in downtown San Francisco, California which is entitled for an approximately 381,000 rentable square foot office building. The Company is currently pursuing predevelopment and investigative work to confirm the feasibility of developing this office building. Retail Properties. In January 1997, the Company purchased the land for, and commenced construction of Abbotts Bridge Station, an approximately 83,000 square foot neighborhood retail center in suburban Atlanta, Georgia. In August 1997, the Company purchased the land for, and commenced construction of Laguna Niguel Promenade, an approximately 153,000 square foot retail center in Laguna Niguel, California. On July 1, 1997, CREC sold Rivermont Station and Lovejoy Station, two Atlanta neighborhood retail centers with 90,000 and 77,000 square feet, respectively, for $20.1 million, which was approximately $4.0 million over the cost of the centers. Including depreciation recapture of approximately $.5 million and net of an income tax provision of approximately $1.5 million, the net gain on the sale was approximately $3.0 million. Medical Office Properties. In August 1997, Presbyterian Medical Plaza at University, a 69,000 rentable square foot medical office building became partially operational for financial reporting purposes. In September 1997, the Company commenced construction on Meridian Mark Plaza, a 159,000 rentable square foot medical office building located in Atlanta, Georgia. Financings. Three new financings were completed during 1997. On March 20, 1997, Wildwood Associates completed the financing of the 4100 and 4300 Wildwood Parkway Buildings with a $30 million non-recourse mortgage note payable at a 7.65% interest rate and maturity of April 1, 2012. On July 30, 1997, the Company completed the financing of the 100 and 200 North Point Center East Buildings with a $25 million non-recourse mortgage note payable at a 7.86% interest rate and maturity of August 1, 2007. On September 30, 1997, Cousins LORET Venture, L.L.C. completed the financing of Two Live Oak Center with a $30 million non-recourse mortgage note payable at a 7.9% interest rate and a maturity of October 1, 2007. Effective June 30, 1997, the Company extended the maturity of its $100 million line of credit from June 30, 1997 to June 29, 1998. The line is unsecured and bears interest tied to the Federal Funds rate. The Company had no borrowings under the line as of December 31, 1997. In November 1997, Cousins LORET Venture, L.L.C. received a commitment for the financing of The Pinnacle office building which is expected to close in the second quarter of 1998 and will be drawn down as needed, with the full amount funded by December 1998. The $70 million non-recourse mortgage note payable has an interest rate of 7.11% and term of twelve years. Common Stock Issuance. In December 1997, the Company issued 2,150,000 shares of common stock through a public offering at a price of $31.5625 per share. The Company has used the proceeds to reduce debt and develop income-producing properties. Subsequent Events Subsequent to year-end, in January 1998, the Company purchased the land for, and commenced construction on, Carlyle I, an approximately 150,000 rentable square foot office building in Alexandria, Virginia. Subsequent to year-end, 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 includes existing retail space and a parking deck. The Company plans to reposition and remerchandise the project into an approximately 380,000 square foot open-air, high-end specialty center. Executive Offices The Registrant's executive offices are located at 2500 Windy Ridge Parkway, Suite 1600, Atlanta, Georgia 30339-5683. At December 31, 1997, the Company employed 180 people. I-15 Item 2. Properties - ---------------------- Table of Major Properties The following tables set forth certain information relating to major office and retail properties, stand alone retail lease sites, medical office properties and land held for investment and future development in which the Company has a 50% or greater ownership interest. All information presented is as of December 31, 1997, except leasing information which is as of March 15, 1998. Dollars are stated in thousands.
Percentage Description, Year Rentable Leased Average Major Location Development Company's Square Feet as of 1997 Major Tenants (lease Tenants' and Completed Joint Venture Ownership and Acres March 15, Economic expiration/options Rentable Zip Code or Acquired Partner Interest as Noted 1998 Occupancy expiration) Sq. Feet - ------------ ----------- ------------- ---------- ---------- ---------- --------- -------------------- -------- Office - ------ Wildwood Office Park: Suburban Atlanta, GA 2300 Windy Ridge Parkway 30339-5671 1987 IBM 50% 634,000 98% 98% IBM (2002/2012) 240,430 12 Acres Manhattan Associates, LLC 63,296 (2002/2007) Electrolux (2000/2005) 62,576 Computer Associates 62,445 (2005/2010) Financial Services 56,932 Corporation (2006/2011)(2) Chevron USA (2001) 50,242 2500 Windy Ridge Parkway 30339-5683 1985 IBM 50% 313,000 98% 95% Coca-Cola Enterprises Inc. 165,180 8 Acres (2003/2008) 3200 Windy Hill Road 30339-5609 1991 IBM 50% 685,000 98% 97% IBM (2001/2011)(3) 436,539 15 Acres Equifax (4) (1998/2003) 68,402 W.H. Smith Inc. 41,858 (2002/2007) 3301 Windy Ridge Parkway 30339-5685 1984 N/A 100% 106,000 100% 80% Indus International, 106,000 10 Acres Inc.(4) (2003/2008) 3100 Windy Hill Road 30339-5605 1983 N/A (5) 188,000 100% 100% IBM (2006) 188,000 13 Acres
Adjusted Cost and Adjusted Debt Description, Depreciation Maturity Location and and and Amortization Debt Interest Zip Code (1) Balance Rate - ------------ ------------ ------- -------- Office - ------ Wildwood Office Park: Suburban Atlanta, GA 2300 Windy Ridge Parkway 30339-5671 $77,774 $ 69,995 12/1/05 $51,222 7.56% 2500 Windy Ridge Parkway 30339-5683 $29,318 $ 24,781 12/15/05 $18,202 7.45% 3200 Windy Hill Road 30339-5609 $80,997 $ 69,389 1/1/07 $59,971 8.23% 3301 Windy Ridge Parkway 30339-5685 $10,467 $ 0 N/A $ 6,559 3100 Windy Hill Road 30339-5605 $17,005 (5) $ 0 N/A $16,325 (5)
Percentage Description, Year Rentable Leased Average Major Location Development Company's Square Feet as of 1997 Major Tenants (lease Tenants' and Completed Joint Venture Ownership and Acres March 15, Economic expiration/options Rentable Zip Code or Acquired Partner Interest as Noted 1998 Occupancy expiration) Sq. Feet - ------------ ----------- ------------- ---------- ---------- ---------- --------- -------------------- -------- Office (Continued) - ------------------ 4100 and 4300 Wildwood Parkway 30339-8400 1996 IBM 50% 250,000 100% 100% Georgia-Pacific 250,000 13 Acres Corporation (2012/2017) (6)(7) 4200 Wildwood Parkway 30339-8402 1997 IBM 50% 260,000 100% (8) General Electric 260,000 8 Acres (2014/2024)(8) NationsBank Plaza Atlanta, GA 30308-2214 1992 NationsBank (4) 50% (9) 1,260,000 95% 92% NationsBank (4) 572,742 4 Acres (2012/2042) Ernst & Young LLP 203,397 (2007/2017) Troutman Sanders 201,320 (2007/2017) Paul Hastings (2012/2017) 92,224 Hunton & Williams 69,699 (2004/2009) First Union Tower Greensboro, NC 27401-2167 1990 N/A 100% 319,000 93% 93% Smith Helms Mullis & 70,360 1 Acre Moore (2000/2015) First Union Bank (4) 62,622 (2009/2019) Halstead Industries 60,253 (2000/2005) Ten Peachtree Place Atlanta, GA 30309-3814 1991 Coca-Cola (4) 50% (9) 259,000 100% 100% Coca-Cola (4) (2001/2006) 259,000 5 Acres John Marshall-II Suburban Washington, D.C. 22102-3802 1996 CarrAmerica Realty 50% 224,000 100% 100% Booz-Allen & Hamilton 224,000 Corporation (4) 3 Acres (2011/2016) 100 North Point Center East Suburban Atlanta, GA 30022-4885 1995 N/A 100% 128,000 100% 100% Schweitzer-Mauduit 39,739 7 Acres International, Inc. (2001/2007) Green Tree Financial 21,914 (2006/2011)(6)
Adjusted Cost and Adjusted Debt Description, Depreciation Maturity Location and and and Amortization Debt Interest Zip Code (1) Balance Rate - ------------ ------------ ------- -------- Office (Continued) - ------------------ Wildwood Parkway 30339-8400 $26,363 $ 29,696 4/1/12 $24,755 7.65% 4200 Wildwood Parkway 30339-8402 $19,670 $ 0 N/A (8) NationsBank Plaza Atlanta, GA 30308-2214 $218,978 $ 0(10) N/A (10) $182,043 First Union Tower Greensboro, NC 27401-2167 $ 33,962 $ 0 N/A $ 22,897 Ten Peachtree Place Atlanta, GA 30309-3814 $ 23,474 $ 19,355 11/30/01(11) $ 19,735 8.00% John Marshall-II Suburban Washington, D.C. 22102-3802 $ 29,917 $ 23,673 4/1/13 $ 27,797 7.00% 100 North Point Center East Suburban Atlanta, GA 30022-4885 $ 12,791 $ 12,446(12) 8/1/07 $ 11,594 7.86%
Percentage Description, Year Rentable Leased Average Major Location Development Company's Square Feet as of 1997 Major Tenants (lease Tenants' and Completed Joint Venture Ownership and Acres March 15, Economic expiration/options Rentable Zip Code or Acquired Partner Interest as Noted 1998 Occupancy expiration) Sq. Feet - ------------ ----------- ------------- ---------- ---------- ---------- --------- -------------------- -------- Office (Continued) - ------------------ 200 North Point Center East Suburban Atlanta, GA 30022-4885 1996 N/A 100% 129,000 100% 94% Alltel Telecom Information 60,029 9 Acres Services, Inc. (1999/2000) Motorola, Inc. (2001/2011) 26,897 APAC Teleservices, Inc. 22,409 (2004/2009) 333 North Point Center East Suburban Atlanta, GA 30022-8274 (13) N/A 100% 129,000 41%(13) (13) J.C. Bradford (2005/2010)(13) 22,222 9 Acres 615 Peachtree Street Atlanta, GA 30308-2312 1996 N/A 100% 147,000 73% 86% Wachovia (4)(2001/2007) 51,561 2 Acres McCann Erickson (1998) 28,967 101 Independence Center Charlotte, NC 28246-1000 1996 N/A 100% 522,000 93% 96% NationsBank(4) 359,796 2 Acres (2008/2028)(14) Robinson Bradshaw & Hinson, 64,893 P.A. (2004/2009) Ernst & Young LLP (2001/2006) 33,962 Carlyle I Alexandria, VA 22314-9999 (15) N/A 100% 150,000 58%(15) (15) A.T. Kearney (2009/2019)(15) 87,455 1 Acre 101 Second Street San Francisco, CA 94105-3601 (9) Myers Second 100% (9) 381,000 (9) (9) (9) (9) Street Company .63 Acres LLC Two Live Oak Center Atlanta, GA 30326-1234 1997 LORET 50% 278,000 88% 30%(16) Sales Technologies, Inc. 75,484 Holdings, L.L.L.P. 2 Acres (2007/2017) Chubb & Son, Inc. (4) 48,520 (2007/2017) The Pinnacle Atlanta, GA 30326-1234 (13) LORET 50% 424,000 33%(13) (13) PaineWebber (2013/2018) 47,631 Holdings, L.L.L.P. 4 Acres (13)(6) A.T. Kearney (2009/2019)(13) 47,566 Merrill Lynch 46,440 (2008/2013)(13)
Adjusted Cost and Adjusted Debt Description, Depreciation Maturity Location and and and Amortization Debt Interest Zip Code (1) Balance Rate - ------------ ------------ ------- -------- Office (Continued) - ------------------ 200 North Point Center East Suburban Atlanta, GA 30022-4885 $ 11,487 $ 12,447(12) 8/1/07 $ 10,768 7.86% 333 North Point Center East Suburban Atlanta, GA 30022-8274 $ 10,583 $ 0 N/A (13) 615 Peachtree Street Atlanta, GA 30308-2312 $ 11,670 $ 0 N/A $ 11,010 101 Independence Center Charlotte, NC 28246-1000 $ 73,515 $ 48,928 11/1/07 $ 70,615 8.22% Carlyle I Alexandria, VA 22314-9999 (15) $ 0 N/A 101 Second Street San Francisco, CA 94105-3601 $ 11,698 $ 0 N/A (9) Two Live Oak Center Atlanta, GA 30326-1234 $ 48,000 $ 30,000 10/01/07 $ 47,506 7.9% The Pinnacle Atlanta, GA 30326-1234 $ 18,501 (17) (17) (13)
Percentage Description, Year Rentable Leased Average Major Location Development Company's Square Feet as of 1997 Major Tenants (lease Tenants' and Completed Joint Venture Ownership and Acres March 15, Economic expiration/options Rentable Zip Code or Acquired Partner Interest as Noted 1998 Occupancy expiration) Sq. Feet - ------------ ----------- ------------- ---------- ---------- ---------- --------- -------------------- -------- Office (Continued) - ------------------ Grandview II Birmingham, AL 35243-1930 (13) Daniel 100% 150,000 64%(13) (13) TXEN, Inc. (2008/2013)(13) 52,112 Realty Company 8 Acres Daniel Realty Company 20,097 (9) (2008)(13) Retail Centers and Malls Haywood Mall Greenville, SC 29607-2749 1977/1995 Corporate 50% 1,256,000 91% 88% Sears (19) N/A Property 86 acres overall of J.C. Penney (19) N/A Investors (4) of which 84% of owned Rich's (19) N/A 330,000 and owned Belk (19) N/A 21 acres are Dillard's (19) N/A owned (18) Perimeter Expo Atlanta, GA 30338-1519 1993 N/A 100% 291,000 99% 99% The Home Depot Expo (19) N/A 19 acres overall of Marshalls (2014/2029) 36,598 of which 99% of Company Best Buy (2014/2029) 36,000 171,000 and Company owned Linens `N Things (2014/2024) 30,351 10 acres are owned Office Max (2013/2033) 23,500 owned by The Sport Shoe (2004/2014) 14,348 the Company Gap's Old Navy Store 13,939 (2002/2012) North Point MarketCenter Suburban Atlanta, GA 30202-4889 1994/1995 N/A 100% 514,000 100% 99% Target (19) N/A 60 Acres (20) Babies "R" Us (2011/2031) 50,275 of which Media Play (2010/2025) 48,884 398,000 and Marshalls (2010/2025) 40,000 49 acres are Rhodes (2011/2021) 40,000 owned by Linens `N Things 35,000 the Company (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 (2000/2010)
Adjusted Cost and Adjusted Debt Description, Depreciation Maturity Location and and and Amortization Debt Interest Zip Code (1) Balance Rate - ------------ ------------ ------- -------- Office (Continued) - ------------------ Grandview II Birmingham, AL 35243-1930 $ 11,191 $ 0 N/A (13) Retail Centers and Malls - ------------------------ Haywood Mall Greenville, SC 29607-2749 $ 50,399 $ 0 N/A $ 35,930 Perimeter Expo Atlanta, GA 30338-1519 $ 19,769 $ 21,061 8/15/05 $ 17,983 8.04% North Point MarketCenter Suburban Atlanta, GA 30202-4889 $ 27,003 $ 29,068 7/15/05 $ 23,929 8.50%
Percentage Description, Year Rentable Leased Average Major Location Development Company's Square Feet as of 1997 Major Tenants (lease Tenants' and Completed Joint Venture Ownership and Acres March 15, Economic expiration/options Rentable Zip Code or Acquired Partner Interest as Noted 1998 Occupancy expiration) Sq. Feet - ------------ ----------- ------------- ---------- ---------- ---------- --------- -------------------- -------- Retail Centers and Malls (Continued) - ------------------------------------ Presidential MarketCenter Suburban Atlanta, GA 30278-2149 1994/1996 N/A 100% 478,000 (21) 99% (21) 92% (21) Target (19) N/A 66 acres overall of Publix Super Market 56,146 of which 99% (21) Company (2019/2044) 361,000 (21) of Company owned Carmike Cinemas(5)(2023/2033) 44,565 and 49 acres owned MJDesigns (4) (2011/2026) 37,957 are owned Bed, Bath & Beyond (2008/2024)35,127 by the T.J. Maxx (2004/2014) 32,000 Company Office Depot, Inc. 31,628 (2011/2026) Marshalls (2010/2025) 30,000 Colonial Plaza MarketCenter Orlando, FL 32803-5029 1996 N/A 100% 493,000(22) 91%(22) 95%(22) Circuit City (2016/2036) 43,936 49 Acres Rhodes (2012/2027) 40,000 Baby Superstore, Inc. (2006/2021) 40,000 Stein Mart, Inc. (2006/2026) 36,000 Barnes & Noble Superstores, 35,131 Inc.(2012/2022) Linens `N Things 35,000 (2012/2027) Marshalls (2012/2027) 30,400 Ross Stores (2007/2022) 28,000 Just For Feet, Inc. 26,667 (2012/2027) Walgreen Co. (2012) 18,614 Gap's Old Navy Store 17,920 (2002/2012) Mansell Crossing Phase II Suburban Atlanta, GA 30202-4822 1996 N/A 100% 103,000 100% 100% Bed Bath & Beyond 40,000 13 Acres (2012/2027) Goody's Family Clothing, 32,144 Inc. (2009/2027) Rooms To Go (2016/2036) 21,000 Greenbrier MarketCenter Chesapeake, VA 23327-2840 1996 N/A 100% 478,000 100% 99% Target (2016/2046) 117,220 44 Acres Harris Teeter, Inc. 51,806 (2016/2036) Bed Bath & Beyond 40,484 (2012/2027)
Adjusted Cost and Adjusted Debt Description, Depreciation Maturity Location and and and Amortization Debt Interest Zip Code (1) Balance Rate - ------------ ------------ ------- -------- Retail Centers and Malls (Continued) - ------------------------------------ Presidential MarketCenter Suburban Atlanta, GA 30278-2149 $ 23,722 $ 0 N/A $ 22,251 Colonial Plaza MarketCenter Orlando, FL 32803-5029 $ 40,543 $ 0 N/A $ 38,502 Mansell Crossing Phase II Suburban Atlanta, GA 30202-4822 $ 8,913 $ 0 N/A $ 8,622 Chesapeake, VA 23327-2840 $ 33,525 $ 0 N/A $ 32,238
Percentage Description, Year Rentable Leased Average Major Location Development Company's Square Feet as of 1997 Major Tenants (lease Tenants' and Completed Joint Venture Ownership and Acres March 15, Economic expiration/options Rentable Zip Code or Acquired Partner Interest as Noted 1998 Occupancy expiration) Sq. Feet - ------------ ----------- ------------- ---------- ---------- ---------- --------- -------------------- -------- Retail Centers and Malls (Continued) - ------------------------------------ Greenbrier MarketCenter (Continued) Baby Superstore, Inc. 40,000 (2006/2021) Stein Mart, Inc. (2006/2026) 36,000 Kinetex, Inc. (2011/2026) 33,000 Barnes & Noble Superstores, 29,974 Inc. (2011/2026) PETsMART (2011/2031) 26,052 Office Max (2011/2026) 23,484 Gap's Old Navy Store 14,000 (2001/2011) Los Altos MarketCenter Long Beach, CA 90815-3126 1996 N/A 100% 258,000 100% 97% Sears (19) N/A 19 Acres of Circuit City (4)(2017/2037) 38,541 which 157,000 Borders, Inc. (2017/2037) 30,000 and 17 Acres Bristol Farms (4)(2012/2032) 28,200 are owned by CompUSA, Inc. (2011/2021) 25,620 the Company Sav-on Drugs (4)(2016/2026) 16,914 Abbotts Bridge Station Suburban Atlanta, GA 30097-5793 (13) N/A 100% 83,000 95%(13) (13) Harris Teeter, Inc. 40,406 17 Acres (2017/2037)(13) Eckerd Corporation 10,909 (2017/2037)(13) Laguna Niguel Promenade Laguna Niguel, CA 92677-3920 (13) N/A 100% 153,000 75%(13) (13) Orchard's Supply Hardware(4) 63,811 13 Acres (2018/2033)(13) Ralph's Grocery Company 51,028 (2018/2043)(13) The Shops at Palos Verdes Rolling Hills Estates, CA 90274-3664 (23) N/A 100% 380,000(23) (23) (23) (23) (23) 13 Acres Stand Alone Retail Sites Adjacent to Company's Office and Retail Projects - ------------------------------------------------------------------------- Wildwood Office Park Suburban Atlanta, GA 30339-5671 1985-1993 IBM 50% 15 Acres 100% 100% N/A N/A North Point Suburban Atlanta, GA 30202-4885 1993 N/A 100% 24 Acres 100% 100% N/A N/A
Adjusted Cost and Adjusted Debt Description, Depreciation Maturity Location and and and Amortization Debt Interest Zip Code (1) Balance Rate - ------------ ------------ ------- -------- Retail Centers and Malls (Continued) - ------------------------------------ Greenbrier MarketCenter (Continued) Los Altos MarketCenter Long Beach, CA 90815-3126 $ 21,658 $ 0 N/A $ 21,000 Abbotts Bridge Station Suburban Atlanta, GA 30097-5793 $ 10,781 $ 0 N/A (13) Laguna Niguel Promenade Laguna Niguel, CA 92677-3920 $ 9,128 $ 0 N/A (13) The Shops at Palos Verdes Rolling Hills Estates, CA 90274-3664 (23) $ 0 N/A Stand Alone Retail Sites Adjacent to Company's Office and Retail Projects - ------------------------------------------------------------------------- Wildwood Office Park Suburban Atlanta, GA 30339-5671 $ 8,813 $ 0 N/A $ 7,581 North Point Suburban Atlanta, GA 30202-4885 $ 3,742 $ 0 N/A $ 3,666
Percentage Description, Year Rentable Leased Average Major Location Development Company's Square Feet as of 1997 Major Tenants (lease Tenants' and Completed Joint Venture Ownership and Acres March 15, Economic expiration/options Rentable Zip Code or Acquired Partner Interest as Noted 1998 Occupancy expiration) Sq. Feet - ------------ ----------- ------------- ---------- ---------- ---------- --------- -------------------- -------- Medical Office - -------------- Presbyterian Medical Plaza at University Charlotte, NC 28233-3549 1997 N/A 100% 69,000 100% 37%(24) Presbyterian Health Services 63,862 1 Acre (24) Corporation (2012/2027)(26) Meridian Mark Plaza Atlanta, GA 30342-1613 (13) N/A 100% 159,000 66%(13) (13) Northside Hospital (4) 40,675 3 Acres (2013/2023)(13) Scottish Rite Hospital for 22,000 Crippled Children, Inc. (2003/2008)(13)
Adjusted Cost and Adjusted Debt Description, Depreciation Maturity Location and and and Amortization Debt Interest Zip Code (1) Balance Rate - ------------ ------------ ------- -------- Medical Office - -------------- Presbyterian Medical Plaza at University Charlotte, NC 28233-3549 $ 7,216 $ 0 N/A $ 7,112 Meridian Mark Plaza Atlanta, GA 30342-1613 $ 5,619 $ 0 N/A (13)
(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) 1,556 square feet of this lease of 2300 Windy Ridge Parkway expires in 2001. (3) 115,944 square feet of this lease of 3200 Windy Hill Road expires in 2001, and the balance expires in 2006. (4) Actual tenant or venture partner is affiliate of entity shown. (5) See "Major Properties" - "Wildwood Office Park" where the accounting for the 3100 Windy Hill Road Building is discussed. (6) Green Tree Financial, Georgia-Pacific Corporation and PaineWebber have the right to terminate their leases in 2001, 2007 and 2008, respectively, upon payment of significant cancellation penalties. (7) Tenant has the option to purchase the building on its lease expiration date for a price of $33,750,000. (8) 4200 Wildwood Parkway was completed in December 1997. A lease for 100% of the building was signed in March 1998 whereby the tenant will begin partial occupancy in June 1998 with 100% occupancy by April 1999. (9) See "Major Properties" - "NationsBank Plaza," "Ten Peachtree Place," "Grandview II," and "101 Second Street" where the venture's preferences and terms are discussed. (10) See "Major Properties" - "NationsBank Plaza" where debt on NationsBank Plaza is discussed. (11) Maturity of the Ten Peachtree Place mortgage debt is extendible to December 31, 2008. Rate becomes floating after November 30, 2001. (12) 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. (13) Project was under construction as of December 31, 1997. Lease expiration dates are based upon estimated commencement dates, and square footage is estimated. (14) 103,656 square feet of this lease of 101 Independence Center expires in 2000. (15) Land was acquired and construction commenced on Carlyle I subsequent to December 31, 1997. Lease expiration dates are based upon estimated commencement dates, and square footage is estimated. (16) Two Live Oak Center became partially operational in October 1997. Thus, economic occupancy for Two Live Oak Center does not include a full year of operations. (17) In November 1997, Cousins LORET Venture, L.L.C. received a commitment for the financing of The Pinnacle which is expected to close in March 1998 and will be drawn down as needed, with the full amount funded by December 1998. The $70 million non-recourse mortgage note payable has an interest rate of 7.11% and a term of 12 years. (18) A portion of the Haywood Mall parking lot (3 acres) is subject to a long-term ground lease expiring in 2017, with five 10-year renewal options. (19) This anchor tenant owns its own space. (20) North Point MarketCenter includes approximately 4 outparcels which are ground leased to freestanding users. (21) 61,000 square feet became operational in March 1997. Thus, economic occupancy does not include a full year of operations for this 61,000 square feet portion of Presidential MarketCenter. Includes 21,000 square feet not yet constructed as of March 15, 1998 which were excluded from the calculation of percentage leased and average 1997 economic occupancy. (22) Includes 16,000 square feet not yet constructed as of March 15, 1998 which were excluded from the calculation of percentage leased and average 1997 economic occupancy. (23) The Shops at Palos Verdes was acquired subsequent to December 31, 1997. This 355,000 square foot center includes existing retail space and a parking deck. The Company plans to reposition and remerchandise the project into an approximately 380,000 square foot open-air, high-end specialty center. (24) Presbyterian Medical Plaza at University is located on 1 acre which is subject to a ground lease expiring in 2057. (25) Presbyterian Medical Plaza at University became partially operational in August 1997 for financial reporting purposes. Thus, economic occupancy for Presbyterian Medical Plaza at University does not include a full year of operations. (26) Tenant 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)
Adjusted Cost Less Developable Company's Depreciation Land Area Joint Venture Ownership and Debt Description, Location and Zoned Use Year Acquired (Acres)(1) Partner Interest Amortization Balances - ----------------------------------- --------------- --------- ------------- --------- -------------- -------- Wildwood Office Park Suburban Atlanta, Georgia Office and Commercial 1971-1987 147 N/A 100% $ 7,005 $ 0 Office and Commercial 1971-1982 36 IBM 50% $ 10,075(2) $ 0 North Point Land (Georgia Highway 400 & Haynes Bridge Road) (3) Suburban Atlanta, Georgia Office and Commercial - East 1970-1985 41 N/A 100% $ 1,356 $ 0 Office and Commercial - West 1970-1985 221 N/A 100% $ 4,587 $ 0 Midtown Atlanta Office and Commercial 1984 2 N/A 100% $ 1,398 $ 0 Temco Associates (Paulding County) Suburban Atlanta, Georgia 1991 --(5) Temple-Inland 50% --(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 of $1,183,000. (3) The North Point property is located both east and west of Georgia Highway 400. Currently, only the land which is located east of Georgia Highway 400 is being developed, but planning and infrastructure work has begun for additional development on the west side property. This land 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 11,300 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. Temco Associates has engaged in certain sales of land as to which it simultaneously exercised its purchase option. During 1996, approximately 375 acres of the option related to the fee simple interest was exercised and simultaneously sold for gross profits of $1,427,000. None of the option was exercised in 1995 or 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 289 acre Class A commercial development in suburban Atlanta master planned by I.M. Pei, including 8 office buildings containing 2,436,000 rentable square feet. The property is zoned for office, institutional and commercial use. Approximately 109 acres in the park are owned by, or committed to be contributed to, Wildwood Associates (see below), including approximately 36 acres of land held for future development. The Company owns 100% of the 147 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, 1997, 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 reduced to a negative investment of approximately $12.6 million due to partnership distributions in excess of net income made during 1997 and prior years. Wildwood Associates owns the 3200 Windy Hill Road Building (685,000 rentable square feet), the 2300 Windy Ridge Parkway Building (634,000 rentable square feet), the 2500 Windy Ridge Parkway Building (313,000 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). At March 15, 1998, these buildings were 98%, 98%, 98%, 100% and 100% leased, respectively. Wildwood Associates also owns 15 acres leased to two banking facilities and five restaurants. On March 20, 1997, Wildwood Associates completed the $30 million financing of the 4100 and 4300 Wildwood Parkway Buildings (see Note 4). In conjunction with this financing and a portion of the $70 million financing of the 3200 Windy Hill Road Building completed in December 1996, during the first quarter of 1997, Wildwood Associates made non-operating cash distributions of $12.5 million to each partner and paid the entire calendar year 1997 operating distribution of $4.5 million to each partner. Wildwood Associates has a $10 million bank line of credit (the Company severally guarantees one-half) under which $0 was drawn as of December 31,1997. 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. Commencing January 1994, a single tenant leased the building for a term of ten years. The lease was initially for 60% of the building with options permitting the tenant to expand its occupancy to the remainder of the building over the next several years. The first such option for an additional 10% of the space was exercised in the fourth quarter of 1994, the second option for another 10% of the space was exercised effective December 15, 1996, and the remainder of the option was exercised during 1997, bringing the building to 100% leased as of March 15, 1998. 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 which are discussed in Note 3, 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 1997 revenues and expenses (including depreciation) 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 approximately 152 and 221 acres located on the east and west sides of Georgia Highway 400, respectively. Currently, only the land which is located east of Georgia Highway 400 is being developed, but planning and infrastructure work has begun for additional development on the west side property. This 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 100% leased as of March 15, 1998, is a 514,000 square foot retail power center (of which 398,000 square feet are owned by Cousins) located adjacent to North Point Mall. Mansell Crossing Phase II, which is 100% leased as of March 15, 1998, 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 (Company owned) and 13 acres of land, respectively, at North Point. North Point Center East. The Company owns three office buildings located adjacent to North Point Mall and the Company's retail properties. 100 North Point Center East and 200 North Point Center East, which were completed in 1995 and 1996, are 128,000 and 129,000 rentable square feet, respectively. Construction commenced in December 1996 on the third office building, 333 North Point Center East, a 129,000 square foot office building, adjacent to 100 and 200 North Point Center East. These three office buildings are located on 25 acres of land at North Point and are 100%, 100% and 41% leased, respectively, as of March 15, 1998. 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, 1998. The remaining approximately 262 developable acres at North Point are 100% owned by the Company. Approximately 41 acres of this land are located on the east side of Georgia Highway 400 and are zoned for mixed-use development including retail and office space. Approximately 221 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 - ----------------------- NationsBank Plaza. NationsBank Plaza is a Class A, 55-story, 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 approximately 95% leased as of March 15, 1998. An affiliate of NationsBank leases 46% of the rentable square feet. NationsBank Plaza was developed by CSC, a joint venture formed by the Company and a wholly owned subsidiary of NationsBank, 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, 1997, the Company's investment in CSC was approximately $99,513,000. Cousins LORET Venture, L.L.C. Effective July 31, 1997, Cousins LORET Venture, L.L.C. ("the Venture") 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 recently renovated and is in the process of being leased up. Two Live Oak Center became partially operational for financial reporting purposes in October 1997 and was 88% leased as of March 15, 1998. LORET also contributed an adjacent 4 acre site on which construction commenced in August 1997 on The Pinnacle, a 424,000 rentable square foot office building which was 33% leased as of March 15, 1998. Two Live Oak Center was contributed subject to a 7.90% $30 million non-recourse ten year mortgage note payable (see Note 4). The Company is obligated to contribute $25 million of cash to the Venture to match the value of LORET's agreed-upon equity, which cash is to be contributed as needed for the development of The Pinnacle. As of December 31, 1997, the Company had contributed $8.5 million of its $25 million obligation. The Pinnacle is expected to be completed at the end of 1998 at a cost of approximately $86 million. In November 1997, Cousins LORET Venture, L.L.C. received a commitment for the financing of The Pinnacle office building which is expected to close in the second quarter of 1998 and will be drawn down as needed with the full amount funded by December 1998. The $70 million non-recourse mortgage note payable has an interest rate of 7.11% and term of twelve years. First Union Tower. First Union Tower is a Class A office building containing approximately 319,000 rentable square feet. The property is located on approximately one acre of land in downtown Greensboro, North Carolina. First Union Tower opened in the first quarter of 1990 and as of March 15, 1998 was approximately 93% leased. 615 Peachtree Street. In August 1996, the Company acquired 615 Peachtree Street, a 147,000 rentable square foot 12-story downtown Atlanta office building, located across from NationsBank Plaza. 615 Peachtree Street was 73% leased as of March 15, 1998. 101 Independence Center. In December 1996, the Company acquired 101 Independence Center, a 522,000 rentable square foot office building (including an underground parking garage and an adjacent parking deck) located at the intersection of Trade and Tryon in the central business district of Charlotte, North Carolina. 101 Independence Center was 93% leased as of March 15, 1998. 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 93% leased at March 15, 1998. 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 is 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 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 by DIHC Peachtree Associates 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, 1997, the cumulative undistributed preferred return was $15,281,555. After DIHC Peachtree Associates 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 $145,000,000 at December 31, 1997. At December 31, 1997, the Company had a negative investment of $90,000 in the One Ninety One Peachtree Tower project. 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 $19.4 million at December 31, 1997. 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, 1997, the Company had an investment in Ten Peachtree Place Associates of $44,000. 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 a 224,000 square foot 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. Office Properties Under Development - ----------------------------------- Grandview II. Cousins/Daniel, LLC 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 Cousins. 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 April 1997, Cousins/Daniel, LLC purchased the land on which construction commenced on Grandview II, the first project developed and owned by Cousins/Daniel, LLC which is a 150,000 rentable square foot office building in Birmingham, Alabama. Grandview II is expected to be completed during the second quarter of 1998 at a cost of approximately $18 million and was 64% leased as of March 15, 1998. 101 Second Street. Cousins/Myers Second Street Partners, L.L.C., a venture formed in 1997 between Cousins and Myers Second Street Company LLC ("Myers"), purchased .63 acres of undeveloped land in downtown San Francisco, California which is entitled for 101 Second Street, an approximately 381,000 rentable square foot office building. The venture is currently pursing predevelopment and investigative work to confirm the feasibility of developing this office building. Pursuant to the Operating Agreement, Cousins funded substantially all of the purchase price of the land through its initial capital contribution of $11,101,500. Myers' initial capital contribution was $603,304 which included $500,000 of earnest money toward the purchase of the land. Cousins and Myers are each obligated to fund additional capital contributions of $450,000. Thereafter, Cousins is obligated to fund 30% of the total budgeted costs of the project, with the remaining 70% obtained either from Cousins, if it so elects, or with project financing. Myers' economic rights are limited to development fees and certain incentive interests, which include a residual interest in the cash flow and a residual interest in capital proceeds. This venture is treated as a consolidated entity in the Company's financial statements. Carlyle I. Subsequent to year-end, in January 1998, the Company purchased the land for, and commenced construction on Carlyle I, an approximately 150,000 rentable square foot office building in Alexandria, Virginia. Carlyle I is expected to be completed during the second quarter of 1999 at a cost of approximately $30 million and was 58% leased as of March 15, 1998. Other Retail Properties - ----------------------- Haywood Mall. Haywood Mall is an enclosed regional shopping center located 5 miles southeast of downtown Greenville, South Carolina, which was developed and opened in 1980, and is owned by the Company and Bellwether Properties of South Carolina, L.P. ("Bellwether"), an affiliate of Corporate Properties Investors. The mall has 1,256,000 gross leaseable square feet ("GLA") of which approximately 330,000 GLA is owned. The balance of the mall is owned by the mall's five major department stores. The portion of Haywood Mall owned by the Company and Bellwether was developed on approximately 21 acres of land, of which approximately 18 acres is owned and approximately 3 acres (of parking area) is leased under a ground lease expiring in 2017, with five 10-year renewal options. The portion of Haywood Mall owned by the Company and Bellwether was approximately 84% leased as of March 15, 1998. The Company has a 50% interest in Haywood Mall. At December 31, 1997, the Company's investment was $20,626,000. Other Fully Operational Retail Properties. In addition to the aforementioned North Point MarketCenter and Mansell Crossing Phase II, the Company owns five other retail centers which were fully operational for financial reporting purposes as of December 31, 1997. Perimeter Expo is a 291,000 square foot retail power center (of which the Company owns 171,000 square feet) which is located in Atlanta, Georgia and was 99% leased (Company owned) as of March 15, 1998. Presidential MarketCenter is a 478,000 square foot retail power center (of which the Company owns 361,000 square feet) which is located in suburban Atlanta, Georgia and was 99% leased (Company owned) as of March 15, 1998. Greenbrier MarketCenter is a 478,000 square foot retail power center which is located in Chesapeake, Virginia and was 100% leased as of March 15, 1998. Colonial Plaza MarketCenter is a 493,000 square foot retail power center which is located in Orlando, Florida and was 91% leased as of March 15, 1998. Los Altos MarketCenter is a 258,000 square foot retail power center (of which the Company owns 157,000 square feet) which is located in Long Beach, California and was 100% leased as of March 15, 1998. Retail Properties Under Development. The Company owns two retail centers which were under construction as of December 31, 1997. Abbotts Bridge Station, an 83,000 square foot neighborhood retail center which is located in suburban Atlanta, was completed in early 1998 and was 95% leased as of March 15, 1998. In August 1997, the Company purchased the land for and commenced construction on Laguna Niguel Promenade, an approximately 153,000 square foot retail center in Laguna Niguel, California and is expected to be completed in mid 1998 at a total cost of approximately $19.5 million. Laguna Niguel Promenade was 75% leased as of March 15, 1998. Subsequent to year-end, 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 includes existing retail space and a parking deck. The Company plans to reposition and remerchandise the project into an approximately 380,000 square foot open-air, high-end specialty center. Retail Properties Sold. On July 1, 1997, CREC sold Rivermont Station and Lovejoy Station, two Atlanta neighborhood retail centers with 90,000 and 77,000 square feet, respectively, for $20.1 million, which was approximately $4.0 million over the cost of the centers. Including depreciation recapture of approximately $.5 million and net of an income tax provision of approximately $1.5 million, the net gain on the sale was approximately $3.0 million. Medical Office Properties - ------------------------- In August 1997, Presbyterian Medical Plaza at University, a 69,000 rentable square foot medical office building located in Charlotte, North Carolina, became partially operational for financial reporting purposes and was 100% leased as of March 15, 1998. In September 1997, the Company commenced construction on Meridian Mark Plaza, a 159,000 rentable square foot medical office building located in Atlanta, Georgia. Meridian Mark Plaza is expected to be completed during the third quarter of 1998 at a total cost of approximately $27 million and was 66% leased as of March 15, 1998. Residential Lots Under Development - ----------------------------------- As of December 31, 1997, CREC owned the following parcels of land which are being developed into residential communities ($ in thousands):
Estimated Total Lots Purchase Initial on Land Money Year Currently Lots Remaining Carrying Debt Description Acquired Owned (1) Sold to Date Lots Value Balances ----------- -------- --------- -------------------------- --------- -------- Brown's Farm 1993 219 133 86 $ 2,426 $ 0 West Cobb County Suburban Atlanta, GA Apalachee River Club 1994 186 90 96 2,974 0 Gwinnett County Suburban Atlanta, GA Echo Mill 1994 543 197 346 4,585 0 West Cobb County Suburban Atlanta, GA Barrett Downs 1994 145 77 68 1,603 0 Forsyth County Suburban Atlanta, GA Bradshaw Farm 1994 512 252 260 2,322 0 Cherokee County Suburban Atlanta, GA Alcovy Woods Gwinnett County Suburban Atlanta, GA 1996 121 37 84 1,032 568 ----- --- --- ------- ------ Total 1,726 786 940 $14,942 $ 568 ===== === === ======= ======
(1) Includes lots sold to date. Additional lots may be developed on adjacent land on which CREC holds purchase options. 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 the following significant land holdings either directly or indirectly through joint venture arrangements. The Company intends to convert its land holdings to income-producing usage or to sell portions of land holdings as opportunities present themselves 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 11,300 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 $827 per acre at January 1, 1998, escalating at 6% on January 1 of each succeeding year during the term of the option. The Temco Associates property has the potential for future residential, industrial and commercial development. Temco Associates has to date sold parcels of land as to which it simultaneously exercised its purchase option. During 1996, approximately 375 acres of the option related to the fee simple interest was exercised and simultaneously sold for gross profits of $1,427,000. None of the option was exercised in 1995 or 1997. Other Real Property Investments - ------------------------------- Omni Norfolk Hotel. Norfolk Hotel Associates ("NHA") was a general partnership formed in 1978 between the Company and an affiliate of Odyssey Partners, L.P. (an investment partnership), each as 50% partners, which held a mortgage note on and owned the land under the 442-room Omni International Hotel in downtown Norfolk, Virginia. In January 1992, NHA terminated the land lease and became the owner of the hotel and a long-term parking agreement with an adjacent building owner. In April 1993, the partnership sold the hotel, but retained its interest in the parking agreement. The partnership received a $8,325,000 mortgage note for a portion of the sales proceeds. In July 1994, NHA distributed to each partner a 50% interest in the parking agreement held by NHA, and in July 1996 the Company sold its 50% interest for $2 million, resulting in a profit to the Company of approximately $408,000 which is included in Gain on Sale of Investment Properties in the 1996 Consolidated Statement of Income. On February 14, 1997, the mortgage note receivable due to NHA with a balance of $8,325,000 was repaid in full. A portion of the proceeds from the repayment was used to pay off the partnership's lines of credit, with the balance of the partnership's assets ($2.2 million of cash for each partner) distributed to the partners in 1997. The partnership was dissolved in 1997. Dusseldorf Joint Venture. In 1992, Cousins entered into a joint venture agreement for the development of a 133,000 rentable square foot office building in Dusseldorf, Germany which is 34% leased to IBM. Cousins' venture partners are IBM and Multi Development Corporation International B.V. ("Multi"), a Dutch real estate development company. In December 1993, the building was presold to an affiliate of Deutsche Bank. CREC and Multi jointly developed the building. Due to the release of certain completion guarantees related to the building, approximately $2.6 million of development income was recognized in September 1995 ($931,000 of which had been deferred as of December 31, 1994). An additional $235,000 and $777,000 of development income was received and recognized in 1997 and 1996, respectively. Kennesaw Crossings. The Company owns Kennesaw Crossings, a 116,000 square foot shopping center in suburban Atlanta, Georgia. The center was constructed in 1974 on 14 acres of land leased from an unrelated party through 2068. The Company's net carrying value in Kennesaw Crossings as of December 31, 1997 was $908,000. 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 $0. Supplemental Financial and Leasing Information - ---------------------------------------------- Depreciation and amortization expense include the following components for the years ended December 31, 1997 and 1996 ($ in thousands):
1997 1996 ------------------------------------- -------------------------------------- Share of Share of Unconsolidated Unconsolidated Consolidated Joint Ventures Total Consolidated Joint Ventures Total ------------ -------------- ----- ------------ -------------- ----- Furniture, fixtures and equipment $ 435 $ 7 $ 442 $ 306 $ 40 $ 346 Deferred financing costs -- 10 10 -- 16 16 Goodwill and related business acquisition costs 486 35 521 363 44 407 Real estate related: Building (including tenant first generation) 12,351 9,056 21,407 6,336 8,958 15,294 Tenant second generation 774 1,243 2,017 214 979 1,193 -------- -------- ------- ------ -------- ------- $ 14,046 $ 10,351 $24,397 $7,219 $ 10,037 $17,256 ======== ======== ======= ====== ======== =======
Exclusive of new developments and purchases of furniture, fixtures and equipment, the Company had the following capital expenditures for the years ended December 31, 1997 and 1996, including its share of unconsolidated joint ventures ($ in thousands):
1997 1996 ------------------------------ -------------------------------- Office Retail Total Office Retail Total ------ ------ ----- ------ ------ ----- Second generation related costs $ 978 $ -- $ 978 $1,892 $ -- $1,892 Building improvements 14 -- 14 3 -- 3 ------ ----- ------ ------ ----- ------ Total $ 992 $ -- $ 992 $1,895 $ -- $1,895 ====== ===== ====== ====== ===== ======
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, 1997. 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 66 Chairman of the Board of Directors and Chief Executive Officer Daniel M. DuPree 51 President and Chief Operating Officer Kelly H. Barrett 33 Senior Vice President - Finance George J. Berry 60 Senior Vice President Tom G. Charlesworth 48 Senior Vice President, Secretary and General Counsel Craig B. Jones 47 Senior Vice President Joel T. Murphy 39 Senior Vice President and President of the Retail Division (Cousins MarketCenters, Inc.) John L. Murphy 52 Senior Vice President W. James Overton 51 Senior Vice President - Development Lea Richmond III 50 Senior Vice President and President of the Medical Office Division (Cousins/Richmond) Peter A. Tartikoff 56 Senior Vice President and Chief Financial Officer
Relationships: - -------------- There are no family relationships among the 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. From 1987 until joining the Company, he was Executive Vice President of New Market Companies, Inc. and affiliates. 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. Mr. Tartikoff has been Senior Vice President and Chief Financial Officer of the Company since February 1986. 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 47 of the Registrant's 1997 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 39 of the Registrant's 1997 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 40 through 46 of the Registrant's 1997 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 21 through 39 of the Registrant's 1997 Annual Report to Stockholders are incorporated herein by reference. The information appearing under the caption "Selected Quarterly Financial Information (Unaudited)" on page 48 of the Registrant's 1997 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 5 and "Compliance with Section 16(a) of the Securities Exchange Act of 1934" on page 13 of the Proxy Statement dated March 27, 1998 relating to the 1997 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 and "Compensation of Directors" on page 13 of the Proxy Statement dated March 27, 1998 relating to the 1997 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 6 and "Principal Stockholders" on pages 23 and 24 of the Proxy Statement dated March 27, 1998 relating to the 1997 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, 1998 relating to the 1997 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 21 through 39 of the Registrant's 1997 Annual Report to Stockholders and are incorporated herein by reference:
Page Number in Annual Report ---------------- Consolidated Balance Sheets - December 31, 1997 and 1996 21 Consolidated Statements of Income for the Years Ended December 31, 1997, 1996 and 1995 22 Consolidated Statements of Stockholders' Investment for the Years Ended December 31, 1997, 1996 and 1995 23 Consolidated Statements of Cash Flows for the Years Ended December 31, 1997, 1996 and 1995 24 Notes to Consolidated Financial Statements December 31, 1997, 1996 and 1995 25 Report of Independent Public Accountants 39
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, 1997 and 1996 F-2 Combined Statements of Income for the Years Ended December 31, 1997, 1996 and 1995 F-3 Combined Statements of Partners' Capital for the Years Ended December 31, 1997, 1996 and 1995 F-4 Combined Statements of Cash Flows for the Years Ended December 31, 1997, 1996 and 1995 F-5 Notes to Combined Financial Statements December 31, 1997, 1996 and 1995 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, 1997 and 1996 G-2 Statements of Operations for the Years Ended December 31, 1997, 1996 and 1995 G-3 Statements of Partners' Capital for the Years Ended December 31, 1997, 1996 and 1995 G-4 Statements of Cash Flows for the Years Ended December 31, 1997, 1996 and 1995 G-5 Notes to Financial Statements G-6 through December 31, 1997, 1996 and 1995 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, 1997 S-8 through S-12 B. Wildwood Associates and Green Valley Associates II Schedule III - Real Estate and Accumulated Depreciation - December 31, 1997 F-12 C. CSC Associates, L.P. Schedule III- Real Estate and Accumulated Depreciation - December 31, 1997 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 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 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(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. 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. 11 Schedule showing computation of net income per share for each of the five years ended December 31, 1997. 13 Annual Report to Stockholders for the year ended December 31, 1997. 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. -------------------------- On December 12, 1997, the Registrant filed a current report on Form 8-K to file the Underwriting Agreement, dated December 10, 1997, among the Registrant and the Underwriters named therein. 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, 1998 BY: /s/ Kelly H. Barret ------------------------------------- Kelly H. Barrett Senior Vice President - Finance (Authorized Officer) (Principal 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, 1998 Chief Executive Officer /s/ T.G. Cousins and Director - ---------------------------- T. G. Cousins Principal Financial Officer: Senior Vice President and March 20, 1998 /s/ Peter A. Tartikoff Chief Financial Officer - ---------------------------- Peter A. Tartikoff Additional Directors: /s/ Richard W. Courts Director March 20, 1998 - ---------------------------- Richard W. Courts, II /s/ Boone A. Knox Director March 20, 1998 - ---------------------------- Boone A. Knox /s/ William Porter Payne Director March 20, 1998 - ---------------------------- William Porter Payne REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS ON SCHEDULE To the Stockholders of 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 16, 1998. 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 16, 1998
SCHEDULE III (Page 1 of 5) COUSINS PROPERTIES INCORPORATED AND CONSOLIDATED ENTITIES REAL ESTATE AND ACCUMULATED DEPRECIATION DECEMBER 31, 1997 ($ 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, 1997 ------------ ----------------- ----------------------------------- 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),(b) - ----------- ------------ ---- ------------ -------- --------- ------------ ------------ ------- LAND HELD FOR INVESTMENT OR FUTURE DEVELOPMENT - ---------------------------------------------- 101 Second Street - San Francisco, CA $ -- $ 11,698 $ -- $ -- $ -- $ 11,698 $ -- $ 11,698 Wildwood - Atlanta, GA -- 11,156 -- 4,737 (8,888) 7,005 -- 7,005 North Point Property - Fulton Co., GA -- 10,294 -- 12,213 (16,942) 5,565 -- 5,565 Midtown - Atlanta, GA -- 2,949 -- 56 (1,607) 1,398 -- 1,398 McMurray - Cobb Co., GA. -- 1,015 -- 172 (1,092) 95 -- 95 Lawrenceville - Gwinnett Co., GA -- 5,543 -- 365 (5,044) 864 -- 864 Colonial Plaza MarketCenter - Orlando, FL -- 1,649 -- 286 (1,218) 717 -- 717 Greenbrier MarketCenter Outparcels - Chesapeake, VA -- 3,191 -- 201 (2,985) 407 -- 407 Lovejoy Station Outparcels - Clayton Co., GA -- 575 -- -- (376) 199 -- 199 --------------------------------------------------------------------------------------------- -- 48,070 -- 18,030 (38,152) 27,948 -- 27,948 ---------------------------------------------------------------------------------------------
Column A Column F Column G Column H Column I -------- -------- -------- -------- -------- Life on Which De- preciation Accumu- In 1997 lated Date of Income Deprecia- Construc- Date Statement Description tion (a) tion Acquired Is Computed - ----------- --------- --------- -------- ----------- LAND HELD FOR INVESTMENT OR FUTURE DEVELOPMENT - ---------------------------------------------- 101 Second Street - San Francisco, CA $ -- -- 1997 -- Wildwood - Atlanta, GA -- -- 1971-1982,1989 -- North Point Property - Fulton Co., GA -- -- 1970-1985 -- Midtown - Atlanta, GA -- -- 1984 -- McMurray - Cobb Co., GA. -- -- 1981 -- Lawrenceville - Gwinnett Co., GA -- -- 1994 -- Colonial Plaza MarketCenter - Orlando, FL -- -- 1995 -- Greenbrier MarketCenter Outparcels - Chesapeake, VA -- -- 1995 -- Lovejoy Station Outparcels - Clayton Co., GA -- -- 1995 -- ------- -- -------
SCHEDULE III (Page 2 of 5) COUSINS PROPERTIES INCORPORATED AND CONSOLIDATED ENTITIES REAL ESTATE AND ACCUMULATED DEPRECIATION DECEMBER 31, 1997 ($ 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, 1997 ------------ ----------------- ----------------------------------- 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),(b) - ----------- ------------ ---- ------------ -------- --------- ------------ ------------ ------- OPERATING PROPERTIES - -------------------- First Union Tower - Greensboro, N.C. $ -- $ 1,394 $ -- $ 30,597 $ 1,971 $ 1,399 $32,563 $ 33,962 Wildwood - 3301 Windy Ridge - Atlanta, GA -- 20 -- 8,928 1,519 1,237 9,230 10,467 Wildwood - 3100 Windy Hill Road - Atlanta, GA -- -- 17,005 -- -- -- 17,005 17,005 Kennesaw - Cobb Co., GA -- -- -- 2,351 -- -- 2,351 2,351 615 Peachtree Street - Atlanta, GA -- 4,740 6,930 -- -- 4,740 6,930 11,670 100 North Point Center East - Fulton Co., GA 12,447 419 -- 11,868 504 419 12,372 12,791 200 North Point Center East - Fulton County, GA 12,446 419 -- 10,705 363 419 11,068 11,487 101 Independence Center - Charlotte, NC 48,928 11,096 62,419 -- -- 11,096 62,419 73,515 Perimeter Expo - Atlanta, GA 21,061 8,564 -- 11,134 71 8,564 11,205 19,769 North Point Stand Alone Retail Sites - Fulton Co., GA -- 4,559 -- 164 (981) 3,742 -- 3,742 North Point MarketCenter - Fulton Co., GA 29,068 8,500 -- 17,997 506 8,500 18,503 27,003 Presidential MarketCenter - Gwinnett Co., GA -- 3,956 -- 18,949 817 3,956 19,766 23,722
Column A Column F Column G Column H Column I -------- -------- -------- -------- -------- Life on Which De- preciation Accumu- In 1997 lated Date of Income Deprecia- Construc- Date Statement Description tion (a) tion Acquired Is Computed - ----------- --------- --------- -------- ----------- OPERATING PROPERTIES - -------------------- First Union Tower - Greensboro, N.C. $11,065 1988-1990 1987 40 Years Wildwood - 3301 Windy Ridge - Atlanta, GA 3,908 1984 1984 30 Years Wildwood - 3100 Windy Hill Road - Atlanta, GA 680 1997 1997 25 Years Kennesaw - Cobb Co., GA 1,443 1974 1973 30 Years 615 Peachtree Street - Atlanta, GA 660 -- 1996 15 Years 100 North Point Center East - Fulton Co., GA 1,197 1994 1994 40 Years 200 North Point Center East - Fulton County, GA 720 1995 1995 -- 101 Independence Center - Charlotte, NC 2,900 -- 1996 25 Years Perimeter Expo - Atlanta, GA 1,787 1993 1993 30 Years North Point Stand Alone Retail Sites - Fulton Co., GA 75 -- 1970-1985 -- North Point MarketCenter - Fulton Co., GA 3,073 1993-1994 1970-1985 30 Years Presidential MarketCenter - Gwinnett Co., GA 1,470 1993-1995 1993 30 Years
SCHEDULE III (Page 3 of 5) COUSINS PROPERTIES INCORPORATED AND CONSOLIDATED ENTITIES REAL ESTATE AND ACCUMULATED DEPRECIATION DECEMBER 31, 1997 ($ 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, 1997 ------------ ----------------- ----------------------------------- 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),(b) - ----------- ------------ ---- ------------ -------- --------- ------------ ------------ ------- OPERATING PROPERTIES (Continued) - -------------------------------- Mansell Crossing Phase II - Fulton Co., GA $ -- $ 3,272 $ -- $ 5,171 $ 470 $ 3,272 $ 5,641 $ 8,913 Greenbrier MarketCenter - Chesapeake, VA -- 5,500 -- 26,441 1,584 5,500 28,025 33,525 Colonial Plaza MarketCenter - Orlando, FL -- 8,500 -- 30,138 1,905 8,500 32,043 40,543 Los Altos MarketCenter - Long Beach, CA -- 4,900 -- 16,178 580 4,900 16,758 21,658 Miscellaneous -- 398 145 77 (473) -- 147 147 ---------------------------------------------------------------------------------------------- 123,950 66,237 86,499 190,698 8,836 66,244 286,026 352,270 ---------------------------------------------------------------------------------------------- PROJECTS UNDER CONSTRUCTION - --------------------------- 333 North Point Center East - Fulton County, GA $ -- $ 587 $ -- $ 9,528 $ 453 $ 587 $ 9,981 $ 10,568 Presbyterian Medical Plaza at University - Charlotte, NC -- -- -- 6,923 189 -- 7,112 7,112 Abbotts Bridge Station - Fulton Co., GA -- 2,856 -- 7,477 449 2,856 7,926 10,782 Laguna Niguel Promenade - Laguna Niguel, CA -- 5,578 -- 3,342 208 5,578 3,550 9,128 Meridian Mark Plaza - Atlanta, GA -- 2,200 -- 3,162 257 2,200 3,419 5,619 Grandview II - Birmingham, AL -- 2,010 -- 8,844 337 2,010 9,181 11,191
Column A Column F Column G Column H Column I -------- -------- -------- -------- -------- Life on Which De- preciation Accumu- In 1997 lated Date of Income Deprecia- Construc- Date Statement Description tion (a) tion Acquired Is Computed - ----------- --------- --------- -------- ----------- OPERATING PROPERTIES (Continued) - -------------------------------- Mansell Crossing Phase II - Fulton Co., GA $ 291 1995 1995 30 Years Greenbrier MarketCenter - Chesapeake, VA 1,287 1995 1995 30 Years Colonial Plaza MarketCenter - Orlando, FL 2,042 1995 1995 -- Los Altos MarketCenter - Long Beach, CA 658 1996 1996 -- Miscellaneous 113 -- 1977-1984 Various ------- 33,369 ------- PROJECTS UNDER CONSTRUCTION - --------------------------- 333 North Point Center East - Fulton County, GA $ -- 1996 1996 -- Presbyterian Medical Plaza at University - Charlotte, NC -- 1996 1996 -- Abbotts Bridge Station - Fulton Co., GA -- 1997 1997 -- Laguna Niguel Promenade - Laguna Niguel, CA -- 1997 1997 -- Meridian Mark Plaza - Atlanta, GA -- 1997 1997 -- Grandview II - Birmingham, AL -- 1997 1997 --
SCHEDULE III (Page 4 of 5) COUSINS PROPERTIES INCORPORATED AND CONSOLIDATED ENTITIES REAL ESTATE AND ACCUMULATED DEPRECIATION DECEMBER 31, 1997 ($ 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, 1997 ------------ ----------------- ----------------------------------- 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),(b) - ----------- ------------ ---- ------------ -------- --------- ------------ ------------ ------- PROJECTS UNDER CONSTRUCTION (Continued) - --------------------------------------- Other $ -- $ 378 $ -- $ -- $ -- $ 378 $ -- $ 378 ---------------------------------------------------------------------------------------------- -- 13,609 -- 39,276 1,893 13,609 41,169 54,778 ---------------------------------------------------------------------------------------------- RESIDENTIAL LOTS UNDER DEVELOPMENT - ---------------------------------- Brown's Farm - Cobb Co., GA -- 3,154 -- 4,549 (5,277) 2,426 -- 2,426 Apalachee River Club - Gwinnett Co., GA -- 1,820 -- 3,613 (2,459) 2,974 -- 2,974 Echo Mill - Cobb Co., GA -- 5,298 -- 5,203 (5,916) 4,585 -- 4,585 Barrett Downs - Forsyth Co., GA -- 1,489 -- 2,426 (2,312) 1,603 -- 1,603 Bradshaw Farm - Cherokee Co., GA -- 5,100 -- 8,259 (11,037) 2,322 -- 2,322 Alcovy Woods - Gwinnett Co., GA 568 1,142 -- 684 (794) 1,032 -- 1,032 ---------------------------------------------------------------------------------------------- 568 18,003 -- 24,734 (27,795) 14,942 -- 14,942 ---------------------------------------------------------------------------------------------- $ 124,518 $ 145,919 $86,499 $272,738 $(55,218) $122,743 $327,195 $449,938 ==============================================================================================
Column A Column F Column G Column H Column I -------- -------- -------- -------- -------- Life on Which De- preciation Accumu- In 1997 lated Date of Income Deprecia- Construc- Date Statement Description tion (a) tion Acquired Is Computed - ----------- --------- --------- -------- ----------- PROJECTS UNDER CONSTRUCTION (Continued) - --------------------------------------- Other $ -- -- 1996 -- ------- -- ------- RESIDENTIAL LOTS UNDER DEVELOPMENT - ---------------------------------- Brown's Farm - Cobb Co., GA -- 1993-1994 1993-1994 -- Apalachee River Club - Gwinnett Co., GA -- 1994 1994 -- Echo Mill - Cobb Co., GA -- 1994 1994 -- Barrett Downs - Forsyth Co., GA -- 1994 1994 -- Bradshaw Farm - Cherokee Co., GA -- 1994 1994 -- Alcovy Woods - Gwinnett Co., GA -- 1996 1996 -- ------- -- -------- $ 33,369 ========
SCHEDULE III (Page 5 of 5) COUSINS PROPERTIES INCORPORATED AND CONSOLIDATED ENTITIES REAL ESTATE AND ACCUMULATED DEPRECIATION DECEMBER 31, 1997 ($ in thousands) NOTES: (a) Reconciliations of total real estate carrying value and accumulated depreciation for the three years ended December 31, 1997 are as follows: Real Estate Accumulated Depreciation ----------- ------------------------ 1997 1996 1995 1997 1996 1995 ---- ---- ---- ---- ---- ---- Balance at beginning of period $377,663 $235,344 $149,242 $20,339 $15,483 $12,112 Additions during the period: Improvements and other capitalized costs 100,714 181,682 97,036 -- -- -- Provision for depreciation -- -- -- 13,030 5,571 3,371 ------------------------------ -------------------------- 100,714 181,682 97,036 13,030 5,571 3,371 ------------------------------ -------------------------- Deductions during the period: Cost of real estate sold (28,439) (39,363) (10,934) -- (715) -- ------------------------------ -------------------------- (28,439) (39,363) (10,934) -- (715) -- ------------------------------ -------------------------- Balance at close of period $449,938 $377,663 $235,344 $33,369 $20,339 $15,483 ============================== ========================== (b) Initial cost for Kennesaw was previously adjusted to reflect a write- down of $1,430 to state the property at the then realizable value.
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS ---------------------------------------- To the Partners of 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, 1997 and 1996, and the related combined statements of income, partners' capital and cash flows for each of the three years in the period ended December 31, 1997. 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, 1997 and 1996, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 1997 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 16, 1998
WILDWOOD ASSOCIATES AND GREEN VALLEY ASSOCIATES II -------------------------------------------------- COMBINED BALANCE SHEETS ----------------------- DECEMBER 31, 1997 AND 1996 -------------------------- ($ in thousands) 1997 1996 ------- -------- ASSETS - ------ REAL ESTATE ASSETS: - ------------------- Income producing properties, including land of $44,366 in 1997 and 1996 (Note 7) $271,227 $239,647 Accumulated depreciation and amortization (56,354) (48,699) ------------------- 214,873 190,948 Projects under construction -- 19,670 Land committed to be contributed (Note 3) 9,405 9,405 Land and property predevelopment costs 11,828 11,862 ------------------- Total real estate assets 236,106 231,885 ------------------- CASH AND CASH EQUIVALENTS 9,413 16,511 ------------------- OTHER ASSETS: Deferred expenses, net of accumulated amortization of $7,091 and $6,365 in 1997 and 1996, respectively 6,636 7,249 Receivables (Note 6) 11,451 15,330 Allowance for possible losses (Note 1) (2,550) (2,550) Furniture, fixtures and equipment, net of accumulated depreciation of $364 and $1,153 in 1997 and 1996, respectively 733 456 Other 39 29 ------------------- 16,309 20,514 ------------------- $261,828 $268,910 =================== LIABILITIES AND PARTNERS' CAPITAL - --------------------------------- NOTES PAYABLE (Note 7) $193,861 $166,490 RETAINAGE, ACCOUNTS PAYABLE AND ACCRUED LIABILITIES 7,503 11,762 ------------------- Total liabilities 201,364 178,252 ------------------- PARTNERS' CAPITAL (Notes 3 and 4): International Business Machines Corporation 30,232 45,329 Cousins Properties Incorporated 30,232 45,329 ------------------- Total partners' capital 60,464 90,658 ------------------- $261,828 $268,910 ===================
The accompanying notes are an integral part of these combined balance sheets.
WILDWOOD ASSOCIATES AND GREEN VALLEY ASSOCIATES II -------------------------------------------------- COMBINED STATEMENTS OF INCOME ----------------------------- FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995 ---------------------------------------------------- ($ in thousands) 1997 1996 1995 ------- ------- ------- REVENUES: Rental income and recovery of expenses charged directly to specific tenants $38,507 $40,351 $37,589 Interest 474 39 32 Other 134 115 146 ------------------------- Total revenues 39,115 40,505 37,767 ------------------------- EXPENSES: Real estate taxes 3,471 3,579 3,032 Maintenance and repairs 2,791 2,622 2,207 Utilities 2,031 2,182 1,965 Management and personnel costs 2,262 2,217 1,892 Contract security 1,051 1,094 820 Grounds maintenance 823 776 646 Expenses charged directly to specific tenants 444 417 395 Insurance 93 93 98 Interest expense 12,972 9,712 11,478 Depreciation and amortization 8,798 8,372 8,353 Predevelopment, marketing and other expenses 283 293 345 Ground lease expense (Note 8) -- 295 322 Real estate taxes on undeveloped land (Note 3) 143 208 163 General and administrative expenses 147 155 167 ------------------------- Total expenses 35,309 32,015 31,883 ------------------------- NET INCOME $ 3,806 $ 8,490 $ 5,884 ========================= 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, 1997, 1996 AND 1995 ---------------------------------------------------- ($ in thousands) International Business Cousins Machines Properties Corporation Incorporated Total ----------- ------------ ----- BALANCE, December 31, 1994 $46,142 $46,142 $92,284 Distributions (4,000) (4,000) (8,000) Net income 2,942 2,942 5,884 --------------------------------------- BALANCE, December 31, 1995 45,084 45,084 90,168 Distributions (4,000) (4,000) (8,000) Net income 4,245 4,245 8,490 --------------------------------------- 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 $60,464 ======================================= The accompanying notes are an integral part of these combined statements.
WILDWOOD ASSOCIATES AND GREEN VALLEY ASSOCIATES II -------------------------------------------------- COMBINED STATEMENTS OF CASH FLOWS (Note 9) ------------------------------------------ FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995 ---------------------------------------------------- ($ in thousands) 1997 1996 1995 ------- -------- -------- CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 3,806 $ 8,490 $ 5,884 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 8,798 8,372 8,353 Effect of recognizing rental revenues on a straight-line basis 3,311 421 (383) Change in tenant rental receivables 297 (562) (38) Change in accounts payable and accrued liabilities related to operations (423) 3,557 (1,004) --------------------------- Net cash provided by operating activities 15,789 20,278 12,812 --------------------------- CASH FLOWS FROM INVESTING ACTIVITIES: Property acquisition and development expenditures (15,501) (34,871) (4,940) Payment for deferred expenses, furniture, fixtures and equipment, and other assets (757) (2,978) (2,123) --------------------------- Net cash used in investing activities (16,258) (37,849) (7,063) --------------------------- CASH FLOWS FROM FINANCING ACTIVITIES: Repayment of notes payable (2,629) (1,610) (1,063) Repayment of long term financing -- -- (111,998) Proceeds from long term financing 30,000 70,000 -- Proceeds from long term refinancing -- -- 98,000 Proceeds from line of credit -- 75,733 31,212 Repayments under line of credit -- (102,041) (13,904) Partnership distributions (34,000) (8,000) (8,000) --------------------------- Net cash (used in) provided by financing activities (6,629) 34,082 (5,753) --------------------------- NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS (7,098) 16,511 (4) CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 16,511 -- 4 --------------------------- CASH AND CASH EQUIVALENTS AT END OF YEAR $ 9,413 $ 16,511 $ -- =========================== 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, 1997, 1996 AND 1995 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 organizational costs, certain marketing and leasing costs, and loan acquisition costs - 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 ("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. Wildwood is an office park containing a total of approximately 289 acres, of which approximately 94 acres are owned by WWA, and an estimated 15 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, 1997, 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 15 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 36 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 32 acres of other land to be developed (including additional land committed to be contributed by Cousins) (see Note 3). See Note 8 where the disposition of the Summit Green property is discussed. 3. CONTRIBUTIONS TO THE PARTNERSHIPS IBM and Cousins have each contributed or committed to contribute $62,857,000 in cash or properties to the Partnerships. The value of property contributed by IBM was agreed to by the partners at the time of formation of WWA and was recorded at the cash amount IBM paid for the property just prior to contributing it to the Partnership. The value of the property contributed and to be contributed by Cousins was recorded on the Partnership's books at an amount equal to the cash and property contributed by IBM for an equal (50%) partnership interest. The status of contributions at December 31, 1997, was as follows ($ in thousands):
IBM COUSINS TOTAL ------- ------- -------- Cash contributed $46,590 $ 84 $ 46,674 Property contributed 16,267 53,853 70,120 Land committed to be contributed -- 8,920 8,920 -------------------------------- 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, 1997, Cousins was committed to contribute land on which an additional 678,051 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 15 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 $143,000, $208,000 and $163,000 in 1997, 1996 and 1995, respectively. 4. OTHER PROVISIONS OF THE PARTNERSHIP AGREEMENTS Net income or loss and net cash flow, as defined, shall be allocated to the partners based on their percentage interests (50% each, subject to adjustment as provided in the partnership agreements). In the event of dissolution of the Partnerships, the assets will be distributed as follows: First, to repay all debts to third parties, including any secured loans with the partners. Second, to each partner until each capital account is reduced to zero. The balance to each partner in accordance with its percentage interest. 5. FEES TO RELATED PARTIES The Partnerships engaged Cousins to manage, develop and lease the Partnerships' property. Fees to Cousins incurred by the Partnerships during 1997, 1996 and 1995 were as follows ($ in thousands):
1997 1996 1995 ------ ------ ------ Development and tenant construction fees $ 406 $ 604 $ 250 Management fees 1,047 1,032 945 Leasing and procurement fees 223 1,105 235 ---------------------------- $1,676 $2,741 $1,430 ============================
6. RENTAL REVENUES WWA leases property to the partners, as well as to unrelated third parties. The leases with partners are at rates comparable to those quoted to third parties. The leases typically contain escalation provisions and provisions requiring tenants to pay a pro rata share of operating expenses. The leases typically include renewal options and all are classified and accounted for as operating leases. At December 31, 1997, future minimum rentals to be received under existing non-cancelable leases, including tenants' current pro rata share of operating expenses are as follows ($ in thousands):
Leases Leases With With Third Partners Parties Total -------- ------- ----- 1998 $10,403 $ 19,482 $ 29,885 1999 10,145 16,760 26,905 2000 9,915 14,805 24,720 2001 7,728 13,474 21,202 2002 8,555 12,811 21,366 Thereafter 23,083 31,078 54,161 ------------------------------------------ $69,829 $108,410 $178,239 ==========================================
At December 31, 1997 and 1996, 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 $11,020,000 and $14,331,000, respectively. Of the 1997 amount, 84% was related to leases with IBM. 7. NOTES PAYABLE At December 31, 1997, notes payable included the following ($ in thousands):
Term/ Amortization Balance at Period Final December 31, Description Rate (Years) Maturity 1997 ----------- ---------------- ------------ -------- ------------ Line of credit ($10 million maximum) Fed Funds + .75% 1/ N/A 9/1/98 $ -- 2300 Windy Ridge Parkway Building mortgage note 7.56% 10/25 12/01/05 69,995 3200 Windy Hill Road Building mortgage note 8.23% 10/28 1/1/07 69,389 4100/4300 Wildwood Parkway Buildings mortgage note 7.65% 15/25 4/1/12 29,696 2500 Windy Ridge Parkway Building mortgage note 7.45% 10/20 12/15/05 24,781 -------- $193,861 ========
On March 20, 1997, WWA completed the financing of the 4100 and 4300 Wildwood Parkway Buildings with a $30 million non-recourse mortgage note payable at an interest rate of 7.65% and a maturity of April 1, 2012. In conjunction with this financing and a portion of the $70 million financing of the 3200 Windy Hill Road Building completed in December 1996, WWA made non-operating cash distributions of $12.5 million to each partner and paid the entire calendar year 1997 operating distribution of $4.5 million to each partner. The 2300 Windy Ridge Parkway Building, the 3200 Windy Hill Road Building, and the 4100/4300 Wildwood Parkway Buildings 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, 1998, 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 federal funds rate 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 $167,671,000 were pledged as security on the Partnerships' debt. The aggregate maturities of the indebtedness at December 31, 1997 summarized above are as follows ($ in thousands): 1998 $ 3,952 1999 4,265 2000 4,604 2001 5,131 2002 5,670 Thereafter 170,239 -------- $193,861 ======== The Partnerships capitalize interest expense to property under development as required by SFAS No. 34. In the years ended December 31, 1997 and 1996, the Partnerships capitalized interest totaling $1,998,000 and $1,053,000, respectively. The estimated fair value of the notes payable at December 31, 1997 was approximately $209 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): 1997 1996 1995 ---- ---- ---- Interest paid $12,700 $9,096 $12,011 Significant non-cash financing and investing activities included the following: In 1996, land parcels with a cost of $4,498,000 were transferred from Land Committed To Be Contributed to Land and Property Predevelopment Cost. In 1996, the Partnerships recorded the disposition of the Summit Green project (including the office building and the anticipated disposition of the leasehold interest in the adjacent land) having a total cost of $10,447,000, and the cancellation of $10,447,000 of related debt (see Note 8). In 1996, two buildings with a total cost of $29,368,000 were transferred from Projects Under Construction to Income Producing Properties. In 1997, one building with a total cost of $29,807,000 was transferred from Projects Under Construction to Income Producing Properties.
SCHEDULE III WILDWOOD ASSOCIATES AND GREEN VALLEY ASSOCIATES II REAL ESTATE AND ACCUMULATED DEPRECIATION DECEMBER 31, 1997 ($ in thousands) Column A Column B Column C Column D Column E -------- -------- -------- -------- -------- Costs Capitalized Gross Amount at Which Initial Cost Subsequent Carried at to Venture to Acquisition December 31, 1997 ------------------- -------------------- ----------------------------------- 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 $ 24,781 $ 4,414 $ 14,814 $ 10,435 $ 141 $ 4,414 $ 25,390 $ 29,804 2300 Windy Ridge 69,995 8,927 -- 62,247 5,429 8,927 67,676 76,603 Parkside -- 4,274 2,553 (1,029) (45) 3,136 2,617 5,753 3200 Windy Hill 69,389 10,503 -- 67,840 5,470 10,503 73,310 83,813 4100/4300 Wildwood Parkway 29,696 6,689 -- 22,945 251 6,689 23,196 29,885 4200 Wildwood Parkway -- 4,347 -- 25,085 375 -- 29,807 29,807 Stand Alone Retail Sites -- 7,659 1,234 3,691 123 9,570 3,137 12,707 Land committed to be contributed -- 9,023 -- -- 382 9,405 -- 9,405 Other land and property -- 11,430 -- 3,426 (173) 11,575 3,108 14,683 -------------------------------------------------------------------------------------------- $193,861 $67,266 $ 18,601 $194,640 $ 11,953 $64,219 $228,241 $292,460 ============================================================================================
Column A Column F Column G Column H Column I -------- -------- -------- -------- -------- Life on Which De- preciation Accumu- In 1997 lated Date of Income Deprecia- Construc- Date Statement Description tion (a) tion Acquired Is Computed - ----------- -------- --------- -------- ----------- Wildwood Office Park - Cobb Co., GA 2500 Windy Ridge $10,004 1985 1985 40 Years 2300 Windy Ridge 22,416 1986 1986 40 Years Parkside 2,098 1980 1986 25 Years 3200 Windy Hill 18,565 1989 1989 40 Years 4100/4300 Wildwood Parkway 1,449 1995 1986 40 Years 4200 Wildwood Parkway -- 1996 1986 -- Stand Alone Retail Sites 1,180 Various 1985-1995 Various Land committed to be contributed -- -- 1985-1986 -- Other land and property 642 Various 1985-1986 Various ------ $56,354 =======
NOTE: (a) Reconciliations of total real estate carrying value and accumulated depreciation for the three years ended December 31, 1997 are as follows: Real Estate Accumulated Depreciation ---------------------------------- ------------------------------- 1997 1996 1995 1997 1996 1995 -------- -------- -------- ------- ------- ------- Balance at beginning of period $280,584 $259,428 $250,738 $48,699 $44,900 $40,009 Additions during the period: Improvements, and other capitalized costs 11,876 32,361 8,690 -- -- -- Provisions for depreciation -- -- -- 7,655 7,296 4,891 Deductions during the period: Retirement of fully depreciated assets and writeoffs -- -- -- -- (16) -- Disposition of Summit Green Office Building -- (11,205) -- -- (3,481) -- ---------------------------------- ------------------------------- Balance at close of period $292,460 $280,584 $259,428 $56,354 $48,699 $44,900 ================================== ===============================
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, 1997 and 1996, and the related statements of operations, partners' capital, and cash flows for each of the three years in the period ended December 31, 1997. Our audits also included 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 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 CSC Associates, L.P. as of December 31, 1997 and 1996, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 1997, in conformity with generally accepted accounting principles. 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 2, 1998
CSC ASSOCIATES, L.P. -------------------- BALANCE SHEETS -------------- DECEMBER 31, 1997 AND 1996 -------------------------- ($ in thousands) ASSETS ------ 1997 1996 -------- -------- REAL ESTATE ASSETS: Building and improvements, including land and land improvements of $22,818 in 1997 and 1996 $209,120 $209,141 Accumulated depreciation (33,621) (27,621) ------------------- 175,499 181,520 ------------------- CASH 487 31 ------------------- NOTE RECEIVABLE (Note 4) 76,147 78,304 ------------------- OTHER ASSETS: Deferred expenses, net of accumulated amortization of $3,292 and $4,779 in 1997 and 1996, respectively 6,485 7,293 Other receivables (Note 3) 11,243 10,895 Furniture, fixtures and equipment, net of accumulated depreciation of $22 and $1,311 in 1997 and 1996, respectively 59 162 Other, net of accumulated amortization of $338 and $256 in 1997 and 1996, respectively (Note 6) 1,425 1,486 ------------------- Total other assets 19,212 19,836 ------------------- $271,345 $279,691 =================== LIABILITIES AND PARTNERS' CAPITAL --------------------------------- NOTE PAYABLE (Note 4) $ 76,147 $ 78,304 ACCOUNTS PAYABLE AND ACCRUED LIABILITIES 1,482 1,041 ------------------- Total liabilities 77,629 79,345 ------------------- PARTNERS' CAPITAL (Note 1) 193,716 200,346 ------------------- $271,345 $279,691 =================== The accompanying notes are an integral part of these balance sheets.
CSC ASSOCIATES, L.P. -------------------- STATEMENTS OF OPERATIONS ------------------------ FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995 ---------------------------------------------------- ($ in thousands) 1997 1996 1995 ------- ------- ------- REVENUES: Rental income and recovery of expenses charged directly to specific tenants $35,159 $33,312 $31,195 Interest income (Note 4) 4,931 4,561 -- --------------------------- Total revenues 40,090 37,873 31,195 --------------------------- EXPENSES: Real estate taxes 3,349 3,578 3,482 Utilities 887 967 1,103 Management and personnel costs 1,546 1,523 1,403 Cleaning 1,253 1,152 1,086 Contract security 474 640 434 Repairs and maintenance 461 408 349 Elevator 325 330 305 Parking 260 245 208 Insurance 106 112 116 Grounds maintenance 129 135 116 Interest expense (Note 4) 4,931 4,561 -- Depreciation and amortization 7,535 7,968 7,688 Marketing and other expenses 37 64 164 General and administrative expenses 77 82 44 --------------------------- Total expenses 21,370 21,765 16,498 --------------------------- NET INCOME $18,720 $16,108 $14,697 =========================== The accompanying notes are an integral part of these statements.
CSC ASSOCIATES, L.P. -------------------- STATEMENTS OF PARTNERS' CAPITAL ------------------------------- FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995 ---------------------------------------------------- ($ in thousands) BALANCE, December 31, 1994 $204,712 Net income 14,697 Distributions (15,471) -------- BALANCE, December 31, 1995 203,938 Net income 16,108 Distributions (19,700) -------- BALANCE, December 31, 1996 200,346 Net income 18,720 Distributions (25,350) -------- BALANCE, December 31, 1997 $193,716 ======== The accompanying notes are an integral part of these statements.
CSC ASSOCIATES, L.P. -------------------- STATEMENTS OF CASH FLOWS ------------------------ FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995 ---------------------------------------------------- ($ in thousands) 1997 1996 1995 ------- ------- ------- CASH FLOWS FROM OPERATING ACTIVITIES: Net income $18,720 $16,108 $14,697 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 7,535 7,968 7,688 Rental revenue recognized on straight-line basis in excess of rental revenue specified in the lease agreements (238) (748) (1,148) Change in other receivables and other assets (90) (997) 7 Change in accounts payable and accrued liabilities related to operations 454 (1,937) 1,122 --------------------------- Net cash provided by operating activities 26,381 20,394 22,366 --------------------------- CASH FLOWS FROM INVESTING ACTIVITIES: Additions to building and improvements (433) (571) (6,918) Payments for deferred expenses (112) (143) (1,285) Investment in note receivable -- (80,000) -- Collection of note receivable 2,157 1,696 -- (Payments for) proceeds from furniture, fixtures and equipment (30) (46) 10 --------------------------- Net cash provided by (used in) investing activities 1,582 (79,064) (8,193) --------------------------- CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from note payable -- 80,000 -- Repayment of note payable (2,157) (1,696) -- Partnership distributions (25,350) (19,700) (15,471) Net cash (used in) provided by financing activities (27,507) 58,604 (15,471) NET INCREASE (DECREASE) IN CASH 456 (66) (1,298) CASH AT BEGINNING OF YEAR 31 97 1,395 --------------------------- CASH AT END OF YEAR $ 487 $ 31 $ 97 =========================== SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Cash paid during the year for interest $ 4,937 $ 4,339 $ -- =========================== The accompanying notes are an integral part of these statements.
CSC ASSOCIATES, L.P. -------------------- NOTES TO FINANCIAL STATEMENTS ----------------------------- DECEMBER 31, 1997, 1996 AND 1995 -------------------------------- 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 NationsBank Corporation. 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 NationsBank 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), subject to a preference to CPI. The CPI preference was $2.5 million, and accrued to CPI, with interest at 9% to the extent unpaid, over the period February 1, 1992 through January 31, 1995. During the year ended December 31, 1994, CPI received distributions of the preference and accrued interest of approximately $2.65 million. The remaining preference amount of $71,000 was distributed to CPI in January 1995. Amounts above the preference amount are allocated based on the partners' percentage interests. 2. SIGNIFICANT ACCOUNTING POLICIES Capitalization Policies All costs related to planning, development and construction of the Building, and 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 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 leases or useful life of the assets, whichever is shorter. Furniture, fixtures, and equipment are depreciated over 5 years. Deferred expenses which include organizational costs, certain marketing and leasing costs, and loan acquisition costs 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, 1997 and 1996, 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 1996 amounts have been reclassified to conform with 1997 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 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, 1997, 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 ----------- ------- ----- 1998 $ 16,762 $ 17,499 $ 34,261 1999 16,762 17,451 34,213 2000 16,762 17,440 34,202 2001 16,762 17,804 34,566 2002 16,785 18,412 35,197 Subsequent to 2002 153,237 90,334 243,571 -------- -------- -------- $237,070 $178,940 $416,010 ======== ======== ========
In the years ended December 31, 1997 and 1996, income recognized on a straight-line basis exceeded income which would have accrued in accordance with the lease terms by approximately $238,000 and $748,000, respectively. At December 31, 1997 and 1996, 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 $10,670,000 and $10,432,000, respectively. Of that amount, 19% was related to leases with NB Holdings Corporation and 35% was related to each of two professional services firms. At December 31, 1997, NB Holdings Corporation leased approximately 46% and two professional services firms leased approximately 15% and 14%, 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. In conjunction with this financing, Premises transferred its 1% general partnership interest in the partnership to C&S Premises-SPE, Inc., a wholly owned subsidiary of Premises. 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 NationsBank Corporation. In addition, CPI pays a monthly fee to an affiliate of NationsBank Corporation of .025% of the outstanding principal balance of the Notes which totaled approximately $232,000 and $220,000 in 1997 and 1996, respectively. The estimated fair value of both the note payable and related note receivable at December 31, 1997 was $75 million which was calculated by discounting future cash flows under the notes at estimated rates at which similar notes would be made currently. The Partnership also has an unsecured $3 million line of credit provided by an affiliate of Premises. Interest on the line is paid at a floating rate (6.35% weighted average rate in December 1997) and interest only is payable quarterly through July 31, 1998, at which time the entire outstanding balance is due. There were no borrowings under the line as of December 31, 1997 and 1996. The maturities of the Notes at December 31, 1997 are as follows (in thousands): 1998 $ 2,299 1999 2,450 2000 2,610 2001 2,782 2002 2,965 Subsequent to 2002 63,041 ------- $76,147 ======= 5. RELATED PARTIES - --------------------- The Partnership engaged CPI and an affiliate of CPI to manage, develop and lease the Building. During 1997, 1996 and 1995, fees to CPI and its affiliate incurred by the Partnership were as follows ($ in thousands):
1997 1996 1995 ---- ---- ------ Development and tenant construction fees $ 17 $ 13 $ 88 Leasing and procurement fees 32 101 229 Management fees 870 815 744 ---- ---- ------ $919 $929 $1,061 ==== ==== ======
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 is included in Other Assets and is 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 $1,000,000 would be due to CSC. In addition, CSC is responsible for the maintenance of the parking deck and the payment of the related operating expenses.
SCHEDULE III CSC ASSOCIATES, L.P. -------------------- REAL ESTATE AND ACCUMULATED DEPRECIATION ---------------------------------------- DECEMBER 31, 1997 ----------------- ($ 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 Acquisitions December 31, 1997 ------------------ -------------------- ---------------------------------- Carrying Costs and Improve- of Sales and Land and Total Description Encumbrances Land Improvements ments and Other Improvements Improvements (a) - ----------- ------------ ---- ------------ -------- --------- ------------ ------------ ----- NationsBank Plaza Atlanta, Georgia $ -- $ 18,200 $ -- $180,471 $ 10,449 $ 22,818 $186,302 $209,120 =============================================================================================
Column A Column F Column G Column H Column I -------- -------- -------- -------- -------- Life on Which De- preciation Accumu- In 1997 lated Date of Income Deprecia- Construc- Date Statement Description tion (a) tion Acquired Is Computed - ----------- --------- --------- -------- ----------- NationsBank Plaza Atlanta, Georgia $33,621 1990-1992 1990 5-40 =======
NOTE: (a) Reconciliations of total real estate carrying value and accumulated depreciation for the three years ended December 31, 1997 are as follows: Real Estate Accumulated Depreciation -------------------------------- ------------------------------- 1997 1996 1995 1997 1996 1995 -------- -------- -------- ------- ------- ------- Balance at beginning of period $209,141 $208,676 $203,275 $27,621 $21,232 $14,980 Improvements and other capitalized costs 420 465 5,401 -- -- -- Write offs of improvements and other capitalized costs (441) -- -- (441) -- -- Provision for depreciation -- -- -- 6,441 6,389 6,252 -------------------------------- ------------------------------- Balance at close of period $209,120 $209,141 $208,676 $33,621 $27,621 $21,232 ================================ ===============================
EX-11 2
EXHIBIT 11 COUSINS PROPERTIES INCORPORATED AND CONSOLIDATED ENTITIES COMPUTATION OF NET INCOME PER SHARE FOR THE FIVE YEARS ENDED DECEMBER 31, 1997 ($ in thousands, except per share amounts) 1997 1996 1995 1994 1993 ---------- ---------- ---------- ---------- ---------- BASIC: Net income $ 37,277 $ 41,016 $ 26,342 $ 26,895 $ 11,965 Weighted average shares 29,267,239 28,520,178 27,983,180 27,844,341 22,781,485 Basic net income per share $ 1.27 $ 1.44 $ .94 $ .97 $ .53 DILUTED: Net income $ 37,277 $ 41,016 $ 26,342 $ 26,895 $ 11,965 Dilutive potential common shares 425,504 218,194 163,413 103,604 106,595 Adjusted weighted average shares 29,692,743 28,738,372 28,146,593 27,947,945 22,888,080 Diluted net income per share $ 1.26 $ 1.43 $ .94 $ .96 $ .52
EX-13 3 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 share and per share amounts) ------------------------------ Years Ended December 31, ------------------------------- 1997 1996 1995 ------- ------- ------- Income before gain on sale of investment properties $31,305 $28,212 $24,480 Depreciation and amortization 24,397 17,256 13,381 Amortization of deferred financing costs and depreciation of furniture, fixtures and equipment (452) (362) (592) Elimination of the recognition of rental revenues on a straight-line basis 998 (311) (1,053) Adjustment to reflect stock appreciation right expense on a cash basis (702) (567) 1,166 Deferred income received net of deferred income recognized -- -- (1,127) ------- ------- ------- Consolidated Funds From Operations $55,546 $44,228 $36,255 ======= ======= ======= Weighted Average Shares 29,267 28,520 27,983 ======= ======= ======= Consolidated Funds From Operations Per Share - Basic $ 1.90 $ 1.55 $ 1.30 ======= ======= ======= Adjusted Weighted Average Shares 29,693 28,738 28,146 ======= ======= ======= Consolidated Funds From Operations Per Share - Diluted $ 1.87 $ 1.54 $ 1.29 ======= ======= =======
Cousins Properties Incorporated and Consolidated Entities CONSOLIDATED BALANCE SHEETS - -------------------------------------------------------------------------------- ($ in thousands, except share and per share amounts)
December 31, ------------------ 1997 1996 ------- -------- ASSETS - ------ PROPERTIES (Notes 4 and 8): Operating properties, net of accumulated depreciation of $33,369 in 1997 and $20,339 in 1996 $318,901 $232,360 Land held for investment or future development 27,948 21,213 Projects under construction 54,778 88,568 Residential lots under development 14,942 15,183 ------------------ Total properties 416,569 357,324 CASH AND CASH EQUIVALENTS, at cost, which approximates market 32,694 1,598 NOTES AND OTHER RECEIVABLES (Note 3) 38,464 56,497 INVESTMENT IN UNCONSOLIDATED JOINT VENTURES (Notes 4 and 5) 120,198 132,262 OTHER ASSETS 9,814 8,963 ------------------ TOTAL ASSETS $617,739 $556,644 ================== LIABILITIES AND STOCKHOLDERS' INVESTMENT - ---------------------------------------- NOTES PAYABLE (Note 4) $226,348 $231,831 ACCOUNTS PAYABLE AND ACCRUED LIABILITIES 20,332 25,302 DEPOSITS AND DEFERRED INCOME 385 327 ------------------ TOTAL LIABILITIES 247,065 257,460 ------------------ COMMITMENTS AND CONTINGENT LIABILITIES (Note 4) STOCKHOLDERS' INVESTMENT (Note 6): Common stock, $1 par value; authorized 50,000,000 shares, issued 31,472,178 in 1997; and 28,920,122 in 1996 31,472 28,920 Additional paid-in capital 234,237 164,970 Cumulative undistributed net income 104,965 105,294 ------------------ TOTAL STOCKHOLDERS' INVESTMENT 370,674 299,184 ------------------ TOTAL LIABILITIES AND STOCKHOLDERS' INVESTMENT $617,739 $556,644 ==================
The accompanying notes are an integral part of these consolidated balance sheets. Cousins Properties Incorporated and Consolidated Entities CONSOLIDATED STATEMENTS OF INCOME - -------------------------------------------------------------------------------- ($ in thousands, except share and per share amounts)
Years Ended December 31, --------------------------- 1997 1996 1995 ------- ------- ------- REVENUES: Rental property revenues (Note 10) $62,252 $33,112 $19,348 Development income 3,123 1,660 3,515 Management fees 3,448 2,801 2,213 Leasing and other fees 720 1,558 2,156 Residential lot and outparcel sales 12,847 14,145 9,040 Interest and other 3,609 5,256 4,764 --------------------------- 85,999 58,532 41,036 --------------------------- INCOME FROM UNCONSOLIDATED JOINT VENTURES (Note 5) 15,461 17,204 14,113 --------------------------- COSTS AND EXPENSES: Rental property operating expenses 15,371 7,616 4,681 General and administrative expenses 12,717 9,148 7,668 Depreciation and amortization 14,046 7,219 4,516 Stock appreciation right expense (Note 6) 204 2,154 1,298 Residential lot and outparcel cost of sales 11,917 13,676 8,407 Interest expense (Note 4) 14,126 6,546 687 Property taxes on undeveloped land 606 1,301 977 Other 2,695 1,567 1,688 --------------------------- 71,682 49,227 29,922 --------------------------- INCOME FROM OPERATIONS BEFORE INCOME TAXES AND GAIN ON SALE OF INVESTMENT PROPERTIES 29,778 26,509 25,227 PROVISION (BENEFIT) FOR INCOME TAXES FROM OPERATIONS (Note 7) (1,527) (1,703) 747 --------------------------- INCOME BEFORE GAIN ON SALE OF INVESTMENT PROPERTIES 31,305 28,212 24,480 --------------------------- GAIN ON SALE OF INVESTMENT PROPERTIES, NET OF APPLICABLE INCOME TAX PROVISION (Note 7) 5,972 12,804 1,862 --------------------------- NET INCOME $37,277 $41,016 $26,342 =========================== WEIGHTED AVERAGE SHARES 29,267 28,520 27,983 =========================== BASIC NET INCOME PER SHARE $ 1.27 $ 1.44 $ .94 =========================== ADJUSTED WEIGHTED AVERAGE SHARES 29,693 28,738 28,146 =========================== DILUTED NET INCOME PER SHARE $ 1.26 $ 1.43 $ .94 =========================== CASH DIVIDENDS DECLARED PER SHARE (Note 6) $ 1.29 $ 1.12 $ .99 ===========================
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, 1997, 1996 and 1995 ($ in thousands)
Additional Cumulative Common Paid-In Undistributed Stock Capital Net Income Total ------- ---------- ------------- ------- BALANCE, December 31, 1994 $27,864 $147,495 $ 97,539 $272,898 Net income, 1995 -- -- 26,342 26,342 Common stock issued pursuant to: Exercise of options and director stock plan 42 638 -- 680 Dividend reinvestment plan 307 4,956 -- 5,263 Compensation paid in stock in lieu of cash 10 176 -- 186 Dividends declared -- -- (27,691) (27,691) --------------------------------------------- BALANCE, December 31, 1995 28,223 153,265 96,190 277,678 Net income, 1996 -- -- 41,016 41,016 Common stock issued pursuant to: Exercise of options and director stock plan 307 4,344 -- 4,651 Dividend reinvestment plan 390 7,361 -- 7,751 Dividends declared -- -- (31,912) (31,912) --------------------------------------------- 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 $370,674 =============================================
The accompanying notes are an integral part of these consolidated statements. Cousins Properties Incorporated and Consolidated Entities CONSOLIDATED STATEMENTS OF CASH FLOWS (Note 9) - -------------------------------------------------------------------------------- ($ in thousands)
Years Ended December 31, ------------------------------ 1997 1996 1995 -------- -------- -------- CASH FLOWS FROM OPERATING ACTIVITIES: Income before gain on sale of investment properties $ 31,305 $ 28,212 $ 24,480 Adjustments to reconcile income before gain on sale of investment properties to net cash provided by operating activities: Depreciation and amortization, net of minority interests' share 14,046 7,219 4,340 Stock appreciation right expense 204 2,154 1,298 Cash charges to expense accrual for stock appreciation rights (906) (2,721) (132) Effect of recognizing rental revenues on a straight-line basis (440) (4) (107) Deferred income received -- -- 1,673 Deferred income recognized -- -- (2,800) Income from unconsolidated joint ventures (15,461) (17,204) (14,113) Operating distributions from unconsolidated joint ventures 21,707 19,382 15,786 Compensation paid in stock in lieu of cash -- -- 186 Residential lot and outparcel cost of sales 11,398 13,111 8,065 Changes in other operating assets and liabilities: Change in other receivables 2,592 (3,420) (1,018) Change in accounts payable and accrued liabilities (6,492) 10,375 62 ------------------------------ Net cash provided by operating activities 57,953 57,104 37,720 ------------------------------ CASH FLOWS FROM INVESTING ACTIVITIES: Gain on sale of investment properties, net of applicable income tax provision 5,972 12,804 1,862 Adjustments to reconcile gain on sale of investment properties to net cash provided by sales activities: Cost of sales 17,041 26,252 2,869 Note received as sales consideration -- (365) (500) Property acquisition and development expenditures (80,628) (162,154) (87,234) Non-operating distributions from unconsolidated joint ventures 14,681 1,408 1,226 Investment in unconsolidated joint ventures, including interest capitalized to equity investments (8,863) (268) (9,318) Investment in notes receivable (5,593) (27,115) (18) Collection of notes receivable 3,472 27,703 841 Change in other assets, net (1,645) (4,095) 905 Cash portion of exchange transaction -- 1,092 -- ------------------------------ Net cash used in investing activities (55,563) (124,738) (89,367) ------------------------------ CASH FLOWS FROM FINANCING ACTIVITIES: Repayment of line of credit (138,430) (87,627) (86,336) Proceeds from line of credit 114,631 47,677 78,575 Common stock sold, net of expenses 71,795 12,074 5,848 Dividends paid (37,606) (31,912) (27,691) Proceeds from other notes payable 25,000 131,844 80,116 Repayment of other notes payable (6,684) (4,376) (720) ------------------------------ Net cash provided by financing activities 28,706 67,680 49,792 ------------------------------ NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 31,096 46 (1,855) CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 1,598 1,552 3,407 ------------------------------ CASH AND CASH EQUIVALENTS AT END OF YEAR $ 32,694 $ 1,598 $ 1,552 ==============================
The accompanying notes are an integral part of these consolidated statements. Cousins Properties Incorporated and Consolidated Entities NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- December 31, 1997, 1996 and 1995 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, as well as Cousins Real Estate Corporation ("CREC") 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 CREC's and its wholly owned subsidiaries' consolidated taxable income) 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 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 and 25 years. Furniture, fixtures and equipment are depreciated over 3 to 15 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. Costs related to planning, development, leasing and construction of properties (including related general and administrative expenses) are capitalized. The table below shows the fees eliminated, the internal costs capitalized related to these fees, and the additional internal costs capitalized by CREC to its own residential developments ($ in thousands):
1997 1996 1995 ------- ------- ------- Fees eliminated in consolidation $ 1,510 $ 3,400 $ 5,479 Internal costs capitalized in consolidation to projects on which fees were eliminated $ 1,525 $ 2,135 $ 2,552 Internal costs capitalized to CREC residential developments $ 515 $ 500 $ 498
Interest, real estate taxes, and rental revenues and expenses of properties prior to the date they become operational for financial reporting purposes are also capitalized. Interest is also 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. Management fees received from consolidated entities are shown as a reduction in rental property operating expenses. 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, 1997, cash and cash equivalents included $1,087,000 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. Earnings Per Share: The Company has adopted SFAS No. 128, "Earnings Per Share," which specifies the computation, presentation and disclosure requirements for earnings per share. The Company has disclosed both basic and diluted net income per share and has restated all prior period amounts disclosed in accordance with SFAS No. 128. Disclosure About Segments: In June 1997, the Financial Accounting Standards Board issued SFAS No. 131, "Disclosure About Segments of an Enterprise and Related Information." This statement requires companies to identify segments based on how management makes decisions about allocating resources to segments and measuring their performance. The Company will adopt SFAS No. 131 in 1998 which will only affect the Notes to Consolidated Financial Statements by the addition of disclosures of the results of certain identified segments. 2. RELATIONSHIP WITH DEVELOPMENT AND LEASING ENTITY CREC conducts certain development and leasing activities for real estate projects. A wholly owned subsidiary of CREC, Cousins MarketCenters, Inc. ("CMC"), develops retail centers for the Company. CREC also manages a joint venture property in which it has an ownership interest. At December 31, 1997, 1996 and 1995, 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 ($9,045,000 in aggregate) exceeds CREC's $1,824,683 of equity. 3. NOTES AND OTHER RECEIVABLES At December 31, 1997 and 1996, notes and other receivables included the following ($ in thousands):
1997 1996 ------- ------- 650 Massachusetts Avenue Mortgage Notes $25,961 $26,786 Wildwood Training Facility Mortgage Note -- 17,005 Daniel Realty Company Note Receivable 4,000 1,080 Miscellaneous Notes 776 903 Cumulative rental revenue recognized on a straight- line basis in excess of revenue which accrued in accordance with lease terms (see Note 1) 4,496 4,056 Other Receivables 3,231 6,667 ----------------- Total Notes and Other Receivables $38,464 $56,497 =================
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 $30.5 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 ($825,000 and $788,000 in 1997 and 1996, respectively) are treated as a reduction of principal. Wildwood Training Facility Mortgage Note - The Wildwood Training Facility is owned by a limited partnership which leases the land under the facility from the Company through November 30, 2013, with no renewal option, and owes the Company $25.9 million on a note collateralized by the building located on the land. The facility had been 100% leased to International Business Machines Corporation ("IBM") through November 30, 1998. The IBM lease generated net cash flow of approximately $2.4 million, of which all but $44,000 was paid to the Company as payments on the mortgage note and ground lease, and for management fees. At December 31, 1996, the land and the mortgage note (which for financial reporting purposes was treated as an amortizing note even though it did not actually amortize) were carried at $0 and $17,005,000, respectively, in the accompanying financial statements. Effective January 1, 1997, the IBM lease was extended eight years beyond its previous expiration, to November 30, 2006. The amended lease will continue to generate net cash flow of approximately $2.4 million through November 30, 1998, after which it will generate approximately $2.7 million through November 30, 2002, and $3.0 million through November 30, 2006. All but $44,000 will be paid to the Company as payments on the mortgage note and ground lease and for management fees through November 30, 1998, after which all but $54,000 will be paid to the Company. The mortgage note payable to the Company is not expected to amortize during this period. Based on the above, 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 1997 revenues and expenses (including depreciation) have been recorded as if the building were owned by the Company. 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 will focus on the development and acquisition of commercial office properties. The arrangement with Daniel includes 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, commencing April 1, 1998, in the amount of approximately $250,568. The loan will fully amortize over 5 years. Fair Value - The estimated fair value of the Company's $30.7 million and $45.8 million of notes receivable at December 31, 1997 and 1996, respectively, is $37.7 million and $51.9 million, respectively, calculated by discounting future cash flows from the notes receivable at the estimated rates at which similar loans would be made currently. 4. NOTES PAYABLE, COMMITMENTS, AND CONTINGENT LIABILITIES At December 31, 1997 and 1996, the notes payable included the following ($ in thousands):
December 31, 1997 December 31, 1996 ------------------------------------ ------------------------------------- Share of Share of Unconsolidated Unconsolidated Company Joint Ventures Total Company Joint Ventures Total -------- -------------- -------- -------- --------------- -------- Floating Rate Lines of Credit $ -- $ -- $ -- $ 25,100 $ 2,025 $ 27,125 Other Debt (primarily non-recourse fixed rate mortgages) 226,348 133,446 359,794 206,731 105,487 312,218 ----------------------------------------------------------------------------- $226,348 $133,446 $359,794 $231,831 $107,512 $339,343 =============================================================================
The following table summarizes the terms of the debt outstanding at December 31, 1997 ($ in thousands):
Term/ Amortization Balance at Period Final December 31, Description Rate (Years) Maturity 1997 ----------- ---------------- ------------- --------- ------------ Company Debt: - ------------- Line of credit ($100 million maximum) unsecured Fed Funds + .88% 1/ N/A 6/29/98 $ -- Note secured by Company's interest in CSC Associates, L.P. 6.677% 15/20 2/15/11 76,147 101 Independence Center mortgage note 8.22% 11/25 11/1/07 48,928 North Point MarketCenter mortgage note 8.50% 10/25 7/15/05 29,068 100/200 North Point Center East mortgage note 7.86% 10/25 8/1/07 24,893 Note secured by Company's interest in 650 Massachusetts Avenue mortgage notes (see Note 3) 6.53% 5/ N/A 10/01/00 24,224 Perimeter Expo mortgage note 8.04% 10/30 8/15/05 21,061 Other miscellaneous notes 0% to 9.4% Various Various 2,027 -------- 226,348 -------- Share of Unconsolidated Joint Venture Debt: - ------------------------------------------- Wildwood Associates: Line of credit ($5 million maximum) Fed Funds + .75% 1/N/A 9/1/98 -- 2300 Windy Ridge mortgage note 7.56% 10/25 12/01/05 34,998 3200 Windy Hill mortgage note 8.23% 10/28 1/1/07 34,695 4100/4300 Wildwood Parkway mortgage note 7.65% 15/25 4/1/12 14,848 2500 Windy Ridge mortgage note 7.45% 10/20 12/15/05 12,391 Cousins LORET Venture, L.L.C. mortgage note 7.90% 10/30 10/01/07 15,000 CC-JM II Associates mortgage note 7.00% 17/17 4/1/13 11,837 Ten Peachtree Place Associates mortgage note 8.00% 10/18 11/30/01 9,677 -------- 133,446 -------- $359,794 ========
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 NationsBank 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 NationsBank Corporation. In addition, the Company pays a fee to an affiliate of NationsBank 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.) Effective June 30, 1997, the Company extended the maturity of its $100 million line of credit from June 30, 1997 to June 29, 1998. The line is unsecured and bears interest tied to the Federal Funds rate. The Company had no borrowings under the line as of December 31, 1997. Three new financings were completed during 1997. On March 20, 1997, Wildwood Associates completed the financing of the 4100 and 4300 Wildwood Parkway Buildings with a $30 million non-recourse mortgage note payable at a 7.65% interest rate and maturity of April 1, 2012. On July 30, 1997, the Company completed the financing of the 100 and 200 North Point Center East Buildings with a $25 million non-recourse mortgage note payable at a 7.86% interest rate and maturity of August 1, 2007. On September 30, 1997, Cousins LORET Venture, L.L.C. completed the financing of Two Live Oak Center with a $30 million non-recourse mortgage note payable at a 7.9% interest rate and a maturity of October 1, 2007. In November 1997, Cousins LORET Venture, L.L.C. received a commitment for the financing of The Pinnacle office building which is expected to close in March 1998 and will be drawn down as needed with the full amount funded by December 1998. The $70 million non-recourse mortgage note payable has an interest rate of 7.11% and term of twelve years. The Wildwood Associates 2300 Windy Ridge, 3200 Windy Hill and 4100/4300 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 shown above) 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 shown above. The difference between fixed and variable interest amounts calculated by reference to the principal notional amount (which was $23,700,000 at December 31, 1997) is recognized as an adjustment to interest expense over the life of the swap. If the Company settled the swap as of December 31, 1997, it would receive $176,000. At December 31, 1997, the Company had outstanding letters of credit totaling $1,831,000, and assets with carrying values of $271,473,000 and $268,121,000 were pledged as security on the Company's and its unconsolidated joint ventures' debt, respectively. The fixed rate long-term mortgage debt of the Company and its unconsolidated joint ventures is non-recourse to the Company. As of December 31, 1997, the weighted average maturity of the Company's debt, including its share of unconsolidated joint ventures, was 9 years. The aggregate maturities of the indebtedness at December 31, 1997 summarized above are as follows ($ in thousands):
Share of Unconsolidated Company Joint Ventures Total -------- -------------- -------- 1998 $ 6,929 $ 2,878 $ 9,807 1999 6,790 3,118 9,908 2000 24,871 3,423 28,294 2001 4,943 11,427 16,370 2002 5,309 3,550 8,859 Thereafter 177,506 109,050 286,556 ---------------------------------------------- $226,348 $133,446 $359,794 ==============================================
For each of the years ended December 31, 1997, 1996 and 1995, interest expense was recorded as follows ($ in thousands):
Share of Unconsolidated Company Joint Ventures Total ------------------------------- ------------------------------- -------------------------------- Year Expensed Capitalized Total Expensed Capitalized Total Expensed Capitalized Total - ---- -------- ----------- ------- -------- ----------- ------ -------- ----------- ------- 1997 $14,126 $3,167 $17,293 $8,281 $1,123 $9,404 $22,407 $4,290 $26,697 1996 6,546 5,648 12,194 6,599 557 7,156 13,145 6,205 19,350 1995 687 5,073 5,760 6,760 302 7,062 7,447 5,375 12,822
The Company has future lease commitments under a land lease aggregating $7.3 million over its remaining term of 71 years. Current annual lease payments are approximately $63,000. The Company has entered into construction and design contracts for real estate projects, of which approximately $17.4 million remains committed at December 31, 1997. At December 31, 1997 the fair value of the Company's notes payable was $238 million. At December 31, 1996, the carrying value of the Company's notes payable approximates fair value. 5. INVESTMENT IN UNCONSOLIDATED JOINT VENTURES The following information summarizes financial data and principal activities of unconsolidated joint ventures in which the Company had ownership interests ($ 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 -------------------- ------------------- ------------------- ------------------- 1997 1996 1997 1996 1997 1996 1997 1996 -------- -------- --------- -------- -------- -------- -------- -------- SUMMARY OF FINANCIAL POSITION: Wildwood Associates $261,828 $268,910 $193,861 $166,490 $ 60,464 $ 90,658 $(12,622) $ 2,476 CSC Associates, L.P. 194,982 201,166 -- -- 193,716 200,346 99,513 102,904 Ten Peachtree Place Associates 20,225 20,811 19,354 20,196 533 215 44 (4) Haywood Mall 40,546 41,530 -- -- 39,643 40,941 20,626 20,743 Cousins LORET Venture, L.L.C. 68,820 -- 30,000 -- 50,214 -- 8,770 -- CC-JM II Associates 29,510 30,351 23,674 24,288 4,878 5,211 2,771 2,981 Norfolk Hotel Associates -- 8,283 -- 4,050 -- 4,182 -- 2,091 Other 2,433 2,365 -- -- 2,302 2,144 1,096 1,071 ------------------- ------------------- ------------------- ------------------- $618,344 $573,416 $266,889 $215,024 $351,750 $343,697 $120,198 $132,262 =================== =================== =================== ===================
Company's Share Total Revenues Net Income of Net Income ------------------------- ------------------------- ------------------------- 1997 1996 1995 1997 1996 1995 1997 1996 1995 ------- ------- ------- ------- ------- ------- ------- ------- ------- SUMMARY OF OPERATIONS: Wildwood Associates $39,115 $40,505 $37,767 $ 3,806 $ 8,490 $ 5,884 $ 1,903 $ 4,245 $ 2,942 CSC Associates, L.P. 35,159 33,312 31,195 18,720 16,108 14,697 9,284 7,978 7,308 Ten Peachtree Place Associates 4,295 4,284 4,276 718 632 523 248 235 236 Haywood Mall 13,820 13,527 11,269 7,382 7,120 5,926 3,648 3,538 2,963 Cousins LORET Venture, L.L.C. 1,885 -- -- 135 -- -- 68 -- -- CC-JM II Associates 3,860 3,489 -- 261 316 -- 113 141 -- Norfolk Hotel Associates 214 820 804 180 552 486 90 276 243 Other 329 2,018 1,504 215 1,586 846 107 791 421 ------------------------- ------------------------- ------------------------- $98,677 $97,955 $86,815 $31,417 $34,804 $28,362 $15,461 $17,204 $14,113 ========================= ========================= =========================
Company's Share Of ----------------------------------------------------- Cash Flows From Cash Flows From Operating Operating Activities Operating Activities Cash Distributions ------------------------- ------------------------- ------------------------- 1997 1996 1995 1997 1996 1995 1997 1996 1995 ------- ------- ------- ------- ------- ------- ------- ------- ------- SUMMARY OF OPERATING CASH FLOWS: Wildwood Associates $15,789 $20,278 $12,812 $ 7,894 $10,139 $ 6,406 $ 4,500 $ 4,000 $ 4,000 CSC Associates, L.P. 26,381 20,394 22,366 13,191 10,197 11,219 12,675 9,850 7,771 Ten Peachtree Place Associates 1,205 1,360 1,100 321 344 305 200 200 200 Haywood Mall 9,795 7,877 3,502 4,897 3,939 1,751 3,895 4,990 3,349 Cousins LORET Venture, L.L.C. 768 -- -- 384 -- -- -- -- -- CC-JM II Associates 1,222 (1,655) -- 611 (828) -- 324 162 -- Norfolk Hotel Associates 132 428 338 66 214 169 -- -- -- Other 235 1,378 843 118 689 422 113 180 466 ------------------------- ------------------------- ------------------------- $55,527 $50,060 $40,961 $27,482 $24,694 $20,272 $21,707 $19,382 $15,786 ========================= ========================= =========================
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 289 acres, of which approximately 94 acres are owned by Wildwood Associates and an estimated 15 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 15 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. Effective December 1, 1996, Wildwood Associates disposed of its interest in an office building at Summit Green in exchange for cancellation of the related mortgage debt. Summit Green is an office project situated on 21 acres of leased land in Greensboro, North Carolina and includes sites for two additional buildings. In connection with the office building disposition, Wildwood Associates and a related partnership also may dispose of a leasehold interest in the sites for the two additional buildings. No material gain or loss is anticipated to result from the disposition of the Summit Green project. Through December 31, 1997, 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 15 acres of additional land with an agreed value of $13.5 million. The Company and IBM each lease office space from the partnership at rates comparable to those charged to third parties. On March 20, 1997, Wildwood Associates completed the $30 million financing of the 4100 and 4300 Wildwood Parkway Buildings (see Note 4). In conjunction with this financing and a portion of the $70 million financing of the 3200 Windy Hill Road Building completed in December 1996, during the first quarter of 1997, Wildwood Associates made non-operating cash distributions of $12.5 million to each partner and paid the entire calendar year 1997 operating distribution of $4.5 million to each partner. The Company's investment as recorded in the Consolidated Balance Sheets, which was reduced to a negative investment of $12.6 million at December 31, 1997 due to the aforementioned 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 ($30.2 million at December 31, 1997) is based upon the agreed 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 NationsBank Corporation, each as 50% partners. CSC owns the 1.3 million rentable square foot NationsBank 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, is owned by the Company and an affiliate of Corporate Property Investors. The mall has 1,256,000 gross leaseable square feet ("GLA") (of which approximately 330,000 GLA is owned). The balance of the mall is owned by the mall's five major department stores. Cousins LORET Venture, L.L.C. Effective July 31, 1997, Cousins LORET Venture, L.L.C. ("the Venture") 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 recently renovated and is in the process of being leased up. Two Live Oak Center became partially operational for financial reporting purposes in October 1997. LORET also contributed an adjacent 4 acre site on which construction commenced in August 1997 on The Pinnacle, a 424,000 rentable square foot office building. Two Live Oak Center was contributed subject to a 7.90% $30 million non-recourse ten year mortgage note payable (see Note 4). The Company is obligated to contribute $25 million of cash to the Venture to match the value of LORET's agreed-upon equity, which cash is to be contributed as needed for the development of The Pinnacle. As of December 31, 1997, the Company had contributed $8.5 million of its $25 million obligation. Norfolk Hotel Associates ("NHA") - NHA was a partnership between the Company and an affiliate of Odyssey Partners, L.P., each as 50% partners, which held a mortgage note on and owned the land under the Omni International Hotel in Norfolk, Virginia. In January 1992, NHA terminated the land lease and became the owner of the hotel and a long-term parking agreement with an adjacent building owner. In April 1993, the partnership sold the hotel, but retained its interest in the parking agreement. The partnership received a mortgage note receivable for a portion of the sales proceeds. In July 1994, NHA distributed to each partner a 50% interest in the parking agreement held by NHA, and in July 1996 the Company sold its 50% interest for $2 million, resulting in a profit to the Company of approximately $408,000 which is included in Gain on Sale of Investment Properties in the accompanying Consolidated Statements of Income. On February 14, 1997, the mortgage note receivable due to NHA with a balance of $8,325,000 was repaid in full. A portion of the proceeds from the repayment was used to pay off the partnership's lines of credit, with substantially all of the balance of the partnership's assets ($2.2 million of cash for each partner) distributed to the partners in 1997. The partnership was dissolved in 1997. 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. Rent commenced on January 21, 1996. 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. 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 11,300 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 $827 per acre at January 1, 1998, escalating at 6% on January 1 of each succeeding year during the term of the option. During 1996, approximately 375 acres of the option related to the fee simple interest was exercised and simultaneously sold for gross profits of approximately $1,427,000. None of the option was exercised in 1995 and 1997. Dusseldorf Joint Venture - In 1992, the Company entered into a joint venture agreement for the development of a 133,000 rentable square foot office building in Dusseldorf, Germany which is 34% leased to IBM. Cousins' venture partners are IBM and Multi Development Corporation International B.V. ("Multi"), a Dutch real estate development company. In December 1993, the building was presold to an affiliate of Deutsche Bank. CREC and Multi jointly developed the building. Due to the release of certain completion guarantees related to the building, approximately $2.6 million of development income was recognized in September 1995 ($931,000 of which had been deferred as of December 31, 1994). An additional $235,000 and $777,000 of development income was received and recognized in 1997 and 1996, respectively. Additional Information - The Company recognized $4,398,000, $4,926,000 and $5,780,000 of development, construction, leasing, and management fees from unconsolidated joint ventures in 1997, 1996 and 1995, respectively. 6. STOCKHOLDERS' INVESTMENT Common Stock Issuance: In December 1997, the Company issued 2,150,000 shares of common stock through a public offering at a price of $31.5625 per share. The Company has used the proceeds to reduce debt and develop income-producing properties. General: The Company has elected to account for its stock-based compensation plans under APB 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". Had compensation cost for stock-based compensation plans been determined consistent with SFAS No. 123, the Company's earnings and earnings per share would have been as disclosed below. Options and Stock Appreciation Rights: The Company has a key employee stock incentive plan and an outside director stock plan which provide for the granting of both stock and stock option awards (see also "Stock Grants" below). Under both plans, stock options have been granted for a term of 10 years, and the vesting period for all options outstanding is 5 years and 1 year under the key employee and outside director plans, respectively. At December 31, 1997, 1,841,070 stock options to key employees and outside directors were outstanding, and the Company is authorized to award an additional 529,357 stock options or shares of stock. Prior to 1991, the Company included a provision in each key employee stock option agreement to allow the option holder to surrender options and request a cash payment for the difference between the fair market value of the shares at the date of surrender and the option price; all of those options were exercised prior to December 31, 1997. Separately from the stock incentive plan, the Company has issued stock appreciation rights ("SARs") to certain employees under two plans. At December 31, 1997, 120,600 SARs were outstanding, and the Company is authorized to award an additional 1,110,354 SARs. The Company accounts for stock options which have a cash payment election option as SARs. Accordingly, included in the Consolidated Statements of Income under the heading "stock appreciation right expense" are increases or reductions 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. The following is a summary of stock option activity under the stock option plans and SAR plans (in thousands, except per share amounts):
Number of Weighted Average Shares Exercise Price Per Share --------------------------- ------------------------------ 1997 1996 1995 1997 1996 1995 ---- ---- ---- ------ ------ ------ Stock Option Plans - ------------------ Outstanding, beginning of year 1,507 1,413 1,184 $17.95 $15.42 $14.74 Granted 580 436 300 $30.15 $22.75 $18.00 Exercised (231) (340) (42) $14.67 $13.61 $13.30 Forfeited (15) (2) (29) $19.01 $16.77 $16.99 --------------------------- Outstanding, end of year 1,841 1,507 1,413 $22.23 $17.95 $15.42 =========================== Shares exercisable at end of year 630 601 805 $17.04 $15.29 $13.68 =========================== SARs Outstanding, beginning of year 184 344 369 $14.74 $13.21 $13.21 Granted -- -- -- -- -- -- Exercised (62) (159) (23) $14.09 $11.44 $13.03 Forfeited (1) (1) (2) $16.88 $13.59 $13.91 --------------------------- Outstanding, end of year 121 184 344 $15.05 $14.74 $13.21 =========================== Shares exercisable at end of year 103 145 272 $14.74 $14.21 $12.44 ===========================
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, 1997 (in thousands, except per share amounts and option life):
For Outstanding Options/SARs ---------------------------- Exercise Weighted Weighted Average Price Average Contractual Life Range Outstanding Exercisable Price (in years) -------- ----------- ----------- -------- ---------------- Stock Option Plans - ------------------ $13.25 to $16.30 547 422 $15.61 5.6 $16.31 to $23.00 714 205 $20.85 8.5 $23.01 to $30.25 580 3 $30.15 9.9 ------------------------------------------- Total 1,841 630 $22.23 8.1 =========================================== SARs - ---- $10.78 to $13.75 46 46 $12.85 3.4 $13.76 to $16.875 75 57 $16.40 5.0 ------------------------------------------- Total 121 103 $15.05 4.4 ===========================================
At December 31, 1997 and 1996, the total amount accrued for stock options, SARs, and Deferred Payment Agreements was $1,746,000 and $2,472,000, respectively. Stock Grants: As indicated above the key employee stock incentive plan and the outside director stock plan provide for stock awards in addition to stock option awards. The stock awards may be subject to specified performance and vesting requirements. Under the outside director stock plan, since April 1995 a director could elect to receive any portion of his director fees in stock, and since May 1996 the amount of stock received has been based on 95% of the market price. As of December 31, 1997, 110,400 shares of common stock have been awarded under the key employee stock incentive plan, of which 10,400 shares were awarded in lieu of 1995 cash bonuses, and 100,000 shares were awarded in 1995 subject to specified performance and 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, 1997 and 1996, $1,242,000 and $654,000 was accrued, respectively. Outside directors elected to receive 4,638, 2,260 and 307 shares of stock in lieu of cash for director fees in 1997, 1996 and 1995, respectively. SFAS No. 123 Pro Forma Disclosures: For purposes of the pro forma disclosures required by SFAS No. 123, the Company has computed the value of all stock and stock options awards granted during 1997, 1996 and 1995 using the Black-Scholes option pricing model with the following weighted-average assumptions and results:
1997 1996 1995 ---- ---- ---- Assumptions - ----------- Risk-free interest rate 5.93% 6.26% 5.94% Assumed dividend yield 4.80% 5.34% 6.00% Assumed lives of option awards 8 years 8 years 8 years Assumed volatility 0.202 0.171 0.173 Results Weighted average fair value of options granted $ 5.12 $ 3.08 $ 1.98
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 1997, 1996 and 1995 in accordance with SFAS No. 123, pro forma results would have been as follows ($ in thousands, except per share amounts):
1997 1996 1995 ------- ------- ------- Pro forma net income $36,769 $40,978 $26,297 Pro forma basic net income per share $ 1.26 $ 1.44 $ .94 Pro forma diluted net income per share $ 1.24 $ 1.43 $ .93
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.
Per Share Data: 1997 1996 1995 ------ ------ ------ Weighted average shares 29,267 28,520 27,983 Dilutive potential common shares 426 218 163 Adjusted weighted average shares 29,693 28,738 28,146 Anti-dilutive options not included 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 1996 and 1995 and estimated to be applied in 1997 to meet REIT distribution requirements ($ in thousands):
1997 1996 1995 ------- ------- ------- Dividends declared $37,606 $31,912 $27,691 Additional dividends paid deduction due to 5% discount on dividends reinvested 236 408 277 That portion of dividends declared in current year, and paid in current year, which was applied to the prior year distribution requirements (4,816) (2,197) (3,048) That portion of dividends declared in subsequent year, and paid in subsequent year, which will apply to current year 9,789 4,816 2,197 --------------------------- Dividends applied to meet current year REIT distribution requirements $42,815 $34,939 $27,117 ===========================
Tax Status of Dividends: Dividends applied to meet REIT distribution requirements were equal to Cousins' taxable income (see Note 7). Since electing to qualify as a REIT in 1987, Cousins has had no accumulated undistributed taxable income. In 1997, the Company designated as 28% capital gain dividends 49% of the dividend paid February 10, 1997. In 1996, the Company designated as capital gain dividends 16.778% of the dividend paid February 22, 1996 and 30.6774% of the dividend paid December 23, 1996. In 1995, the Company designated as capital gain dividends 2.4815% of the dividend paid December 21, 1995. All other dividends paid in 1995 and 1997 were taxable as ordinary dividends. In addition, in 1997, 1996 and 1995 an amount calculated as 1.91%, 1.95% and 3.25% of total dividends, respectively, was an "adjustment attributed to depreciation of tangible property placed in service after 1986" for alternative minimum tax purposes. This amount was passed through to stockholders and must be used as an item of adjustment in determining each stockholder's alternative minimum taxable income. 7. INCOME TAXES In 1997, 1996 and 1995, because Cousins qualified as a REIT and distributed all of its taxable income (see Note 6), it incurred no federal income tax liability. The differences between taxable income as reported on Cousins' tax return (estimated 1997 and actual 1996 and 1995) and Consolidated Net Income as reported herein are as follows ($ in thousands):
1997 1996 1995 ------- ------- ------- Consolidated net income $37,277 $41,016 $26,342 Consolidating adjustments (1,218) (3,868) 348 Less CREC net (income) loss (482) 2,937 (1,652) ----------------------------- Cousins net income for financial reporting purposes 35,577 40,085 25,038 Adjustments arising from: Sales of investment properties 1,615 (8,844) (1,633) Income from unconsolidated joint ventures (principally depreciation, revenue recognition, and operational timing differences) 1,770 (489) (1,891) Rental income recognition (440) 73 (130) - Interest income recognition 554 448 305 Wildwood Training Facility differences -- 411 375 Interest expense 1,600 2,356 2,830 Compensation expense under stock option and SAR plans (2,578) (2,893) 312 Depreciation 4,697 1,170 245 Other 20 2,622 1,666 ------------------------------ Cousins taxable income $ 42,815 $ 34,939 $ 27,117 ==============================
The consolidated provision (benefit) for income taxes is composed of the following ($ in thousands):
1997 1996 1995 CREC and its wholly owned subsidiaries: Currently payable: Federal $ 46 $ -- $ -- State -- -- -- ----------------------------- 46 -- -- ----------------------------- Adjustments arising from: Income from unconsolidated joint ventures 304 298 171 Operating loss carryforward 751 (1,133) 914 Stock appreciation right expense 119 (185) (324) Fee income -- -- 354 Other (922) (776) (49) ----------------------------- 252 (1,796) 1,066 ----------------------------- CREC provision (benefit) for income taxes 298 (1,796) 1,066 Cousins provision (benefit) for state income taxes 72 680 (228) Less provision applicable to gain on sale of investment properties (1,897) (587) (91) ----------------------------- Consolidated provision (benefit) applicable to income from operations $(1,527) $(1,703) $ 747 =============================
The Cousins provision (benefit) for state income taxes in 1995 is net of $252,000 of state income tax refunds related to a successful judicial appeal by Cousins of an assessment paid in 1992. The net income tax provision (benefit) differs from the amount computed by applying the statutory federal income tax rate to CREC's income (loss) before taxes as follows ($ in thousands):
1997 1996 1995 --------------- ---------------- --------------- Amount Rate Amount Rate Amount Rate ------ ---- ------- ---- ------ ---- Federal income tax provision (benefit) $ 265 34% $(1,609) 34% $ 924 34% State income tax provision (benefit), net of federal income tax effect 31 4 (189) 4 109 4 Other 2 -- 2 -- 33 1 ------------------------------------------------------ CREC provision (benefit) for income taxes 298 38% (1,796) 38% 1,066 39% --- --- --- Cousins provision (benefit) for income taxes 72 680 (228) Less provision applicable to gain on sale of investment properties (1,897) (587) (91) ------- ------ ------ Consolidated provision (benefit) applicable to income from operations $(1,527) $(1,703) $ 747 ======= ======= ======
The components of CREC's net deferred tax liability are as follows ($ in thousands):
1997 1996 ------- ------- Deferred tax assets $ 4,244 $ 3,684 Deferred tax liabilities (4,961) (4,148) -------------------- Net deferred tax liability $ (717) $ (464) ===================
The tax effect of significant temporary differences representing CREC's deferred tax assets and liabilities are as follows ($ in thousands):
1997 1996 ------- ------- Operating loss carryforward $ 2,258 $ 1,749 Income from unconsolidated joint ventures (3,872) (3,485) Stock appreciation right expense 821 939 Other 76 333 ------------------- $ (717) $ (464) ===================
8. PROPERTY TRANSACTIONS Retail Properties In January 1997, the Company purchased the land for, and commenced construction of Abbotts Bridge Station, an approximately 83,000 square foot neighborhood retail center in suburban Atlanta, Georgia. In August 1997, the Company purchased the land for, and commenced construction of Laguna Niguel Promenade, an approximately 153,000 square foot retail center in Laguna Niguel, California. On July 1, 1997, CREC sold Rivermont Station and Lovejoy Station, two Atlanta neighborhood retail centers with 90,000 and 77,000 square feet, respectively, for $20.1 million, which was approximately $4.0 million over the cost of the centers. Including depreciation recapture of approximately $.5 million and net of an income tax provision of approximately $1.5 million, the net gain on the sale was approximately $3.0 million. Subsequent to year-end, 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 includes existing retail space and a parking deck. The Company plans to reposition and remerchandise the project into an approximately 380,000 square foot open-air, high-end specialty center. Office Properties In April 1997, the Company purchased the land on which construction commenced on Grandview II, a 150,000 rentable square foot office building in Birmingham, Alabama. Two Live Oak Center, a 278,000 rentable square foot office building located in Atlanta, Georgia owned by Cousins LORET Venture, L.L.C. became partially operational for financial reporting purposes in October 1997. In August 1997, Cousins LORET Venture, L.L.C. commenced construction on The Pinnacle, a 424,000 rentable square foot office building located adjacent to Two Live Oak Center (see Note 5). In November 1997, the Company purchased approximately .6 acres of undeveloped land in downtown San Francisco, California which is entitled for an approximately 381,000 rentable square foot office building. The Company is currently pursuing predevelopment and investigative work to confirm the feasibility of developing this office building. Subsequent to year-end, in January 1998, the Company purchased the land for, and commenced construction on Carlyle I, an approximately 150,000 square foot office building in Alexandria, Virginia. Medical Office Properties In August 1997, Presbyterian Medical Plaza at University, a 69,000 rentable square foot medical office building became partially operational for financial reporting purposes. In September 1997, the Company commenced construction on Meridian Mark Plaza, a 159,000 rentable square foot medical office building located in Atlanta, Georgia. Residential Lots The Company is currently developing six residential communities in suburban Atlanta, including four in which development commenced in 1994, one in 1995 and one in 1996. These developments currently include land on which approximately 1,726 lots are being developed (with additional lots developable on adjacent land under option), of which 260, 227 and 183 lots were sold in 1997, 1996 and 1995, respectively. 9. CONSOLIDATED STATEMENTS OF CASH FLOWS - SUPPLEMENTAL INFORMATION Interest (net of amounts capitalized) (see Note 4) and income taxes paid (net of refunds) were as follows ($ in thousands):
1997 1996 1995 ------- ------ ----- Interest paid $14,118 $5,753 $ 846 Income taxes paid (refunded), net of $511 and $252 refunded 1996 and 1995, respectively $ 46 $ 54 $ 376
Significant non-cash financing and investing activities included the following: a. In 1997, 1996 and 1995, approximately $87,658,000, $78,169,000 and, $2,860,000 respectively, were transferred from Projects Under Construction to Operating Properties. b. In 1997 and 1996, approximately $1,553,000 and $3,246,000 were transferred from Land Held for Investment or Future Development to Operating Properties. In 1995, approximately $2,970,000 was transferred from Land Held for Investment or Future Development to Projects Under Construction. c. In January 1997, approximately $17,005,000 was transferred from Notes and Other Receivables to Operating Properties (see Note 3). d. In December 1996, in conjunction with the acquisition of 101 Independence Center a mortgage note payable of approximately $30,879,000 was assumed. e. In January 1996, in conjunction with the exchange of certain partnership interests approximately $3,825,000 was transferred from Minority Interests in Consolidated Entities to Operating Properties ($3,283,000) and Projects Under Construction ($542,000); and approximately $1,688,000 was transferred from Investment in Unconsolidated Joint Ventures to Operating Properties. 10. RENTAL PROPERTY REVENUES The Company's leases typically contain escalation provisions and provisions requiring tenants to pay a pro rata share of operating expenses. The leases typically include renewal options and all are classified and accounted for as operating leases. At December 31, 1997, future minimum rentals to be received by consolidated entities under existing non-cancelable leases, excluding tenants' current pro rata share of operating expenses, are as follows ($ in thousands):
Office and Medical Retail Office Total -------- -------- -------- 1998 $ 27,643 $ 33,469 $ 61,112 1999 27,736 32,400 60,136 2000 27,029 26,638 53,667 2001 26,738 20,119 46,857 2002 25,328 14,732 40,060 Subsequent to 2002 257,426 76,568 333,994 -------------------------------- $391,900 $203,926 $595,826 ================================
Cousins Properties Incorporated and Consolidated Entities - -------------------------------------------------------------------------------- FIVE YEAR SUMMARY OF SELECTED FINANCIAL DATA ($ in thousands, except per share amounts)
1997 1996 1995 1994 1993 ------- -------- -------- -------- -------- Rental property revenues $ 62,252 $ 33,112 $ 19,348 $ 13,150 $ 6,687 Fees 7,291 6,019 7,884 5,023 5,903 Residential lot and outparcel sales 12,847 14,145 9,040 6,132 -- Interest and other 3,609 5,256 4,764 6,801 6,456 ------------------------------------------------------------------- Total revenues 85,999 58,532 41,036 31,106 19,046 ------------------------------------------------------------------- Income from unconsolidated joint ventures 15,461 17,204 14,113 12,580 5,516 ------------------------------------------------------------------- Rental property operating expenses 15,371 7,616 4,681 3,338 2,310 Depreciation and amortization 14,046 7,219 4,516 3,742 3,164 Stock appreciation right expense 204 2,154 1,298 433 721 Residential lot and outparcel cost of sales 11,917 13,676 8,407 5,762 -- Interest expense 14,126 6,546 687 411 -- General, administrative, and other expenses 16,018 12,016 10,333 9,627 9,124 ------------------------------------------------------------------- Total expenses 71,682 49,227 29,922 23,313 15,319 Provision (benefit) for income taxes from operations (1,527) (1,703) 747 (166) (795) Gain on sale of investment properties, net of applicable income tax provision 5,972 12,804 1,862 6,356 1,927 ------------------------------------------------------------------- Net income $ 37,277 $ 41,016 $ 26,342 $ 26,895 $ 11,965 =================================================================== Basic net income per share $ 1.27 $ 1.44 $ .94 $ .97 $ .53 =================================================================== Diluted net income per share $ 1.26 $ 1.43 $ .94 $ .96 $ .52 =================================================================== Cash dividends declared per share $ 1.29 $ 1.12 $ .99 $ .90 $ .73 =================================================================== Total assets $617,739 $556,644 $418,006 $330,817 $319,702 Notes payable 226,348 231,831 113,434 41,799 35,151 Stockholders' investment 370,674 299,184 277,678 272,898 270,557 Shares outstanding at year-end 31,472 28,920 28,223 27,864 27,831
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS - -------------------------------------------------------------------------------- To the Stockholders of 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, 1997 and 1996, and the related consolidated statements of income, stockholders' investment and cash flows for each of the three years in the period ended December 31, 1997. 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. and Haywood Mall which statements combined reflect assets of 38% and 42% of the joint ventures totals as of December 31, 1997 and 1996 and revenues of 50%, 48% and 49% of the 1997, 1996 and 1995 joint ventures 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, 1997 and 1996 and for each of the three years in the period ended December 31, 1997, 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, 1997 and 1996 and the results of their operations and their cash flows for each of the three years in the period ended December 31, 1997 in conformity with generally accepted accounting principles. ARTHUR ANDERSEN LLP Atlanta, Georgia February 16, 1998 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, 1997 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 $19,348,000 in 1995 to $33,112,000 and $62,252,000 in 1996 and 1997, respectively. Rental property revenues from the Company's office portfolio increased approximately $19,834,000 in 1997 due primarily to the acquisition of two office buildings, the addition of two new office buildings which became operational for financial reporting purposes during 1996, and one medical office building which became partially operational for financial reporting purposes during 1997. Rental property revenues from 101 Independence Center and 615 Peachtree Street, two office buildings which were acquired in December 1996 and August 1996, respectively, contributed to the increase in 1997 by $10,844,000 and $1,578,000, respectively. Two office buildings, 100 and 200 North Point Center East, which became operational for financial reporting purposes in April 1996 and November 1996, respectively, increased rental property revenues in 1997 approximately $1,186,000 and $2,354,000, respectively. Presbyterian Medical Plaza at University, which became partially operational in August 1997, contributed approximately $477,000 to rental property revenues in 1997. The Wildwood Training Facility also favorably impacted the rental property revenues recognized from the Company's office portfolio by approximately $3,319,000 in 1997. Effective January 1, 1997, the Wildwood Training Facility is being accounted for as an owned property by the Company (see Note 3). Rental property revenues from the Company's retail portfolio increased approximately $9,509,000 in 1997. The increase was due primarily to new retail centers or expansions of existing retail centers which became operational for financial reporting purposes during 1996 as follows (1997 increase): Colonial Plaza MarketCenter in March 1996 ($3,041,000), Greenbrier MarketCenter in October 1996 ($4,059,000), Los Altos MarketCenter in November 1996 ($2,746,000), the expansion of Presidential MarketCenter in June 1996 ($956,000), the expansion of North Point MarketCenter in December 1996 ($524,000) and Mansell Crossing Phase II in March 1996 ($619,000). (The Company does not own Mansell Crossing Phase I.) Rivermont Station, which became operational for financial reporting purposes in February 1997 but was subsequently sold on July 1, 1997 (see Note 8), increased rental property revenues approximately $644,000. The tax-deferred exchange of Lawrenceville MarketCenter in November 1996 partially offset the foregoing increases in rental property revenues by $3,027,000 in 1997. Also the sale of Lovejoy Station on July 1, 1997 (see Note 8) negatively impacted rental property revenues by approximately $297,000. Rental property revenues from the Company's office portfolio increased approximately $4,211,000 in 1996. The aforementioned two new office buildings and two acquisitions of existing office buildings also favorably impacted 1996 rental property revenues. The 100 and 200 North Point Center East office buildings increased rental property revenues $1,554,000 and $270,000, respectively. The acquisitions of 615 Peachtree Street and 101 Independence Center also contributed to the increase by $1,057,000 and $886,000, respectively. Rental property revenues from the Company's retail portfolio increased approximately $9,887,000 in 1996. The increase in 1996 was due in part to increased rental property revenues from five retail centers, Lawrenceville MarketCenter ($2,714,000), Lovejoy Station ($712,000), Colonial Plaza MarketCenter ($3,366,000), Presidential MarketCenter Phase II ($727,000) and Greenbrier MarketCenter ($872,000). Three other centers also favorably impacted 1996 results by somewhat less than the aforementioned five retail centers: Mansell Crossing Phase II rental property revenues increased approximately $571,000, North Point MarketCenter rental property revenues increased approximately $518,000, and Los Altos MarketCenter rental property revenues increased approximately $336,000. Rental property revenues were negatively impacted by approximately $278,000 in 1996 due to the termination of one tenant at Perimeter Expo in February 1996 which was replaced by a better credit tenant whose lease commenced in August 1996. Rental property revenues from 24 acres of the North Point land being ground leased to freestanding users also increased in 1996 by approximately $347,000. Approximately 11 of the total 24 acres of leases began generating income throughout 1995. Rental property operating expenses increased from $4,681,000 in 1995 to $7,616,000 and $15,371,000 in 1996 and 1997, respectively. The increases in 1996 and 1997 were primarily related to the occupancy of the retail power centers, the 100 and 200 North Point Center East office buildings and Presbyterian Medical Plaza at University, as well as the acquisitions of the 615 Peachtree Street and 101 Independence Center office buildings and the reclassification of the Wildwood Training Facility as discussed above. Development Income. Development income decreased from $3,515,000 in 1995 to $1,660,000 in 1996 and then increased to $3,123,000 in 1997. Development income recognized by the Company's retail division from third party retail developments increased approximately $1,324,000 in 1997. Development income was also favorably impacted by $622,000 from the fee development of Total Systems' corporate headquarters in Columbus, Georgia. Partially offsetting the foregoing increases in development income in 1997 was a decrease in development income received from the Dusseldorf project of approximately $542,000 (see Note 5). The decrease in development income in 1996 was due primarily to a decrease in the recognition of development income from the Dusseldorf joint venture's office building project ($2,604,000 in 1995 and $777,000 in 1996) (see Note 5). Also contributing to the decrease in 1996 was a decrease of approximately $140,000 in development fees received from the Emory Conference Center, a third party development. Partially offsetting the decrease in 1996 was an increase in development fees from Wildwood Associates (approximately $334,000) which was attributed to development of three new office buildings in Wildwood Office Park, the 4100, 4200 and 4300 Wildwood Parkway Buildings. Management Fees. Management fees increased from $2,213,000 in 1995 to $2,801,000 and $3,448,000 in 1996 and 1997, respectively. The increases in both 1996 and 1997 were due to the acquisition of the management contracts of The Lea Richmond Company in July 1996 (increases of approximately $395,000 and $491,000, respectively). Management fees also increased in 1996 and 1997 due to lease-up of the projects from which management fees are received. Leasing and Other Fees. Leasing and other fees decreased from $2,156,000 in 1995 to $1,558,000 and $720,000 in 1996 and 1997, respectively. The decrease in leasing and other fees in 1997 was due in part to a decrease of approximately $843,000 from leasing fees related to Wildwood Office Park, primarily related to fees received from the leasing of the 4100 and 4300 Wildwood Parkway Buildings. Leasing and other fees recognized by the Company's retail division from third party developments also decreased approximately $305,000 in 1997. The decrease in 1997 was partially offset by the recognition of approximately $411,000 of leasing fees from the Company's newly formed venture, Cousins LORET Venture, L.L.C. (see Note 5). The decrease in leasing and other fees in 1996 was due primarily to a decrease of approximately $567,000 in leasing and other fees recognized by the Company's retail division from third party retail developments. Also contributing to the decrease in 1996 was a decrease of approximately $327,000 in leasing fee income from NationsBank Plaza and a decrease of approximately $228,000 in leasing fee income from a third party office project. Partially offsetting the decrease in 1996 was an increase of approximately $540,000 from leasing fees related to Wildwood Office Park. Residential Lot and Outparcel Sales and Cost of Sales. Residential lot and outparcel sales increased from $9,040,000 in 1995 to $14,145,000 in 1996 and then decreased to $12,847,000 in 1997. The decrease in 1997 is due primarily to a decrease in outparcel sales by CREC and one of its subsidiaries from $3,951,000 in 1996 to $2,619,000 in 1997 resulting from the sale of eight outparcels in 1996 and five outparcels in 1997. The decrease was partially offset by an increase in residential lot sales from $10,194,000 in 1996 to $10,228,000 in 1997. The number of lots sold increased from 227 lots in 1996 to 260 lots in 1997. The increase in 1996 is due primarily to an increase in outparcel sales by CREC and one of its subsidiaries from $525,000 in 1995 to $3,951,000 in 1996 resulting from the sale of one outparcel in 1995 and eight outparcels in 1996. An increase in residential lot sales from $8,515,000 to $10,194,000 also contributed to the increase in 1996. The number of lots sold increased from 183 lots in 1995 to 227 lots in 1996. Residential lot and outparcel cost of sales increased from $8,407,000 in 1995 to $13,676,000 in 1996 and then decreased to $11,917,000 in 1997. The increase in 1996 and decrease in 1997 were due to the aforementioned increases and decreases in sales. Interest and Other Income. Interest and other income increased from $4,764,000 in 1995 to $5,256,000 in 1996 and then decreased to $3,609,000 in 1997. The decrease in interest and other income in 1997 was due primarily to the reclassification of the Wildwood Training Facility Mortgage Note Receivable to Operating Properties (see Note 3), which caused a decrease of approximately $1,591,000 in interest income. Also contributing to the decrease in 1997 was a decrease of approximately $351,000 in interest income recognized from temporary investments. During 1996, the Company recognized interest income on temporary investments made with proceeds received from the CSC Associates, L.P. financing (see Note 4). No similar amounts were invested in 1997. Partially offsetting the aforementioned decreases was an increase in interest income of approximately $369,000 recognized from the Daniel Realty Company Note Receivable (see Note 3). The increase in 1996 was due to an increase in interest income received from temporary investments made with proceeds received from the aforementioned CSC Associates, L.P. financing completed in 1996. Income From Unconsolidated Joint Ventures. (All amounts reflect the Company's share of joint venture income.) Income from unconsolidated joint ventures increased from $14,113,000 in 1995 to $17,204,000 in 1996 and then decreased to $15,461,000 in 1997. Income from CSC Associates, L.P. increased from $7,308,000 in 1995 to $7,978,000 and $9,284,000 in 1996 and 1997, respectively. The increases in both 1996 and 1997 were due to the continued lease-up of NationsBank Plaza. Results in 1997 also increased due to the increase in rental income from a tenant whose increase in rental rate did not require straight-lining under Statement of Financial Accounting Standards No. 13. Also favorably impacting 1997 results was a decrease in depreciation and amortization in 1997 of approximately $217,000 due to certain deferred leasing and marketing costs and furniture and equipment becoming fully amortized during 1997. Income from Wildwood Associates increased from $2,942,000 in 1995 to $4,245,000 in 1996 and then decreased to $1,903,000 in 1997. Results in 1997 were negatively impacted by an increase in interest expense of approximately $1,630,000. This increase was due primarily to the financing of the 3200 Windy Hill Road Building which contributed approximately $2,773,000 to the increase in interest expense in 1997. On December 16, 1996, Wildwood Associates completed the financing of this building with a $70 million non-recourse mortgage note payable at an 8.23% interest rate and a maturity of January 1, 2007. Concurrent with the financing, Wildwood Associates paid down its line of credit to $0 which partially offset the increase in interest expense by approximately $846,000. Interest expense also increased due to the financing of the 4100 and 4300 Wildwood Parkway Buildings which increased interest expense $901,000. On March 20, 1997, Wildwood Associates completed the financing of these two buildings with a $30 million non-recourse mortgage note payable at a 7.65% interest rate and a term of fifteen years. In conjunction with this financing and a portion of the aforementioned $70 million financing of the 3200 Windy Hill Road Building, during the first quarter of 1997, Wildwood Associates made non-operating cash distributions of $12.5 million to each partner and paid the entire calendar year 1997 operating distribution of $4.5 million to each partner. Wildwood Associates used the remaining loan proceeds and the operating cash flow for the balance of 1997 to complete the 4200 Wildwood Parkway Building. Partially offsetting the increase in interest expense in 1997 was a decrease of approximately $475,000 in interest expense related to the Summit Green Building. Effective December 1, 1996, Wildwood Associates disposed of its interest in this building in exchange for cancellation of the related mortgage debt. In addition, an increase in interest capitalization also partially offset the increase in interest expense by $473,000. Income before depreciation, amortization and interest expense from the 4100 and 4300 Wildwood Parkway Buildings favorably impacted results in 1997 by approximately $840,000. The 4100 and 4300 Wildwood Parkway Buildings became partially operational for financial reporting purposes in March 1996. Lease-up of the 2300 and 2500 Windy Ridge Parkway Buildings also increased income before depreciation, amortization and interest expense by $152,000 and $319,000, respectively. Income before depreciation, amortization and interest expense from the 3200 Windy Hill Road Building decreased approximately $1,222,000 due primarily to the effect of the straight-lining of rental revenues in accordance with Statement of Financial Accounting Standards No. 13, which decreased rental revenues by approximately $1,386,000. The disposition of the Summit Green Building, as discussed above, decreased income before depreciation, amortization and interest expense by approximately $896,000. Results in 1996 were favorably impacted by a decrease in interest expense of approximately $883,000 which was due primarily to increased interest capitalization and to the refinancings of two mortgage notes in December 1995. The 4100 and 4300 Wildwood Parkway Buildings becoming partially operational for financial reporting purposes in March 1996 increased income before depreciation, amortization and interest expense by approximately $877,000 in 1996. The income before depreciation, amortization and interest expense of the 2500 Windy Ridge Parkway Building decreased approximately $720,000 in 1996, primarily due to the expiration of a tenant's lease which was replaced with another tenant with less square footage at a lower rate. Additionally, increases in income before depreciation, amortization and interest expense from the 2300 Windy Ridge Parkway Building contributed to the increase in 1996 by approximately $276,000. Income from Haywood Mall increased from $2,963,000 in 1995 to $3,538,000 and $3,648,000, in 1996 and 1997, respectively. The increase in 1996 was due to an increase of approximately $798,000 in 1996 in income before depreciation, amortization and interest expense resulting from the completion and lease-up of an expansion of Haywood Mall. This increase was partially offset by an increase in depreciation and amortization of approximately $201,000 in 1996, which was also due to the expansion of Haywood Mall. Income from Temco Associates increased from a loss of $36,000 in 1995 to income of $700,000 in 1996 and then decreased to income of $11,000 in 1997. During 1996, Temco Associates exercised portions of the option related to the fee simple interest to purchase 375 acres of land which it simultaneously sold. CREC's share of the gain on these sales was approximately $713,000. There were no similar sales in 1995 or 1997. Income from Hickory Hollow Associates decreased from $257,000 in 1995 to a loss of $11,000 in 1996 and a loss of $8,000 in 1997. The decreases in 1996 and 1997 were due to two outparcel sales in 1995 and none in 1996 and 1997. Income from CC-JM II Associates increased from $0 in 1995 to $141,000 in 1996 and then decreased to $113,000 in 1997. The increase in 1996 was due to the John Marshall-II office building becoming fully operational for financial reporting purposes in late January 1996. General and Administrative Expenses. General and administrative expenses increased from $7,668,000 in 1995 to $9,148,000 and $12,717,000 in 1996 and 1997, respectively. The increases in 1997 and 1996 were primarily related to the Company's expansion and the acquisition of The Lea Richmond Company and The Richmond Development Company in July 1996. The increase in 1997 was also due to approximately $397,000 of additional expense being accrued in 1997 for higher than anticipated estimates of runoff and other expenses associated with the termination of the Company's partially self-insured medical plan in December 1996. Depreciation and Amortization. Depreciation and amortization increased from $4,516,000 in 1995 to $7,219,000 and $14,046,000 in 1996 and 1997, respectively. Both the 1996 and 1997 increases were due primarily to the retail centers becoming operational as discussed above. The 1996 and 1997 increases were also due to the 100 and 200 North Point Center East office buildings becoming operational and the acquisition of the 101 Independence Center and 615 Peachtree Street office buildings as discussed above. Both the reclassification of the Wildwood Training Facility Mortgage Note Receivable to Operating Properties, as well as Presbyterian Medical Plaza at University becoming partially operational in August 1997 increased depreciation and amortization in 1997. Stock Appreciation Right Expense. Stock appreciation right expense increased from $1,298,000 in 1995 to $2,154,000 in 1996 and then decreased to $204,000 in 1997. 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 which occurred since the first quarter of 1996 contributed to the decrease in the stock appreciation right expense. The Company's stock price was $29.3125, $28.125 and $20.25 per share at December 31, 1997, 1996 and 1995, respectively. Interest Expense. Interest expense increased from $687,000 in 1995 to $6,546,000 and $14,126,000 in 1996 and 1997, respectively. Interest expense before capitalization increased from $5,760,000 in 1995 to $12,194,000 and $17,293,000 in 1996 and 1997, respectively, due to higher debt levels. The amount of interest capitalization (a reduction of interest expense), which increases and decreases with increases and decreases in projects under development, increased from $5,073,000 in 1995 to $5,648,000 in 1996 which partially offset the overall increase in interest expense in 1996, and then decreased to $3,167,000 in 1997 which contributed to the increase in interest expense in 1997. Property Taxes on Undeveloped Land. Property taxes on undeveloped land increased from $977,000 in 1995 to $1,301,000 in 1996 and then decreased to $606,000 in 1997. The decrease in 1997 was primarily due to favorable settlements of property taxes on the Company's land related to 1994, 1995 and 1996 tax years, which had been under appeal. The increase in 1996 was due primarily to an increase in property taxes on the land the Company owns in Wildwood Office Park due to a property tax reassessment ($254,000 increase). Other Expenses. Other expenses decreased from $1,688,000 in 1995 to $1,567,000 in 1996 and then increased to $2,695,000 in 1997. The increase in 1997 and decrease in 1996 were due to an increase and decrease in predevelopment expenses, respectively. Provision (Benefit) for Income Taxes From Operations. The provision (benefit) for income taxes from operations decreased from a provision of $747,000 in 1995 to a benefit of $1,703,000 in 1996, which benefit decreased to a benefit of $1,527,000 in 1997. The decrease in the benefit for income taxes from operations in 1997 was due to a decrease of $463,000 in CREC and its subsidiaries' loss before income taxes and gain on sale of investment properties, which decrease was due to the aforementioned increases in development income recognized by CREC and its subsidiaries. Partially offsetting the increase in development income was an increase in predevelopment expense and a decrease in intercompany development and leasing fees recognized in 1997. Certain development and leasing fees recorded on CREC and its subsidiaries' books are intercompany fee income which is eliminated in consolidation, but the tax effect is not. The decrease in the 1996 provision (benefit) for income taxes from operations was due primarily to a decrease of $7,229,000 in CREC and its subsidiaries' income before income taxes and gain on sale of investment properties which resulted in a loss for CREC and its subsidiaries and hence an income tax benefit. The decrease in CREC and its subsidiaries' income before income taxes and gain on sale of investment properties was due primarily to a decrease in development and leasing fees received by CREC and its subsidiaries including a decrease in development fee income from the Dusseldorf project as discussed above. In addition, CREC and its subsidiaries' income before income taxes and gain on sale of investment properties was reduced by increases in the stock appreciation right expense in 1996. Intercompany development and leasing fees also decreased in 1996. Gain on Sale of Investment Properties. Gain on sale of investment properties, net of applicable income tax provision was $1,862,000, $12,804,000 and $5,972,000 in 1995, 1996 and 1997, respectively. The 1997 gain included the following: the January 1997 sale of land at the Company's North Point development ($2.4 million gain), the July 1997 sale of Lovejoy Station and Rivermont Station (see Note 8) ($3.0 million gain), and the December 1997 sale of 30 acres of land adjacent to Lawrenceville MarketCenter (a retail center formerly owned by the Company) ($.6 million gain). The 1996 gain included the following: the November 1996 sale of Lawrenceville MarketCenter ($10.6 million gain), three North Point land sales in May, October and December 1996 ($1.96 million gain), the July 1996 sale of the Company's 50% interest in the Norfolk parking agreement ($.4 million gain) (see Note 5), and the November 1996 sale of a land parcel located in midtown Atlanta ($.1 million loss). Liquidity and Capital Resources: Financial Condition. The Company's debt (including its pro rata share of unconsolidated joint venture debt) was 28% of total market capitalization at December 31, 1997. As discussed in Note 4, the Company amended and extended the maturity date of its $100 million line of credit to June 29, 1998. The Company and certain of its unconsolidated joint ventures completed three new financings in 1997: the $30 million non-recourse financing of the 4100 and 4300 Wildwood Parkway Buildings, the $25 million non-recourse financing of the 100 and 200 North Point Center East office buildings, and the $30 million non-recourse financing of the Two Live Oak Center office building (see Note 4). As discussed in Note 8, a $20.1 million property sale was completed on July 1, 1997, and as discussed in Note 6, the sale of 2,150,000 shares of common stock for net proceeds of approximately $64.1 million was completed in December 1997. As a result of these transactions, there were no borrowings under the Company's $100 million line of credit as of December 31, 1997. In addition, Cousins LORET Venture, L.L.C. received a commitment for the $70 million non-recourse financing of The Pinnacle office building which is expected to close by March 1998 and be fully funded by December 1998 (see Note 4). 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 the excess proceeds from the December 1997 sale of common stock, its existing lines of credit (increasing those lines of credit as required), and long-term non-recourse financing on the Company's unleveraged projects 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, 1997. As discussed above and in Note 6, the Company sold 2,150,000 shares of common stock in December 1997 at $31.5625 per share pursuant to the above shelf registration statement. The executive branch of the U.S. Government has proposed certain changes to the Internal Revenue Code which in their current form may affect the ability of REITs to engage in certain types of activities in which they are not currently engaged. At this time, it is uncertain whether the proposed legislation will be passed by Congress, and if passed, what its final form and impact will be on the Company's ability to engage in new activities. Cash Flows. Net cash provided by operating activities increased from $37.7 million in 1995 to $57.1 million and $58.0 million in 1996 and 1997, respectively. The increases resulted primarily from an improvement in income before gain on sale of investment properties of $3.7 million and $3.1 million in 1996 and 1997, respectively. Additionally, depreciation and amortization increased $2.9 million and $6.8 million in 1996 and 1997, respectively. Residential lot and outparcel cost of sales which contributed approximately $5.0 million of the increase in 1996, partially offset the increase in 1997 by a decrease of approximately $1.7 million. Operating distributions from unconsolidated joint ventures also favorably impacted 1996 and 1997 with increases of $3.6 million and $2.3 million, respectively. Changes in other receivables, accounts payable and accrued liabilities which increased net cash provided by operating activities in 1996 by approximately $7.9 million, decreased approximately $10.9 million in 1997 which partially offset the increase in net cash provided by operating activities in 1997. An increase in income from unconsolidated joint ventures of approximately $3.1 million partially offset the increase in net cash provided by operating activities in 1996. Net cash used in investing activities increased from $89.4 million in 1995 to $124.7 million in 1996 and then decreased to $55.6 million in 1997. The decrease in property acquisition and development expenditures of approximately $81.5 million in 1997, as a result of the Company having a lower level of projects under construction, was the primary component of the decrease in net cash used in investing activities in 1997. Also contributing to the decrease was a decrease in investment in notes receivable of approximately $21.5 million in 1997. The Company temporarily invested approximately $18 million of proceeds from the $80 million CSC Associates, L.P. financing completed in 1996 in a note receivable due from Wildwood Associates. No similar investment occurred in 1997. Non-operating distributions from unconsolidated joint ventures increased $13.3 million due primarily to distributions from Wildwood Associates of $10 million in January 1997 from the proceeds of the financing of the 3200 Wildwood Plaza Building completed in December 1996 and $2.5 million from the proceeds of the financing of the 4100 and 4300 Wildwood Parkway Buildings in March 1997. The Company also received $2.2 million of distributions from Norfolk Hotel Associates (see Note 5). The decrease in collection of notes receivable of approximately $24.2 million in 1997 partially offset the above decreases in net cash used in investing activities. Net cash provided by sales activities decreased approximately $15.7 million which was due to a decrease in net proceeds received from the sale of Rivermont Station and Lovejoy Station in 1997 as compared to the sale of Lawrenceville MarketCenter in 1996. Investment in unconsolidated joint ventures increased approximately $8.6 million in 1997 which also offset the decrease in net cash used in investing activities. The Company contributed approximately $8.5 million to the newly formed Cousins LORET Venture, L.L.C. (see Note 5). The increase in net cash used in investing activities in 1996 resulted primarily from an increase in property acquisition and development expenditures of approximately $74.9 million. The change in other assets also added to the increase in net cash used in investing activities by approximately $5.0 million which was due in part to goodwill from the July 1996 acquisition of The Lea Richmond Company and The Richmond Development Company and deferred financing costs related to the $80 million financing (see Note 4). The increase in net cash used in investing activities in 1996 was partially offset by a decrease of $9.1 million in investment in unconsolidated joint ventures. The Company contributed $5.8 million to Haywood Mall in 1995 to fund the expansion of the mall and $2.6 million to CC-JM II Associates in 1995 to fund its share of the equity in the partnership. No similar contributions were made in 1996. Also partially offsetting the increase in net cash used in investing activities in 1996 was an increase in the net cash provided by sales activities of $34.5 million which was primarily related to the sale of Lawrenceville MarketCenter in November 1996. Net cash provided by financing activities increased from $49.8 million in 1995 to $67.7 million in 1996 and then decreased to $28.7 million in 1997. The decrease in 1997 was primarily attributable to a decrease of $106.8 million in proceeds from other notes payable. During 1996, the Company completed two financings for approximately $129.5 million: the $80 million CSC Associates, L.P. financing and the $49.5 million assumption of the 101 Independence Center mortgage note payable, as compared to one financing in 1997 for approximately $25 million of the 100 and 200 North Center East office buildings (see Note 4). The repayment of the line of credit increased approximately $50.8 million which also decreased the cash flows from financing activities. An increase in the total dividends paid per share from $1.12 in 1996 to $1.29 in 1997 and an increase in the number of shares outstanding also contributed to the decrease in net cash provided by financing activities as dividends paid increased $5.7 million in 1997. Partially offsetting the above decreases were increases in the proceeds from the line of credit of approximately $67.0 million and common stock sold of approximately $59.7 million. In December 1997, the Company completed the sale of 2,150,000 shares of common stock which raised net proceeds of approximately $64.1 million (see Note 6). The increase in 1996 was attributable to an increase in proceeds from other notes payable of approximately $51.7 million. In 1995, the Company completed three financings for approximately $79.5 million as compared to two financings in 1996 for approximately $129.5 million. The proceeds from the line of credit decreased $30.9 million in 1996. The decrease in 1996 was due to the use of the proceeds from the $129.5 million of financing instead of the line of credit. The repayment of the line of credit increased $1.3 million in 1996. Dividends paid increased $4.2 million in 1996 due to an increase in the number of shares outstanding and an increase in the total dividends paid per share from $.99 in 1995 to $1.12 per share in 1996. The common stock sold increased $6.2 million in 1996 due to increased reinvestment of dividends by stockholders through the Company's dividend reinvestment plan and increased stock option exercises. Repayment of other notes payable increased $3.6 million in 1996 due to the scheduled amortization of the financings completed in 1995 and 1996. 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. 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: 1997 Quarters 1996 Quarters ---------------------------------------- ---------------------------------------- First Second Third Fourth First Second Third Fourth ----- ------ ----- ------ ----- ------ ----- ------ High $28-1/4 $29-1/8 $30 $33-3/4 $21 $20 $24-1/2 $28 Low 24-1/4 24-1/2 26-3/8 27-1/4 18-3/8 18-3/8 18-7/8 21-7/8 Dividends Declared .31 .31 .31 .36 .27 .27 .27 .31 Payment Date 2/24/97 5/30/97 8/26/97 12/22/97 2/22/96 5/30/96 8/26/96 12/23/96
The Company's stock trades on the New York Stock Exchange (ticker symbol CUZ). At December 31, 1997, there were 1,304 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 a consolidated non-REIT entity that pays 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 1997, 1996 and 1995, 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, line 13, column (g) 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, 1997 ($ in thousands, except per share amounts):
Quarters ---------------------------------------- First Second Third Fourth ----- ------ ----- ------ 1997: Revenues $20,291 $21,141 $22,233 $22,334 Income from unconsolidated joint ventures 3,582 3,467 3,737 4,675 Gain on sale of investment properties, net of applicable income tax provision 2,396 2,974 602 Net income 9,624 7,455 10,874 9,324 Basic net income per share .33 .26 .37 .31 Diluted net income per share .33 .25 .37 .31 1996: Revenues 13,223 14,155 12,812 18,342 Income from unconsolidated joint ventures 4,394 4,170 4,362 4,278 Gain on sale of investment properties, net of applicable income tax provision -- 620 397 11,787 Net income 7,298 8,549 7,039 18,130 Basic net income per share .26 .30 .25 .63 Diluted net income per share .26 .30 .24 .62
INDEPENDENT PUBLIC ACCOUNTANTS Arthur Andersen LLP COUNSEL King & Spalding Troutman Sanders TRANSFER AGENT AND REGISTRAR First Union National Bank Shareholder Services Group Two First Union Center, M-12 Charlotte, North Carolina 28288-1154 Telephone Number: 1-800-829-8432 FAX Number: 1-704-374-6987 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. INVESTOR RELATIONS CONTACT Mark B. Riley, Vice President 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 Terence C. Golden President and Chief Executive Officer Host Marriott Corporation Boone A. Knox Chairman Merry Land & Investment Company, Inc. William Porter Payne Vice Chairman NationsBank Richard E. Salomon President and Managing Director Spears, Benzak, Salomon & Farrell D. W. Brooks Director Emeritus 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 Peter A. Tartikoff Senior Vice President and Chief Financial Officer Mark B. Riley Vice President - Acquisitions and Investor Relations Lisa R. Simmons Director of Corporate Communications OFFICE DIVISION* Craig B. Jones Senior Vice President John L. Murphy Senior Vice President Jack A. LaHue Senior Vice President - Asset Management John S. Durham Vice President - Leasing Walter L. Fish Vice President - Leasing PROPERTY MANAGEMENT* Terry M. Hampel Vice President - Retail Property Management Dara J. Nicholson Vice President - Office Property Management LAND DIVISION** (Cousins Neighborhoods) Bruce E. Smith President RETAIL DIVISION** (Cousins MarketCenters, Inc.) Joel T. Murphy* President Ronald B. Pfohl Senior Vice President -Leasing John D. Hopkins 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 Michael J. Lant Vice President - Development Kevin D. Doherty Vice President-Development Western Region Hans F. Kuhlmann Vice President - Midwest Region 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 William D. Varner Vice President - Development MEDICAL OFFICE DIVISION*** (Cousins/Richmond) Lea Richmond III President John S. McColl Senior Vice President David J. Rubenstein Senior Vice President Thomas H. Sawyer Senior Vice President S. Rox Green Vice President *Officers of Cousins Properties Incorporated, as well as Cousins Real Estate Corporation and/or Cousins MarketCenters, Inc. **Officers of Cousins Real Estate Corporation and/or Cousins MarketCenters, Inc. ***Officers of Cousins Properties Incorporated EX-21 4 EXHIBIT 21 COUSINS PROPERTIES INCORPORATED AND CONSOLIDATED ENTITIES SUBSIDIARIES OF THE REGISTRANT DECEMBER 31, 1997 At December 31, 1997, the Registrant had no 100% owned subsidiaries. At December 31, 1997, the financial statements of the following entities were consolidated with those of the Registrant in the Consolidated Financial Statements incorporated herein: 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) Rocky Creek Properties, Inc. & MT&E - Macon-Harris (75% owned by Registrant) Perimeter Expo Associates, L.P. (90% owned by Registrant and 10% owned by Cousins MarketCenters, Inc.) Cousins, Inc. (100% owned by Registrant); subsidiaries include Cousins/Daniel, LLC* Cousins/Myers Second Street Partners, L.L.C.* At December 31, 1997, the Registrant and its consolidated entities had the following significant unconsolidated subsidiaries which were not 100% owned: CC-JM II Associates (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) CSC Associates, L.P. (50% owned by Registrant) Cousins LORET Venture, L.L.C. (50% owned by Registrant) Green Valley Associates II (50% owned by Registrant) Haywood Mall (50% owned by Registrant) Hickory Hollow (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) Wildwood Associates (50% owned by Registrant) Ten Peachtree Place Associates (50% owned by Registrant) Temco Associates (50% owned by Cousins Real Estate Corporation) * Registrant receives a preferred return on its capital, with minority member receiving a portion of residual cash flow and capital proceeds. EX-23 5 EXHIBIT 23(a) CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS As independent public accountants, we hereby consent to the incorporation by reference in this registration statement of our reports dated February 16, 1998 included and incorporated by reference in Cousins Properties Incorporated's Form 10-K for the year ended December 31, 1997 and to all references to our firm included in this registration statement. ARTHUR ANDERSEN LLP Atlanta, Georgia March 25, 1998 EX-23 6 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, and 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 of our report dated February 2, 1998, 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, 1997. ERNST & YOUNG LLP Atlanta, Georgia March 25, 1998 EX-27 7
5 YEAR DEC-31-1997 DEC-31-1997 32,694 0 38,464 0 0 9,814 449,938 33,369 617,739 20,717 226,348 0 0 31,472 339,202 617,739 0 85,999 0 71,682 0 0 14,126 29,778 (1,527) 31,305 0 0 0 37,277 1.27 1.26
EX-27 8
5 6-MOS DEC-31-1996 JUN-30-1996 854 0 54,568 0 0 0 280,101 17,588 458,965 0 158,373 28,503 0 0 254,622 458,965 0 27,378 0 20,771 0 0 2,376 15,171 (56) 15,227 0 0 0 15,847 .56 .56
EX-27 9
5 9-MOS DEC-31-1996 SEP-30-1996 132 0 53,027 0 0 0 315,716 19,134 492,798 0 186,460 28,771 0 0 258,217 492,798 0 40,190 0 32,111 0 0 3,959 21,005 (864) 21,869 0 0 0 22,886 .81 .80
EX-27 10
5 YEAR DEC-31-1996 DEC-31-1996 1,598 0 56,497 0 0 0 377,663 20,339 556,644 231,831 0 0 0 38,920 270,264 556,644 0 58,532 0 49,227 0 0 6,546 26,509 (1,703) 28,212 0 0 0 41,016 1.44 1.43
EX-27 11
5 6-MOS DEC-31-1997 JUN-30-1997 4,866 0 42,309 0 0 0 424,715 27,538 564,653 261,375 0 0 0 29,209 274,069 564,653 0 41,432 0 34,403 0 0 7,275 14,078 (605) 14,683 0 0 0 17,079 .59 .58
EX-27 12
5 9-MOS DEC-31-1997 SEP-30-1997 1,405 0 41,815 0 0 0 426,387 30,254 562,515 256,570 0 0 0 29,242 276,703 562,515 0 63,665 0 52,787 0 0 10,701 21,664 (919) 22,583 0 0 0 27,953 .96 .95
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