-----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, UurzZTrVRGeNt1rzzsorIKbO8FYHTuwr8HeXbHg63IveGT0VH7eejbwbLjwVKF2l qAwkaETlMgrIWrWCavFwGg== 0000025232-97-000010.txt : 19970326 0000025232-97-000010.hdr.sgml : 19970326 ACCESSION NUMBER: 0000025232-97-000010 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 7 CONFORMED PERIOD OF REPORT: 19961231 FILED AS OF DATE: 19970325 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: 1934 Act SEC FILE NUMBER: 000-03576 FILM NUMBER: 97562445 BUSINESS ADDRESS: STREET 1: 2500 WINDY RIDGE PKWY STE 1600 CITY: MARIETTA STATE: GA ZIP: 30067 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, 1996 Commission file number 2-20111 COUSINS PROPERTIES INCORPORATED A GEORGIA CORPORATION I.R.S. EMPLOYER IDENTIFICATION NO. 58-0869052 2500 WINDY RIDGE PARKWAY ATLANTA, GEORGIA 30339 TELEPHONE: 770-955-2200 Name of exchange on which registered: New York Stock Exchange Securities registered pursuant to Section 12(b) of the Act: Common Stock ($1 Par Value) Securities registered pursuant to Section 12(g) of the Act: None Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months, and (2) has been subject to such filing requirements for the past 90 days. Yes X No Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. As of March 11, 1997, 29,076,420 common shares were outstanding; and the aggregate market value of the common shares of Cousins Properties Incorporated held by nonaffiliates was $568,218,327. 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 28, 1997 Registrant's Annual Report to Part II, Items 5, 6, 7 and 8 Stockholders for the year ended December 31, 1996 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 CREC's 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 residential developments and holds several tracts of strategically located undeveloped land. The Company's holdings are concentrated in the southeastern United States, primarily in the Atlanta area. 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 1996 Annual Report to Stockholders. Brief Description of Company Investments Office. As of March 15, 1997, the Company owns, directly and indirectly, equity interests of at least 50% in the following seventeen commercial office buildings:
Company's Metropolitan Rentable Ownership Property Description Area Square Feet Interest -------------------- ---- ----------- -------- One Independence Center Charlotte, NC 522,000 100% First Union Tower Greensboro, NC 319,000 100% 3100 Windy Hill Road Atlanta 188,000 100% (a) 615 Peachtree Street Atlanta 147,000 100% 200 North Point Center East Atlanta 129,000 100% 100 North Point Center East Atlanta 128,000 100% 333 North Point Center East Atlanta 128,000 100% (b) 3301 Windy Ridge Parkway Atlanta 106,000 100% NationsBank Plaza Atlanta 1,260,000 50% 3200 Windy Hill Road Atlanta 685,000 50% 2300 Windy Ridge Parkway Atlanta 634,000 50% 2500 Windy Ridge Parkway Atlanta 313,000 50% Ten Peachtree Place Atlanta 259,000 50% 4200 Wildwood Parkway Atlanta 250,000 50% (b) John Marshall-II Washington, D.C. 224,000 50% 4300 Wildwood Parkway Atlanta 150,000 50% 4100 Wildwood Parkway Atlanta 100,000 50% One Ninety One Peachtree Atlanta 1,215,000 9.8% --------- 6,757,000 =========
(a) See Item 2. Properties footnote (7) where ownership is discussed. (b) Under construction or in early stages of leaseup. The weighted average leased percentage of these office buildings (excluding 333 North Point Center East and 4200 Wildwood Parkway both of which are currently under construction and One Ninety One Peachtree Tower as it is less than 50% owned by the Company) was approximately 96% as of March 15, 1997 and the leases expire as follows:
2006 & 1997 1998 1999 2000 2001 2002 2003 2004 2005 Thereafter Total ---- ---- ---- ---- ---- ---- ---- ---- ---- ---------- ----- OFFICE Consolidated: - ------------- Square Feet Expiring (d) 71,380 302,697 61,652 267,068 205,583 30,419 80,256 96,477 0 342,389 1,457,921(b) % of Leased Space 5% 21% 4% 18% 14% 2% 6% 7% 0% 23% 100% Annual Base Rent (a) 830,088 3,623,661 998,923 3,306,215 3,275,072 452,852 736,262 1,304,769 0 7,003,144 21,530,986 Annual Base Rent/ Sq. Ft. (a) 11.63 11.97 16.20 12.38 15.93 14.89 9.17 13.52 0 20.45 14.77 Joint Venture: - -------------- Square Feet Expiring (d) 113,117 287,584 47,514 162,293 450,062 289,180 70,726 65,019 353,539 1,675,539 3,514,573(c) % of Leased Space 3% 8% 1% 5% 13% 8% 2% 2% 10% 48% 100% Annual Base Rent (a) 1,342,829 4,073,307 497,185 3,138,232 5,994,914 5,105,217 1,082,084 1,352,068 6,845,063 38,970,677 68,401,576 Annual Base Rent/ Sq. Ft. (a) 11.87 14.16 10.46 19.34 13.32 17.65 15.30 20.79 19.36 23.26 19.46 Total (including only Company's 50% share of Owned Properties): - ---------------------------------------------------------------- Square Feet Expiring (d) 127,939 446,489 85,409 348,215 430,614 175,009 115,619 128,987 176,770 1,180,159 3,215,210 % of Leased Space 4% 14% 3% 11% 13% 5% 3% 4% 6% 37% 100% Annual Base Rent (a) 1,501,503 5,660,315 1,247,516 4,875,331 6,272,529 3,005,461 1,277,304 1,980,803 3,422,532 26,488,483 55,731,777 Annual Base Rent/ Sq. Ft. (a) 11.74 12.68 14.61 14.00 14.57 17.17 11.05 15.36 19.36 22.44 17.33
(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, 1997 out of 1,539,000 total rentable square feet. (c) Rentable square feet leased as of March 15, 1997 out of 3,625,000 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 during 1998, if notice is given by April 1, 1997. As of March 23, 1997, no notice had been received. The weighted average remaining lease term of these fifteen office buildings was approximately 8 years as of March 31, 1997. 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, 1997, the Company's retail portfolio includes the following eleven properties:
Rentable Company's Metropolitan Square Feet Ownership Property Description Area (Company Owned) Interest -------------------- ------------ --------------- -------- Colonial Plaza MarketCenter Orlando, FL 493,000 100% (a) Greenbrier MarketCenter Chesapeake, VA 479,000 100% North Point MarketCenter Atlanta 398,000 100% Presidential MarketCenter Atlanta 362,000 100% (b) Perimeter Expo Atlanta 171,000 100% Los Altos MarketCenter Long Beach, CA 157,000 100% Mansell Crossing Phase II Atlanta 103,000 100% (c) Rivermont Station Atlanta 90,000 100% Abbotts Bridge Station Atlanta 85,000 100% (d) Lovejoy Station Atlanta 77,000 100% Haywood Mall Greenville, SC 330,000 50% --------- 2,745,000 =========
(a) Includes 16,000 square feet not yet under construction. (b) Includes 82,000 square feet currently under construction. (c) Includes 32,000 square feet currently under construction. (d) Under construction. The weighted average leased percentage of these eleven retail properties (excluding the properties under construction and Haywood Mall) was approximately 99% as of March 15, 1997, and the leases of these eleven properties (excluding only Haywood Mall) expire as follows:
2006 & 1997 1998 1999 2000 2001 2002 2003 2004 2005 Thereafter Total ---- ---- ---- ---- ---- ---- ---- ---- ---- ---------- ----- RETAIL - ------ Square Feet Expiring 2,195 13,780 60,322 33,981 108,743 88,799 9,300 85,267 46,097 1,770,227 2,218,711(b) % of Leased Space 0% 1% 3% 2% 5% 4% 0% 4% 2% 79% 100% Annual Base Rent (a) 41,486 216,421 1,096,851 537,784 1,675,072 1,374,159 134,950 941,311 532,730 21,981,131 28,531,895 Annual Base Rent /Sq. Ft. (a) 18.90 15.71 18.18 15.83 15.40 15.47 14.51 11.04 11.56 12.42 12.86
(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 rate in the year of expiration. Amounts disclosed are in dollars. (b) Gross leasable area leased as of March 15, 1997 out of 2,414,000 total gross leasable area. The weighted average remaining lease term of these eleven retail properties (excluding only Haywood Mall) was approximately 14 years as of March 15, 1997. 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. As of March 15, 1997, the Company owned the following medical office property: Company's Metropolitan Rentable Ownership Property Description Area Square Feet Interest - -------------------- ------------ ----------- --------- Presbyterian Medical Center at University Charlotte, NC 67,000 100% (a) (a) Under construction and in early stages of lease-up. Other. The Company's other real estate holdings include equity interests in approximately 472 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, Odyssey Partners, L.P., Temple-Inland Inc., Dutch Institutional Holding Company ("DIHC"), 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 1996 Significant changes in the Company's business and properties during the year ended December 31, 1996 were as follows: Retail Properties. In March 1996, Colonial Plaza MarketCenter, a 493,000 square foot retail power center in Orlando, Florida and Mansell Crossing Phase II, a 103,000 square foot retail expansion adjacent to the Company's other North Point properties, became partially operational for financial reporting purposes. In June 1996, Presidential MarketCenter Phase II, an 82,000 square foot retail power center expansion in northeast suburban Atlanta became partially operational for financial reporting purposes. In October 1996, Greenbrier MarketCenter, a 479,000 square foot retail power center in Chesapeake, Virginia became partially operational for financial reporting purposes. In November 1996, Los Altos MarketCenter, a 157,000 square foot retail power center located in Long Beach, California became partially operational for financial reporting purposes (construction commenced on this retail power center in January 1996). In November 1996, Lawrenceville MarketCenter, a 500,000 square foot retail power center located in northeast suburban Atlanta was sold to Equitable Real Estate Investment Management, Inc., acting on behalf of its client, a major state pension fund for a purchase price of $34,605,000. The gain on the sale, net of applicable income tax provision was approximately $10,651,000 (including depreciation recapture of approximately $715,000). The net proceeds were swapped in a tax-deferred exchange into the purchase of One Independence Center (see discussion below). Office Properties. Two office buildings, 100 and 200 North Point Center East, consisting of 128,000 and 129,000 rentable square feet, respectively, located adjacent to North Point Mall and the Company's retail properties in north central suburban Atlanta became partially operational for financial reporting purposes in April 1996 and November 1996, respectively. In March 1996, 4100 and 4300 Wildwood Parkway, two office buildings with a total of 250,000 rentable square feet owned by Wildwood Associates and located in Wildwood Office Park became partially operational for financial reporting purposes. In October 1996, Wildwood Associates commenced construction on 4200 Wildwood Parkway, a 250,000 square foot office building located adjacent to 4100 and 4300 Wildwood Parkway. In December 1996, the Company commenced construction on 333 North Point Center East, a 128,000 rentable square foot office building, adjacent to 100 and 200 North Point Center East. In May 1996, pursuant to the third amendment to the North Greene Associates partnership agreement, Weaver Downtown, L.P., the minority partner, sold its partnership interest to Cousins for $999,000. As a result, Cousins owns 100% of the First Union Tower, a 319,000 rentable square foot office building in Greensboro, North Carolina. During 1996 Cousins acquired two office buildings. In August 1996, Cousins acquired 615 Peachtree Street, a 147,000 rentable square foot downtown Atlanta office building, located across from NationsBank Plaza. The 12-story office building was purchased for $11.1 million plus a contingent future payment of up to an additional $1 million. In December 1996, Cousins acquired One 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 for a purchase price of approximately $70.6 million. Cousins purchased the office building using approximately $34,612,000 of proceeds from the tax-deferred exchanges of Lawrenceville MarketCenter and an outparcel at North Point, $30,879,000 from the assumption of a mortgage note payable, $18,621,000 from an additional amount drawn down on the mortgage note payable (to bring the mortgage note payable to a total of $49,500,000) (see Note 4) and $2,426,000 of cash. Cousins also assumed $1,300,000 of municipal bonds related to the underground parking garage. Medical Properties. In July 1996, Cousins acquired the medical office building development and management operations of The Lea Richmond Company and The Richmond Development Company. The purchase price for the acquisition was $1.8 million plus contingent future payments of up to an additional $1 million (of which $200,000 was paid through December 31, 1996), subject to commencement of development of certain medical office projects. This new division of the Company commenced construction in July 1996 on the Presbyterian Medical Center at University, a 67,000 rentable square foot medical office building in Charlotte, North Carolina. Financings. On February 6, 1996, CSC Associates, L.P. ("CSC"), a joint venture formed by the Company and a wholly owned subsidiary of NationsBank, each as 50% partners, 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 CSC and are secured by a Deed to Secure Debt, an Assignment of Rents and Security Agreement covering CSC's interest in the NationsBank Plaza building and related leases and agreements. CSC has 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 share of unconsolidated joint venture balances as disclosed in Note 4 or in Note 5. (The related note receivable and interest income are also not included in Note 4.) Effective July 1, 1996, the Company amended and extended its line of credit. The line amount was $50 million through December 31, 1996, and increased to $100 million on January 1, 1997. The line is unsecured, bears interest tied to the Federal Funds rate and matures June 30, 1997. On April 1, 1996, CC-JM II Associates completed a $24,675,000, 17 year fully amortizing non-recourse mortgage note payable at a 7% interest rate. On December 16, 1996, Wildwood Associates completed the financing of the 3200 Windy Hill Road Building with a $70 million mortgage note payable at an 8.23% interest rate and maturity of January 1, 2007. Concurrent with the financing, Wildwood Associates paid down its line of credit to $0 and on January 16, 1997, made a cash distribution of $10 million to each partner. On January 7, 1997, WWA received a commitment for the financing of the 4100 and 4300 Wildwood Parkway Buildings which funded on March 20, 1997. The $30 million non-recourse mortgage note payable has an interest rate of 7.65% and term of fifteen years. Executive Offices The Registrant's executive offices are located at 2500 Windy Ridge Parkway, Suite 1600, Atlanta, Georgia 30339-5683. At December 31, 1996, the Company employed 150 people. 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, 1996, except percentage leased which is as of March 15, 1997. Dollars are stated in thousands.
Percentage Description, Year Rentable Leased Average Location Development Company's Square Feet as of 1996 Zip Code or Acquired Partner Interest as Noted 1997 Occupancy - ------------ ----------- ------- --------- ----------- ---------- --------- Office - ------ Wildwood Office Park: Suburban Atlanta, GA 2300 Windy Ridge Parkway 30339-5671 1987 IBM 50% 634,000 98% 95% 12 Acres 2500 Windy Ridge Parkway 30339-5683 1985 IBM 50% 313,000 97% 85% 8 Acres 3200 Windy Hill Road 30339-5609 1991 IBM 50% 685,000 97% 96% 15 Acres 3301 Windy Ridge Parkway 30339-5685 1984 N/A 100% 106,000 80% 80% 10 Acres 3100 Windy Hill Road 30339-5605 1983 N/A (7) 188,000 100% 100% 13 Acres
Adjusted Cost and Adjusted Cost Less Debt Description, Major Depreciation Maturity Location Major Tenants (lease Tenants' and and and expiration/options Rentable Amortization Debt Interest Zip Code expiration) Sq. Feet (1) Balance Rate - ------------ -------------------- -------- ------------ ------- -------- Office - ------ Wildwood Office Park: Suburban Atlanta, GA 2300 Windy Ridge Parkway 30339-5671 IBM (2002/2012) 240,430 $ 77,058 $ 71,078 12/1/05 Georgia-Pacific Corporation 63,006 $ 52,998 7.56% (1997) Electrolux (2000/2005) 62,576 Computer Associates 62,445 (2005/2010) Financial Services Corporation (2006/2011)(3) 55,604 Chevron USA (2005)(2) 50,242 2500 Windy Ridge Parkway 30339-5683 Coca-Cola Enterprises Inc. 165,180 $ 28,378 $ 25,412 12/15/05 (1998/2008) $ 18,252 7.45% 3200 Windy Hill Road 30339-5609 IBM (2001/2011)(4) 436,539 $ 80,463 $ 70,000 1/1/07 Equifax (5) (1998/2003) 68,402 $ 62,521 8.23% W.H. Smith Inc. 41,858 (2002/2007) 3301 Windy Ridge Parkway 30339-5685 TSW International, Inc. 84,104 $ 10,377 $ 0 N/A (2003/2008) (6) $ 6,854 3100 Windy Hill Road 30339-5605 IBM (1998/2003) 188,000 $17,416 (7) $ 0 N/A $17,416 (7)
Percentage Description, Year Rentable Leased Average Location Development Company's Square Feet as of 1996 Zip Code or Acquired Partner Interest as Noted 1997 Occupancy - ------------ ----------- ------- --------- ----------- ---------- --------- Office (Continued) - ------------------ 4100 and 4300 Wildwood Parkway 30339-9999 1996 IBM 50% 250,000 100% 51% 13 Acres 4200 Wildwood Parkway 30339-9999 (10) IBM 50% 250,000 (10) (10) 8 Acres NationsBank Plaza Atlanta, GA 30308-2214 1992 NationsBank(5) 50% (11)1,260,000 92% 92% 4 Acres First Union Tower Greensboro, NC 27401-2167 1990 N/A 100% 319,000 94% 90% 1 Acre Ten Peachtree Place Atlanta, GA 30309-3814 1991 Coca-Cola (5) 50% (11) 259,000 100% 100% 5 Acres John Marshall-II Suburban Washington, D.C. 22102-3802 1996 CarrAmerica Realty 50% 224,000 100% 92% . Corporation (5) 3 Acres 100 North Point Center East Suburban Atlanta, GA 30202-4885 1995 N/A 100% 128,000 100% 63% 7 Acres
Adjusted Cost and Adjusted Cost Less Debt Description, Major Depreciation Maturity Location Major Tenants (lease Tenants' and and and expiration/options Rentable Amortization Debt Interest Zip Code expiration) Sq. Feet (1) Balance Rate - ------------ -------------------- -------- ------------ ------- -------- Office (Continued) - ------------------ 4100 and 4300 Wildwood Parkway 30339-9999 Georgia-Pacific 250,000 $ 26,426 $ 0(9) N/A (9) Corporation (2012/2017) $ 25,899 (6)(8) 4200 Wildwood Parkway 30339-9999 (10) (10) $ 19,670 $ 0 N/A (10) NationsBank Plaza Atlanta, GA 30308-2214 NationsBank(5) 572,742 $223,393 $ 0(26) N/A (26) (2012/2042) $189,440 Ernst & Young LLP 188,175 (2007/2017) Troutman Sanders 178,459 (2007/2017) Paul Hastings (2012/2017) 68,980 Hunton & Williams 56,560 (2004/2009) First Union Tower Greensboro, NC 27401-2167 Smith Helms Mullis & 70,360 $ 33,594 $ 0 N/A Moore (2000/2015) $ 24,055 First Union Bank (5) 62,622 (2009/2019) Halstead Industries 60,253 (2000/2005) Ten Peachtree Place Atlanta, GA 30309-3814 Coca-Cola (5) (2001/2006) 259,000 $ 23,474 $ 20,19611/30/01(12) $ 20,290 8.00% John Marshall-II Suburban Washington, D.C. 22102-3802 Booz-Allen & Hamilton 224,000 $ 29,917 $ 24,288 4/1/13 . (2011/2016) $ 28,889 7.00% 100 North Point Center East Suburban Atlanta, GA 30202-4885 Schweitzer-Mauduit 30,728 $ 12,935 $ 0 N/A International, Inc. $ 12,497 (2001/2007) Green Tree Financial 21,914 (2006/2011)(6)
Percentage Description, Year Rentable Leased Average Location Development Company's Square Feet as of 1996 Zip Code or Acquired Partner Interest as Noted 1997 Occupancy - ------------ ----------- ------- --------- ----------- ---------- --------- Office (Continued) - ------------------ 200 North Point Center East Suburban Atlanta, GA 30202-4885 1996 N/A 100% 129,000 93% 30% 7 Acres 333 North Point Center East Suburban Atlanta, GA 30202-9999 (10) N/A 100% 128,000 (10) (10) 8 Acres 615 Peachtree Street Atlanta, GA 30308-2312 1996 N/A 100% 147,000 89% 30% (13) 2 Acres One Independence Center Charlotte, NC 28246-1000 1996 N/A 100% 522,000 99% 8%(14) 2 Acres Retail Centers and Malls Haywood Mall Greenville, SC 29607-2749 1977/1995 Corporate 50% 1,256,000 92% 86% Property 86 acres overall of Investors (5) of which 84% of owned 330,000 and owned 21 acres are owned (16) Perimeter Expo Atlanta, GA 30338-1519 1993 N/A 100% 291,000 100% 95% 19 acres overall of of which 100% of Company 171,000 and Company owned 10 acres are owned owned by the Company
Adjusted Cost and Adjusted Cost Less Debt Description, Major Depreciation Maturity Location Major Tenants (lease Tenants' and and and expiration/options Rentable Amortization Debt Interest Zip Code expiration) Sq. Feet (1) Balance Rate - ------------ -------------------- -------- ------------ ------- -------- Office (Continued) - ------------------ 200 North Point Center East Suburban Atlanta, GA 30202-4885 Alltel Telecom Information 48,168 $ 10,868 $ 0 N/A Services, Inc. (1999/2000) $ 10,802 Motorola, Inc. (2001/2011) 26,897 APAC Teleservices, Inc. 22,409 (2004/2009) 333 North Point Center East Suburban Atlanta, GA 30202-9999 N/A N/A $ 1,233 $ 0 N/A (10) 615 Peachtree Street Atlanta, GA 30308-2312 Wachovia (5)(1998/2007) 44,881 $ 11,725 $ 0 N/A McCann Erickson (1998) 28,967 $ 11,553 One Independence Center Charlotte, NC 28246-1000 NationsBank (5)(2008/2028) 357,390 (15) $ 70,759 $ 49,500 11/1/07 Robinson Bradshaw & Hinson, 64,893 $ 70,538 8.22% P.A. (2004/2009) Ernst & Young LLP (2001/2006)33,962 Transamerica (5)(1997) 30,736 Retail Centers and Malls Haywood Mall Greenville, SC 29607-2749 Sears (17) N/A $ 49,716 $ 0 N/A J.C. Penney (17) N/A $ 37,573 Rich's (17) N/A Belk (17) N/A Dillard's (17) N/A Perimeter Expo Atlanta, GA 30338-1519 The Home Depot Expo (17) N/A $ 19,772 $ 21,259 8/15/05 Marshalls (2014/2029) 36,598 $ 18,458 8.04% Best Buy (2014/2029) 36,000 Linens `N Things (2014/2024) 30,351 Office Max (2013/2033) 23,500 The Sport Shoe (2004/2014) 14,348 Gap's Old Navy Store 13,939 (2002/2012)
Percentage Description, Year Rentable Leased Average Location Development Company's Square Feet as of 1996 Zip Code or Acquired Partner Interest as Noted 1997 Occupancy - ------------ ----------- ------- --------- ----------- ---------- --------- Retail Centers and Malls (Continued) - ------------------------------------ North Point MarketCenter Suburban Atlanta, GA 30202-4889 1994/1995 N/A 100% 514,000 100% 93% 60 Acres (18) of which 398,000 and 49 acres are owned by the Company Presidential MarketCenter Suburban Atlanta, GA 30278-2149 1994/1996 N/A 100% 478,000 (19) 99% (19) 99% (19) 66 acres overall of of which 99% (19) Company 362,000 (19) of Company owned and 49 acres owned are owned by the Company Lovejoy Station Suburban Atlanta, GA 30228-0458 1995 N/A 100% 77,000 95% 89% 12 Acres Colonial Plaza MarketCenter Orlando, FL 32803-5029 1996 N/A 100% 493,000 97% 67%(20) 49 Acres
Adjusted Cost and Adjusted Cost Less Debt Description, Major Depreciation Maturity Location Major Tenants (lease Tenants' and and and expiration/options Rentable Amortization Debt Interest Zip Code expiration) Sq. Feet (1) Balance Rate - ------------ -------------------- -------- ------------ ------- -------- Retail Centers and Malls (Continued) - ------------------------------------ North Point MarketCenter Suburban Atlanta, GA 30202-4889 Target (17) N/A $ 27,021 $ 29,477 7/15/05 Babies "R" Us (2011/2031) 50,275 $ 24,847 8.50% Media Play (2010/2025) 48,884 Marshalls (2010/2025) 40,000 Rhodes (2011/2021) 40,000 Linens `N Things 35,000 (2005/2025) United Artists (2014/2034) 34,733 Circuit City (2015/2030) 33,420 PETsMART (2009/2029) 25,465 Gap's Old Navy Store 17,000 (2001/2011) Presidential MarketCenter Suburban Atlanta, GA 30278-2149 Target (17) N/A $ 19,588 $ 0 N/A Publix Super Market 56,146 $ 18,634 (2019/2044) Carmike Cinemas(5)(2002/2032)44,565 HomeGoods, Inc. (2004/2014) 35,000 T.J. Maxx (2004/2014) 32,000 Marshalls (2010/2025) 30,000 MJDesigns (5) (2011/2026) 37,957 Office Depot, Inc. 31,628 (2011/2026) Lovejoy Station Suburban Atlanta, GA 30228-0458 Publix Super Market 47,955 $ 6,033 $ 0 N/A (2016/2036) $ 5,837 Colonial Plaza MarketCenter Orlando, FL 32803-5029 Circuit City (2017/2037) 43,936 $ 37,899 $ 0 N/A Rhodes (2011/2026) 40,000 $ 37,299 Baby Superstore, Inc. (2006/2021) 40,000 Stein Mart, Inc. (2007/2027) 36,000 Linens `N Things 35,458 (2012/2027) Barnes & Noble Superstores 35,131 Inc. (2011/2021) Luria's (2012/2027) 32,900
Percentage Description, Year Rentable Leased Average Location Development Company's Square Feet as of 1996 Zip Code or Acquired Partner Interest as Noted 1997 Occupancy - ------------ ----------- ------- --------- ----------- ---------- --------- Retail Centers and Malls (Continued) - ------------------------------------ Colonial Plaza MarketCenter (Continued) Mansell Crossing Phase II Suburban Atlanta, GA 30202-4822 1996 N/A 100% 103,000 100% 74% (21) 13 Acres Greenbrier MarketCenter Chesapeake, VA 23327-2840 1996 N/A 100% 479,000 99% 38% (22) 44 Acres Los Altos MarketCenter Long Beach, CA 90815-3126 1996 N/A 100% 258,000 100% 16% (23) 19 Acres of which 157,000 and 17 Acres are owned by the Company
Adjusted Cost and Adjusted Cost Less Debt Description, Major Depreciation Maturity Location Major Tenants (lease Tenants' and and and expiration/options Rentable Amortization Debt Interest Zip Code expiration) Sq. Feet (1) Balance Rate - ------------ -------------------- -------- ------------ ------- -------- Retail Centers and Malls (Continued) - ------------------------------------ Colonial Plaza MarketCenter (Continued) Marshalls (2011/2026) 30,400 Ross Stores (2011/2026) 28,000 Just For Feet,Inc.(2012/2027)26,667 Walgreen Co. (2017) 18,614 Gap's Old Navy Store 18,073 (2002/2012) Mansell Crossing Phase II Suburban Atlanta, GA 30202-4822 Bed Bath & Beyond 40,787 $ 7,403 $ 0 N/A (2012/2027) $ 7,286 Goody's Family Clothing, Inc. (2009/2027) 32,144 Rooms To Go (2016/2036) 21,000 Greenbrier MarketCenter Chesapeake, VA 23327-2840 Target (2016/2046) 117,220 $ 32,749 $ 0 N/A Harris Teeter, Inc. 50,000 $ 32,558 (2016/2036) Bed Bath & Beyond 40,484 (2012/2027) Baby Superstore, Inc. 42,296 (2006/2021) Stein Mart, Inc. (2006/2026) 36,000 Kinetex, Inc. (2012/2027) 33,000 Barnes & Noble Superstores, 29,974 Inc. (2012/2027) PETsMART (2011/2031) 26,052 Office Max (2011/2026) 23,484 Gap's Old Navy Store 14,000 (2002/2012) Los Altos MarketCenter Long Beach, CA 90815-3126 Sears (17) N/A $ 19,413 $ 0 N/A Circuit City (5)(2016/2036) 38,541 $ 19,282 Borders, Inc. (2017/2037) 30,000 Bristol Farms (5)(2012/2032) 28,200 CompUSA, Inc. (2011/2021) 25,620 Savon Drugs (5)(2016/2026) 16,914
Percentage Description, Year Rentable Leased Average Location Development Company's Square Feet as of 1996 Zip Code or Acquired Partner Interest as Noted 1997 Occupancy - ------------ ----------- ------- --------- ----------- ---------- --------- Retail Centers and Malls (Continued) - ------------------------------------ Rivermont Station Suburban Atlanta, Ga. 30076-9999 (10) N/A 100% 90,000 100% (10) 19 Acres Abbotts Bridge Station Suburban Atlanta, GA 30155-9999 (24) N/A 100% 85,000 (24) (24) 17 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% 95% North Point Suburban Atlanta, GA 30202-4885 1993 N/A 100% 24 Acres 100% 100% Medical Office Presbyterian Medical Center at University Charlotte, NC 28233-3549 (10) N/A 100% 67,000 73%(10) (10) 1 Acre (25)
Adjusted Cost and Adjusted Cost Less Debt Description, Major Depreciation Maturity Location Major Tenants (lease Tenants' and and and expiration/options Rentable Amortization Debt Interest Zip Code expiration) Sq. Feet (1) Balance Rate - ------------ -------------------- -------- ------------ ------- -------- Retail Centers and Malls (Continued) - ------------------------------------ Rivermont Station Suburban Atlanta, Ga. 30076-9999 Harris Teeter, Inc. 58,261 $ 10,116 $ 0 N/A (2015/2035)(10) (10) CVS Drug Store (5) 8,775 (2007/2022)(10) Abbotts Bridge Station Suburban Atlanta, GA 30155-9999 Harris Teeter, Inc. 41,813 (24) $ 0 N/A (2018/2038)(24) Eckerd Corporation 10,909 (2017/2037)(24) Stand Alone Retail Sites Adjacent to Company's Office and Retail Projects - ------------------------------------------------------------------------- Wildwood Office Park Suburban Atlanta, GA 30339-5671 N/A N/A $ 8,763 $ 0 N/A $ 7,673 North Point Suburban Atlanta, GA 30202-4885 N/A N/A $ 3,819 $ 0 N/A $ 3,769 Medical Office Presbyterian Medical Center at University Charlotte, NC 28233-3549 Presbyterian Health Services 49,291 $ 1,949 $ 0 N/A Corporation (2012)
(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) Chevron USA has the right to terminate its lease during 1998 if notice is given by April 1, 1997. As of March 23, 1997, no notice had been received. (3) 1,556 square feet expires in 2001. (4) 115,944 square feet expires in 2001, and the balance expires in 2006. (5) Actual tenant or venture partner is affiliate of entity shown. (6) TSW International, Inc., Green Tree Financial and Georgia-Pacific Corporation have the right to terminate their leases in 1998, 2001 and 2007, respectively, upon payment of significant cancellation penalties. (7) For 3100 Windy Hill Road, the cost shown is the Company's carrying value of the land lease and first mortgage note from which it derives substantially all of the economic benefits of the property. (8) Tenant has the option to purchase the building on its lease expiration date for a price of $33,750,000. (9) On January 7, 1997, Wildwood Associates received a commitment for the financing of the 4100 and 4300 Wildwood Parkway Buildings which funded on March 20, 1997. The $30 million non-recourse mortgage note payable has an interest rate of 7.65% and term of fifteen years. (10) Project was under construction as of December 31, 1996. Lease expiration dates are based upon estimated commencement dates, and square footage is estimated. (11) See "Major Properties" - "NationsBank Plaza" and "Ten Peachtree Place" where the partnership's preferences are discussed. (12) Maturity of the Ten Peachtree Place mortgage debt is extendible to December 31, 2008. Rate becomes floating after November 30, 2001. (13) 615 Peachtree Street was acquired in July 1996. Thus, economic occupancy for 615 Peachtree Street does not include a full year of operations. (14) One Independence Center was acquired in December 1996. Thus, economic occupancy for One Independence Center does not include a full year of operations. (15) 101,250 square feet expires in 2000. (16) 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. (17) This anchor tenant owns its own space. (18) North Point MarketCenter includes approximately 4 outparcels which are ground leased to freestanding users. (19) Includes 82,000 square feet under development as of March 15, 1997 which were excluded from calculation of percentage leased and the average 1996 economic occupancy. (20) Colonial Plaza MarketCenter became partially operational in March 1996 for financial reporting purposes. Thus, economic occupancy for Colonial Plaza MarketCenter does not include a full year of operations. (21) Mansell Crossing Phase II became partially operational in March 1996 for financial reporting purposes. Thus, economic occupancy for Mansell Crossing Phase II does not include a full year of operations. (22) Greenbrier MarketCenter became partially operational in October 1996 for financial reporting purposes. Thus, economic occupancy for Greenbrier MarketCenter does not include a full year of operations. (23) Los Altos MarketCenter became partially operational in November 1996 for financial reporting purposes. Thus, economic occupancy for Los Altos MarketCenter does not include a full year of operations. (24) Land was acquired and construction commenced on Abbotts Bridge Station subsequent to December 31, 1996. Lease expiration dates are based upon estimated commencement dates, and square footage is estimated. (25) Presbyterian Medical Center at University is located on 1 acre which is subject to a ground lease expiring in 2057. (26) See "Major Properties" - "NationsBank Plaza" where debt on NationsBank Plaza is discussed. 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% $ 10,610(2) $ 0 North Point Land (Georgia Highway 400 & Haynes Bridge Road) (3) Suburban Atlanta, Georgia Office and Commercial - East 1970-1985 59 N/A 100% $ 1,853 $ 0 Office and Commercial - West 1970-1985 230 N/A 100% $ 4,511 $ 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) Lawrenceville Gwinnett County Suburban Atlanta, Georgia Single-Family Residential and Commercial 1994 84 N/A 100% $ 1,487 $ 0
(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 $1,217,000. (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 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 1994 and 1996, approximately 72 and 375 acres, respectively, of the option related to the fee simple interest was exercised and simultaneously sold for gross profits of $243,000 and $1,427,000, respectively. None of the option was exercised in 1995. 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 (of which 1 is under construction) containing 2,426,000 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, 1996, the Company's investment in Wildwood Associates and a related partnership was approximately $2.5 million, which included the cost of the land the Company is committed to contribute to Wildwood Associates. 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 (250,000 rentable square feet, which is under construction). At March 15, 1997, these buildings were 97%, 98%, 97%, 100% and 0% leased, respectively. Wildwood Associates also owns 15 acres leased to two banking facilities and five restaurants. On December 16, 1996, Wildwood Associates completed the financing of the 3200 Windy Hill Road Building with a $70 million mortgage note payable at an 8.23% interest rate and maturity of January 1, 2007. Concurrent with the financing, Wildwood Associates paid down its line of credit to $0 and on January 16, 1997, made a cash distribution of $10 million to each partner. On January 7, 1997, Wildwood Associates received a commitment for the financing of the 4100 and 4300 Wildwood Parkway Buildings which funded on March 20, 1997. The $30 million non-recourse mortgage note payable has an interest rate of 7.65% and term of fifteen years. Wildwood Associates has a $10 million bank line of credit (the Company severally guarantees one-half) under which $0 was drawn at December 31, 1996. 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, TSW International, Inc., 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 and the second option for another 10% of the space was exercised effective December 15, 1996, bringing the building to 80% leased as of March 15, 1997. 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 was 100% leased by the partnership to IBM through November 1993. In January 1993, the IBM lease was extended through November 30, 1998. Concurrently with the IBM extension, the mortgage note and related leases were also modified (see Note 3). 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 167 and 230 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 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. Through December 31, 1995, these two retail properties were owned by North Point Market Associates, L.P. ("NPMA") a limited partnership between Cousins (82.3%) and an affiliate of Coca-Cola (17.7%). At December 31, 1995, Cousins also had a 50% interest with an affiliate of Coca-Cola in another partnership, Spring/Haynes Associates, which owned approximately 11 acres of land in midtown Atlanta. Effective January 1, 1996, Cousins and Coca-Cola entered into a transaction to exchange their interests in these two partnerships, which effectively resulted in Coca-Cola receiving 100% of the Spring/Haynes Associates' property and Cousins receiving $1,092,000 in cash and 100% of North Point Market Associates, L.P.'s properties (North Point MarketCenter and Mansell Crossing Phase II). The net amount of Coca-Cola's minority interest of $3,825,000 in North Point Market Associates, L.P. and the Company's investment in Spring/Haynes Associates of $1,688,000 as of December 31, 1995 were credited against the carrying values of North Point Market Associates, L.P.'s properties. North Point MarketCenter, which is 100% leased as of March 15, 1997, 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, 1997, is an approximately 103,000 square foot expansion of an existing retail power center, previously developed by the Company for a third party, which became partially operational for financial reporting purposes in March 1996. 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, 128,000 and 129,000 rentable square feet, respectively, became partially operational for financial reporting purposes in April 1996 and November 1996, respectively. Construction commenced in December 1996 on the third office building, 333 North Point Center East, a 128,000 square foot office building, adjacent to 100 and 200 North Point Center East. These three office buildings are located on 22 acres of land at North Point and are 100%, 93% and 0% leased as of March 15, 1997. 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, 1997. The remaining approximately 289 developable acres at North Point are 100% owned by the Company. Approximately 59 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 230 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 92% leased at March 15, 1997. 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. In October 1993, CSC fully repaid all of its debt with equity contributions of $86.7 million made by each partner. On February 6, 1996, CSC issued $80 million of 6.377% collateralized notes and simultaneously loaned the $80 million proceeds to the Company (see Note 4 where discussed). At December 31, 1996, the Company's investment in CSC was approximately $102,904,000. CSC's net income or loss and cash distributions are allocated to the partners based on their percentage interests (50% each), subject to a preference to Cousins, which preference resulted in Cousins recognizing $451,000 and $36,000 in income over what it would have otherwise recognized in the years ended December 31, 1994 and 1995, respectively. No additional preference is due to Cousins. 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 at March 15, 1997 was approximately 94% leased. In May 1996, pursuant to the third amendment to the North Greene Associates partnership agreement, Weaver Downtown, L.P., the minority partner, sold its partnership interest to Cousins for $999,000. As a result, Cousins owns 100% of the First Union Tower. 615 Peachtree Street. In August 1996, the Company acquired 615 Peachtree Street, a 147,000 rentable square foot downtown Atlanta office building, located across from NationsBank Plaza. The 12-story office building was purchased for $11.1 million plus a contingent future payment of up to an additional $1 million. 615 Peachtree Street was 89% leased as of March 15, 1997. One Independence Center. In December 1996, the Company acquired One 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 for a purchase price of approximately $70.6 million. The Company purchased the office building using approximately $34,612,000 of proceeds from the tax-deferred exchanges of Lawrenceville MarketCenter and an outparcel at North Point, $30,879,000 from the assumption of a mortgage note payable, $18,621,000 from an additional amount drawn down on the mortgage note payable (to bring the mortgage note payable to a total of $49,500,000) (see Note 4) and $2,426,000 of cash. The Company also assumed $1,300,000 of municipal bonds related to the underground parking garage. One Independence Center was 99% leased as of March 15, 1997. 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 2088 with a 99-year renewal option. One Ninety One Peachtree Tower was approximately 92% leased at March 15, 1997. 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, an affiliate of DIHC. 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, 1996, the cumulative undistributed preferred return was $10,325,065. The project is subject to long-term debt of $145,000,000 at December 31, 1996. Thereafter, the partners will share in any cash flow distributions in accordance with their percentage interests. At December 31, 1996, 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 $20.2 million at December 31, 1996. 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, 1996, the Company had a negative investment in Ten Peachtree Place Associates of $4,000. 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. In April 1996, the venture completed the financing of the building with a $24,675,000, 17 year fully amortizing non-recourse mortgage note at a 7% interest rate. 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. Expansion of the mall from 956,000 gross leasable square feet ("GLA") (of which ownership is approximately 272,000 GLA) to 1,256,000 GLA (of which ownership is approximately 330,000) was substantially completed in 1995. 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, 1997. The Company has a 50% interest in Haywood Mall. The Company contributed $5.8 million during 1995 to fund its share of the expansion of the mall. At December 31, 1996, the Company's investment was $20,743,000. Other Fully Operational Retail Properties. In addition to North Point MarketCenter and Mansell Crossing Phase II which are discussed above, the Company owns four other retail centers which were fully operational for financial reporting purposes as of December 31, 1996. 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 100% leased (Company owned) as of March 15, 1997. Presidential MarketCenter is a 478,000 square foot retail power center (of which the Company owns 362,000 square feet) which is located in suburban Atlanta, Georgia and was 99% leased (Company owned) as of March 15, 1997. Lovejoy Station is a 77,000 square foot neighborhood retail center which is located in suburban Atlanta and was 95% leased as of March 15, 1997. Greenbrier MarketCenter is a 479,000 square foot retail power center which is located in Chesapeake, Virginia and was 99% leased as of March 15, 1997. Partially Operational Retail Properties. The Company owns two retail properties which were partially operational for financial reporting purposes as of December 31, 1996. Colonial Plaza MarketCenter is a 493,000 square foot retail power center which is located in Orlando, Florida and was 97% leased as of March 15, 1997. 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, 1997. Retail Projects Under Construction. The Company owns two neighborhood retail centers one of which was under construction as of December 31, 1996; the land was purchased and construction commenced in January 1997 for the other center. Rivermont Station is a 90,000 square foot neighborhood retail center which is located in suburban Atlanta, 100% leased as of March 15, 1997, and expected to be completed in early 1997 at a total cost of approximately $10 million. The Company purchased the land for and commenced construction on Abbotts Bridge Station, an 85,000 square foot neighborhood retail center which is located in suburban Atlanta and is expected to be completed in early 1998 at a total cost of approximately $11 million. Abbotts Bridge Station was 62% leased as of March 15, 1997. Medical Properties - ------------------ In July 1996, Cousins acquired the medical office building development and management operations of The Lea Richmond Company and The Richmond Development Company. The purchase price for the acquisition was $1.8 million plus contingent future payments of up to an additional $1 million (of which $200,000 was paid through December 31, 1996), subject to commencement of development of certain medical office projects. This new division of the Company commenced construction in July 1996 on the Presbyterian Medical Center at University, a 67,000 rentable square foot medical office building in Charlotte, North Carolina, which was 73% leased as of March 15, 1997. Residential Lot Developments As of December 31, 1996, CREC owned the following parcels of land which are being developed into residential communities ($ 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 160 116 44 $ 2,298 $ 0 West Cobb County Suburban Atlanta, GA Apalachee River Club 1994 186 74 112 2,992 0 Gwinnett County Suburban Atlanta, GA Echo Mill 1994 542 137 405 4,912 423 West Cobb County Suburban Atlanta, GA Barrett Downs 1994 143 41 102 1,850 0 Forsyth County Suburban Atlanta, GA Bradshaw Farms 1994 230 157 73 1,856 0 Cherokee County Suburban Atlanta, GA Alcovy Woods Gwinnett County Suburban Atlanta, GA 1996 121 121 1,275 1,005 ----- --- --- ------- ------ Total 1,382 525 857 $15,183 $1,428 ===== === === ======= ======
(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 $780 per acre at January 1, 1997, 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 1994 and 1996, approximately 72 and 375 acres, respectively, of the option related to the fee simple interest was exercised and simultaneously sold for gross profits of $243,000 and $1,427,000, respectively. None of the option was exercised in 1995. Other Real Property Investments - ------------------------------- Omni Norfolk Hotel. Norfolk Hotel Associates ("NHA") is 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. At December 31, 1996, the Company had an investment of $2,091,000 in NHA. The Company has also guaranteed a $2.1 million line of credit to NHA under which $2.0 million had been drawn at December 31, 1996 and its partner has guaranteed an equal line of credit under which $2.0 million had been drawn at December 31, 1996. On February 14, 1997, the mortgage note with a balance of $8,325,000 was repaid in full. A portion of the proceeds from the repayment were used to pay off the partnership's lines of credit, with the balance distributed to the partners. It is anticipated that this partnership will be liquidated 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 $777,000 of development income was received and recognized in 1996. 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, 1996 was $993,000. 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 $0. Supplemental Financial and Leasing Information Depreciation and amortization expense include the following components for the years ended December 31, 1995 and 1996 ($ in thousands):
1995 1996 -------------------------------------- --------------------------------------- Share of Share of Unconsolidated Unconsolidated Consolidated Joint Ventures Total Consolidated Joint Ventures Total ------------ -------------- ------- ------------ -------------- ------- Furniture, fixtures and equipment $ 389 $ 123 $ 512 $ 306 $ 40 $ 346 Deferred financing costs -- 80 80 -- 16 16 Goodwill and related business acquisition costs 229 41 270 363 44 407 Real estate related: Building (including tenant first generation) 3,578 8,142 11,720 6,336 8,958 15,294 Tenant second generation 144 655 799 214 979 1,193 ------- ------- ------- ------ -------- ------- $ 4,340 $ 9,041 $13,381 $7,219 $ 10,037 $17,256 ======= ======= ======= ====== ======== =======
Exclusive of new developments and purchases of furniture, fixtures and equipment, the Company had the following capital expenditures for the years ended December 31, 1995 and 1996, including its share of unconsolidated joint ventures ($ in thousands):
1995 1996 ------------------------------- -------------------------------- Office Retail Total Office Retail Total ------ ------ ----- ------ ------ ----- Second generation related costs $1,316 $ -- $1,316 $1,892 $ -- $1,892 Building improvements 28 23 51 3 -- 3 ------ ----- ------ ------ ----- ------ Total $1,344 $ 23 $1,367 $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, 1996. 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 65 Chairman of the Board of Directors and Chief Executive Officer Daniel M. DuPree 50 President and Chief Operating Officer George J. Berry 59 Senior Vice President Tom G. Charlesworth 47 Senior Vice President, Secretary and General Counsel Craig B. Jones 46 Senior Vice President Joel T. Murphy 38 Senior Vice President and President of the Retail Division (Cousins MarketCenters, Inc.) John L. Murphy 51 Senior Vice President - Marketing W. James Overton 50 Senior Vice President - Development Lea Richmond III 49 Senior Vice President and President of the Medical Office Division (Cousins/ Richmond) Peter A. Tartikoff 55 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. 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 44 of the Registrant's 1996 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 38 of the Registrant's 1996 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 39 through 43 of the Registrant's 1996 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 19 through 38 of the Registrant's 1996 Annual Report to Stockholders are incorporated herein by reference. The information appearing under the caption "Selected Quarterly Financial Information (Unaudited)" on page 45 of the Registrant's 1996 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 4 and "Compliance with Section 16(a) of the Securities Exchange Act of 1934" on page 13 of the Proxy Statement dated March 28, 1997 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 12 of the Proxy Statement dated March 28, 1997 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 16 and 17 of the Proxy Statement dated March 28, 1997 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 28, 1997 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 19 through 36 of the Registrant's 1996 Annual Report to Stockholders and are incorporated herein by reference: Page Number in Annual Report ---------------- Consolidated Balance Sheets - December 31, 1995 and 1996 19 Consolidated Statements of Income for the Years Ended December 31, 1994, 1995 and 1996 20 Consolidated Statements of Stockholders' Investment for the Years Ended December 31, 1994, 1995 and 1996 21 Consolidated Statements of Cash Flows for the Years Ended December 31, 1994, 1995 and 1996 22 Notes to Consolidated Financial Statements December 31, 1994, 1995 and 1996 23 Report of Independent Public Accountants 38 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, 1995 and 1996 F-2 Combined Statements of Income for the Years Ended December 31, 1994, 1995 and 1996 F-3 Combined Statements of Partners' Capital for the Years Ended December 31, 1994, 1995 and 1996 F-4 Combined Statements of Cash Flows for the Years Ended December 31, 1994, 1995 and 1996 F-5 Notes to Combined Financial Statements December 31, 1994, 1995 and 1996 F-6 through F-12
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, 1995 and 1996 G-2 Statements of Operations for the Years Ended December 31, 1994, 1995 and 1996 G-3 Statements of Partners' Capital for the Years Ended December 31, 1994, 1995 and 1996 G-4 Statements of Cash Flows for the Years Ended December 31, 1994, 1995 and 1996 G-5 Notes to Financial Statements G-6 through December 31, 1994, 1995 and 1996 G-9
D. The following Financial Statements, together with the applicable Report of Independent Auditors, of Haywood Mall Associates, 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 part of this report. Page Number in Form l0-K ------------ Report of Independent Auditors H-1 Balance Sheets - December 31, 1996 and 1995 H-2 Statements of Income for the Years Ended December 31, 1996, 1995 and 1994 H-3 Statements of Cash Flows for the Years Ended December 31, 1996, 1995 and 1994 H-4 Statements of Venturers' Equity for the Three Years Ended December 31, 1996 H-5 Notes to Financial Statements H-6 through December 31, 1996, 1995 and 1994 H-7
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 Schedules S-1 Schedule III- Real Estate and Accumulated Depreciation - December 31, 1996 S-2 through S-6 B. Wildwood Associates and Green Valley Associates II Schedule III - Real Estate and Accumulated Depreciation - December 31, 1996 F-13 C. CSC Associates, L.P. Schedule III- Real Estate and Accumulated Depreciation - December 31, 1996 G-10 D. Haywood Mall Associates Schedule III- Real Estate and Accumulated Depreciation - December 31, 1996 H-8
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 restated as of April 29, 1993, filed as Exhibit 4(a) to the Registrant's Form S-3 dated September 28, 1993, and incorporated herein by reference. 3(b) By-laws of Registrant, as amended and restated as of November 30, 1989, as further amended 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 amended on April 26, 1994, filed as Exhibit 99.1 to the Registrant's Form S-8 dated December 8, 1994, and incorporated herein by reference, as further amended 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 amended by the Stockholders on May 6, 1996, filed on page 24 of the Registrant's Proxy Statement dated May 6, 1996, and incorporated herein by reference. Item 14. Continued - --------------------- 11 Schedule showing computations of weighted average number of shares of common stock outstanding as used to compute primary and fully diluted income per share for each of the five years ended December 31, 1996. 13 Annual Report to Stockholders for the year ended December 31, 1996. 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. -------------------------- A Form 8-K was filed on December 20, 1996 and a Form 8-K/A was filed on February 18, 1997. 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 21, 1997 BY: /s/ Kelly H. Barret Kelly H. Barrett Vice President and Controller (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 21, 1997 Chief Executive Officer /s/ T.G. Cousins and Director - ---------------------------- T. G. Cousins Principal Financial and Accounting Officer: Senior Vice President and March 21, 1997 /s/ Peter A. Tartikoff Chief Financial Officer - ---------------------------- Peter A. Tartikoff Additional Directors: /s/ Richard W. Courts Director March 21, 1997 - ---------------------------- Richard W. Courts, II /s/ Boone A. Knox Director March 21, 1997 - ---------------------------- Boone A. Knox /s/ William Porter Payne Director March 21, 1997 - ---------------------------- 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 14, 1997. 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 14, 1997 SCHEDULE III (Page 1 of 5) COUSINS PROPERTIES INCORPORATED AND CONSOLIDATED ENTITIES REAL ESTATE AND ACCUMULATED DEPRECIATION DECEMBER 31, 1996 ($ 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, 1996 ------------------- ------------------------ ----------------------------------- 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 - ---------------------------------------------- Wildwood - Atlanta, GA $ -- $ 11,156 $ -- $ 4,737 $ (8,888) $ 7,005 $ -- $ 7,005 North Point Property - Fulton Co., GA -- 10,294 -- 12,213 (16,521) 5,986 -- 5,986 Midtown - Atlanta, GA -- 2,949 -- 56 (1,607) 1,398 -- 1,398 McMurray - Cobb Co., GA. -- 1,015 -- 172 (1,092) 95 -- 95 Presidential MarketCenter Outparcels - Gwinnett Co., GA -- 2,939 -- 603 (2,629) 913 -- 913 Lawrenceville - Gwinnett Co., GA -- 5,543 -- 536 (3,798) 2,281 -- 2,281 Colonial Plaza MarketCenter Orlando, FL -- 1,649 -- 183 (186) 1,646 -- 1,646 Greenbrier MarketCenter Outparcels Chesapeake, VA -- 3,191 -- 194 (2,511) 874 -- 874 Lovejoy Station Outparcels Clayton Co., GA -- 575 -- -- -- 575 -- 575 Rivermont Station Outparcels Fulton Co., GA -- 794 -- -- (474) 320 -- 320 Miscellaneous Investments - Atlanta, GA -- 120 -- -- -- 120 -- 120 -------- -------- ------- -------- -------- -------- -------- ------- -- 40,225 -- 18,694 (37,706) 21,213 -- 21,213 -------- -------- ------- -------- -------- -------- -------- -------
Column G Column G Column H Column I -------- -------- -------- --------
Life on Which De- preciation Accumu- In 1996 lated Date of Income Deprecia- Construc- Date Statement Description tion (a) tion Acquired Is Computed - ----------- -------- --------- -------- ----------- LAND HELD FOR INVESTMENT OR FUTURE DEVELOPMENT - ---------------------------------------------- Wildwood - Atlanta, GA $ -- -- 1971-1982,1989 -- North Point Property - Fulton Co., GA -- -- 1970-1985 -- Midtown - Atlanta, GA -- -- 1984 -- McMurray - Cobb Co., GA. -- -- 1981 -- Presidential MarketCenter Outparcels - Gwinnett Co., GA -- -- 1993 -- Lawrenceville - Gwinnett Co., GA -- -- 1994 -- Colonial Plaza MarketCenter Orlando, FL -- -- 1995 -- Greenbrier MarketCenter Outparcels Chesapeake, VA -- -- 1995 -- Lovejoy Station Outparcels Clayton Co., GA -- -- 1995 -- Rivermont Station Outparcels Fulton Co., GA -- 1996 -- Miscellaneous Investments - Atlanta, GA -- -- 1972-1984 -- ------- -- -------
SCHEDULE III (Page 2 of 5) COUSINS PROPERTIES INCORPORATED AND CONSOLIDATED ENTITIES REAL ESTATE AND ACCUMULATED DEPRECIATION DECEMBER 31, 1996 ($ 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, 1996 ------------------- ------------------------ ----------------------------------- 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 $ -- $ 30,229 $ 1,971 $ 1,399 $ 32,195 $ 33,594 Wildwood - 3301 Windy Ridge - Atlanta., GA -- 20 -- 8,838 1,519 1,237 9,140 10,377 Kennesaw - Cobb Co., GA -- -- -- 2,337 -- -- 2,337 2,337 615 Peachtree Street Atlanta, GA -- 4,740 6,985 -- -- 4,740 6,985 11,725 100 North Point Center East Fulton Co., GA -- 441 -- 11,990 504 441 12,494 12,935 One Independence Center Charlotte, NC 50,800 11,096 59,663 -- -- 11,096 59,663 70,759 Perimeter Expo - Atlanta, GA 21,259 8,564 -- 11,137 71 8,564 11,208 19,772 North Point Stand Alone Retail Sites - Fulton Co., GA -- 4,559 -- 164 (904) 3,819 -- 3,819 North Point MarketCenter Fulton Co., GA 29,477 8,500 -- 18,015 506 8,500 18,521 27,021 Presidential MarketCenter Gwinnett Co., GA -- 3,956 -- 11,363 599 3,956 11,962 15,918 Mansell Crossing Phase II Fulton Co., GA -- 2,172 -- 2,994 348 2,172 3,342 5,514 Lovejoy Station Clayton Co., GA -- 1,387 -- 4,315 332 812 5,222 6,034
Life on Which De- preciation Accumu- In 1996 lated Date of Income Deprecia- Construc- Date Statement Description tion (a) tion Acquired Is Computed - ----------- -------- --------- -------- ----------- OPERATING PROPERTIES - -------------------- First Union Tower - Greensboro, N.C. $ 9,539 1988-1990 1987 40 Years Wildwood - 3301 Windy Ridge - Atlanta., GA 3,523 1984 1984 30 Years Kennesaw - Cobb Co., GA 1,344 1974 1973 30 Years 615 Peachtree Street Atlanta, GA 172 -- 1996 15 Years 100 North Point Center East Fulton Co., GA 438 1994 1994 40 Years One Independence Center Charlotte, NC 221 -- 1996 25 Years Perimeter Expo - Atlanta, GA 1,313 1993 1993 30 Years North Point Stand Alone Retail Sites - Fulton Co., GA 50 -- 1970-1985 -- North Point MarketCenter Fulton Co., GA 2,174 1993-1994 1970-1985 30 Years Presidential MarketCenter Gwinnett Co., GA 954 1993-1994 1993 30 Years Mansell Crossing Phase II Fulton Co., GA 117 1995 1995 30 Years Lovejoy Station Clayton Co., GA 196 1994 1994 30 Years
SCHEDULE III (Page 3 of 5) COUSINS PROPERTIES INCORPORATED AND CONSOLIDATED ENTITIES REAL ESTATE AND ACCUMULATED DEPRECIATION DECEMBER 31, 1996 ($ 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, 1996 ------------------- ------------------------ ----------------------------------- 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) - -------------------------------- Greenbrier MarketCenter Chesapeake, VA $ -- $ 5,500 $ -- $ 25,665 $ 1,584 $ 5,500 $ 27,249 $ 32,749 Miscellaneous -- 398 145 77 (475) -- 145 145 -------- -------- ------- -------- -------- -------- -------- ------- 101,536 52,727 66,793 127,124 6,055 52,236 200,463 252,699 -------- -------- ------- -------- -------- -------- -------- ------- PROJECTS UNDER CONSTRUCTION - --------------------------- Mansell Crossing Phase II-Expansion Fulton Co., GA $ -- 1,100 -- 725 64 1,100 789 1,889 200 North Point Center East Fulton County, GA -- 441 -- 9,998 363 441 10,361 10,802 333 North Point Center East Fulton County, GA -- 618 -- 605 10 618 615 1,233 Presbyterian Medical Center at University Charlotte, NC -- -- -- 1,935 14 -- 1,949 1,949 Colonial Plaza MarketCenter Orlando, FL -- 8,500 -- 26,894 1,905 8,500 28,799 37,299 Presidential MarketCenter-Expansion Gwinnett Co., GA -- 1,968 -- 1,579 123 1,968 1,702 3,670 Rivermont Station Fulton Co., GA -- 2,050 -- 7,262 421 2,050 7,683 9,733 Los Altos MarketCenter Long Beach, CA -- 4,900 -- 13,803 580 4,900 14,383 19,283 Other -- 2,578 -- 85 47 2,578 132 2,710 -- 22,155 -- 62,886 3,527 22,155 66,413 88,568
Life on Which De- preciation Accumu- In 1996 lated Date of Income Deprecia- Construc- Date Statement Description tion (a) tion Acquired Is Computed - ----------- -------- --------- -------- ----------- OPERATING PROPERTIES (Continued) - -------------------------------- Greenbrier MarketCenter Chesapeake, VA $ 191 1995 1995 30 Years Miscellaneous 107 -- 1977-1984 Various -------- 20,339 -------- PROJECTS UNDER CONSTRUCTION - --------------------------- Mansell Crossing Phase II-Expansion Fulton Co., GA -- 1995 1995 -- 200 North Point Center East Fulton County, GA -- 1995 1995 -- 333 North Point Center East Fulton County, GA -- 1996 1996 -- Presbyterian Medical Center at University Charlotte, NC -- 1996 1996 -- Colonial Plaza MarketCenter Orlando, FL -- 1995 1995 -- Presidential MarketCenter-Expansion Gwinnett Co., GA -- 1995 1995 -- Rivermont Station Fulton Co., GA -- 1995 1995 -- Los Altos MarketCenter Long Beach, CA -- 1996 1996 -- Other -- 1996 1996 -- ------- -- -------
SCHEDULE III (Page 4 of 5) COUSINS PROPERTIES INCORPORATED AND CONSOLIDATED ENTITIES REAL ESTATE AND ACCUMULATED DEPRECIATION DECEMBER 31, 1996 ($ 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, 1996 ------------------- ------------------------ ----------------------------------- 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) - ----------- ------------ ---- ------------ ----- --------- ------------ ------------ ------- RESIDENTIAL LOTS UNDER DEVELOPMENT - ---------------------------------- Brown's Farm - Cobb Co., GA -- 3,154 -- 3,883 (4,739) 2,298 -- 2,298 Apalachee River Club Gwinnett Co., GA -- 1,820 -- 3,240 (2,068) 2,992 -- 2,992 Echo Mill Cobb Co., GA 423 5,298 -- 3,907 (4,293) 4,912 -- 4,912 Barrett Downs Forsyth Co., GA -- 1,489 -- 1,742 (1,381) 1,850 -- 1,850 Bradshaw Farms Cherokee Co., GA -- 3,246 -- 5,887 (7,277) 1,856 -- 1,856 Alcovy Woods Gwinnett Co., GA 1,005 1,142 -- 108 25 1,275 -- 1,275 1,428 16,149 -- 18,767 (19,733) 15,183 -- 15,183 -------- -------- ------- -------- -------- -------- -------- $102,964 $131,256 $66,793 $227,471 $(47,857) $110,787 $266,876 $377,663 ======== ======== ======= ======== ======== ======== ======== ========
Life on Which De- preciation Accumu- In 1996 lated Date of Income Deprecia- Construc- Date Statement Description tion (a) tion Acquired Is Computed - ----------- -------- --------- -------- ----------- 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 Farms Cherokee Co., GA -- 1994 1994 -- Alcovy Woods Gwinnett Co., GA -- 1996 1996 -- ------- -- ------- $20,339 =======
SCHEDULE III (Page 5 of 5) COUSINS PROPERTIES INCORPORATED AND CONSOLIDATED ENTITIES REAL ESTATE AND ACCUMULATED DEPRECIATION DECEMBER 31, 1996 ($ in thousands)
NOTES: (a) Reconciliations of total real estate carrying value and accumulated depreciation for the three years ended December 31, 1996 are as follows: Real Estate Accumulated Depreciation ------------------------------ -------------------------- 1994 1995 1996 1994 1995 1996 ---- ---- ---- ---- ---- ---- Balance at beginning of period $108,252 $149,242 $235,344 $ 9,418 $12,112 $15,483 Additions during the period: Improvements and other capitalized costs 53,580 97,036 181,682 -- -- -- Provision for depreciation -- -- -- 2,694 3,371 5,571 -------- -------- -------- ------- ------- ------- 53,580 97,036 181,682 2,694 3,371 5,571 -------- -------- -------- ------- ------- ------- Deductions during the period: Cost of real estate sold (12,590) (10,934) (39,363) -- -- (715) -------- -------- -------- ------- ------- ------- (12,590) (10,934) (39,363) -- -- -- -------- -------- -------- ------- ------- ------- Balance at close of period $149,242 $235,344 $377,663 $12,112 $15,483 $20,339 ======== ======== ======== ======= ======= ======= (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, 1995 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, 1996. 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, 1995 and 1996, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 1996 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 14, 1997
WILDWOOD ASSOCIATES AND GREEN VALLEY ASSOCIATES II -------------------------------------------------- COMBINED BALANCE SHEETS ----------------------- DECEMBER 31, 1995 AND 1996 -------------------------- ($ in thousands) 1995 1996 ------- -------- ASSETS - ------ REAL ESTATE ASSETS: Income producing properties, including land of $37,677 and $44,366 in 1995 and 1996, respectively (Note 7) $217,748 $239,647 Accumulated depreciation and amortization (44,900) (48,699) ------------------- 172,848 190,948 Projects under construction 15,378 19,670 Land committed to be contributed (Note 3) 13,903 9,405 Land and property predevelopment costs 12,399 11,862 ------------------- Total real estate assets 214,528 231,885 ------------------- CASH AND CASH EQUIVALENTS -- 16,511 ------------------- OTHER ASSETS: Deferred expenses, net of accumulated amortization of $6,078 and $6,365 in 1995 and 1996, respectively 5,641 7,249 Receivables (Note 6) 14,920 15,330 Allowance for possible losses (Note 1) (2,550) (2,550) Furniture, fixtures and equipment, net of accumulated depreciation of $1,276 and $1,153 in 1995 and 1996, respectively 296 456 Other 31 29 ------------------- 18,338 20,514 ------------------- $232,866 $268,910 =================== LIABILITIES AND PARTNERS' CAPITAL - --------------------------------- NOTES PAYABLE (Note 7) $134,855 $166,490 RETAINAGE, ACCOUNTS PAYABLE AND ACCRUED LIABILITIES 7,843 11,762 ------------------- Total liabilities 142,698 178,252 ------------------- PARTNERS' CAPITAL (Notes 3 and 4): International Business Machines Corporation 45,084 45,329 Cousins Properties Incorporated 45,084 45,329 ------------------- Total partners' capital 90,168 90,658 ------------------- $232,866 $268,910 ===================
The accompanying notes are an integral part of these combined balance sheets. WILDWOOD ASSOCIATES AND GREEN VALLEY ASSOCIATES II COMBINED STATEMENTS OF INCOME FOR THE YEARS ENDED DECEMBER 31, 1994, 1995 and 1996 ($ in thousand)
1994 1995 1996 ---- ---- ---- REVENUES: Rental income and recovery of expenses charged directly to specific tenants $36,196 $37,589 $40,351 Interest 27 32 39 Other 82 146 115 --------------------------- Total revenues 36,305 37,767 40,505 --------------------------- EXPENSES: Real estate taxes 2,516 3,032 3,579 Maintenance and repairs 1,991 2,207 2,622 Utilities 1,822 1,965 2,182 Management and personnel costs 1,794 1,892 2,217 Contract security 745 820 1,094 Grounds maintenance 588 646 776 Expenses charged directly to specific tenants 458 395 417 Insurance 100 98 93 Interest expense 11,790 11,478 9,712 Depreciation and amortization 8,648 8,353 8,372 Predevelopment, marketing and other expenses 342 345 293 Ground lease expense (Note 8) 322 322 295 Real estate taxes on undeveloped land (Note 3) 182 163 208 General and administrative expenses 163 167 155 --------------------------- Total expenses 31,461 31,883 32,015 --------------------------- GAIN ON SALE OF INVESTMENT PROPERTIES (Note 8) -- -- -- --------------------------- NET INCOME $ 4,844 $ 5,884 $ 8,490 ===========================
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, 1994, 1995 AND 1996 ---------------------------------------------------- ($ in thousands)
International Business Cousins Machines Properties Corporation Incorporated Total ----------- ------------ ----- BALANCE, December 31, 1993 $47,720 $47,720 $95,440 Distributions (4,000) (4,000) (8,000) Net income 2,422 2,422 4,844 ------------------------------------- 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 $90,658 =====================================
The accompanying notes are an integral part of these combined statements. WILDWOOD ASSOCIATES AND GREEN VALLEY ASSOCIATES II -------------------------------------------------- COMBINED STATEMENTS OF CASH FLOWS (Note 9) ------------------------------------------ FOR THE YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996 ---------------------------------------------------- ($ in thousands)
1994 1995 1996 ---- ---- ---- CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 4,844 $ 5,884 $ 8,490 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 8,648 8,353 8,372 Effect of recognizing rental revenues on a straight-line basis (349) (383) 421 Change in tenant rental receivables 51 (38) (562) Change in accounts payable and accrued liabilities related to operations (195) (1,004) 3,557 --------------------------- Net cash provided by operating activities 12,999 12,812 20,278 --------------------------- CASH FLOWS FROM INVESTING ACTIVITIES: Property acquisition and development expenditures (3,008) (4,940) (34,871) Payment for deferred expenses; furniture, fixtures and equipment; and other assets (661) (2,123) (2,978) --------------------------- Net cash used in investing activities (3,669) (7,063) (37,849) --------------------------- CASH FLOWS FROM FINANCING ACTIVITIES: Repayment of notes payable (630) (1,063) (1,610) Repayment of long term financing -- (111,998) -- Proceeds from long term refinancing -- 98,000 70,000 Proceeds from line of credit 12,600 31,212 75,733 Repayments under line of credit (13,300) (13,904) (102,041) Partnership distributions (8,000) (8,000) (8,000) --------------------------- Net cash provided by (used in) financing activities (9,330) (5,753) 34,082 --------------------------- NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS -- (4) 16,511 CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 4 4 -- --------------------------- CASH AND CASH EQUIVALENTS AT END OF YEAR $ 4 $ -- $ 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, 1994, 1995 AND 1996 -------------------------------- 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: Buildings are depreciated over 25 to 40 years. Furniture, fixtures, and equipment are depreciated over 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) 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. Impairment of Long-Lived Assets: The Partnerships have adopted SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of" which requires impairment losses to be recorded on long-lived assets used in operations when indicators of impairment are present and the undiscounted cash flows estimated to be generated by those assets are less than the assets' carrying amount. SFAS No. 121 also addresses the accounting for long-lived assets that are expected to be disposed of. The adoption of SFAS No. 121 had no effect on the financial results of the Partnerships and the Partnerships have recognized no provision for real estate losses for any period presented. 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, 1996, WWA's income producing real estate assets in Wildwood consisted of: five office buildings totaling 1,882,000 rentable square feet, one office building of 250,000 rentable square feet which is under construction (including land under such buildings totaling approximately 46 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 $62,857,000 in cash or properties to the Partnerships. The value of property contributed by IBM was agreed to by the partners at the time of formation of WWA and was recorded at the cash amount IBM paid for the property just prior to contributing it to the Partnership. The value of the property contributed and to be contributed by Cousins was recorded on the Partnership's books at an amount equal to the cash and property contributed by IBM for an equal (50%) partnership interest. The status of contributions at December 31, 1996, was as follows ($ 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, 1996, 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 $182,000, $163,000 and $208,000 in 1994, 1995 and 1996, respectively. 4. OTHER PROVISIONS OF THE PARTNERSHIP AGREEMENTS Net income or loss and net cash flow, as defined, shall be allocated to the partners based on their percentage interests (50% each, subject to adjustment as provided in the partnership agreements). In the event of dissolution of the Partnerships, the assets will be distributed as follows: First, to repay all debts to third parties, including any secured loans with the partners. Second, to each partner until each capital account is reduced to zero. The balance to each partner in accordance with its percentage interest. 5. FEES TO RELATED PARTIES The Partnerships engaged Cousins to manage, develop and lease the Partnerships' property. Fees to Cousins incurred by the Partnerships during 1994, 1995 and 1996 were as follows ($ in thousands):
1994 1995 1996 ---- ---- ---- Development and tenant construction fees $ 57 $ 250 $ 604 Management fees 909 945 1,032 Leasing and procurement fees 189 235 1,105 ---------------------------- $1,155 $1,430 $2,741 ============================
6. RENTAL REVENUES WWA leases property to the partners, as well as to unrelated third parties. The leases with partners are at rates comparable to those quoted to third parties. The leases typically contain escalation provisions and provisions requiring tenants to pay a pro rata share of operating expenses. The leases typically include renewal options and all are classified and accounted for as operating leases. At December 31, 1996, future minimum rentals to be received under existing non-cancelable leases, including tenants' current pro rata share of operating expenses are as follows ($ in thousands):
Leases Leases With With Third Partners Parties Total -------- ------- ----- 1997 $ 16,371 $ 18,330 $ 34,701 1998 17,145 17,767 34,912 1999 16,896 11,937 28,833 2000 16,673 9,997 26,670 2001 12,719 7,687 20,406 Thereafter 31,829 35,902 67,731 -------------------------------- $111,633 $101,620 $213,253 ================================
At December 31, 1995 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 $14,754,000 and $14,331,000, respectively. Of the 1996 amount, 57% was related to leases with IBM. 7. NOTES PAYABLE At December 31, 1996, notes payable consisted of the following ($ in thousands):
Term/ Amortization Balance at Period Final December 31, Description Rate (Years) Maturity 1996 ----------- ---- ------------ -------- ------------ Line of credit ($10 million maximum) Fed Funds + .75% 2/ N/A 9/1/97 $ -- 2300 Windy Ridge Parkway Building mortgage note 7.56% 10/25 12/01/05 71,078 3200 Windy Hill Road Building mortgage note 8.23% 10/28 1/1/07 70,000 2500 Windy Ridge Parkway Building mortgage note 7.45% 10/20 12/15/05 25,412 -------- $166,490 ========
On December 16, 1996, WWA completed the financing of the 3200 Windy Hill Road Building with a $70 million mortgage note payable at an 8.23% interest rate and maturity of January 1, 2007. Concurrent with the financing, WWA paid down its line of credit to $0 and on January 16, 1997, made a cash distribution of $10 million to each partner. On January 7, 1997, WWA received a commitment for the financing of the 4100 and 4300 Wildwood Parkway Buildings which is scheduled to fund by April 1, 1997. The $30 million non-recourse mortgage note payable has an interest rate of 7.65% and a term of fifteen years. The 2300 Windy Ridge Parkway Building and 3200 Windy Hill Road Building mortgage notes, as well as the $30 million mortgage note on which WWA has received a commitment, 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, 1997, 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 $143,775,000 were pledged as security on the Partnerships' debt. The aggregate maturities of the indebtedness at December 31, 1996 summarized above are as follows ($ in thousands):
1997 $ 2,325 1998 3,513 1999 3,791 2000 4,093 2001 4,579 Thereafter 148,189 -------- $166,490 ========
The Partnerships capitalize interest expense to property under development as required by Statement of Financial Accounting Standards No. 34. In the years ended December 31, 1995 and 1996, the Partnerships capitalized interest totaling $236,000 and $1,053,000, respectively. At December 31, 1995 and 1996, the carrying value of the Partnerships' notes payable approximates fair value. 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 $256,000 per year, and escalate at ten year intervals based on the cumulative increase in the Consumer Price Index ("Index") over the prior ten year period (subject to a 5% annual cap on the increase in such Index in any one year). The next escalation date is December 1, 2006. 9. COMBINED STATEMENTS OF CASH FLOWS-SUPPLEMENTAL INFORMATION Interest (net of amounts capitalized) was as follows ($ in thousands): 1994 1995 1996 ---- ---- ---- Interest paid $11,780 $12,011 $9,096 Significant non-cash financing and investing activities included the following: In 1994, the child care facility under construction with an aggregate cost of $1,600,000 was transferred from Land and Property Predevelopment Costs to Income Producing Properties. In 1995 and 1996, land parcels with costs of $6,537,000 and $4,498,000, respectively, 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 $29,368,000 were transferred from Projects Under Construction to Income Producing Properties. SCHEDULE III WILDWOOD ASSOCIATES AND GREEN VALLEY ASSOCIATES II REAL ESTATE AND ACCUMULATED DEPRECIATION DECEMBER 31, 1996 ($ 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, 1996 ------------------- ------------------------ ----------------------------------- 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) - ----------- ------------ ---- ------------ ----- --------- ------------ ------------ ------- Wildwood Office Park - Cobb Co., GA 2500 Windy Ridge $ 25,413 $ 4,414 $ 14,814 $ 9,904 $ 141 $ 4,414 $ 24,859 $ 29,273 2300 Windy Ridge 71,077 8,927 -- 61,728 5,429 8,927 67,157 76,084 Parkside -- 4,274 2,553 (1,029) (45) 3,136 2,617 5,753 3200 Windy Hill 70,000 10,503 -- 67,571 5,470 10,503 73,041 83,544 4100/4300 Wildwood Parkway -- 6,689 -- 22,541 251 6,689 22,792 29,481 4200 Wildwood Parkway -- 4,347 -- 14,948 375 -- 19,670 19,670 Stand Alone Retail Sites -- 7,659 1,234 3,642 123 9,570 3,088 12,658 Land committed to be contributed -- 9,023 -- -- 382 9,405 -- 9,405 Other land and property -- 11,430 -- 3,459 (173) 11,575 3,141 14,716 -------- ------- -------- -------- ------- ------- -------- -------- $166,490 $67,266 $ 18,601 $182,764 $11,953 $64,219 $216,365 $280,584 ======== ======= ======== ======== ======= ======= ======== ========
NOTE: (a) Reconciliations of total real estate carrying value and accumulated depreciation for the three years ended December 31, 1996 are as follows: Real Estate Accumulated Depreciation ---------------------------------- -------------------------------- 1994 1995 1996 1994 1995 1996 ---- ---- ---- ---- ---- ---- Balance at beginning of period $249,714 $250,738 $259,428 $32,932 $40,009 $44,900 Additions during the period: Improvements, and other capitalized costs 1,058 8,690 32,361 -- -- -- Provisions for depreciation -- -- -- 7,111 4,891 7,296 Deductions during the period: Retirement of fully depreciated assets and writeoffs (34) -- -- (34) -- (16) Disposition of Summit Green Office Building -- -- (11,205) -- -- (3,481) -------- -------- -------- ------- ------- ------- Balance at close of period $250,738 $259,428 $280,584 $40,009 $44,900 $48,699 ======== ======== ======== ======= ======= =======
Life on Which De- preciation Accumu- In 1996 lated Date of Income Deprecia- Construc- Date Statement Description tion (a) tion Acquired Is Computed - ----------- -------- --------- -------- ----------- Wildwood Office Park - Cobb Co., GA 2500 Windy Ridge $ 9,249 1985 1985 40 Years 2300 Windy Ridge 20,065 1986 1986 40 Years Parkside 1,562 1980 1986 25 Years 3200 Windy Hill 15,813 1989 1989 40 Years 4100/4300 Wildwood Parkway 445 1995 1986 40 Years 4200 Wildwood Parkway -- 1996 1986 -- Stand Alone Retail Sites 1,027 Various 1985-1995 Various Land committed to be contributed -- -- 1985-1986 -- Other land and property 538 Various 1985-1986 Various ------- $48,699
======= 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, 1995 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, 1996. 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, 1995 and 1996, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 1996, 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 January 31, 1997 CSC ASSOCIATES, L.P. BALANCE SHEETS DECEMBER 31, 1995 AND 1996 ($ in thousands)
ASSETS ------ 1995 1996 ---- ---- REAL ESTATE ASSETS: Building and improvements, including land and land improvements of $22,818 in 1995 and 1996 $208,676 $209,141 Accumulated depreciation (21,232) (27,621) --------------------- 187,444 181,520 --------------------- CASH 97 31 --------------------- NOTE RECEIVABLE (Note 4) -- 78,304 OTHER ASSETS: Deferred expenses, net of accumulated amortization of $3,664 and $4,779 in 1995 and 1996, respectively 8,306 7,293 Other receivables (Note 3) 10,142 10,895 Furniture, fixtures and equipment, net of accumulated depreciation of $1,218 and $ 1,553 in 1995 and 1996, respectively 871 627 Other (Note 6) 29 1,021 --------------------- Total other assets 19,348 19,836 --------------------- $206,889 $279,691 ===================== LIABILITIES AND PARTNERS' CAPITAL --------------------------------- NOTE PAYABLE (Note 4) $ -- $ 78,304 ACCOUNTS PAYABLE AND ACCRUED LIABILITIES 2,951 1,041 --------------------- Total liabilities 2,951 79,345 --------------------- PARTNERS' CAPITAL (Note 1) 203,938 200,346 --------------------- $206,889 $279,691 =====================
The accompanying notes are an integral part of these balance sheets. CSC ASSOCIATES, L.P. STATEMENTS OF OPERATIONS FOR THE YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996 ($ in thousands)
1994 1995 1996 ---- ---- ---- REVENUES: Rental income and recovery of expenses charged directly to specific tenants $28,931 $31,195 $33,312 Interest income (Note 4) -- -- 4,561 --------------------------- Total revenues 28,931 31,195 37,873 --------------------------- EXPENSES: Real estate taxes 3,493 3,482 3,578 Utilities 1,198 1,103 967 Management and personnel costs 1,313 1,403 1,523 Cleaning 1,041 1,086 1,152 Contract security 412 434 640 Repairs and maintenance 352 349 408 Elevator 274 305 330 Parking 206 208 245 Insurance 111 116 112 Grounds maintenance 105 116 135 Interest expense (Note 4) -- -- 4,561 Depreciation and amortization 7,222 7,688 7,968 Marketing and other expenses 154 164 64 General and administrative expenses 41 44 82 --------------------------- Total expenses 15,922 16,498 21,765 --------------------------- NET INCOME $13,009 $14,697 $16,108 =========================== The accompanying notes are an integral part of these statements.
CSC ASSOCIATES, L.P. STATEMENTS OF PARTNERS' CAPITAL FOR THE YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996 ($ in thousands)
BALANCE, December 31, 1993 $205,853 Net income 13,009 Distributions (14,150) -------- 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 $200,346 ========
The accompanying notes are an integral part of these statements. CSC ASSOCIATES, L.P. STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996 ($ in thousands)
1994 1995 1996 ---- ---- ---- CASH FLOWS FROM OPERATING ACTIVITIES: Net income $13,009 $14,697 $16,108 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 7,222 7,688 7,968 Rental revenue recognized on straight-line basis in excess of rental revenue specified in the lease agreements (3,156) (1,148) (748) Change in other receivables and other assets (315) 7 (997) Change in accounts payable and accrued liabilities related to operations 17 1,122 (1,937) -------------------------- Net cash provided by operating activities 16,777 22,366 20,394 -------------------------- CASH FLOWS FROM INVESTING ACTIVITIES: Additions to building and improvements (1,120) (6,918) (571) Payments for deferred expenses (1,060) (1,285) (143) Investment in note receivable -- -- (80,000) Collection of note receivable -- -- 1,696 Proceeds from (payments for) furniture, fixtures and equipment (17) 10 (46) -------------------------- Net cash used in investing activities (2,197) (8,193) (79,064) -------------------------- CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from note payable -- -- 80,000 Repayment of note payable -- -- (1,696) Partnership distributions (14,150) (15,471) (19,700) -------------------------- Net cash provided by (used in) financing activities (14,150) (15,471) 58,604 -------------------------- NET INCREASE (DECREASE) IN CASH 430 (1,298) (66) CASH AT BEGINNING OF YEAR 965 1,395 97 -------------------------- CASH AT END OF YEAR $ 1,395 $ 97 $ 31 ========================== SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Cash paid during the year for interest $ 15 $ -- $ 4,339 ========================== The accompanying notes are an integral part of these statements.
CSC ASSOCIATES, L.P. NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1994, 1995 AND 1996 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 - ----------------------------- 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 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, 1995 and 1996, there is no allowance for doubtful accounts included in the accompanying balance sheet. 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. Impairment of Long-Lived Assets - ------------------------------- In 1995, the Partnership adopted SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of" which requires impairment losses to be recorded on long-lived assets used in operations when indicators of impairment are present and the undiscounted cash flows estimated to be generated by those assets are less than the assets' carrying amount. SFAS No. 121 also addresses the accounting for long-lived assets that are expected to be disposed of. The adoption of SFAS No. 121 had no effect on the financial results of the Partnership. 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, 1996, 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 ----------- ------- ----- 1997 $ 16,563 $ 16,324 $ 32,887 1998 16,762 16,563 33,325 1999 16,762 16,366 33,128 2000 16,762 16,358 33,120 2001 16,762 16,195 32,957 Subsequent to 2001 197,679 98,668 296,347 ---------------------------------------- $281,290 $180,474 $461,764 ========================================
In the years ended December 31, 1995 and 1996, income recognized on a straight-line basis exceeded income which would have accrued in accordance with the lease terms by $1,148,000 and $748,000, respectively. At December 31, 1995 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 $9,684,000 and $10,432,000, respectively. Of that amount, 20% was related to leases with NB Holdings Corporation. At December 31, 1996, 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 $220,000 in 1996. The estimated fair value of both the note payable and related note receivable at December 31, 1996 was $74 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 (6.14% weighted average rate in December 1996) and interest only is payable quarterly through July 31, 1997, at which time the entire outstanding balance is due. There were no borrowings under the line as of December 31, 1995 and 1996. The maturities of the Notes at December 31, 1996 are as follows (in thousands):
1997 $ 2,157 1998 2,298 1999 2,450 2000 2,610 2001 2,782 Subsequent to 2001 66,007 ------- $78,304
======= 5. RELATED PARTIES --------------- The Partnership engaged CPI and an affiliate of CPI to manage, develop and lease the Building. During 1994, 1995 and 1996, fees to CPI and its affiliate incurred by the Partnership were as follows ($ in thousands):
1994 1995 1996 ---- ---- ---- Development and tenant construction fees $ 25 $ 88 $ 13 Leasing and procurement fees 230 229 101 Management fees 640 744 815 ---------------------- $895 $1,061 $929 ======================
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 $1,000,000 would be due to CSC. In addition, CSC is responsible for the maintenance of the parking deck and the payment of the related operating expenses. SCHEDULE III CSC ASSOCIATES, L.P. REAL ESTATE AND ACCUMULATED DEPRECIATION DECEMBER 31, 1996 ($ 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, 1996 ------------------- ------------------------ ----------------------------------- 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) - ----------- ------------ ---- ------------ ----- --------- ------------ ------------ ------- NationsBank Plaza Atlanta, Georgia $ -- $18,200 $ -- $180,492 $10,449 $22,818 $186,323 $209,141 ================================================================================================= NOTE: (a) Reconciliations of total real estate carrying value and accumulated depreciation for the three years ended December 31, 1996 are as follows: Real Estate Accumulated Depreciation ---------------------------------- -------------------------------- 1994 1995 1996 1994 1995 1996 ---- ---- ---- ---- ---- ---- Balance at beginning of period $200,781 $203,275 $208,676 $ 9,176 $14,980 $21,232 Improvements and other capitalized costs 2,494 5,401 465 -- -- -- Provision for depreciation -- -- -- 5,804 6,252 6,389 ---------------------------------- -------------------------------- Balance at close of period $203,275 $208,676 $209,141 $14,980 $21,232 $27,621 ================================== ================================
Life on Which De- preciation Accumu- In 1996 lated Date of Income Deprecia- Construc- Date Statement Description tion (a) tion Acquired Is Computed - ----------- -------- --------- -------- ----------- NationsBank Plaza Atlanta, Georgia $27,621 1990-1992 1990 5-40 =======
REPORT OF INDEPENDENT AUDITORS The Partners Haywood Mall Associates (A South Carolina Joint Venture) We have audited the accompanying balance sheets of Haywood Mall Associates (A South Carolina Joint Venture) as of December 31, 1996 and 1995, and the related statements of income, cash flows and venturers' equity for each of the three years in the period ended December 31, 1996. Our audits also included the financial statement schedules of Haywood Mall Associates listed in the Index at Item 14(a). These financial statements and schedules are the responsibility of the Management of the Joint Venture. Our responsibility is to express an opinion on these financial statements and schedules 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 Haywood Mall Associates (A South Carolina Joint Venture) at December 31, 1996 and December 31, 1995, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 1996, in conformity with generally accepted accounting principles. Also, in our opinion the related financial statement schedules, when considered in relation to the basic financial statements taken as a whole, present fairly in all material respects the information set forth therein. ERNST & YOUNG LLP New York, NY February 6, 1997 HAYWOOD MALL ASSOCIATES (A South Carolina Joint Venture) BALANCE SHEETS DECEMBER 31, 1996 AND 1995
1996 1995 ----------- ----------- ASSETS - ------ Shopping center: Land $ 3,353,335 $ 3,353,335 Building and improvements 38,648,103 38,861,068 --------------------------- 42,001,438 42,214,403 Less: accumulated depreciation 9,806,074 8,550,512 --------------------------- 32,195,364 33,663,891 Cash 1,304,867 2,971,993 Receivables (principally rentals) less allowance of $395,440 and $428,094 2,551,788 2,716,834 Other assets 5,477,821 5,178,154 --------------------------- $41,529,840 $44,530,872 =========================== LIABILITIES AND VENTURERS' EQUITY - --------------------------------- Accounts payable and accrued liabilities $ 589,218 $ 1,237,422 Venturers' equity: Cousins Properties Incorporated 19,895,026 21,268,088 Bellwether Properties of South Carolina, L.P. 21,045,596 22,025,362 --------------------------- $41,529,840 $44,530,872 ===========================
The accompanying notes are an integral part of these financial statements. HAYWOOD MALL ASSOCIATES (A South Carolina Joint Venture) STATEMENTS OF INCOME FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
1996 1995 1994 ---- ---- ---- INCOME Rental income: Minimum $ 8,400,211 $ 6,667,505 $ 6,050,650 Overage 317,372 261,214 568,546 Real estate taxes 752,816 459,222 418,166 Utility charges and other operating expense recoveries 3,935,100 3,776,482 3,287,614 ------------------------------------- Interest income 121,265 104,741 45,655 ------------------------------------- 13,526,764 11,269,164 10,370,631 ------------------------------------- EXPENSES Mortgage interest -- -- 598,389 Repairs and maintenance 1,030,119 1,014,931 882,580 Utilities 900,046 917,881 820,798 Managing agent's costs (principally payroll) 1,096,696 924,208 840,149 Depreciation 1,539,387 1,137,513 597,732 Other 898,518 742,457 486,981 Real estate taxes 874,778 539,020 450,338 Leasehold rent 66,752 66,752 64,765 ------------------------------------- 6,406,296 5,342,762 4,741,732 ------------------------------------- INCOME BEFORE EXTRAORDINARY ITEM 7,120,468 5,926,402 5,628,899 Extraordinary loss from prepayment of mortgage debt -- -- 680,277 ------------------------------------- NET INCOME $ 7,120,468 $ 5,926,402 $ 4,948,622 =====================================
The accompanying notes are an integral part of these financial statements. HAYWOOD MALL ASSOCIATES (A South Carolina Joint Venture) STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
1996 1995 1994 ---- ---- ---- OPERATING ACTIVITIES Net income $7,120,468 $ 5,926,402 $ 4,948,622 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 1,539,387 1,137,513 597,732 Amortization of deferred charges 632,203 482,746 363,230 Straight line adjustment for step lease rentals (47,352) (209,567) (114,085) Loss from prepayment of mortgage debt -- -- 680,277 Change in operating assets and liabilities: Decrease/(increase) in receivables 212,398 (518,551) (134,841) Increase in other assets, principally deferred leasing costs (931,870) (3,596,952) (543,502) (Decrease)/increase in accounts payable and accrued liabilities (648,204) 280,869 58,522 ------------------------------------ Net Cash Provided by Operating Activities 7,877,030 3,502,460 5,855,955 ------------------------------------ INVESTING ACTIVITIES Investments in shopping center (70,860) (7,658,996) (11,864,544) ------------------------------------ Cash Used in Investing Activities (70,860) (7,658,996) (11,864,544) ------------------------------------ FINANCING ACTIVITIES Principal payments on mortgages -- -- (92,492) Prepayment of mortgage debt -- -- (20,116,762) Cash distributions (9,530,000) (6,698,000) (5,758,268) Partners' capital contributions 56,704 12,196,032 32,031,738 ------------------------------------ Net Cash (Used in)/Provided by Financing Activities (9,473,296) 5,498,032 6,064,216 ------------------------------------ (Decrease)/increase in cash (1,667,126) 1,341,496 55,627 Cash at beginning of year 2,971,993 1,630,497 1,574,870 ------------------------------------ Cash at end of year $1,304,867 $ 2,971,993 $ 1,630,497 ==================================== SUPPLEMENTAL DISCLOSURE Interest paid during the year $ -- $ -- $ 750,964 ====================================
The accompanying notes are an integral part of these financial statements. HAYWOOD MALL ASSOCIATES (A South Carolina Joint Venture) STATEMENTS OF VENTURERS' EQUITY FOR THE THREE YEARS ENDED DECEMBER 31, 1996
Bellwether Cousins Properties of Properties South Carolina, L.P. Incorporated Total -------------------- ------------ ----- Balance at December 31, 1993 $ 323,462 $ 323,462 $ 646,924 Net income 2,474,311 2,474,311 4,948,622 Cash distributions (2,879,134) (2,879,134) (5,758,268) Capital contributions 16,058,382 15,973,356 32,031,738 ---------------------------------------------- Balance at December 31, 1994 15,977,021 15,891,995 31,869,016 ---------------------------------------------- Net income 2,963,201 2,963,201 5,926,402 Cash distributions (3,349,000) (3,349,000) (6,698,000) Capital contributions 6,434,140 5,761,892 12,196,032 ---------------------------------------------- Balance at December 31, 1995 22,025,362 21,268,088 43,293,450 Net income 3,560,234 3,560,234 7,120,468 Cash distributions (4,540,000) (4,990,000) (9,530,000) Cash contributions -- 56,704 56,704 ---------------------------------------------- Balance at December 31, 1996 $21,045,596 $19,895,026 $40,940,622 ==============================================
The accompanying notes are an integral part of these financial statements. HAYWOOD MALL ASSOCIATES (A South Carolina Joint Venture) NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1996, 1995 AND 1994 NOTE A - JOINT VENTURE AGREEMENT Haywood Mall Associates (the "Venture") is a South Carolina Joint Venture between Bellwether Properties of South Carolina, L.P., a South Carolina Limited Partnership, and Cousins Properties Incorporated (hereinafter collectively referred to as the "Venturers") formed for the purpose of owning and operating a regional shopping center in Greenville, South Carolina. Under the terms of the joint venture agreement, the Venturers share equally in the cash flow and the profits and losses of the Venture. NOTE B - SIGNIFICANT ACCOUNTING POLICIES Shopping Center: Land and building and improvements are stated at cost. Depreciation of the building and improvements is computed on the straight-line method over an estimated useful life of 35 years. The tenants' alterations are amortized over the life of the related leases. On January 1, 1996, the Venture adopted Statement of Financial Accounting Standards No. 121 "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of" (the Statement). The Statement requires impairment losses to be recognized for long-lived assets used in operations when indicators of impairment are present and the undiscounted cash flows are not sufficient to recover the assets' carrying amount. The impairment loss is measured by comparing the fair value of the asset to its carrying amount. The adoption of the Statement had no effect on the Venture's 1996 financial statements. Taxes: No provision has been made for income taxes, since any taxes which may be payable are the liability of the individual Venturers. 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. NOTE C - MORTGAGES PAYABLE The mortgage notes which bore interest at 9% and 10-1/2% and matured in 2000 were prepaid as of April 29. 1994. A prepayment fee equal to 3-1/2% of the outstanding principal balance was paid in the amount of $680,277. NOTE D - LEASES The Venture has a land lease with a base period that extends through the year 2017. Future lease payments due under the lease, at December 31, 1996, are as follows: 1997 - $ 67,000 1998 - 67,000 1999 - 70,000 2000 - 72,000 2001 - 72,000 Thereafter - 1,202,000 There are five l0-year renewal option periods available beginning in the year 2017. Annual payments during the renewal periods are based upon fair market value as determined at each renewal date. Space in the shopping center is leased to retail tenants. Leases generally provide for minimum rentals plus overage rentals based on the tenants' sales volume, and also require tenants to pay a portion of real estate taxes and other property operating expenses. Lease periods generally range from 5 to 15 years and contain various renewal options. Future minimum rentals (excluding expenses billable to tenants) to be received under leases, all of which are classified and accounted for as operating leases at December 31, 1996 are as follows: Year Ending December 31: Amount* ------- 1997 $ 8,090,150 1998 8,154,996 1999 7,264,576 2000 6,446,833 2001 5,829,049 Thereafter 16,882,032 ----------- TOTAL $52,667,636 =========== *Does not include rentals applicable to renewal options. At December 31, 1996 and 1995, receivables which related to the cumulative excess of revenues recognized in accordance with Statement of Financial Accounting Standards No. 13 "Accounting for Leases" over revenues which accrued in accordance with the actual lease agreements aggregates $1,992,734 and $1,945,382, respectively. NOTE E - RELATED PARTY TRANSACTIONS The Venture pays Corporate Property Investors, which has an ownership interest in one of the Venturers, a leasing fee of 1% of gross rentals received, as defined. During the years ended December 31, 1996, 1995 and 1994, the Venture incurred leasing fees of $94,310, $61,601 and $62,405, respectively. Such amounts are included in managing agent's costs on the statements of income. SCHEDULE III HAYWOOD MALL ASSOCIATES REAL ESTATE AND ACCUMULATED DEPRECIATION DECEMBER 31, 1996 ($ 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, 1996 ------------------- ------------------------ ----------------------------------- 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) - ----------- ------------ ---- ------------ ----- --------- ------------ ------------ ------- Haywood Mall Greenville, S.C. $ -- $ 3,598 $ 9,630 $ 10,669 $ 0 $ 3,353 $44,344 $47,697 ================================================================================================= NOTES: (1) Estimated useful life for Buildings and Improvements. (2) Estimated useful life for Property Equipment. (3) Amounts will not tie to Property totals on Balance Sheet as some real estate assets are classified as Other Assets. (4) Reconciliations of total real estate carrying value and accumulated depreciation for the three years ended December 31, 1996 are as follows:
Real Estate Accumulated Depreciation ---------------------------------- -------------------------------- 1994 1995 1996 1994 1995 1996 ---- ---- ---- ---- ---- ---- Balance at beginning of period $23,392 $23,897 $46,976 $7,017 $7,722 $ 9,108 Improvements and other capitalized costs 505 23,079 721 -- -- -- Provision for depreciation -- -- -- 705 1,386 1,670 --------------------------------- -------------------------------- Balance at close of period $23,897 $46,976 $47,697 $7,722 $9,108 $10,778 ================================= ================================
Life on Which De- preciation Accumu- In 1996 lated Date of Income Deprecia- Construc- Date Statement Description tion (a) tion Acquired Is Computed - ----------- -------- --------- -------- ----------- Haywood Mall Greenville, S.C. $10,778 1979-1980 1979 35 (1) NOTES: (1) Estimated useful life for Buildings and Improvements. (2) Estimated useful life for Property Equipment. (3) Amounts will not tie to Property totals on Balance Sheet as some real estate assets are classified as Other Assets. (4) Reconciliations of total real estate carrying value and accumulated depreciation for the three years ended December 31, 1996 are as follows:
EX-11 2 COUSINS PROPERTIES INCORPORATED AND CONSOLIDATED ENTITIES COMPUTATION OF WEIGHTED AVERAGE NUMBER OF SHARES OF COMMON STOCK USED TO COMPUTE PRIMARY AND FULLY DILUTED INCOME PER SHARE FOR THE FIVE YEARS ENDED DECEMBER 31, 1996
1992 1993 1994 1995 1996 ---------- ---------- ---------- ---------- ---------- Shares outstanding at beginning of year 17,341,364 21,716,911 27,830,631 27,863,741 28,222,639 Weighted average number of shares issued during the year 910,631 1,064,574 14,151 119,439 297,539 Weighted average number of shares acquired during the year (2,689) -- (441) -- -- Dilutive effect of outstanding options and warrants (as determined by the application of the Treasury Stock Method) -- -- -- -- -- Weighted average number of shares -------------------------------------------------------------------------------- outstanding, as adjusted 18,249,306 22,781,485 27,844,341 27,983,180 28,520,128 ================================================================================ Income before gain on sale of investment properties (000's) $ 9,069 $10,038 $20,539 $24,480 $28,212 Gain on sale of investment properties, net of applicable income tax provision (000's) 6,644 1,927 6,356 1,862 12,804 ----------------------------------------------------------------------------- Net income (000's) $15,713 $11,965 $26,895 $26,342 $41,016 ============================================================================= Net income per share $ .86 $ .53 $ .97 $ .94 $ 1.44 =============================================================================
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 a smaller amount of related internal costs. In addition, unlike many REITs, the Company has considerable land holdings which provide a strong base for future FFO growth as land is developed or sold in future years. Property taxes on the land, which are expensed currently, reduce current FFO. As indicated above, the Company does not include straight-lined rents in its FFO, as it could under the NAREIT definition of FFO. Furthermore, most of the Company's leases are also escalated periodically based on the Consumer Price Index, which unlike fixed escalations, do not require rent to be straight-lined; under NAREIT's definition straight-lining of rents produces higher FFO in the early years of a lease and lower FFO in the later years of a lease. FFO is used by industry analysts as a supplemental measure of an equity REIT's performance. FFO should not be considered an alternative to net income or other measurements under generally accepted accounting principles as an indicator of operating performance, or to cash flows from operating, investing, or financing activities as a measure of liquidity.
($ in thousands, except per share amounts) ------------------------------------------ Years Ended December 31, 1994 1995 1996 ---- ---- ---- Income before gain on sale of investment properties $20,539 $24,480 $28,212 Depreciation and amortization 12,032 13,381 17,256 Amortization of deferred financing costs and depreciation of furniture, fixtures and equipment (844) (592) (362) Elimination of the recognition of rental revenues on a straight-line basis (2,100) (1,053) (311) Adjustment to reflect stock appreciation right expense on a cash basis 384 1,166 (567) Deferred income received net of deferred income recognized 830 (1,127) -- ------- ------- ------- Consolidated Funds From Operations $30,841 $36,255 $44,228 ======= ======= ======= Weighted Average Shares Outstanding 27,844 27,983 28,520 ====== ====== ====== Consolidated Funds From Operations Per Share $ 1.11 $ 1.30 $ 1.55 ======= ======= =======
- ------------------------------------------------------------------------------- Cousins Properties Incorporated and Consolidated Entities - ------------------------------------------------------------------------------- CONSOLIDATED BALANCE SHEETS ($ in thousands, except per share amounts)
December 31, ------------------- 1995 1996 -------- -------- ASSETS - ------ PROPERTIES (Notes 4 and 8): Operating properties, net of accumulated depreciation of $15,483 in 1995 and $20,339 in 1996 $ 93,871 $232,360 Land held for investment or future development 27,035 21,213 Projects under construction 87,503 88,568 Residential lots under development 11,452 15,183 ------------------- Total properties 219,861 357,324 CASH AND CASH EQUIVALENTS, at cost, which approximates market 1,552 1,598 NOTES AND OTHER RECEIVABLES (Note 3) 53,868 56,497 INVESTMENT IN UNCONSOLIDATED JOINT VENTURES (Notes 4 and 5) 137,260 132,262 OTHER ASSETS 5,465 8,963 ------------------- TOTAL ASSETS $418,006 $556,644 =================== LIABILITIES AND STOCKHOLDERS' INVESTMENT - ---------------------------------------- NOTES PAYABLE (Note 4) $113,434 $231,831 ACCOUNTS PAYABLE AND ACCRUED LIABILITIES 22,681 25,293 MINORITY INTERESTS IN CONSOLIDATED ENTITIES 3,837 9 DEPOSITS AND DEFERRED INCOME 376 327 ------------------- TOTAL LIABILITIES 140,328 257,460 ------------------- COMMITMENTS AND CONTINGENT LIABILITIES (Note 4) STOCKHOLDERS' INVESTMENT (Note 6): Common stock, $1 par value, authorized 50,000,000 shares; issued 28,222,639 in 1995 and 28,920,122 in 1996 28,223 28,920 Additional paid-in capital 153,265 164,970 Cumulative undistributed net income 96,190 105,294 ------------------- TOTAL STOCKHOLDERS' INVESTMENT 277,678 299,184 ------------------- TOTAL LIABILITIES AND STOCKHOLDERS' INVESTMENT $418,006 $556,644 ===================
The accompanying notes are an integral part of these consolidated balance sheets. Cousins Properties Incorporated and Consolidated Entities CONSOLIDATED STATEMENTS OF INCOME - ------------------------------------------------------------------------------- ($ in thousands, except per share amounts)
Years Ended December 31, ----------------------------- 1994 1995 1996 ------- ------- ------- REVENUES: Rental property revenues (Note 10) $13,150 $19,348 $33,112 Development and construction fees 1,020 3,515 1,660 Management fees 2,061 2,213 2,801 Leasing and other fees 1,942 2,156 1,558 Residential lot and outparcel sales 6,132 9,040 14,145 Interest and other 6,801 4,764 5,256 ----------------------------- 31,106 41,036 58,532 ----------------------------- INCOME FROM UNCONSOLIDATED JOINT VENTURES (Note 5) 12,580 14,113 17,204 ----------------------------- COSTS AND EXPENSES: Rental property operating expenses 3,338 4,681 7,616 General and administrative expenses 7,538 7,648 9,080 Depreciation and amortization 3,742 4,516 7,219 Leasing and other commissions 82 20 68 Stock appreciation right expense (Note 6) 433 1,298 2,154 Residential lot and outparcel cost of sales 5,762 8,407 13,676 Interest expense (Note 4) 411 687 6,546 Property taxes on undeveloped land 1,085 977 1,301 Other 922 1,688 1,567 ----------------------------- 23,313 29,922 49,227 ----------------------------- INCOME FROM OPERATIONS BEFORE INCOME TAXES AND GAIN ON SALE OF INVESTMENT PROPERTIES 20,373 25,227 26,509 PROVISION (BENEFIT) FOR INCOME TAXES FROM OPERATIONS (Note 7) (166) 747 (1,703) ----------------------------- INCOME BEFORE GAIN ON SALE OF INVESTMENT PROPERTIES 20,539 24,480 28,212 ----------------------------- GAIN ON SALE OF INVESTMENT PROPERTIES, NET OF APPLICABLE INCOME TAX PROVISION (Note 7) 6,356 1,862 12,804 ----------------------------- NET INCOME $26,895 $26,342 $41,016 ============================= NET INCOME PER SHARE $ .97 $ .94 $ 1.44 ============================= CASH DIVIDENDS DECLARED PER SHARE (Note 6) $ .90 $ .99 $ 1.12 ============================= WEIGHTED AVERAGE SHARES OUTSTANDING 27,844 27,983 28,520 =============================
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, 1994, 1995 and 1996 ($ in thousands)
Additional Cumulative Common Paid-In Undistributed Stock Capital Net Income Total ------- ---------- ------------- -------- BALANCE, December 31, 1993 $27,831 $147,018 $ 95,708 $270,557 Net income, 1994 -- -- 26,895 26,895 Common stock issued pursuant to: Exercise of options and Director stock plan 12 169 -- 181 Compensation paid in stock in lieu of cash 21 308 -- 329 Dividends declared -- -- (25,064) (25,064) ----------------------------------------- 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 $299,184 =========================================
The accompanying notes are an integral part of these consolidated statements. Cousins Properties Incorporated and Consolidated Entities CONSOLIDATED STATEMENTS OF CASH FLOWS (Note 9) - ------------------------------------------------------------------------------- ($ in thousands)
Years Ended December 31, --------------------------- 1994 1995 1996 ------- ------- -------- CASH FLOWS FROM OPERATING ACTIVITIES: Income before gain on sale of investment properties $20,539 $24,480 $ 28,212 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 3,662 4,340 7,219 Stock appreciation right expense 433 1,298 2,154 Cash charges to expense accrual for stock appreciation rights (49) (132) (2,721) Other non-cash credits (623) -- -- Effect of recognizing rental revenues on a straight-line basis (209) (107) (4) Deferred income received 1,131 1,673 -- Deferred income recognized (301) (2,800) -- Income from unconsolidated joint ventures (12,580) 14,113) (17,204) Operating distributions from unconsolidated joint ventures 15,665 15,786 19,382 Compensation paid in stock in lieu of cash 329 186 -- Residential lot and outparcel cost of sales 5,667 8,065 13,111 Changes in other operating assets and liabilities: Change in other receivables (606) (1,018) (3,420) Change in accounts payable and accrued liabilities 2,549 62 10,375 ---------------------------- Net cash provided by operating activities 35,607 37,720 57,104 ---------------------------- CASH FLOWS FROM INVESTING ACTIVITIES: Gain on sale of investment properties, net of applicable income tax provision 6,356 1,862 12,804 Adjustments to reconcile gain on sale of investment properties to net cash provided by sales activities: Cost of sales 6,923 2,869 26,252 Note received as sales consideration -- (500) (365) Property acquisition and development expenditures (53,573) (87,234) (162,154) Collection of notes receivable 45,011 841 27,703 Investment in notes receivable (28,039) (18) (27,115) Change in other assets, net (2,601) 802 (4,170) Non-operating distributions from unconsolidated joint ventures 586 1,226 1,408 Cash portion of exchange transaction -- -- 1,092 Investment in unconsolidated joint ventures, including interest capitalized to equity investments (20,844) (9,318) (268) Principal payments received on government agency securities 636 103 75 ---------------------------- Net cash used in investing activities (45,545) (89,367) (124,738) ---------------------------- CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from other notes payable 475 80,116 131,844 Repayment of line of credit (50,138) (86,336) (87,627) Proceeds from line of credit 73,287 78,575 47,677 Dividends paid (25,064) (27,691) (31,912) Common stock sold, net of expenses 77 5,848 12,074 Repayment of other notes payable (16,976) (720) (4,376) ---------------------------- Net cash (used in) provided by financing activities (18,339) 49,792 67,680 ---------------------------- NET DECREASE IN CASH AND CASH EQUIVALENTS (28,277) (1,855) 46 CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 31,684 3,407 1,552 ---------------------------- CASH AND CASH EQUIVALENTS AT END OF YEAR $ 3,407 $ 1,552 $ 1,598 ============================
The accompanying notes are an integral part of these consolidated statements. Cousins Properties Incorporated and Consolidated Entities NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - ------------------------------------------------------------------------------- December 31, 1994, 1995 and 1996 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: 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 5 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):
1994 1995 1996 ------ ------ ------ Fees eliminated in consolidation $3,019 $5,479 $3,400 Internal costs capitalized in consolidation to projects on which fees were eliminated $1,508 $2,552 $2,135 Internal costs capitalized to CREC residential developments $ 292 $ 498 $ 500
Interest, real estate taxes, and rental revenues and expenses of properties prior to the date they become operational are also capitalized for financial reporting purposes. 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 includes 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, 1996, cash and cash equivalents included $582,000 from a property sale held in escrow pending reinvestment in a tax-deferred exchange and $1,016,000 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. Impairment of Long-Lived Assets: The Company has adopted SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of" which requires impairment losses to be recorded on long-lived assets used in operations when indicators of impairment are present and the undiscounted cash flows estimated to be generated by those assets are less than the assets' carrying amount. SFAS No. 121 also addresses the accounting for long-lived assets that are expected to be disposed of. The adoption of SFAS No. 121 had no effect on the financial results of the Company. 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 power centers for the Company. CREC also manages a joint venture property in which it has an ownership interest. At December 31, 1994, 1995 and 1996 Cousins owned 100% of CREC's $5,025,000 par value 8% cumulative preferred stock and 100% of CREC's nonvoting common stock, which common stock 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 ($8,643,000 in aggregate) exceeds CREC's $1,341,825 of equity. 3. NOTES AND OTHER RECEIVABLES At December 31, 1995 and 1996, notes and other receivables include the following ($ in thousands):
1995 1996 ------- ------- 650 Massachusetts Avenue Mortgage Notes $27,574 $26,786 Wildwood Training Facility Mortgage Note 17,416 17,005 Daniel Realty Company Note Receivable -- 1,080 Miscellaneous Notes 1,082 903 Cumulative rental revenue recognized on a straight- line basis in excess of revenue which accrued in accordance with lease terms (see Note 1) 4,052 4,056 Other Receivables 3,744 6,667 ------------------- Total Notes and Other Receivables $53,868 $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 $31.3 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 at a rate of approximately 10%. Amounts in excess of the minimum required payments ($465,000 and $787,970 in 1995 and 1996, respectively) are treated as a reduction of principal. Wildwood Training Facility Mortgage Note - This note, which has a face amount of $25.9 million and matures November 30, 2013, is collateralized by a building located on land owned by the Company and leased to a limited partnership through November 30, 2013, with no renewal option. The building is 100% leased to International Business Machines Corporation ("IBM") through November 30, 1998. The IBM lease generates net cash flow of approximately $2.4 million annually to the limited partnership, of which approximately $2.3 million is paid to the Company as note and lease payments. Of these amounts, ground lease payments of $304,000 per year have been treated as rental income in the accompanying financial statements and the remaining $2.0 million is treated as principal amortization over the remaining ground lease term and interest at 9.235% on the carrying value of the note. The leased land is carried at $0 in the accompanying financial statements. 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 under which approximately $1.08 million was advanced on December 27, 1996. The loan bears interest at 11%, requires semi-annual principal payments commencing February 1, 1998 and matures on December 31, 2003. The Company also obtained an option to acquire certain segments of Daniel's business. Fair Value - The estimated fair value of the Company's $46.1 million and $45.8 million of notes receivable at December 31, 1995 and 1996, respectively, is $52.1 million and $51.9 million, respectively, calculated by discounting future cash flows from the notes receivable at the estimated rates at which similar loans would be made currently. 4. NOTES PAYABLE, COMMITMENTS, AND CONTINGENT LIABILITIES At December 31, 1995 and 1996, the composition of notes payable was as follows ($ in thousands):
December 31, 1995 December 31, 1996 ----------------------------------- ------------------------------------ Share of Share of Unconsolidated Unconsolidated Company Joint Ventures Total Company Joint Ventures Total -------- ----------------- -------- -------- ----------------- --------- Floating Rate Lines of Credit $ 32,870 $23,153 $ 56,023 $ 25,100 $ 2,025 $ 27,125 Fixed Rate Mortgages (primarily non-recourse) 80,564 64,759 145,323 206,731 105,487 312,218 -------- ------- -------- -------- -------- -------- $113,434 $87,912 $201,346 $231,831 $107,512 $339,343 ======== ======= ======== ======== ======== ========
The following table summarizes the terms of the debt outstanding at December 31, 1996 ($ in thousands):
Term/ Amortization Balance at Period Final December 31, Description Rate (Years) Maturity 1996 ----------- ---------------- ------------ -------- ------------ Company Debt: Line of credit ($100 million maximum) unsecured Fed Funds + .88% 1/N/A 6/30/97 $ 23,800 Note secured by Company's interest in CSC Associates, L.P. 6.677% 15/20 2/15/11 78,304 One Independence Center mortgage note 8.22% 11/25 11/1/07 49,500 North Point MarketCenter mortgage note 8.50% 10/25 7/15/05 29,477 Note secured by Company's interest in 650 Massachusetts Avenue mortgage notes (see Note 3) 6.53% 5/ N/A 10/01/00 26,180 Perimeter Expo mortgage note 8.04% 10/30 8/15/05 21,259 Other miscellaneous notes 0% to 9.4% Various Various 3,311 -------- 231,831 ======== Share of Unconsolidated Joint Venture Debt: Wildwood Associates: Line of credit ($5 million maximum) Fed Funds + .75% 2/N/A 9/1/97 2300 Windy Ridge mortgage note 7.56% 10/25 12/01/05 35,539 3200 Windy Hill mortgage note 8.23% 10/28 1/1/07 35,000 2500 Windy Ridge mortgage note 7.45% 10/20 12/15/05 12,706 CC-JM II Associates mortgage note 7.00% 17/17 4/1/13 12,144 Ten Peachtree Place Associates mortgage note 8.00% 10/18 11/30/01 10,098 Norfolk Hotel Associates ($2.1 million line of credit) Fed Funds + .85% 1/N/A 10/31/97 2,025 107,512 -------- $339,343 ========
On February 6, 1996, CSC Associates, L.P. ("CSC") 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 CSC and are secured by a Deed to Secure Debt, an Assignment of Rents and Security Agreement covering CSC's interest in the NationsBank Plaza building and related leases and agreements. CSC has 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 share of unconsolidated joint venture balances as disclosed in this Note 4 or in Note 5. (The related note receivable and interest income are also not included in this Note 4.) Effective July 1, 1996, the Company amended and extended its line of credit. The line amount was $50 million through December 31, 1996, and increased to $100 million on January 1, 1997. The line is unsecured, bears interest tied to the Federal Funds rate and matures June 30, 1997. On April 1, 1996, CC-JM II Associates completed a $24,675,000, 17 year fully amortizing mortgage note payable at a 7% interest rate. On December 16, 1996, Wildwood Associates completed the financing of the 3200 Windy Hill Road Building with a $70 million mortgage note payable at an 8.23% interest rate and maturity of January 1, 2007. Concurrent with the financing, Wildwood Associates paid down its line of credit to $0 and on January 6, 1997, made a cash distribution of $10 million to each partner. On January 7, 1997, WWA received a commitment for the financing of the 4100 and 4300 Wildwood Parkway Buildings which is scheduled to fund by April 1, 1997. The $30 million non-recourse mortgage note payable has an interest rate of 7.65% and term of fifteen years. The Wildwood Associates 2300 Windy Ridge and 3200 Wildwood 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 $25,700,000 at December 31, 1996) is recognized as an adjustment to interest expense over the life of the swap. The fair value of the swap was $400,600 at December 31, 1996. The Company has guaranteed its share of the Wildwood Associates and Norfolk Hotel Associates short-term credit facilities. At December 31, 1996, the Company had outstanding letters of credit totaling $459,000, and assets with carrying values of $253,847,000 and $185,248,000 were pledged as security on the Company's and its unconsolidated joint ventures' debt, respectively. The fixed rate long-term mortgage debt of the Company and its unconsolidated joint ventures is non-recourse to the Company. As of December 31, 1996, the weighted average maturity of the Company's debt, including its share of unconsolidated joint ventures, was 8 years. The aggregate maturities of the indebtedness at December 31, 1996 summarized above are as follows ($ in thousands):
Share of Unconsolidated Company Joint Ventures Total -------- -------------- -------- 1997 $ 29,821 $ 3,916 $ 33,737 1998 7,035 2,542 9,577 1999 6,413 2,743 9,156 2000 24,582 3,019 27,601 2001 4,508 10,990 15,498 Thereafter 159,472 84,302 243,774 -------- -------- -------- $231,831 $107,512 $339,343 ======== ======== ========
For each of the years ended December 31, 1994, 1995 and 1996, interest expense was recorded as follows ($ in thousands):
Share of Unconsolidated Company Joint Ventures Total ------------------------------ ------------------------------ ------------------------------- Year Expensed Capitalized Total Expensed Capitalized Total Expensed Capitalized Total - ---- -------- ----------- ------- -------- ----------- ------ -------- ----------- ------- 1994 $ 411 $1,118 $ 1,529 $7,262 $ -- $7,262 $ 7,673 $1,118 $ 8,791 1995 687 5,073 5,760 6,760 302 7,062 7,447 5,375 12,822 1996 6,546 5,648 12,194 6,599 557 7,156 13,145 6,205 19,350
The Company had future lease commitments under a land lease aggregating $7.3 million over its remaining term of 72 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 $12.2 million remains committed at December 31, 1996. At December 31, 1995 and 1996, the carrying value of the Company's notes payable approximates fair value. 5. INVESTMENT IN UNCONSOLIDATED JOINT VENTURES The following information summarizes financial data and principal activities of unconsolidated joint ventures in which the Company had ownership interests ($ in thousands). Audited financial statements for Wildwood Associates, CSC Associates, L.P., and Haywood Mall are included in the Company's Form 10-K.
Company's Total Assets Total Debt Total Equity Investment ------------------- ------------------- ------------------- ------------------- 1995 1996 1995 1996 1995 1996 1995 1996 -------- -------- -------- -------- -------- -------- -------- -------- SUMMARY OF FINANCIAL POSITION: Wildwood Associates $232,866 $268,910 $134,855 $166,490 $ 90,168 $ 90,658 $ 2,231 $ 2,476 CSC Associates, L.P. 206,889 201,387 -- -- 203,938 200,346 104,776 102,904 Ten Peachtree Place Associates 21,173 20,811 20,971 20,196 (17) 215 (39) (4) Haywood Mall 44,531 41,530 -- -- 43,293 40,941 21,961 20,743 Spring/Haynes Associates 16,527 -- -- -- 16,502 -- 1,688 -- Norfolk Hotel Associates 8,169 8,283 4,480 4,050 3,631 4,182 1,815 2,091 CC-JM II Associates 27,253 30,351 15,518 24,288 8,034 5,211 4,393 2,981 Other 1,183 2,365 -- -- 882 2,144 435 1,071 -------- -------- -------- -------- -------- -------- -------- -------- $558,591 $573,637 $175,824 $215,024 $366,431 $343,697 $137,260 $132,262 ======== ======== ======== ======== ======== ======== ======== ========
Company's Share Total Revenues Net Income (Loss) of Net Income (Loss) ----------------------- ----------------------- ----------------------- 1994 1995 1996 1994 1995 1996 1994 1995 1996 ------- ------- ------- ------- ------- ------- ------- ------- ------- SUMMARY OF OPERATIONS: Wildwood Associates $36,305 $37,767 $40,505 $ 4,844 $ 5,884 $ 8,490 $ 2,422 $ 2,942 $ 4,245 CSC Associates, L.P. 28,931 31,195 33,312 13,009 14,697 16,108 6,880 7,308 7,978 Ten Peachtree Place Associates 4,228 4,276 4,284 461 523 632 192 236 235 Haywood Mall 10,371 11,269 13,527 4,949 5,926 7,120 2,474 2,963 3,538 Spring/Haynes Associates 63 289 -- (66) 171 -- (33) 86 -- Norfolk Hotel Associates 1,029 804 820 664 486 552 332 243 276 CC-JM II Associates -- -- 3,489 -- -- 316 -- -- 141 Other 999 1,215 2,08 627 675 1,586 313 335 791 ------- ------- ------- ------- ------- ------- ------- ------- ------- $81,926 $86,815 $97,955 $24,488 $28,362 $34,804 $12,580 $14,113 $17,204 ======= ======= ======= ======= ======= ======= ======= ======= =======
Company's Share Of ------------------------------------------------ Cash Flows From Cash Flows From Operating Operating Activities Operating Activities Cash Distributions ----------------------- ----------------------- ----------------------- 1994 1995 1996 1994 1995 1996 1994 1995 1996 ------- ------- ------- ------- ------- ------- ------- ------- ------- SUMMARY OF OPERATING CASH FLOWS: Wildwood Associates $12,999 $12,812 $20,278 $ 6,500 $ 6,406 $10,139 $ 4,000 $ 4,000 $ 4,000 CSC Associates, L.P. 16,777 22,366 20,394 8,840 11,219 10,197 8,400 7,771 9,850 Ten Peachtree Place Associates 1,165 1,100 1,360 315 305 344 200 200 200 Haywood Mall 5,856 3,502 7,877 2,928 1,751 3,939 2,879 3,349 4,990 Spring/Haynes Associates (83) 122 -- (42) 61 -- -- -- -- Norfolk Hotel Associates 470 338 428 235 169 214 -- -- -- CC-JM II Associates -- -- (1,655) -- -- (828) -- -- 162 Other 619 721 1,378 310 361 689 186 466 180 ------- ------- ------- ------- ------- ------- ------- ------- ------- $37,803 $40,961 $50,060 $19,086 $20,272 $24,694 $15,665 $15,786 $19,382 ======= ======= ======= ======= ======= ======= ======= ======= =======
Wildwood Associates - Wildwood Associates was formed in 1985 between the Company and IBM, each as 50% partners. The partnership owns five office buildings totaling 1.9 million rentable square feet, one office building under construction totaling 250,000 rentable square feet (see Note 8), 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, 1996, 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. The Company's investment as recorded in the Consolidated Balance Sheets ($2.5 million at December 31, 1996) 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 ($45.3 million at December 31, 1996) 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), subject to (prior to 1996) a preference to Cousins. The Cousins preference was $2.5 million (giving Cousins an additional $1.25 million over what it would otherwise receive), and accrued to Cousins, with interest at 9% to the extent unpaid, over the period February 1, 1992 through January 31, 1995. In October 1993, the partnership fully repaid all of its debt with equity contributions of $86.7 million made by each partner. Following repayment of the partnership's debt, Cousins began recognizing its accrued preference currently in income, which resulted in Cousins recognizing $451,000 and $36,000 in income over what it would have otherwise recognized in the years ended December 31, 1994 and 1995, respectively. During the years ended December 31, 1994 and 1995, Cousins received distributions of the preference and accrued interest of approximately $2.65 million and $71,000, respectively. Amounts above the preference amount are allocated based on the partners' percentage interests. 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. Expansion of the mall from 956,000 gross leaseable square feet ("GLA") (of which approximately 272,000 GLA is owned) to 1,256,000 GLA (of which approximately 330,000 GLA is owned) was substantially completed in 1995. The balance of the mall is owned by the mall's five major department stores. During the year ended December 31, 1995, the Company contributed $5.8 million to fund its share of the completion of the expansion. Spring/Haynes Associates - This general partnership was formed in 1985 between the Company and a wholly owned subsidiary of Coca-Cola, each as 50% general partners, to jointly own and develop real estate. The Company contributed 40 acres of undeveloped land at Georgia Highway 400 and Haynes Bridge Road in north central suburban Atlanta, Georgia. Coca-Cola contributed 11 acres of property in midtown Atlanta. In September 1993, the undeveloped land at Georgia Highway 400 was distributed to the partners who concurrently recontributed certain acres of the land into North Point Market Associates, L.P., a consolidated partnership formed between the partners to own North Point MarketCenter and Mansell Crossing Phase II. Effective January 1, 1996, the Company and Coca-Cola entered into an exchange transaction which effectively resulted in Coca-Cola receiving 100% of the Spring/Haynes Associates' property and the Company receiving $1,092,000 in cash and 100% of North Point Market Associates, L.P.'s properties (North Point MarketCenter and Mansell Crossing Phase II). The net amount of Coca-Cola's minority interest of $3,825,000 in North Point Market Associates, L.P. and the Company's investment in Spring/Haynes Associates of $1,688,000 as of December 31, 1995 was credited against the carrying values of North Point Market Associates, L.P.'s properties. Norfolk Hotel Associates ("NHA") - NHA is 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 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. 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 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. In April 1996, the venture completed the financing of the building with a $24,675,000, 17 year fully amortizing non-recourse mortgage note (see Note 4). 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. 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 $780 per acre at January 1, 1997, escalating at 6% on January 1 of each succeeding year during the term of the option. During 1994 and 1996, approximately 72 and 375 acres, respectively, of the option related to the fee simple interest was exercised and simultaneously sold for gross profits of approximately $243,000 and $1,427,000, respectively. None of the option was exercised in 1995. 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 $777,000 of development income was received and recognized in 1996. Additional Information - The Company recognized $2,539,000, $5,780,000 and $4,926,000 of development, construction, leasing, and management fees from unconsolidated joint ventures in 1994, 1995 and 1996, respectively. 6. STOCKHOLDERS' INVESTMENT, STOCK APPRECIATION RIGHT EXPENSE AND PER SHARE DATA 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 stock incentive plan for key employees which provides for the granting of both stock and stock option awards under the plan (see also "Stock Grants" below). The Company also has adopted a similar plan for its outside directors. 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. All options were awarded at the then current market price. At December 31, 1996, 1,506,980 stock options to key employees and outside directors were outstanding (including 43,500 shares under a predecessor plan), and the Company is authorized to award an additional 1,099,445 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, 1996. Separately from the stock incentive plan, the Company has issued stock appreciation rights ("SARs") to certain employees under two plans. At December 31, 1996, 184,500 SARs were outstanding, and the Company is authorized to award an additional 1,109,354 SARs. In order to compensate the holders of unexercised stock options for decreases in the underlying value of shares subject to the options resulting from certain capital gain distributions to stockholders, the Company issued Deferred Payment Agreements from 1988 through 1991 to holders of unexercised stock options at the time of such distributions. These Deferred Payment Agreements provided for a fixed cash payment to stock option holders upon exercise of the options in an amount approximately equal to the amount of the capital gain distribution that would have been payable on the shares subject to the options if the options had been exercised prior to the record date for the distributions. Holders of SARs were similarly compensated by a downward adjustment in the price of SARs held by them. 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 -------------------- ------------------------ 1994 1995 1996 1994 1995 1996 ---- ---- ---- ---- ---- ---- Stock Option Plans - ------------------ Outstanding, beginning of year 911 1,184 1,413 $14.27 $14.74 $15.42 Granted 284 300 436 $15.75 $18.00 $22.75 Exercised (11) (42) (340) $ 3.19 $13.30 $13.61 Forfeited -- (29) (2) -- $16.99 $16.77 --------------------- Outstanding, end of year 1,184 1,413 1,507 $14.74 $15.42 $17.95 ===================== Shares exercisable at end of year 567 805 601 $13.75 $13.68 $15.29 ===================== SARs - ---- Outstanding, beginning of year 382 369 344 $13.26 $13.21 $13.21 Granted -- -- -- -- -- -- Exercised (6) (23) (159) $12.17 $13.03 $11.44 Forfeited (7) (2) (1) $16.74 $13.91 $13.59 --------------------- Outstanding, end of year 369 344 184 $13.21 $13.21 $14.74 ===================== Shares exercisable at end of year 225 272 145 $12.25 $12.44 $14.21 =====================
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, 1996 (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 - ------------------ $10.78 to $14.50 283 260 $13.87 3.0 $14.51 to $20.00 803 341 $16.80 7.4 $20.01 to $23.00 421 -- $22.87 9.9 ----------------------------------------------- Total 1,507 601 $17.95 7.3 =============================================== SARs - ---- $10.78 to $14.49 94 91 $12.62 3.6 $14.50 to $16.875 90 54 $16.88 6.1 ----------------------------------------------- Total 184 145 $14.21 4.8 ===============================================
At December 31, 1995 and 1996, the total amount accrued for stock options, SARs, and Deferred Payment Agreements was $3,367,000 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, 1996, 110,400 shares of common stock have been awarded under the key employee 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, 1995 and 1996, $44,000 and $654,000 was accrued, respectively. Outside directors elected to receive 307 and 2,260 shares of stock in lieu of cash for director fees in 1995 and 1996, 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 option awards granted during 1995 and 1996 using the Black-Scholes option pricing model with the following weighted-average assumptions and results:
1995 1996 ---- ---- Assumptions - ----------- Risk-free interest rate 5.94% 6.26% Assumed dividend yield 6.00% 5.34% Assumed lives of option awards 8 years 8 years Assumed volatility 0.173 0.171 Results - ------- Weighted average fair value of options granted $1.98 $3.08
The Black-Scholes option valuation model was developed for use in estimating the fair value of traded options which have no vesting restrictions and are fully transferable. In addition, option valuation models require the input of highly subjective assumptions. In the Company's opinion, because the Company's options have characteristics significantly different from traded options, and because changes in the subjective assumptions can materially affect the fair value estimate, the results obtained from the valuation model do not necessarily provide a reliable single measure of its option awards. If the Company had accounted for its option awards in 1995 and 1996 in accordance with SFAS No. 123, pro forma results would have been as follows ($ in thousands, except per share amounts): 1995 1996 ------- ------- Pro forma net income $26,297 $40,978 Pro forma net income per share $ .94 $ 1.44 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: Primary income per share is computed by dividing income by the weighted average number of shares of common stock and dilutive common stock equivalents outstanding. Fully diluted income per share does not differ materially from primary income per share in 1994, 1995 and 1996. 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 1994 and 1995 and estimated to be applied in 1996 to meet REIT distribution requirements ($ in thousands):
1994 1995 1996 ---- ---- ---- Dividends declared $25,064 $27,691 $31,912 Additional dividends paid deduction due to 5% discount on dividends reinvested -- 277 407 That portion of dividends declared in current year, and paid in current year, which was applied to the prior year distribution requirements (161) (3,048) (2,197) That portion of dividends declared in subsequent year, and paid in subsequent year, which will apply to current year 3,048 2,197 4,314 --------------------------- Dividends applied to meet current year REIT distribution requirements $27,951 $27,117 $34,436 ===========================
Tax Status of Dividends: Dividends applied to meet REIT distribution requirements were equal to Cousins' taxable income (see Note 7). Since electing to qualify as a REIT in 1987, Cousins has had no accumulated undistributed taxable income. In 1996, the Company designated as capital gain dividends 16.778% of the dividend paid February 22, 1996 and 30.6774% of the dividend paid December 23, 1996. In 1995, the Company designated as capital gain dividends 2.4815% of the dividend paid December 21, 1995. All other dividends paid in 1994 and 1995 were taxable as ordinary dividends. In addition, in 1995 and 1996 an amount calculated as 3.25% and 1.95% of total dividends, respectively, was an "adjustment attributed to depreciation of tangible property placed in service after 1986" for alternative minimum tax purposes. This amount was passed through to stockholders and must be used as an item of adjustment in determining each stockholder's alternative minimum taxable income. 7. INCOME TAXES In 1994, 1995 and 1996, because Cousins qualified as a REIT and distributed all of its taxable income (see Note 6), it incurred no federal income tax liability. The differences between taxable income as reported on Cousins' tax return (actual 1994 and 1995 and estimated 1996) and Consolidated Net Income as reported herein are as follows ($ in thousands):
1994 1995 1996 ---- ---- ---- Consolidated net income $26,895 $26,342 $41,016 Consolidating adjustments (1,875) 348 (2,754) Less CREC net loss (income) 394 (1,652) 2,937 ------------------------- Cousins net income for financial reporting purposes 25,414 25,038 41,199 ------------------------- Adjustments arising from: Sales of investment properties 3,909 (1,633) (12,175) Income from unconsolidated joint ventures (principally depreciation, revenue recognition, and operational timing differences) (2,361) (1,891) 2,429 Rental income recognition (111) (130) 137 Interest income recognition 198 305 448 Wildwood Training Facility differences 342 375 411 Interest expense 297 2,830 3,000 Compensation expense under stock option and SAR plans 92 312 (2,893) Depreciation 336 245 657 Net operating loss utilized (295) -- -- Other 130 1,666 1,223 ------------------------- Cousins taxable income $27,951 $27,117 $34,436 =========================
The consolidated provision (benefit) for income taxes is composed of the following ($ in thousands):
1994 1995 1996 CREC and its wholly owned subsidiaries: Currently payable (refundable): Federal $ -- $ 574 $(1,141) State -- 17 (185) ------------------------- -- 591 (1,326) ------------------------- Adjustments arising from: Income from unconsolidated joint ventures 411 171 298 Operating loss carryforward (94) 323 193 Stock appreciation right expense (111) (324) (185) Fee income (361) 354 -- Other (33) (49) (776) ------------------------- (188) 475 (470) ------------------------- CREC provision (benefit) for income taxes (188) 1,066 (1,796) Cousins provision (benefit) for state income taxes 22 (228) 680 Less provision applicable to gain on sale of investment properties -- (91) (587) ------------------------- Consolidated provision (benefit) applicable to income from operations $ (166) $ 747 $(1,703) ========================
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):
1994 1995 1996 ------------ ------------ ------------ Amount Rate Amount Rate Amount Rate ------ ---- ------ ---- ------ ---- Federal income tax provision (benefit) $(198) 34% $ 924 34% $(1,609) 34% State income tax provision (benefit), net of federal income tax effect (23) 4 109 4 (189) 4 Other 33 (5) 33 1 2 -- ---------------------------------------- CREC provision (benefit) for income taxes (188) 33% 1,066 39% (1,796) 38% --- --- --- Cousins provision (benefit) for income taxes 22 (228) 680 Less provision applicable to gain on sale of investment properties -- (91) (587) ----- ------ ------- Consolidated provision (benefit) applicable to income from operations $(166) $ 747 $(1,703) ===== ====== =======
The components of CREC's net deferred tax liability are as follows ($ in thousands):
1995 1996 ---- ---- Deferred tax assets $ 1,616 $ 3,684 Deferred tax liabilities (3,398) (4,148) ------------------ Net deferred tax liability $(1,782) $ (464) ==================
The tax effect of significant temporary differences representing CREC's deferred tax assets and liabilities are as follows ($ in thousands):
1995 1996 ---- ---- Operating loss carryforward $ 1,168 $ 1,749 Income from unconsolidated joint ventures (3,188) (3,485) Stock appreciation right expense 754 939 Fee income 7 7 Other (523) 326 ------------------ $(1,782) $ (464) ==================
8. PROPERTY TRANSACTIONS Retail Properties In March 1996, Colonial Plaza MarketCenter, a 493,000 square foot retail power center in Orlando, Florida and Mansell Crossing Phase II, a 103,000 square foot retail expansion adjacent to the Company's other North Point properties, became partially operational for financial reporting purposes. In June 1996, Presidential MarketCenter Phase II, an 82,000 square foot retail power center expansion in northeast suburban Atlanta became partially operational for financial reporting purposes. In October 1996, Greenbrier MarketCenter, a 479,000 square foot retail power center in Chesapeake, Virginia became partially operational for financial reporting purposes. In November 1996, Los Altos MarketCenter, a 157,000 square foot retail power center located in Long Beach, California became partially operational for financial reporting purposes (construction commenced on this retail power center in January 1996). In November 1996, Lawrenceville MarketCenter, a 500,000 square foot retail power center located in northeast suburban Atlanta was sold to Equitable Real Estate Investment Management, Inc., acting on behalf of its client, a major state pension fund for a purchase price of $34,605,000. The gain on the sale, net of applicable income tax provision was approximately $10,651,000 (including depreciation recapture of approximately $715,000). The net proceeds were swapped in a tax-deferred exchange into the purchase of One Independence Center (see discussion below). Office Properties Two office buildings, 100 and 200 North Point Center East, 128,000 and 129,000 rentable square feet, respectively, located adjacent to North Point Mall and the Company's retail properties in north central suburban Atlanta became partially operational for financial reporting purposes in April 1996 and November 1996, respectively. In March 1996, 4100 and 4300 Wildwood Parkway, two office buildings with a total of 250,000 rentable square feet owned by Wildwood Associates and located in Wildwood Office Park became partially operational for financial reporting purposes. In October 1996, Wildwood Associates commenced construction on 4200 Wildwood Parkway, a 250,000 square foot office building located adjacent to 4100 and 4300 Wildwood Parkway. In December 1996, the Company commenced construction on 333 North Point Center East, a 128,000 rentable square foot office building, adjacent to 100 and 200 North Point Center East. In May 1996, pursuant to the third amendment to the North Greene Associates partnership agreement, Weaver Downtown, L.P., the minority partner, sold its partnership interest to Cousins for $999,000. As a result, Cousins owns 100% of the First Union Tower, a 319,000 rentable square foot office building in Greensboro, North Carolina. During 1996 Cousins acquired two office buildings. In August 1996, Cousins acquired 615 Peachtree Street, a 147,000 rentable square foot downtown Atlanta office building, located across from NationsBank Plaza. The 12-story office building was purchased for $11.1 million plus a contingent future payment of up to an additional $1 million. In December 1996, Cousins acquired One 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 for a purchase price of approximately $70.6 million. Cousins purchased the office building using approximately $34,612,000 of proceeds from the tax-deferred exchanges of Lawrenceville MarketCenter and an outparcel at North Point, $30,879,000 from the assumption of a mortgage note payable, $18,621,000 from an additional amount drawn down on the mortgage note payable (to bring the mortgage note payable to a total of $49,500,000) (see Note 4) and $2,426,000 of cash. Cousins also assumed $1,300,000 of municipal bonds related to the underground parking garage. Medical Properties In July 1996, Cousins acquired the medical office building development and management operations of The Lea Richmond Company and The Richmond Development Company. The purchase price for the acquisition was $1.8 million plus contingent future payments of up to an additional $1 million (of which $200,000 was paid through December 31, 1996), subject to commencement of development of certain medical office projects. This new division of the Company commenced construction in July 1996 on the Presbyterian Medical Center at University, a 67,000 rentable square foot medical office building in Charlotte, North Carolina. Residential Lots The Company is currently developing six residential communities in suburban Atlanta, including four in which development commenced in 1994, one in 1995 and one in 1996. These developments currently include land on which approximately 1,382 lots are being developed (with additional lots developable on adjacent land under option), of which 116, 183 and 226 lots were sold in 1994, 1995 and 1996, respectively. 9. CONSOLIDATED STATEMENTS OF CASH FLOWS - SUPPLEMENTAL INFORMATION Interest (net of amounts capitalized) (see Note 4) and income taxes paid (net of refunds) were as follows ($ in thousands):
1994 1995 1996 ---- ---- ---- Interest paid $ 336 $846 $5,753 Income taxes paid (refunded), net of $577, $252 and $511 refunded in 1994, 1995 and 1996, respectively $(549) $376 $ 54
Significant non-cash financing and investing included the following: a. In 1994, 1995 and 1996, approximately $27,602,000, $2,860,000 and $78,169,000, respectively, were transferred from Projects Under Construction to Operating Properties. b. In 1994 and 1995, approximately $941,000 and $2,970,000, respectively, were transferred from Land Held for Investment or Future Development to Projects Under Construction. In 1996, approximately $3,246,000 was transferred from Land Held for Investment or Future Development to Operating Properties. c. In July 1994, Norfolk Hotel Associates distributed a 50% interest (approximately $1,589,000) in a long-term parking agreement with an adjacent building owner (see Note 5). d. In January 1996, in conjunction with the exchange of certain partnership interests (see Note 5), 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. e. In December 1996, in conjunction with the acquisition of One Independence Center (see Notes 4 and 8) a mortgage note payable of approximately $30,879,000 was assumed. 10. RENTAL PROPERTY REVENUES The Company's leases typically contain escalation provisions and provisions requiring tenants to pay a pro rata share of operating expenses. The leases typically include renewal options and all are classified and accounted for as operating leases. At December 31, 1996, future minimum rentals to be received by consolidated entities under existing non-cancelable leases, excluding tenants' current pro rata share of operating expenses, are as follows ($ in thousands):
Retail Office Total ------ ------ ----- 1997 $ 26,340 $ 18,754 $ 45,094 1998 26,437 17,664 44,101 1999 26,272 17,090 43,362 2000 25,595 15,711 41,306 2001 25,244 10,302 35,546 Subsequent to 2002 256,786 52,926 309,712 -------------------------------- $386,674 $132,447 $519,121 ================================
Cousins Properties Incorporated and Consolidated Entities FIVE YEAR SUMMARY OF SELECTED FINANCIAL DATA - ------------------------------------------------------------------------------- ($ in thousands, except per share amounts)
1992 1993 1994 1995 1996 ---- ---- ---- ---- ---- Rental property revenues $ 6,933 $ 6,687 $ 13,150 $ 19,348 $ 33,112 Fees 4,953 5,903 5,023 7,884 6,019 Residential lot and outparcel sales -- -- 6,132 9,040 14,145 Interest and other 6,989 6,456 6,801 4,764 5,256 -------------------------------------------- Total revenues 18,875 19,046 31,106 41,036 58,532 -------------------------------------------- Income from unconsolidated joint ventures 2,573 5,516 12,580 14,113 17,204 Rental property operating expenses 2,354 2,310 3,338 4,681 7,616 Depreciation and amortization 2,345 3,164 3,742 4,516 7,219 Stock appreciation right expense 860 721 433 1,298 2,154 Residential lot and outparcel cost of sales -- -- 5,762 8,407 13,676 Interest expense 820 -- 411 687 6,546 General, administrative, and other expenses 5,640 9,124 9,627 10,333 12,016 -------------------------------------------- Total expenses 2,019 15,319 23,313 29,922 49,227 Provision (benefit) for income taxes from operations 360 (795) (166) 747 (1,703) Gain on sale of investment properties, net of applicable income tax provision 6,644 1,927 6,356 1,862 12,804 -------------------------------------------- Net income $ 15,713 $ 11,965 $ 26,895 $ 26,342 $ 41,016 ============================================ Net income per share $ .86 $ .53 $ .97 $ .94 $ 1.44 ============================================ Cash dividends declared per share $ .62 $ .73 $ .90 $ .99 $ 1.12 ============================================ Total assets $195,791 $319,702 $330,817 $418,006 $556,644 Notes payable 9,079 35,151 41,799 113,434 231,831 Stockholders' investment 176,091 270,557 272,898 277,678 299,184 Shares outstanding at year-end 21,717 27,831 27,864 28,223 28,920
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, 1995 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, 1996. 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 45% and 42% of the joint ventures totals as of December 31, 1995 and 1996 and revenues of 48%, 49% and 48% of the 1994, 1995 and 1996 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, 1995 and 1996 and for each of the three years in the period ended December 31, 1996, 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, 1995 and 1996, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 1996 in conformity with generally accepted accounting principles. ARTHUR ANDERSEN LLP Atlanta, Georgia February 14, 1997 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, 1996 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 $13,150,000 in 1994 to $19,348,000 and $33,112,000 in 1995 and 1996, respectively. The increases in 1995 and 1996 were primarily due to rental property revenues from the Company's retail power centers. The increase in 1996 was due in part to 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), which became partially operational in October 1995, December 1995, March 1996, June 1996 and October 1996, respectively. 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 $571,000 as it became partially operational in March 1996, North Point MarketCenter rental property revenues increased $518,000 due to increases from Phase II which was partially operational in July 1995, and Los Altos MarketCenter rental property revenues increased $336,000 as it became partially operational in November 1996. 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. 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 which became partially operational in April 1996 and November 1996, respectively, increased rental property revenues $1,554,000 and $270,000, respectively. The acquisitions of 615 Peachtree Street and One Independence Center in August 1996 and December 1996, respectively, (see Note 8) also contributed to the increase by $1,057,000 and $886,000, respectively. The increase in rental property revenues in 1995 was attributable to four of the Company's retail centers. Perimeter Expo and Presidential MarketCenter Phase I which became operational in December 1993 and December 1994, respectively, increased rental property revenues $418,000 and $1,762,000 in 1995. North Point MarketCenter rental property revenues increased $2,437,000 in 1995 due to increases from Phase II which became partially operational in July 1995. Lawrenceville MarketCenter which became operational in December 1995 contributed to the increased results in 1995 by $312,000. Rental property revenues were also affected in 1995 by changes which occurred in the 3301 Windy Ridge Parkway Building, a 107,000 square foot Company wholly owned office building in Wildwood Office Park, and the First Union Tower in Greensboro, North Carolina. Commencing January 1994 a single tenant leased 3301 Windy Ridge Parkway for a term of ten years for initially 60% of the building, with options permitting the expansion 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. Rental property revenues were also favorably impacted over the three year period by the lease-up of First Union Tower, which had rental property revenues of $5,522,000, $5,961,000 and $6,232,000 in 1994, 1995 and 1996, respectively. Rental property revenues from 24 acres of the North Point land being ground leased to freestanding users also increased in 1995 and 1996 by $429,000 and $347,000, respectively. Approximately 6 acres of leases began generating income during the fourth quarter of 1993, with 7 acres of leases beginning throughout 1994 and an additional 11 acres of leases beginning throughout 1995. Rental property operating expenses increased from $3,338,000 in 1994 to $4,681,000 and $7,616,000 in 1995 and 1996, respectively. The increases in 1995 and 1996 were primarily related to the occupancy of the retail power centers and the 100 and 200 North Point Center East office buildings, as well as the acquisitions of the 615 Peachtree Street and One Independence Center office buildings as discussed above. Development and Construction Fees. Development and construction fee income increased from $1,020,000 in 1994 to $3,515,000 in 1995 and then decreased to $1,660,000 in 1996. The decrease 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 from Wildwood Associates fees (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. The increase in 1995 was due primarily to the recognition of development income from the Dusseldorf project ($2,604,000) and an increase of $244,000 in development fees recognized from Wildwood Associates. This increase was partially offset by a decrease in development fees of $313,000 recognized by the Company's retail division from third party retail developments. Development fees received from the Emory Conference Center, a third party development, also decreased in 1995 by $117,000. Management Fees. Management fees increased from $2,061,000 in 1994 to $2,213,000 and $2,801,000 in 1995 and 1996, respectively. Approximately $395,000 of the increase in 1996 was due to the acquisition of the management contracts of The Lea Richmond Company in July 1996 (see Note 8). Management fees also increased in 1995 and 1996 due to lease-up of the projects from which management fees are received. Leasing and Other Fees. Leasing and other fees increased from $1,942,000 in 1994 to $2,156,000 in 1995, and then decreased to $1,558,000 in 1996. The decrease 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 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. The increase in 1995 was due primarily to a $374,000 third party incentive fee and a $276,000 cash flow and sale participation received from third party retail developments. Leasing fee income from NationsBank Plaza also increased $141,000 in 1995. Partially offsetting these increases was a decrease in leasing fees received from third party retail developments as such third party work was phased out and in-house development increased. Residential Lot and Outparcel Sales and Cost of Sales. Residential lot and outparcel sales increased from $6,132,000 in 1994 to $9,040,000 and $14,145,000 in 1995 and 1996, respectively. Both the increases in 1995 and 1996 were due to increases in residential lot sales by CREC from 116 lots in 1994 to 183 and 226 lots in 1995 and 1996, respectively. CMC also recognized $525,000 and $3,951,000 in 1995 and 1996, respectively, from one and eight outparcel sales in 1995 and 1996, respectively. Residential lot and outparcel cost of sales increased from $5,762,000 in 1994 to $8,407,000 and $13,676,000 in 1995 and 1996, respectively. The increases in both years were due to the increases in sales discussed above. Interest and Other Income. Interest and other income decreased from $6,801,000 in 1994 to $4,764,000 in 1995 and then increased to $5,256,000 in 1996. The increase in 1996 was due to an increase in interest income received from temporary investments made with proceeds received from the $80 million CSC Associates, L.P. financing completed in 1996 (see Note 4). The decrease in 1995 was due to decreases in interest income received from the 9.1% Mortgage Notes ($1,813,000 decrease) and temporary investments ($163,000 decrease). The 9.1% Mortgage Notes which had a balance of $39,927,000 at December 31, 1993 were repaid in full on June 30, 1994. The decrease in temporary investment income was primarily due to the Company's investment of its excess cash in real estate assets in 1995. Partially offsetting these decreases was an increase of $533,000 due to the recognition of a full year of interest income from the 650 Massachusetts Avenue Notes which were purchased in March 1994 (see Note 3). Income From Unconsolidated Joint Ventures. (All amounts reflect the Company's share of joint venture income.) Income from unconsolidated joint ventures increased from $12,580,000 in 1994 to $14,113,000 and $17,204,000 in 1995 and 1996, respectively. Income from CSC Associates, L.P. increased from $6,880,000 in 1994 to $7,308,000 and $7,978,000 in 1995 and 1996, respectively. The increases in both 1995 and 1996 were due to the continued lease-up of NationsBank Plaza. The Company's share of both the 1994 and 1995 results benefited by $451,000 and $36,000 in 1994 and 1995, respectively, due to recognition by the Company of a partnership income preference after the partnership's debt was repaid in October 1993 and net income became positive (see Note 5). Income from Wildwood Associates increased from $2,422,000 in 1994 to $2,942,000 and $4,245,000 in 1995 and 1996, respectively. Results in 1996 were favorably impacted by a decrease in interest expense of approximately $883,000 in 1996 which was due primarily to increased interest capitalization and to the refinancings of two mortgage notes in December 1995. In March 1996, the 4100 and 4300 Wildwood Parkway Buildings became partially operational for financial reporting purposes which 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. The increase in 1995 is the result of the lease-up of the 2500 Windy Ridge Parkway Building, an increase in income before depreciation, amortization and interest expense of approximately $140,000. Results in 1995 were also favorably impacted by lower interest expense (approximately $155,000) which was due to increased interest capitalization and the refinancings of two mortgage notes in December 1995. Depreciation and amortization expense which was lower in 1995 (approximately $147,000) and increased rental income from certain ground lease sites (approximately $57,000) also favorably impacted 1995 results. Income from Haywood Mall increased from $2,474,000 in 1994 to $2,963,000 and $3,538,000, in 1995 and 1996, respectively. The increases in 1995 and 1996 were due to increases of approximately $460,000 and $798,000 in 1995 and 1996, respectively, in income before depreciation, amortization and interest expense resulting from the completion and lease-up of the expansion of Haywood Mall (see Note 5). These increases were partially offset by increases in depreciation and amortization of approximately $270,000 and $201,000 in 1995 and 1996, respectively, which were also due to the expansion of Haywood Mall. The Company's share of the 1995 results was also favorably impacted by the prepayment of the outstanding debt through contributions of $10 million from each owner on April 29, 1994. Results in 1995 reflect no interest expense as compared to four months of interest expense in 1994 (a decrease in interest expense of $299,000). Income from Temco Associates decreased from $79,000 in 1994 to a loss of $36,000 in 1995 and then increased to $700,000 in 1996. The decrease in 1995 and increase in 1996 were due to the number of acres that were purchased and simultaneously sold under the option related to the fee simple interest (see Note 5). Approximately 72 acres were purchased and simultaneously sold in 1994, none in 1995 and 375 acres in 1996. Income from Hickory Hollow Associates increased from $85,000 in 1994 to $257,000 in 1995 and then decreased to a loss of $11,000 in 1996. The increase in 1995 and decrease in 1996 were due to changes in outparcel sales from one in 1994 to two in 1995 and none in 1996. Income from CC-JM II Associates increased from $0 in 1994 and 1995 to $141,000 in 1996. The increase in 1996 was due to the John Marshall-II office building becoming fully operational for financial reporting purposes in late January 1996. Income from Norfolk Hotel Associates decreased from $332,000 in 1994 to $243,000 in 1995 and then increased to $276,000 in 1996. The decrease in 1995 was a result of the July 1994 distribution to each partner of a 50% interest in the parking agreement (see Note 5). The 1994 results include seven months of income from the parking agreement versus none in 1995, a decrease of $121,000. General and Administrative Expenses. General and administrative expenses increased from $7,538,000 in 1994 to $7,648,000 and $9,080,000 in 1995 and 1996, respectively. The increase in 1996 was primarily related to inflationary cost increases, the Company's expansion and the acquisition of The Lea Richmond Company and The Richmond Development Company in July 1996 (see Note 8). The increase in 1995 was primarily because of personnel increases related to the Company's expansion, offset by an increase in costs capitalized to projects under development ($3,049,000 in 1995 versus $1,800,000 in 1994). Depreciation and Amortization. Depreciation and amortization increased from $3,742,000 in 1994 to $4,516,000 and $7,219,000 in 1995 and 1996, respectively. Both the 1995 and 1996 increases were due primarily to the retail centers becoming operational as discussed above. The 1996 increase was also due to the 100 and 200 North Point Center East office buildings becoming operational and the acquisitions of the One Independence Center and 615 Peachtree Street office buildings as discussed above. Stock Appreciation Right Expense. Stock appreciation right expense increased from $433,000 in 1994 to $1,298,000 and $2,154,000 in 1995 and 1996, respectively. This non-cash item is primarily related to the price per share of the common stock, which increased over the three year period and was $17.375, $20.25 and $28.125 per share at December 31, 1994, 1995 and 1996, respectively. Interest Expense. Interest expense increased from $411,000 in 1994 to $687,000 and $6,546,000 in 1995 and 1996, respectively. Interest expense before capitalization increased from $1,529,000 in 1994 to $5,760,000 and $12,194,000 in 1995 and 1996, respectively. Also contributing to the increases in 1996 and 1995, approximately $50 million of floating rate debt was replaced with long-term debt at higher interest rates during the third quarter of 1995. The overall increase in interest expense in 1996 and 1995 was partially offset by increased interest capitalization because of a higher level of projects under development. The amount of interest capitalized to projects under development (a reduction of interest expense) increased from $1,118,000 in 1994 to $5,073,000 and $5,648,000 in 1995 and 1996, respectively. Property Taxes on Undeveloped Land. Property taxes on undeveloped land decreased from $1,085,000 in 1994 to $977,000 in 1995 and then increased to $1,301,000 in 1996. 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 increased from $922,000 in 1994 to $1,688,000 in 1995 and then decreased to $1,567,000 in 1996. The decrease in 1996 was due to a decrease of approximately $121,000 in predevelopment expenses. The increase in 1995 was due primarily to an increase of $631,000 in predevelopment expenses. Provision (Benefit) For Income Taxes From Operations. The provision (benefit) for income taxes from operations increased from a benefit of $166,000 in 1994 to a provision of $747,000 in 1995, which provision decreased to a benefit of $1,703,000 in 1996. 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 1995 and 1996. 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, and such intercompany fees decreased in 1996. The provision (benefit) for income taxes from operations increased from 1994 to 1995 due primarily to an increase of $3,208,000 in CREC and its subsidiaries' income before income taxes and gain on sale of investment properties. The increase in 1995 in CREC and its subsidiaries' income before income taxes and gain on sale of investment properties was due to the recognition of certain of the development income from the Dusseldorf project by CREC (see Note 5) and an increase in intercompany development and leasing fees recognized from $3,019,000 in 1994 to $5,479,000 in 1995. The increase in 1995 in the provision (benefit) for income taxes from operations was partially offset by $252,000 of state income tax refunds received related to a successful judicial appeal by Cousins of an assessment paid in 1992. Gain on Sale of Investment Properties. Gain on sale of investment properties, net of applicable income tax provision was $6,356,000, $1,862,000 and $12,804,000 in 1994, 1995 and 1996, respectively. The 1996 gain included the following: the November 1996 sale of Lawrenceville MarketCenter ($10.6 million gain) (see Note 8), 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). The 1995 gain included the following: the August 1995 sale of an approximately 1 acre parcel proximate to the CNN Center in downtown Atlanta ($1.6 million gain) and the September 1995 sale of a 6.2 acre parcel in West Cobb County, Georgia ($.5 million gain). The 1994 gain included the following: the June 1994 sale of the Company's 9 acre Peachtree Road property ($3.3 million gain), the August 1994 sale of the 10.8 acre site in North Point MarketCenter Phase II ($1.8 million gain), and the November 1994 sale of a 21 acre parcel in West Cobb County, Georgia ($1.3 million gain). Net proceeds received from sales were $13,279,000, $4,731,000 and $39,056,000 in 1994, 1995 and 1996, respectively. Liquidity and Capital Resources The Company's debt (including its pro rata share of unconsolidated joint venture debt) was 29% of total market capitalization at December 31, 1996. As discussed in Note 4, the Company amended and extended the maturity date of its line of credit to June 30, 1997. The Company has development and acquisition projects in various planning stages. The Company currently intends to finance these projects and projects currently under construction discussed in Note 8, by using its existing 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 offering from time to time of up to $200 million of common stock, warrants to purchase common stock and debt securities. The SEC declared the registration statement effective on October 4, 1996. Cash Flows Net cash provided by operating activities increased from $35.6 million in 1994 to $37.7 million and $57.1 million in 1995 and 1996, respectively. The increases resulted primarily from an improvement in income before gain on sale of investment properties of $3.9 million and $3.7 million in 1995 and 1996, respectively. Additionally, non-cash charges consisting of depreciation and amortization and residential lot and outparcel cost of sales included in income before gain on sale of investment properties increased $3.1 million and $7.9 million in 1995 and 1996, respectively. Operating distributions from unconsolidated joint ventures also favorably impacted 1996 by an increase of $3.6 million from 1995. Net cash used in investing activities increased from $45.5 million in 1994 to $89.4 million and $124.7 million in 1995 and 1996, respectively. The increase in net cash used in investing activities resulted primarily from an increase in property acquisition and development expenditures of approximately $33.7 million and $74.9 million in 1995 and 1996, respectively, which included the completion of projects under construction and the acquisitions discussed in Note 8 in 1996. 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 acquisition of The Lea Richmond Company and The Richmond Development Company (see Note 8) and deferred financing costs related to the $80 million financing (see Note 4). The increases in net cash used in investing activities were partially offset by decreases of $11.5 million and $9.1 million in 1995 and 1996, respectively, in investment in unconsolidated joint ventures. The Company contributed $16.0 million and $5.8 million to Haywood Mall in 1994 and 1995, respectively, 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(see Note 5). 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 $34.8 million which was primarily related to the sale of Lawrenceville MarketCenter in December 1996 (see Note 8). 1995 was also impacted by two transactions related to notes receivable. In 1995, the Company purchased two notes receivable for a total of $28 million (see Note 3). In 1994, the Company received the scheduled repayment of $39.9 million of notes receivable. No similar amount was repaid in 1995. Net cash (used in) provided by financing activities increased from net cash used in financing activities in 1994 of $18.3 million to net cash provided by financing activities in 1995 and 1996 of $49.8 million and $67.7 million, respectively. The increases were attributable to an increase in proceeds from other notes payable of approximately $79.6 million and $51.7 million in 1995 and 1996, respectively. In 1995, the Company completed three financings for approximately $79.5 million as compared to two financings in 1996 for approximately $129.5 million (see Note 4). The proceeds from the line of credit increased $5.3 million in 1995 and then 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 $36.2 million and $1.3 million in 1995 and 1996, respectively. Dividends paid increased $2.6 million and $4.2 million in 1995 and 1996, respectively, due to an increase in the number of shares outstanding and an increase in the cash dividends per share from $.90 per share in 1994 to $.99 and $1.12 per share in 1995 and 1996, respectively. The common stock increased $5.8 million and $6.2 million in 1995 and 1996, respectively, 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 $3.7 million in 1996 due to the scheduled amortization of the financings completed in 1995 and 1996. The decrease in repayment of other notes of $16.3 million in 1995 was due to the scheduled repayment of certain debt in 1994. No similar amount of debt was repaid in 1995. 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:
1995 Quarters 1996 Quarters -------------------------------- ------------------------------- First Second Third Fourth First Second Third Fourth ------- ------- ------- -------- ------- ------- ------- ------- High $17-3/4 $18-1/8 $18-3/8 $20-1/4 $21 $20-1/4 $24-1/2 $28-1/8 Low 16-1/2 16-1/2 17-1/8 17 18-3/8 18-3/8 18-7/8 21-7/8 Dividends Declared .24 .24 .24 .27 .27 .27 .27 .31 Payment Date 2/22/95 5/30/95 8/24/95 12/21/95 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, 1996, there were 1,211 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 1994, 1995 and 1996, 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. For individuals, the capital gain portion of the dividends is subtracted from total dividends on Schedule B of IRS Form 1040 and reported separately as a capital gain in accordance with the Schedule B instructions. 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 5 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, 1996 ($ in thousands, except per share amounts):
Quarters -------------------------------- First Second Third Fourth ----- ------ ----- ------ 1995: Revenues $ 8,000 $ 8,409 $15,330 $ 9,297 Income from unconsolidated joint ventures 3,374 3,495 3,467 3,777 Gain on sale of investment properties, net of applicable income tax provision -- -- 1,746 116 Net income 5,873 5,441 9,599 5,429 Net income per share .21 .20 .34 .19 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 Net income per share .26 .30 .25 .63
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- Acquisitions and Investor Relations Cousins Properties Incorporated and Consolidated Entities DIRECTORS T. G. Cousins Chairman of the Board and Chief Executive Officer Bennett A. Brown Former Chairman NationsBank Richard W. Courts, II Chairman Atlantic Investment Company Terence C. Golden President and Chief Executive Officer Host Marriott Corporation Boone A. Knox Chairman Allied Bankshares, Inc. and Merry Land & Investment Company, Inc. William Porter Payne Vice Chairman NationsBank Richard E. Salomon 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 George J. Berry Senior Vice President Tom G. Charlesworth Senior Vice President, General Counsel and Secretary Craig B. Jones Senior Vice President Peter A. Tartikoff Senior Vice President and Chief Financial Officer Kelly H. Barrett Vice President and Controller Mark B. Riley Vice President - Acquisitions and Investor Relations Lisa R. Simmons Advertising and Public Relations Manager OFFICE DIVISION* John L. Murphy Senior Vice President - Marketing John S. Durham Vice President - Leasing Walter L. Fish Vice President - Leasing Jack A. LaHue Vice President - Finance PROPERTY MANAGEMENT* Terry M. Hampel Vice President - Retail Property Management Dara J. Nicholson Vice President - Office Property Management RESIDENTIAL DIVISION** (Cousins Neighborhoods) Bruce E. Smith President RETAIL DIVISION** (Cousins MarketCenters, Inc.) Joel T. Murphy* President Ronald B. Pfohl Senior Vice President -Leasing William I. Bassett Vice President - Development Michael I. Cohn Vice President - Development Michael J. Lant Vice President - Development William D. Varner Vice President - Development Robert S. Wordes Vice President - Asset Management John D. Hopkins Senior Vice President - Western Region Robert A. Manarino Senior Vice President - Western Region 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 Lloyd P. Thompson, Jr. Vice President - Development MEDICAL OFFICE DIVISION*** (Cousins/Richmond) Lea Richmond III President John S. McColl Senior Vice President David J. Rubenstein Senior Vice President L. Ronald Wyche 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 COUSINS PROPERTIES INCORPORATED AND CONSOLIDATED ENTITIES SUBSIDIARIES OF THE REGISTRANT DECEMBER 31, 1996 At December 31, 1996, the Registrant had no 100% owned subsidiaries. At December 31, 1996, 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) At December 31, 1996, 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) Green Valley Associates II (50% owned by Registrant) Haywood Mall Associates (50% owned by Registrant) Hickory Hollow Associates (50% owned by Cousins Real Estate Corporation) Norfolk Hotel Associates (50% owned by Registrant) 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) EX-23 5 CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS As independent public accountants, we hereby consent to the incorporation of our reports included or incorporated by reference in this Form 10-K, into Cousins Properties Incorporated's previously filed Registration Statements File No. 33-41927, 33-56787, 33-60350 and 333-12031. ARTHUR ANDERSEN LLP Atlanta, Georgia March 24, 1997 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, 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 January 31, 1997, with respect to the financial statements and schedule of CSC Associates, L.P. and our report dated February 6, 1997, with respect to the financial statements and schedule of Haywood Mall Associates, included in the Form 10-K of Cousins Properties Incorporated for the year ended December 31, 1996. ERNST & YOUNG LLP Atlanta, Georgia March 24, 1997 EX-27 7
5 YEAR DEC-31-1996 DEC-31-1996 1,598 0 56,497 0 0 0 377,663 20,339 556,644 0 231,831 0 0 28,920 270,264 556,644 0 58,532 0 49,227 0 0 6,546 26,509 (1,703) 28,212 0 0 0 41,016 1.44 1.44
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