10-K 1 H-62 FORM 10-K COUSINS PROPERTIES INCORPORATED SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-K ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 1994Commission file number 2-20111 COUSINS PROPERTIES INCORPORATED A GEORGIA CORPORATION I.R.S. EMPLOYER IDENTIFICATION NO. 58-086952 2500 WINDY RIDGE PARKWAY ATLANTA, GEORGIA 30339 TELEPHONE: 404-955-2200 Name of exchange on which registered: New York Stock Exchange Securities registered pursuant to Section 12(b) of the Act:Common Stock ($1 Par Value) Securities registered pursuant to Section 12(g) of the Act: None Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months, and (2) has been subject to such filing requirements for the past 90 days. Yes No Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. As of March 20, 1995, 27,881,070 common shares were outstanding; and the aggregate market value of the common shares of Cousins Properties Incorporated held by nonaffiliates was $352,861,971. 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, 1995 Registrant's Annual Report to Part II, Items 5, 6, 7 and 8 Stockholders for the year ended December 31, 1994 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, leases, and manages a portion of the Company's real estate portfolio. Cousins/New Market Development Company, Inc. ("CNM") is a subsidiary of CREC which develops retail shopping centers. The Registrant, together with CREC, CNM and CREC's other consolidated entities, is hereafter referred to as the "Company." Cousins is an Atlanta-based, fully integrated 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 and office 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. The notes referenced in the discussion below are the "Notes to Consolidated Financial Statements" included in the financial section of the Registrant's 1994 Annual Report to Stockholders. BRIEF DESCRIPTION OF COMPANY INVESTMENTS Presently, the Company owns, directly and indirectly, equity interests of at least 50% in nine high-quality commercial office buildings, primarily in the Atlanta, Georgia area, with aggregate rentable space of approximately 3.9 million square feet (4.4 million gross square feet). (This total includes the Wildwood 3100 Windy Hill Road building, from which the Company derives substantially all of the economic benefits through a ground lease and first mortgage note (see Note 3)). The Company also owns a 9.8% interest in and manages a 1.2 million square foot building in Atlanta, Georgia. In addition to the above completed office buildings, the Company has two office buildings that are currently under construction totaling 349,000 square feet. The Company believes that its portfolio of commercial office buildings is currently the largest (measured by leasable area) in the southeastern United States held by any publicly-traded REIT. The weighted average leased percentage of the nine 50% or more owned buildings which were operational was approximately 92% as of March 15, 1995. The leases at these major office properties expire as follows:
Square Feet Square Feet Expiring Expiring as % of Total Leased ----------- -------------------- 1995 247,140 7%(a) 1996 158,610 4% 1997 88,069 2% 1998 536,307 15%(a) 1999 72,441 2% 2000 253,273 7% 2001 and thereafter 2,235,604 63% --------- ---- 3,591,444 100% ========= ====
(a)Includes 130,847 square feet and 73,896 square feet of leases which expire in 1995 and 1998, respectively, only if significant cancellation penalties are paid. Otherwise, the leases expire 5 years later than shown in the above table. The weighted average remaining lease term of the nine 50% or more owned buildings which were operational was approximately 8 years as of December 31, 1994. All of the Company's major office tenant leases in these buildings provide for pass through of operating expenses, and base rents which escalate over time. In the retail area, which is the primary focus of the Company's current development activity, the Company's holdings at December 31, 1994 include a 50% interest in a regional mall (currently being expanded), a 100% interest in three retail power centers, an 82.3% interest in a fourth retail power center, and a 100% interest in one retail strip center. The retail strip center and one of the retail power centers were under construction at December 31, 1994. The Company purchased sites for and began development of two additional retail power centers in February 1995. All of the Company's retail power centers are significantly preleased to anchor tenants which generally have lease terms of 10 years or more, pass through of operating expenses, and base rents which escalate over time. The weighted average leased percentage of the three operational retail power centers was approximately 98% as of March 15, 1995. The leases at these retail centers expire as follows:
Square Feet Square Feet Expiring Expiring as % of Total Leased ----------- -------------------- 1995 - - 1996 - - 1997 2,195 - 1998 6,000 1% 1999 35,074 5% 2000 37,925 6% 2001 and thereafter 595,947 88% ------- ---- 677,141 100% ======= ====
The weighted average remaining lease term of the three operational retail power centers was approximately 15 years as of December 31, 1994. The Company's other real estate holdings include equity interests in approximately 600 acres of strategically located land held for investment and future development, 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 Carr 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; 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 1994 Significant changes in the Company's business and properties during the year ended December 31, 1994 were as follows: During 1994 the Company completed construction of two retail power centers, North Point Market-Phase I (313,000 square feet) and Presidential Market-Phase I (320,000 square feet, 204,000 square feet owned). For financial reporting purposes North Point Market-Phase I and Presidential Market-Phase I became operational on May 1, 1994 and December 1, 1994, respectively. The Company began construction of North Point-Phase II, a 173,000 square foot expansion (57,000 square feet owned), in August 1994. Additional construction started in 1994 included: Lovejoy Station, a 78,000 square foot retail strip center and Lawrenceville Market, a 519,000 square foot retail power center. Also, development commenced on two power centers in February 1995, which were in the predevelopment stage as of December 31, 1994; Colonial Plaza, a 543,000 square foot retail power center located in Orlando, Florida and Mansell Crossing-Phase II, a 100,000 square foot retail power center expansion adjacent to the Company's other North Point properties. The Company commenced construction of two office buildings during 1994. In September 1994, the Company formed a joint venture with an affiliate of Carr Realty Corporation to jointly develop John Marshall-II a 224,000 square foot building located in suburban Washington, D.C. which is 100% pre-leased. North Point Center, a 125,000 square foot building located adjacent to the Company's other North Point properties which will be 100% owned by the Company, was started in December 1994. In July 1994, the Company entered into a $100 million line of credit with two commercial banks. The line bears interest tied to the Federal funds rate, matures September 30, 1996, and is secured by the Company's partnership interest in CSC Associates, L.P. In conjunction with obtaining the new line, the Company paid off its First Union Tower line of credit. EXECUTIVE OFFICES The Registrant's executive offices are located at 2500 Windy Ridge Parkway, Suite 1600, Atlanta, Georgia 30339. At December 31, 1994, the Company employed 113 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, 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, 1994, except percentage leased which is as of March 15, 1995. Dollars are stated in thousands.
Percentage Description, Year Rentable Leased Average Location Development Joint Venture Company's Square Feet as of 1994 Major Tenants (lease and Completed Partner or Ownership and Acres March 15, Economic expiration/options Zip Code or Acquired Partners Interest as Noted 1995 Occupancy expiration) ------------ ----------- ------------- --------- ----------- --------- --------- --------------------- OFFICE Wildwood Office Park: Suburban Atlanta, GA 2300 Windy Ridge Parkway 30339-5671 1987 IBM 50% 634,000 94% 95% IBM (2002/2012) 12 Acres Georgia Pacific (2002/2007) Electrolux (2000/2005) Computer Associates (1998)(6) Chevron USA (1998/2001/2005) 2500 Windy Ridge Parkway 30339-5683 1985 IBM 50% 313,000 89% 84% Coca-Cola Enterprises Inc. 8 Acres (1998/2008) IBM (1995/2005) 3200 Windy Hill Road 30339-5609 1991 IBM 50% 681,000 95% 93% IBM (2001/2011) 15 Acres Equifax (4) (1998/2003) W.H. Smith Inc. (2002/2007) 3301 Windy Ridge Parkway 30339-5685 1984 N/A 100% 106,000 70% 64% TSW International, Inc. 10 Acres (2003/2008) (7) 3100 Windy Hill Road 30339-5605 1983 N/A (1) 188,000 100% 100% IBM (1998/2003) 13 Acres Adjusted Cost and Adjusted Cost Less Debt Description, Depreciation 1994 FFO (2) Maturity Location Tenants' and ----------------- and and Rentable Amortization Company's Debt Interest Zip Code Sq. Feet (1) 100% Share Balance Rate (3) ----------- -------- ------------ ------ --------- ------- --------- OFFICE Wildwood Office Park: Suburban Atlanta, GA 2300 Windy Ridge Parkway 30339-5671 252,038 $ 76,390 $ 9,995 $ 4,998 $81,822 8/10/99 63,006 $ 54,795 9.090% 62,576 62,445 59,912 2500 Windy Ridge Parkway 30339-56831985 139,944 $ 26,864 $ 4,227 $ 2,114 $31,140 6/28/96 $ 18,347 9.125% 47,689 3200 Windy Hill Road 30339-5609 1991 445,755 $ 78,289 $ 8,592 $ 4,296 $ 9,000 9/01/95 68,642 $ 66,706 Renewable 41,858 Floating 3301 Windy Ridge Parkway 30339-56851984 73,896 $10,368 $ 446 $ 446 $ 0 N/A $ 7,514 3100 Windy Hill Road 30339-5605 188,000 $17,791 $ 2,008 $ 1,964 $ 0 N/A $17,791 Percentage Description, Year Rentable Leased Average Location Development Joint Venture Company's Square Feet as of 1994 Major Tenants (lease and Completed Partner or Ownership and Acres March 15, Economic expiration/options Zip Code or Acquired Partners Interest as Noted 1995 Occupancy expiration) ------------ ----------- ------------- --------- ----------- --------- --------- --------------------- OFFICE (CONTINUED) NationsBank Plaza Atlanta, GA 30308-2214 1992 NationsBank(4) 50%(8) 1,256,000 91% 75% NationsBank(4) 4 Acres (2012/2042) Ernst & Young (2007/2017) Troutman Sanders (2007/2017) Paul Hastings (2012/2017) Hunton & Williams (2004/2009) First Union Tower Greensboro, NC 27401-2167 1990 Weaver 85%(8) 317,000 86% 81% Smith Helms Mullis Downtown, L.P. 1 Acre Moore (2000/2015) First Union Bank (4) (2009/2019) Halstead Industries (2000/2005) Ten Peachtree Place Atlanta, GA 30309-3814 1991 Coca-Cola (4) 50%(8) 259,000 100% 100% Coca-Cola (2001/2006) 5 Acres Summit Green Greensboro, NC 27408-7023 1986 IBM 50% 135,000 100% 100% IBM (1996/2006) 9 Acres(10) Fitech Systems (1999/2004) Massachusetts Mutual Life Ins. Co. (1997/2002) John Marshall-II Suburban Washington, D.C 22102-3802 (13) Carr Realty 50% 224,000 100% (13) Booz-Allen & Hamilton Corporation (4) 3 Acres (2011/2016)(13) North Point Center Suburban Atlanta, GA. 30202-4885 (13) N/A 100% 125,000 0% (13) N/A 7 Acres Adjusted Cost and Adjusted Cost Less Debt Description, Depreciation 1994 FFO (2) Maturity Location Tenants' and ----------------- and and Rentable Amortization Company's Debt Interest Zip Code Sq. Feet (1) 100% Share Balance Rate (3) ----------- -------- ------------ ------ --------- ------- --------- NationsBank Plaza Atlanta, GA 30308-2214 572,742 $216,193 $17,075 $ 8,989 $ 0 N/A $197,632 (8) 188,175 178,459 68,772 43,523 First Union Tower Greensboro, NC 27401-2167 70,360 $ 32,185 $ 3,660 $ 3,660 $ 0 N/A $ 25,125 (8) 62,622 60,253 Ten Peachtree Place Atlanta, GA 30309-3814 259,000 $ 23,474 $ 2,863 $ 301 $21,692 11/30/01(9) $ 21,523 (8) 8.00% Summit Green Greensboro, NC 27408-7023 75,797 $10,667 $ 1,786 $ 893 $10,646 4/01/98 22,688 $ 7,672 9.875% 11,476 John Marshall-II Suburban Washington, D.C 22102-3802 224,000 $ 6,629 (13) (13) $ 0 N/A (13) North Point Center Suburban Atlanta, GA. 30202-4885 N/A $ 543 (13) (13) $ 0 N/A (13) Percentage Description, Year Rentable Leased Average Location Development Joint Venture Company's Square Feet as of 1994 Major Tenants (lease and Completed Partner or Ownership and Acres March 15, Economic expiration/options Zip Code or Acquired Partners Interest as Noted 1995 Occupancy expiration) ------------ ----------- ------------- --------- ----------- --------- --------- --------------------- RETAIL CENTERS AND MALLS Haywood Mall Greenville, SC 29607-2749 1977 Corporate 50% 956,000 98% 93% Sears (5) Property 86 acres overall of J.C. Penney (5) Investors (4) of which 93% of Venture Rich's (5) 272,000 and Venture owned Belk (5) 19 acres are owned owned by joint venture (10) Perimeter Expo Atlanta, GA 30338-1519 1993 N/A 100% 295,000 100% 90% The Home Depot Expo (5) 19 acres overall of Marshalls (2013/2028) of which 100% of Company Best Buy (2013/2028) 178,000 and Company owned Linens `N Things (2013/2023) 10 acres are owned Office Max (2014/2034) owned by the Company North Point Market-Phase I Suburban Atlanta, GA 30202-4889 1994 Coca-Cola (4) 82.3%(8) 313,000 98% 87% Sportstown (2014/2024) (6) 44 Acres (15) (11) Media Play (2009/2024) Marshalls (2009/2024) Linens `N Things (2004/2024) United Artists (2014/2034) Circuit City (2014/2029) PETsMART (2009/2029) North Point Market-Phase II Suburban Atlanta, GA 30202-4885 (13) Coca-Cola (4) 82.3% (8) 173,000 100% (13) Target (5) 16 acres overall Gap's Old Navy Store of which 100% (2000/2010)(13) 57,000 of Company Rhodes (2010/2020)(13) and 5 acres owned are owned by the Company Adjusted Cost and Adjusted Cost Less Debt Description, Depreciation 1994 FFO (2) Maturity Location Tenants' and ----------------------- and and Rentable Amortization Company's Debt Interest Zip Code Sq. Feet (1) 100% Share Balance Rate (3) ----------- -------- ------------ ------ --------- ------- --------- RETAIL CENTERS AND MALLS Haywood Mall Greenville, SC 29607-2749 N/A $ 35,760 $ 7,074 $ 3,537 $ 0 N/A N/A $ 27,076 N/A N/A Perimeter Expo Atlanta, GA 30338-1519 N/A $ 19,209 $ 2,679 $ 2,679 $ 0 N/A 36,598 $ 18,804 36,000 30,351 23,500 North Point Market-Phase I Suburban Atlanta, GA 30202-4889 50,275 $ 21,870 $ 1,558(11) $1,398(11) $ 0 N/A 48,884 $ 21,423 (8) 40,000 35,000 34,800 33,000 25,416 North Point Market-Phase II Suburban Atlanta, GA 30202-4885 N/A $ 1,219 (13) (13) $ 0 N/A 17,000 (13) (8) 40,000 Percentage Description, Year Rentable Leased Average Location Development Joint Venture Company's Square Feet as of 1994 Major Tenants (lease and Completed Partner or Ownership and Acres March 15, Economic expiration/options Zip Code or Acquired Partners Interest as Noted 1995 Occupancy expiration) ------------ ----------- ------------- --------- ----------- --------- --------- --------------------- RETAIL CENTERS AND MALLS (CONTINUED) Presidential Market-Phase I Suburban Atlanta, GA 30278-2149 1994 N/A 100% 320,000 97% 86% Target (5) 29 acres overall of Publix Super of which 95% Company Market (2019/2044) 204,000 and of Company owned T.J. Maxx (2004/2014) 19 acres owned Marshalls (2009/2024) are owned (12) by the Company (16) Lovejoy Station Suburban Atlanta, GA 30228 (13) N/A 100% 78,000 63% (13) Publix Super Market 12 Acres (2015/2035)(13) Lawrenceville Market Suburban Atlanta, GA 30243-5420 (13) N/A 100% 519,000 72% (13) Target (2014/2040)(13) 56 Acres Home Depot (2025/2040) AMC Theater (4) (2016/2036)(13) M.J. Designs (2010/2025) Marshalls (2010/2025)(13) PETsMART (2011/2031)(13) Colonial Plaza Orlando, FL 32803-5029 (17) N/A 100% 543,000 (17) (17) J. Bryons (2007/2027)(17) 49 Acres Circuit City (2015/2035)(17) Barnes & Noble (2011/2021)(17) Rhodes (2011/2026)(17) Linens `N Things (2011/2026)(17) Marshalls (2011/2026)(17) Luria's (2011/2026)(17) Ross Stores (2006/2026)(17) Mansell Crossing-Phase II Suburban Atlanta, GA 30202-4822 (17) Coca-Cola (4) 82.3% (8) 100,000 (17) (17) Rooms To Go (2015/2035)(17) 13 Acres Adjusted Cost and Adjusted Cost Less Debt Description, Depreciation 1994 FFO (2) Maturity Location Tenants' and ----------------------- and and Rentable Amortization Company's Debt Interest Zip Code Sq. Feet (1) 100% Share Balance Rate (3) ----------- -------- ------------ ------ --------- ------- --------- RETAIL CENTERS AND MALLS (CONTINUED) Presidential Market-Phase I Suburban Atlanta, GA 30278-2149 N/A $ 9,580 $ 90(12) $ 90(12) $ 0 N/A $ 9,549 56,146 32,000 30,000 Lovejoy Station Suburban Atlanta, GA 30228 47,955 $ 2,177 (13) (13) $ 0 N/A (13) Lawrenceville Market Suburban Atlanta, GA 30243-5420 117,000 $ 4,568 (13) (13) $ 0 N/A 103,000 (13) 63,000 35,150 30,000 25,416 Colonial Plaza Orlando, FL 32803-5029 54,000 (17) (17) (17) $ 0 N/A 43,432 40,450 40,000 35,000 30,400 32,900 28,000 Mansell Crossing-Phase II Suburban Atlanta, GA 30202-4822 21,000 (17) (17) (17) $ 0 N/A (8) Percentage Description, Year Rentable Leased Average Location Development Joint Venture Company's Square Feet as of 1994 Major Tenants (lease and Completed Partner or Ownership and Acres March 15, Economic expiration/options Zip Code or Acquired Partners Interest as Noted 1995 Occupancy expiration) ------------ ----------- ------------- --------- ----------- --------- --------- --------------------- 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 93% 76% N/A GA Highway 400 Property Suburban Atlanta, GA 30202-4885 1993 N/A 100% 30 Acres 60% 30% N/A Adjusted Cost and Adjusted Cost Less Debt Description, Depreciation 1994 FFO (2) Maturity Location Tenants' and ----------------------- and and Rentable Amortization Company's Debt Interest Zip Code Sq. Feet (1) 100% Share Balance Rate (3) ----------- -------- ------------ ------ --------- ------- --------- STAND ALONE RETAIL SITES ADJACENT TO COMPANY'S OFFICE AND RETAIL PROJECTS Wildwood Office Park Suburban Atlanta, GA 30339-5671 N/A $ 8,790 $ 887(14) $ 444(14) $ 0 N/A $ 8,046 GA Highway 400 Property Suburban Atlanta, GA 30202-4885 N/A $ 4,559 $ 395(18) $ 395(18) $ 0 N/A $ 4,548
(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, Wildwood Stand Alone Retail Lease Sites and North Point Market Phases I and II, 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. 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. (2)FFO represents cash flows from operating activities before interest expense excluding changes in other operating assets and liabilities. 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. (3)Floating rate is .75% over Federal Funds rate; Federal Funds rate averaged 5.45% for the month of December 1994. (4)Actual office or venture partner is affiliate of entity shown. (5)This anchor tenant owns its own space. (6)Currently operating under Chapter 11 bankruptcy proceedings. (7)Computer Associates, Equifax and TSW International, Inc. have the right to terminate their leases in 1995, 1995 and 1998, respectively, upon payment of significant cancellation penalties. The Company is currently negotiating to extend Computer Associates lease to the year 2005. This extension is expected to be signed by April 1995. (8)See "Major Properties - "North Point," "NationsBank Plaza," "First Union Tower" and "Ten Peachtree Place" where the partnership's preferences are discussed. (9)Maturity extendible to December 31, 2008. Rate becomes floating after November 30, 2001. (10)Summit Green and a portion of the Haywood Mall parking lot (3 acres) are subject to long-term ground leases. (11)North Point Market-Phase I became operational for financial reporting purposes on May 1, 1994. Thus, FFO and economic occupancy reported for North Point Market-Phase I represent eight months of operations. FFO (100% share) is expected to be approximately $3.5 million on an annualized basis when the center becomes fully operational. (12)Presidential Market-Phase I became operational for financial reporting purposes on December 1, 1994. Thus, FFO and economic occupancy reported for Presidential Market-Phase I represent one month of operations. FFO is expected to be approximately $1.7 million on an annualized basis when the center becomes fully operational. (13)Project was under construction as of December 31, 1994. Lease expiration dates are based upon estimated commencement dates, and square footage is estimated. (14)Approximately 10 acres of the Wildwood Office Park ground lease sites were generating FFO for the twelve months ended December 31, 1994. Three acres are leased to a tenant whose rental commencement date began June 1, 1994. One acre of the remaining 2 acres is leased to a tenant whose rental commencement begins on April 1, 1995. FFO (100% share) from the total 14 leased acres will be approximately $1 million on an annualized basis. The remaining acre is currently being marketed to prospective tenants. (15)North Point Market-Phase I includes approximately 6 outparcels available for ground lease to freestanding users, of which four are currently leased. The remaining 2 sites are currently being marketed to prospective tenants. (16)Presidential Market-Phase I excludes approximately 5 acres developed as stand alone retail sites held for sale or lease to tenants, which costs are included in Land Held for Investment and Future Development. (17)Land was acquired and construction commenced on these properties subsequent to December 31, 1994. Lease expiration dates are based upon estimated commencement dates, and square footage is estimated. (18)During 1994, rentals were received from 13 acres of the GA Highway 400 Property, with 7 of the acres rentals commencing during 1994. To date leases have been signed for approximately 5 additional acres, with the lease commencements for these 5 acres beginning in the second quarter of 1995. Leases on the 18 leased acres will generate FFO of approximately $700,000 per year. The remaining acres are currently being marketed to prospective tenants. LAND HELD FOR INVESTMENT AND FUTURE DEVELOPMENT
Adjusted Cost (2) 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 151 N/A 100% $ 7,005 $ 0 Office and Commercial 1971-1982 52 IBM 50% $14,739 $ 0 Georgia Highway 400 Land (Georgia Highway 400 & Haynes Bridge Road) (3) Suburban Atlanta, Georgia Office and Commercial - East 1970-1985 70 N/A 100% $ 2,599 $ 0 Office and Commercial - West 1970-1985 230 N/A 100% $ 4,260 $ 0 Midtown Atlanta Office and Commercial 1984 2 N/A 100% $ 2,957 $145(4) Office and Commercial 1985-1989 11 Coca-Cola(5) 50% $ 2,928 $ 0 Temco Associates (Paulding County) Suburban Atlanta, Georgia 1991 -(6) Temple-Inland 50% -(6) $ 0 Inc. (5) Presidential Market Suburban Atlanta, Georgia Retail (Outparcels) - Phase I 1993 5 N/A 100% $ 2,202 $ 0 Retail - Phase II 1994 9 N/A 100% $ 2,236 $ 0 Retail (Outparcels) - Phase II 1994 3 NA 100% $ 159 $ 0 Lawrenceville Gwinnett County Suburban Atlanta, Georgia Multi-Family and Single-Family Residential, Commercial, and Retail (Outparcels) 1994 110 N/A 100% $ 5,549 $ 0
(1)Based upon management's estimates. (2)For the portion of the Wildwood Office Park land and Midtown Atlanta land owned by joint ventures, 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. For the 50%-owned Wildwood Office Park land, the adjusted cost excludes building predevelopment costs of $1,282,000. (3)The Georgia Highway 400 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. This land surrounds North Point Mall, a 1.1 million square foot regional mall (currently being expanded to 1.3 million square feet) on a 100 acre site which the Company sold in 1988 to a joint venture of Homart Development Co. and JMB/Federated Realty Associates, Ltd. (4)This note bears interest at 8.5% and amortizes in equal monthly installments through October 1997. There is a 15% penalty for prepayment of this loan. (5)Joint venture partner is an affiliate of the entity shown. (6)Temco Associates has an option through March 2006, with no carrying costs, to acquire approximately 35,000 acres in Paulding County, Georgia (northwest of Atlanta, Georgia), of which approximately 13,000 acres would be a fee simple interest and approximately 22,000 acres would be a timber rights interest only. The option 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 1993 and 1994, approximately 1,100 and 72 acres, respectively of the option related to the fee simple interest was exercised and simultaneously sold for gross profits of $305,000 and $243,000, respectively. 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 5 office buildings containing 1,922,000 rentable square feet. The property is zoned for office, institutional, and commercial use, with over 7 million additional gross square feet of office and commercial space planned for the park. Approximately 104 acres in the park are owned by, or committed to be contributed to, Wildwood Associates (see below), including approximately 52 acres of land held for future development. The Company owns 100% of the 151 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 between the Company and IBM formed in 1985. The Company and IBM each have a 50% interest in Wildwood Associates. At December 31, 1994, the Company's investment in Wildwood Associates and a related partnership (see "Summit Green") was approximately $3.3 million, which included the cost of the land the Company is committed to contribute to Wildwood Associates. In addition, the Company has severally guaranteed one-half of a $50,000,000 bank line of credit to Wildwood Associates related to the 3200 Windy Hill Road Building, under which $9.0 million was drawn at December 31, 1994. Wildwood Associates owns the 3200 Windy Hill Road Building (681,000 rentable square feet), the 2300 Windy Ridge Parkway Building (634,000 rentable square feet) and the 2500 Windy Ridge Parkway Building (313,000 rentable square feet). At March 15, 1995, these three buildings were 95%, 94% and 89% leased, respectively. Wildwood Associates also owns 14 acres leased to two banking facilities and five restaurants (one under development); an additional one acre retail site currently being marketed to prospective users, and a child care facility. The 3200 Windy Hill Road Building was financed primarily with equity, and at December 31, 1994 had $9 million outstanding debt related to it. The 2300 Windy Ridge Parkway Building and the 2500 Windy Ridge Parkway Building were financed primarily with debt and, at December 31, 1994, had $81.8 million and $31.1 million of outstanding debt related to them, respectively. 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. 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 either directly or indirectly, approximately 169 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. The Company previously sold 100 acres of its holdings located on the east side of Georgia Highway 400 in 1988 to a joint venture of Homart Development Co. and JMB/Federated Realty Associates, Ltd. This joint venture constructed North Point Mall, a 1.1 million square foot regional mall which opened in October 1993 and will be expanded to 1.3 million square feet with the addition of a sixth anchor store (Dillard's). The following describes the various components of North Point. North Point Market Associates, L.P. ("NPMA"). NPMA is a limited partnership between Cousins (82.3%) and an affiliate of Coca-Cola (17.7%). The venture was formed in September 1993 when the Georgia Highway 400 land owned through Spring/Haynes Associates (see Note 5) was distributed to its partners, with each partner concurrently recontributing certain acres of the land to NPMA. Additionally, Cousins contributed certain acres of its wholly owned Georgia Highway 400 land to the new venture. NPMA developed North Point Market-Phase I, a 313,000 square foot retail power center located adjacent to North Point Mall, which became operational for financial reporting purposes in May 1994. The center also includes six outparcels available for ground lease to freestanding users, of which four are currently leased. Construction commenced on North Point Market-Phase II (173,000 square feet, 57,000 square feet owned) in August 1994. In connection with the commencement of construction, NPMA sold 10.8 acres of land in Phase II to Dayton Hudson Corporation, which is developing a Target store on the site. This sale was treated as a tax-free exchange, and in February 1995 the proceeds were swapped into the purchase of land adjacent to the Company's other North Point properties. The Company plans to use this land for Mansell Crossing-Phase II, an approximately 100,000 square foot expansion of an existing retail power center previously developed by the Company for a third party. North Point Market-Phase I was financed partially with equity contributions from both partners, with the remainder financed by a note payable to Cousins which bears interest at the Prime rate plus 1%. The balance of this note payable is $17.7 million at December 31, 1994. The extent to which Cousins receives interest income from the note (which is eliminated in consolidation) creates a preferential return from the Partnership to Cousins. The improvements at North Point Market-Phase II are being financed 100% through this note payable to Cousins. The construction costs of Mansell Crossing-Phase II, however, will be financed 100% through equity contributions from Cousins, thus creating an additional preferential return to Cousins. Wholly Owned North Point Property. In December 1994, the Company commenced construction on North Point Center, a 125,000 square foot office building, located on half of a 14 acre site of the North Point land adjacent to North Point Mall. North Point Center is scheduled to be completed in the first quarter of 1996 at a total cost of approximately $16 million. Approximately 30 acres of the North Point land are being ground leased in 1 to 2 acre sites to freestanding users. The carrying value of this land was transferred to Operating Properties in September 1993. Approximately 18 acres are leased as of March 15, 1995. The remaining approximately 300 developable acres at North Point are 100% owned by the Company. Approximately 70 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 91% leased at March 15, 1995. An affiliate of NationsBank, the fourth largest bank in the United States, leases 46% of the rentable square feet. NationsBank Plaza was developed by CSC Associates, L.P. ("CSC"), a joint venture formed by the Company and C&S Premises, Inc., an affiliate of NationsBank. The Company and C&S Premises, Inc. each have a 50% interest in CSC. In October 1993, the partnership fully repaid all of its debt with equity contributions of $86.7 million made by each partner. At December 31, 1994, the Company's investment in CSC was approximately $105,239,000. The Company has guaranteed one-half of a $5,000,000 bank line of credit under which there was no outstanding balance at December 31, 1994. 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. The Cousins preference is $2.5 million (giving Cousins an additional $1.25 million over what it would otherwise receive), and accrues to Cousins, with interest at 9% to the extent unpaid, over the period February 1, 1992 through January 31, 1995. Following repayment of the partnership's debt in October 1993, Cousins began recognizing its accrued preference currently in income, which resulted in Cousins recognizing $874,000 and $451,000 in income over what it would have otherwise recognized in the years ended December 31, 1993 and 1994, respectively. During the year ended December 31, 1994, Cousins received distributions of the preference and accrued interest of approximately $2.65 million. The remaining preference amount of $71,000 was distributed in January 1995. Amounts above the preference amount are allocated based on the partners' percentage interests. First Union Tower. First Union Tower is a Class A office building containing approximately 317,000 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, 1995 was approximately 86% leased. First Union Tower is owned by North Greene Associates Limited Partnership ("NGA"), which was formed in 1987 as a joint venture of Cousins and Weaver Downtown Limited Partnership. Cousins has an 85% ownership interest in NGA, and accounts for it as a consolidated entity. Cousins is recognizing 100% of the income or losses from NGA until cumulative retained earnings exceed zero or partnership distributions commence, at which time Cousins will recognize 85% of the income or losses, subject to the preference discussed below. Cousins has made a $36 million secured line of credit available to NGA which matures December 31, 1996. At December 31, 1994, the line had a balance of $29.8 million and an interest rate equal to the Federal funds rate plus 1%. Under terms of the line, partnership distributions are prohibited and 100% of the project's operating cash flows have been paid to Cousins. The extent to which Cousins receives interest income from the partnership effectively creates a preferential return to Cousins. 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 94% leased at March 15, 1995. 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 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. 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, 1994, the cumulative undistributed preferred return was $3,006,562. Thereafter, the partners will share in any distributions in accordance with their percentage interests. At December 31, 1994, 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 invest ment, subject to a ten-year purchase money note. This 8% purchase money note had an outstanding balance of $21.7 million at December 31, 1994. 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, 1994, the Company had a negative investment in Ten Peachtree Place Associates of $75,000. 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). Summit Green. Summit Green, a 21-acre office park located in Greensboro, North Carolina, is owned by Wildwood Associates (the partnership with IBM) and a related partnership. The park contains a 135,000 rentable square foot mid-rise office building which was 100% leased at March 15, 1995. The Summit Green land is leased from an unrelated third party for a 99-year term expiring in 2084. Space exists for two additional office buildings, but the Company has no plans to commence additional development without prior leasing commitments. CC-JM II Associates. This joint venture was formed in 1994 between the Company and an affiliate of Carr 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 will be 100% leased for 15 years to Booz-Allen & Hamilton, an international consulting firm, as a part of its corporate headquarters campus, and is scheduled to be completed in 1996 at a total cost of approximately $32 million. Each partner contributed $2.7 million to the venture during 1994. 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. Haywood Mall Associates, a joint venture arrangement formed in 1979 by the Company and Bellwether Properties of South Carolina, L.P., an affiliate of Corporate Properties Investors, owns the mall which is currently being expanded from 956,000 gross leasable square feet ("GLA") (of which the venture's ownership is approximately 272,000 GLA) to 1,256,000 GLA (of which the venture's ownership will be approximately 329,000). The balance of the mall is owned by the mall's major department stores (four prior to the expansion and five afterwards). The portion of Haywood Mall owned by Haywood Mall Associates was developed on approximately 19 acres of land, of which approximately 16 acres is owned and approximately 3 acres (of parking area) is leased under a ground lease expiring in 2067. The portion of Haywood Mall owned by the joint venture was approximately 93% leased as of March 15, 1995 and has been at least 90% leased since 1986. The Company has a 50% interest in Haywood Mall Associates. The Company originally had only a nominal cash investment, but funded an aggregate of $2.8 million in 1988 through 1990 as its 50% share of capital improvements made to the mall, including a new food court area. Additionally, the Company contributed $16.1 million during 1994 to fund its share of the expansion and the prepayment of an existing 9.37% first mortgage in May 1994. The venture intends to continue funding the expansion with additional equity contributions of approximately $6 million from each partner. At December 31, 1994, the Company's investment was $15,985,000. Perimeter Expo Associates, L.P. In June 1993, Perimeter Expo Associates, L.P. (90% owned by Cousins and 10% owned by CNM) purchased the land for and began construction of a retail power center adjacent to Perimeter Mall in Atlanta, Georgia. Perimeter Expo features a new concept called The Home Depot Expo, which was separately developed by The Home Depot as an upscale interior design center. Perimeter Expo contains approximately 295,000 square feet, of which approximately 178,000 square feet are owned by the Company and the balance of the center, 117,000 square feet, owned by The Home Depot. The center opened in November 1993 and became operational for financial reporting purposes on December 1, 1993. Presidential Market. In December 1994, Presidential Market-Phase I, an approximately 320,000 square foot retail power center, located in northeast suburban Atlanta became operational for financial reporting purposes. Cousins owns approximately 204,000 square feet of the center, with the remaining 116,000 square feet separately developed as a Target store which is owned by Dayton Hudson Corporation. In November 1994, Cousins and CNM purchased an additional 14 acres of land adjacent to Presidential Market, of which 2 acres were sold by CNM in December 1994. The Company plans to commence construction on Presidential Market-Phase II on the balance of this land during the first half of 1995. Presidential Market-Phase II is classified as Land Held for Investment or Future Development on the Consolidated Balance Sheets as of December 31, 1994. Lovejoy Station. In September 1994, CREC commenced construction of Lovejoy Station, a 78,000 square foot retail strip center in south central suburban Atlanta. Publix is the anchor tenant of this center, which is scheduled to open in late 1995 at a total cost of approximately $6 million. Lawrenceville Market. In December 1994, Cousins acquired the land for and commenced construction of Lawrenceville Market, a 519,000 square foot retail power center in northeast suburban Atlanta. The center is scheduled to open in late 1995 at a total cost of approximately $23 million. Additionally, CREC and CNM own approximately 110 acres adjacent to Lawrenceville Market which are zoned for various purposes including commercial, retail, single-family and multi- family residential. Approximately 7 of the acres adjacent to Lawrenceville Market that are zoned retail are actively being marketed as stand alone retail sites to either be sold or ground leased to tenants. The remaining acreage is being held for investment or future development. Colonial Plaza. In February 1995, Cousins commenced construction of Colonial Plaza, a 543,000 square foot retail power center in suburban north central Orlando, Florida. The center is scheduled to be completed in the first half of 1996 at a total cost of approximately $45 million. RESIDENTIAL LOT DEVELOPMENTS As of December 31, 1994, CREC owned the following parcels of land which are being developed into residential communities ($ in thousands):
Estimated Total Lots Purchase on Land Money Year Currently Lots Carrying Debt Description Acquired Owned (1) Sold to Date Value Balances ----------- -------- --------- ------------ -------- -------- Brown's Farm 1993 108 56 $1,150 $0 West Cobb County Suburban Atlanta, GA Apalachee River Club 1994 185 36 $2,607 $0 Gwinnett County Suburban Atlanta, GA Echo Mill 1994 218 24 $1,581 $454 West Cobb County Suburban Atlanta, GA Barrett Downs 1994 76 - (2) $1,271 $0 Forsyth County Suburban Atlanta, GA Bradshaw Farms 1994 119 - (2) $1,993 $0 Cherokee County Suburban Atlanta, GA
(1) Additional lots may be developed on adjacent land on which CREC holds purchase options. (2) Lot sales activity in Barrett Downs and Bradshaw Farms will commence in mid-1995. LAND HELD FOR INVESTMENT AND FUTURE DEVELOPMENT In addition to the various land 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. 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 areas of the land into North Point Market Associates, L.P., a consolidated partnership formed between the partners (see above). The Company's remaining investment in Spring/Haynes Associates is $1,603,000 at December 31, 1994. 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 approximately 35,000 acres in Paulding County, Georgia (northwest of Atlanta, Georgia), of which approximately 13,000 acres would be a fee simple interest and approximately 22,000 acres would be a timber rights interest only. The option may be exercised in whole or in part over the option period and the option price of this fee simple land was $655 per acre at December 31, 1994, escalating at 6% per 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 1993 and 1994, approximately 1,100 and 72 acres, respectively of the option related to the fee simple interest was exercised and simultaneously sold for gross profits of $305,000 and $243,000, respectively. 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 Company's share of the gain on this transaction was approximately $.5 million and is included in Income From Joint Ventures in the 1993 Consolidated Statement of Income. 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. The Company currently receives payments of approximately $206,000 per year for its 50% interest in the agreement, and has entered into an agreement to sell its interest for $2 million in July 1996, which would result in a profit to the Company of approximately $411,000. Additionally, in July 1994, each partner contributed $2 million to NHA to pay down $4 million in debt. At December 31, 1994, the Company had an investment of $1,572,000 in NHA. The Company has also guaranteed a $2.6 million line of credit to NHA under which $2.4 million had been drawn at December 31, 1994, and its partner has guaranteed an equal line of credit under which $2.4 million had been drawn at December 31, 1994. 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% preleased 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 are jointly developing the building, with CREC receiving fees of approximately $1.4 million ratably over the development period of January 1994 through June 1995; through December 31, 1994 approximately $931,000 of fees have been received. In addition, the Company will recognize 30% of the venture's profit or 50% of the venture's loss. Due to the Company's continuing involvement in the project (see Notes 4 and 5), all fees and profits are being deferred. 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, 1994 was $1.2 million. Air Rights and Other Property 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 world 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. The Company also owns 0.8 acres of additional land proximate to the CNN Center which is currently being used for surface parking and has a net carrying value of $408,000. SUPPLEMENTAL FINANCIAL AND LEASING INFORMATION Depreciation and amortization expense include the following components ($ in thousands):
1993 1994 Share of Share of Consolidated Unconsolidated Total Consolidated Unconsolidated Total ------------ -------------- ------ ------------ -------------- ------- General and administrative $ 411 $ 205 $ 616 $ 444 $ 202 $ 646 Deferred financing costs 35 80 115 119(1) 80 199 Goodwill and related business acquisition costs 873 503 1,376 441(2) 37 478 Real estate related: Building (including tenant first generation) 1,788 7,517 9,305 2,598 7,724 10,322 Tenant second generation 57 481 538 140 509 649 ------ ------ ------- ------ ------ ------- $3,164 $8,786 $11,950 $3,742 $8,552 $12,294 ====== ====== ======= ====== ====== =======
(1) This amount relates to the First Union Tower line of credit which was paid off in July 1994 and includes accelerated amortization of the unamortized balance of $84 at the time of payoff. (2) Of this amount, $211 relates to costs which were fully amortized during 1994. Exclusive of new developments, the Company had the following capital expenditures during 1994, including its share of unconsolidated joint ventures ($ in thousands):
Office Retail Other Total ------ ------ ----- ----- Second generation related costs $381 $272 $ - $653 Building improvements 62 - - 62 Furniture, fixtures and equipment 31 - 102(1) 133 ---- ---- ---- ---- Total $474 $272 $102 $848 ==== ==== ==== ====
(1) Excludes net expenditure of $522 on trade for a new airplane (50% interest). 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, 1994. 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 63 Chairman of the Board of Directors, President, and Chief Executive Officer Vipin L. Patel 52 Senior Executive Vice President George J. Berry 57 Senior Vice President Tom G. Charlesworth 45 Senior Vice President, Secretary, and General Counsel Daniel M. DuPree 48 Senior Vice President and President of the Retail Division (Cousins/New Market Development Company, Inc.) John L. Murphy 49 Senior Vice President - Marketing W. James Overton 48 Senior Vice President - Development William C. Smith 49 Senior Vice President - Management and Acquisitions Peter A. Tartikoff 53 Senior Vice President and Chief Financial Officer Roy I. Wood, Jr. 73 Senior Vice President - Management (Retiring in April 1995)
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. Patel has been Senior Executive Vice President of the Company since March 1991. He joined the Company in December 1982 and was Executive Vice President from March 1983 through February 1991. 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. DuPree joined the Company in October 1992 and became Senior Vice President in April 1993. Prior to that he was President of New Market Companies, Inc. and affiliates since 1984. Mr. 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. Smith has been Senior Vice President since joining the Company in September 1993. Prior to that he was employed as the Chief Operating Officer and Senior Vice President of The John Akridge Company, an office development company headquartered in Washington, D.C. since 1978. Mr. Tartikoff has been Senior Vice President and Chief Financial Officer of the Company since February 1986. Mr. Wood has been a Senior Vice President of the Company since September 1992 and a Senior Vice President of Cousins Real Estate Corporation since January 1990. From January 1987 to November 1992, he was principally employed as President of Cousins Management, Inc. 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 40 of the Registrant's 1994 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 35 of the Registrant's 1994 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 36 through 39 of the Registrant's 1994 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 35 of the Registrant's 1994 Annual Report to Stockholders are incorporated herein by reference. The information appearing under the caption "Selected Quarterly Financial Information (Unaudited)" on page 41 of the Registrant's 1994 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 and 3 of the Proxy Statement dated March 28, 1995 relating to the 1995 Annual Meeting of the Registrant's Stockholders, and is incorporated herein by reference. ITEM 11.EXECUTIVE COMPENSATION The information appearing under the captions "Executive Compensation" on pages 7 through 12 of the Proxy Statement dated March 28, 1995 relating to the 1995 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 and 3 and "Principal Stockholders" on pages 16 and 17 of the Proxy Statement dated March 28, 1995 relating to the 1995 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, 1995 relating to the 1995 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 35 of the Registrant's 1994 Annual Report to Stockholders and are incorporated herein by reference:
Page Number in Annual Report ---------------- Consolidated Balance Sheets - December 31, 1993 and 1994 19 Consolidated Statements of Income for the Years Ended December 31, 1992, 1993 and 1994 20 Consolidated Statements of Stockholders' Investment for the Years Ended December 31, 1992, 1993 and 1994 21 Consolidated Statements of Cash Flows for the Years Ended December 31, 1992, 1993 and 1994 22 Notes to Consolidated Financial Statements December 31, 1992, 1993 and 1994 23 Report of Independent Public Accountants 35
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, 1993 and 1994 F-2 Combined Statements of Income for the Years Ended December 31, 1992, 1993 and 1994 F-3 Combined Statements of Partners' Capital for the Years Ended December 31, 1992, 1993 and 1994 F-4 Combined Statements of Cash Flows for the Years Ended December 31, 1992, 1993 and 1994 F-5 Notes to Combined Financial Statements December 31, 1992, 1993 and 1994 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, 1993 and 1994 G-2 Statements of Operations for the Years Ended December 31, 1992, 1993 and 1994 G-3 Statements of Partners' Capital for the Years Ended December 31, 1992, 1993 and 1994 G-4 Statements of Cash Flows for the Years Ended December 31, 1992, 1993 and 1994 G-5 Notes to Financial Statements G-6 through December 31, 1992, 1993 and 1994 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, 1994 and 1993 H-2 Statements of Income for the Years Ended December 31, 1994, 1993 and 1992 H-3 Statements of Cash Flows for the Years Ended December 31, 1994, 1993 and 1992 H-4 Statements of Venturers' Equity for the Three Years Ended December 31, 1994 H-5 Notes to Financial Statements H-6 through December 31, 1994, 1993 and 1992 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 SchedulesS- 1 III- Real Estate and Accumulated Depreciation - December 31, 1994S- 2 through S-5 B. Wildwood Associates and Green Valley Associates II: III - Real Estate and Accumulated Depreciation - December 31, 1994F- 13 C. CSC Associates, L.P. III- Real Estate and Accumulated Depreciation - December 31, 1994G- 10 D. Haywood Mall Associates III- Real Estate and Accumulated Depreciation - December 31, 1994H- 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 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. 10(a)(ii)Cousins Real Estate Corporation Stock Appreciation Right Plan, amended and restated as of March 15, 1993, filed as Exhibit 10(a)(ii) to the Registrant's Form 10-K for the year ended December 31, 1992, and incorporated herein by reference. 10(a)(iii)Cousins Properties Incorporated Stock Appreciation Right Plan, dated as of March 15, 1993, filed as Exhibit 10(a)(iii) to the Registrant's Form 10-K for the year ended December 31, 1992, and incorporated herein by reference. 10(a)(iv)Cousins Properties Incorporated 1994 Stock Bonus Plan as effective November 22, 1994, filed as Exhibit 99.2 to the Registrant's Form S-8 dated December 8, 1994, and incorporated herein by reference. 10(b)(i) Cousins Properties Incorporated Profit Sharing Plan as effective as of January 1, 1991, with Amendments Number One and Two dated as of December 22, 1992 and January 1, 1994, respectively. 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(d) 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. ITEM 14.CONTINUED 10(f) Cousins Properties Incorporated 1987 Restricted Stock Plan for Outside Directors, filed as Exhibit A to the Registrant's Proxy Statement dated March 27, 1987 relating to the 1987 Annual Meeting of Registrant's Stockholders, and incorporated herein by reference. 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, 1994. 13 Annual Report to Stockholders for the year ended December 31, 1994. 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. No reports on Form 8-K were filed during the fourth quarter of the year ended December 31, 1994. 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 24, 1995 BY: -------------------------------------------- Peter A. Tartikoff Senior Vice President and Chief Financial 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 24, 1995 President, and Chief Executive Officer. --------------------------- Director T. G. Cousins PRINCIPAL FINANCIAL AND ACCOUNTING OFFICER: Senior Vice President andMarch 24, 1995 --------------------------- Chief Financial Officer Peter A. Tartikoff ADDITIONAL DIRECTORS: -------------------------- Director March 24, 1995 Richard W. Courts, II -------------------------- Director March 24, 1995 Boone A. Knox -------------------------- Director March 24, 1995 Richard E. Salomon
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 24, 1995. 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, 24, 1995 SCHEDULE III (Page 1 of 4) COUSINS PROPERTIES INCORPORATED AND CONSOLIDATED ENTITIES REAL ESTATE AND ACCUMULATED DEPRECIATION DECEMBER 31, 1994 ($ in thousands)
Column A Column B Column C Column D Column E -------- -------- -------- -------- -------- Costs Capitalized Gross Amount at Which Initial Cost Subsequent Carried at to Company to Acquisitions December 31, 1994 ------------------ ----------------- --------------------------------- Carrying Costs Buildings Less Cost Land Buildings and Improve- of Sales and Land and Total Description Encumbrances Land Improvements ments and Other Improvements Improvements (3) ----------- ------------ ---- ------------ ------ --------- ------------ ------------ ----- LAND HELD FOR INVESTMENT OR FUTURE DEVELOPMENT Wildwood - Cobb Co., GA $ - $11,156 $ - $ 4,737 $ (8,888) $ 7,005 $ - $ 7,005 North Fulton Property - Fulton Co., GA - 10,294 - 12,353 (15,788) 6,859 - 6,859 Midtown-Atlanta, GA 145 2,949 - 81 (73) 2,957 - 2,957 McMurray - Cobb Co., GA. - 1,015 - 172 (923) 264 - 264 Presidential Market Outparcels - Gwinnett Co., GA - 2,939 - 582 (1,159) 2,362 - 2,362 Lawrenceville - Gwinnett Co., GA - 5,543 - - 7 5,550 - 5,550 Presidential Market - Phase II - Gwinnett Co., GA - 2,170 - 48 18 2,236 - 2,236 Miscellaneous Investments - Atlanta, GA - 120 - - - 120 - 120 ------------------------------------------------------------------------------------ 145 36,186 - 17,973 (26,806) 27,353 - 27,353 ------------------------------------------------------------------------------------ Column F Column G Column H Column I Life on Which De- preciation Accumu- In 1994 lated Date of Income Deprecia- Construc- Date Statement Description tion (3) tion Acquired Is Computed ----------- --------- --------- -------- ----------- Wildwood-Cobb Co., GA $ - - 1971-1982,1989 - North Fulton Property - Fulton Co., - - 1970-1985 - Midtown - Atlanta, - - 1984 - McMurray - Cobb Co., - - 1981 - Presidential Market Outparcels - Gwinnett Co., GA - - 1993 - Lawrenceville - Gwinnett Co., - - 1994 - Presidential Market - Phase II - Gwinnett Co., GA - - 1994 - Miscellaneous Investments - Atlanta, GA - 1972-1984 - ---- - ----
SCHEDULE III (Page 2 of 4) COUSINS PROPERTIES INCORPORATED AND CONSOLIDATED ENTITIES REAL ESTATE AND ACCUMULATED DEPRECIATION DECEMBER 31, 1994 ($ in thousands)
Column A Column B Column C Column D Column E -------- -------- -------- -------- -------- Costs Capitalized Gross Amount at Which Initial Cost Subsequent Carried at to Company to Acquisitions December 31, 1994 ------------------ ----------------- --------------------------------- Carrying Costs Buildings Less Cost Land Buildings and Improve- of Sales and Land and Total Description Encumbrances Land Improvements ments and Other Improvements Improvements (3) ----------- ------------ ---- ------------ ------ --------- ------------ ------------ ----- OPERATING PROPERTIES First Union Tower - Greensboro, N.C. $ - $ 1,394 $ - $ 29,083 $ 1,971 $ 1,399 $31,049 $ 32,448 Wildwood - 3301 Windy Ridge-Cobb Co., GA - 20 - 8,829 1,519 1,237 9,131 10,368 Kennesaw - Cobb Co., GA - - - 2,337 - - 2,337 2,337 Perimeter Expo - Fulton Co., GA - 8,564 - 10,574 71 8,564 10,645 19,209 GA Highway 400 Stand Alone Retail Sites - Fulton Co., GA - 4,559 - - - 4,559 - 4,559 North Point Market-Phase I Fulton Co., GA - 7,932 - 15,607 394 7,932 16,001 23,933 Presidential Market-Phase I Gwinnett Co., GA - 1,786 - 7,572 222 1,786 7,794 9,580 Norfolk Parking Agreement - 1,589 - - - 1,589 - 1,589 Miscellaneous - 398 145 77 (67) 408 145 553 -------------------------------------------------------------------------------- - 26,242 145 74,079 4,110 27,474 77,102 104,576 -------------------------------------------------------------------------------- Column F Column G Column H Column I Life on Which De- preciation Accumu- In 1994 lated Date of Income Deprecia- Construc- Date Statement Description tion (3) tion Acquired Is Computed ----------- --------- --------- -------- ----------- First Union Tower - Greensboro, N.C. $ 7,119 1988-1990 1987 40 Years Wildwood - 3301 Windy Ridge - Cobb Co., GA 2,854 1984 1984 30 Years Kennesaw - Cobb Co., GA 1,150 1974 1973 30 Years Perimeter Expo - Fulton Co., GA 405 1993 1993 30 Years GA Highway 400 Stand Alone Retail Sites - Fulton Co., GA 10 - 1970-1985 - North Point Market-Phase I Fulton Co., GA 447 1993-1994 1970-1985 30 Years Presidential Market-Phase I Gwinnett Co., GA 32 1993-1994 1993 30 Years Norfolk Parking Agreement - - 1994 - Miscellaneous 95 - 1977-1984 Various ------- 12,112 -------
SCHEDULE III (Page 3 of 4) COUSINS PROPERTIES INCORPORATED AND CONSOLIDATED ENTITIES REAL ESTATE AND ACCUMULATED DEPRECIATION DECEMBER 31, 1994 ($ in thousands)
Column A Column B Column C Column D Column E -------- -------- -------- -------- -------- Costs Capitalized Gross Amount at Which Initial Cost Subsequent Carried at to Company to Acquisitions December 31, 1994 ------------------ ----------------- --------------------------------- Carrying Costs Buildings Less Cost Land Buildings and Improve- of Sales and Land and Total Description Encumbrances Land Improvements ments and Other Improvements Improvements (3) ----------- ------------ ---- ------------ ------ --------- ------------ ------------ ----- PROJECTS UNDER CONSTRUCTION North Point Market-Phase II - Fulton Co., GA $ - $ 567 $ - $ 832 $ 24 $ 567 $ 856 $ 1,423 Lawrenceville Market Gwinnett Co., GA - 3,510 - 1,047 11 3,510 1,058 4,568 North Point Center Fulton Co., GA - 441 - 101 1 441 102 543 Lovejoy Station - Clayton Co., GA - 1,387 - 761 29 1,387 790 2,177 -------------------------------------------------------------------------------------- - 5,905 - 2,741 65 5,905 2,806 8,711 -------------------------------------------------------------------------------------- RESIDENTIAL LOTS UNDER DEVELOPMENT Brown's Farm - Cobb Co., GA - 1,473 - 1,845 (2,168) 1,150 - 1,150 Apalachee River Club Gwinnett Co., GA - 1,820 - 2,023 (1,236) 2,607 - 2,607 Echo Mill Cobb Co., GA 454 1,318 - 1,143 (880) 1,581 - 1,581 Barrett Downs Forsyth Co., GA - 900 - 341 30 1,271 - 1,271 Bradshaw Farms Cherokee Co., GA - 1,741 - 237 15 1,993 - 1,993 -------------------------------------------------------------------------------------- 454 7,252 5,589 (4,239) 8,602 - 8,602 -------------------------------------------------------------------------------------- $599 $ 75,585 $145 $100,382 $(26,870) $69,334 $79,908 $149,242 ====================================================================================== Column F Column G Column H Column I Life on Which De- preciation Accumu- In 1994 lated Date of Income Deprecia- Construc- Date Statement Description tion (3) tion Acquired Is Computed ----------- --------- --------- -------- ----------- PROJECTS UNDER CONSTRUCTION North Point Market-Phase II - Fulton Co., GA $ - 1994 1970-1985 - Lawrenceville Market Gwinnett Co., GA - 1994 1994 - North Point Center Fulton Co., GA - 1994 1994 - Lovejoy Station - Clayton Co., - 1994 1994 - ------- - ------- 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 - ------- - ------- $12,112 =======
SCHEDULE III (Page 4 of 4) COUSINS PROPERTIES INCORPORATED AND CONSOLIDATED ENTITIES REAL ESTATE AND ACCUMULATED DEPRECIATION DECEMBER 31, 1994 ($ in thousands) NOTES: (a) Reconciliations of total real estate carrying value and accumulated depreciation for the three years ended December 31, 1994 are as follows:
Real Estate Accmulated Depreciation ------------------------ ----------------------- 1992 1993 1994 1992 1993 1994 ------- ------- -------- ------ ------ ------- Balance at beginning of period $69,338 $ 71,994 $108,252 $5,703 $7,448 $ 9,418 Additions during the period: Improvements and other capitalized costs 6,231 37,851 53,580 - - - Provision for depreciation - - - 1,974 1,970 2,694 ------ -------- ------- ------ ------ ------- 6,231 37,851 53,580 1,974 1,970 2,694 ------ -------- ------- ------ ------ ------- Deductions during the period: Cost of real estate sold (3,332) (1,593) (12,590) - - - Retirement of fully depreciated 243) - - (229) - - (3,575) (1,593) (12,590) (229) - - ------- -------- -------- ------ ------ ------- Balance at close of period $71,994 $108,252 $149,242 $7,448 $9,418 $12,112 ======= ======== ======== ====== ====== =======
(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, 1993 and 1994, and the related combined statements of income, partners' capital and cash flows for each of the three years in the period ended December 31, 1994. 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, 1993 and 1994, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 1994 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 24, 1995 WILDWOOD ASSOCIATES AND GREEN VALLEY ASSOCIATES II COMBINED BALANCE SHEETS DECEMBER 31, 1993 AND 1994 ($ in thousands)
1993 1994 ASSETS REAL ESTATE ASSETS: Income producing properties, including land of $36,349 and $37,677 in 1993 and 1994, respectively (Note 7) $215,316 $217,869 Accumulated depreciation and amortization (32,932) (40,009) -------- -------- 182,384 177,860 Land committed to be contributed (Note 3) 20,440 20,440 Land and property predevelopment costs 13,958 12,429 -------- -------- Total real estate assets 216,782 210,729 -------- -------- CASH AND CASH EQUIVALENTS, at cost, which approximates market 4 4 -------- -------- OTHER ASSETS: Deferred expenses, net of accumulated amortization of $4,706 and $6,065 in 1993 and 1994, respectively 5,617 4,892 Receivables (Note 6) 14,201 14,506 Allowance for possible losses (Note 1) (2,619) (2,616) Furniture, fixtures and equipment, net of accumulated depreciation of $1,000 and $1,198 in 1993 and 1994, respectively 501 358 Other 48 2 -------- -------- 17,748 17,142 -------- -------- $234,534 $227,875 ======== ======== LIABILITIES AND PARTNERS' CAPITAL NOTES PAYABLE (Note 7) $133,938 $132,608 RETAINAGE, ACCOUNTS PAYABLE AND ACCRUED LIABILITIES 5,156 2,983 -------- -------- Total liabilities 139,094 135,591 -------- -------- PARTNERS' CAPITAL (Notes 3 and 4): International Business Machines Corporation 47,720 46,142 Cousins Properties Incorporated 47,720 46,142 -------- -------- Total partners' capital 95,440 92,284 -------- -------- $234,534 $227,875 ======== ========
The accompanying notes are an integral part of these combined balance sheets. WILDWOOD ASSOCIATES AND GREEN VALLEY ASSOCIATES II COMBINED STATEMENTS OF INCOME FOR THE YEARS ENDED DECEMBER 31, 1992, 1993 AND 1994 ($ in thousands)
1992 1993 1994 ---- ---- ---- REVENUES: Rental income and recovery of expenses charged directly to specific tenants $34,181 $36,104 $36,196 Interest 25 24 27 Other 75 96 82 ------------------------- Total revenues 34,281 36,224 36,305 ------------------------- OPERATING EXPENSES: Real estate taxes 2,089 2,785 2,516 Maintenance and repairs 2,171 2,142 1,991 Utilities 1,801 1,737 1,822 Management and personnel costs 1,665 1,805 1,794 Contract security 720 761 745 Grounds maintenance 672 632 588 Expenses charged directly to specific tenants 1,350 852 458 Insurance 98 99 100 ------------------------- Total operating expenses 10,566 10,813 10,014 ------------------------- OTHER EXPENSES: Interest expense 11,998 11,606 11,790 Depreciation and amortization 8,278 8,336 8,648 Predevelopment, marketing and other expenses 435 489 342 Ground lease expense (Note 8) 322 322 322 Real estate taxes on undeveloped land (Note 4) 194 190 182 General and administrative expenses 184 146 163 ------------------------- Total other expenses 21,411 21,089 21,447 ------------------------- Total expenses 31,977 31,902 31,461 ------------------------- NET INCOME $ 2,304 $ 4,322 $ 4,844 =========================
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, 1992, 1993 AND 1994 ($ in thousands)
International Business Cousins Machines Properties Corporation Incorporated Total ------------ ------------ ----- BALANCE, December 31, 1991 $48,407 $48,407 $96,814 Net income 1,152 1,152 2,304 ------------------------------- BALANCE, December 31, 1992 49,559 49,559 99,118 Distributions (4,000) (4,000) (8,000) Net income 2,161 2,161 4,322 ------------------------------- 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 $92,284 ===============================
The accompanying notes are an integral part of these combined statements. WILDWOOD ASSOCIATES AND GREEN VALLEY ASSOCIATES II COMBINED STATEMENTS OF CASH FLOWS (NOTE 9) FOR THE YEARS ENDED DECEMBER 31, 1992, 1993 AND 1994 ($ in thousands)
1992 1993 1994 ------- ------- ------- CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 2,304 $ 4,322 $ 4,844 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 8,278 8,336 8,648 Rental revenue recognized on straight-line basis in excess of rental revenue specified in the lease agreements (3,278) (570) (349) Change in tenant rental receivables 101 (106) 51 Change in accounts payable and accrued liabilities related to operations 156 24 (195) ------------------------- Net cash provided by operating activities 7,561 12,006 12,999 CASH FLOWS FROM INVESTING ACTIVITIES: Property acquisition and development expenditures (2,389) (3,581) (3,008) Payment for deferred expenses; furniture, fixtures and equipment; and other assets (939) (1,617) (661) ------------------------- Net cash used in investing activities (3,328) (5,198) (3,669) ------------------------- CASH FLOWS FROM FINANCING ACTIVITIES: Repayment of notes payable (2,735) (413) (630) Proceeds from line of credit 4,350 11,500 12,600 Repayments under line of credit (5,350) (10,400) (13,300) Partnership distributions - (8,000) (8,000) ------------------------- Net cash used in financing activities (3,735) (7,313) (9,330) ------------------------- NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 498 (505) - CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 11 509 4 ------------------------- CASH AND CASH EQUIVALENTS AT END OF YEAR $ 509 $ 4 $ 4 =========================
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, 1992, 1993 AND 1994 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 related assets on WWA' s books. The allowance reflects management's evaluation of the credit exposure to WWA based on a specific review of existing tenants and the impact of current economic conditions on those tenants. 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 No. 13 ("SFAS No. 13"), income on leases which include scheduled increases in rental rates over the lease term is recognized on a straight-line basis. 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 the Summit Green project located in Greensboro, North Carolina, and selected property within Wildwood Office Park ("Wildwood"), located in Cobb County, Georgia. Summit Green is a project consisting of one office building and a parts distribution center totaling approximately 144,000 gross square feet ("GSF") which was completed in 1986, and land for two additional office buildings not yet constructed. The two additional buildings are planned to total approximately 240,000 GSF. The 21 acres in the project are leased from a third party by WWA (see Note 8). GVA II subleases the undeveloped portion of this land from WWA. Wildwood is an office park containing a total of approximately 289 acres, of which approximately 73 acres are owned by WWA, and an estimated 31 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, 1994, WWA's income producing real estate assets in Wildwood consisted of: one office building of 338,000 GSF which became operational January 1, 1986, one office building of 684,000 GSF which became operational December 1, 1987 and one office building of 757,000 GSF which became operational April 1, 1991 (including land under such buildings totaling approximately 35 acres); land parcels totaling approximately 13 acres leased to two banking facilities and four restaurants; a 2 acre site on which a child care facility is constructed, and a 1 acre restaurant site. In addition, WWA's assets include 52 acres of land held for future development, which is composed of a 5 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 47 acres of other land to be developed (including additional land committed to be contributed by Cousins) (see Note 3). 3. CONTRIBUTIONS TO THE PARTNERSHIPS IBM and Cousins have each contributed or committed to contribute $62,857,000 in cash or properties to the Partnerships. The value of property contributed was agreed to by the partners at the time of formation of WWA. The status of contributions at December 31, 1994, was as follows ($ in thousands):
IBM COUSINS TOTAL ------- ------- -------- Cash contributed $46,590 $ 84 $ 46,674 Property contributed 16,267 42,817 59,084 Land committed to be contributed - 19,956 19,956 ---------------------------- 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, and condemnation proceeds net of condemnation restoration costs, 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, 1994, Cousins was committed to contribute land on which an additional 1,473,691 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 31 acres if the density were similar to that achieved on land contributed to date. 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. WWA pays all real estate taxes on property owned by Cousins which is subject to future contribution. Such real estate taxes were $194,000, $190,000 and $182,000 in 1992, 1993 and 1994, respectively, all of which were expensed. 5. FEES TO RELATED PARTIES The Partnerships engaged Cousins to develop and lease the Partnerships' property, and Cousins Management, Inc. ("CMI"), to manage the Partnerships' property. In November 1992, Cousins purchased the assets of CMI and assumed all responsibilities under the management agreement. Fees to Cousins and CMI incurred by the Partnerships during 1992, 1993 and 1994 were as follows ($ in thousands):
1992 1993 1994 ---- ---- ---- Development and tenant construction fees $ 63 $ 132 $ 57 Management fees 787 902 909 Leasing and procurement fees 331 523 189 ------------------------ $1,181 $1,557 $1,155 ========================
6. RENTAL REVENUES WWA leases property to the partners, as well as to unrelated third parties. The leases with partners are at rates comparable to those quoted to third parties. The leases typically contain escalation provisions and provisions requiring tenants to pay a pro rata share of operating expenses. The leases typically include renewal options and all are classified and accounted for as operating leases. At December 31, 1994, future minimum rentals to be received under existing non-cancelable leases, including tenants' current pro rata share of operating expenses are as follows ($ in thousands):
Leases Leases With With Third Partners Parties Total -------- ------- ----- 1995 $ 21,560 $17,315 $ 38,875 1996 17,776 13,740 31,516 1997 16,216 13,589 29,805 1998 17,128 11,249 28,377 1999 16,983 6,652 23,635 Subsequent to 1999 33,662 35,455 69,117 ----------------------------- $123,325 $98,000 $221,325 =============================
In the years ended December 31, 1992, 1993 and 1994, income recognized on a straightline basis exceeded income which would have accrued in accordance with the lease terms by $3,278,000, $570,000 and $349,000, respectively. At December 31, 1993 and 1994, 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 $14,022,000, and $14,371,000, respectively. Of the 1994 amount, 60% was related to leases with IBM. 7. NOTES PAYABLE At December 31, 1993 and 1994, notes payable consisted of the following ($ in thousands):
Due In --------------------------------------------------- Six Year-End Years Interest One Two Three Four Five or Description Rate Balance Year Years Years Years Years Later ----------- -------- ------- ------- ------- ------- ------- ------- ------- 2300 Windy Ridge Parkway 9.090% $ 81,822 $ 567 $ 621 $ 679 $ 744 $79,211 $ - 2500 Windy Ridge Parkway 9.125% 31,140 397 30,743 - - - - Summit Green 9.875% 10,646 99 109 121 10,317 - - 3200 Windy Hill Road 6.200% 9,000 9,000 - - - - - -------------------------------------------------------------- December 31, 1994 $132,608 $10,063 $31,473 $ 800 $11,061 $79,211 $ - ============================================================== December 31, 1993 $133,938 $10,330 $ 1,063 $31,473 $ 800 $11,061 $79,211 ==============================================================
The 2300 Windy Ridge Parkway Building note is secured by the building and two additional leased commercial properties in Wildwood, which properties had a net carrying value of approximately $62,300,000 and $60,000,000 at December 31, 1993 and 1994, respectively. The note had been secured by a bank letter of credit but the requirement was canceled on December 5, 1994. The note was payable interest only through August 10, 1994, after which it amortizes in equal monthly installments of $665,108 based on a 30 year amortization schedule, and matures August 10, 1999. The 2500 Windy Ridge Parkway Building note is secured by the building, which had a net carrying value of approximately $21,300,000 and $20,700,000 at December 31, 1993 and 1994, respectively. The note amortizes in equal monthly installments of $268,499 based on a 30 year amortization schedule, and matures June 28, 1996. The Summit Green Building note is secured by a leasehold mortgage on the building, which had a net carrying value of approximately $7,900,000 and $7,600,000 at December 31, 1993 and 1994, respectively. The note amortizes in equal monthly installments of $95,517 based on a 30 year amortization schedule, and matures April 1, 1998. The note related to the 3200 Windy Hill Road building is an unsecured line of credit under which up to $50,000,000 may be drawn. As amended and restated as of August 1, 1990, the line of credit matures September 1, 1995, 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. 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. The Partnerships capitalize interest expense to property under development as required by Statement of Financial Accounting Standards No. 34. In the year ended December 31, 1993, the Partnerships capitalized interest totaling $108,000. No interest was capitalized during the years ended December 31, 1992 and 1994. The estimated fair value of the Partnership's $134 million and $133 million of notes payable at December 31, 1993 and 1994 respectively, is $144 million and $132 million, respectively, calculated by discounting future cash flows under the notes payable at estimated rates at which similar notes would be made currently. 8. GROUND LEASE All of the land in the Summit Green development is subject to a non- subordinated ground lease expiring October 31, 2084. Lease payments commenced December 1, 1986, and are payable in monthly installments at an annual rate of approximately $322,000 per year for the first ten years. The lease rate escalates at ten year intervals commencing December 1, 1996, based on the cumulative increase in the Consumer Price Index ("Index") over the prior ten year period (subject to a 5% annual cap on the increase in such Index in any one year); or, at lessor's option, at the end of any ten year interval the property shall be appraised, and the lessee shall elect to either purchase the land for the appraised value, or pay annually during the succeeding ten year period 10% of the appraised fair market value of the land. 9. COMBINED STATEMENTS OF CASH FLOWS-SUPPLEMENTAL INFORMATION Interest (net of amounts capitalized) was as follows ($ in thousands):
1992 1993 1994 ---- ---- ---- Interest paid $12,038 $11,608 $11,780
Significant non-cash financing and investing activities included the following: In 1992, land parcels with an aggregate value of $4,583,000 were transferred from Land Committed To Be Contributed to Land and Property Predevelopment Costs. In 1993, a land parcel with a value of $926,000 was transferred from Land Committed To Be Contributed to Land and Property Predevelopment Costs. In September 1993, restaurant site parcels under construction with an aggregate value of $6,700,000 were transferred from Land and Property Predevelopment Costs to Income Producing Properties. See Notes 2 and 3. In 1994, the child care facility under construction with an aggregate value of $1,600,000 was transferred from Land and Property Predevelopment Costs to Income Producing Properties. See Notes 2 and 3. SCHEDULE III WILDWOOD ASSOCIATES AND GREEN VALLEY ASSOCIATES II REAL ESTATE AND ACCUMULATED DEPRECIATION DECEMBER 31, 1994 ($ in thousands)
Column A Column B Column C Column D Column E -------- -------- -------- -------- -------- Costs Capitalized Gross Amount at Which Initial Cost Subsequent Carried at to Company to Acquisitions December 31, 1994 ------------------ ----------------- --------------------------------- Carrying Costs Buildings Less Cost Land Buildings and Improve- of Sales and Land and Total Description Encumbrances Land Improvements ments and Other Improvements Improvements (3) ----------- ------------ ---- ------------ ------ --------- ------------ ------------ ----- Wildwood Office Park - Cobb Co., GA 2500 Windy Ridge $ 31,140 $ 4,414 $14,814 $ 9,010 $ 141 $ 4,414 $ 23,965 $ 28,379 2300 Windy Ridge 81,822 8,927 - 61,548 5,429 8,927 66,977 75,904 Parkside - 4,274 2,553 (1,019) (45) 3,136 2,627 5,763 3200 Windy Hill 9,000 10,503 - 65,993 5,470 10,503 71,463 81,966 Stand Alone Retail Sites - 7,659 1,234 3,650 123 9,570 3,096 12,666 Land committed to be contributed - 20,059 - - 381 20,440 - 20,440 Other land and property - 11,430 - 3,457 (104) 11,645 3,138 14,783 --------------------------------------------------------------------------------------- 121,962 67,266 18,601 142,639 11,395 68,635 171,266 239,901 --------------------------------------------------------------------------------------- Summit Green, Greensboro, NC: Summit Green Phase I 10,646 - - 10,077 259 - 10,336 10,336 Other property - - - 501 - - 501 501 --------------------------------------------------------------------------------------- 10,646 - - 10,578 259 - 10,837 10,837 --------------------------------------------------------------------------------------- $132,608 $67,266 $18,601 $153,217 $11,654 $68,635 $182,103 $250,738 ======================================================================================= Column F Column G Column H Column I Life on Which De- preciation Accumu- In 1994 lated Date of Income Deprecia- Construc- Date Statement Description tion (3) tion Acquired Is Computed ----------- --------- --------- -------- ----------- Wildwood Office Park - Cobb Co., GA 2500 Windy Ridge $ 7,714 1985 1985 40 Years 2300 Windy Ridge 17,338 1986 1986 40 Years Parkside 938 1980 1986 25 Years 3200 Windy Hill 10,198 1989 1989 40 Years Stand Alone Retail Sites 727 Various 1985-1992 Various Land committed to be contributed - - 1985-1986 - Other land and property 329 Various 1985-1986 Various ------- 37,244 ------- Summit Green, Greensboro, NC: Summit Green Phase I 2,765 1986 1986 40 Years Other property - 1986 1986 - ------- 2,765 ------- $40,009 ======= NOTE: (a) Reconciliations of total real estate carrying value and accumulated depreciation for the three years ended December 31, 1994 are as follows: Real Estate Accumulated Depreciation ------------------------- ------------------------ 1992 1993 1994 1992 1993 1994 ------- ------- ------- ------- ------- ------- Balance at beginning of period $244,212 $246,472 $249,714 $20,510 $26,039 $32,932 Additions during the period: Improvements, and other capitalized costs 3,747 3,242 1,058 - - - Provisions for depreciation - - - 6,956 6,893 7,111 Deductions during the period: Retirement of fully depreciated assets and writeoffs (1,487) - (34) (1,427) - (34) ---------------------------- ------------------------- Balance at close of period $246,472 $249,714 $250,738 $26,039 $32,932 $40,009 ============================ ========================= >/TABLE> 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, 1993 and 1994, and the related statements of operations, partners' capital, and cash flows for each of the three years in the period ended December 31, 1994. Our audits also included the financial statement schedules of CSC Associates, L.P. listed in the Index at Item 14(a). These financial statements and schedules are the responsibility of the Partnership's management. 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 CSC Associates, L.P. as of December 31, 1993 and 1994, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 1994, 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 applicable schedule listed in Item 14 of Cousins Properties Incorporated Form 10-K for 1994 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. ERNST & YOUNG LLP Atlanta, Georgia February 3, 1995 CSC ASSOCIATES, L.P. BALANCE SHEETS DECEMBER 31, 1993 AND 1994 ($ in thousands)
ASSETS 1993 1994 -------- -------- REAL ESTATE ASSETS: Building and improvements, including land and land improvements of $22,818 in 1993 and 1994 $200,781 $203,275 Accumulated depreciation (9,176) (14,980) -------------------- 191,605 188,295 -------------------- CASH 965 1,395 -------------------- OTHER ASSETS: Deferred expenses, net of accumulated amortization of $1,663 and $2,715 in 1993 and 1994, respectively 8,612 8,170 Receivables (Note 3) 5,522 9,002 Furniture, fixtures and equipment, net of accumulated depreciation of $502 and $866 in 1993 and 1994, respectively 1,434 1,167 Other 37 28 -------------------- Total other assets 15,605 18,367 -------------------- $208,175 $208,057 ==================== LIABILITIES AND PARTNERS' CAPITAL NOTES PAYABLE (Note 4) $ - $ - RETAINAGE, ACCOUNTS PAYABLE AND ACCRUED LIABILITIES 2,322 3,345 -------------------- Total liabilities 2,322 3,345 -------------------- PARTNERS' CAPITAL (Note 1) 205,853 204,712 -------------------- $208,175 $208,057 ====================
The accompanying notes are an integral part of these balance sheets. CSC ASSOCIATES, L.P. STATEMENTS OF OPERATIONS FOR THE YEARS ENDED DECEMBER 31, 1992, 1993 AND 1994 ($ in thousands)
1992 1993 1994 ------- ------- ------- REVENUES: Rental income and recovery of expenses charged directly to specific tenants $19,831 $27,810 $28,931 OPERATING EXPENSES: Real estate taxes 1,468 3,673 3,493 Utilities 1,072 1,317 1,198 Management and personnel costs 1,013 1,311 1,313 Cleaning 763 1,042 1,041 Contract security 360 419 412 Repairs and maintenance 192 258 352 Elevator 11 193 274 Parking 144 186 206 Insurance 101 111 111 Grounds maintenance 41 90 105 ----------------------------- Total operating expenses 5,165 8,600 8,505 ----------------------------- OTHER EXPENSES: Interest expense 12,318 12,317 - Depreciation and amortization 4,448 7,182 7,222 Marketing and other expenses 315 174 154 General and administrative expenses 29 8 41 ------------------------------ Total other expenses 17,110 19,681 7,417 ----------------------------- Total expenses 22,275 28,281 15,922 ----------------------------- CAPITALIZED OPERATIONS 1,392 - - ----------------------------- INCOME (LOSS) BEFORE EXTRAORDINARY ITEM (1,052) (471) 13,009 EXTRAORDINARY ITEM (Note 4) - (723) - ----------------------------- NET INCOME (LOSS) $(1,052) $(1,194) $13,009 =============================
The accompanying notes are an integral part of these statements. CSC ASSOCIATES, L.P. STATEMENTS OF PARTNERS' CAPITAL FOR THE YEARS ENDED DECEMBER 31, 1992, 1993 AND 1994 ($ in thousands)
BALANCE, December 31, 1991 $ 36,652 Net loss (1,052) -------- BALANCE, December 31, 1992 35,600 Net loss (1,194) Capital contributions 173,347 Distributions (1,900) -------- BALANCE, December 31, 1993 205,853 Net income 13,009 Distributions (14,150) -------- BALANCE, December 31, 1994 $204,712 ========
The accompanying notes are an integral part of these statements. CSC ASSOCIATES, L.P. STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 1992, 1993 AND 1994 ($ in thousands) (Note 6)
1992 1993 1994 CASH FLOWS FROM OPERATING ACTIVITIES: Net income (loss) $(1,052) $ (1,194) $13,009 Extraordinary item (Note 4) - 723 - Adjustments to reconcile net income (loss) to net cash provided by operating activities: Depreciation and amortization 4,448 7,182 7,222 Rental revenue recognized on straight-line basis in excess of rental revenue specified in the lease agreements (2,047) (3,333) (3,156) Change in other receivables and other assets (210) 31 (315) Change in accounts payable and accrued liabilities related to operations 2,815 (1,016) 17 ---------------------------- Net cash provided by operating activities 3,954 2,393 16,777 ---------------------------- CASH FLOWS FROM INVESTING ACTIVITIES: Additions to building and improvements (52,169) (7,242) (1,120) Payments for deferred expenses (5,829) (1,732) (1,060) Payments for furniture, fixtures and equipment (1,496) (388) (17) ---------------------------- Net cash used in investing activities (59,494) (9,362) (2,197) ---------------------------- CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from construction loan 55,499 4,533 - Repayment of construction loan - (168,046) - Capital contributions - 173,347 - Partnership distributions - (1,900) (14,150) ---------------------------- Net cash provided by (used in) financing activities 55,499 7,934 (14,150) ---------------------------- NET INCREASE (DECREASE) IN CASH (41) 965 430 CASH AT BEGINNING OF YEAR 41 - 965 ---------------------------- CASH AT END OF YEAR $ - $ - $1,395 ============================
The accompanying notes are an integral part of these statements. CSC ASSOCIATES, L.P. NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1992, 1993 AND 1994 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 Partnership Agreement effective September 29, 1989. C&S Premises, Inc. ("Premises"), a wholly owned subsidiary of C&S/Sovran Corporation (the "Holding Corporation"), and Cousins Properties Incorporated ("CPI"), each own a 1% general partnership and a 49% limited partnership interest in the Partnership. The Holding Corporation became a wholly owned subsidiary of NationsBank Corporation on December 31, 1991. 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, is equal to the estimated fair market value of the land at the time of formation of the Partnership. 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 is $2.5 million, and accrues 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. The accompanying financial statements reflect revenues and expenses subsequent to February 1, 1992, the date the first lease in the building commenced. For financial reporting purposes, the Building was considered operational on June 1, 1992. Capitalized operations in the accompanying statement of operations represent revenues of $4,849,000 and expenses of $6,241,000 which were capitalized for the period February 1, 1992 through May 31, 1992. DEPRECIATION AND AMORTIZATION Depreciation of the Building commenced the date the Building became operational for financial statement purposes and the Building is being depreciated over 40 years. Leasehold and tenant improvements are amortized over the life of the leases or useful life of the assets, whichever is shorter. Furniture, fixtures, and equipment are depreciated over 5 years. Deferred expenses which include organizational costs, certain marketing and leasing costs, and loan acquisition costs are amortized over the period of estimated benefit. The straight line method is used for all depreciation and amortization. INCOME TAXES No provision has been made for federal or state income taxes because each partner's proportionate share of income or loss from the Partnership will be passed through to be included on each partner's separate tax return. RENTAL INCOME In accordance with Statement of Financial Accounting Standards No. 13 ("SFAS No. 13"), income on leases which include increases in rental rates over the lease term is recognized on a straight-line basis. RECLASSIFICATIONS Certain prior year amounts have been reclassified to conform to current presentation. 3. LEASES The Partnership has leased office space to the Holding Corporation, as well as to unrelated third parties. The lease with the Holding Corporation is at rates comparable to those quoted to third parties. The leases contain escalation provisions and provisions requiring tenants to pay a pro rata share of operating expenses. The leases typically include renewal options and all are classified and accounted for as operating leases. At December 31, 1994, future minimum rentals to be received under existing non-cancelable leases, including tenants' current pro rata share of operating expenses, are as follows ($ in thousands):
Lease Leases With With Holding Third Corporation Parties Total ----------- -------- -------- 1995 $ 14,979 $ 13,990 $ 28,969 1996 15,091 15,205 30,296 1997 15,091 15,216 30,307 1998 15,091 15,506 30,597 1999 15,091 15,416 30,507 Subsequent to 1998 187,385 114,696 302,081 --------------------------------- $262,728 $190,029 $452,757 ================================
In the years ended December 31, 1993 and 1994, income recognized on a straight-line basis exceeded income which would have accrued in accordance with the lease terms by $3,333,000 and $3,156,000, respectively. At December 31, 1993 and 1994, receivables which related to the cumulative excess of revenues recognized in accordance with SFAS No. 13 over revenues which accrued in accordance with the actual lease agreements totaled $5,380,000, and $8,536,000, respectively. Of that amount, 27% was related to leases with the Holding Corporation. 4. NOTES PAYABLE At December 31, 1992, notes payable consisted solely of the amount borrowed under a Construction Loan Agreement with six banks under which a maximum of $210 million could have been drawn. On October 29, 1993, using capital contributions made by each partner, the Partnership paid off this note payable, which had an outstanding balance of $168 million. Approximately $723,000 of deferred loan costs were written off due to the early extinguishment of this note payable and is classified as an Extraordinary Item in the accompanying Statements of Operations. The Construction Loan was payable interest only monthly and had a floating interest rate equal to LIBOR plus the Applicable Spread Rate. The Applicable Spread Rate was .85% through May 29, 1992, and .70% through December 31, 1992. The Applicable Spread Rate was reduced to .65% effective January 1, 1993 and .60% effective February 1, 1993 to maturity. The Partnership entered into an interest rate swap agreement with an affiliate of Premises which effectively fixed LIBOR at 8.45% through September 1993. The face amount of the swap increased over time in amounts corresponding to the projected increases in the Construction Loan balance. The Partnership has an unsecured $5 million line of credit provided by an affiliate of Premises. Interest on the line is paid at a floating rate (6.3% weighted average rate in December 1994), and interest only is payable through July 31, 1995, at which time the entire outstanding balance is due. There were no borrowings under the line as of December 31, 1993 and 1994. For the year ended December 31, 1992, the Partnership capitalized interest expense totaling $4,591,000, including $3,853,000 capitalized as part of capitalized operations in 1992. 5. RELATED PARTIES The Partnership engaged an affiliate of CPI, Cousins Real Estate Corporation ("CREC"), to develop and lease the Building and engaged Cousins Management, Inc. ("CMI") to manage the Building. In November 1992, CPI purchased the assets of CMI and assumed all responsibilities under the management agreement. During 1992, 1993 and 1994, fees to CREC, CMI, and CPI incurred by the Partnership were as follows ($ in thousands):
1992 1993 1994 ------ ------ ----- Development and tenant construction fees $1,547 $ 58 $ 25 Leasing and procurement fees 1,145 684 230 Management fees 444 610 640 --------------------- $3,136 $1,352 $ 895 =====================
6. STATEMENT OF CASH FLOWS - SIGNIFICANT NON-CASH TRANSACTIONS In February 1992, the office building under construction with a book value of $167,511,000 was transferred to Buildings and Improvements. In 1993 and 1994, there were no significant non-cash transactions. Interest paid net of amounts capitalized was $13,387,000 and $15,000 in 1993 and 1994, respectively. SCHEDULE III CSC ASSOCIATES, L.P. REAL ESTATE AND ACCUMULATED DEPRECIATION DECEMBER 31, 1994 ($ in thousands)
Column A Column B Column C Column D Column E -------- -------- -------- -------- -------- Costs Capitalized Gross Amount at Which Initial Cost Subsequent Carried at to Company to Acquisitions December 31, 1994 ------------------ ----------------- --------------------------------- Carrying Costs Buildings Less Cost Land Buildings and Improve- of Sales and Land and Total Description Encumbrances Land Improvements ments and Other Improvements Improvements (3) ----------- ------------ ---- ------------ ------ --------- ------------ ------------ ----- NationsBank Plaza Atlanta, Georgia $ - $18,200 $ - $174,626 $10,449 $18,777 $184,498 $203,275 ===================================================================================== Column F Column G Column H Column I Life on Which De- preciation Accumu- In 1994 lated Date of Income Deprecia- Construc- Date Statement Description tion (3) tion Acquired Is Computed ----------- --------- --------- -------- ----------- NationsBank Plaza $14,980 1990-1992 1990 40 Atlanta, Georgia ======= NOTE: (a) Reconciliations of total real estate carrying value and accumulated depreciation for the three years ended December 31, 1994 are as follows: Real Estate Accumulated Depreciation ------------------------- ------------------------ 1992 1993 1994 1992 1993 1994 ------- ------- ------- ------ ------ ------- Balance at beginning of period $164,997 $195,681 $200,781 $ - $3,463 $ 9,176 Improvements and other capitalized costs 30,684 5,100 2,494 - - - Provision for depreciation - - - 3,463 5,713 5,804 -------------------------- ----------------------- Balance at close of period $195,681 $200,781 $203,275 $3,463 $9,176 $14,980 ========================== =======================
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, 1994 and 1993, and the related statements of income, cash flows and venturers' equity for each of the three years in the period ended December 31, 1994. 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, 1994 and December 31, 1993, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 1994, 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 13, 1995 HAYWOOD MALL ASSOCIATES (A SOUTH CAROLINA JOINT VENTURE) BALANCE SHEETS DECEMBER 31, 1994 AND 1993
1994 1993 ------------ ----------- ASSETS Shopping center: Land $ 3,353,335 $ 3,353,335 Building and improvements 19,339,940 19,333,257 -------------------------- 22,693,275 22,686,592 Less: accumulated depreciation 7,412,999 6,827,743 -------------------------- 15,280,276 15,858,849 Construction-in-progress 11,862,132 16,747 Cash 1,630,497 1,574,870 Receivables (principally rentals) less allowance of $249,291 and $268,090 1,988,716 1,739,790 Other assets 2,063,948 1,883,676 -------------------------- $32,825,569 $21,073,932 ========================== LIABILITIES AND PARTNERS' EQUITY Mortgages payable $ - $19,528,977 Accounts payable and accrued liabilities 956,553 898,031 Venturers' equity: Cousins Properties, Inc. 15,891,995 323,462 Bellwether Properties of South Carolina, L.P. 15,977,021 323,462 -------------------------- $32,825,569 $21,073,932 ==========================
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, 1994, 1993 AND 1992
1994 1993 1992 ---------- --------- ---------- INCOME Rental income: Minimum $ 6,050,650 $6,064,131 $5,632,562 Overage 568,546 435,082 526,333 Real estate taxes 418,166 408,422 350,415 Utility charges and other operating expense recoveries 3,287,614 3,044,326 2,995,808 Interest income 45,655 27,320 33,111 ----------------------------------- 10,370,631 9,979,281 9,538,229 ----------------------------------- EXPENSES Mortgage interest 598,389 1,842,232 1,865,533 Repairs and maintenance 882,580 916,474 887,892 Utilities 820,798 806,911 865,129 Managing agent's costs (principally payroll) 840,149 817,137 779,267 Depreciation 597,732 598,780 608,865 Other 486,981 477,501 561,022 Real estate taxes 450,338 444,642 383,427 Leasehold rent 64,765 61,984 61,984 ----------------------------------- 4,741,732 5,965,661 6,013,119 ----------------------------------- INCOME BEFORE EXTRAORDINARY ITEMS 5,628,899 4,013,620 3,525,110 Extraordinary loss from prepayment of mortgage debt 680,277 - - ----------------------------------- NET INCOME $ 4,948,622 $4,013,620 $3,525,110 ===================================
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, 1994, 1993 AND 1992
1994 1993 1992 ---------- --------- ---------- OPERATING ACTIVITIES Net income $ 4,948,622 $4,013,620 $3,525,110 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 597,732 598,780 608,865 Amortization of deferred charges 363,230 338,069 340,192 Straight line adjustment for step lease rentals (114,085) (255,254) (271,143) Loss from prepayment of mortgage debt 680,277 - - Change in operating assets and liabilities: Decrease(increase) in receivables (134,841) 53,552 195,514 Increase in other assets (543,502) (138,880) (228,522) (Decrease)/increase in accounts payable and accrued liabilities 58,522 17,915 (25,011) ----------------------------------- Net Cash Provided by Operating Activities 5,855,955 4,627,802 4,145,005 ----------------------------------- INVESTING ACTIVITIES Investments in shopping center (11,864,544) (27,247) (7,909) ----------------------------------- Cash Used in Investing Activities (11,864,544) (27,247) (7,909) FINANCING ACTIVITIES Principal payments on mortgages (92,492) (260,913) (237,791) Prepayment of mortgage debt (20,116,762) - - Cash distributions (5,758,268) (4,105,000) (3,898,000) Partners' capital contribution 32,031,738 - - ----------------------------------- Cash Used in Financing Activities 6,064,216 (4,365,913) (4,135,791) ----------------------------------- Increase in cash 55,627 234,642 1,305 Cash at beginning of year 1,574,870 1,340,228 1,338,923 ----------------------------------- Cash at end of year $ 1,630,497 $1,574,870 $1,340,228 =================================== SUPPLEMENTAL DISCLOSURE Interest paid during the year $ 750,964 $1,844,258 $1,867,378 ===================================
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, 1994
BELLWETHER COUSINS PROPERTIES OF PROPERTIES, SOUTH CAROLINA, L.P. INC. TOTAL -------------------- ----------- ----------- BALANCE AT DECEMBER 31, 1991 $ 555,597 $ 555,597 $ 1,111,194 Net income 1,762,555 1,762,555 3,525,110 Cash distributions (1,949,000) (1,949,000) (3,898,000) ---------------------------------------------- BALANCE AT DECEMBER 31, 1992 369,152 369,152 738,304 Net income 2,006,810 2,006,810 4,013,620 Cash distributions. (2,052,500) (2,052,500) (4,105,000) ---------------------------------------------- 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 ==============================================
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, 1994, 1993 AND 1992 NOTE A - JOINT VENTURE AGREEMENT Haywood Mall Associates (the "Venture") is a South Carolina Joint Venture between Bellwether Properties of South Carolina, L.P. ("BP"), a South Carolina Limited Partnership, and Cousins Properties, Inc. (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. Construction-in-progress at December 31, 1994 represents costs incurred in connection with expanding the shopping center which is anticipated to be completed during 1995. Taxes: No provision has been made for income taxes, since any taxes which may be payable are the liability of the individual Venturers. NOTE C - MORTGAGES PAYABLE The mortgage notes which bore interest at 9% and 10-l/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, 1994, are as follows:
1995 - $ 67,000 1996 - 67,000 1997 - 67,000 1998 - 67,000 1999 - 70,000 Thereafter - 1,346,000
There are five 10-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, 1994 are as follows:
Year Ending December 31: Amount* ---------- 1995 $ 5,856,757 1996 5,661,736 1997 5,624,127 1998 5,464,690 1999 4,545,167 Thereafter 12,066,167 ----------- TOTAL $39,218,644 ===========
SCHEDULE III HAYWOOD MALL ASSOCIATES REAL ESTATE AND ACCUMULATED DEPRECIATION DECEMBER 31, 1994 ($ in thousands)
Column A Column B Column C Column D Column E -------- -------- -------- -------- -------- Costs Capitalized Gross Amount at Which Initial Cost Subsequent Carried at to Company to Acquisitions December 31, 1994 ------------------ ----------------- --------------------------------- Carrying Costs Buildings Less Cost Land Buildings and Improve- of Sales and Land and Total Description Encumbrances Land Improvements ments and Other Improvements Improvements (3) ----------- ------------ ---- ------------ ------ --------- ------------ ------------ ----- Haywood Mall Greenville, S.C. $ - $3,598 $9,630 $10,669 $0 $3,353 $20,544 $23,897 ==================================================================================== Column F Column G Column H Column I Life on Which De- preciation Accumu- In 1994 lated Date of Income Deprecia- Construc- Date Statement Description tion (3) tion Acquired Is Computed ----------- --------- --------- -------- ----------- Haywood Mall Greenville, S.C. $7,722 1979-1980 1979 35(1) ====== 7(2) NOTES:(1) Estimated useful life for Buildings and Improvements. (2) Estimated useful life for Property Equipment. (3) Reconciliations of total real estate carrying value and accumulated depreciation for the three years ended December 31, 1994 are as follows: Real Estate Accumulated Depreciation ------------------------- ------------------------ 1992 1993 1994 1992 1993 1994 ------- ------- ------- ------ ------ ------ Balance at beginning of period $23,328 $23,291 $23,392 $5,704 $6,321 $7,017 Improvements and other capitalized costs (37) 101 505 - - - Provision for depreciation - - - 617 696 705 ------------------------- ---------------------- Balance at close of period $23,291 $23,392 $23,897 $6,321 $7,017 $7,722 ========================= ======================
EX-11 2 COMPUTATION INCOME PER SHARE EXHIBIT 11
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, 1994 1990 1991 1992 1993 1994 ---------- ---------- ---------- ---------- --------- Shares outstanding at beginning of year 17,336,364 17,337,364 17,341,364 21,716,911 27,830,631 Weighted average number of shares issued during the year 921 3,235 910,631 1,064,574 14,151 Weighted average number of share acquired during the year - (195) (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 17,337,285 17,340,404 18,249,306 22,781,485 27,844,341 ==============================================================
Income from operations before gain on sale of investment properties (000's) $12,802 $ 9,108 $ 9,069 $10,038 $20,539 Gain on sale of investment properties, net of applicable income tax provision (000's) 5,006 - 6,644 1,927 6,356 ----------------------------------------------------------- Net income (000's) $17,808 $ 9,108 $15,713 $11,965 $26,895 =========================================================== Income per share: From operations before gain on sale of investment properties $ .74 $ .53 $ .50 $ .44 $ .74 From gain on sale of investment properties, net of applicable income tax provision .29 - .36 .09 .23 ----------------------------------------------------------- Net income per share $ 1.03 $ .53 $ .86 $ .53 $ .97 ===========================================================
EX-13 3 53 [DESCRIPTION] ANNUAL REPORT DATED 12/31/94 [CAPTION] COUSINS PROPERTIES INCORPORATED AND CONSOLIDATED ENTITIES
CONSOLIDATED BALANCE SHEETS ($ IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) DECEMBER 31, --------------- 1993 1994 ------- ------- ASSETS PROPERTIES (Notes 4 and 8): Operating properties, net of accumulated depreciation of $9,418 in 1993 and $12,112 in 1994 $ 59,361 $ 92,464 Land held for investment or future development 23,877 27,353 Projects under construction 14,556 8,711 Residential lots under development 1,040 8,602 ------------------ Total properties 98,834 137,130 ------------------ CASH AND CASH EQUIVALENTS, at cost, which approximates market 31,684 3,407 NOTES AND OTHER RECEIVABLES (Note 3) 69,455 52,571 INVESTMENT IN UNCONSOLIDATED JOINT VENTURES (Notes 4 and 5) 115,252 130,838 OTHER ASSETS 4,477 6,871 ------------------ TOTAL ASSETS $319,702 $330,817 ================== LIABILITIES AND STOCKHOLDERS' INVESTMENT NOTES PAYABLE (Note 4) $ 35,151 $ 41,799 ACCOUNTS PAYABLE AND ACCRUED LIABILITIES 9,925 11,144 MINORITY INTERESTS IN CONSOLIDATED ENTITIES 3,648 3,631 DEPOSITS AND DEFERRED INCOME 421 1,345 ------------------ TOTAL LIABILITIES 49,145 57,919 ------------------ COMMITMENTS AND CONTINGENT LIABILITIES (Note 4) STOCKHOLDERS' INVESTMENT (Note 6): Common stock, $1 par value, authorized 50,000,000 shares; issued 27,830,631 in 1993 and 27,863,741 in 1994 27,831 27,864 Additional paid-in capital 147,018 147,495 Cumulative undistributed net income 95,708 97,539 ------------------ TOTAL STOCKHOLDERS' INVESTMENT 270,557 272,898 ------------------ TOTAL LIABILITIES AND STOCKHOLDERS' INVESTMENT $319,702 $330,817 ==================
The accompanying notes are an integral part of these consolidated balance sheets. COUSINS PROPERTIES INCORPORATED AND CONSOLIDATED ENTITIES
CONSOLIDATED STATEMENTS OF INCOME ($ IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) YEARS ENDED DECEMBER 31, ------------------------- 1992 1993 1994 ------- ------- ------- REVENUES: Rental property revenues (Note 10) $ 6,933 $ 6,687 $13,150 Development and construction fees 1,744 898 1,020 Management fees (Note 2) 498 1,999 2,061 Leasing and other fees 2,711 3,006 1,942 Residential lot and outparcel sales - - 6,132 Interest and other 6,989 6,456 6,801 ------------------------- 18,875 19,046 31,106 ------------------------- INCOME FROM UNCONSOLIDATED JOINT VENTURES (Note 5) 2,573 5,516 12,580 ------------------------- COSTS AND EXPENSES: Rental property operating expenses 2,354 2,310 3,338 General and administrative expenses 4,585 7,336 7,538 Depreciation and amortization 2,345 3,164 3,742 Leasing and other commissions 404 193 82 Stock appreciation right expense (Note 6) 860 721 433 Residential lot and outparcel cost of sales - - 5,762 Interest expense (Note 4) 820 - 411 Property taxes on undeveloped land 488 537 1,085 Other 163 1,058 922 ------------------------- 12,019 15,319 23,313 ------------------------- INCOME FROM OPERATIONS BEFORE INCOME TAXES AND GAIN ON SALE OF INVESTMENT PROPERTIES 9,429 9,243 20,373 PROVISION (BENEFIT) FOR INCOME TAXES FROM OPERATIONS (Note 7) 360 (795) (166) ------------------------- INCOME BEFORE GAIN ON SALE OF INVESTMENT PROPERTIES 9,069 10,038 20,539 ------------------------- GAIN ON SALE OF INVESTMENT PROPERTIES, NET OF APPLICABLE INCOME TAX PROVISION (Note 7) 6,644 1,927 6,356 ------------------------- NET INCOME $15,713 $11,965 $26,895 ========================= INCOME PER SHARE (Note 6) From operations before gain on sale of investment properties $ .50 $ .44 $ .74 From gain on sale of investment properties, net of applicable income tax provision .36 .09 .23 ------------------------- NET INCOME PER SHARE $ .86 $ .53 $ .97 ========================= CASH DIVIDENDS DECLARED PER SHARE (Note 6) $ .62 $ .73 $ .90 =========================
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, 1992, 1993 AND 1994 ($ IN THOUSANDS) ADDITIONAL CUMULATIVE COMMON PAID-IN UNDISTRIBUTED TREASURY STOCK CAPITAL NET INCOME STOCK TOTAL --------- --------- ------------- -------- ----- BALANCE, December 31, 1991 $20,237 $ 7,421 $107,458 $(21,016) $114,100 Net income, 1992 - - 15,713 - 15,713 Cancellation of treasury stock (2,896) (7,421) (10,699) 21,016 - Common stock issued pursuant to: 4,375,000 share stock offering, net of expenses 4,375 53,389 - - 57,764 Exercise of options 9 101 - - 110 Common stock acquired (8) (63) (29) - (100) Dividends declared - - (11,496) - (11,496) -------------------------------------------------- BALANCE, December 31, 1992 21,717 53,427 100,947 - 176,091 -------------------------------------------------- Net income, 1993 - - 11,965 - 11,965 Common stock issued pursuant to: 6,100,000 share stock offering, net of expenses 6,100 93,401 - - 99,501 Exercise of options and Director stock plan 14 190 - - 204 Dividends declared - - (17,204) - (17,204) -------------------------------------------------- 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 plan, in lieu of cash 21 308 - - 329 Dividends declared - - (25,064) - (25,064) -------------------------------------------------- BALANCE, December 31, 1994 $27,864 $147,495 $ 97,539 $ - $272,898 ==================================================
The accompanying notes are an integral part of these consolidated statements. COUSINS PROPERTIES INCORPORATED AND CONSOLIDATED ENTITIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (Note 9) ($ IN THOUSANDS) YEARS ENDED DECEMBER 31, ------------------------- 1992 1993 1994 ------- -------- ------- CASH FLOWS FROM OPERATING ACTIVITIES: Income before gain on sale of investment properties $ 9,069 $ 10,038 $20,539 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization, net of minority interests' share 2,345 3,164 3,662 Stock appreciation right expense 860 721 433 Cash charges to expense accrual for stock appreciation rights (123) (147) (49) Other non-cash charges (credits) - 310 (623) Rental revenue recognized on straight-line basis in excess of rental revenue specified in lease agreements (804) (391) (209) Deferred income received 284 297 1,131 Deferred income recognized (703) (252) (301) Income from unconsolidated joint ventures (2,573) (5,516)(12,580) Operating distributions from unconsolidated joint ventures 2,370 7,507 15,665 Compensation paid in stock in lieu of cash - - 329 Residential lot and outparcel cost of sales - - 5,667 Changes in other operating assets and liabilities: Change in other receivables (237) 440 (606) Change in accounts payable and accrued liabilities 945 (1,068) 2,549 -------------------------- Net cash provided by operating activities 11,433 15,103 35,607 -------------------------- CASH FLOWS FROM INVESTING ACTIVITIES: Gain on sale of investment properties, net of applicable income tax provision 6,644 1,927 6,356 Adjustments to reconcile gain on sale of investment properties to net cash provided by sales activities: Cost of sales 3,483 1,444 6,923 Deposits and deferred income received 358 - - Deposits and deferred income recognized (9,118) (3,370) - Property acquisition and development expenditures (6,038) (31,358)(53,573) Collection of notes receivable 294 386 45,011 Investment in notes receivable - (5,524)(28,039) Investment in unconsolidated joint ventures, including interest capitalized to equity investments (725) (87,180)(20,844) Change in other assets, net (95) (458) (2,601) Principal payments received on government agency securities 648 585 636 Non-operating distributions from unconsolidated joint ventures - - 586 Non-property acquisitions, net of cash acquired (Note 9) (2,003) - - -------------------------- Net cash used in investing activities (6,552) (123,548)(45,545) -------------------------- CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from lines of credit 788 3,499 73,287 Repayment of lines of credit (34,525) - (50,138) Dividends paid (11,496) (17,204)(25,064) Repayment of other notes payable (480) (43)(16,976) Proceeds from other notes payable 8,616 22,306 475 Common stock sold, net of expenses 57,788 99,564 77 Investment in joint venture by minority interest - 974 - Common stock acquired (100) - - -------------------------- Net cash (used in) provided by financing activities 20,591 109,096 (18,339) -------------------------- NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS 25,472 651 (28,277) CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 5,561 31,033 31,684 -------------------------- CASH AND CASH EQUIVALENTS AT END OF YEAR $31,033 $ 31,684 $ 3,407 ==========================
The accompanying notes are an integral part of these consolidated statements. COUSINS PROPERTIES INCORPORATED AND CONSOLIDATED ENTITIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 1992, 1993 AND 1994 1.SIGNIFICANT ACCOUNTING POLICIES CONSOLIDATION AND PRESENTATION: The Consolidated Financial Statements include the accounts of Cousins Properties Incorporated ("Cousins") and its majority owned partnerships, 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. Certain 1992 and 1993 amounts have been reclassified to conform with the 1994 presentation. 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. 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 received by CREC and its subsidiaries from Cousins and Cousins' majority owned joint ventures 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):
1992 1993 1994 ---- ---- ---- Fees eliminated in consolidation $94 $ 918 $3,019 Internal costs capitalized to projects on which fees were eliminated $67 $1,107 $1,508 Internal costs capitalized to CREC residential developments $ - $ 39 $ 292
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, 1994, cash and cash equivalents included $3 million from a property sale held in escrow pending reinvestment in a tax free exchange. RENTAL PROPERTY REVENUES: In accordance with Statement of Financial Accounting Standards No. 13, income on leases which include scheduled increases in rental rates over the lease term is recognized on a straight-line basis. 2.RELATIONSHIP WITH MANAGEMENT ENTITY AND DEVELOPMENT AND LEASING ENTITY DEVELOPMENT AND LEASING ACTIVITIES - CREC conducts development and leasing activities for real estate projects. A wholly owned subsidiary of CREC, Cousins/New Market Development Company, Inc. ("CNM"), develops retail power centers for the Company. CREC also manages a joint venture property in which it has an ownership interest. At December 31, 1992, 1993 and 1994 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 ($7,839,000 in aggregate) exceed CREC's $2,627,680 of equity. PROPERTY MANAGEMENT ACTIVITIES - Through November 19, 1992, Cousins Management, Inc. ("CMI") conducted property management activities for Cousins and certain of its joint ventures. A charitable foundation was the owner of 100% of the nonvoting common stock of CMI, which stock was entitled to 99% of any dividends. Vipin L. Patel, Senior Executive Vice President of Cousins, was the owner of 100% of the voting common stock of CMI, which stock was entitled to 1% of any dividends. CMI was an independent contractor and was not included in the Company's Consolidated Financial Statements. CMI received $1,338,000 of management fees from the Company and its joint ventures in 1992. All personnel and other costs associated with generating these management fees were absorbed by CMI. On November 20, 1992, after receiving a ruling from the Internal Revenue Service that Cousins' performance of the management activities which had been conducted by CMI would not affect the status, as qualifying REIT income, of the rents received from real property owned by Cousins or its joint ventures, Cousins acquired the assets of CMI and began directly managing properties owned by Cousins and certain of its joint ventures. 3.NOTES AND OTHER RECEIVABLES At December 31, 1993 and 1994, notes and other receivables include the following ($ in thousands):
1993 1994 ------- ------- Wildwood Training Facility Mortgage Note $ 18,208 $17,791 9.1% Mortgage Notes 39,927 - 650 Massachusetts Avenue Mortgage Notes - 28,039 Norfolk Hotel Associates Line of Credit 4,624 - Miscellaneous Notes 80 36 Cumulative rental revenue recognized on a straight- line basis in excess of revenue which accrued in accordance with lease terms (see Note 1) 3,735 3,945 Other Receivables 1,612 2,127 Investment in Government Agency Securities 1,269 633 ----------------- Total Notes and Other Receivables $69,455 $52,571 =================
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 limited partnership also leased certain equipment from the Company. The building was 100% leased to International Business Machines Corporation ("IBM") through November 30, 1993. In January 1993, the IBM lease was extended through November 30, 1998. Concurrently with the IBM lease extension, the mortgage note and leases were also modified, and the Company funded an additional $900,000 under the modified note during 1993 for building improvements. The IBM lease generated net cash flow of approximately $3.7 million annually to the limited partnership through December 31, 1992, of which approximately $3.6 million was paid to the Company as note and lease payments. Effective January 1, 1993, the IBM lease generated net cash flow of approximately $2.4 million annually to the limited partnership, of which approximately $2.3 million was 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. The leased land is carried at $0 in the accompanying financial statements. For financial reporting purposes, the following accounting treatment was applied. During the years ended on and before December 31, 1992, payments from the limited partnership in excess of the ground lease payments were treated as interest (at 12.7%), principal amortization and deferred income. Cumulative deferred income of $3.6 million was applied against the note balance at December 31, 1992. During the years ended December 31, 1993 and 1994, the Company recognized payments as principal amortization over the remaining ground lease term and interest at 9.235% on the carrying value of the note. IBM has an option to extend its Training Facility lease from December 1, 1998 through November 30, 2003 on terms that would generate net cash flow to the limited partnership of approximately $3.1 million annually, of which approximately $3.0 million would be paid to the Company as note and ground lease payments. 9.1% MORTGAGE NOTES - These notes, which represented a portion of the sales proceeds received by the Company on shopping centers it developed and then sold in 1984, were repaid in full on June 30, 1994. The notes were collateralized by the shopping center properties, guaranteed by the AT&T Master Pension Trust, and payable interest only until maturity. During 1992 and 1993, CREC purchased $8.1 million and $21.7 million participations, respectively, in the 9.1% mortgage notes from Cousins. These purchases resulted in Cousins' recognition of gains for tax purposes in 1992 and 1993 of $7.7 million and $20.0 million, respectively, including installment gains in 1992 and 1993 of $7.2 million and $19.5 million, respectively, which had been deferred for tax purposes in 1984. Cousins recognized additional installment gains for tax purposes of approximately $5.0 million upon repayment of the 9.1% mortgage notes in June 1994. 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 $33 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, with the monthly payments treated as interest income at a rate of approximately 10%. NORFOLK HOTEL ASSOCIATES LINE OF CREDIT - This $4.75 million line of credit, which was repaid in full on April 25, 1994, was due from Norfolk Hotel Associates (see Note 5). The interest rate on the line was the daily Federal funds rate plus 75 basis points with payments of interest only until maturity. This line of credit had been used by Cousins for temporary investment of excess cash. Norfolk Hotel Associates repaid the line of credit in full using its Cousins guaranteed bank line of credit (see Note 4). FAIR VALUE - The estimated fair value of the Company's $62.8 million and $45.9 million of notes receivable at December 31, 1993 and 1994, respectively, is $63.8 million and $48.7 million, respectively, calculated by discounting future cash flows from the notes receivable at the estimated rates at which similar loans would be made currently. 4.NOTES PAYABLE, COMMITMENTS, AND CONTINGENT LIABILITIES At December 31, 1993 and 1994, the composition and scheduled maturities of notes payable were as follows ($ in thousands):
DUE IN ------------------------------------------ YEAR-END ONE TWO THREE FOUR FIVE SIX YEARS INTEREST RATE BALANCE YEAR YEARS YEARS YEARS YEARS OR LATER ------------- ------- ------- ------- ------ ----- ----- -------- Line of Credit 6.3% $40,631 $ - $40,631 $ - $ - $ - $ - Land Mortgages 2.0% 600 502 52 46 - - - Unsecured Note 10.0% 298 34 35 35 36 37 121 Life Insurance Loans 8.0% 270 - - - - - 270 ------------------------------------------------ December 31, 1994 $41,799 $ 536 $40,718 $ 81 $36 $37 $391 ================================================ December 31, 1993 $35,151 $30,983 $ 81 $3,587 $81 $36 $383 ================================================
At December 31, 1993 and 1994, the carrying value of notes payable approximates fair value. Interest expense as reported in the Consolidated Statements of Income included herein is net of interest capitalized of $571,000, $346,000 and $1,118,000 in 1992, 1993 and 1994, respectively. The Line of Credit was entered into in July 1994. The line is secured by Cousins' partnership interest in CSC Associates, L.P., which had a net carrying value of $105,239,000 at December 31, 1994 (see Note 5). The line bears interest at the daily Federal funds rate plus .85%, and is payable interest only through September 30, 1996, at which time the outstanding balance is due. At December 31, 1994, up to $100,000,000 may be borrowed under the line, which amount will be reduced by any letters of credit outstanding under the line ($3,200,000 at December 31, 1994). Certain property (carrying value of $991,000 and $2,563,000 in 1993 and 1994, respectively), and cash surrender value of life insurance ($311,000 and $328,000 in 1993 and 1994, respectively), are pledged as collateral on the Land Mortgages and Life Insurance Loans, respectively. In addition to the above indebtedness, at December 31, 1994, Cousins had future lease commitments under a land lease aggregating $7.5 million over its remaining term of 74 years. Current annual lease payments are approximately $63,000. Cousins has guaranteed the following debt obligations related to its unconsolidated joint ventures (see Note 5): a. Wildwood Associates - One half of a $50 million bank line of credit, under which $9,000,000 was drawn at December 31, 1994. The line of credit matures September 1, 1995 but is renewable on an annual basis at the lender's discretion. b. Norfolk Hotel Associates - $2,600,000 bank line of credit under which $2,405,000 was drawn at December 31, 1994. The line of credit matures October 31, 1995. c. CSC Associates, L.P. - One half of a $5 million bank line of credit used for working capital under which there was no outstanding balance at December 31, 1994. d. Dusseldorf Joint Venture - A DEM 4,750,000 (approximately $3.2 million) letter of credit guaranteeing certain obligations related to the Dusseldorf project. The Company has entered into construction and design contracts for real estate projects, of which approximately $9.0 million remains committed at December 31, 1994. 5.INVESTMENT IN UNCONSOLIDATED JOINT VENTURES The following information summarizes financial data and principal activities of unconsolidated joint ventures in which the Company had ownership interests ($ in thousands). Audited financial statements for Wildwood Associates, CSC Associates, L.P., and Haywood Mall Associates are included in the Company's Form 10-K.
COMPANY'S TOTAL ASSETS TOTAL DEBT TOTAL EQUITY INVESTMENT ------------------ ------------------ ------------------ ------------------ 1993 1994 1993 1994 1993 1994 1993 1994 -------- -------- -------- -------- -------- -------- -------- -------- SUMMARY OF FINANCIAL POSITION: Wildwood Associates $234,534 $ 227,875 $133,938 $132,608 $ 95,440 $ 92,284 $ 4,867 $ 3,289 CSC Associates, L.P. 208,175 208,057 - - 205,853 204,712 106,759 105,239 Ten Peachtree Place Associates 22,320 21,814 22,342 21,692 (201) (140) (66) (75) Haywood Mall Associates 21,074 32,826 19,529 - 647 31,869 323 15,985 Spring/Haynes Associates 16,333 16,344 - - 16,267 16,331 1,571 1,603 Norfolk Hotel Associates 11,051 8,011 9,250 4,810 1,659 3,144 830 1,572 CC-JM II Associates - 7,351 - - - 5,281 - 2,711 Other 2,164 2,781 1,101 - 884 1,095 968 514 ------------------ ------------------ ------------------ ------------------ $515,651 $525,059 $186,160 $159,110 $320,549 $354,576 $115,252 $ 30,838 ================== ================== ================== ================== /TABLE>
COMPANY'S SHARE TOTAL REVENUES NET INCOME (LOSS) OF NET INCOME (LOSS ------------------------- ---------------------- --------------------- 1992 1993 1994 1992 1993 1994 1992 1993 1994 ------- ------- ------- ----- ------ ------- ------ ------ ------ SUMMARY OF OPERATIONS: Wildwood Associates $3 4,281 $36,224 $36,305 $2,304 $4,322 $ 4,844 $1,152 $2,161 $ 2,422 CSC Associates, L.P. 19,831 27,810 28,931 (1,052) (1,194) 13,009 (526) 201 6,880 Ten Peachtree Place Associates 4,425 4,263 4,228 166 411 461 92 240 192 Haywood Mall Associates 9,538 9,979 10,371 3,525 4,014 4,949 1,763 2,007 2,474 Spring/Haynes Associates 32 57 63 (162) (214) (66) (81) (107) (33) Norfolk Hotel Associates 10,698 12,680 1,029 214 1,445 664 107 723 332 CC-JM II Associates - - - - - - - - (1) Other 1,293 1,784 999 132 582 627 66 291 314 ------------------------- ----------------------- ----------------------- $80,098 $92,797 $81,926 $5,127 $9,366 $24,488 $2,573 $5,516 $12,580 ========================= ======================= =======================
COMPANY'S SHARE OF ------------------------------------------------- CASH FLOWS FROM CASH FLOWS FROM OPERATING OPERATING ACTIVITIES OPERATING ACTIVITIES CASH DISTRIBUTIONS ------------------------- ------------------------ ----------------------- 1992 1993 1994 1992 1993 1994 1992 1993 1994 ------------------------- ------------------------ ----------------------- SUMMARY OF OPERATING CASH FLOWS: Wildwood Associates $ 7,561 $12,006 $12,999 $ 3,780 $ 6,003 $ 6,500 $ - $4,000 $ 4,000 CSC Associates, L.P. 3,954 2,393 16,777 1,977 2,070 8,840 - 950 8,400 Ten Peachtree Place Associates 828 935 1,165 243 280 315 385 200 200 Haywood Mall Associates 4,146 4,628 5,856 2,073 2,314 2,928 1,949 2,053 2,879 Spring/Haynes Associates (101) (98) (83) (51) (49) (42) - - - Norfolk Hotel Associates 1,136 33 470 568 17 235 - - - CC-JM II Associates - - - - - - - - - Other 192 843 619 96 422 310 36 304 186 ------------------------- ------------------------ ----------------------- $17,716 $20,740 $37,803 $8,686 $11,057 $19,086 $2,370 $7,507 $15,665 ========================= ======================== =======================
WILDWOOD ASSOCIATES - Wildwood Associates was formed in 1985 between the Company and IBM, each as 50% partners. The partnership owns three office buildings totaling 1.6 million rentable square feet, other income producing commercial properties, and additional developable land in Wildwood Office Park ("Wildwood") in Atlanta, Georgia. Wildwood is an office park containing a total of approximately 289 acres, of which approximately 73 acres are owned by Wildwood Associates and an estimated 31 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. Wildwood Associates and a related partnership (included in the amounts for Wildwood Associates above) also own one office building at Summit Green, an office project situated on 21 acres of leased land in Greensboro, North Carolina. Two additional buildings are planned for the project. Through December 31, 1994, 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 $42.8 million for its one-half interest in the partnership, and is obligated to contribute the aforesaid estimated 31 acres of additional land with an agreed value of $20.0 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 ($3.3 million at December 31, 1994) 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 ($46.1 million at December 31, 1994) 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. The building became operational for financial reporting purposes in June 1992. In October 1993, the partnership fully repaid all of its debt with equity contributions of $86.7 million made by each partner. 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. The Cousins preference is $2.5 million (giving Cousins an additional $1.25 million over what it would otherwise receive), and accrues to Cousins, with interest at 9% to the extent unpaid, over the period February 1, 1992 through January 31, 1995. Following repayment of the partnership's debt in October 1993, Cousins began recognizing its accrued preference currently in income, which resulted in Cousins recognizing $874,000 and $451,000 in income over what it would have otherwise recognized in the years ended December 31, 1993 and 1994, respectively. During the year ended December 31, 1994, Cousins received distributions of the preference and accrued interest of approximately $2.65 million. The remaining preference amount of $71,000 was distributed in January 1995. Amounts above the preference amount are allocated based on the partners' percentage interests. 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 ASSOCIATES - Haywood Mall Associates is a joint venture between the Company and an affiliate of Corporate Property Investors. The venture owns Haywood Mall, a regional shopping center on 86 acres 5 miles southeast of downtown Greenville, South Carolina. The mall is currently being expanded from 956,000 gross leaseable square feet ("GLA") (of which the venture's ownership is approximately 272,000 GLA) to 1,256,000 GLA (of which the venture's ownership will be approximately 329,000 GLA). The balance of the mall is owned by the mall's major department stores (four prior to the expansion and five afterwards). During the year ended December 31, 1994, the Company contributed $16.1 million to fund its share of the expansion and the prepayment of an existing 9.37% first mortgage in May 1994. The venture intends to continue funding the expansion with additional equity contributions of approximately $6 million from each partner. 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 Market (see Note 8). The Company's remaining investment in Spring/Haynes Associates as recorded in the Consolidated Balance Sheets ($1.6 million at December 31, 1994) is based upon the Company's historical cost, whereas its investment as recorded on the partnership's books ($8.2 million at December 31, 1994) is based upon the agreed values of the properties at the time they were contributed to the partnership. 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 Company's share of the gain on this transaction was approximately $.5 million and is included in Income From Unconsolidated Joint Ventures in the accompanying Consolidated Statements of Income. 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. The Company currently receives payments of approximately $206,000 per year for its 50% interest in the agreement, and has entered into an agreement to sell its interest for $2 million in July 1996, which would result in a profit to the Company of approximately $411,000. Additionally, in July 1994, each partner contributed $2 million to NHA to pay down $4 million in debt. CC-JM II ASSOCIATES - This joint venture was formed in 1994 between the Company and an affiliate of Carr 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 will be 100% leased for 15 years to Booz-Allen & Hamilton, an international consulting firm, as a part of its corporate headquarters campus, and is scheduled to be completed in 1996 at a total cost of approximately $32 million. Each partner contributed $2.7 million to the venture during 1994. 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. 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 approximately 35,000 acres in Paulding County, Georgia (northwest of Atlanta, Georgia), of which approximately 13,000 acres would be a fee simple interest and approximately 22,000 acres would be a timber rights interest only. The option may be exercised in whole or in part over the option period, and the option price of the fee simple land was $655 per acre at December 31, 1994, escalating at 6% per year during the term of the option. During 1993 and 1994, approximately 1,100 and 72 acres, respectively, of the option related to the fee simple interest was exercised and simultaneously sold for gross profits of $305,000 and $243,000, respectively. 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% preleased 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 are jointly developing the building, with CREC receiving fees of approximately $1.4 million ratably over the development period of January 1994 through June 1995; through December 31, 1994 approximately $931,000 of fees have been received. In addition, the Company will recognize 30% of the venture's profit or 50% of the venture's loss. Due to the Company's continuing involvement in the project (see Note 4), all fees and profits are being deferred until the project's completion and leaseup. ADDITIONAL INFORMATION - At December 31, 1994, total assets of joint ventures included in the above tables include $469 million of real estate properties financed by $145 million of mortgage notes. The Company received $4,342,000, $3,106,000 and $2,539,000 of development, construction, leasing, and management fees from unconsolidated joint ventures in 1992, 1993 and 1994, respectively. At December 31, 1993 and 1994, the composition and scheduled maturities of the Company's 50% share of joint venture debt were as follows ($ in thousands):
DUE IN ---------------------------------------------------- YEAR-END ONE TWO THREE FOUR FIVE SIX YEARS INTEREST RATE BALANCE YEAR YEARS YEARS YEARS YEARS OR LATER ------------- ------- ------- ------- ------- ------ ------- -------- Fixed Rate Mortgages (non-recourse) 9.0% $72,650 $ 892 $16,124 $ 820 $5,986 $40,099 $ 8,729 Floating Rate Lines of Credit 6.2% 6,905 6,905 - - - - - ------------------------------------------------------------- December 31, 1994 $79,555 $ 7,797 $16,124 $ 820 $5,986 $40,099 $ 8,729 ============================================================= December 31, 1993 $93,080 $10,809 $1,048 $16,296 $1,010 $ 6,193 $57,724 -------------------------------------------------------------
The Company's share of interest expense on joint venture debt was $14,334,000, $13,990,000 and $7,262,000 in 1992, 1993 and 1994, respectively. 6.STOCKHOLDERS' INVESTMENT, STOCK APPRECIATION RIGHT EXPENSE AND PER SHARE DATA COMMON STOCK ISSUANCE: In October 1992 and October 1993, Cousins issued 3,975,000 and 5,800,000 shares of common stock, respectively, through public offerings at prices of $14.00 and $17.25 per share, respectively. Concurrently with the public offerings, an additional 400,000 and 300,000 shares, respectively, were purchased at the public offering price by Thomas G. Cousins, Chairman of the Board of Cousins. OPTIONS: The Company has a stock option plan for key employees. At December 31, 1994, the Company had granted options to key employees to purchase 1,183,557 shares of the Company's common stock (including 270,557 shares under a predecessor plan), and was authorized under the plan to grant an additional 1,084,000 stock options. The Company may incorporate a provision in each 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. Separately from the stock option plan, the Company has issued stock appreciation rights ("SARs") to certain employees. 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. Financial Accounting Standards Board pronouncements require that all stock options which have a cash payment election option be accounted for 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 or stock options with cash payment provisions, vesting, changes in the market value of the common stock from the dates of grant, and expirations of non-vested options or SARs of terminated employees. In the first quarter of 1993, the cash payment provision associated with 374,341 stock options was given up by certain of the option holders, thereby reducing stock appreciation right expense for 1993 by approximately $502,000. The following is a summary of stock option activity under the stock option plan (amounts in thousands, except per share amounts):
NUMBER OF TOTAL OPTION SHARES PRICE OPTION PRICE PER SHARE ---------- ---------------- ----------------------------------- 1993 1994 1993 1994 1993 1994 ---- ---- ------- ------- ---------------- ---------------- Outstanding, beginning of year 658 911 $ 9,221 $13,503 $ 4.82 to $17.25 $ 4.82 TO $17.75 Terminated - - - $ - $ - Exercised (11) (11) (51) (57) $ 4.82 $ 4.82 Granted 264 284 4,333 4,473 $16.125 to $17.75 $15.75 ---------------------------- Outstanding, end of year 911 1,184 $13,503 $17,919 $ 4.82 to $17.75 $ 8.11 to $17.75 ============================ Shares exercisable at end of year 455 567 ==========
At December 31, 1993, the Company had 382,605 SARs outstanding (of which 142,015 were exercisable) at prices ranging from $9.87 per share to $16.875 per share. At December 31, 1994, the Company had 369,215 SARs outstanding (of which 225,360 were exercisable) at prices ranging from $10.78 per share to $16.875 per share. At December 31, 1993 and 1994, the total amount accrued for stock options, SARs, and Deferred Payment Agreements was $2,026,000 and $2,296,000, respectively. PER SHARE DATA: Primary income per share is computed by dividing income by the weighted average number of shares of common stock and dilutive common stock equivalents outstanding (18,249,306, 22,781,485 and 27,844,341 in 1992, 1993 and 1994, respectively). Fully diluted income per share does not differ materially from primary income per share in 1992, 1993 and 1994. OWNERSHIP LIMITATIONS: In order to maintain Cousins' qualifications as a REIT, Cousins' Articles of Incorporation include certain restrictions on the ownership of more than 3.9% of the Company's common stock. DISTRIBUTION OF REIT TAXABLE INCOME: The following is a reconciliation between dividends declared and dividends applied in 1992 and 1993 and estimated to be applied in 1994 to meet REIT distribution requirements ($ in thousands):
1992 1993 1994 ------- ------- ------- Dividends declared $11,496 $17,204 $25,064 That portion of dividends declared in current year, and paid in current year, which was applied to the prior year distribution requirements (136) (665) (161) That portion of dividends declared in subsequent year, and paid in subsequent year, which will apply to current year 665 161 2,905 ------------------------- Dividends applied to meet current year REIT distribution requirements $12,025 $16,700 $27,808 =========================
Dividends applied to meet REIT distribution requirements were equal to Cousins' taxable income (see Note 7). Since electing to qualify as a REIT in 1987, Cousins has had no accumulated undistributed taxable income. 7.INCOME TAXES In 1992, 1993 and 1994, because Cousins qualified as a REIT and distributed all of its taxable income (see Note 6), it incurred no federal income tax liability. The differences between taxable income as reported on Cousins' tax return (actual 1992 and 1993 and estimated 1994) and Consolidated Net Income as reported herein are as follows ($ in thousands):
1992 1993 1994 ------- ------- ------- Consolidated net income $15,713 $11,965 $26,895 Consolidating adjustments 178 515 (1,875) Less CREC net loss (income) (366) 1,413 394 Cousins net income for financial reporting purposes 15,525 13,893 25,414 Adjustments arising from: Sales of investment properties 1,085 17,563 3,805 Income from unconsolidated joint ventures (principally depreciation, revenue recognition, and operational timing differences (4,829) (7,529) (2,374) Rental income recognition (726) (403) (127) Interest income recognition - - 343 Wildwood Training Facility differences 765 (7,664) 175 Interest expense (320) 194 400 Compensation expense under stock option and SAR plans 397 138 92 Depreciation 37 59 175 Net operating loss generated (utilized) - 295 (295) Other 91 154 200 ------------------------- Cousins taxable income $12,025 $16,700 $27,808 ========================= The consolidated provision (benefit) for income taxes is composed of the following ($ in thousands): 1992 1993 1994 ------- ------- ------- CREC and its wholly owned subsidiaries: Currently payable (refundable): Federal $ 542 $ (577) $ - State (37) (157) - -------------------------- 505 (734) - -------------------------- Adjustments arising from: Income from unconsolidated joint ventures (153) 687 408 Operating loss carryforward - (628) (75) Stock appreciation right expense (127) (166) (111) Fee income - - (354) Other - 16 (56) -------------------------- (280) (91) (188) -------------------------- CREC provision (benefit) for income taxes 225 (825) (188) Cousins provision for state income taxes 205 30 22 Less provision applicable to gain on sale of investment properties (70) - - -------------------------- Consolidated provision (benefit) applicable to income from operations $ 360 $ (795) $ (166) ==========================
The Cousins provision for state income taxes in 1992 included $185,000 for settlement of prior years' income taxes. The net income tax provision (benefit) differs from the amount computed by applying the statutory federal income tax rate to CREC's income (loss) before taxes as follows ($ in thousands):
1992 1993 1994 ------------ ------------ ------------ AMOUNT RATE AMOUNT RATE AMOUNT RATE ------ ---- ------ ---- ------ ---- Federal income tax provision (benefit) $201 34% $(761) 34% $(198) 34% State income tax provision (benefit), net of federal income tax effect 24 4 (90) 4 (23) 4 Other - - 26 (1) 33 (5) ----------------------------------------- CREC provision (benefit) for income taxes 225 38% (825) 37% (188) 33% === === === Cousins provision for income taxes 205 30 22 Less provision applicable to gain on sale of investment properties (70) - - ----- ---- ----- Consolidated provision (benefit) applicable to income from operations $360 $(795) $(166) ==== ===== =====
The components of CREC's net deferred tax liability are as follows ($ in thousands): 1993 1994 ------- ------- Deferred tax assets $ 1,109 $ 1,702 Deferred tax liabilities (2,622) (3,008) ----------------- Net deferred tax liability $(1,513) $(1,306) ================== The tax effect of significant temporary differences representing CREC's deferred tax assets and liabilities are as follows ($ in thousands): 1993 1994 ------- ------- Operating loss carryforward $ 628 $ 703 Income from unconsolidated joint ventures (2,365) (2,773) Stock appreciation right expense 319 430 Fee income - 354 Other (95) (20) ------------------ $(1,513) $(1,306) ==================
8.PROPERTY TRANSACTIONS RETAIL PROPERTIES In May 1994, North Point Market Phase I, a 313,000 square foot retail power center in north central suburban Atlanta, became operational for financial reporting purposes. Construction began on North Point Market Phase II (173,000 square feet, 57,000 square feet owned) in August 1994. In December 1994, Presidential Market, a 320,000 square foot retail power center (204,000 square feet owned) in northeast suburban Atlanta became operational for financial reporting purposes. In November 1994, additional adjacent acreage was purchased for Phase II of this center, with construction expected to commence in 1995. Additional construction started in 1994 included: Lovejoy Station, a 78,000 square foot retail strip center in south central suburban Atlanta, in September 1994; and Lawrenceville Market, a 519,000 square foot retail power center in northeast suburban Atlanta, in December 1994. In February 1995, the Company purchased sites for Colonial Plaza, a 543,000 square foot retail power center in suburban north central Orlando, Florida, and for Mansell Crossing Phase II, a 100,000 square foot retail power center expansion adjacent to the Company's other North Point properties. OFFICE PROPERTIES In December 1994, construction commenced on a 125,000 rentable square foot building at North Point, adjacent to North Point Mall and the Company's retail properties in north central suburban Atlanta. In September 1994, an unconsolidated joint venture commenced construction on a 224,000 square foot office building in suburban Washington, D.C. (see Note 5). RESIDENTIAL LOTS The Company is currently developing five residential communities in suburban Atlanta, including four in which development commenced in 1994. These developments currently include approximately 450 lots (with additional lots developable on adjacent land under option), of which 116 lots were sold in 1994. 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):
1992 1993 1994 ---- ---- ---- Interest paid $957 $ - $ 336 Income taxes paid (refunded), net of $565 and $577 refunded in 1992 and 1994, respectively $163 $ 68 $(549)
Significant non-cash financing and investing activities included the following: a. In May 1994, North Point Market Phase I (approximately $18,641,000) was transferred from Projects Under Construction to Operating Properties. b. 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). c. In August 1994, North Point Market Phase II (approximately $941,000) was transferred from Land Held for Investment or Future Development to Projects Under Construction. d. In December 1994, Presidential Market (approximately $8,961,000) was transferred from Projects Under Construction to Operating Properties. e. In September 1993, the carrying value of the Company's land and infrastructure costs for North Point Market (approximately $7,933,000) was transferred from Land Held for Investment or Future Development to Projects Under Construction. Included in the $7,933,000 of costs transferred to Projects Under Construction was the Company's carrying value (approximately $495,000) of a concurrent land distribution from Spring/Haynes Associates. Also concurrently, an affiliate of Coca-Cola contributed the land it previously held in Spring/Haynes Associates for a 17.7% minority interest in the North Point Market project, which was recorded at a value of $2,658,000 (see Note 5). f. In December 1993, the $4,709,000 carrying value of approximately 30 acres of the Georgia Highway 400 land being ground leased to freestanding users was transferred from Land Held For Investment or Future Development to Operating Properties. g. Effective June 30, 1992, the Company elected to cancel its outstanding treasury stock. The carrying value of the 2,896,000 shares of treasury stock in excess of $1 per share was charged to additional paid-in capital ($7,421,000) and cumulative undistributed net income ($10,699,000). This transaction had no effect on stockholders' investment. h. In 1992, the Company purchased certain assets of CMI (see Note 2) and New Market Companies, Inc. and affiliates. The assets were acquired subject to certain liabilities as follows ($ in thousands):
Assets acquired (including cash of $609) $3,508 Liabilities 896 Cash paid for assets $2,612
i. In December 1992, cumulative deferred income of $3.6 million was applied against the Wildwood Training Facility Mortgage Note (see Note 3). 10. RENTAL PROPERTY REVENUES The Company's leases typically contain escalation provisions and provisions requiring tenants to pay a pro rata share of operating expenses. The leases typically include renewal options and all are classified and accounted for as operating leases. At December 31, 1994, future minimum rentals to be received by consolidated entities under existing non-cancelable leases, including tenants' current pro rata share of operating expenses, are as follows ($ in thousands):
Retail Office Total ------- ------- -------- 1995 $ 11,818 $ 6,510 $ 18,328 1996 11,964 6,952 18,916 1997 12,135 6,377 18,512 1998 12,207 6,117 18,324 1999 11,961 6,089 18,050 Subsequent to 1999 135,843 22,823 158,666 ----------------------------- $195,928 $54,868 $250,796 =============================
For the years ended December 31, 1992, 1993 and 1994, income recognized on a straight-line basis for financial reporting purposes exceeded income which accrued in accordance with the lease terms by $804,000, $391,000, and $210,000, respectively (see Notes 1 and 3). Of the future minimum office rentals, 86% are attributable to the three major tenants of the Company's First Union Tower project in Greensboro, North Carolina. COUSINS PROPERTIES INCORPORATED AND CONSOLIDATED ENTITIES
FIVE YEAR SUMMARY OF SELECTED FINANCIAL DATA ($ in thousands, except per share amounts) 1990 1991 1992 1993 1994 -------- -------- -------- -------- -------- Rental property revenues $ 4,917 $ 6,728 $ 6,933 $ 6,687 $ 13,150 Fees 5,512 4,855 4,953 5,903 5,023 Residential lot and outparcel sales - - - - 6,132 Interest and other 7,794 7,127 6,989 6,456 6,801 ------------------------------------------------ TOTAL REVENUES 18,223 18,710 18,875 19,046 31,106 ------------------------------------------------ INCOME FROM UNCONSOLIDATED JOINT VENTURES 880 2,434 2,573 5,516 12,580 ------------------------------------------------ Rental property operating expenses 1,890 2,456 2,354 2,310 3,338 Depreciation and amortization 1,911 2,236 2,345 3,164 3,742 Stock appreciation right expense (credit) (1,272) 378 860 721 433 Residential lot and outparcel cost of sales - - - - 5,762 Interest expense 1,376 1,149 820 - 411 General, administrative, and other expenses 4,743 5,573 5,640 9,124 9,627 ------------------------------------------------ TOTAL EXPENSES 8,648 11,792 12,019 15,319 23,313 ------------------------------------------------ PROVISION (BENEFIT) FOR INCOME TAXES FROM OPERATIONS (2,347) 244 360 (795) (166) GAIN ON SALE OF INVESTMENT PROPERTIES, NET OF APPLICABLE INCOME TAX PROVISION 5,006 - 6,644 1,927 6,356 ------------------------------------------------ NET INCOME $ 17,808 $ 9,108 $ 15,713 $ 11,965 $ 26,895 ================================================ INCOME PER SHARE: From operations before gain on sale of investment properties $ .74 $ .53 $ .50 $ .44 $ .74 From gain on sale of investment proper- ties, net of applicable tax provision .29 - .36 .09 .23 ------------------------------------------------ Net income per share $ 1.03 $ .53 $ .86 $ .53 $ .97 ================================================ CASH DIVIDENDS DECLARED PER SHARE $ .60 $ .60 $ .62 $ .73 $ .90 ================================================ Total assets $168,358 $169,406 $195,791 $319,702 $330,817 Notes payable 34,285 34,680 9,079 35,151 41,799 Stockholders' investment 115,345 114,100 176,091 270,557 272,898
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, 1993 and 1994, and the related consolidated statements of income, stockholders' investment and cash flows for each of the three years in the period ended December 31, 1994. 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 Associates which statements combined reflect assets of 44% and 46% of the joint ventures totals as of December 31, 1993 and 1994 and revenues of 37%, 41% and 48% of the 1992, 1993 and 1994 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, 1993 and 1994 and for each of the three years in the period ended December 31, 1994, 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, 1993 and 1994, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 1994 in conformity with generally accepted accounting principles. ARTHUR ANDERSEN LLP Atlanta, Georgia February 24, 1995 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, 1994 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. For information as to certain factors which may affect future income and cash flow, see "Additional Prospective Information." 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 decreased from $6,933,000 in 1992 to $6,687,000 in 1993, and then increased to $13,150,000 in 1994. The increase in 1994 was primarily due to rental property revenues from Perimeter Expo ($3,022,000 increase), North Point Market Phase I ($1,958,000 increase), and Presidential Market ($117,000 increase). These retail power centers became operational in December 1993, May 1994 and December 1994, respectively. Also, $400,000 of the increase in 1994 was due to revenue from 13 acres of the Georgia Highway 400 land being ground leased to freestanding users. Approximately 6 acres of leases began generating income during the fourth quarter of 1993, with the remaining 7 acres of leases beginning throughout 1994. Rental property revenues were also affected by changes which occurred in the 3301 Windy Ridge Parkway Building, a 107,000 square foot Company wholly owned building in Wildwood Office Park, which had rental property revenues of $713,000, $0 and $876,000 in 1992, 1993 and 1994, respectively. This building was unoccupied for the first three months of 1991, after which it was 80% leased to IBM from April 1991 through June 1992. Subsequently, commencing January 1994 a single tenant leased the building for a term of ten years. The lease was initially for 60% of the building, with options permitting the tenant to expand its occupancy to the remainder of the building over the next several years; the first such option for an additional 10% of the space was exercised in the fourth quarter of 1994. Rental property revenues were also favorably impacted over the three year period by First Union Tower, which had rental property revenues of $5,302,000, $5,421,000 and $5,522,000 in 1992, 1993 and 1994, respectively. Rental property operating expenses decreased from $2,354,000 in 1992 to $2,310,000 in 1993 and then increased to $3,338,000 in 1994. The increase in 1994 was primarily related to the occupancy of the three retail power centers in 1994 and the decrease in 1993 was primarily related to the 3301 Windy Ridge Parkway Building being unoccupied in 1993. DEVELOPMENT AND CONSTRUCTION FEES. Development and construction fee income decreased from $1,744,000 to $898,000 in 1993 and then increased to $1,020,000 in 1994. The increase in 1994 was primarily related to development fees received from the Emory Conference Center, a third party development ($235,000 increase). This increase was partially offset by a decrease in office tenant construction activity ($112,000 decrease). The decrease in 1993 was primarily due to the number of office buildings under development which decreased from one in 1992 to none in 1993. Development fees recognized by CNM from third party retail developments was $590,000 in both 1993 and 1994, partially offsetting the 1993 decrease in office related fees. MANAGEMENT FEES. Management fees increased from $498,000 in 1992 to $1,999,000 and $2,061,000 in 1993 and 1994, respectively. Beginning in November 1992, additional management fees were received from projects previously managed by CMI, amounting to $194,000 and $1,673,000 in 1992 and 1993, respectively, (see Note 2). Management fees increased in 1994 primarily due to lease-up of the projects from which management fees are received. LEASING AND OTHER FEES AND LEASING AND OTHER COMMISSIONS EXPENSE. Leasing and other fees increased from $2,711,000 in 1992 to $3,006,000 in 1993, and then decreased to $1,942,000 in 1994. Both the decrease in 1994 and the increase in 1993 were primarily the result of acquiring the retail development business of New Market Companies, Inc. ("NMC") in October 1992, which generated leasing and other fees from third parties. Such fees increased from $49,000 in 1992 to $1,598,000 in 1993, and then decreased to $796,000 in 1994 as third party work was phased out and in-house development increased. The increase in 1993 was partially offset by a decrease in office leasing fees of $1,255,000 due to no new office buildings generating major tenant leasing fees in 1993. Office leasing fees also decreased in 1994 by $262,000. Changes in leasing commission expense were associated primarily with the changes in leasing fee income recognized from One Ninety One Peachtree Tower and retail leasing and other fees received from third parties. RESIDENTIAL LOT AND OUTPARCEL SALES NET OF COST OF SALES. The Company recognized $370,000 of income in 1994 from sales of residential lots and outparcels, including $307,000 from the sale of 116 lots by CREC, and $63,000 from the sale of two outparcel sites by CNM. INTEREST AND OTHER INCOME. Interest and other income decreased from $6,989,000 in 1992 to $6,456,000 in 1993 and then increased to $6,801,000 in 1994. The increase in 1994 is primarily due to interest income of $2,285,000 being recognized from the purchase of the 650 Massachusetts Avenue Notes in March 1994 (see Note 3). Additionally, the Company recognized a gain of $623,000 on the sale of a non-real estate asset in November 1994. Offsetting these increases in 1994 were decreases in interest income received from the 9.1% Mortgage Notes ($1,820,000 decrease) and temporary investments ($511,000 decrease). The 9.1% Mortgage Notes were repaid in full on June 30, 1994 (see Note 3). The decrease in temporary investment income was primarily due to the Company's investment of its excess cash in real estate assets during 1994. Between 1992 and 1993, the decrease was primarily due to a $1,088,000 reduction in interest recognized on the Wildwood Training Facility Mortgage Note (see Note 3). The decrease in 1993 was partially offset by a $403,000 increase in temporary investment income due to higher average cash balances. INCOME FROM UNCONSOLIDATED JOINT VENTURES. (All amounts reflect the Company's share of joint venture income.) Income from unconsolidated joint ventures increased from $2,573,000 in 1992 to $5,516,000 and $12,580,000 in 1993 and 1994, respectively. Income from CSC Associates, L.P. increased from a loss of $526,000 in 1992 to income of $201,000 and $6,880,000 in 1993 and 1994, respectively. The Company's share of both the 1993 and 1994 results benefited by $874,000 and $451,000 in 1993 and 1994, 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). In addition, interest expense was reduced by approximately $1.8 million and $12.3 million in 1993 and 1994, respectively because of the partnership's debt prepayment (see Note 5). Partially offsetting the improvement in 1993 was the benefit in 1992 of the capitalization of $696,000 of startup losses, and the lack of approximately $.7 million of building depreciation until the building became operational in June 1992. Also mitigating the improvement in 1993 was the write-off of $361,000 of unamortized loan closing costs upon prepayment of the partnership's debt in October 1993. Income from Wildwood Associates increased from $1,152,000 in 1992 to $2,161,000 and $2,422,000 in 1993 and 1994, respectively, primarily because of leaseup of the 3200 Windy Hill Road Building (increases of $326,000 and $143,000 in 1993 and 1994, respectively). Results in 1994 were also favorably impacted by increased rental income (approximately $139,000) from certain ground lease sites which began generating revenue during the fourth quarter of 1993 and second quarter of 1994. Additionally, 1993 was favorably impacted by a deferred rent payment received on the 2500 Windy Ridge Parkway Building ($161,000) and less interest expense than in 1992 and 1994 ($195,000 and $92,000, respectively). Income from Haywood Mall Associates increased from $1,763,000 in 1992 to $2,007,000 and $2,474,000, in 1993 and 1994, respectively. The Company's share of the 1994 results was favorably impacted by the venture's prepayment of its outstanding debt through equity contributions of $10 million from each partner on April 29, 1994. Results in 1994 reflect four months of interest expense as compared to twelve months of interest expense in 1993 ($613,000 decrease). Partially offsetting this favorable impact of reduced interest expense was a $340,000 charge incurred related to the prepayment of the venture's mortgage debt. Income from Norfolk Hotel Associates increased from $107,000 in 1992 to $723,000 in 1993, and then decreased to $332,000 in 1994. Income in 1993 was favorably impacted by a $460,000 gain recognized upon the sale of the Omni International Hotel in April 1993. Subsequent to the sale, the partnership recognized more net income from the sales proceeds (including a purchase money first mortgage note) than it was receiving from hotel operations prior to the sale. GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative expenses increased from $4,585,000 in 1992 to $7,336,000 and $7,538,000 in 1993 and 1994, respectively. The increase in 1994 was primarily because of personnel increases related to the Company's expansion, offset by an increase in costs capitalized to projects under development ($1,800,000 in 1994 versus $1,146,000 in 1993). The 1993 increase was primarily due to the acquisition in the fourth quarter of 1992 of CMI ($1,029,000 increase over 1992) and the retail development business of NMC ($1,922,000 increase over 1992 net of costs capitalized to projects under construction). DEPRECIATION AND AMORTIZATION. Depreciation and amortization increased from $2,345,000 in 1992 to $3,164,000 and $3,742,000 in 1993 and 1994, respectively. The 1994 increase is due primarily to three retail power centers, Perimeter Expo, North Point Market Phase I and Presidential Market, becoming operational in December 1993, May 1994 and December 1994, respectively ($824,000 increase). The increase in 1993 was due primarily to an increase of $763,000 in the amortization of intangible assets acquired from NMC. These intangible assets are being written off as the related income is recognized. This amortization decreased in 1994 (approximately $439,000) which partially offset the above increase in depreciation related to the retail power centers. STOCK APPRECIATION RIGHT EXPENSE. Stock appreciation right expense decreased from $860,000 in 1992 to $721,000 and $433,000 in 1993 and 1994, 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 $14.50, $16.50 and $17.375 per share at December 31, 1992, 1993 and 1994, respectively. The cash payment provision associated with 374,341 stock options was given up by certain of the option holders in 1993, thereby reducing stock appreciation right expense by approximately $502,000 (see Note 6). INTEREST EXPENSE. Interest expense decreased from $820,000 in 1992 to $0 in 1993, and then increased to $411,000 in 1994. All interest was capitalized in 1993. In 1994, interest expense before capitalization increased to $1,529,000 due to higher debt levels, but the increase was partially offset by increased capitalization because of a higher level of projects under development. Interest expense was lower in 1993 than in 1992 primarily because the First Union Tower line of credit was paid down to $1,000 from October 1992 through December 30, 1993 with the proceeds from a common stock offering. This reduced interest expense on the line of credit from $1,250,000 in 1992 to $1,000 in 1993. Partially offsetting the decrease in interest expense in 1993 was the amount of interest capitalized to projects under development (a reduction of interest expense), which decreased from $571,000 in 1992 to $347,000 in 1993. PROPERTY TAXES ON UNDEVELOPED LAND. Property taxes on undeveloped land increased from $488,000 in 1992 to $537,000 and $1,085,000 in 1993 and 1994, respectively. The increase in 1994 is due primarily to an increase in property taxes of the Company's Georgia Highway 400 land ($579,000 increase of which $150,000 related to a 1993 property tax reassessment). OTHER EXPENSES. Other expenses increased from $163,000 in 1992 to $1,058,000 in 1993, and then decreased to $922,000 in 1994. Other expenses were negatively impacted in 1993 because of a $310,000 charge made for the present value of an indemnification an insurance company in rehabilitation had made to the Company in 1974, but defaulted on in the third quarter of 1993. This obligation is due in monthly installments of principal and interest of $3,208 through December 2009. Additionally, predevelopment expenses increased $556,000 in 1993 over 1992, and then decreased $244,000 in 1994 from the 1993 level. PROVISION (BENEFIT) FOR INCOME TAXES FROM OPERATIONS. The provision (benefit) for income taxes from operations decreased from a provision of $360,000 in 1992 to a benefit of $795,000 in 1993, which benefit decreased in 1994 to $166,000. The benefit for income taxes from operations decreased from 1993 to 1994 due primarily to a decrease in CREC and its subsidiaries' net loss before income taxes from $2,238,000 in 1993 to $582,000 in 1994. The decrease in CREC and its subsidiaries' net loss before income taxes was due to an increase in intercompany development and leasing fees recognized, and decreased intangible amortization. Intercompany fee income is eliminated in consolidation (see Note 1), but the tax effect is not. In 1993, CREC and its subsidiaries had a higher net loss than in 1992 due to a reduction in CREC's fee income and higher expenses resulting from the acquisition of the retail development business of NMC. GAIN ON SALE OF INVESTMENT PROPERTIES. Gain on sale of investment properties was $6,644,000, $1,927,000 and $6,356,000 in 1992, 1993 and 1994, respectively. 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 Market 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). The 1993 gain and $6.0 million of the 1992 gain was from profits recognized on the sale of 100 acres in 1988 at North Point; the Company recognized profits on this sale based on percentage of completion accounting as certain infrastructure work required by the sales contract was completed in 1992 and 1993. The balance of the 1992 gain was from the sale of a 27 acre parcel in West Cobb County Georgia. Net proceeds received from land sales were $1,084,000, $0 and $9,793,000 in 1992, 1993 and 1994, respectively. ADDITIONAL PROSPECTIVE INFORMATION The Company opened two retail power centers during 1994, North Point Market in May 1994 and Presidential Market in December 1994. Cash flows from operating activities from these two retail power centers will increase in 1995 as the Company recognizes a full year of operations. The Company's share of cash flows from operating activities from CSC Associates, L.P. will increase in 1995 as leases at NationsBank Plaza executed in 1994 impact operating results. Development fees are expected to decrease in 1995 as the Company's involvement with third party development decreases and its development capacity is shifted almost entirely to Company owned projects. As the Company begins to increase the level of work on internal projects, internal fees (which are eliminated in consolidation) and capitalized development overhead are expected to increase in 1995. Interest expense will increase in 1995 as projects that have been under construction become operational and associated interest expense is no longer capitalized. In addition to being a 50% partner in Wildwood Associates, IBM is a major tenant in Wildwood Office Park and Summit Green. IBM has undergone a downsizing and is making a portion of its leased space available to new tenants. This has provided Cousins with a marketing advantage by allowing cash flow to be maintained, while making space available to prospective tenants for extended leases on very competitive lease terms. The following is a breakdown as of December 31, 1994, of the office space leased by IBM (square feet in thousands):
Square Feet Square Feet Square Feet Primary Re-leased Currently Square Feet Leased at Lease or Sub-leased to Available Currently January 1, Expiration Others During for Re-leasing Retained Building 1993 Date 1993 and 1994 or Sub-leasing by IBM -------- ----------- ---------- ---------------- -------------- ---------- Wildwood 2300 315 December 2002* 166 149 - Wildwood 2500 186 December 1995 144 42 - Wildwood 3100 188 November 1998 - - 188 Wildwood 3200 446 December 2001 - 226 220 Summit Green 104 November 1996 35 54 15 ----- --- --- --- 1,239 345 471 423 ===== === === ===
*12 square feet expired December 1994. Major tenants in the re-leased space included Coca-Cola Enterprises (140,000 square feet) and Georgia Pacific (63,000 square feet). Letters of intent have been signed for an additional 70,000 square feet of space, and the Company is negotiating with two prospective tenants for an additional 140,000 square feet of space. LIQUIDITY AND CAPITAL RESOURCES The Company's debt (including its pro rata share of unconsolidated joint venture debt) was only 20% of total market capitalization at December 31, 1994, giving the Company excellent financial flexibility. The Company has development projects in various planning stages. The Company currently intends to finance these projects, projects currently under construction and capital contributions to various joint ventures discussed in Notes 5 and 8 of "Notes to Consolidated Financial Statements", by using existing lines of credit, (increasing those lines of credit as required), and long-term non-recourse financing on the Company's unleveraged projects as market conditions warrant. 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:
1993 QUARTERS 1994 QUARTERS ------------------------------------- ------------------------------------- FIRST SECOND THIRD FOURTH FIRST SECOND THIRD FOURTH ------- ------- ------- ------- ------- ------- -------- ------- High $ 18 $18 $18 1/4 $18 3/8 $17 5/8 $18 $17 3/4 $17 3/8 Low 14 1/4 14 7/8 15 3/8 15 1/2 15 7/8 15 1/8 15 3/4 15 31/4 Dividends Declared .17 .17 .17 .22 .22 .22 .22 .24 Payment Date 2/22/93 5/28/93 8/24/93 12/21/93 2/22/94 5/27/94 8/27/94 12/21/94
The Company's stock trades on the New York Stock Exchange (ticker symbol CUZ). At December 31, 1994, there were 1,139 stockholders of record. In 1993, the Company designated all dividends as capital gain dividends. In 1994, the Company designated as capital gain dividends 42.1818% of the dividend paid February 22, 1994 and all of the dividends paid May 27, 1994. All other dividends paid in 1994 were taxable as ordinary dividends. In addition, in 1993 and 1994 an amount calculated as 5.26% and 3.73% 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. ABOUT YOUR DIVIDENDS TIMING OF DIVIDENDS - Cousins normally pays regular dividends four times each year in February, May, August and December. However, the timing of the last dividend from year to year may cause stockholders to receive as few as three and as many as five regular dividends in any year. Depending upon taxable income (see below), special dividends may also be declared in some years, and may be payable at the same time or separately from regular dividends. 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 1992, 1993 and 1994, 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 under "Market and Dividend Information" in this report. 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, 1994 ($ in thousands, except per share amounts): QUARTERS FIRST SECOND THIRD FOURTH ----- ------ ----- ------- 1993: Revenues $4,374 $4,637 $4,986 $ 5,049 Income from unconsolidated joint ventures 441 1,145 494 3,436 Gain on sale of investment properties, net of applicable income tax provision 230 496 1,201 - Net income 1,415 3,205 2,913 4,432 Net income per share .07 .15 .13 .17 1994: REVENUES 5,507 6,751 8,147 10,701 INCOME FROM UNCONSOLIDATED JOINT VENTURES 3,241 2,774 3,335 3,230 GAIN ON SALE OF INVESTMENT PROPERTIES, NET OF APPLICABLE INCOME TAX PROVISION - 3,242 1,677 1,437 NET INCOME 4,798 8,056 6,134 7,907 NET INCOME PER SHARE .17 .29 .22 .28
NDEPENDENT PUBLIC ACCOUNTANTS Arthur Andersen LLP COUNSEL King & Spalding Troutman Sanders Kilpatrick & Cody Arrington & Hollowell, P.C. 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. Beginning with the May 1995 dividend, purchases will be at 95% of current market value. Materials describing this Plan and an enrollment card are included with the mailing of this Annual Report. A copy of the Plan prospectus 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. EX-21 4 EXHIBIT 21 COUSINS PROPERTIES INCORPORATED AND CONSOLIDATED ENTITIES SUBSIDIARIES OF THE REGISTRANT DECEMBER 31, 1994 At December 31, 1994, the Registrant had no 100% owned subsidiaries. At December 31, 1994, 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/New Market Development Company, Inc. (100% owned by Cousins Real Estate Corporation) North Greene Associates Limited Partnership (85% owned by Registrant) Rocky Creek Properties, Inc. & MT&E - Macon-Harris (75% owned by Registrant) North Point Market Associates, L.P. (82.3% owned by Registrant) Perimeter Expo Associates, L.P. (90% owned by Registrant and 10% owned by Cousins/New Market Development Company, Inc.) At December 31, 1994, 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) Spring/Haynes Associates (50% owned by Registrant) Wildwood Associates (50% owned by Registrant) Ten Peachtree Place Associates (50% owned by Registrant) Temco Associates (50% owned by Cousins Real Estate Corporation) West Georgia Commons Associates (50% owned by Cousins Real Estate Corporation) EX-23 5 EXHIBIT 23(a) 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 and 33-60350. ARTHUR ANDERSEN LLP Atlanta, Georgia March 27, 1995 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. 33-60350) pertaining to the Dividend Reinvestment Plan of Cousins Properties Incorporated and in the related Prospectus, in the Registration Statement (Form S-8 No. 33-56787) pertaining to the 1994 Stock Bonus Plan and the 1989 Stock Option Plan of Cousins Properties Incorporated and in the related Prospectus, and in the Registration Statement (Form S-8 No. 33-41927) pertaining to the 1989 Stock Option Plan, 1987 Restricted Stock Plan for Outside Directors and Incentive Stock Option Plan of Cousins Properties Incorporated and in the related Prospectus, of our report dated February 3, 1995, with respect to the financial statements and schedules of CSC Associates, L.P. and our report dated February 13, 1995, with respect to the financial statements and schedules of Haywood Mall Associates, included in the Form 10-K of Cousins Properties Incorporated for the year ended December 31, 1994. ERNST & YOUNG LLP Atlanta, Georgia March 27, 1995 EX-27 7
5 YEAR DEC-31-1994 DEC-31-1994 3,407 0 52,571 0 0 0 137,130 12,112 330,817 0 41,799 27,864 0 0 245,034 272,898 0 31,106 0 23,313 0 0 411 20,373 (166) 20,539 0 0 0 26,895 .97 .97