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, 1998 Commission file number 2-20111
COUSINS PROPERTIES INCORPORATED
A GEORGIA CORPORATION
I.R.S. EMPLOYER IDENTIFICATION NO. 58-0869052
2500 WINDY RIDGE PARKWAY
ATLANTA, GEORGIA 30339
TELEPHONE: 770-955-2200
Name of exchange on which registered: New York Stock Exchange
Securities registered pursuant to Section 12(b) of the Act: Common Stock ($1
Par Value)
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months, and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K.
As of March 10, 1999, 32,038,802 common shares were outstanding; and the
aggregate market value of the common shares of Cousins Properties Incorporated
held by nonaffiliates was $718,485,091.
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 29, 1999
Registrant's Annual Report to Part II, Items 5, 6, 7 and 8
Stockholders for the year
ended December 31, 1998
PART I
------
Item 1. Business
- --------------------
Corporate Profile
Cousins Properties Incorporated (the "Registrant" or "Cousins") is a
Georgia corporation, which since 1987 has elected to be taxed as a real estate
investment trust ("REIT"). Cousins Real Estate Corporation ("CREC"), a taxable
entity consolidated with the Registrant, owns, develops, and manages a portion
of the Registrant's real estate portfolio. Cousins MarketCenters, Inc. ("CMC")
is a subsidiary of CREC which develops retail shopping centers. The Registrant,
together with CREC, CMC and their other consolidated entities, is hereafter
referred to as the "Company."
Cousins is an Atlanta-based, fully integrated, self administered equity
real estate investment trust. The Company has extensive experience in the real
estate industry, including the acquisition, financing, development, management
and leasing of properties. Cousins has been a public company since 1962, and its
common stock trades on the New York Stock Exchange. The Company owns a portfolio
of well-located, high-quality retail, office, medical office and land
development projects and holds several tracts of strategically located
undeveloped land. The strategies employed to achieve the Company's investment
goals include the development of properties which are substantially precommitted
to quality tenants; maintaining high levels of occupancy within owned
properties; the selective sale of assets and the acquisition of quality
income-producing properties at attractive prices. The Company also seeks to be
opportunistic and take advantage of normal real estate business cycles.
Unless otherwise indicated, the notes referenced in the discussion
below are the "Notes to Consolidated Financial Statements" included in the
financial section of the Registrant's 1998 Annual Report to Stockholders.
Brief Description of Company Investments
Office. As of March 15, 1999, the Company owns, directly and
indirectly, equity interests of at least 50% (excluding One Ninety One Peachtree
Tower) in the following twenty-eight commercial office buildings:
Company's
Metropolitan Rentable Ownership Percent
Property Description Area Square Feet Interest Leased
-------------------- ------------ ----------- -------- ------
101 Independence Center Charlotte, NC 522,000 100% 98%
101 Second Street San Francisco, CA 390,000 100% (b) 62% (a)
LA Cellular Headquarters Los Angeles, CA 217,000 100% (b) 100% (a)
Lakeshore Park Plaza Birmingham, AL 193,000 100% (b) 100%
3100 Windy Hill Road Atlanta, GA 188,000 100% 100%
333 John Carlyle Washington, D.C. 153,000 100% 68% (a)
555 North Point Center East Atlanta, GA 148,000 100% (a)
615 Peachtree Street Atlanta, GA 145,000 100% 59%
333 North Point Center East Atlanta, GA 129,000 100% 96%
600 University Park Place Birmingham, AL 123,000 100% (b) (a)
3301 Windy Ridge Parkway Atlanta, GA 106,000 100% 100%
First Union Tower Greensboro, NC 319,000 59.68% 95%
Grandview II Birmingham, AL 149,000 59.68% 97%
200 North Point Center East Atlanta, GA 130,000 59.68% 100%
100 North Point Center East Atlanta, GA 128,000 59.68% 100%
NationsBank Plaza Atlanta, GA 1,260,000 50% 98%
Gateway Village Charlotte, NC 976,000 50% 100% (a)
3200 Windy Hill Road Atlanta, GA 685,000 50% 91%
2300 Windy Ridge Parkway Atlanta, GA 634,000 50% 100%
The Pinnacle Atlanta, GA 424,000 50% 71% (a)
2500 Windy Ridge Parkway Atlanta, GA 314,000 50% 95%
Two Live Oak Atlanta, GA 278,000 50% 98%
4200 Wildwood Parkway Atlanta, GA 260,000 50% 100%
Ten Peachtree Place Atlanta, GA 259,000 50% 100%
John Marshall-II Washington, D.C. 224,000 50% 100%
4300 Wildwood Parkway Atlanta, GA 150,000 50% 100%
4100 Wildwood Parkway Atlanta, GA 100,000 50% 100%
One Ninety One Peachtree Tower Atlanta, GA 1,215,000 9.8% 97%
---------
9,819,000
=========
(a) Under construction and/or in lease-up.
(b) These projects are actually owned in ventures in which a portion of
the upside is shared with the other venturer. See "Major
Properties" - "Cousins/Daniel LLC," "101 Second Street" and
"CommonWealth/Cousins I, LLC" where discussed.
The weighted average leased percentage of these office buildings
(excluding all non-operational properties currently under construction and/or in
lease-up and One Ninety One Peachtree Tower, as it is less than 50% owned by the
Company) was approximately 96% as of March 15, 1999 and the leases expire as
follows:
2008
&
1999 2000 2001 2002 2003 2004 2005 2006 2007 Thereafter Total
---- ---- ---- ---- ---- ---- ---- ---- ---- ---------- -----
OFFICE
- ------
Consolidated:
- -------------
Square Feet
Expiring (d) 26,992 135,293 116,970 28,763 232,476 86,585 114,900 187,955 0 276,620 1,206,554(b)
% of Leased Space 2% 11% 10% 2% 19% 7% 10% 16% 0% 23% 100%
Annual Base
Rent (a) 236,326 1,206,539 1,326,747 303,773 2,784,428 1,165,468 1,524,442 2,947,134 0 5,831,535 17,326,392
Annual Base
Rent/Sq. Ft.(a) 8.76 8.92 11.34 10.56 11.98 13.46 13.27 15.68 0 21.08 14.36
Joint Venture:
- --------------
Square Feet
Expiring (d) 52,207 218,727 564,444 437,557 335,631 193, 778 600,826 403,726 583,058 1,367,422 4,757,376(c)
% of Leased Space 1% 5% 12% 9% 7% 4% 13% 8% 12% 29% 100%
Annual Base
Rent (a) 892,846 3,895,296 7,898,739 8,151,483 5,897,440 3,729,341 11,402,783 7,224,245 15,093,689 31,446,694 95,632,556
Annual Base
Rent/Sq. Ft. (a) 17.10 17.81 13.99 18.63 17.57 19.25 18.98 17.89 25.89 23.00 20.10
Total (including only Company's % share of Joint Venture Properties):
- ---------------------------------------------------------------------
Square Feet
Expiring (d) 47,265 192,802 336,051 235,715 397,796 163,302 377,209 381,381 291,529 889,337 3,312,387
% of Leased Space 1% 6% 10% 7% 12% 5% 11% 12% 9% 27% 100%
Annual Base
Rent (a) 593,935 2,277,195 4,244,468 4,170,953 5,694,797 2,659,094 6,487,264 6,418,530 7,546,845 20,294,572 60,387,653
Annual Base
Rent/Sq. Ft. (a) 12.57 11.81 12.63 17.69 14.32 16.28 17.20 16.83 25.89 22.82 18.23
(a)Annual base rent excludes the operating expense reimbursement portion of the
rent payable. If the lease does not provide for pass through of such
operating expense reimbursements, an estimate of operating expenses is
deducted from the rental rate shown. The base rental rate shown is the
estimated rate in the year of expiration. Amounts disclosed are in dollars.
(b)Rentable square feet leased as of March 15, 1999 out of 1,283,000 total
rentable square feet.
(c)Rentable square feet leased as of March 15, 1999 out of 5,315,000 total
rentable square feet.
(d)Where a tenant has the option to cancel its lease without penalty, the lease
expiration date used in the table above reflects the cancellation option date
rather than the lease expiration date.
The weighted average remaining lease term of these twenty office
buildings was approximately 8 years as of March 15, 1999. Most of the Company's
leases in these buildings provide for pass through of operating expenses, and
base rents which escalate over time.
Retail. As of March 15, 1999, the Company's retail portfolio includes
the following twelve properties:
Rentable Company's
Metropolitan Square Feet Ownership Percent
Property Description Area (Company Owned) Interest Leased
-------------------- ------------ --------------- --------- -------
Colonial Plaza MarketCenter Orlando, FL 489,000 100% 94%
The Avenue of the Peninsula Rolling Hills Estates, CA 385,000 100% (a)
Presidential MarketCenter Atlanta, GA 354,000 (b) 100% 99%
The Avenue East Cobb Atlanta, GA 241,000 100% (a)
Perimeter Expo Atlanta, GA 176,000 100% 100%
Laguna Niguel Promenade Laguna Niguel, CA 154,000 100% 94%
Greenbrier MarketCenter Chesapeake, VA 493,000 59.68% 100%
North Point MarketCenter Atlanta, GA 401,000 59.68% 100%
Los Altos MarketCenter Long Beach, CA 157,000 59.68% 100%
Mansell Crossing Phase II Atlanta, GA 103,000 59.68% 100%
Haywood Mall Greenville, SC 330,000 50% 96%
The Shops at World Golf Village St. Augustine, FL 80,000 50% (a)
---------
3,363,000
=========
(a) Under construction, redevelopment and/or in lease-up.
(b) Includes 14,000 square feet not yet constructed.
The weighted average leased percentage of these retail properties
(excluding all non-operational properties currently under construction,
redevelopment and/or in lease-up and Haywood Mall) was approximately 98% as of
March 15, 1999, and the leases expire as follows:
2008
&
1999 2000 2001 2002 2003 2004 2005 2006 2007 Thereafter Total
---- ---- ---- ---- ---- ---- ---- ---- ---- ---------- -----
RETAIL
- ------
Consolidated:
- -------------
Square Feet
Expiring 18,055 46,215 35,070 66,577 29,743 59,128 12,725 91,345 68,774 679,988 1,107,620(b)
% of Leased Space 2% 4% 3% 6% 3% 5% 1% 8% 6% 62% 100%
Annual Base
Rent (a) 363,052 589,189 650,726 1,094,197 890,500 782,624 237,545 856,354 702,801 9,842,124 16,009,112
Annual Base
Rent/Sq. Ft. (a) 20.11 12.75 18.56 16.44 29.94 13.24 18.67 9.37 10.22 14.47 14.45
Joint Venture:
- --------------
Square Feet
Expiring 32,066 22,711 30,119 40,098 22,800 5,900 35,000 113,000 7,553 851,009 1,160,256(c)
% of Leased Space 3% 2% 3% 3% 2% 1% 3% 10% 1% 72% 100%
Annual Base
Rent (a) 646,227 243,046 397,658 695,754 283,223 75,000 350,000 1,557,092 293,968 11,054,163 15,596,131
Annual Base
Rent/Sq. Ft. (a) 20.15 10.70 13.20 17.35 12.42 12.71 10.00 13.78 38.92 12.99 13.44
Total (including only Company's % share of Joint Venture Properties):
- ----------------------------------------------------------------------
Square Feet
Expiring (d) 21,743 48,827 38,534 71,188 32,365 59,807 16,750 104,340 69,643 777,852 1,241,049
% of Leased Space 2% 4% 3% 6% 3% 5% 1% 8% 6% 62% 100%
Annual Base
Rent (a) 437,368 617,139 696,457 1,174,209 923,071 791,249 277,795 1,035,420 736,607 11,113,352 17,802,667
Annual Base
Rent/Sq. Ft. (a) 20.12 12.64 18.07 16.49 28.52 13.23 16.58 9.92 10.58 14.29 14.34
(a)Annual base rent excludes the operating expense reimbursement portion of the
rent payable and any percentage rents due. If the lease does not provide for
pass through of such operating expense reimbursements, an estimate of
operating expenses is deducted from the rental rate shown. The base rental
rate shown is the estimated rate in the year of expiration. Amounts disclosed
are in dollars.
(b)Gross leasable area leased as of March 15, 1999 out of 1,173,000 total gross
leasable area. (c) Gross leasable area leased as of March 15, 1999 out
of 1,154,000 total gross leasable area.
The weighted average remaining lease term of these eight retail
properties was approximately 16 years as of March 15, 1999. All of the major
tenant leases in these retail properties have lease terms of 10 years or more
from the date of initial occupancy and provide for pass through of operating
expenses and base rents which escalate over time.
Medical Office. As of March 15, 1999, the Company owned the following
five medical office properties:
Company's
Metropolitan Rentable Ownership Percent
Property Description Area Square Feet Interest Leased
-------------------- ------------ ----------- --------- -------
Northside/Alpharetta II Atlanta, GA 198,000 100% 44% (a)
Meridian Mark Plaza Atlanta, GA 159,000 100% 78% (a)
Northside/Alpharetta I Atlanta, GA 100,000 100% 100%
AtheroGenics Atlanta, GA 50,000 100% 100% (a)
Presbyterian Medical Plaza
at University Charlotte, NC 69,000 59.68% 100%
-------
576,000
=======
(a) Under construction and/or in lease-up.
The weighted average leased percentage of the medical office buildings
(excluding all properties currently under construction and/or in lease-up) was
100% as of March 15, 1999 and the leases expire as follows:
2008
&
1999 2000 2001 2002 2003 2004 2005 2006 2007 Thereafter Total
---- ---- ---- ---- ---- ---- ---- ---- ---- ---------- -----
MEDICAL OFFICE
- --------------
Consolidated:
- -------------
Square Feet
Expiring 20,627 12,154 0 4,290 9,970 15,215 4,677 0 0 33,067 100,000(b)
% of Leased Space 21% 12% 0% 4% 10% 15% 5% 0% 0% 33% 100%
Annual Base
Rent (a) 295,379 190,089 0 68,426 166,898 261,698 81,146 0 0 812,543 1,876,179
Annual Base
Rent/Sq. Ft. (a) 14.32 15.64 0 15.95 16.74 17.20 17.35 0 0 24.57 18.76
Joint Venture:
- --------------
Square Feet
Expiring 0 0 0 1,397 0 0 3,445 0 23,359 40,503 68,704(c)
% of Leased Space 0% 0% 0% 2% 0% 0% 5% 0% 34% 59% 100%
Annual Base
Rent (a) 0 0 0 20,552 0 0 56,498 0 379,817 772,362 1,229,229
Annual Base
Rent/Sq. Ft. (a) 0 0 0 14.71 0 0 16.40 0 16.26 19.07 17.89
Total (including only Company's % share of Joint Venture Properties):
- ---------------------------------------------------------------------
Square Feet
Expiring 20,627 12,154 0 4,451 9,970 15,215 5,073 0 2,686 39,903 110,079
% of Leased Space 19% 11% 0% 4% 9% 14% 5% 0% 2% 36% 100%
Annual Base
Rent (a) 295,379 190,089 0 70,786 166,898 261,698 87,643 0 43,679 901,368 2,017,540
Annual Base
Rent/Sq. Ft. (a) 14.32 15.64 0 15.90 16.74 17.20 17.28 0 16.26 22.59 18.33
(a)Annual base rent excludes the operating expense reimbursement portion of the
rent payable and any percentage rents due. If the lease does not provide for
pass through of such operating expense reimbursements, an estimate of
operating expenses is deducted from the rental rate shown. The base rental
rate shown is the estimated rate in the year of expiration. Amounts disclosed
are in dollars.
(b)Rentable square feet leased as of March 15, 1999 out of 100,000 total
rentable square feet. (c) Rentable square feet leased as of March 15, 1999
out of 69,000 total rentable square feet.
The weighted average remaining lease term of the two medical office
buildings (excluding buildings currently under construction and lease-up) was
approximately 9 years as of March 15, 1999. The Company's leases in these
buildings provide for pass through of operating expenses and base rents which
escalate over time.
Other. The Company's other real estate holdings include equity
interests in approximately 410 acres of strategically located land held for
investment and future development at North Point and Wildwood Office Park, the
option to acquire the fee simple interest in approximately 11,000 acres of land
through its Temco Associates joint venture, and two mortgage notes for
approximately $25 million which are secured by a 250,000 square foot office
building in Washington, D.C. The terms of these two notes have some of the
characteristics of an equity investment, and should provide a comparable return
on investment (see Note 3).
The Company's joint venture partners include either the company as
named or an affiliate of the company named and are as follows: IBM, The
Coca-Cola Company ("Coca-Cola"), Bank of America Corporation ("Bank of
America"), The Prudential Insurance Company of America ("Prudential"), Simon
Property Group, Temple-Inland Inc., Cornerstone Properties, Inc., American
General Corporation, and CarrAmerica Realty Corporation.
The success of the Company's operations is dependent upon such
unpredictable factors as the availability of satisfactory financing; general and
local economic conditions; the activity of others developing competitive
projects; the cyclical nature of the real estate industry; and zoning,
environmental impact, and other government regulations.
Refer to Item 2 hereof for a more detailed description of the Company's
real estate properties. Significant Changes in 1998 Significant changes
in the Company's business and properties during the year ended
December 31, 1998 were as follows:
Office Division. In January 1998, the Company purchased the land for,
and commenced construction of, 333 John Carlyle, an approximately 153,000
rentable square foot office building in suburban Washington, D.C. In May 1998,
the Company commenced construction of 555 North Point Center East, an
approximately 148,000 rentable square foot office building in suburban Atlanta,
Georgia. This office building is being built on land the Company already owned
which is adjacent to the Company's three other office buildings, 100, 200 and
333 North Point Center East.
In June 1998, the Company acquired Lakeshore Park Plaza, an
approximately 193,000 rentable square foot office building and also purchased
the land for, and commenced construction of, 600 University Park Place, an
approximately 123,000 rentable square foot office building. Both of these office
buildings are located in Birmingham, Alabama.
Also in June 1998, 333 North Point Center East, an approximately
129,000 rentable square foot office building in suburban Atlanta, Georgia and
4200 Wildwood Parkway, a 260,000 rentable square foot office building in
suburban Atlanta, Georgia owned by Wildwood Associates, became partially
operational for financial reporting purposes. In July 1998, Charlotte Gateway
Village, LLC commenced construction on Gateway Village, an approximately 976,000
rentable square foot office building in Charlotte, North Carolina (see Note 5).
In August 1998, Grandview II, an approximately 149,000 rentable square foot
office building in Birmingham, Alabama became partially operational for
financial reporting purposes.
In August 1998, the Company commenced construction of LA Cellular
Headquarters, an approximately 217,000 rentable square foot office building in
suburban Los Angeles, California.
Retail Division. In January 1998, Abbotts Bridge Station, an
approximately 83,000 square foot neighborhood retail center in suburban Atlanta,
Georgia became partially operational for financial reporting purposes. In
February 1998, Brad Cous Golf Venture, Ltd., purchased the land for, and
commenced construction of, The Shops at World Golf Village, an approximately
80,000 square foot retail center located adjacent to the PGA Hall of Fame in St.
Augustine, Florida (see Note 5).
Also in February 1998, the Company purchased The Shops at Palos Verdes,
located in Rolling Hills Estates, California, in the greater Los Angeles
metropolitan area. This approximately 355,000 square foot center includes
existing retail space and a parking deck. The Company plans to redevelop and
remerchandise the project into an approximately 385,000 square foot open-air,
high-end specialty center, to be named The Avenue of the Peninsula. In April
1998, the Company purchased the land for, and commenced construction of, The
Avenue East Cobb, an approximately 241,000 square foot open-air, high-end
speciality center in suburban Atlanta, Georgia. In July 1998, Laguna Niguel
Promenade, an approximately 154,000 square foot retail center in Laguna Niguel,
California became partially operational for financial reporting purposes.
Medical Office Division. In June 1998, the Company acquired
Northside/Alpharetta I, an approximately 100,000 rentable square foot medical
office building in suburban Atlanta, Georgia. Construction also commenced in
June 1998 of Northside/Alpharetta II, an approximately 198,000 rentable square
foot medical office building. In July 1998, the Company commenced construction
of AtheroGenics, an approximately 50,000 rentable square foot office and
laboratory building, located in suburban Atlanta, Georgia, on land the Company
already owned.
Financings. Effective June 30, 1998, the Company extended the maturity
of its $100 million line of credit from June 30, 1998 to June 29, 1999. The line
is unsecured and bears interest tied to the Federal Funds rate. Effective in
October 1998, the Company increased the line of credit to a maximum of $150
million. The Company had $11,120,000 of borrowings under the line as of December
31, 1998.
During 1998 three new financings were completed and one mortgage note
payable was assumed. In May 1998, Cousins LORET Venture, L.L.C. completed the
$70 million non-recourse financing of The Pinnacle at an interest rate of 7.11%
and a term of twelve years. This financing was completely funded on December 30,
1998. In June 1998, Wildwood Associates completed the financing of the 4200
Wildwood Parkway Building with a $44 million non-recourse mortgage note payable
at an interest rate of 6.78% and a term of fifteen and three-quarters years.
Also in June 1998, the Company assumed a $10.6 million non-recourse mortgage
note payable pursuant to the acquisition of the Northside/Alpharetta I medical
office building. This mortgage note payable has an interest rate of 7.70% and a
remaining term of eight years. In October 1998, the Company completed the
financing of Lakeshore Park Plaza with a $10.9 million non-recourse mortgage
note payable at an interest rate of 6.78% and a term of ten years.
In November 1998, the Company formed a venture with The Prudential
Insurance Company of America ("Prudential") whereby the Company contributed four
office properties, four retail properties and one medical office property and
Prudential contributed cash (see Note 5).
Subsequent Events
Subsequent to year-end, on February 1, 1999, CREC sold Abbotts Bridge
Station, an approximately 83,000 square foot neighborhood retail center in
suburban Atlanta, Georgia for $15.7 million, which was approximately $5.0
million over the cost of the center. Including depreciation recapture of
approximately $.3 million and net of an income tax provision of approximately
$2.2 million, the net gain on the sale was approximately $3.1 million.
Executive Offices
The Registrant's executive offices are located at 2500 Windy Ridge
Parkway, Suite 1600, Atlanta, Georgia 30339-5683. At December 31, 1998, the
Company employed approximately 230 people.
I-14
Item 2. Properties
Table of Major Properties
The following tables set forth certain information relating to major
office, retail and medical office properties, stand alone retail lease sites,
and land held for investment and future development in which the Company has a
50% or greater ownership interest. All information presented is as of December
31, 1998, except leasing information which is as of March 15, 1999. Dollars are
stated in thousands.
Percentage
Description, Year Rentable Leased Average Major
Location Development Company's Square Feet as of 1998 Major Tenants (lease Tenants'
and Completed Joint Venture Ownership and Acres March 15, Economic expiration/options Rentable
Zip Code or Acquired Partner Interest as Noted 1999 Occupancy expiration) Sq. Feet
- ------------ ----------- ------------- --------- ----------- ---------- --------- -------------------- --------
Office
- ------
Wildwood Office Park:
Suburban Atlanta, GA
2300 Windy
Ridge Parkway
30339-5671 1987 IBM 50% 634,000 100% 99% IBM (2002/2012) 240,430
12 Acres Profit Recovery Group 73,626
(2005/2010)(2)
Manhattan Associates, LLC 63,296
(2002/2007)
Computer Associates 62,445
(2005/2010)
Financial Services 56,932
Corporation (2006/2011)(2)
Chevron USA (2005)(2) 51,415
2500 Windy
Ridge Parkway
30339-5683 1985 IBM 50% 314,000 95% 96% Coca-Cola Enterprises Inc. 165,180
8 Acres (2003/2008)
3200 Windy
Hill Road
30339-5609 1991 IBM 50% 685,000 91% 97% IBM (2001/2011)(3) 440,139
15 Acres W.H. Smith Inc. 41,858
(2002/2007)
3301 Windy Ridge
Parkway
30339-5685 1984 N/A 100% 106,000 100% 100% Indus International, Inc. 106,000
10 Acres (2003/2008)
3100 Windy Hill
Road
30339-5605 1983 N/A 100%(5) 188,000 100% 100% IBM (2006) 188,000
13 Acres
Adjusted
Cost and
Adjusted
Cost Less Debt
Description, Depreciation Maturity
Location and and
and Amortization Debt Interest
Zip Code (1) Balance Rate
- ------------ ------------- ------- ---------
Office
- ------
Wildwood Office Park:
Suburban Atlanta, GA
2300 Windy
Ridge Parkway
30339-5671 $ 77,185 $ 67,885 12/1/05
$ 52,617 7.56%
2500 Windy
Ridge Parkway
30339-5683 $ 29,892 $ 24,102 12/15/05
$ 19,072 7.45%
3200 Windy
Hill Road
30339-5609 $ 83,879 $ 68,668 1/1/07
$ 62,564 8.23%
(2002/2007)
3301 Windy Ridge
Parkway
30339-5685 $ 10,546 $ 0 N/A
$ 6,249
3100 Windy Hill
Road
30339-5605 $ 17,005(5) $ 0 N/A
$ 15,645(5)
Percentage
Description, Year Rentable Leased Average Major
Location Development Company's Square Feet as of 1998 Major Tenants (lease Tenants'
and Completed Joint Venture Ownership and Acres March 15, Economic expiration/options Rentable
Zip Code or Acquired Partner Interest as Noted 1999 Occupancy expiration) Sq. Feet
- ------------ ----------- ------------- --------- ----------- ---------- --------- -------------------- --------
Office (Continued)
- ------------------
4100 and 4300
Wildwood Parkway
30339-8400 1996 IBM 50% 250,000 100% 100% Georgia-Pacific 250,000
13 Acres Corporation (2012/2017)
(6)(7)
4200 Wildwood Parkway
30339-8402 1997 IBM 50% 260,000 100% 28%(8) General Electric 260,000
8 Acres (4)(2014/2024)
NationsBank Plaza
Atlanta, GA
30308-2214 1992 Bank of America (4) 50%(9) 1,260,000 98% 94% Bank of America (4) 572,742
4 Acres (2012/2042)
Ernst & Young LLP 211,211
(2007/2017)(10)
Troutman Sanders 201,320
(2007/2017)
Paul Hastings
(2012/2017)(10) 92,224
Hunton & Williams 91,103
(2004/2009)
Gateway Village
Charlotte, NC
28202-9999 (12) Bank of America (4) 50% 976,000 100% (12) Bank of America 976,000 (12)
8 Acres (2015/2035)(12)
First Union Tower
Greensboro, NC
27401-2167 1990 Prudential 59.68%(9) 319,000 95% 94% Smith Helms Mullis & 70,360
1 Acre Moore (2010/2015)
First Union Bank (4) 62,622
(2009/2019)
Halstead Industries 60,253
(2000/2005)
Ten Peachtree Place
Atlanta, GA
30309-3814 1991 Coca-Cola (4) 50%(9) 259,000 100% 100% Coca-Cola (4)(2001/2006) 259,000
5 Acres
John Marshall-II
Suburban
Washington, D.C.
22102-3802 1996 CarrAmerica Realty 50% 224,000 100% 100% Booz-Allen & Hamilton 224,000
Corporation (4) 3 Acres (2011/2016)
Adjusted
Cost and
Adjusted
Cost Less Debt
Description, Depreciation Maturity
Location and and
and Amortization Debt Interest
Zip Code (1) Balance Rate
- ------------ ------------- ------- ---------
Office (Continued)
- ------------------
4100 and 4300
Wildwood Parkway
30339-8400 $ 29,914 $ 29,258 4/1/12
$ 27,454 7.65%
4200 Wildwood Parkway
30339-8402 $ 33,222 $ 44,000 3/31/14
$ 32,971 6.78%
NationsBank Plaza
Atlanta, GA
30308-2214 $222,665 $ 0(11) N/A (11)
$178,663
Gateway Village
Charlotte, NC
28202-9999 (12) $ 0 N/A
First Union Tower
Greensboro, NC
27401-2167 $ 53,000 (13) $ 0 N/A
$ 52,223
Ten Peachtree Place
Atlanta, GA
30309-3814 $ 23,474 $ 18,444 11/30/01(14)
$ 19,180 8.00%
John Marshall-II
Suburban
Washington, D.C.
22102-3802 $ 29,194 $ 23,014 4/1/13
$ 25,885 7.00%
Percentage
Description, Year Rentable Leased Average Major
Location Development Company's Square Feet as of 1998 Major Tenants (lease Tenants'
and Completed Joint Venture Ownership and Acres March 15, Economic expiration/options Rentable
Zip Code or Acquired Partner Interest as Noted 1999 Occupancy expiration) Sq. Feet
- ------------ ----------- ------------- --------- ----------- ---------- --------- -------------------- --------
Office (Continued)
- ------------------
100 North Point Center East
Suburban Atlanta, GA
30022-4885 1995 Prudential 59.68%(9) 128,000 100% 100% Schweitzer-Mauduit 39,739
7 Acres International, Inc.
(2001/2007)
Green Tree Financial 21,914
(2006/2011)(6)
200 North Point Center East
Suburban Atlanta, GA
30022-4885 1996 Prudential 59.68%(9) 130,000 100% 100% Alltel Telecom Information 60,029
9 Acres Services, Inc. (2000/2001)
Motorola, Inc. (2001/2011) 26,897
APAC Teleservices, Inc. 22,409
(2004/2009)
333 North Point Center East
Suburban Atlanta, GA
30022-8274 1998 N/A 100% 129,000 96% 80%(16) Alltel Telecom (2003) 48,559
9 Acres J.C. Bradford (2005/2010) 22,222
555 North Point Center East
Suburban Atlanta, GA
30022-8274 (12) N/A 100% 148,000 (12) (12) (12) (12)
10 Acres
615 Peachtree Street
Atlanta, GA
30308-2312 1996 N/A 100% 145,000 59% 75% Wachovia (4)(2001/2007) 51,561
2 Acres
101 Independence Center
Charlotte, NC
28246-1000 1996 N/A 100% 522,000 98% 94% Bank of America (4) 359,796
2 Acres (2008/2028)(17)
Robinson Bradshaw & Hinson, 82,218
P.A. (2004/2009)
Ernst & Young LLP
(2001/2006) 45,060
333 John Carlyle
Suburban Washington, D.C.
22314-9999 (12) N/A 100% 153,000 68%(12) (12) A.T. Kearney 87,455
1 Acre (2009/2019)(12)
101 Second Street
San Francisco, CA
94105-3601 (12) Myers Second 100%(9) 390,000 62%(12) (12) Arthur Andersen LLP 129,480
Street Company .63 Acres (2009/2014)(12)
LLC Thelen, Reid & Priest 115,000
(2012/2022)(12)
Adjusted
Cost and
Adjusted
Cost Less Debt
Description, Depreciation Maturity
Location and and
and Amortization Debt Interest
Zip Code (1) Balance Rate
- ------------ ------------- ------- ---------
Office (Continued)
- ------------------
100 North Point Center East
Suburban Atlanta, GA
30022-4885 $ 24,332 (13) $ 12,259 (15) 8/1/07
$ 23,933 7.86%
200 North Point Center East
Suburban Atlanta, GA
30022-4885 $ 21,718 (13) $ 12,259 (15) 8/1/07
$ 21,412 7.86%
333 North Point Center East
Suburban Atlanta, GA
30022-8274 $ 13,163 $ 0 N/A
$ 12,630
555 North Point Center East
Suburban Atlanta, GA
30022-8274 $ 0 N/A
615 Peachtree Street
Atlanta, GA
30308-2312 $ 11,969 $ 0 N/A
$ 10,817
101 Independence Center
Charlotte, NC
28246-1000 $ 73,920 $ 48,254 11/1/07
$ 68,065 8.22%
333 John Carlyle
Suburban Washington, D.C.
22314-9999 $ 21,632 $ 0 N/A
(12)
101 Second Street
San Francisco, CA
94105-3601 $ 31,606 $ 0 N/A
(12)
Percentage
Description, Year Rentable Leased Average Major
Location Development Company's Square Feet as of 1998 Major Tenants (lease Tenants'
and Completed Joint Venture Ownership and Acres March 15, Economic expiration/options Rentable
Zip Code or Acquired Partner Interest as Noted 1999 Occupancy expiration) Sq. Feet
- ------------ ----------- ------------- --------- ----------- ---------- --------- -------------------- --------
Office (Continued)
- ------------------
Two Live Oak
Atlanta, GA
30326-1234 1997 LORET 50% 278,000 98% 92% IMS Health Incorporated 75,484
Holdings, L.L.L.P. 2 Acres (2007/2017)
Chubb & Son, Inc. (4) 48,520
(2007/2017)
The Pinnacle
Atlanta, GA
30326-1234 (12) LORET 50% 424,000 71%(12) (12) Merrill Lynch (2008/2013) 54,283
Holdings, L.L.L.P. 4 Acres PaineWebber (2013/2018)(6) 47,631
A.T. Kearney (2009/2019) 47,566
Lakeshore Park Plaza
Birmingham, AL
35209-6719 1998 Daniel Realty 100%(9) 193,000 100% 100% Infinity Insurance (2005) 91,302
Company 12 Acres TCI Southeast (2003) 20,625
600 University Park Place
Birmingham, AL
35209-9999 (12) Daniel Realty 100%(9) 123,000 (12) (12) (12) (12)
Company 10 Acres
Grandview II
Birmingham, AL
35243-1930 1998 Prudential 59.68%(9) 149,000 97% 33%(18) Protective Life 65,164
8 Acres (2005/2011)(19)
Daniel Realty Company (2008) 23,440
LA Cellular Headquarters
Suburban Los Angeles, CA
90703-9998 (12) CommonWealth 100%(9) 217,000 100%(12) (12) LA Cellular (2015/2030)(12) 217,000
Pacific, LLC 9 Acres (20)
Retail Centers and Malls
Haywood Mall
Greenville, SC
29607-2749 1977/1995 Simon 50% 1,256,000 99% 94% Sears (22) N/A
Property 86 acres overall of J.C. Penney (22) N/A
Group of which 6% of owned Rich's (22) N/A
330,000 and owned Belk (22) N/A
21 acres are Dillard's (22) N/A
owned (21)
Adjusted
Cost and
Adjusted
Cost Less Debt
Description, Depreciation Maturity
Location and and
and Amortization Debt Interest
Zip Code (1) Balance Rate
- ------------ ------------- ------- ---------
Office (Continued)
- ------------------
Two Live Oak
Atlanta, GA
30326-1234 $ 48,235 $ 29,766 12/31/09
$ 45,244 7.9%
The Pinnacle
Atlanta, GA
30326-1234 $ 73,959 $ 70,000 12/31/09
(12) 7.11%
Lakeshore Park Plaza
Birmingham, AL
35209-6719 $ 15,623 $ 10,856 11/1/08
$ 15,425 6.78%
600 University Park Place
Birmingham, AL
35209-9999 N/A $ 0 N/A
Grandview II
Birmingham, AL
35243-1930 $ 23,000 (13) $ 0 N/A
$ 22,879
LA Cellular Headquarters
Suburban Los Angeles, CA
90703-9998 (12) $ 0 N/A
Retail Centers and Malls
- ------------------------
Haywood Mall
Greenville, SC
29607-2749 $ 51,027 $ 0 N/A
$ 34,608
Percentage
Description, Year Rentable Leased Average Major
Location Development Company's Square Feet as of 1998 Major Tenants (lease Tenants'
and Completed Joint Venture Ownership and Acres March 15, Economic expiration/options Rentable
Zip Code or Acquired Partner Interest as Noted 1999 Occupancy expiration) Sq. Feet
- ------------ ----------- ------------- --------- ----------- ---------- --------- -------------------- --------
Retail Centers and Malls (Continued)
- ------------------------------------
Perimeter Expo
Atlanta, GA
30338-1519 1993 N/A 100% 291,000 100% 100% The Home Depot Expo (22) N/A
19 acres overall of Marshalls (2014/2029) 36,598
of which 100% of Company Best Buy (2014/2029) 36,000
176,000 and Company owned Linens `N Things (2014/2024) 30,351
10 acres are owned Office Max (2013/2033) 23,500
owned by The Sport Shoe (2004/2014) 14,348
the Company Gap's Old Navy Store 13,939
(2002/2012)
North Point MarketCenter
Suburban
Atlanta, GA
30202-4889 1994/1995 Prudential 59.68%(9) 517,000 100% 100% Target (22) N/A
60 Acres (23) Babies "R" Us (2011/2031) 50,275
of which Media Play (2010/2025) 48,884
401,000 and Marshalls (2010/2025) 40,000
49 acres are Rhodes (2011/2021) 40,000
owned by Linens `N Things 35,000
the Venture (2005/2025)
United Artists (2014/2034) 34,733
Circuit City (2015/2030) 33,420
PETsMART (2009/2029) 25,465
Gap's Old Navy Store 20,000
(2000/2010)
Presidential MarketCenter
Suburban
Atlanta, GA
30278-2149 1994/1996 N/A 100% 471,000 (24) 99% (24) 97% (24) Target (22) N/A
66 acres overall of Publix Super Market 56,146
of which 99% (24) Company (2019/2044)
354,000 (24) of Company owned Carmike Cinemas (4) 44,565
and 49 acres owned (2023/2033)
are owned MJDesigns (4 (24)(2011/2026) 37,957
by the Bed, Bath & Beyond 35,127
Company (2008/2024)
T.J. Maxx (2004/2014) 32,000
Office Depot, Inc. 31,628
(2011/2026)
Marshalls (2010/2025) 30,000
Adjusted
Cost and
Adjusted
Cost Less Debt
Description, Depreciation Maturity
Location and and
and Amortization Debt Interest
Zip Code (1) Balance Rate
- ------------ ------------- ------- ---------
Retail Centers and Malls (Continued)
- ------------------------------------
Perimeter Expo
Atlanta, GA
30338-1519 $ 19,435 $ 20,846 8/15/05
$ 17,333 8.04%
North Point MarketCenter
Suburban
Atlanta, GA
30202-4889 $ 56,750 (13) $ 28,623 7/15/05
$ 56,570 8.50%
Presidential MarketCenter
Suburban
Atlanta, GA
30278-2149 $ 23,719 $ 0 N/A
$ 21,441
Percentage
Description, Year Rentable Leased Average Major
Location Development Company's Square Feet as of 1998 Major Tenants (lease Tenants'
and Completed Joint Venture Ownership and Acres March 15, Economic expiration/options Rentable
Zip Code or Acquired Partner Interest as Noted 1999 Occupancy expiration) Sq. Feet
- ------------ ----------- ------------- --------- ----------- ---------- --------- -------------------- --------
Retail Centers and Malls (Continued)
- ------------------------------------
Colonial Plaza MarketCenter
Orlando, FL
32803-5029 1996 N/A 100% 489,000 94% 89% Circuit City (2016/2036) 43,936
49 Acres Rhodes (2012/2027) 42,376
Baby Superstore, Inc. 40,000
(2006/2021)
Stein Mart, Inc.(2006/2026) 36,000
Barnes & Noble Superstores, 35,131
Inc.(2012/2022)
Linens `N Things 35,000
(2012/2027)
Marshalls (2012/2027) 30,400
Ross Stores (2007/2022) 28,000
Just For Feet, Inc. 26,667
(2012/2027)
Walgreen Co. (2012)(26) 18,614
Gap's Old Navy Store 17,920
(2002/2012)
Mansell Crossing Phase II
Suburban
Atlanta, GA
30202-4822 1996 Prudential 59.68%(9) 103,000 100% 100% Bed Bath & Beyond 40,787
13 Acres (2012/2027)
Goody's Family Clothing, 32,144
Inc. (2009/2027)
Rooms To Go (2016/2036) 21,000
Greenbrier MarketCenter
Chesapeake, VA
23327-2840 1996 Prudential 59.68%(9) 493,000 100% 100% Target (2016/2046) 117,220
44 Acres Harris Teeter, Inc. 51,806
(2016/2036)
Best Buy (2014/2029) 45,106
Bed Bath & Beyond 40,484
(2012/2027)
Baby Superstore, Inc. 40,000
(2006/2021)
Stein Mart, Inc. (2006/2026) 36,000
Barnes & Noble Superstores, 29,974
Inc. (2011/2026)
PETsMART (2011/2031) 26,052
Office Max (2011/2026) 23,484
Gap's Old Navy Store 14,000
(2001/2011)
Adjusted
Cost and
Adjusted
Cost Less Debt
Description, Depreciation Maturity
Location and and
and Amortization Debt Interest
Zip Code (1) Balance Rate
- ------------ ------------- ------- ---------
Retail Centers and Malls (Continued)
- ------------------------------------
Colonial Plaza MarketCenter
Orlando, FL
32803-5029 $ 41,670 $ 0 N/A
$ 38,288
Mansell Crossing Phase II
Suburban
Atlanta, GA
30202-4822 $ 12,350 (13) $ 0 N/A
$ 12,309
Greenbrier MarketCenter
Chesapeake, VA
23327-2840 $ 51,200 (13) $ 0 N/A
$ 51,052
Percentage
Description, Year Rentable Leased Average Major
Location Development Company's Square Feet as of 1998 Major Tenants (lease Tenants'
and Completed Joint Venture Ownership and Acres March 15, Economic expiration/options Rentable
Zip Code or Acquired Partner Interest as Noted 1999 Occupancy expiration) Sq. Feet
- ------------ ----------- ------------- --------- ----------- ---------- --------- -------------------- --------
Retail Centers and Malls (Continued)
- ------------------------------------
Los Altos MarketCenter
Long Beach, CA
90815-3126 1996 Prudential 59.68%(9) 258,000 100% 100% Sears (22) N/A
19 Acres of Circuit City (4)(2017/2037) 38,541
which 157,000 Borders, Inc. (2017/2037) 30,000
and 17 Acres Bristol Farms (4)(2012/2032) 28,200
are owned by CompUSA, Inc. (2011/2021) 25,620
the Venture Sav-on Drugs (4)(2016/2026) 16,914
Laguna Niguel Promenade
Laguna Niguel, CA
92677-3920 1998 N/A 100% 154,000 94% 69%(26) Orchard's Supply Hardware (4)63,811
13 Acres (2018/2033)
Ralph's Grocery Company 51,028
(2018/2043)
The Avenue of the Peninsula
Rolling Hills Estates, CA
90274-3664 (12) N/A 100% 385,000 (12) (12) Regal Cinema (2013/2028)(12) 60,000
14 Acres (12)
Saks & Company 42,217
(2019/2049)(12) (12)
The Avenue East Cobb
Suburban Atlanta, GA
30062-9999 (12) N/A 100% 241,000 (12) (12) Borders, Inc.(2014/2029)(12) 25,000
30 Acres
The Shops at World Golf Village
St. Augustine, FL
32092-9999 (12) W.C. Bradley Co. 50% 80,000 (12) (12) Bradley Specialty Retailing, 31,044
3 Acres Inc. (2013/2023)
Medical Office
- --------------
Northside/Alpharetta I
Atlanta, GA
30005-3707 1998 N/A 100% 100,000 100% 100% Northside Hospital (4)(2013) 37,387
1 Acre (28)
Presbyterian Medical Plaza
at University
Charlotte, NC
28233-3549 1997 Prudential 59.68%(9) 69,000 100% 100% Presbyterian Health Services 63,862
1 Acre (29) Corporation (2012/2027)(30)
Adjusted
Cost and
Adjusted
Cost Less Debt
Description, Depreciation Maturity
Location and and
and Amortization Debt Interest
Zip Code (1) Balance Rate
- ------------ ------------- ------- ---------
Retail Centers and Malls (Continued)
- ------------------------------------
Los Altos MarketCenter
Long Beach, CA
90815-3126 $ 32,800 (13) $ 0 N/A
$ 32,704
Laguna Niguel Promenade
Laguna Niguel, CA
92677-3920 $ 18,572 $ 0 N/A
$ 18,423
The Avenue of the Peninsula
Rolling Hills Estates, CA
90274-3664 $ 25,104 $ 0 N/A
(12)
The Avenue East Cobb
Suburban Atlanta, GA
30062-9999 (12) $ 0 N/A
The Shops at World Golf Village
St. Augustine, FL
32092-9999 (12) $ 0 N/A
Medical Office
- --------------
Northside/Alpharetta I
Atlanta, GA
30005-3707 $ 15,587 $ 10,543 1/1/06
$ 15,400 7.70%
Presbyterian Medical Plaza
at University
Charlotte, NC
28233-3549 $ 8,600 (13) $ 0 N/A
$ 8,545
Percentage
Description, Year Rentable Leased Average Major
Location Development Company's Square Feet as of 1998 Major Tenants (lease Tenants'
and Completed Joint Venture Ownership and Acres March 15, Economic expiration/options Rentable
Zip Code or Acquired Partner Interest as Noted 1999 Occupancy expiration) Sq. Feet
- ------------ ----------- ------------- --------- ----------- ---------- --------- -------------------- --------
Medical Office (Continued)
- --------------------------
Meridian Mark Plaza
Atlanta, GA
30342-1613 (12) N/A 100% 159,000 78%(12) (12) Northside Hospital (4) 40,675
3 Acres (2013/2023)(12)
Scottish Rite Hospital for 22,000
Crippled Children, Inc.
(2003/2008)(12)
AtheroGenics
Suburban Atlanta, GA
30004-2148 (12) N/A 100% 50,000 100% (12) AtheroGenics (2019/2029)(12) 50,000
4 Acres
Northside/Alpharetta II
Atlanta, GA
30005-3707 (12) N/A 100% 198,000 44%(12) (12) Northside Hospital (4) 63,321
2 Acres (28) (2019)(12)
Stand Alone Retail Sites Adjacent to Company's Office and Retail Projects
- -------------------------------------------------------------------------
Wildwood Office Park
Suburban Atlanta, GA
30339-5671 1985-1993 IBM 50% 14 Acres 100% 100% N/A N/A
North Point
Suburban Atlanta, GA
30202-4885 1993 N/A 100% 24 Acres 100% 100% N/A N/A
Adjusted
Cost and
Adjusted
Cost Less Debt
Description, Depreciation Maturity
Location and and
and Amortization Debt Interest
Zip Code (1) Balance Rate
- ------------ ------------- ------- ---------
Medical Office (Continued)
- --------------------------
Meridian Mark Plaza
Atlanta, GA
30342-1613 $ 17,918 $ 0 N/A
(12)
AtheroGenics
Suburban Atlanta, GA
30004-2148 (12) $ 0 N/A
Northside/Alpharetta II
Atlanta, GA
30005-3707 (12) $ 0 N/A
Stand Alone Retail Sites Adjacent to Company's Office and Retail Projects
- -------------------------------------------------------------------------
Wildwood Office Park
Suburban Atlanta, GA
30339-5671 $ 8,718 $ 0 N/A
$ 7,093
North Point
Suburban Atlanta, GA
30202-4885 $ 3,716 $ 0 N/A
$ 3,616
(1) Cost as shown in the accompanying table includes deferred leasing and
financing costs and other related assets. For each of the following
projects: 2300 and 2500 Windy Ridge Parkway, 3200 Windy Hill Road, 4100
and 4300 Wildwood Parkway, 4200 Wildwood Parkway and Wildwood Stand
Alone Retail Lease Sites, the cost shown is what the cost would be
if the venture's land cost were adjusted downward to the Company's lower
basis in the land it contributed to the venture.
(2) 11,050 square feet of the Profit Recovery Group lease of 2300 Windy Ridge
Parkway expires in 2002, 1,556 square feet of the Financial Services
Corporation lease of 2300 Windy Ridge Parkway expires in 2001 and Chevron
USA has a lease cancellation right in 2001 at 2300 Windy Ridge Parkway if
notice is received in 2000.
(3) 119,544 square feet of this lease of 3200 Windy Hill Road expires in 2001,
and the balance expires in 2006.
(4) Actual tenant or venture partner is affiliate of entity shown.
(5) See "Major Properties" - "Wildwood Office Park" where the accounting for
the 3100 Windy Hill Road Building is discussed.
(6) Green Tree Financial, Georgia-Pacific Corporation and PaineWebber have
the right to terminate their leases in 2001, 2007 and 2008, respectively,
upon payment of significant cancellation penalties.
(7) Tenant has the option to purchase the building on its lease expiration
date for a price of $33,750,000.
(8) A lease for 100% of the building was signed in March 1998 whereby the
tenant began partial occupancy in June 1998 with 100% occupancy by April
1999. Thus, economic occupancy for 4200 Wildwood Parkway does not include
a full year of operations.
(9) See "Major Properties" - "NationsBank Plaza," "Ten Peachtree Place,"
"Cousins/Daniel, LLC," "CommonWealth/Cousins I, LLC ," "CP Venture Two
LLC," and "101 Second Street" where these ventures' preferences and terms
are discussed.
(10) Ernst & Young LLP has a cancellation right on 20,753 square feet of this
lease at NationsBank Plaza in 2003, if notice is received in 2002, and
Paul Hastings has a cancellation right on 12,812 square feet and 20,574
square feet in 2005 and 2006, respectively.
(11) See "Major Properties" - "NationsBank Plaza" where debt on NationsBank
Plaza is discussed.
(12) Project was under construction as of December 31, 1998. Lease expiration
dates are based upon estimated commencement dates, and square footage is
estimated.
(13) See Note 5 for a discussion of the properties contributed to the
Prudential venture.
(14) Maturity of the Ten Peachtree Place mortgage debt is extendible to
December 31, 2008. Rate becomes floating after November 30, 2001.
(15) 100 North Point Center East and 200 North Point Center East were financed
together with one non-recourse mortgage note payable. For purposes of this
schedule the total debt has been allocated 50% to each building.
(16) 333 North Point Center East became partially operational in June 1998.
Thus, economic occupancy for 333 North Point Center East does not include
a full year of operations.
(17) 103,656 square feet of this lease of 101 Independence Center expires in
2000.
(18) Grandview II became partially operational in August 1998. Thus, economic
occupancy for Grandview II does not include a full year of occupancy.
(19) This tenant has the right to cancel 13,052 square feet of this lease of
Grandview II in 2003.
(20) LA Cellular Headquarters is located on 9 acres which are subject to a
ground lease expiring in 2034, with an option to renew through 2087.
(21) A portion of the Haywood Mall parking lot (3 acres) is subject to a long-
term ground lease expiring in 2017, with five 10-year renewal options.
(22) This anchor tenant owns its own space.
(23) North Point MarketCenter includes approximately 4 outparcels which are
ground leased to freestanding users.
(24) Includes 14,000 square feet not yet constructed as of March 15, 1999 which
was excluded from the calculation of percentage leased and average 1998
economic occupancy.
(25) This tenant declared Chapter 11 bankruptcy subsequent to December 31,
1998.
(26) The Company is under contract to sell an outparcel site and building to
Walgreens which is under construction and is expected to be completed in
1999. The tenant will vacate its space in the center and the lease will
terminate upon completion and purchase of the building and outparcel site.
(27) Laguna Niguel Promenade became operational in July 1998. Thus, economic
occupancy of Laguna Niguel Promenade does not include a full year of
operations.
(28) Northside/Alpharetta I and II are located on 1 acre and 2 acres subject
to ground leases, which expire in 2058 and 2060, respectively.
(29) Presbyterian Medical Plaza at University is located on 1 acre which is
subject to a ground lease expiring in 2057.
(30) Tenant has the option to renew 23,359 rentable square feet through 2027 of
this lease of Presbyterian Medical Plaza at University, with the option
to renew the balance through 2022.
Land Held for Investment and Future Development (excluding Retail Outparcels)
Adjusted
Cost
Less
Developable Company's Depreciation
Land Area Joint Venture Ownership and Debt
Description, Location and Zoned Use Year Acquired (Acres)(1) Partner Interest Amortization Balances
- ----------------------------------- ------------- ----------- ------------- --------- ------------ --------
Wildwood Office Park
Suburban Atlanta, Georgia
Office and Commercial 1971-1987 146 N/A 100% $ 7,005 $ 0
Office and Commercial 1971-1982 34 IBM 50% $ 8,930(2) $ 0
North Point Land
(Georgia Highway 400 & Haynes Bridge Road)(3)
Suburban Atlanta, Georgia
Office and Commercial - East 1970-1985 13 N/A 100% $ 1,020 $ 0
Office and Commercial - West 1970-1985 217 N/A 100% $ 4,450 $ 0
Midtown Atlanta
Office and Commercial 1984 1 N/A 100% $ 1,398 $ 0
Temco Associates
(Paulding County)
Suburban Atlanta, Georgia 1991 --(5) Temple-Inland 50% --(5) $ 0
Inc. (4)
- ----------------------
(1) Based upon management's estimates.
(2) For the portion of the Wildwood Office Park land owned by a joint venture,
the cost shown is what the cost would be if the venture's land cost were
adjusted downward to the Company's lower basis in the land it contributed
to the venture. The adjusted cost excludes building predevelopment costs of
$1,148,000.
(3) The North Point property is located both east and west of Georgia Highway
400. Development had been mainly concentrated on the land located east of
Georgia Highway 400, until July 1998 when the Company commenced
construction of the first building on the west side. The land located east
of Georgia Highway 400 surrounds North Point Mall, a 1.3 million square
foot regional mall on a 100 acre site which the Company sold in 1988.
(4) Joint venture partner is an affiliate of the entity shown.
(5) Temco Associates has an option through March 2006, with no carrying costs,
to acquire the fee simple interest in approximately 11,000 acres in
Paulding County, Georgia (northwest of Atlanta, Georgia). The partnership
also has an option to acquire interests in a timber rights only lease
covering approximately 22,000 acres. The lease expires in March 2006. The
options may be exercised in whole or in part over the option period. Temco
Associates has engaged in certain sales of land as to which it
simultaneously exercised its purchase option. During 1998, approximately
328 acres of the option related to the fee simple interest was exercised.
Approximately 83 acres were simultaneously sold for gross profits of
approximately $192,000. The Cobb County, Georgia YMCA has a three year
option to purchase approximately 38 acres out of the 1998 options
exercised. The remaining acreage (approximately 207) was deeded in early
1999 to a golf course developer who is developing the golf course within
the Bentwater residential community on which Temco Associates commenced
development in November 1998. During 1996, approximately 375 acres of the
option related to the fee simple interest was exercised and simultaneously
sold for gross profits of $1,427,000. None of the option was exercised in
1997.
Major Properties
- ----------------
General
- -------
This section describes the major operating properties in which the
Company has an interest either directly or indirectly through joint venture
arrangements. A "negative investment" in a joint venture results from
distributions of capital to the Company, if any, exceeding the sum of (i) the
Company's contributions of capital and (ii) reported earnings (losses) of the
joint venture allocated to the Company. "Investment" in a joint venture means
the book value of the Company's investment in the joint venture.
Wildwood Office Park
- --------------------
Wildwood Office Park is a 285 acre Class A commercial development in
suburban Atlanta master planned by I.M. Pei, including 8 office buildings
containing 2,437,000 rentable square feet. The property is zoned for office,
institutional and commercial use. Approximately 105 acres in the park are owned
by, or committed to be contributed to, Wildwood Associates (see below),
including approximately 34 acres of land held for future development. The
Company owns 100% of the 146 acre balance of the land available for future
development.
Located in Atlanta's northwest commercial district, just north of the
Interstate 285/Interstate 75 intersection, Wildwood features convenient access
to all of Atlanta's major office, commercial and residential districts. The
Wildwood complex overlooks the Chattahoochee River and borders 1,200 acres of
national forest, thus providing an urban office facility in a forest setting.
Wildwood Associates. Wildwood Associates is a joint venture formed in
1985 between the Company and IBM. The Company and IBM each have a 50% interest
in Wildwood Associates. At December 31, 1998, the Company's investment in
Wildwood Associates and a related partnership, which included the cost of the
land the Company is committed to contribute to Wildwood Associates, was reduced
to a negative investment of approximately $36,364,000 due to partnership
distributions in excess of net income made during 1998 and prior years.
Wildwood Associates owns the 3200 Windy Hill Road Building (685,000
rentable square feet), the 2300 Windy Ridge Parkway Building (634,000 rentable
square feet), the 2500 Windy Ridge Parkway Building (314,000 rentable square
feet), the 4100 and 4300 Wildwood Parkway Buildings (250,000 rentable square
feet in total) and the 4200 Wildwood Parkway Building (260,000 rentable square
feet). At March 15, 1999, these buildings were 91%, 100%, 95%, 100% and 100%
leased, respectively. Wildwood Associates also owns 14 acres leased to two
banking facilities and five restaurants.
On June 30, 1998, Wildwood Associates completed the $44 million
financing of the 4200 Wildwood Parkway Building (see Note 4). In conjunction
with this financing, Wildwood Associates made non-operating cash distributions
of approximately $22.6 million to each partner during 1998.
Wildwood Associates has a $10 million bank line of credit(the Company
severally guarantees one-half) under which $0 was drawn as of December 31, 1998.
Other Buildings in Wildwood Office Park. Wildwood Office Park also
contains the 3301 Windy Ridge Parkway Building, a 106,000 rentable square foot
office building located on approximately 10 acres which is wholly owned by the
Company. The 3301 Windy Ridge Parkway Building was 100% leased as of March 15,
1999.
In addition, the 3100 Windy Hill Road Building, a 188,000 rentable
square foot corporate training facility occupies a 13-acre parcel of land which
is wholly owned by the Company. The training facility improvements were sold in
1983 to a limited partnership of private investors, at which time the Company
received a leasehold mortgage note. The training facility land was
simultaneously leased to the partnership for thirty years, along with certain
equipment for varying periods. The training facility had been leased by the
partnership to IBM through November 30, 1998.
Effective January 1, 1997, the IBM lease was extended eight years
beyond its previous expiration, to November 30, 2006. Based on the economics of
the lease, the Company will receive substantially all of the economic risks and
rewards from the property through the term of the IBM lease. In addition, the
Company will receive substantially all of the future economic risks and rewards
from the property beyond the IBM lease because of the short term remaining on
the land lease (7 years) and the large mortgage note balance ($25.9 million)
that would have to be paid off, with interest, in that 7 year period before the
limited partnership would receive any significant benefit. Therefore, effective
January 1, 1997, the $17,005,000 balance of the mortgage note and land was
reclassified to Operating Properties, and revenues and expenses (including
depreciation) from that point forward have been recorded as if the building were
owned by the Company.
North Point
- -----------
North Point is a mixed-use commercial development located in north
central suburban Atlanta, Georgia, off of Georgia Highway 400, a six lane state
highway that runs from downtown Atlanta to the northern Atlanta suburbs. The
Company owns either directly or through a joint venture approximately 134 and
221 acres located on the east and west sides of Georgia Highway 400,
respectively. Development had been mainly concentrated on the land located east
of Georgia Highway 400 until July 1998 when the Company commenced construction
of the first building on the west side. Planning and infrastructure work has
also begun for additional development on the west side property. The east side
land surrounds North Point Mall, a 1.3 million square foot regional mall on a
100-acre site which the Company sold in 1988. The following describes the
various components of North Point.
North Point MarketCenter and Mansell Crossing Phase II. North Point
MarketCenter, which is 100% leased as of March 15, 1999, is a 514,000 square
foot retail power center (of which 401,000 square feet are owned by Cousins)
located adjacent to North Point Mall. Mansell Crossing Phase II, which was 100%
leased as of March 15, 1999, is an approximately 103,000 square foot expansion
of an existing retail power center, previously developed by the Company for a
third party. These two centers are located on 49 and 13 acres of land,
respectively, at North Point. Both of these properties were contributed to the
Prudential venture in November 1998 (see Note 5).
North Point Center East. The Company owns either directly or indirectly
through a joint venture four office buildings located adjacent to North Point
Mall and the retail properties discussed above. 100 North Point Center East and
200 North Point Center East, which were completed in 1995 and 1996, are 128,000
and 130,000 rentable square feet, respectively. The third office building, 333
North Point Center East, a 129,000 rentable square foot office building,
adjacent to 100 and 200 North Point Center East became partially operational for
financial reporting purposes in June 1998. Construction commenced in May 1998 on
the fourth office building, 555 North Point Center East, a 148,000 rentable
square foot building also adjacent to the other buildings. These four office
buildings are located on 35 acres of land at North Point and 100, 200 and 333
North Point Center East were 100%, 100% and 96% leased, respectively, as of
March 15, 1999. 100 and 200 North Point Center East were contributed to the
Prudential venture in November 1998 (see Note 5).
AtheroGenics. In July 1998, the Company commenced construction of
AtheroGenics, an approximately 50,000 rentable square foot office and laboratory
building. This building is located on a 4 acre site on the west side of Georgia
Highway 400.
Other North Point Property. Approximately 24 acres of the North
Point land are ground leased in 1 to 5 acre sites to freestanding users.
These 24 acres were 100% leased as of March 15, 1999.
The remaining approximately 230 developable acres at North Point are
100% owned by the Company. Approximately 13 acres of this land are located on
the east side of Georgia Highway 400 and are zoned for office use. Approximately
217 acres of the land are located on the west side of Georgia Highway 400 and
are zoned for office, institutional and light industrial use.
Other Office Properties
- -----------------------
NationsBank Plaza. NationsBank Plaza is a Class A, 55-story,
approximately 1.3 million rentable square foot office tower designed by Kevin
Roche and is located on approximately 4 acres of land between the midtown and
downtown districts of Atlanta, Georgia. The building, which was completed in
1992, was approximately 98% leased as of March 15, 1999. An affiliate of Bank of
America leases 46% of the rentable square feet. NationsBank Plaza was developed
by CSC, a joint venture formed by the Company and a wholly owned subsidiary of
Bank of America, each as 50% partners.
CSC's net income or loss and cash distributions are allocated to the
partners based on their percentage interests (50% each). At December 31, 1998,
the Company's investment in CSC was approximately $97,685,000.
Cousins LORET Venture, L.L.C.("Cousins LORET"). Effective July 31,
1997, Cousins LORET was formed between the Company and LORET Holdings, L.L.L.P.
("LORET"), each as 50% members. LORET contributed Two Live Oak, a 278,000
rentable square foot office building located in Atlanta, Georgia, which was
renovated in 1997. Two Live Oak became partially operational for financial
reporting purposes in October 1997. Two Live Oak was contributed subject to a
7.90% $30 million non-recourse ten year mortgage note payable. LORET also
contributed an adjacent 4 acre site on which construction commenced in August
1997 of The Pinnacle, a 424,000 rentable square foot office building. In May
1998, Cousins LORET completed the $70 million non-recourse financing of The
Pinnacle at an interest rate of 7.11% and a term of twelve years (see Note 4)
which was completely funded on December 30, 1998. The Company contributed $25
million of cash to Cousins LORET to match the value of LORET's agreed-upon
equity. At December 31, 1998, the Company had an investment in Cousins LORET of
approximately $25,202,000.
101 Independence Center. In December 1996, the Company acquired 101
Independence Center, a 522,000 rentable square foot office building (including
an underground parking garage and an adjacent parking deck) located at the
intersection of Trade and Tryon Streets in the central business district of
Charlotte, North Carolina. 101 Independence Center was 98% leased as of March
15, 1999.
615 Peachtree Street. In August 1996, the Company acquired 615
Peachtree Street, a 145,000 rentable square foot 12-story downtown Atlanta
office building, located across from NationsBank Plaza. 615 Peachtree Street was
59% leased as of March 15, 1999.
CP Venture LLC. On November 12, 1998, the Company entered into a
venture agreement with Prudential. On such date the Company contributed its
interest in nine properties to the venture and Prudential contributed cash (see
Note 5). The nine properties contributed included four office properties, 100
and 200 North Point Center East as discussed above, First Union Tower and
Grandview II. First Union Tower is a Class A office building containing
approximately 319,000 rentable square feet, located on approximately one acre of
land in downtown Greensboro, North Carolina. First Union Tower was approximately
95% leased as of March 15, 1999. In August 1998, Grandview II, an approximately
149,000 rentable square foot office building in Birmingham, Alabama, which was
owned by Cousins/Daniel, LLC, became partially operational for financial
reporting purposes. Grandview II was approximately 97% leased as of March 15,
1999. See the retail and medical office sections where retail and medical office
properties contributed to the Prudential venture are discussed.
One Ninety One Peachtree Tower. One Ninety One Peachtree Tower is a
50-story, Class A office tower located in downtown Atlanta, Georgia that was
completed in December 1990. One Ninety One Peachtree Tower, which contains 1.2
million rentable square feet, was designed by John Burgee Architects, with
Phillip Johnson as design consultant.
One Ninety One Peachtree Tower was developed on approximately 2 acres
of land, of which approximately 1.5 acres is owned and approximately one-half
acre under the parking facility is leased for a 99-year term expiring in 2087
with a 99-year renewal option.
One Ninety One Peachtree Tower was approximately 97% leased at March 15, 1999.
C-H Associates, Ltd. ("C-H Associates"), a partnership formed in 1988
between CREC (49%), Hines Peachtree Associates Limited Partnership (49%) and
Peachtree Palace Hotel, Ltd. (2%), owns a 20% interest in the partnership that
owns One Ninety One Peachtree Tower. C-H Associates' 20% ownership of One Ninety
One Peachtree Tower results in an effective 9.8% ownership interest by CREC,
subject to a preference in favor of the majority partner, in the One Ninety One
Peachtree Tower project. The balance of the One Ninety One Peachtree Tower
project was owned by DIHC Peachtree Associates, which was an affiliate of Dutch
Institutional Holding Company, but was acquired by Cornerstone Properties, Inc.
in October 1997.
Through C-H Associates, CREC received 50% of the development fees from
the One Ninety One Peachtree Tower project. In addition, CREC owns a 50%
interest in two general partnerships which receive fees from leasing and
managing the One Ninety One Peachtree Tower project.
The One Ninety One Peachtree Tower project was funded substantially by
debt until March 1993, at which time DIHC Peachtree Associates (now Cornerstone
Properties, Inc. as discussed above) contributed equity in the amount of
$145,000,000 which repaid approximately one-half of the debt. Subsequent to the
equity contribution, C-H Associates is entitled to a priority distribution of
$250,000 per year (of which the Company is entitled to receive $112,500) for
seven years beginning in 1993. The equity contributed is entitled to a preferred
return at a rate increasing over the first 14 years from 5.5% to 11.5% (payable
after the Company's priority return); at December 31, 1998, the cumulative
undistributed preferred return was $17,892,295. After Cornerstone Properties,
Inc. recovers its preferred return, the partners share in any operating cash
flow distributions in accordance with their percentage interests. The project is
subject to long-term debt of approximately $144,320,000 at December 31, 1998. At
December 31, 1998, the Company had a negative investment of approximately
$63,000 in the One Ninety One Peachtree Tower project.
Ten Peachtree Place. Ten Peachtree Place is a 20-story, 259,000
rentable square foot Class A office building located in midtown Atlanta,
Georgia. Completed in 1991, this structure was designed by Michael Graves and is
currently 100% leased to Coca-Cola. Approximately four acres of adjacent land,
currently used for surface parking, are available for future development.
Ten Peachtree Place is owned by Ten Peachtree Place Associates, a
general partnership between the Company (50%) and a wholly owned subsidiary of
Coca-Cola (50%). The partnership acquired the property in 1991 for a nominal
cash investment, subject to a ten-year purchase money note. This 8% purchase
money note had an outstanding balance of $18.4 million at December 31, 1998. 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,
1998, the Company had an investment in Ten Peachtree Place Associates of
approximately $104,000.
The Company anticipates that Ten Peachtree Place Associates will
generate approximately $400,000 per year of cash flows from operating activities
net of note principal amortization during the ten-year lease. The partnership
agreement generally provides that each of the partners is entitled to receive
50% of cash flows from operating activities net of note principal amortization
(excluding any sale proceeds) for ten years, after which time the Company is
entitled to 15% of cash flows (including any sale proceeds) and its partner is
entitled to receive 85% of cash flows (including any sale proceeds), until the
two partners have received a combined distribution of $15.3 million, after which
time each partner is entitled to receive 50% of cash flows (including any sale
proceeds).
CC-JM II Associates. This joint venture was formed in 1994 between the
Company and an affiliate of CarrAmerica Realty Corporation, each as 50% general
partners, to develop and own a 224,000 square foot office building in suburban
Washington, D.C. The building is 100% leased for 15 years to Booz-Allen &
Hamilton, an international consulting firm, as a part of its corporate
headquarters campus. Rent commenced on January 21, 1996. At December 31, 1998,
the Company had an investment in CC-JM II Associates of approximately
$2,660,000.
Cousins/Daniel, LLC. Cousins/Daniel, LLC ("Cousins/Daniel") was formed
in 1997 between Cousins, Inc. (a wholly owned subsidiary of Cousins) and Daniel
Realty Company ("Daniel"). The purpose of this venture is to develop certain
projects proposed by Daniel and selected by the Company. Daniel's economic
rights are limited to development fees, leasing fees, management fees and
certain incentive interests. These incentive interests include a residual
interest in the cash flow and a residual interest in capital proceeds. All
projects undertaken within the venture are pooled for purposes of calculating
the aforementioned residuals.
This venture is treated as a consolidated entity in the Company's financial
statements.
In June 1998, Cousins/Daniel acquired Lakeshore Park Plaza, an
approximately 193,000 rentable square foot office building and also purchased
the land for, and commenced construction of, 600 University Park Place, an
approximately 123,000 rentable square foot office building. Both of these office
buildings are located in Birmingham, Alabama. Lakeshore Park Plaza was 100%
leased as of March 15, 1999.
Office Properties Under Development
- -----------------------------------
101 Second Street. Cousins/Myers Second Street Partners, L.L.C., a
venture formed in 1997 between the Company and Myers Second Street Company LLC
("Myers"), purchased .63 acres of undeveloped land in downtown San Francisco,
California upon which 101 Second Street, an approximately 390,000 rentable
square foot office building, is being constructed. Myers' economic rights are
limited to development fees and certain incentive interests, which include a
residual interest in the cash flow and a residual interest in capital proceeds.
This venture is treated as a consolidated entity in the Company's financial
statements. 101 Second Street was 62% leased as of March 15, 1999.
333 John Carlyle. In January 1998, the Company purchased the land for,
and commenced construction of, 333 John Carlyle, an approximately 153,000
rentable square foot office building in suburban Washington, D.C. 333 John
Carlyle is expected to be completed during the second quarter of 1999 and was
68% leased as of March 15, 1999.
Charlotte Gateway Village, LLC ("Gateway"). On December 14, 1998, the
Company and a wholly owned subsidiary of Bank of America Corporation formed
Gateway for the purpose of developing and owning Gateway Village, a 976,000
rentable square foot office building and parking deck in downtown Charlotte,
North Carolina (see Note 5). Construction of Gateway Village commenced in July
1998, and the project is 100% leased to Bank of America Corporation. At December
31, 1998 the Company had an investment in Gateway of approximately $11,781,000.
Gateway's net income or loss and cash distributions are allocated to
the members as follows: first to the Company so that it receives a cumulative
compound return equal to 11.46% on its capital contributions, second to a wholly
owned subsidiary of Bank of America Corporation until it has received an amount
equal to the aggregate amount distributed to the Company and then to each
member, 50%.
CommonWealth/Cousins I, LLC. On November 18, 1998, the Company entered
into Commonwealth/Cousins I, LLC (the "Venture") with CommonWealth Pacific, LLC
("CommonWealth") for the purposes of developing a 217,000 square foot office
building in suburban Los Angeles, California. The building will be 100% occupied
by, and the corporate headquarters for, LA Cellular. The Venture is treated as a
consolidated entity in the Company's financial statements.
CommonWealth transferred all rights in the project and in exchange
received an initial credit to its capital account of $4,980,039, which is equal
to a 49.9% interest in the Venture. The Company is unconditionally obligated to
contribute $5,000,000 as its capital contribution to the Venture upon the
occurrence of certain events for a 50.1% interest in the Venture. The Venture
entered into a put and call agreement which the Company intends to exercise to
buy out CommonWealth's interest in the Venture for approximately $7.5 million.
Other Retail Properties
- -----------------------
Haywood Mall. Haywood Mall is an enclosed regional shopping center
located 5 miles southeast of downtown Greenville, South Carolina, which was
developed and opened in 1980, and was originally owned by the Company and
Bellwether Properties of South Carolina, L.P., an affiliate of Corporate
Property Investors. Simon Property Group purchased Corporate Property Investors'
interest in Haywood Mall in October 1998. The mall has 1,256,000 gross leaseable
square feet ("GLA") of which approximately 330,000 GLA is owned by the Company
and Simon Property Group. The balance of the mall is owned by the mall's five
major department stores. The portion of Haywood Mall owned by the Company and
Simon Property Group was developed on approximately 21 acres of land, of which
approximately 18 acres is owned and approximately 3 acres (of parking area) is
leased under a ground lease expiring in 2017, with five 10-year renewal options.
The portion of Haywood Mall owned by the Company and Simon Property Group was
approximately 96% leased as of March 15, 1999.
The Company has a 50% interest in Haywood Mall. At December 31,
1998, the Company's investment was approximately $19,656,000.
Other Fully Operational Retail Properties. The Company owns three other
retail centers which were fully operational for financial reporting purposes as
of December 31, 1998. Perimeter Expo is a 291,000 square foot retail power
center (of which the Company owns 176,000 square feet) which is located in
Atlanta, Georgia and was 100% leased (Company owned) as of March 15, 1999.
Presidential MarketCenter is a 471,000 square foot retail power center (of which
the Company owns 354,000 square feet) which is located in suburban Atlanta,
Georgia and was 99% leased (Company owned) as of March 15, 1999. Colonial Plaza
MarketCenter is a 489,000 square foot retail power center which is located in
Orlando, Florida and was 94% leased as of March 15, 1999.
CP Venture LLC. In November 1998, the Company contributed both
Greenbrier MarketCenter and Los Altos MarketCenter in addition to North Point
MarketCenter and Mansell Crossing II (see North Point discussion) to the
aforementioned Prudential venture (see Note 5). Greenbrier MarketCenter is a
493,000 square foot retail power center which is located in Chesapeake, Virginia
and was 100% leased as of March 15, 1999. Los Altos MarketCenter is a 258,000
square foot retail power center (of which the Prudential venture owns 157,000
square feet) which is located in Long Beach, California and was 100% leased as
of March 15, 1999.
Brad Cous Golf Venture, Ltd. Effective January 31, 1998, the Compan
formed the Brad Cous Golf Venture, Ltd. with the W.C. Bradley Co., each as 50%
partners, for the purpose of developing and owning The Shops at World Golf
Village, an approximately 80,000 square foot retail center located adjacent
to the PGA Hall of Fame in St. Augustine, Florida. The Shops at World Golf
Village is currently under construction and lease-up. At December 31, 1998,
the Company had an investment in Brad Cous Golf Venture, Ltd. of approximately
$4,962,000.
Other Retail Properties Under Development. In February 1998, the
Company purchased The Shops at Palos Verdes, located in Rolling Hills Estates,
California, in the greater Los Angeles metropolitan area. This 355,000 square
foot center includes existing retail space and a parking deck. The Company plans
to redevelop and remerchandise the project into an approximately 385,000 square
foot open-air, high-end specialty center, to be named The Avenue of the
Peninsula. In April 1998, the Company purchased the land for, and commenced
construction of, The Avenue East Cobb, an approximately 241,000 square foot
open-air, high-end speciality center in suburban Atlanta, Georgia.
Retail Properties Sold. Subsequent to year-end, on February 1, 1999,
CREC sold Abbotts Bridge Station, an approximately 83,000 square foot
neighborhood retail center in suburban Atlanta, Georgia for $15.7 million,
which was approximately $5.0 million over the cost of the center. Including
depreciation recapture of approximately $.3 million and net of an income tax
provision of approximately $2.2 million, the net gain on the sale was
approximately $3.1 million.
Medical Office Properties
- -------------------------
Operational Medical Office Properties. In June 1998, the Company
acquired Northside/Alpharetta I, an approximately 100,000 rentable square foot
medical office building in suburban Atlanta, Georgia. Northside/Alpharetta I was
approximately 100% leased as of March 15, 1999.
Medical Office Properties Under Development. Construction commenced in
June 1998 on Northside/Alpharetta II, an approximately 198,000 rentable square
foot medical office building. Additionally, Meridian Mark Plaza, a 159,000
rentable square foot medical office building, is under construction and
lease-up. Meridian Mark Plaza was 78% leased at March 15, 1999.
CP Venture LLC. In November 1998, the Company contributed Presbyterian
Medical Plaza at University, an approximately 69,000 rentable square foot
medical office building in Charlotte, North Carolina, to the Prudential
venture (see Note 5). Presbyterian Medical Plaza at University was
approximately 100% leased as of March 15, 1999.
Residential Lots Under Development
- ----------------------------------
As of December 31, 1998, CREC and Temco Associates owned the following
parcels of land which are being developed into residential communities ($ in
thousands):
Estimated
Total Lots Purchase
Initial on Land Money
Year Currently Lots Remaining Carrying Debt
Description Acquired Owned (1) Sold to Date Lots Value Balances
----------- -------- --------- ------------- ---------- -------- --------
CREC
----
Brown's Farm 1993 213 175 38 $ 972 $ 0
West Cobb County
Suburban Atlanta, GA
Apalachee River Club 1994 186 114 72 2,167 0
Gwinnett County
Suburban Atlanta, GA
Echo Mill 1994 539 274 265 3,680 0
West Cobb County
Suburban Atlanta, GA
Barrett Downs 1994 144 143 1 0 0
Forsyth County
Suburban Atlanta, GA
Bradshaw Farm 1994 529 384 145 205 0
Cherokee County
Suburban Atlanta, GA
Alcovy Woods
Gwinnett County
Suburban Atlanta, GA 1996 164 40 124 1,747 530
----- ----- --- ------ -----
Total 1,775 1,130 645 $8,771 $ 530
===== ===== === ====== =====
Temco Associates
Bentwater
Paulding County
Suburban Atlanta, GA 1998 1,250(2) 0 1,250 $1,288 $ 0
======== ===== ===== ====== =====
(1) Includes lots sold to date. Additional lots may be developed on adjacent
land on which CREC holds purchase options.
(2) See discussion of Temco Associates below.
Land Held for Investment and Future Development
- -----------------------------------------------
In addition to the various land parcels located adjacent to operating
properties or projects under construction discussed above, the Company owns 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
arise over time.
Temco Associates. Temco Associates was formed in March 1991 as a
partnership between CREC (50%) and a subsidiary of Temple-Inland Inc. (50%).
Temco Associates has an option through March 2006, with no carrying costs, to
acquire the fee simple interest in approximately 11,000 acres in Paulding
County, Georgia (northwest of Atlanta, Georgia). The partnership also has an
option to acquire interests in a timber rights only lease covering approximately
22,000 acres. The lease expires in March 2006. The options may be exercised in
whole or in part over the option period and the option price of the fee simple
land was $877 per acre at January 1, 1999, escalating at 6% on January 1 of each
succeeding year during the term of the option. During 1998, approximately 328
acres of the option related to the fee simple interest was exercised.
Approximately 83 acres were simultaneously sold for gross profits of
approximately $192,000. The Cobb County YMCA has a three year option to purchase
approximately 38 acres out of the total acres of the options exercised in 1998.
The remaining approximately 207 acres were deeded in early 1999 to a golf course
developer who is developing the golf course within the Bentwater residential
community on which Temco Associates commenced development in November 1998.
Approximately 1,250 lots will be developed within Bentwater on approximately 838
acres which will be acquired as needed through exercises of the option related
to the fee simple interest. During 1996, approximately 375 acres of the option
related to the fee simple interest was exercised and simultaneously sold for
gross profits of $1,427,000. None of the option was exercised in 1997.
Other Real Property Investments
- -------------------------------
Omni Norfolk Hotel. Norfolk Hotel Associates ("NHA") was a general
partnership formed in 1978 between the Company and an affiliate of Odyssey
Partners, L.P. (an investment partnership), each as 50% partners, which held a
mortgage note on and owned the land under the 442-room Omni International Hotel
in downtown Norfolk, Virginia. In January 1992, NHA terminated the land lease
and became the owner of the hotel and a long-term parking agreement with an
adjacent building owner. In April 1993, the partnership sold the hotel, but
retained its interest in the parking agreement. The partnership received a
$8,325,000 mortgage note for a portion of the sales proceeds. In July 1994, NHA
distributed to each partner a 50% interest in the parking agreement held by NHA,
and in July 1996 the Company sold its 50% interest for $2 million, resulting in
a profit to the Company of approximately $408,000 which is included in Gain on
Sale of Investment Properties in the 1996 Consolidated Statement of Income.
On February 14, 1997, the mortgage note receivable due to NHA with a
balance of $8,325,000 was repaid in full. A portion of the proceeds from the
repayment was used to pay off the partnership's lines of credit, with the
balance of the partnership's assets ($2.2 million of cash for each partner)
distributed to the partners in 1997. The partnership was dissolved in 1997.
Dusseldorf Joint Venture. In 1992, the Company entered into a joint
venture agreement for the development of a 133,000 rentable square foot office
building in Dusseldorf, Germany which is 34% leased to IBM. The Company's
venture partners are IBM and Multi Development Corporation International B.V.
("Multi"), a Dutch real estate development company. In December 1993, the
building was presold to an affiliate of Deutsche Bank. CREC and Multi jointly
developed the building. Due to the release of certain completion guarantees
related to the building, approximately $2.6 million of development income was
recognized in September 1995 ($931,000 of which had been deferred as of December
31, 1994). An additional $115,000, $235,000 and $777,000 of development income
was received and recognized in 1998, 1997 and 1996, respectively.
Air Rights Near the CNN Center. The Company owns a leasehold interest
in the air rights over the approximately 365,000 square foot CNN Center parking
facility in Atlanta, Georgia, adjoining the headquarters of Turner Broadcasting
System, Inc. and Cable News Network. The air rights are developable for
additional parking or office use. The Company's net carrying value of this
property is $0.
Supplemental Financial and Leasing Information
- ----------------------------------------------
Depreciation and amortization expense include the following components
for the years ended December 31, 1998 and 1997 ($ in thousands):
1998 1997
-------------------------------------- --------------------------------------
Share of Share of
Unconsolidated Unconsolidated
Consolidated Joint Ventures Total Consolidated Joint Ventures Total
------------ -------------- ------- ------------ --------------- ------
Furniture, fixtures and
equipment $ 505 $ 2 $ 507 $ 435 $ 7 $ 442
Deferred financing costs -- 17 17 -- 10 10
Goodwill and related business
acquisition costs 342 228 570 486 35 521
Building (including tenant
first generation) 5,300 6,330 11,630 12,351 9,056 21,407
Tenant second generation 9,026 7,159 16,186 774 1,243 2,017
------- ------- ------- ------- ------- -------
$15,173 $13,736 $28,910 $14,046 $10,351 $24,397
======= ======= ======= ======= ======= =======
Exclusive of new developments and purchases of furniture, fixtures and
equipment, the Company had the following capital expenditures for the years
ended December 31, 1998 and 1997, including its share of unconsolidated joint
ventures ($ in thousands):
1998 1997
Office Retail Total Office Retail Total
------ ------ ----- ------ ------ -----
Second generation related costs $1,442 $ 47 $1,488 $ 978 $ -- $ 978
Building improvements -- 1 1 14 -- 14
------ ---- ------ ----- ----- -----
Total $1,442 $ 48 $1,489 $ 992 $ -- $ 992
====== ==== ====== ===== ===== =====
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, 1998.
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 67 Chairman of the Board of Directors
and Chief Executive Officer
Daniel M. DuPree 52 President and Chief Operating Officer
Kelly H. Barrett 34 Senior Vice President - Finance
George J. Berry 61 Senior Vice President
Tom G. Charlesworth 49 Senior Vice President, Secretary and
General Counsel
Craig B. Jones 48 Senior Vice President and President of
the Office Division
Joel T. Murphy 40 Senior Vice President and President of
the Retail Division (Cousins
MarketCenters, Inc.)
John L. Murphy 53 Senior Vice President
W. James Overton 52 Senior Vice President - Development
Lea Richmond III 51 Senior Vice President and President of
the Medical Office Division
(Cousins/Richmond)
Relationships:
- --------------
There are no family relationships among the current Executive
Officers or Directors. Lillian C. Giornelli, Mr. Cousins' daughter, is a
nominee for director at the Company's Annual Meeting of Stockholders on May 4,
1999.
Term of Office:
- ---------------
The term of office for all officers expires at the annual directors'
meeting, but the Board has the power to remove any officer at any time.
Business Experience:
Mr. Cousins has been the Chief Executive Officer of the Company since
its inception.
Mr. DuPree joined the Company in October 1992, became Senior Vice
President in April 1993, Senior Executive Vice President in April 1995 and
President and Chief Operating Officer in November 1995. Prior to that he
was President of New Market Companies, Inc. and affiliates since 1984.
Ms. Barrett joined the Company in October 1992 as Vice President and
Controller and became Senior Vice President - Finance of the Company in August
1997. Prior to that she was employed by Arthur Andersen LLP as an Audit Manager.
Mr. Berry has been Senior Vice President since joining the Company in
September 1990. Prior to that he was Commissioner of the State of Georgia's
Department of Industry, Trade and Tourism from 1983 to 1990.
Mr. Charlesworth joined the Company in October 1992 and became Senior
Vice President, Secretary and General Counsel in November 1992. Prior to
that he worked for certain affiliates of Thomas G. Cousins as Chief Financial
Officer and Legal Counsel.
Mr. Jones joined the Company in October 1992 and became Senior Vice
President in November 1995 and President of the Office Division in September
1998. From 1987 until joining the Company, he was Executive Vice President of
New Market Companies, Inc. and affiliates.
Mr. Joel Murphy joined the Company in October 1992 and became Senior
Vice President of the Company and President of the Retail Division in November
1995. From 1988 until joining the Company, he was Senior Vice President of New
Market Companies, Inc.
and affiliates.
Mr. John Murphy has been Senior Vice President since joining the
Company in December 1987.
Mr. Overton has been Senior Vice President since joining the
Company in September 1989. Prior to that he was employed by Hardin Construction
Group, Inc. from 1972 to 1989, where he served as President from 1985 to 1989.
Mr. Richmond has been Senior Vice President and President of the
Medical Office Division since he joined the Company in July 1996. Prior to that
he was President of The Lea Richmond Company and The Richmond Development
Company from 1975 to 1996.
PART II
Item 5. Market for Registrant's Common Stock and Related Security Holder
- ----------------------------------------------------------------------------
Matters
-------
The information concerning the market prices for the Registrant's
common stock and related stockholder matters appearing under the caption
"Market and Dividend Information" on page 54 of the Registrant's 1998 Annual
Report to Stockholders is incorporated herein by reference.
Item 6. Selected Financial Data
- -----------------------------------
The information appearing under the caption "Five Year Summary of
Selected Financial Data" on page 46 of the Registrant's 1998 Annual Report to
Stockholders is incorporated herein by reference.
Item 7. Management's Discussion and Analysis of Financial Condition and
- ----------------------------------------------------------------------------
Results of Operations
---------------------
Management's Discussion and Analysis of Financial Condition and
Results of Operations which appears on pages 47 through 53 of the Registrant's
1998 Annual Report to Stockholders is incorporated herein by reference. Item 7a
Quantitative and Qualitative Disclosure about Market Risk
Quantitative and Qualitative Disclosures about Market Risk, which
appears on page 53 of the Registrant's 1998 Annual Report to Stockholders, is
incorporated herein by reference.
Item 8. Financial Statements and Supplementary Data
- -------------------------------------------------------
The Consolidated Financial Statements and Notes to Consolidated
Financial Statements of the Registrant and Report of Independent Public
Accountants which appear on pages 25 through 46 of the Registrant's 1998 Annual
Report to Stockholders are incorporated herein by reference.
The information appearing under the caption "Selected Quarterly
Financial Information (Unaudited)" on page 55 of the Registrant's 1998 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 E
xecutive Officers of the Company" on pages 2 through 5 and "Compliance with
Section 16(a) of the Securities Exchange Act of 1934" on page 13 of the Proxy
Statement dated March 29, 1999 relating to the 1998 Annual Meeting of the
Registrant's Stockholders, and is incorporated herein by reference.
Item 11. Executive Compensation
- ----------------------------------
The information appearing under the caption "Executive Compensation" on
pages 7 through 9 and "Compensation of Directors" on page 12 of the Proxy
Statement dated March 29, 1999 relating to the 1998 Annual Meeting of the
Registrant's Stockholders is incorporated herein by reference.
Item 12. Security Ownership of Certain Beneficial Owners and Management
- -----------------------------------------------------------------------
The information concerning security ownership of certain beneficial
owners and management required by this Item 12 is included under the captions
"Directors and Executive Officers of the Company" on pages 2 through 7 and
"Principal Stockholders" on pages 22 and 23 of the Proxy Statement dated March
29, 1999 relating to the 1998 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 29, 1999 relating to the 1998 Annual Meeting of
the Registrant's Stockholders, and is incorporated herein by reference.
S-7
PART IV
-------
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
- ----------------------------------------------------------------------------
(a) 1. Financial Statements
--------------------------
A. The following Consolidated Financial Statements of the
Registrant, together with the applicable Report of
Independent Public Accountants, are contained on pages 25
through 46 of the Registrant's 1998 Annual Report to
Stockholders and are incorporated herein by reference:
Page Number
in
Annual Report
-------------
Consolidated Balance Sheets - December 31, 1998
and 1997 25
Consolidated Statements of Income for the Years
Ended December 31, 1998, 1997 and 1996 26
Consolidated Statements of Stockholders'
Investment for the Years Ended December 31,
1998, 1997 and 1996 27
Consolidated Statements of Cash Flows for the
Years Ended December 31, 1998, 1997 and 1996 28
Notes to Consolidated Financial Statements
December 31, 1998, 1997 and 1996 29 through 45
Report of Independent Public Accountants 46
B. The following Combined Financial Statements, together with
the applicable Report of Independent Public Accountants, of
Wildwood Associates and Green Valley Associates II, joint
ventures of the Registrant meeting the criteria for
significant subsidiaries under the rules and regulations of
the Securities and Exchange Commission, are filed as a part
of this report.
Page Number
in Form l0-K
------------
Report of Independent Public Accountants F-1
Combined Balance Sheets - December 31, 1998
and 1997 F-2
Combined Statements of Income for the Years
Ended December 31, 1998, 1997 and 1996 F-3
Combined Statements of Partners' Capital
for the Years Ended December 31, 1998,
1997 and 1996 F-4
Combined Statements of Cash Flows for the
Years EndedDecember 31, 1998, 1997 and 1996 F-5
Notes to Combined Financial Statements
December 31, 1998, 1997 and 1996 F-6 through
F-11
Item 14. Continued
- ---------------------
C. The following Financial Statements, together with the
applicable Report of Independent Auditors, of CSC
Associates, L.P., a joint venture of the Registrant meeting
the criteria for a significant subsidiary under the rules
and regulations of the Securities and Exchange Commission,
are filed as a part of this report.
Page Number
in Form l0-K
------------
Report of Independent Auditors G-1
Balance Sheets - December 31, 1998 and 1997 G-2
Statements of Operations for the Years Ended
December 31, 1998, 1997 and 1996 G-3
Statements of Partners' Capital for the Years
EndedDecember 31, 1998, 1997 and 1996 G-4
Statements of Cash Flows for the Years Ended
December 31, 1998, 1997 and 1996 G-5
Notes to Financial Statements G-6 through
December 31, 1998, 1997 and 1996 G-9
2. Financial Statement Schedules
-----------------------------------
The following financial statement schedules, together with the
applicable report of independent public accountants are filed as a
part of this report.
Page Number
in Form l0-K
A. Cousins Properties Incorporated and
Consolidated Entities:
Report of Independent Public
Accountants on Schedule S-7
Schedule III- Real Estate and
Accumulated Depreciation -
December 31, 1998 S-8 through
S-12
B. Wildwood Associates and Green Valley
Associates II
Schedule III - Real Estate and
Accumulated Depreciation -
December 31, 1998 F-12
C. CSC Associates, L.P.
Schedule III- Real Estate and
Accumulated Depreciation -
December 31, 1998 G-10
NOTE: Other schedules are omitted because of the absence of conditions
under which they are required or because the required information
is given in the financial statements or notes thereto.
Item 14. Continued
- ---------------------
3. Exhibits
--------------
3(a)(i) Articles of Incorporation of Registrant, as
approved by the Stockholders on April 29, 1997,
filed as Exhibit B to the Registrant's Proxy
Statement dated April 29, 1997, and as amended by
the Stockholders on April 21, 1998 as filed in the
Registrant's Proxy Statement dated March 27, 1998,
and incorporated herein by reference.
3(b) By-laws of Registrant, as approved by the
Stockholders on April 30, 1990, and as further
amended by the Stockholders on April 29, 1993,
filed as Exhibit 4(b) to the Registrant's Form S-3
dated September 28, 1993, and incorporated herein
by reference.
4(a) Dividend Reinvestment Plan as restated as of March
27, 1995, filed in the Registrant's Form S-3 dated
March 27, 1995, and incorporated herein by
reference.
10(a)(i) Cousins Properties Incorporated 1989 Stock Option
Plan, as renamed the 1995 Stock Incentive Plan and
approved by the Stockholders on May 6, 1996, filed
as Exhibit A to the Registrant's Proxy Statement
dated May 6, 1996, and as amended by the
Stockholders on April 21, 1998, as filed in the
Registrant's Proxy Statement dated March 27, 1998,
and incorporated herein by reference.
10(a)(ii) Cousins Real Estate Corporation Stock Appreciation
Right Plan, amended and restated as of March 15,
1993, filed as Exhibit 10(a)(ii) to the
Registrant's Form 10-K for the year ended December
31, 1992, and incorporated herein by reference.
10(a)(iii) Cousins Properties Incorporated Stock Appreciation
Right Plan, dated as of March 15, 1993, filed as
Exhibit 10(a)(iii) to the Registrant's Form 10-K
for the year ended December 31, 1992, and
incorporated herein by reference.
10(b)(i) Cousins Properties Incorporated Profit Sharing Plan
as amended and restated effective as of January 1,
1996.
10(b)(ii) Cousins Properties Incorporated Profit Sharing
Trust Agreement as effective as of January 1, 1991,
filed as Exhibit 10(b)(ii) to the Registrant's Form
10-K for the year ended December 31, 1991, and
incorporated herein by reference.
10(c) Land lease (Kennesaw) dated December 17, 1969, and
an amendment thereto dated December 15, 1977, filed
as Exhibit l0(d) to the Registrant's Form 10-K for
the year ended December 31, 1980, and incorporated
herein by reference.
Item 14. Continued
- ---------------------
10(d) Cousins Properties Incorporated Stock Plan for
Outside Directors, as approved by the Stockholders
on April 29, 1997, filed as Exhibit B to the
Registrant's Proxy Statement dated April 29, 1997,
and incorporated herein by reference.
11 Schedule showing computation of net income per
share for each of the five years ended December 31
1998.
13 Annual Report to Stockholders for the year ended
December 31, 1998.
21 Subsidiaries of the Registrant.
23(a) Consent of Independent Public Accountants (Arthur
Andersen LLP).
23(b) Consent of Independent Auditors (Ernst & Young
LLP).
27 Financial Data Schedule.
(b) Reports on Form 8-K.
--------------------------
On November 16, 1998, the Registrant filed a current report on
Form 8-K to report the formation of a venture with The Prudential
Insurance Company of America.
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 19, 1999
BY: /s/ Kelly H. Barret
---------------------------------
Kelly H. Barrett
Senior Vice President - Finance
(Authorized 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 19, 1999
Chief Executive Officer
/s/ T.G. Cousins and Director
- ---------------------------
T. G. Cousins
Principal Financial and Accounting
Officer:
Senior Vice President March 19, 1999
/s/ Kelly H. Barrett - Finance
- ---------------------------
Kelly H. Barrett
Additional Directors:
/s/ Richard W. Courts Director March 19, 1999
- ---------------------------
Richard W. Courts, II
/s/ Boone A. Knox Director March 19, 1999
- ---------------------------
Boone A. Knox
/s/ William Porter Payne Director March 19, 1999
- ---------------------------
William Porter Payne
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS ON SCHEDULE
----------------------------------------------------
To Cousins Properties Incorporated:
We have audited in accordance with generally accepted auditing
standards, the financial statements included in the Cousins Properties
Incorporated annual report to stockholders incorporated by reference in this
Form l0-K, and have issued our report thereon dated February 11, 1999. 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 11, 1999
SCHEDULE III
(Page 1 of 5)
COUSINS PROPERTIES INCORPORATED AND CONSOLIDATED ENTITIES
REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 1998
($ in thousands)
Column A Column B Column C Column D Column E
-------- -------- -------- -------- --------
Costs Capitalized Gross Amount at Which
Initial Cost Subsequent Carried at
to Company to Acquisition December 31, 1998
------------------- -------------------- -----------------------------------
Carrying
Costs
Buildings Less Cost Land Buildings
and Improve- of Sales and Land and Total
Description Encumbrances Land Improvements ments and Other Improvements Improvements (a),(b)
- ----------- ------------ ---- ------------ -------- --------- ------------ ------------ -------
LAND HELD FOR INVESTMENT OR FUTURE DEVELOPMENT
- ----------------------------------------------
Wildwood - Atlanta, GA $ -- $ 11,156 $ -- $ 4,737 $ (8,888) $ 7,005 $ -- $ 7,005
North Point Property -
Fulton Co., GA -- 10,294 -- 12,213 (17,037) 5,470 -- 5,470
Midtown - Atlanta, GA -- 2,949 -- 56 (1,607) 1,398 -- 1,398
McMurray - Cobb Co., GA. -- 1,105 -- 172 (1,245) 32 -- 32
Lawrenceville -
Gwinnett Co., GA -- 5,543 -- 706 (5,863) 386 -- 386
Colonial Plaza MarketCenter
Outparcels -
Orlando, FL -- 1,649 -- 335 (1,544) 440 -- 440
Greenbrier MarketCenter
Outparcels -
Chesapeake, VA -- 3,191 -- 204 (2,985) 410 -- 410
Abbotts Bridge Station
Outparcels -
Alpharetta, GA -- 902 -- -- (451) 451 -- 451
----------------------------------------------------------------------------------------------
-- 36,789 -- 18,423 (39,620) 15,592 -- 15,592
----------------------------------------------------------------------------------------------
Column F Column G Column H Column I
-------- -------- -------- --------
Life on
Which De-
preciation
Accumu- In 1998
lated Date of Income
Deprecia- Construc- Date Statement
Description tion (a) tion Acquired Is Computed
- ----------- -------- --------- -------- -----------
LAND HELD FOR INVESTMENT OR FUTURE DEVELOPMENT
- ----------------------------------------------
Wildwood - Atlanta, GA $ -- -- 1971-1982,1989 --
North Point Property -
Fulton Co., GA -- -- 1970-1985 --
Midtown - Atlanta, GA -- -- 1984 --
McMurray - Cobb Co., GA. -- -- 1981 --
Lawrenceville -
Gwinnett Co., GA -- -- 1994 --
Colonial Plaza MarketCenter
Outparcels -
Orlando, FL -- -- 1995 --
Greenbrier MarketCenter
Outparcels -
Chesapeake, VA -- -- 1995 --
Abbotts Bridge Station
Outparcels -
Alpharetta, GA -- -- 1998 --
-------
--
-------
SCHEDULE III
(Page 2 of 5)
COUSINS PROPERTIES INCORPORATED AND CONSOLIDATED ENTITIES
REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 1998
($ in thousands)
Column A Column B Column C Column D Column E
-------- -------- -------- -------- --------
Costs Capitalized Gross Amount at Which
Initial Cost Subsequent Carried at
to Company to Acquisition December 31, 1998
------------------- -------------------- -----------------------------------
Carrying
Costs
Buildings Less Cost Land Buildings
and Improve- of Sales and Land and Total
Description Encumbrances Land Improvements ments and Other Improvements Improvements (a),(b)
- ----------- ------------ ---- ------------ -------- --------- ------------ ------------ -------
OPERATING PROPERTIES
- --------------------
Wildwood - 3301 Windy
Ridge - Atlanta, GA $ -- $ 20 $ -- $ 9,007 $ 1,519 $ 1,237 $ 9,309 $ 10,546
Wildwood - 3100 Windy Hill
Road - Atlanta, GA -- -- 17,005 -- -- -- 17,005 17,005
Kennesaw - Cobb Co., GA -- -- -- 2,351 -- -- 2,351 2,351
615 Peachtree Street -
Atlanta, GA -- 4,740 7,229 -- -- 4,740 7,229 11,969
333 North Point Center East -
Fulton Co., GA -- 551 -- 11,803 809 551 12,612 13,163
Lakeshore Park Plaza -
Birmingham, AL 10,856 3,362 12,261 -- -- 3,362 12,261 15,623
101 Independence Center -
Charlotte, NC 48,254 11,096 62,824 -- -- 11,096 62,824 73,920
Perimeter Expo -
Atlanta, GA 20,846 8,564 -- 10,800 71 8,564 10,871 19,435
North Point
Stand Alone Retail Sites -
Fulton Co., GA -- 4,559 -- 451 (1,294) 3,716 -- 3,716
Northside/Alpharetta I -
Fulton Co., GA 10,543 -- 15,587 -- -- -- 15,587 15,587
Presidential MarketCenter -
Gwinnett Co., GA -- 3,956 -- 18,946 817 3,956 19,763 23,719
Column F Column G Column H Column I
-------- -------- -------- --------
Life on
Which De-
preciation
Accumu- In 1998
lated Date of Income
Deprecia- Construc- Date Statement
Description tion (a) tion Acquired Is Computed
- ----------- -------- --------- -------- -----------
OPERATING PROPERTIES
- --------------------
Wildwood - 3301 Windy
Ridge - Atlanta, GA $ 4,297 1984 1984 30 Years
Wildwood - 3100 Windy Hill
Road - Atlanta, GA 1,360 1997 1997 25 Years
Kennesaw - Cobb Co., GA 1,543 1974 1973 30 Years
615 Peachtree Street -
Atlanta, GA 1,152 -- 1996 15 Years
333 North Point Center East -
Fulton Co., GA 533 1996 1996 30 Years
Lakeshore Park Plaza -
Birmingham, AL 198 -- 1998 30 Years
101 Independence Center -
Charlotte, NC 5,855 -- 1996 25 Years
Perimeter Expo -
Atlanta, GA 2,102 1993 1993 30 Years
North Point
Stand Alone Retail Sites -
Fulton Co., GA 100 -- 1970-1985 Various
Northside/Alpharetta I -
Fulton Co., GA 187 -- 1998 25 Years
Presidential MarketCenter -
Gwinnett Co., GA 2,278 1993-1995 1993 30 Years
SCHEDULE III
(Page 3 of 5)
COUSINS PROPERTIES INCORPORATED AND CONSOLIDATED ENTITIES
REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 1998
($ in thousands)
Column A Column B Column C Column D Column E
-------- -------- -------- -------- --------
Costs Capitalized Gross Amount at Which
Initial Cost Subsequent Carried at
to Company to Acquisition December 31, 1998
------------------- -------------------- -----------------------------------
Carrying
Costs
Buildings Less Cost Land Buildings
and Improve- of Sales and Land and Total
Description Encumbrances Land Improvements ments and Other Improvements Improvements (a),(b)
- ----------- ------------ ---- ------------ -------- --------- ------------ ------------ -------
OPERATING PROPERTIES (Continued)
- --------------------------------
Abbotts Bridge Station -
Fulton Co., GA $ -- $ 1,954 $ -- $ 7,674 $ 531 $ 1,954 $ 8,205 $ 10,159
Colonial Plaza MarketCenter -
Orlando, FL -- 8,500 -- 31,265 1,905 8,500 33,170 41,670
Miscellaneous -- 398 145 77 (474) -- 146 146
90,499 47,700 115,051 92,374 3,884 47,676 211,333 259,009
PROJECTS UNDER CONSTRUCTION
101 Second Street -
San Francisco, CA $ -- $ 11,698 $ -- $ 18,616 $ 1,292 $ 11,698 $ 19,908 $ 31,606
AtheroGenics -
Fulton Co., GA -- 200 -- 2,715 44 200 2,759 2,959
The Avenue East Cobb -
Atlanta, GA -- 7,205 -- 9,891 520 7,205 10,411 17,616
333 John Carlyle -
Washington, D.C. -- 5,373 -- 15,554 705 5,373 16,259 21,632
Carlyle II -
Washington, D.C. -- 490 -- -- -- 490 -- 490
Laguna Niguel Promenade -
Laguna Niguel, CA -- 5,578 -- 12,106 739 5,578 12,845 18,423
Meridian Mark Plaza -
Atlanta, GA -- 2,200 -- 14,619 1,099 2,200 15,718 17,918
600 University Park Place -
Birmingham, AL -- 1,899 -- 8,707 212 1,899 8,919 10,818
555 North Point Center East
Fulton Co., GA -- 368 -- 8,303 175 368 8,478 8,846
Column F Column G Column H Column I
-------- -------- -------- --------
Life on
Which De-
preciation
Accumu- In 1998
lated Date of Income
Deprecia- Construc- Date Statement
Description tion (a) tion Acquired Is Computed
- ----------- -------- --------- -------- -----------
OPERATING PROPERTIES (Continued)
- --------------------------------
Abbotts Bridge Station -
Fulton Co., GA $ 312 1997 1997 30 Years
Colonial Plaza MarketCenter -
Orlando, FL 3,382 1995 1995 30 Years
Miscellaneous 120 -- 1977-1984 Various
-------
23,419
-------
PROJECTS UNDER CONSTRUCTION
- ---------------------------
101 Second Street -
San Francisco, CA $ -- 1998 1997 --
AtheroGenics -
Fulton Co., GA -- 1998 1998 --
The Avenue East Cobb -
Atlanta, GA -- 1998 1998 --
333 John Carlyle -
Washington, D.C. -- 1998 1998 --
Carlyle II -
Washington, D.C. -- 1998 1998 --
Laguna Niguel Promenade -
Laguna Niguel, CA -- 1997 1997 --
Meridian Mark Plaza -
Atlanta, GA -- 1997 1997 --
600 University Park Place -
Birmingham, AL -- 1998 1998 --
555 North Point Center East
Fulton Co., GA -- 1998 1998 --
SCHEDULE III
(Page 4 of 5)
COUSINS PROPERTIES INCORPORATED AND CONSOLIDATED ENTITIES
REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 1998
($ in thousands)
Column A Column B Column C Column D Column E
-------- -------- -------- -------- --------
Costs Capitalized Gross Amount at Which
Initial Cost Subsequent Carried at
to Company to Acquisition December 31, 1998
------------------- -------------------- -----------------------------------
Carrying
Costs
Buildings Less Cost Land Buildings
and Improve- of Sales and Land and Total
Description Encumbrances Land Improvements ments and Other Improvements Improvements (a),(b)
- ----------- ------------ ---- ------------ -------- --------- ------------ ------------ -------
PROJECTS UNDER CONSTRUCTION (continued)
- ---------------------------------------
Avenue of the Peninsula -
Los Angeles, CA $ -- $ 4,338 $ 17,152 $ 2,262 $ 1,352 $ 4,338 $ 20,766 $ 25,104
Northside/Alpharetta II
Fulton Co., GA -- -- -- 7,067 67 -- 7,134 7,134
LA Cellular Headquarters -
Los Angeles, CA -- -- -- 16,124 66 -- 16,190 16,190
----------------------------------------------------------------------------------------------
-- 39,349 17,152 115,964 6,271 39,349 139,387 178,736
----------------------------------------------------------------------------------------------
RESIDENTIAL LOTS UNDER DEVELOPMENT
- ----------------------------------
Browns Farm -
Cobb Co., GA $ -- $ 3,154 $ -- $ 5,416 $ (7,598) $ 972 $ -- $ 972
Apalachee River Club -
Gwinnett Co., GA -- 1,820 -- 4,173 (3,826) 2,167 -- 2,167
Echo Mill -
Cobb Co., GA -- 5,298 -- 6,900 (8,518) 3,680 -- 3,680
Bradshaw Farm -
Cherokee Co., GA -- 5,100 -- 11,480 (16,375) 205 -- 205
Alcovy Woods -
Gwinnett Co., GA 530 1,142 -- 1,423 (818) 1,747 -- 1,747
530 16,514 -- 29,392 (37,135) 8,771 -- 8,771
----------------------------------------------------------------------------------------------
$ 91,029 $ 140,352 $132,203 $256,153 $(66,600) $111,388 $350,720 $462,108
==============================================================================================
Column F Column G Column H Column I
-------- -------- -------- --------
Life on
Which De-
preciation
Accumu- In 1998
lated Date of Income
Deprecia- Construc- Date Statement
Description tion (a) tion Acquired Is Computed
- ----------- -------- --------- -------- -----------
PROJECTS UNDER CONSTRUCTION (continued)
- ---------------------------------------
Avenue of the Peninsula -
Los Angeles, CA $ -- 1998 1998 --
Northside/Alpharetta II
Fulton Co., GA -- 1998 -- --
LA Cellular Headquarters -
Los Angeles, CA -- 1998 1998 --
-------
--
-------
RESIDENTIAL LOTS UNDER DEVELOPMENT
- ----------------------------------
Browns Farm -
Cobb Co., GA $ -- 1993-1994 1993-1994 --
Apalachee River Club -
Gwinnett Co., GA -- 1994 1994 --
Echo Mill -
Cobb Co., GA -- 1994 1994 --
Bradshaw Farm -
Cherokee Co., GA -- 1994 1994 --
Alcovy Woods -
Gwinnett Co., GA -- 1996 1996 --
-------
--
-------
$23,419
=======
SCHEDULE III
(Page 5 of 5)
COUSINS PROPERTIES INCORPORATED AND CONSOLIDATED ENTITIES
REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 1998
($ in thousands)
NOTES:
(a) Reconciliations of total real estate carrying value and accumulated
depreciation for the three years ended December 31, 1998 are as
follows:
Real Estate Accumulated Depreciation
------------------------------ --------------------------
1998 1997 1996 1998 1997 1996
---- ---- ---- ---- ---- ----
Balance at beginning of period $449,619 $377,663 $235,344 $33,617 $20,339 $15,483
Additions during the period:
Improvements and other
capitalized costs 213,556 100,395 181,682 -- -- --
Provision for depreciation -- -- -- 13,645 13,278 5,571
------------------------------ ---------------------------
213,446 100,395 181,682 13,645 13,278 5,571
------------------------------ ---------------------------
Deductions during the period:
Cost of real estate contributed (185,044) -- -- (23,843) -- --
Cost of real estate sold (16,023) (28,439) (39,363) -- -- (715)
------------------------------ ---------------------------
(201,067) (28,439) (39,363) (23,843) -- (715)
------------------------------ ---------------------------
Balance at close of period $462,108 $449,619 $377,663 $23,419 $33,617 $20,339
============================== ===========================
(b) Initial cost for Kennesaw was previously adjusted to reflect a write-down of $1,430 to state the property at the then
realizable value.
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
----------------------------------------
To 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, 1998 and 1997, and the related combined
statements of income, partners' capital and cash flows for each of the three
years in the period ended December 31, 1998. 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, 1998 and 1997, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1998 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 11, 1999
WILDWOOD ASSOCIATES AND GREEN VALLEY ASSOCIATES II
--------------------------------------------------
COMBINED BALANCE SHEETS
-----------------------
DECEMBER 31, 1998 AND 1997
--------------------------
($ in thousands)
1998 1997
-------- --------
ASSETS
- ------
REAL ESTATE ASSETS:
Income producing properties, including land of
$49,457 in 1998 and $48,713 in 1997 (Note 7) $276,137 $271,227
Accumulated depreciation and amortization (64,254) (56,354)
--------------------
211,883 214,873
Land committed to be contributed (Note 3) 8,301 9,405
Land and property predevelopment costs 11,794 11,828
--------------------
Total real estate assets 231,978 236,106
--------------------
CASH AND CASH EQUIVALENTS 3,945 9,413
--------------------
OTHER ASSETS:
Deferred expenses, net of accumulated amortization of
$7,896 and $7,091 in 1998 and 1997, respectively 8,867 6,636
Receivables (Note 6) 7,805 11,451
Allowance for possible losses (Note 1) (2,250) (2,550)
Furniture, fixtures and equipment, net of accumulated
depreciation of $426 and $364 in 1998 and 1997,
respectively 1,192 733
Other 8 39
15,622 16,309
--------------------
$251,545 $261,828
====================
LIABILITIES AND PARTNERS' CAPITAL
NOTES PAYABLE (Note 7) $233,914 $193,861
RETAINAGE, ACCOUNTS PAYABLE AND
ACCRUED LIABILITIES 7,445 7,503
--------------------
Total liabilities 241,359 201,364
--------------------
PARTNERS' CAPITAL (Notes 3 and 4):
International Business Machines Corporation 5,093 30,232
Cousins Properties Incorporated 5,093 30,232
--------------------
Total partners' capital 10,186 60,464
--------------------
$251,545 $261,828
====================
The accompanying notes are an integral part of these combined balance sheets.
WILDWOOD ASSOCIATES AND GREEN VALLEY ASSOCIATES II
--------------------------------------------------
COMBINED STATEMENTS OF INCOME
-----------------------------
FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
----------------------------------------------------
($ in thousands)
1998 1997 1996
------- ------- -------
REVENUES:
Rental income and recovery of expenses
charged directly to specific tenants $41,897 $38,507 $40,351
Interest 208 474 39
Other 179 134 115
---------------------------
Total revenues 42,284 39,115 40,505
---------------------------
EXPENSES:
Real estate taxes 3,317 3,471 3,579
Cleaning, maintenance and repairs 3,069 2,791 2,622
Utilities 2,409 2,031 2,182
Management and personnel costs 2,522 2,262 2,217
Contract security 1,183 1,051 1,094
Grounds maintenance 888 823 776
Expenses charged directly to specific tenants 375 444 417
Insurance 95 93 93
Interest expense 15,215 12,972 9,712
Depreciation and amortization 9,161 8,798 8,372
Ground lease expense (Note 8) -- -- 295
Real estate taxes on undeveloped land (Note 3) 87 143 208
Other expense 27 430 448
---------------------------
Total expenses 38,348 35,309 32,015
---------------------------
INCOME BEFORE GAIN ON
CONDEMNATION AWARD 3,936 3,806 8,490
Gain on condemnation award 220 -- --
---------------------------
NET INCOME $ 4,156 $ 3,806 $ 8,490
===========================
The accompanying notes are an integral part of these combined statements.
WILDWOOD ASSOCIATES AND GREEN VALLEY ASSOCIATES II
COMBINED STATEMENTS OF PARTNERS' CAPITAL
FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
($ in thousands)
International
Business Cousins
Machines Properties
Corporation Incorporated Total
------------- ------------ -------
BALANCE, December 31, 1995 $45,084 $45,084 $90,168
Distributions (4,000) (4,000) (8,000)
Net income 4,245 4,245 8,490
--------------------------------------
BALANCE, December 31, 1996 45,329 45,329 90,658
Distributions (17,000) (17,000) (34,000)
Net income 1,903 1,903 3,806
--------------------------------------
BALANCE, December 31, 1997 30,232 30,232 60,464
Distributions (27,217) (27,217) (54,434)
Net income 2,078 2,078 4,156
--------------------------------------
BALANCE, December 31, 1998 $ 5,093 $ 5,093 $10,186
======================================
The accompanying notes are an integral part of these combined statements.
WILDWOOD ASSOCIATES AND GREEN VALLEY ASSOCIATES II
--------------------------------------------------
COMBINED STATEMENTS OF CASH FLOWS (Note 9)
------------------------------------------
FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
----------------------------------------------------
($ in thousands)
1998 1997 1996
------- ------- -------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 4,156 $ 3,806 $ 8,490
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 9,161 8,798 8,372
Effect of recognizing rental revenues
on a straight-line basis 3,780 3,311 421
Change in tenant rental receivables (434) 297 (562)
Change in accounts payable and accrued
liabilities related to operations 2 (423) 3,557
----------------------------
Net cash provided by operating activities 16,665 15,789 20,278
----------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from condemnation 2,246 -- --
Property acquisition and development
expenditures (6,112) (15,501) (34,871)
Payment for deferred expenses, furniture,
fixtures and equipment, and other assets (3,886) (757) (2,978)
----------------------------
Net cash used in investing activities (7,752) (16,258) (37,849)
----------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of notes payable (3,947) (2,629) (1,610)
Proceeds from long term financing 44,000 30,000 70,000
Proceeds from line of credit -- -- 75,733
Repayments under line of credit -- -- (102,041)
Partnership distributions (54,434) (34,000) (8,000)
----------------------------
Net cash (used in) provided by financing
activities (14,381) (6,629) 34,082
----------------------------
NET (DECREASE) INCREASE IN CASH AND
CASH EQUIVALENTS (5,468) (7,098) 16,511
CASH AND CASH EQUIVALENTS AT BEGINNING
OF YEAR 9,413 16,511 --
----------------------------
CASH AND CASH EQUIVALENTS AT END OF YEAR $ 3,945 $ 9,413 $ 16,511
============================
The accompanying notes are an integral part of these combined statements.
WILDWOOD ASSOCIATES AND GREEN VALLEY ASSOCIATES II
--------------------------------------------------
NOTES TO COMBINED FINANCIAL STATEMENTS
--------------------------------------
DECEMBER 31, 1998, 1997 AND 1996
--------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation:
The Combined Financial Statements include the accounts of Wildwood
Associates ("WWA") and Green Valley Associates II ("GVA II"), both of which are
general partnerships. Cousins Properties Incorporated (together with its other
consolidated entities hereinafter referred to as "Cousins") and International
Business Machines Corporation ("IBM") each have a 50% general partnership
interest in both partnerships. The financial statements of the partnerships have
been combined because of the common ownership. The combined entities are
hereinafter referred to as the "Partnerships." All transactions between WWA and
GVA II have been eliminated in the Combined Financial Statements.
Cost of Property Contributed by Cousins:
The cost of property contributed or committed to be contributed by
Cousins was recorded by WWA based upon the procedure described in Note 3. Such
cost was, in the opinion of the partners, at or below estimated fair market
value at the time of such contribution or commitment, but was in excess of
Cousins' historical cost basis.
Cost Capitalization:
All costs related to planning, development and construction of
buildings, and expenses of buildings prior to the date they become operational
for financial statement purposes, are capitalized. Interest and real estate
taxes are also capitalized to property under development.
Depreciation and Amortization:
Real estate assets are stated at depreciated cost. Buildings are
depreciated over 25 to 40 years. Furniture, fixtures, and equipment are
depreciated over 3 to 5 years. Leasehold improvements and tenant improvements
are amortized over the life of the leases or useful life of the assets,
whichever is shorter. Deferred expenses - which include certain marketing and
leasing costs and loan acquisition costs - are amortized over the period of
estimated benefit. The straight-line method is used for all depreciation and
amortization.
Allowance for Possible Losses:
The allowance for possible losses provides for potential writeoffs of
certain tenant receivables and other tenant related assets on WWA's books. The
allowance reflects management's evaluation of the exposure to WWA based on a
specific review of its properties and the impact of current economic conditions
on those properties.
Allocation of Operating Expenses:
In accordance with certain lease agreements, certain management and
maintenance costs incurred by WWA are allocated to individual buildings or
tenants, including buildings not owned by WWA.
Income Taxes:
No provision has been made for federal or state income taxes because
each partner's proportionate share of income or loss from the Partnerships is
passed through to be included on each partner's separate tax return.
Cash and Cash Equivalents:
Cash and Cash Equivalents includes all cash and highly liquid money
market instruments. Highly liquid money market instruments include securities
and repurchase agreements with original maturities of three months or less,
money market mutual funds, and securities on which the interest rate is adjusted
to market rate at least every three months.
Rental Income:
In accordance with Statement of Financial Accounting Standards ("SFAS")
No. 13, income on leases which include scheduled increases in rental rates over
the lease term (other than scheduled increases based on the Consumer Price
Index) is recognized on a straight-line basis.
Use of Estimates:
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
2. FORMATION AND PURPOSE OF THE PARTNERSHIPS
WWA and GVA II were formed under the terms of partnership agreements
effective May 30, 1985 and March 31, 1988, respectively. The purpose of the
Partnerships is, among other things, to develop and operate selected property
within Wildwood Office Park ("Wildwood"), located in Atlanta, Georgia and the
Summit Green project located in Greensboro, North Carolina.
Wildwood is an office park containing a total of approximately 285
acres, of which approximately 92 acres are owned by WWA, and an estimated 13
acres are committed to be contributed to WWA by Cousins (see Note 3). Cousins
owns the balance of the developable acreage in the park. At December 31, 1998,
WWA's income producing real estate assets in Wildwood consisted of: six office
buildings totaling 2,132,000 rentable square feet (including land under such
buildings totaling approximately 56 acres); land parcels totaling approximately
14 acres leased to two banking facilities and five restaurants; and a 2 acre
site on which a child care facility is constructed. In addition, WWA's assets
include 34 acres of land held for future development, which is composed of a 4
acre site with approximately 58,000 square feet of office space which was
purchased in 1986 for future development (classified with income producing
properties in the accompanying financial statements), and 30 acres of other land
to be developed (including additional land committed to be contributed by
Cousins) (see Note 3).
See Note 8 where the disposition of the Summit Green property is
discussed.
3. CONTRIBUTIONS TO THE PARTNERSHIPS
IBM and Cousins have each contributed or committed to contribute
$62,857,000 in cash or properties to the Partnerships. The value of property
contributed by IBM was agreed to by the partners at the time of formation of WWA
and was recorded at the cash amount IBM paid for the property just prior to
contributing it to the Partnership. The value of the property contributed and to
be contributed by Cousins was recorded on the Partnership's books at an amount
equal to the cash and property contributed by IBM for an equal (50%) partnership
interest.
The status of contributions at December 31, 1998, was as follows ($ in
thousands):
IBM COUSINS TOTAL
------- ------- -------
Cash contributed $46,590 $ 84 $ 46,674
Property contributed 16,267 54,472 70,739
Land committed to be contributed -- 8,301 8,301
--------------------------------
Total $62,857 $62,857 $125,714
================================
WWA has elected not to take title to the remaining land committed to be
contributed by Cousins until such land is needed for development. However,
Cousins' capital account was previously credited with the amount originally
required to bring it equal to IBM's, and a like amount, plus preacquisition
costs paid by WWA, were set up as an asset entitled "Land Committed To Be
Contributed." This asset account subsequently has been reduced as land actually
has been contributed, or as land yet to be contributed became associated with a
particular building.
At December 31, 1998, Cousins was committed to contribute land on which
an additional 598,493 GSF are developable, provided that regardless of planned
use or density, 38,333 GSF shall be the minimum GSF attributed to each
developable acre contributed. Cousins has also agreed to contribute
infrastructure land in Wildwood, as defined, at no cost to WWA, in order to
provide the necessary land for development of roads and utilities. The ultimate
acreage remaining to be contributed by Cousins will depend upon the actual
density achieved, but would be approximately 13 acres if the density were
similar to that achieved on land contributed to date.
WWA pays all of the expenses related to the Land Committed to be
Contributed which were approximately $87,000, $143,000 and $208,000 in 1998,
1997 and 1996, respectively.
4. OTHER PROVISIONS OF THE PARTNERSHIP AGREEMENTS
Net income or loss and net cash flow, as defined, shall be allocated to
the partners based on their percentage interests (50% each, subject to
adjustment as provided in the partnership agreements).
In the event of dissolution of the Partnerships, the assets will be
distributed as follows:
o First, to repay all debts to third parties, including any secured loans with
the partners.
o Second, to each partner until each capital account is reduced to zero.
o The balance to each partner in accordance with its percentage interest.
5. FEES TO RELATED PARTIES
The Partnerships engaged Cousins to manage, develop and lease the
Partnerships' property. Fees to Cousins incurred by the Partnerships during
1998, 1997 and 1996 were as follows ($ in thousands):
1998 1997 1996
------ ------ ------
Development and tenant
construction fees $ 123 $ 406 $ 604
Management fees 1,139 1,047 1,032
Leasing and procurement fees 1,224 223 1,105
----------------------------
$2,486 $1,676 $2,741
============================
6. RENTAL REVENUES
WWA leases property to the partners, as well as to unrelated third
parties. The leases with partners are at rates comparable to those quoted to
third parties. The leases typically contain escalation provisions and provisions
requiring tenants to pay a pro rata share of operating expenses. The leases
typically include renewal options and all are classified and accounted for as
operating leases.
At December 31, 1998, future minimum rentals to be received under
existing non-cancelable leases, including tenants' current pro rata share of
operating expenses are as follows ($ in thousands):
Leases
Leases With
With Third
Partners Parties Total
-------- -------- --------
1999 $ 10,068 $ 24,677 $ 34,745
2000 9,839 23,334 33,173
2001 7,728 23,344 31,072
2002 8,555 20,322 28,877
2003 5,771 18,127 23,898
Thereafter 17,312 100,772 118,084
-------------------------------------
$ 59,273 $210,576 $269,849
=====================================
At December 31, 1998 and 1997, 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
$7,240,000 and $11,020,000, respectively. Of the 1998 amount, 72% was related to
leases with IBM.
7. NOTES PAYABLE
At December 31, 1998, notes payable included the following ($ in
thousands):
Term/
Amortization Balance at
Period Final December 31,
Description Rate (Years) Maturity 1998
----------- ---------------- ------------ --------- ------------
Line of credit ($10 million maximum) Fed Funds + .75% 1/ N/A 9/1/99 $ --
2300 Windy Ridge Parkway Building mortgage note 7.56% 10/25 12/1/05 67,886
3200 Windy Hill Road Building mortgage note 8.23% 10/28 1/1/07 68,668
4200 Wildwood Parkway Building mortgage note 6.78% 15.75/18 3/31/14 44,000
4100/4300 Wildwood Parkway Buildings mortgage note 7.65% 15/25 4/1/12 29,258
2500 Windy Ridge Parkway Building mortgage note 7.45% 10/20 12/15/05 24,102
--------
$233,914
========
On June 30, 1998, Wildwood Associates completed the financing of the
4200 Wildwood Parkway office building. The $44 million non-recourse mortgage
note payable has an interest rate of 6.78% and a term of 15-3/4 years. In
conjunction with this financing WWA made non-operating cash distributions of
$22.6 million to each partner. The $4.6 million operating distribution for 1998
was made to each partner at the same time.
The 2300 Windy Ridge Parkway Building, the 3200 Windy Hill Road
Building, the 4100/4300 Wildwood Parkway Buildings, and 4200 Wildwood Parkway
mortgage notes provide for additional amortization in the later years of the
notes (over that required by the amortization periods shown above) concurrent
with scheduled rent increases.
The line of credit matures September 1, 1999, but will automatically be
renewed from year to year unless the lender provides a notice of non-renewal at
least three months in advance of the annual renewal date. The line generally
prohibits new borrowings other than those under the line, or the pledging of any
assets not pledged as of August 1, 1990, without the Lender's prior approval.
The line bears a floating interest rate equal to the daily federal funds rate
plus 3/4%, and there are no fees or compensating balance arrangements required
under the line. Cousins and IBM have each severally guaranteed one-half of the
line of credit. Assets with net carrying values of approximately $194,678,000
were pledged as security on the Partnerships' debt.
The aggregate maturities of the indebtedness at December 31, 1998
summarized above are as follows ($ in thousands):
1999 $ 4,730
2000 5,352
2001 6,037
2002 6,746
Thereafter 211,049
--------
$233,914
========
The Partnerships capitalize interest expense to property under
development as required by SFAS No. 34. In the years ended December 31, 1998 and
1997, the Partnerships capitalized interest totaling $1,463,000 and $1,998,000,
respectively.
The estimated fair value of the notes payable at December 31, 1998 was
approximately $258 million, which was calculated by discounting future cash
flows under the notes at estimated rates at which similar notes would be made
currently.
8. DISPOSITION OF SUMMIT GREEN
Effective December 1, 1996, WWA disposed of its interest in a 144,000
GSF office building at Summit Green in exchange for cancellation of the related
mortgage debt. In connection with this disposition, the Partnerships also may
dispose of their leasehold interest in land adjacent to the office building. The
Partnerships anticipate no material gain or loss will result from their
disposition of the Summit Green project.
The land adjacent to the formerly owned office building is subject to a
non-subordinated ground lease expiring October 31, 2084. Lease payments
effective December 1, 1996 are approximately $256,000 per year, and escalate at
ten year intervals based on the cumulative increase in the Index over the prior
ten year period (subject to a 5% annual cap on the increase in such Index in any
one year). The next escalation date is December 1, 2006.
9. COMBINED STATEMENTS OF CASH FLOWS-SUPPLEMENTAL INFORMATION
Interest paid (net of amounts capitalized) was as follows ($ in
thousands):
1998 1997 1996
------- ------- ------
Interest paid $14,987 $12,700 $9,096
Significant non-cash financing and investing activities included the
following:
In 1996, land parcels with a cost of $4,498,000 were transferred from
Land Committed To Be Contributed to Land and Property Predevelopment Cost.
In 1996, the Partnerships recorded the disposition of the Summit Green
project (including the office building and the anticipated disposition of the
leasehold interest in the adjacent land) having a total cost of $10,447,000, and
the cancellation of $10,447,000 of related debt (see Note 8).
In 1996, two buildings with a total cost of $29,368,000 were
transferred from Projects Under Construction to Income Producing Properties. In
1997, one building with a total cost of $29,807,000 was transferred from
Projects Under Construction to Income Producing Properties.
SCHEDULE III
WILDWOOD ASSOCIATES AND GREEN VALLEY ASSOCIATES II
REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 1998
($ in thousands)
Column A Column B Column C Column D Column E
-------- -------- -------- -------- --------
Costs Capitalized Gross Amount at Which
Initial Cost Subsequent Carried at
to Company to Acquisition December 31, 1998
------------------- -------------------- -----------------------------------
Carrying
Costs
Buildings Less Cost Land Buildings
and Improve- of Sales and Land and Total
Description Encumbrances Land Improvements ments and Other Improvements Improvements (a),(b)
- ----------- ------------ ---- ------------ -------- --------- ------------ ------------ -------
Wildwood Office Park -
Cobb Co., GA
2500 Windy Ridge $ 24,102 $ 4,414 $ 14,814 $ 10,523 $ 141 $ 4,414 $ 25,478 $ 29,892
2300 Windy Ridge 67,886 8,927 -- 62,829 5,429 8,927 68,258 77,185
Parkside -- 3,161 2,553 (626) (45) 2,440 2,603 5,043
3200 Windy Hill 68,668 10,503 -- 67,906 5,470 10,503 73,376 83,879
4100/4300 Wildwood Parkway 29,258 6,689 -- 22,975 251 6,689 23,226 29,915
4200 Wildwood Parkway 44,000 4,347 -- 28,500 375 4,347 28,875 33,222
Stand Alone Retail Sites -- 8,752 1,234 2,372 123 9,344 3,137 12,481
Land committed to
be contributed -- 7,919 -- -- 382 8,301 -- 8,301
Other land and
property -- 11,547 -- 4,524 243 13,415 2,899 16,314
--------------------------------------------------------------------------------------------
$233,914 $66,259 $ 18,601 $199,003 $ 12,369 $68,380 $227,852 $296,232
============================================================================================
Column F Column G Column H Column I
-------- -------- -------- --------
Life on
Which De-
preciation
Accumu- In 1998
lated Date of Income
Deprecia- Construc- Date Statement
Description tion (a) tion Acquired Is Computed
- ----------- -------- --------- -------- -----------
Wildwood Office Park -
Cobb Co., GA
2500 Windy Ridge $10,820 1985 1985 40 Years
2300 Windy Ridge 24,567 1986 1986 40 Years
Parkside 2,603 1980 1986 25 Years
3200 Windy Hill 21,314 1989 1989 40 Years
4100/4300 Wildwood Parkway 2,461 1995 1986 30 Years
4200 Wildwood Parkway 250 1996 1986 30 Years
Stand Alone Retail Sites 1,333 Various 1985-1995 Various
Land committed to
be contributed -- -- 1985-1986 --
Other land and
property 906 Various 1985-1986 Various
-------
$64,254
=======
NOTE: (a) Reconciliations of total real estate carrying value and accumulated depreciation for the three years ended December 31,
1998 are as follows:
Real Estate Accumulated Depreciation
---------------------------------- -------------------------------
1998 1997 1996 1998 1997 1996
-------- -------- -------- ------- ------- -------
Balance at beginning of period $292,460 $280,584 $259,428 $56,354 $48,699 $44,900
Additions during the period:
Improvements, and other
capitalized costs 5,834 11,876 32,361 -- -- --
Provisions for depreciation -- -- -- 7,936 7,655 7,296
Deductions during the period:
Condemnation of land (2,026) -- -- -- -- --
Retirement of fully depreciated
assets and writeoffs (36) -- -- (36) (16) --
Disposition of Summit Green
Office Building -- -- (11,205) -- -- (3,481)
---------------------------------- -------------------------------
Balance at close of period $296,232 $292,460 $280,584 $64,254 $56,354 $48,699
================================== ===============================
REPORT OF INDEPENDENT AUDITORS
To the Partners of
CSC Associates, L.P. (A Limited Partnership)
We have audited the accompanying balance sheets of CSC Associates, L.P. (the
Partnership) as of December 31, 1998 and 1997, and the related statements of
operations, partners' capital, and cash flows for each of the three years in the
period ended December 31, 1998. Our audits also included the financial statement
schedule of CSC Associates, L.P. listed in the Index at Item 14(a). These
financial statements and schedule are the responsibility of the Partnership's
management. Our responsibility is to express an opinion on these financial
statements and schedule based on our audits. We conducted our audits in
accordance with generally accepted auditing standards. Those standards require
that we plan and perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion. In our opinion, the financial
statements referred to above present fairly, in all material respects, the
financial position of CSC Associates, L.P. as of December 31, 1998 and 1997, and
the results of its operations and its cash flows for each of the three years in
the period ended December 31, 1998, in conformity with generally accepted
accounting principles. Also, in our opinion, the related financial statement
schedule, when considered in relation to the basic financial statements taken as
a whole, presents fairly in all material respects the information set forth
therein.
ERNST & YOUNG LLP
Atlanta, Georgia
February 5, 1999
CSC ASSOCIATES, L.P.
--------------------
BALANCE SHEETS
--------------
DECEMBER 31, 1998 AND 1997
--------------------------
($ in thousands)
ASSETS
------
1998 1997
-------- --------
REAL ESTATE ASSETS:
Building and improvements, including land and
land improvements of $22,818 in 1998 and 1997 $212,334 $209,120
Accumulated depreciation (40,033) (33,621)
-------------------
172,301 175,499
-------------------
CASH 1,741 487
-------------------
NOTE RECEIVABLE (Note 4) 73,849 76,147
-------------------
OTHER ASSETS:
Deferred expenses, net of accumulated amortization
of $3,929 and $3,292 in 1998 and 1997, respectively 6,306 6,485
Other receivables (Note 3) 11,518 11,243
Furniture, fixtures and equipment, net of accumulated
depreciation of $40 and $22 in 1998 and 1997,
respectively 56 59
Other, net of accumulated amortization of $449 and
$338 in 1998 and 1997, respectively (Note 6) 1,410 1,425
-------------------
Total other assets 19,290 19,212
-------------------
$267,181 $271,345
===================
LIABILITIES AND PARTNERS' CAPITAL
---------------------------------
NOTE PAYABLE (Note 4) $ 73,849 $ 76,147
ACCOUNTS PAYABLE AND ACCRUED LIABILITIES 3,122 1,482
-------------------
Total liabilities 76,971 77,629
-------------------
PARTNERS' CAPITAL (Note 1) 190,210 193,716
-------------------
$267,181 $271,345
===================
The accompanying notes are an integral part of these balance sheets.
CSC ASSOCIATES, L.P.
--------------------
STATEMENTS OF OPERATIONS
------------------------
FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
----------------------------------------------------
($ in thousands)
1998 1997 1996
------- ------- -------
REVENUES:
Rental income and recovery of expenses
charged directly to specific tenants $36,956 $35,159 $33,312
Interest income (Note 4) 4,790 4,931 4,561
---------------------------
Total revenues 41,746 40,090 37,873
---------------------------
EXPENSES:
Real estate taxes 3,407 3,349 3,578
Utilities 811 887 967
Management and personnel costs 1,686 1,546 1,523
Cleaning 1,352 1,253 1,152
Contract security 485 474 640
Repairs and maintenance 512 461 408
Elevator 309 325 330
Parking 299 260 245
Insurance 106 106 112
Grounds maintenance 164 129 135
Interest expense (Note 4) 4,790 4,931 4,561
Depreciation and amortization 7,444 7,535 7,968
Marketing and other expenses 114 37 64
General and administrative expenses 73 77 82
---------------------------
Total expenses 21,552 21,370 21,765
---------------------------
NET INCOME $20,194 $18,720 $16,108
===========================
The accompanying notes are an integral part of these statements.
CSC ASSOCIATES, L.P.
--------------------
STATEMENTS OF PARTNERS' CAPITAL
-------------------------------
FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
----------------------------------------------------
($ in thousands)
BALANCE, December 31, 1995 $203,938
Net income 16,108
Distributions (19,700)
--------
BALANCE, December 31, 1996 200,346
Net income 18,720
Distributions (25,350)
--------
BALANCE, December 31, 1997 193,716
--------
Net income 20,194
Distributions (23,700)
--------
BALANCE, December 31, 1998 $190,210
========
The accompanying notes are an integral part of these statements.
CSC ASSOCIATES, L.P.
--------------------
STATEMENTS OF CASH FLOWS
------------------------
FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
----------------------------------------------------
($ in thousands)
1998 1997 1996
------- ------- -------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $20,194 $18,720 $16,108
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 7,444 7,535 7,968
Rental revenue recognized on straight-line
basis in excess of rental revenue
specified in the lease agreements (164) (238) (748)
Change in other receivables and
other assets (207) (90) (997)
Change in accounts payable and accrued
liabilities related to operations 1,640 454 (1,937)
-------------------------
Net cash provided by operating activities 28,907 26,381 20,394
-------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to building and improvements (3,480) (433) (571)
Payments for deferred expenses (458) (112) (143)
Investment in note receivable -- -- (80,000)
Collection of note receivable 2,298 2,157 1,696
(Payments for) proceeds from furniture, fixtures
and equipment (15) (30) (46)
-------------------------
Net cash (used in) provided by investing activities (1,655) 1,582 (79,064)
-------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from note payable -- -- 80,000
Repayment of note payable (2,298) (2,157) (1,696)
Partnership distributions (23,700) (25,350) (19,700)
-------------------------
Net cash (used in) provided by financing activities (25,998) (27,507) 58,604
NET INCREASE (DECREASE) IN CASH 1,254 456 (66)
CASH AT BEGINNING OF YEAR 487 31 97
-------------------------
CASH AT END OF YEAR $ 1,741 $ 487 $ 31
=========================
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION:
Cash paid during the year for interest $ 4,802 $ 4,937 $ 4,339
=========================
The accompanying notes are an integral part of these statements.
CSC ASSOCIATES, L.P.
--------------------
NOTES TO FINANCIAL STATEMENTS
-----------------------------
DECEMBER 31, 1998, 1997 AND 1996
--------------------------------
1. FORMATION OF THE PARTNERSHIP AND TERMS OF THE PARTNERSHIP AGREEMENT
-------------------------------------------------------------------
CSC Associates, L.P. ("CSC," or the "Partnership") was formed under the
terms of a Limited Partnership Agreement dated September 29, 1989 and by the
filing of its Certificate of Limited Partnership on October 27, 1989. C&S
Premises, Inc. ("Premises") and Cousins Properties Incorporated ("CPI") each own
a 1% general partnership and a 49% limited partnership interest in the
Partnership. Premises is a wholly owned subsidiary of NB Holdings Corporation
which is a wholly owned subsidiary of Bank of America. The Partnership was
formed for the purpose of developing and owning a 1.4 million gross square foot
office tower in downtown Atlanta, Georgia (the "Building"), which is the Atlanta
headquarters of Bank of America Corporation.
The Partnership Agreement and related documents (the "Agreements")
contain among other provisions, the following:
a. CPI is the Managing Partner.
b. CPI is obligated to contribute a total of $18.2 million cash to the
Partnership, all of which has been contributed. Premises is obligated to
contribute land parcels to the Partnership having an aggregate agreed upon value
of $18.2 million, all of which has been contributed, which property value, in
the opinion of the partners, was equal to the estimated fair market value of the
land at the time of formation of the Partnership. The value of the property
contributed by Premises was recorded on the Partnership's books at an amount
equal to the cash contributed by CPI for an equal (50%) partnership interest. In
October 1993, the partners each contributed an additional $86.7 million.
c. No interest is earned on partnership capital.
d. Net income or loss and cash distributions are allocated to the
partners based on their percentage interests (50% each), subject to a preference
to CPI. The CPI preference was $2.5 million, and accrued to CPI, with interest
at 9% to the extent unpaid, over the period February 1, 1992 through January 31,
1995. During the year ended December 31, 1994, CPI received distributions of the
preference and accrued interest of approximately $2.65 million. The remaining
preference amount of $71,000 was distributed to CPI in January 1995. Amounts
above the preference amount are allocated based on the partners' percentage
interests.
2. SIGNIFICANT ACCOUNTING POLICIES
-------------------------------
Capitalization Policies
- -----------------------
All costs related to planning, development and construction of the
Building, and expenditures for the Building prior to the date it became
operational for financial statement purposes, have been capitalized. Interest
expense, amortization of financing costs, and real estate taxes were also
capitalized while the Building was under development.
Depreciation and Amortization
- -----------------------------
Real estate assets are carried at cost. Depreciation of the Building
commenced the date the Building became operational for financial statement
purposes and the Building is being depreciated over 40 years. Leasehold and
tenant improvements are amortized over the life of the leases or useful life of
the assets, whichever is shorter. Furniture, fixtures, and equipment are
depreciated over 5 years. Deferred expenses which include certain marketing and
leasing costs, and loan acquisition costs are amortized over the period of
estimated benefit. The straight line method is used for all depreciation and
amortization.
Income Taxes
- ------------
No provision has been made for federal or state income taxes because
each partner's proportionate share of income or loss from the Partnership will
be passed through to be included on each partner's separate tax return.
Rental Income
- -------------
In accordance with Statement of Financial Accounting Standards No. 13
("SFAS No. 13"), income on leases which include increases in rental rates over
the lease term (other than scheduled increases based on the Consumer Price
Index) is recognized on a straight-line basis.
Allowance for Doubtful Accounts
- -------------------------------
From time to time, the Partnership evaluates the need to establish an
allowance for doubtful accounts based on a review of specific receivables. As of
December 31, 1998 and 1997, there is no allowance for doubtful accounts included
in the accompanying balance sheets.
Use of Estimates
- ----------------
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from these estimates.
3. LEASES
------
The Partnership has leased office space to NB Holdings Corporation, as
well as to unrelated third parties. The lease with NB Holdings Corporation was
at rates comparable to those quoted to third parties. The leases contain
escalation provisions and provisions requiring tenants to pay a pro rata share
of operating expenses. The leases typically include renewal options and all are
classified and accounted for as operating leases.
At December 31, 1998, future minimum rentals to be received under
existing non-cancelable leases, including tenants' current pro rata share of
operating expenses, are as follows ($ in thousands):
Lease Leases
With With
NB Holdings Third
Corporation Parties Total
----------- ------- -----
1999 $ 16,762 $ 19,666 $ 36,428
2000 16,762 19,679 36,441
2001 16,762 19,997 36,759
2002 16,785 20,017 36,802
2003 16,788 20,377 37,165
Subsequent to 2003 136,450 75,341 211,791
-------------------------------------
$220,309 $175,077 $395,386
=====================================
In the years ended December 31, 1998 and 1997, income recognized on a
straight-line basis exceeded income which would have accrued in accordance with
the lease terms by approximately $164,000 and $238,000, respectively. At
December 31, 1998 and 1997, receivables which related to the cumulative excess
of revenues recognized in accordance with SFAS No. 13 over revenues which
accrued in accordance with the actual lease agreements totaled approximately
$10,834,000 and $10,670,000, respectively. Of that amount, 17% was related to
leases with NB Holdings Corporation and approximately 36% and 33% was related to
each of two professional services firms, respectively. At December 31, 1998 NB
Holdings Corporation leased approximately 46% and two professional services
firms leased approximately 16% and 15%, respectively, of the net rentable space
of the Building.
4. NOTE PAYABLE AND NOTE RECEIVABLE
--------------------------------
On February 6, 1996, the Partnership issued $80 million of 6.377%
collateralized notes (the "Notes"). The Notes amortize in equal monthly
installments of $590,680 based on a 20 year amortization schedule, and mature
February 15, 2011. The Notes are non-recourse obligations of the Partnership and
are secured by a Deed to Secure Debt, Assignment of Rents and Security Agreement
covering the Partnership's interest in the Building. In conjunction with this
financing, Premises transferred its 1% general partnership interest in the
partnership to C&S Premises-SPE, Inc., a wholly owned subsidiary of Premises.
The Partnership has loaned the $80 million proceeds of the Notes to CPI
under a non-recourse loan (the "CPI Loan") secured by CPI's Partnership
interests under the same payment terms as those of the Notes. CPI paid all costs
of issuing the Notes and the CPI Loan, including a $400,000 fee to an affiliate
of NationsBank Corporation. In addition, CPI pays a monthly fee to an affiliate
of NationsBank Corporation of .025% of the outstanding principal balance of the
Notes which totaled approximately $225,000 and $232,000 in 1998 and 1997,
respectively.
The estimated fair value of both the note payable and related note
receivable at December 31, 1998 was $74 million which was calculated by
discounting future cash flows under the notes at estimated rates at which
similar notes would be made currently.
The Partnership also has an unsecured $3 million line of credit
provided by an affiliate of Premises. Interest on the line is paid at a floating
rate (5.53% weighted average rate in December 1998) and interest only is payable
quarterly through July 31, 1999, at which time the entire outstanding balance
will be due. There were no borrowings under the line as of December 31, 1998 and
1997.
The maturities of the Notes at December 31, 1998 are as follows (in
thousands):
1999 $ 2,450
2000 2,610
2001 2,782
2002 2,965
2003 3,159
Subsequent to 2003 59,883
-------
$73,849
=======
5. RELATED PARTIES
---------------
The Partnership engaged CPI and an affiliate of CPI to manage, develop
and lease the Building. During 1998, 1997 and 1996, fees to CPI and its
affiliate incurred by the Partnership were as follows ($ in thousands):
1998 1997 1996
------ ---- ----
Development and tenant construction fees $ 38 $ 17 $ 13
Leasing and procurement fees 399 32 101
Management fees 917 870 815
--------------------------
$1,354 $919 $929
==========================
6. PARKING AGREEMENT
-----------------
On February 7, 1996, CSC entered into a 25 year Cross Parking License
Agreement ("Parking Agreement") with the North Avenue Presbyterian Church
("NAPC") which allows CSC the use of 200 parking spaces in NAPC's parking deck
which is located adjacent to NAPC. The agreement commenced on October 1, 1996.
CSC paid a $1,000,000 contribution toward the construction cost of the parking
deck as consideration for the Parking Agreement. The $1,000,000 contribution is
included in Other Assets and is being amortized over the 25 year life of the
Parking Agreement. NAPC may reduce the number of parking spaces available to the
Partnership or may terminate the Parking Agreement under certain conditions
after the sixth year, at which time a partial refund of the $1,000,000 would be
due to CSC. In addition, CSC is responsible for the maintenance of the parking
deck and the payment of the related operating expenses.
SCHEDULE III
CSC ASSOCIATES, L.P.
REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 1998
($ in thousands)
Column A Column B Column C Column D Column E
-------- -------- -------- -------- --------
Costs Capitalized Gross Amount at Which
Initial Cost Subsequent Carried at
to Company to Acquisition December 31, 1998
------------------- -------------------- -----------------------------------
Carrying
Costs
Buildings Less Cost Land Buildings
and Improve- of Sales and Land and Total
Description Encumbrances Land Improvements ments and Other Improvements Improvements (a),(b)
- ----------- ------------ ---- ------------ -------- --------- ------------ ------------ -------
NationsBank Plaza
Atlanta, Georgia $ -- $ 18,200 $ -- $183,685 $ 10,449 $ 22,818 $189,516 $212,334
Column F Column G Column H Column I
-------- -------- -------- --------
Life on
Which De-
preciation
Accumu- In 1998
lated Date of Income
Deprecia- Construc- Date Statement
Description tion (a) tion Acquired Is Computed
- ----------- -------- --------- -------- -----------
NationsBank Plaza
Atlanta, Georgia $40,033 1990-1992 1990 5-40
NOTE: (a) Reconciliations of total real estate carrying value and accumulated depreciation for the three years ended December 31,
1998 are as follows:
Real Estate Accumulated Depreciation
---------------------------------- -------------------------------
1998 1997 1996 1998 1997 1996
-------- -------- -------- ------- ------- -------
Balance at beginning of period $209,120 $209,141 $208,676 $33,621 $27,621 $21,232
Improvements and other capitalized costs 3,480 420 465 -- -- --
Write offs of improvements and other
capitalized costs (266) (441) -- (266) (441) --
Provision for depreciation -- -- -- 6,678 6,441 6,389
---------------------------------- -------------------------------
Balance at close of period $212,334 $209,120 $209,141 $40,033 $33,621 $27,621
================================== ===============================