Cousins Properties Incorporated and Consolidated Entities
FUNDS FROM OPERATIONS
- --------------------------------------------------------------------------------
The table below shows Funds From Operations ("FFO") for Cousins Properties
Incorporated and Consolidated Entities and its unconsolidated joint ventures. On
a consolidated basis, FFO includes the Company's FFO and the Company's share of
FFO of its unconsolidated joint ventures, but excludes the Company's share of
distributions from such ventures. The Company calculates its FFO using the
National Association of Real Estate Investment Trusts ("NAREIT") definition of
FFO adjusted to (i) eliminate the recognition of rental revenues on a
straight-line basis, (ii) reflect stock appreciation right expense on a cash
basis and (iii) recognize certain fee income as cash is received rather than
when recognized in the financial statements. The Company believes its FFO
presentation more properly reflects its operating results.
Management believes the Company's FFO is not directly comparable to other
REITs which own a portfolio of mature income-producing properties because the
Company develops projects through a development and lease-up phase before they
reach their targeted cash flow returns. Furthermore, the Company eliminates in
consolidation fee income for developing and leasing projects owned by
consolidated entities, while capitalizing related internal costs. In addition,
unlike many REITs, the Company has considerable land holdings which provide a
strong base for future FFO growth as land is developed or sold in future years.
Property taxes on the land, which are expensed currently, reduce current FFO.
As indicated above, the Company does not include straight-lined rents in
its FFO, as it could under the NAREIT definition of FFO. Furthermore, most of
the Company's leases are also escalated periodically based on the Consumer Price
Index, which unlike fixed escalations, do not require rent to be straight-lined;
under NAREIT's definition straight-lining of rents produces higher FFO in the
early years of a lease and lower FFO in the later years of a lease.
FFO is used by industry analysts as a supplemental measure of an equity
REIT's performance. FFO should not be considered an alternative to net income or
other measurements under generally accepted accounting principles as an
indicator of operating performance, or to cash flows from operating, investing,
or financing activities as a measure of liquidity.
- ---------------------------------------------------------------------------------------------------------------
($ in thousands, except
per share amounts)
Years Ended December 31,
-------------------------------
1998 1997 1996
------- ------- -------
Income before gain on sale of investment properties $41,355 $31,305 $28,212
Depreciation and amortization 28,910 24,397 17,256
Amortization of deferred financing costs and
depreciation of furniture, fixtures and equipment (524) (452) (362)
Elimination of the recognition of rental revenues on
a straight-line basis 1,119 998 (311)
Adjustment to reflect stock appreciation right
expense on a cash basis (8) (702) (567)
-------------------------------
Consolidated Funds From Operations $70,852 $55,546 $44,228
===============================
Weighted Average Shares 31,602 29,267 28,520
===============================
Consolidated Funds From Operations Per Share - Basic $ 2.24 $ 1.90 $ 1.55
===============================
Adjusted Weighted Average Shares 32,040 29,693 28,738
===============================
Consolidated Funds From Operations Per Share - Diluted $ 2.21 $ 1.87 $ 1.54
===============================
- ---------------------------------------------------------------------------------------------------------------
Cousins Properties Incorporated and Consolidated Entities
CONSOLIDATED BALANCE SHEETS
- --------------------------------------------------------------------------------
($ in thousands, except share and per share amounts)
December 31,
--------------------
1998 1997
-------- --------
ASSETS
- ------
PROPERTIES (Notes 4 and 8):
Operating properties, net of accumulated depreciation
of $23,419 in 1998 and $33,617 in 1997 $235,590 $318,334
Land held for investment or future development 15,592 27,948
Projects under construction 178,736 54,778
Residential lots under development 8,771 14,942
--------------------
Total properties 438,689 416,002
CASH AND CASH EQUIVALENTS, at cost, which approximates
market 1,347 32,694
NOTES AND OTHER RECEIVABLES (Note 3) 39,470 38,464
INVESTMENT IN UNCONSOLIDATED JOINT VENTURES
(Notes 4 and 5) 264,648 120,198
OTHER ASSETS 8,704 10,381
--------------------
TOTAL ASSETS $752,858 $617,739
====================
LIABILITIES AND STOCKHOLDERS' INVESTMENT
- ----------------------------------------
NOTES PAYABLE (Note 4) $198,858 $226,348
ACCOUNTS PAYABLE AND ACCRUED LIABILITIES 36,104 20,332
DEPOSITS AND DEFERRED INCOME (Note 5) 138,031 385
--------------------
TOTAL LIABILITIES 372,993 247,065
--------------------
COMMITMENTS AND CONTINGENT LIABILITIES (Note 4)
STOCKHOLDERS' INVESTMENT (Note 6):
Common stock, $1 par value; authorized 50,000,000
shares, issued 31,887,298 in 1998; and 31,472,178
in 1997 31,887 31,472
Additional paid-in capital 244,778 234,237
Cumulative undistributed net income 103,200 104,965
--------------------
TOTAL STOCKHOLDERS' INVESTMENT 379,865 370,674
--------------------
TOTAL LIABILITIES AND STOCKHOLDERS' INVESTMENT $752,858 $617,739
====================
The accompanying notes are an integral part of these consolidated balance
sheets.
Cousins Properties Incorporated and Consolidated Entities
CONSOLIDATED STATEMENTS OF INCOME
- --------------------------------------------------------------------------------
($ in thousands, except per share amounts)
Years Ended December 31,
---------------------------
1998 1997 1996
------- ------- -------
REVENUES:
Rental property revenues (Note 10) $67,726 $62,252 $33,112
Development income 3,007 3,123 1,660
Management fees 3,761 3,448 2,801
Leasing and other fees 2,810 720 1,558
Residential lot and outparcel sales 16,732 12,847 14,145
Interest and other 4,275 3,609 5,256
---------------------------
98,311 85,999 58,532
---------------------------
INCOME FROM UNCONSOLIDATED JOINT VENTURES
(Note 5) 18,423 15,461 17,204
---------------------------
COSTS AND EXPENSES:
Rental property operating expenses 17,702 15,371 7,616
General and administrative expenses 13,087 12,717 9,148
Depreciation and amortization 15,173 14,046 7,219
Stock appreciation right expense (Note 6) 330 204 2,154
Residential lot and outparcel cost of sales 15,514 11,917 13,676
Interest expense (Note 4) 11,558 14,126 6,546
Property taxes on undeveloped land 900 606 1,301
Other 1,263 2,695 1,567
---------------------------
75,527 71,682 49,227
---------------------------
INCOME FROM OPERATIONS BEFORE INCOME TAXES
AND GAIN ON SALE OF INVESTMENT PROPERTIES 41,207 29,778 26,509
BENEFIT FOR INCOME TAXES FROM OPERATIONS (Note 7) (148) (1,527) (1,703)
---------------------------
INCOME BEFORE GAIN ON SALE OF INVESTMENT
PROPERTIES 41,355 31,305 28,212
---------------------------
GAIN ON SALE OF INVESTMENT PROPERTIES, NET OF
APPLICABLE INCOME TAX PROVISION (Note 7) 3,944 5,972 12,804
---------------------------
NET INCOME $45,299 $37,277 $41,016
===========================
WEIGHTED AVERAGE SHARES 31,602 29,267 28,520
===========================
BASIC NET INCOME PER SHARE $ 1.43 $ 1.27 $ 1.44
===========================
ADJUSTED WEIGHTED AVERAGE SHARES 32,040 29,693 28,738
===========================
DILUTED NET INCOME PER SHARE $ 1.41 $ 1.26 $ 1.43
===========================
CASH DIVIDENDS DECLARED PER SHARE (Note 6) $ 1.49 $ 1.29 $ 1.12
===========================
The accompanying notes are an integral part of these consolidated statements.
Cousins Properties Incorporated and Consolidated Entities
- --------------------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' INVESTMENT
Years Ended December 31, 1998, 1997 and 1996
($ in thousands)
Additional Cumulative
Common Paid-In Undistributed
Stock Capital Net Income Total
------- ---------- ------------- --------
BALANCE, December 31, 1995 $28,223 $153,265 $ 96,190 $277,678
Net income, 1996 -- -- 41,016 41,016
Common stock issued pursuant to:
Exercise of options and
director stock plan 307 4,344 -- 4,651
Dividend reinvestment plan 390 7,361 -- 7,751
Dividends declared -- -- (31,912) (31,912)
------------------------------------------
BALANCE, December 31, 1996 28,920 164,970 105,294 299,184
------------------------------------------
Net income, 1997 -- -- 37,277 37,277
Common stock issued pursuant to:
2,150,000 share stock offering,
net of expenses 2,150 61,993 -- 64,143
Exercise of options and
director stock plan 223 2,946 -- 3,169
Dividend reinvestment plan 179 4,328 -- 4,507
Dividends declared -- -- (37,606) (37,606)
------------------------------------------
BALANCE, December 31, 1997 31,472 234,237 104,965 370,674
------------------------------------------
Net income, 1998 -- -- 45,299 45,299
Common stock issued pursuant to:
Exercise of options and
director stock plan 43 506 -- 549
Dividend reinvestment plan 372 10,035 -- 10,407
Dividends declared -- -- (47,064) (47,064)
------------------------------------------
BALANCE, December 31, 1998 $31,887 $244,778 $103,200 $379,865
==========================================
The accompanying notes are an integral part of these consolidated statements.
Cousins Properties Incorporated and Consolidated Entities
CONSOLIDATED STATEMENTS OF CASH FLOWS (Note 9)
- -----------------------------------------------------------------------------------------------------------------------
($ in thousands)
Years Ended December 31,
------------------------------
1998 1997 1996
-------- ------- ---------
CASH FLOWS FROM OPERATING ACTIVITIES:
Income before gain on sale of investment properties $ 41,355 $ 31,305 $ 28,212
Adjustments to reconcile income before gain on sale of investment
properties to net cash provided by operating activities:
Depreciation and amortization 15,173 14,046 7,219
Stock appreciation right expense 330 204 2,154
Cash charges to expense accrual for stock appreciation rights (338) (906) (2,721)
Effect of recognizing rental revenues on a straight-line basis (347) (440) (4)
Income from unconsolidated joint ventures (18,423) (15,461) (17,204)
Operating distributions from unconsolidated joint ventures 23,612 21,707 19,382
Residential lot and outparcel cost of sales 14,759 11,398 13,111
Changes in other operating assets and liabilities:
Change in other receivables (1,986) 2,592 (3,420)
Change in accounts payable and accrued liabilities 15,403 (6,492) 10,375
------------------------------
Net cash provided by operating activities 89,538 57,953 57,104
------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Gain on sale of investment properties, net of applicable income tax provision 3,944 5,972 12,804
Adjustments to reconcile gain on sale of investment properties
to net cash provided by sales activities:
Cost of sales 1,264 17,041 26,252
Note received as sales consideration -- -- (365)
Property acquisition and development expenditures (194,255) (80,628) (162,154)
Non-operating distributions from unconsolidated joint ventures 22,617 14,681 1,408
Investment in unconsolidated joint ventures, including interest
capitalized to equity investments (34,712) (8,863) (268)
Investment in notes receivable (33,345) (5,593) (27,115)
Collection of notes receivable 30,528 3,472 27,703
Change in other assets, net 976 (1,645) (4,095)
Net cash received in formation of venture 103,025 -- --
Cash portion of exchange transaction -- -- 1,092
------------------------------
Net cash used in investing activities (99,958) (55,563) (124,738)
------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of line of credit (231,115) (138,430) (87,627)
Proceeds from line of credit 242,235 114,631 47,677
Common stock sold, net of expenses 10,956 71,795 12,074
Dividends paid (47,064) (37,606) (31,912)
Proceeds from other notes payable 10,870 25,000 131,844
Repayment of other notes payable (6,809) (6,684) (4,376)
------------------------------
Net cash (used in) provided by financing activities (20,927) 28,706 67,680
------------------------------
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS (31,347) 31,096 46
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 32,694 1,598 1,552
------------------------------
CASH AND CASH EQUIVALENTS AT END OF YEAR $ 1,347 $ 32,694 $ 1,598
==============================
The accompanying notes are an integral part of these consolidated statements.
Cousins Properties Incorporated and Consolidated Entities
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
December 31, 1998, 1997 and 1996
1. SIGNIFICANT ACCOUNTING POLICIES
Consolidation and Presentation:
The Consolidated Financial Statements include the accounts of Cousins
Properties Incorporated ("Cousins"), its majority owned partnerships and wholly
owned subsidiary, as well as Cousins Real Estate Corporation ("CREC") and its
subsidiaries. All of the entities included in the Consolidated Financial
Statements are hereinafter referred to collectively as the "Company." The
Company's investments in its non-majority owned joint ventures are recorded
using the equity method of accounting. However, the recognition of losses is
limited to the amount of direct or implied financial support. Information
regarding the non-majority owned joint ventures is included in Note 5.
Income Taxes:
Since 1987, Cousins has elected to be taxed as a real estate investment
trust ("REIT"). As a REIT, Cousins is not subject to corporate federal income
taxes to the extent that it distributes 100% of its taxable income (excluding
CREC's and its wholly owned subsidiaries' consolidated taxable income) to
stockholders, which is Cousins' current intention. The Company computes taxable
income on a basis different from that used for financial reporting purposes (see
Note 7). CREC and its wholly owned subsidiaries file a consolidated federal
income tax return.
Depreciation and Amortization:
Real estate assets are stated at depreciated cost. Buildings are
depreciated over 30 to 40 years. Buildings that were acquired are depreciated
over 15, 25 and 30 years. Furniture, fixtures and equipment are depreciated over
3 to 15 years. Leasehold improvements and tenant improvements are amortized over
the life of the applicable leases or the estimated useful life of the assets,
whichever is shorter. Deferred expenses are amortized over the period of
estimated benefit. The straight-line method is used for all depreciation and
amortization.
Fee Income and Cost Capitalization:
Development, construction, management and leasing fees received from
unconsolidated joint ventures are recognized as earned. A portion of these fees
may be capitalized by the joint ventures; however, the Company expenses salaries
and other direct costs related to this income. The Company classifies its share
of fee income earned by unconsolidated joint ventures as fee income rather than
joint venture income for those ventures where the related expense is borne
primarily by the Company rather than the venture.
Development, construction, and leasing fees between consolidated entities
are eliminated in consolidation. These fees totaled $3,104,000, $1,510,000 and
$3,400,000 in 1998, 1997 and 1996, respectively. Management fees received from
consolidated entities are shown as a reduction in rental property operating
expenses. Costs related to planning, development, leasing and construction of
properties (including related general and administrative expenses) are
capitalized.
Interest, real estate taxes, and rental property revenues and expenses of
properties prior to the date they become operational for financial reporting
purposes are also capitalized. Interest is capitalized to investments accounted
for by the equity method when the investee has property under development with a
carrying value in excess of the investee's borrowings. Deferred leasing and
other capitalized costs associated with a particular property are classified
with Properties in the Consolidated Balance Sheets.
Cash and Cash Equivalents:
Cash and cash equivalents include cash and highly liquid money market
instruments. Highly liquid money market instruments include securities and
repurchase agreements with original maturities of three months or less, money
market mutual funds, and securities on which the interest or dividend rate is
adjusted to market rate at least every three months. At December 31, 1998, cash
and cash equivalents included $813,000 which is restricted under a municipal
bond indenture and $301,000 held in escrow.
Rental Property Revenues:
In accordance with Statement of Financial Accounting Standards ("SFAS") No.
13, income on leases which include scheduled increases in rental rates over the
lease term (other than scheduled increases based on the Consumer Price Index) is
recognized on a straight-line basis.
Use of Estimates:
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
Disclosure About Segments:
In June 1997, the Financial Accounting Standards Board ("FASB") issued SFAS
No. 131, "Disclosure About Segments of an Enterprise and Related Information."
This statement requires companies to identify segments based on how management
makes decisions about allocating resources to segments and measuring their
performance. The Company adopted SFAS No. 131 in 1998 (see Note 11).
Derivative Instruments and Hedging Activities:
In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities," effective for fiscal years beginning after
June 15, 1999. The Statement requires companies to record derivatives on the
balance sheet as assets and liabilities at fair value. The Statement also
requires that changes in the derivative's fair value be recognized currently in
earnings unless specific hedge accounting criteria are met. The Company does not
expect the adoption of this statement will have a material impact on the
financial statements or results of operations of the Company.
Comprehensive Income:
In June 1997, the FASB issued SFAS No. 130, "Reporting Comprehensive
Income," which establishes standards for reporting and display of comprehensive
income and its components in a full set of general purpose financial statements.
Comprehensive income is the total of net income and all other non-owner changes
in equity. The Company currently does not have any components of comprehensive
income other than net income and, therefore, SFAS No. 130 has no effect on the
Company.
Reporting on the Costs of Start-Up Activities:
The Company adopted Statement of Position 98-5, "Reporting on the Costs of
Start-up Activities," in 1998 which requires entities to expense costs of
start-up activities as incurred. The statement did not have a material effect on
the financial statements or results of operations of the Company.
Reclassifications:
Certain 1997 amounts have been reclassified to conform with the 1998
presentation.
2. RELATIONSHIP WITH DEVELOPMENT AND LEASING ENTITY
CREC conducts certain development and leasing activities for real estate
projects. A wholly owned subsidiary of CREC, Cousins MarketCenters, Inc.
("CMC"), develops and leases retail centers for the Company. CREC also manages a
joint venture property in which it has an ownership interest. At December 31,
1998, 1997 and 1996, Cousins owned 100% of CREC's $5,025,000 par value 8%
cumulative preferred stock and 100% of CREC's nonvoting common stock, which is
entitled to 95% of any dividends of CREC after preferred dividend requirements.
Thomas G. Cousins, Chairman of the Board of Cousins, owns 100% of the voting
common stock of CREC, which voting common stock is entitled to 5% of any
dividends of CREC after preferred dividend requirements. CREC is included in the
Company's Consolidated Financial Statements, but is taxed as a regular
corporation. CREC has paid no common dividends to date, and for financial
reporting purposes, none of CREC's income is attributable to Mr. Cousins'
minority interest because the face amount of CREC's preferred stock plus
accumulated dividends thereon ($9,447,000 in aggregate) exceeds CREC's
$1,364,169 of equity.
- --------------------------------------------------------------------------------
3. NOTES AND OTHER RECEIVABLES
At December 31, 1998 and 1997, notes and other receivables included the
following ($ in thousands):
1998 1997
------- -------
650 Massachusetts Avenue Mortgage Notes $25,053 $25,961
Daniel Realty Company Note Receivable 3,336 4,000
Miscellaneous Notes 608 776
Cumulative rental revenue recognized on a straight-
line basis in excess of revenue accrued in
accordance with lease terms (see Note 1) 1,071 4,496
Other Receivables 9,402 3,231
------------------
Total Notes and Other Receivables $39,470 $38,464
==================
- --------------------------------------------------------------------------------
650 Massachusetts Avenue Mortgage Notes - On March 10, 1994, the Company
purchased from the Resolution Trust Corporation ("RTC") two notes aggregating
$37 million at a total cost of approximately $28 million. The two notes, which
resulted from the RTC's restructuring in December 1993 of a $53 million note,
are secured by a first deed of trust on an office building containing
approximately 250,000 square feet located at 650 Massachusetts Avenue, NW, in
Washington, D.C. The notes mature December 31, 2003, at which time their
unamortized balance will be a maximum of approximately $29.6 million. The notes
require minimum monthly payments totaling $2,818,000 annually, which, through
the year 2000, are supported by a U.S. government agency lease. For financial
reporting purposes, the discounted notes are treated as non-amortizing notes to
the extent of the minimum required payments, with the minimum required payments
treated as interest income. Amounts in excess of the minimum required payments
($908,000 and $825,000 in 1998 and 1997, respectively) are treated as a
reduction of principal.
Daniel Realty Company Note Receivable - On December 27, 1996, the Company
entered into a venture with Daniel Realty Company ("Daniel"), a privately-held
real estate company headquartered in Birmingham, Alabama, which focuses on the
development and acquisition of commercial office properties. The arrangement
with Daniel included a loan to Daniel of up to $9.5 million which had an
interest rate of 11%, required semiannual principal payments commencing February
1, 1998 and matured on December 31, 2003. The Company also obtained an option to
acquire certain segments of Daniel's business.
On December 31, 1997, upon paydown of the outstanding balance of the note
receivable to $4 million, the Company amended the note, which reduced the
interest rate to 9% and requires quarterly payments of principal and interest,
which commenced April 1, 1998, in the amount of $250,568. The loan will fully
amortize over 5 years.
Fair Value - The estimated fair value of the Company's $29.0 million and
$30.7 million of notes receivable at December 31, 1998 and 1997, respectively,
is $35.9 million and $37.7 million, respectively, calculated by discounting
future cash flows from the notes receivable at estimated rates at which similar
loans would be made currently.
- ---------------------------------------------------------------------------------------------------------------------
4. NOTES PAYABLE, COMMITMENTS, AND CONTINGENT LIABILITIES
At December 31, 1998 and 1997, notes payable included the following ($ in
thousands):
December 31, 1998 December 31, 1997
---------------------------------- ------------------------------------
Share of Share of
Unconsolidated Unconsolidated
Company Joint Ventures Total Company Joint Ventures Total
-------- -------------- -------- -------- -------------- --------
Floating Rate Lines of Credit $ 11,120 $ -- $ 11,120 $ -- $ -- $ --
Other Debt (primarily non-recourse
fixed rate mortgages) 187,738 221,498 409,236 226,348 133,446 359,794
----------------------------------------------------------------------------
$198,858 $221,498 $420,356 $226,348 $133,446 $359,794
============================================================================
The following table summarizes the terms of the debt outstanding at
December 31, 1998 ($ in thousands):
Term/
Amortization Balance at
Period Final December 31,
Description Rate (Years) Maturity 1998
----------- ---------------- ------------ -------- -----------
Company Debt:
Line of credit ($150 million maximum)
unsecured Fed Funds + .88% 1/ N/A 6/29/99 $ 11,120
Note secured by Company's interest in
CSC Associates, L.P. 6.677% 15/20 2/15/11 73,849
Perimeter Expo mortgage note 8.04% 10/30 8/15/05 20,846
Note secured by Company's interest in 650
Massachusetts Avenue mortgage notes (see Note 3) 6.53% 5/ N/A 10/01/00 22,055
101 Independence Center mortgage note 8.22% 11/25 11/01/07 48,254
Lakeshore Park Plaza mortgage note 6.78% 10/30 11/01/08 10,856
Northside/Alpharetta I mortgage note 7.70% 8/28 1/01/06 10,543
Other miscellaneous notes 0% to 9.4% Various Various 1,335
--------
198,858
--------
Share of Unconsolidated Joint Venture Debt:
Wildwood Associates:
Line of credit ($5 million maximum) Fed Funds + .75% 1/N/A 9/1/99 --
2300 Windy Ridge mortgage note 7.56% 10/25 12/01/05 33,943
2500 Windy Ridge mortgage note 7.45% 10/20 12/15/05 12,051
3200 Windy Hill mortgage note 8.23% 10/28 1/01/07 34,334
4100/4300 Wildwood Parkway mortgage note 7.65% 15/25 4/01/12 14,629
4200 Wildwood Parkway mortgage note 6.78% 15.75/18 3/31/14 22,000
Cousins LORET Venture, L.L.C.:
Two Live Oak mortgage note 7.90% 12/30 12/31/09 14,883
The Pinnacle mortgage note 7.11% 12/30 12/31/09 35,000
Other miscellaneous note 6.86% N/A N/A 2,215
CP Venture Two LLC:
North Point MarketCenter mortgage note 8.50% 10/25 7/15/05 17,082
100/200 North Point Center East mortgage note 7.86% 10/25 8/01/07 14,633
Ten Peachtree Place Associates mortgage note 8.00% 10/18 11/30/01 9,222
CC-JM II Associates mortgage note 7.00% 17/17 4/01/13 11,507
--------
221,498
--------
$420,356
========
- --------------------------------------------------------------------------------------------------------------------
In 1996, CSC Associates, L.P. ("CSC") issued $80 million of 6.377%
collateralized non-recourse mortgage notes (the "Notes") secured by CSC's
interest in the NationsBank Plaza building and related leases and agreements.
CSC loaned the $80 million proceeds of the Notes to the Company under a
non-recourse loan (the "Cousins Loan") secured by the Company's interest in CSC
under the same payment terms as those of the Notes. The Company paid all costs
of issuing the Notes and the Cousins Loan, including a $400,000 fee to an
affiliate of Bank of America Corporation. In addition, the Company pays a fee to
an affiliate of Bank of America Corporation of .3% per annum of the outstanding
principal balance of the Notes. Because CSC has loaned the $80 million proceeds
of the Notes to the Company, the Notes and their related interest expense and
maturities are disclosed as an obligation of the Company and are not included in
the unconsolidated joint venture balances disclosed in the above table or in
Note 5. (The related note receivable and interest income are also not included
in Note 5.)
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 outstanding 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.
The Wildwood Associates 2300 Windy Ridge, 3200 Windy Hill, 4100/4300
Wildwood Parkway and 4200 Wildwood Parkway mortgage notes and the CC-JM II
Associates mortgage note provide for additional amortization in the later years
of the notes (over that required by the amortization periods disclosed in the
table) concurrent with scheduled rent increases.
The Company has entered into an interest rate swap in order to hedge its
exposure to fluctuations in the interest rate on the note secured by the
Company's interest in the 650 Massachusetts Avenue mortgage notes. The note
actually floats at LIBOR + 1%, but as of January 10, 1996 was effectively fixed
at the 6.53% rate disclosed in the table. The difference between fixed and
variable interest amounts calculated by reference to the principal notional
amount (which was $21,500,000 at December 31, 1998) is recognized as an
adjustment to interest expense over the life of the swap. If the Company settled
the swap as of December 31, 1998, it would receive $178,000.
At December 31, 1998, the Company had outstanding letters of credit
totaling $7,335,000, and assets with carrying values of $248,850,000 were
pledged as security on the Company's and its unconsolidated joint ventures'
debt. The fixed rate long-term mortgage debt of the Company and its
unconsolidated joint ventures is non-recourse to the Company.
As of December 31, 1998, the weighted average maturity of the Company's
debt, including its share of unconsolidated joint ventures, was 10 years.
- --------------------------------------------------------------------------------
The aggregate maturities of the indebtedness at December 31, 1998
summarized above are as follows ($ in thousands):
Share of
Unconsolidated
Company Joint Ventures Total
-------- -------------- --------
1999 $ 17,900 $ 6,075 $ 23,975
2000 24,109 4,699 28,808
2001 4,298 12,855 17,153
2002 4,605 5,614 10,219
2003 4,937 5,650 10,587
Thereafter 143,009 186,605 329,614
------------------------------------------
$198,858 $221,498 $420,356
==========================================
For each of the years ended December 31, 1998, 1997 and 1996, interest
expense was recorded as follows ($ in thousands):
Share of Unconsolidated
Company Joint Ventures Total
------------------------------- ------------------------------- -------------------------------
Year Expensed Capitalized Total Expensed Capitalized Total Expensed Capitalized Total
- ---- -------- ----------- ------- -------- ----------- ------- -------- ----------- -------
1998 $11,558 $7,470 $19,028 $9,902 $2,173 $12,075 $21,460 $9,643 $31,103
1997 14,126 3,167 17,293 8,281 1,123 9,404 22,407 4,290 26,697
1996 6,546 5,648 12,194 6,599 557 7,156 13,145 6,205 19,350
- -------------------------------------------------------------------------------------------------------------------
The Company has future lease commitments under a land lease aggregating
$7.2 million over its remaining term of 70 years. Current annual lease payments
are approximately $63,000. The Company has entered into construction and design
contracts for real estate projects, of which approximately $125 million remains
committed at December 31, 1998. At December 31, 1998 and 1997, the fair value of
the Company's notes payable, including its share of unconsolidated joint
ventures, was $445 million and $382 million, respectively.
5. INVESTMENT IN UNCONSOLIDATED JOINT VENTURES
The following information summarizes financial data and principal
activities of unconsolidated joint ventures in which the Company had ownership
interests ($ in thousands). Audited financial statements for Wildwood Associates
and CSC Associates, L.P. are included in the Company's Form 10-K.
Company's
Total Assets Total Debt Total Equity Investment
--------------------- ------------------- ------------------- --------------------
1998 1997 1998 1997 1998 1997 1998 1997
---------- -------- -------- -------- -------- -------- -------- --------
SUMMARY OF FINANCIAL POSITION:
Wildwood Associates $ 251,545 $261,828 $233,914 $193,861 $ 10,186 $ 60,464 $(36,364) $(12,622)
CSC Associates, L.P. 193,129 194,982 -- -- 190,210 193,716 97,685 99,513
Ten Peachtree Place Associates 19,718 20,225 18,444 19,354 936 533 104 44
Haywood Mall 39,792 40,546 -- -- 37,937 39,643 19,656 20,626
CC-JM II Associates 29,231 29,510 23,014 23,674 4,841 4,878 2,660 2,771
Cousins LORET Venture, L.L.C. 163,320 68,820 104,196 30,000 50,374 50,214 25,202 8,770
Brad Cous Golf Venture, Ltd. 10,687 -- -- -- 9,924 -- 4,962 --
Charlotte Gateway Village, LLC 15,433 -- -- -- 15,000 -- 11,781 --
CP Venture LLC -- -- -- -- -- -- 135,519 --
CP Venture Two LLC 285,372 -- 53,141 -- 230,468 -- 2,308 --
Other 2,560 2,433 -- -- 2,315 2,302 1,135 1,096
---------------------- -------------------- ------------------- --------------------
$ 1,010,787 $ 618,344 $ 432,709 $ 266,889 $552,191 $351,750 $264,648 $120,198
====================== ==================== =================== ====================
Company's Share
Total Revenues Net Income of Net Income
-------------------------- ------------------------- -------------------------
1998 1997 1996 1998 1997 1996 1998 1997 1996
-------- ------- ------- ------- ------- ------- ------- ------- -------
SUMMARY OF OPERATIONS:
Wildwood Associates $ 42,284 $39,115 $40,505 $ 4,156 $ 3,806 $ 8,490 $ 1,968 $ 1,903 $ 4,245
CSC Associates, L.P. 36,956 35,159 33,312 20,194 18,720 16,108 10,021 9,284 7,978
Ten Peachtree Place Associates 4,396 4,295 4,284 803 718 632 261 248 235
Haywood Mall 17,049 13,820 13,527 9,465 7,382 7,120 4,614 3,648 3,538
CC-JM II Associates 4,070 3,860 3,489 469 261 316 213 113 141
Cousins LORET Venture, L.L.C. 6,810 1,885 -- 1,747 135 -- 672 68 --
CP Venture LLC -- -- -- -- -- -- 280 -- --
CP Venture Two LLC 4,384 -- -- 335 -- -- 4 -- --
Other 1,174 543 2,838 783 395 2,138 390 197 1,067
-------------------------- ------------------------- -------------------------
$117,123 $98,677 $97,955 $37,952 $31,417 $34,804 $18,423 $15,461 $17,204
========================== ========================= =========================
Company's Share Of
-------------------------------------------------------
Cash Flows From Cash Flows From Operating
Operating Activities Operating Activities Cash Distributions
------------------------- ------------------------- -------------------------
1998 1997 1996 1998 1997 1996 1998 1997 1996
------- ------- ------- ------- ------- ------- ------- ------- -------
SUMMARY OF OPERATING CASH FLOWS:
Wildwood Associates $16,665 $15,789 $20,278 $ 8,333 $ 7,894 $10,139 $ 4,600 $ 4,500 $ 4,000
CSC Associates, L.P. 28,907 26,381 20,394 14,454 13,191 10,197 11,850 12,675 9,850
Ten Peachtree Place Associates 1,358 1,205 1,360 343 321 344 200 200 200
Haywood Mall 11,571 9,795 7,877 5,786 4,897 3,939 5,585 3,895 4,990
CC-JM II Associates 1,551 1,222 (1,655) 775 611 (828) 324 324 162
Cousins LORET Venture, L.L.C. 3,968 768 -- 1,984 384 -- 703 -- --
CP Venture Two LLC 2,576 -- -- 2,154 -- -- -- -- --
Other 783 367 1,806 391 184 903 350 113 180
------------------------- ------------------------- -------------------------
$67,379 $55,527 $50,060 $34,220 $27,482 $24,694 $23,612 $21,707 $19,382
========================= ========================= =========================
Wildwood Associates - Wildwood Associates was formed in 1985 between the
Company and IBM, each as 50% partners. The partnership owns six office buildings
totaling 2.1 million rentable square feet, other income-producing commercial
properties, and additional developable land in Wildwood Office Park ("Wildwood")
in Atlanta, Georgia. Wildwood is an office park containing a total of
approximately 285 acres, of which approximately 92 acres are owned by Wildwood
Associates and an estimated 13 acres are committed to be contributed to Wildwood
Associates by the Company; the Company owns the balance of the developable
acreage in the office park. The 13 acres of land which are committed to be
contributed to Wildwood Associates by the Company are included in Wildwood
Associates' financial statements under the caption "Land Committed to be
Contributed" and are not included in "Land Held for Investment or Future
Development" in the Company's financial statements. All costs associated with
the land are borne by Wildwood Associates.
Effective December 1, 1996, Wildwood Associates disposed of its interest in
an office building at Summit Green in exchange for cancellation of the related
mortgage debt. Summit Green is an office project situated on 21 acres of leased
land in Greensboro, North Carolina and includes sites for two additional
buildings. In connection with the office building disposition, Wildwood
Associates and a related partnership also may dispose of a leasehold interest in
the sites for the two additional buildings. No material gain or loss is
anticipated to result from the disposition of the Summit Green project.
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.
Through December 31, 1998, IBM had contributed $46.6 million in cash plus
properties having an agreed value of $16.3 million for its one-half interest in
Wildwood Associates. The Company has contributed $84,000 in cash plus properties
having an agreed value of $49.3 million for its one-half interest in the
partnership, and is obligated to contribute the aforesaid estimated 13 acres of
additional land with an agreed value of $8.3 million. The Company and IBM each
lease office space from the partnership at rates comparable to those charged to
third parties.
The Company's investment as recorded in the Consolidated Balance Sheets,
which was a negative investment of $36.4 million at December 31, 1998 due to the
aforementioned partnership distributions and other partnership distributions
made prior to 1998, is based upon the Company's historical cost of the
properties at the time they were contributed or committed to be contributed to
the partnership, whereas its investment as recorded on Wildwood Associates'
books ($5.1 million at December 31, 1998) is based on the agreed-upon values at
the time the partnership was formed.
CSC Associates, L.P. ("CSC") - CSC was formed in 1989 between the Company
and a wholly owned subsidiary of Bank of America Corporation, each as 50%
partners. CSC owns the 1.3 million rentable square foot NationsBank Plaza in
Atlanta, Georgia.
CSC's net income or loss and cash distributions are allocated to the
partners based on their percentage interests (50% each). See Note 4 for a
discussion of the presentation of certain CSC assets, liabilities and revenues.
Ten Peachtree Place Associates ("TPPA") - TPPA is a general partnership
between the Company (50%) and a wholly owned subsidiary of The Coca-Cola Company
("Coca-Cola") (50%). The venture owns Ten Peachtree Place, a 259,000 rentable
square foot building located in midtown Atlanta, Georgia. The building is 100%
leased to Coca-Cola through November 30, 2001.
The TPPA partnership agreement generally provides that each of the partners
is entitled to receive 50% of cash flows from operating activities net of note
principal amortization through the term of the Coca-Cola lease, after which the
Company and its partner are entitled to receive 15% and 85% of the cash flows
(including any sales proceeds), respectively, until the two partners have
received a combined distribution of $15.3 million. Thereafter, each partner is
entitled to receive 50% of cash flows.
Haywood Mall - Haywood Mall, a regional shopping center on 86 acres 5 miles
southeast of downtown Greenville, South Carolina, was originally owned by the
Company and an affiliate of Corporate Property Investors. In October 1998, Simon
Property Group purchased Corporate Property Investors' interest in Haywood Mall.
The mall has 1,256,000 gross leaseable square feet ("GLA") (of which
approximately 330,000 GLA is owned). The balance of the mall is owned by the
mall's five major department stores.
Cousins LORET Venture, L.L.C. ("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 (see Note 4).
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.
CC-JM II Associates - This joint venture was formed in 1994 between the
Company and an affiliate of CarrAmerica Realty Corporation, each as 50% general
partners, to develop and own a 224,000 rentable square foot office building in
suburban Washington, D.C. The building is 100% leased until January 2011 to
Booz-Allen & Hamilton, an international consulting firm, as a part of its
corporate headquarters campus.
Brad Cous Golf Venture, Ltd. - Effective January 31, 1998, the Company
formed the Brad Cous Golf Venture, Ltd. with the W.C. Bradley Co., each as 50%
partners, for the purpose of developing and owning The Shops at World Golf
Village, an approximately 80,000 square foot retail center located adjacent to
the PGA Hall of Fame in St. Augustine, Florida.
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. Construction of Gateway Village commenced in July 1998. The
project is 100% leased to Bank of America Corporation.
Gateway's net income or loss and cash distributions are allocated to the
members as follows: first to the Company so that it receives a cumulative
compounded return equal to 11.46% on its capital contributions, second to a
wholly owned subsidiary of Bank of America Corporation until it has received an
amount equal to the aggregate amount distributed to the Company and then to each
member, 50%.
CP Venture LLC, CP Venture Two LLC and CP Venture Three LLC - On November
12, 1998 (the "Closing Date"), the Company entered into a venture arrangement
(the "Venture") with The Prudential Insurance Company of America ("Prudential").
On such date the Company contributed its interests in nine properties (the
"Properties") to the Venture. At the time of contribution, the Properties were
valued by the Company and Prudential based on arms' length negotiations at a
total gross value of $283,750,000, subject to mortgages in the principal amount
of $53,281,219. The following table details the values allocated to each of the
Properties and the mortgages to which certain properties were subject.
Allocated Value Mortgage Net Value
--------------- ----------- ------------
First Union Tower $53,000,000 $ - $ 53,000,000
Grandview II 23,000,000 - 23,000,000
100 North Point Center East and
200 North Point Center East 46,050,000 24,581,670 21,468,330
Presbyterian Medical Plaza 8,600,000 - 8,600,000
NorthPoint MarketCenter 56,750,000 28,699,549 28,050,451
Mansell Crossing II 12,350,000 - 12,350,000
Greenbrier MarketCenter 51,200,000 - 51,200,000
Los Altos MarketCenter 32,800,000 - 32,800,000
------------ ----------- ------------
$283,750,000 $53,281,219 $230,468,781
============ =========== ============
Under the Venture arrangements, Prudential is contributing cash to the Venture
equal to the agreed-upon net value of the Properties ($230,468,781). The dates
at which such amounts are to be contributed are shown in the following table,
although Prudential may accelerate such funding if the Company so requests. Also
shown are the percentages (including both direct and indirect interests) the
Company and Prudential will have, respectively, in the economics of the
Properties following the cash contributions on the indicated dates. The total
cumulative cash contribution made by Prudential as of December 31, 1998 was $105
million.
Total Cumulative Cousins Prudential
Date Cash Contribution Percentage Percentage
- ------------ ----------------- ---------- ----------
Closing Date $ 40 million 84.64% 15.36%
12/30/98 $105 million 59.68% 40.32%
3/30/99 $155 million 40.48% 59.52%
6/29/99 $205 million 21.28% 78.72%
9/29/99 $230.469 million 11.50% 88.50%
The structure of the Venture is as follows: CP Venture LLC ("Parent"), the
parent entity, owns a 99% interest in each of CP Venture Two LLC ("Property
Activity LLC") and CP Venture Three LLC ("Development Activity LLC"). The
Company owns a 1% direct interest in Property Activity LLC and Prudential owns a
1% direct interest in Development Activity LLC. The contributed properties are
owned and operated by Property Activity LLC. The Company has a 10.6061% interest
in the Parent's 99% interest in Property Activity LLC, which, combined with its
1% direct interest, gives it a net interest of 11.5% in the economics of
Property Activity LLC. Unless both parties agree otherwise, Property Activity
LLC may not sell the contributed properties until the end of lock-out periods
(generally three years for retail properties and four years for office and
medical office properties).
The cash contributed by Prudential is contributed to Development Activity
LLC. To the extent such funds are not yet needed for development activity,
Development Activity LLC can temporarily invest such funds; such potential
investments may include temporary loans to the Company. As of December 31, 1998,
the Company had a note payable to Development Activity LLC of approximately $105
million which was eliminated in consolidation. Prudential is entitled to
10.6061% of the Parent's 99% share of the economics of Development Activity LLC,
which combined with its 1% direct interest entitles it to an overall net
interest of 11.5% in the economics of Development Activity LLC. In addition,
Prudential receives a priority current return of 9.5% per annum on its share
(11.5%) of the initial capital ($230.469 million) ("Initial Capital") of
Development Activity LLC. Prudential also receives a liquidation preference
whereby it is first entitled to, subject to capital account limitations,
sufficient proceeds to allow it to achieve an overall 11.5% internal rate of
return on its share of the Initial Capital of Development Activity LLC. After
these preferences to Prudential, the Company has certain preferences, with the
residual interests in the development activity being shared according to the
interests of the parties.
Parent has appointed the Company to serve as Development Manager and in
such capacity to act for it in connection with its ownership of Development
Activity LLC. Parent has also appointed Prudential to serve as Property Manager
and in such capacity to act for it in connection with its ownership of Property
Activity LLC. Prudential appointed the Company to serve as property manager of
the Properties for Property Activity LLC. The Company also serves as
Administrative Manager of Parent. Property Activity LLC is expected to continue
to operate the contributed Properties. Development Activity LLC is expected to
develop commercial real estate projects over time, as selected by the
Development Manager. Development Activity LLC may also make acquisitions, which
are anticipated to be redevelopment or value-added opportunities. The parties
anticipate that some of the projects currently under consideration by the
Company will be undertaken by Development Activity LLC, although the Company has
no obligation to make any particular opportunity available to Development
Activity LLC.
For financial reporting purposes, the Properties were deconsolidated and
contributed to Property Activity LLC. Both Property Activity LLC and Parent are
being treated as unconsolidated joint ventures. Development Activity LLC is
treated as a consolidated entity in the Company's financial statements. The
Company has deferred the net gain on the contributed Properties and is
recognizing this net gain as Gain on Sale of Investment Properties, Net of
Applicable Income Tax Provision in the accompanying Consolidated Statements of
Income as capital distributions of cash are made from Development Activity LLC
to the Company or when the Properties initially contributed to Property Activity
LLC are liquidated by Property Activity LLC. The liquidation of the Properties
may be in the form of actual sales of the Properties or in the form of the
depreciation of the Properties which have an average remaining life of 30 years.
The total net deferred gain on the contributed Properties was approximately
$96.8 million over the cost of the Properties. Including depreciation recapture
of $23.8 million, the total net deferred gain was approximately $120.6 million
which is included in Deposits and Deferred Income in the accompanying
Consolidated Balance Sheets. The Company recognized approximately $536,000 of
the total net deferred gain in 1998.
Other - This category consists of several other joint ventures including:
Norfolk Hotel Associates ("NHA") - NHA was a partnership between the
Company and an affiliate of Odyssey Partners, L.P., each as 50% partners, which
held a mortgage note on and owned the land under the Omni International Hotel in
Norfolk, Virginia. In January 1992, NHA terminated the land lease and became the
owner of the hotel and a long-term parking agreement with an adjacent building
owner. In April 1993, the partnership sold the hotel, but retained its interest
in the parking agreement. The partnership received a mortgage note receivable
for a portion of the sales proceeds. In July 1994, NHA distributed to each
partner a 50% interest in the parking agreement held by NHA, and in July 1996
the Company sold its 50% interest for $2 million, resulting in a profit to the
Company of approximately $408,000 which is included in Gain on Sale of
Investment Properties in the accompanying Consolidated Statements of Income.
On February 14, 1997, the mortgage note receivable due to NHA with a
balance of $8,325,000 was repaid in full. A portion of the proceeds from the
repayment was used to pay off the partnership's lines of credit, with
substantially all of the balance of the partnership's assets ($2.2 million of
cash for each partner) distributed to the partners in 1997. The partnership was
dissolved in 1997.
Cousins-Hines Partnerships - Through the Cousins-Hines partnerships, CREC
effectively owns 9.8% of the One Ninety One Peachtree Tower in Atlanta, Georgia,
subject to a preference in favor of the majority partner. This 1.2 million
rentable square foot office building, which opened in December 1990, was
developed in partnership with the Hines Interests Limited Partnership and the
Dutch Institutional Holding Company ("DIHC"). In October 1997, Cornerstone
Properties, Inc. purchased DIHC's interest in the partnership. Because CREC's
effective ownership of this building is less than 20%, the Company accounts for
its investment using the cost method of accounting, and therefore the above
tables do not include the Company's share of One Ninety One Peachtree Tower.
Temco Associates - Temco Associates was formed in 1991 as a partnership
between the Company (50%) and a subsidiary of Temple-Inland Inc. (50%). Temco
Associates has an option through March 2006, with no carrying costs, to acquire
the fee simple interest in approximately 11,000 acres in Paulding County,
Georgia (northwest of Atlanta, Georgia). The partnership also has an option to
acquire a timber rights interest only in approximately 22,000 acres. The options
may be exercised in whole or in part over the option period, and the option
price of the fee simple land was $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
approximately $1,427,000. None of the option was exercised 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 $115,000, $235,000 and $777,000 of
development income was received and recognized in 1998, 1997 and 1996,
respectively.
Additional Information - The Company recognized $7,426,000, $4,398,000 and
$4,926,000 of development, construction, leasing, and management fees from
unconsolidated joint ventures in 1998, 1997 and 1996, respectively.
6. STOCKHOLDERS' INVESTMENT
General:
The Company has elected to account for its stock-based compensation plans
under Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued
to Employees," which requires the recording of compensation expense for some,
but not all, stock-based compensation, rather than the alternative accounting
permitted by SFAS No. 123, "Accounting for Stock-Based Compensation". Had
compensation cost for stock-based compensation plans been determined consistent
with SFAS No. 123, the Company's earnings and earnings per share would have been
as disclosed below. Options and Stock Appreciation Rights:
The Company has a key employee stock incentive plan and an outside director
stock plan which provide for the granting of both stock and stock option awards
(see also "Stock Grants" below). Under both plans, stock options have been
granted for a term of 10 years, and the vesting period for all options
outstanding is 5 years and 1 year under the key employee and outside director
plans, respectively.
At December 31, 1998, 2,418,530 stock options to key employees and outside
directors were outstanding, and the Company is authorized to award an additional
895,525 stock options or shares of stock.
Separately from the stock incentive plan, the Company has issued stock
appreciation rights ("SARs") to certain employees under two plans. At December
31, 1998, 97,550 SARs were outstanding, and the Company is authorized to award
an additional 1,110,354 SARs.
The Company accounts for stock options which have a cash payment election
option as SARs. Accordingly, included in the Consolidated Statements of Income
under the heading "stock appreciation right expense" are increases or reductions
in accrued compensation expense to reflect the issuance of new SARs, vesting,
changes in the market value of the common stock between periods, and forfeiture
of non-vested SARs of terminated employees.
The following is a summary of stock option activity under the stock option
plans and SAR plans (in thousands, except per share amounts):
Number of Weighted Average
Shares Exercise Price Per Share
--------------------------- --------------------------------
1998 1997 1996 1998 1997 1996
----- ----- ----- ------ ------ ------
Stock Option Plans
- ------------------
Outstanding, beginning of year 1,841 1,507 1,413 $22.23 $17.95 $15.42
Granted 678 580 436 $30.31 $30.15 $22.75
Exercised (52) (231) (340) $17.12 $14.67 $13.61
Forfeited (48) (15) (2) $24.26 $19.01 $16.77
---------------------------
Outstanding, end of year 2,419 1,841 1,507 $24.56 $22.23 $17.95
---------------------------
Shares exercisable at end of year 918 630 601 $19.20 $17.04 $15.29
---------------------------
SARs
Outstanding, beginning of year 121 184 344 $15.05 $14.74 $13.21
Exercised (23) (62) (159) $15.81 $14.09 $11.44
Forfeited -- (1) (1) $ -- $16.88 $13.59
---------------------------
Outstanding, end of year 98 121 184 $14.88 $15.05 $14.74
===========================
Shares exercisable at end of year 98 103 145 $14.88 $14.74 $14.21
===========================
The following table provides a breakdown by exercise price range of the
number of shares, weighted average exercise price, and remaining contractual
lives for all stock options and SARs outstanding at December 31, 1998 (in
thousands, except per share amounts and option life):
For Outstanding Options/SARs
-------------------------------
Exercise Weighted Weighted Average
Price Average Contractual Life
Range Outstanding Exercisable Exercise Price (in years)
-------- ----------- ----------- -------------- ----------------
Stock Option Plans
- ------------------
$13.25 to $16.30 504 463 $15.59 4.6
$16.31 to $23.00 676 333 $20.84 7.5
$23.01 to $30.375 1,239 122 $30.24 9.4
------------------------------------------------
Total 2,419 918 $24.56 7.9
------------------------------------------------
SARs
- ----
$10.78 to $13.75 41 41 $12.80 2.4
$13.76 to $16.875 57 57 $16.35 4.0
----------------------------------------------
Total 98 98 $14.88 3.4
----------------------------------------------
At December 31, 1998 and 1997, the total amount accrued for stock options,
SARs, and Deferred Payment Agreements was $1,738,000 and $1,746,000,
respectively.
Stock Grants:
As indicated above the key employee stock incentive plan and the outside
director stock plan provide for stock awards in addition to stock option awards.
The stock awards may be subject to specified performance and vesting
requirements. Under the outside director stock plan, since April 1995 a director
could elect to receive any portion of his director fees in stock, and since May
1996 the amount of stock received has been based on 95% of the market price.
As of December 31, 1998, 110,400 shares of common stock have been awarded
under the key employee stock incentive plan, of which 10,400 shares were awarded
in lieu of 1995 cash bonuses, and 100,000 shares were awarded in 1995 subject to
specified performance and vesting requirements. The estimated cost of the
100,000 shares, which will not be issued until all requirements have been met,
is being accrued over the five year performance and vesting period, and at
December 31, 1998 and 1997, $1,914,000 and $1,242,000 was accrued, respectively.
Outside directors elected to receive 3,882, 4,638 and 2,260 shares of stock in
lieu of cash for director fees in 1998, 1997 and 1996, respectively.
SFAS No. 123 Pro Forma Disclosures:
For purposes of the pro forma disclosures required by SFAS No. 123, the
Company has computed the value of all stock and stock option awards granted
during 1998, 1997 and 1996 using the Black-Scholes option pricing model with the
following weighted-average assumptions and results:
1998 1997 1996
---- ---- ----
Assumptions
- -----------
Risk-free interest rate 4.96% 5.93% 6.26%
Assumed dividend yield 5.36% 4.80% 5.34%
Assumed lives of option
awards 8 years 8 years 8 years
Assumed volatility 0.191 0.202 0.171
Results
- -------
Weighted average
fair value of
options granted $ 3.75 $ 5.12 $ 3.08
The Black-Scholes option valuation model was developed for use in
estimating the fair value of traded options which have no vesting restrictions
and are fully transferable. In addition, option valuation models require the
input of highly subjective assumptions. In the Company's opinion, because the
Company's stock-based compensation awards have characteristics significantly
different from traded options, and because changes in the subjective assumptions
can materially affect the fair value estimate, the results obtained from the
valuation model do not necessarily provide a reliable single measure of the
value of its stock-based compensation awards.
If the Company had accounted for its stock-based compensation awards in
1998, 1997 and 1996 in accordance with SFAS No. 123, pro forma results would
have been as follows ($ in thousands, except per share amounts):
1998 1997 1996
---- ---- ----
Pro forma net income $43,834 $36,769 $40,978
Pro forma basic net
income per share $ 1.39 $ 1.26 $ 1.44
Pro forma diluted net
income per share $ 1.37 $ 1.24 $ 1.43
Because the SFAS No. 123 method of accounting has not been applied to
awards granted prior to January 1, 1995, the pro forma compensation adjustments
used to derive the above results are not likely to be representative of the pro
forma compensation adjustments to be reported in future years.
Per Share Data:
1998 1997 1996
---- ---- ----
Weighted average shares 31,602 29,267 28,520
Dilutive potential common shares 438 426 218
Adjusted weighted average shares 32,040 29,693 28,738
Anti-dilutive options not included 1,207 565 --
Ownership Limitations:
In order to maintain Cousins' qualification as a REIT, Cousins' Articles of
Incorporation include certain restrictions on the ownership of more than 3.9% of
the Company's common stock.
Distribution of REIT Taxable Income:
The following is a reconciliation between dividends declared and dividends
applied in 1997 and 1996 and estimated to be applied in 1998 to meet REIT
distribution requirements ($ in thousands):
1998 1997 1996
------- ------- -------
Dividends declared $47,064 $37,606 $31,912
Additional dividends paid deduction due to 5% discount on
dividends reinvested 548 257 408
That portion of dividends declared in current year, and paid in current
year, which was applied to the prior year distribution requirements (7,644) (4,816) (2,197)
That portion of dividends declared in subsequent year, and paid in
subsequent year, which will apply to current year 11,779 7,644 4,816
-------------------------------
Dividends applied to meet current year REIT distribution requirements $51,747 $40,691 $34,939
===============================
Tax Status of Dividends:
Dividends applied to meet REIT distribution requirements were equal to
Cousins' taxable income (see Note 7). Since electing to qualify as a REIT in
1987, Cousins has had no accumulated undistributed taxable income.
In 1998, the Company designated as 20% capital gain dividends 5% of the
dividend paid December 22, 1998. In 1997, the Company designated as 28% capital
gain dividends 49% of the dividend paid February 10, 1997. In 1996, the Company
designated as capital gain dividends 16.778% of the dividend paid February 22,
1996 and 30.6774% of the dividend paid December 23, 1996. All other dividends
paid in 1998, 1997 and 1996 were taxable as ordinary income dividends. In
addition, in 1998, 1997 and 1996 an amount calculated as 1.74%, 1.91% and
1.95% of total dividends, respectively, was an "adjustment attributed to
depreciation of tangible property placed in service after 1986" for alternative
minimum tax purposes. This amount was passed through to stockholders and must be
used as an item of adjustment in determining each stockholder's alternative
minimum taxable income.
7. INCOME TAXES
In 1998, 1997 and 1996, because Cousins qualified as a REIT and distributed
all of its taxable income (see Note 6), it incurred no federal income tax
liability. The differences between taxable income as reported on Cousins' tax
return (estimated 1998 and actual 1997 and 1996) and Consolidated Net Income as
reported herein are as follows ($ in thousands):
1998 1997 1996
------- ------- -------
Consolidated net income $45,299 $37,277 $41,016
Consolidating adjustments (2,759) (1,218) (3,868)
Less CREC net loss (income) 540 (482) 2,937
------------------------------
Cousins net income for financial reporting purposes 43,080 35,577 40,085
Adjustments arising from:
Sales of investment properties (7,471) 1,606 (8,844)
Income from unconsolidated joint ventures (principally depreciation,
revenue recognition, and operational timing differences) 2,227 1,112 (489)
Rental income recognition 344 438 73
Interest income recognition 429 566 448
Wildwood Training Facility differences -- -- 411
Interest expense 5,052 1,401 2,356
Compensation expense under stock option and SAR plans 19 (2,578) (2,893)
Depreciation 5,946 4,809 1,170
Other 2,121 (2,240) 2,622
------------------------------
Cousins taxable income $51,747 $40,691 $34,939
==============================
The consolidated benefit for income taxes is composed of the following ($
in thousands):
1998 1997 1996
------- ------- ------
CREC and its wholly owned subsidiaries:
Currently payable:
Federal $ 33 $ 46 $ --
------------------------------
33 46 --
------------------------------
Adjustments arising from:
Income from unconsolidated joint ventures 356 304 298
Operating loss carryforward 574 751 (1,133)
Stock appreciation right expense (132) 119 (185)
Other (1,347) (922) (776)
------------------------------
(549) 252 (1,796)
------------------------------
CREC (benefit) provision for income taxes (516) 298 (1,796)
Cousins provision for state income taxes 379 72 680
Less provision applicable to gain on sale of investment properties (11) (1,897) (587)
------------------------------
Consolidated benefit applicable to income from operations $ (148) $(1,527) $ (1,703)
==============================
The net income tax provision (benefit) differs from the amount computed by
applying the statutory federal income tax rate to CREC's income (loss) before
taxes as follows ($ in thousands):
1998 1997 1996
--------------- ---------------- ----------------
Amount Rate Amount Rate Amount Rate
------ ---- ------- ---- ------- ----
Federal income tax (benefit) provision $(359) 34% $ 265 34% $(1,609) 34%
State income tax (benefit) provision, net of
federal income tax effect (42) 4 31 4 (189) 4
Other (115) 11 2 -- 2 --
------------------------------------------------------
CREC (benefit) provision for income taxes (516) 49% 298 38% (1,796) 38%
=== ===
Cousins provision for state income taxes 379 72 680
Less provision applicable to gain on sale of
investment properties (11) (1,897) (587)
------ ------- -------
Consolidated benefit applicable to income
from operations $ (148) $(1,527) $(1,703)
====== ======= =======
The components of CREC's net deferred tax liability are as follows ($ in
thousands):
1998 1997
---- ----
Deferred tax assets $ 5,726 $ 4,735
Deferred tax liabilities (5,907) (5,452)
------------------
Net deferred tax liability $ (181) $ (717)
==================
The tax effect of significant temporary differences representing CREC's
deferred tax assets and liabilities are as follows ($ in thousands):
1998 1997
---- ----
Operating loss carryforward $ 1,736 $ 2,277
Income from unconsolidated
joint ventures (4,272) (3,916)
Stock appreciation right expense 952 821
Residential lot sales, net 1,890 776
Interest capitalization (1,323) (1,228)
Other 836 553
------------------
$ (181) $ (717)
==================
8. PROPERTY TRANSACTIONS
Office Division
In January 1998, the Company purchased the land for, and commenced
construction of, 333 John Carlyle, an approximately 150,000 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, Gateway 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 150,000 square foot office building in Birmingham, Alabama became
partially operational for financial reporting purposes.
In August 1998, the Company commenced construction on 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 355,000 square foot center includes existing retail
space and a parking deck. The Company plans to reposition and remerchandise the
project into an approximately 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 retail 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.
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 $3.1 million.
Medical Office Division
In June 1998, the Company acquired Northside/Alpharetta I, an approximately
100,000 rentable square foot medical office building in suburban Atlanta,
Georgia. Construction also commenced in June 1998 on Northside/Alpharetta II, an
approximately 198,000 rentable square foot medical office building. In July
1998, the Company commenced construction on AtheroGenics, an approximately
50,000 rentable square foot office and laboratory building, located in suburban
Atlanta, Georgia, on land the Company already owned.
Land Division
The Company is currently developing six residential communities in suburban
Atlanta, Georgia, including four in which development commenced in 1994, one in
1995 and one in 1996. These developments currently include land on which
approximately 1,775 lots are being developed (with additional lots developable
on adjacent land under option), of which 344, 260 and 227 lots were sold in
1998, 1997 and 1996, respectively.
In November 1998, Temco Associates began development of the Bentwater
residential community, which will consist of approximately 1,250 lots on
approximately 838 acres (see Note 5).
9. CONSOLIDATED STATEMENTS OF CASH FLOWS - SUPPLEMENTAL INFORMATION
Interest (net of amounts capitalized) (see Note 4) and income taxes paid
(net of refunds) were as follows ($ in thousands):
1998 1997 1996
------- ------- ------
Interest paid $11,258 $14,118 $5,753
Income taxes paid,
net of $5 and $511
refunded in
1998 and 1996,
respectively $ 110 $ 46 $ 54
Significant non-cash financing and investing activities included the
following:
a. In 1998, 1997 and 1996, approximately $29,939,000, $87,658,000 and
$78,169,000, respectively, were transferred from Projects Under Construction to
Operating Properties.
b. In 1998, 1997 and 1996, approximately $1,229,000, $1,553,000 and
$3,246,000, respectively, were transferred from Land Held for Investment or
Future Development to Operating Properties. In 1998 approximately $14,115,000
was transferred from Land Held for Investment or Future Development to Projects
Under Construction.
c. In January 1997, approximately $17,005,000 was transferred from Notes
and Other Receivables to Operating Properties. d. In June 1998, in
conjunction with the acquisition of Northside/Alpharetta I, a mortgage note
payable of approximately
$10,610,000 was assumed (see Note 4). In December 1996, in conjunction with the
acquisition of 101 Independence Center, a mortgage note payable of approximately
$30,879,000 was assumed.
e. In January 1996, in conjunction with the exchange of certain partnership
interests, approximately $3,825,000 was transferred from Minority Interests in
Consolidated Entities to Operating Properties ($3,283,000) and Projects Under
Construction ($542,000); and approximately $1,688,000 was transferred from
Investment in Unconsolidated Joint Ventures to Operating Properties.
f. In November 1998, in conjunction with the formation of the Venture with
Prudential (see Note 5), the Company contributed nine properties, certain of
which were subject to mortgages, and received net cash in the amount of
approximately $103,025,000. The non-cash activities related to the formation of
the Venture are as follows:
Decrease in:
Operating properties, net $137,746,000
Projects under construction 19,684,000
Notes and other receivables 3,771,000
Notes payable (53,281,000)
Increase in:
Investment in unconsolidated
joint ventures (137,544,000)
Deposits and deferred income 132,649,000
------------
Net cash received in formation
of venture $103,025,000
============
10. RENTAL PROPERTY REVENUES
The Company's leases typically contain escalation provisions and provisions
requiring tenants to pay a pro rata share of operating expenses. The leases
typically include renewal options and are classified and accounted for as
operating leases.
At December 31, 1998, future minimum rentals to be received by consolidated
entities under existing non-cancelable leases, excluding tenants' current pro
rata share of operating expenses, are as follows ($ in thousands):
Office and
Medical
Retail Office Total
-------- -------- --------
1999 $ 15,694 $ 27,673 $ 43,367
2000 17,868 42,591 60,459
2001 17,697 40,312 58,009
2002 16,961 39,706 56,667
2003 16,850 38,849 55,699
Subsequent to 2003 152,585 248,447 401,032
---------------------------------
$237,655 $437,578 $675,233
=================================
11. REPORTABLE SEGMENTS
The Company has four reportable segments: Office Division, Retail Division,
Medical Office Division and Land Division. The Office Division, Retail Division
and Medical Office Division develop, lease and manage office buildings, retail
centers and medical office buildings, respectively. The Land Division owns
various tracts of strategically located land which are being held for future
development. The Land Division also develops single-family residential
communities which are parceled into lots and sold to various home builders.
The accounting policies of the segments are the same as those described in
Significant Accounting Policies (see Note 1). The management of the Company
evaluates performance of its reportable segments based on Funds From Operations.
The Company's reportable segments are broken down based on what type of product
the division provides. The divisions are managed separately because each product
they provide has separate and distinct development issues, leasing and/or sales
strategies and management issues. The notations (100%) and (JV) used in the
following tables indicate wholly-owned and unconsolidated joint ventures,
respectively, and all amounts are in thousands.
Office Retail Medical Land Unallocated
1998 Division Division Office Division Division and Other Total
- ---- -------- -------- --------------- -------- ----------- --------
Rental property revenues (100%) $ 33,011 $ 31,315 $ 2,579 $ -- $ 473 $ 67,378
Rental property revenues (JV) 49,129 10,168 149 -- -- 59,446
Development income, management
fees and leasing and other fees 7,867 692 1,019 -- -- 9,578
Other income (100%) -- -- -- 16,732 4,275 21,007
Other income (JV) -- -- -- 181 294 475
------------------------------------------------------------------------
Total revenues 90,007 42,175 3,747 16,913 5,042 157,884
------------------------------------------------------------------------
Rental property operating expenses (100%) 10,319 6,308 913 -- 162 17,702
Rental property operating expenses (JV) 14,111 2,933 52 -- -- 17,096
Other expenses (100%) -- -- -- 16,414 26,602 43,016
Other expenses (JV) -- -- -- 80 9,138 9,218
------------------------------------------------------------------------
Total expenses 24,430 9,241 965 16,494 35,902 87,032
------------------------------------------------------------------------
Consolidated funds from operations 65,577 32,934 2,782 419 (30,860) 70,852
------------------------------------------------------------------------
Depreciation and amortization (100%) (8,040) (5,742) (457) -- (430) (14,669)
Depreciation and amortization (JV) (12,000) (1,670) (47) -- -- (13,717)
Effect of the recognition of rental
revenues on a straight-line basis (100%) 348 -- -- -- -- 348
Effect of the recognition of rental
revenues on a straight-line basis (JV) (1,578) 111 -- -- -- (1,467)
Adjustment to reflect stock appreciation
right expense on a cash basis -- -- -- -- 8 8
Gain on sale of investment properties, net
of applicable income tax provision -- -- -- -- 3,944 3,944
------------------------------------------------------------------------
Net income 44,307 25,633 2,278 419 (27,338) 45,299
Benefit for income taxes from operations -- -- -- -- (148) (148)
------------------------------------------------------------------------
Income from operations before taxes $ 44,307 $ 25,633 $ 2,278 $ 419 $(27,486) $ 45,151
========================================================================
Total assets $386,414 $255,207 $49,437 $ 9,912 $ 51,888 $752,858
========================================================================
Investment in unconsolidated joint ventures $158,720 $ 99,661 $ 5,183 $ 1,082 $ 2 $264,648
========================================================================
Capital expenditures $104,266 $ 55,161 $25,811 $ 9,017 $ -- $194,255
========================================================================
Reconciliation to Consolidated Revenues
1998 1997 1996
------- ------- -------
Rental property revenues (100%) $67,378 $61,812 $33,108
Effect of the recognition of rental
revenues on a straight-line basis (100%) 348 440 4
Development income, management fees
and leasing and other fees 9,578 7,291 6,019
Residential lot and outparcel sales 16,732 12,847 14,145
Interest and other 4,275 3,609 5,256
-----------------------------
Total consolidated revenues $98,311 $85,999 $58,532
=============================
Office Retail Medical Land Unallocated
1997 Division Division Office Division Division and Other Total
- ---- -------- -------- --------------- -------- ----------- --------
Rental property revenues (100%) $ 30,353 $ 30,514 $ 476 $ -- $ 469 $ 61,812
Rental property revenues (JV) 44,318 6,892 -- -- -- 51,210
Development income, management
fees and leasing and other fees 5,081 1,310 887 -- 13 7,291
Other income (100%) -- -- -- 12,847 3,609 16,456
Other income (JV) -- -- -- 52 217 269
------------------------------------------------------------------------
Total revenues 79,752 38,716 1,363 12,899 4,308 137,038
------------------------------------------------------------------------
Rental property operating expenses (100%) 9,286 5,766 145 -- 174 15,371
Rental property operating expenses (JV) 12,143 2,103 -- -- -- 14,246
Other expenses (100%) -- -- -- 12,523 29,352 41,875
Other expenses (JV) -- -- -- 41 9,959 10,000
------------------------------------------------------------------------
Total expenses 21,429 7,869 145 12,564 39,485 81,492
------------------------------------------------------------------------
Consolidated funds from operations 58,323 30,847 1,218 335 (35,177) 55,546
------------------------------------------------------------------------
Depreciation and amortization (100%) (7,465) (5,456) (104) -- (586) (13,611)
Depreciation and amortization (JV) (9,168) (1,159) -- -- (7) (10,334)
Effect of the recognition of rental
revenues on a straight-line basis (100%) 440 -- -- -- -- 440
Effect of the recognition of rental
revenues on a straight-line basis (JV) (1,438) -- -- -- -- (1,438)
Adjustment to reflect stock appreciation
right expense on a cash basis -- -- -- -- 702 702
Gain on sale of investment properties, net
of applicable income tax provision -- -- -- -- 5,972 5,972
------------------------------------------------------------------------
Net income 40,692 24,232 1,114 335 (29,096) 37,277
------------------------------------------------------------------------
Benefit for income taxes from operations -- -- -- -- (1,527) (1,527)
------------------------------------------------------------------------
Income from operations before taxes $ 40,692 $ 24,232 $ 1,114 $ 335 $(30,623) $ 35,750
========================================================================
Total assets $294,306 $212,876 $13,143 $16,407 $ 81,007 $617,739
========================================================================
Investment in unconsolidated joint ventures $ 98,425 $ 20,784 $ -- $ 985 $ 4 $120,198
========================================================================
Capital expenditures $ 34,395 $ 29,635 $ 7,516 $ 9,068 $ 14 $ 80,628
========================================================================
Office Retail Medical Land Unallocated
1996 Division Division Office Division Division and Other Total
- ---- -------- -------- --------------- -------- ----------- --------
Rental property revenues (100%) $ 11,435 $ 21,007 $ -- $ -- $ 666 $ 33,108
Rental property revenues (JV) 41,442 6,740 -- -- -- 48,182
Development income, management
fees and leasing and other fees 5,160 451 404 -- 4 6,019
Other income (100%) -- -- -- 14,145 5,256 19,401
Other income (JV) -- -- -- 897 452 1,349
------------------------------------------------------------------------
Total revenues 58,037 28,198 404 15,042 6,378 108,059
------------------------------------------------------------------------
Rental property operating expenses (100%) 3,411 4,017 -- -- 188 7,616
Rental property operating expenses (JV) 12,308 2,118 -- 192 -- 14,618
Other expenses (100%) -- 68 -- 14,977 18,516 33,561
Other expenses (JV) -- -- -- -- 8,036 8,036
------------------------------------------------------------------------
Total expenses 15,719 6,203 -- 15,169 26,740 63,831
------------------------------------------------------------------------
Consolidated funds from operations 42,318 21,995 404 (127) (20,362) 44,228
------------------------------------------------------------------------
Depreciation and amortization (100%) (2,807) (3,637) -- -- (470) (6,914)
Depreciation and amortization (JV) (8,854) (1,086) -- (5) (35) (9,980)
Effect of the recognition of rental
revenues on a straight-line basis (100%) 4 -- -- -- -- 4
Effect of the recognition of rental
revenues on a straight-line basis (JV) 307 -- -- -- -- 307
Adjustment to reflect stock appreciation
right expense on a cash basis -- -- -- -- 567 567
Gain on sale of investment properties, net
of applicable income tax provision -- -- -- -- 12,804 12,804
------------------------------------------------------------------------
Net income 30,968 17,272 404 (132) (7,496) 41,016
------------------------------------------------------------------------
Benefit for income taxes from operations -- -- -- -- (1,703) (1,703)
------------------------------------------------------------------------
Income from operations before taxes $ 30,968 $ 17,272 $ 404 $ (132) $ (9,199) $ 39,313
========================================================================
Total assets $258,699 $208,793 $ 4,656 $17,361 $ 67,135 $556,644
========================================================================
Investment in unconsolidated joint ventures $108,305 $ 20,880 $ -- $ 974 $ 2,103 $132,262
========================================================================
Capital expenditures $ 66,354 $ 76,737 $ 4,281 $13,656 $ 1,126 $162,154
========================================================================
Cousins Properties Incorporated and Consolidated Entities
- ---------------------------------------------------------------------------------------------------------------------
FIVE YEAR SUMMARY OF SELECTED FINANCIAL DATA ($ in thousands, except per share
amounts)
1998 1997 1996 1995 1994
-------- -------- -------- -------- --------
Rental property revenues $ 67,726 $ 62,252 $ 33,112 $ 19,348 $ 13,150
Fees 9,578 7,291 6,019 7,884 5,023
Residential lot and outparcel sales 16,732 12,847 14,145 9,040 6,132
Interest and other 4,275 3,609 5,256 4,764 6,801
---------------------------------------------------------------------
Total revenues 98,311 85,999 58,532 41,036 31,106
---------------------------------------------------------------------
Income from unconsolidated joint ventures 18,423 15,461 17,204 14,113 12,580
---------------------------------------------------------------------
Rental property operating expenses 17,702 15,371 7,616 4,681 3,338
Depreciation and amortization 15,173 14,046 7,219 4,516 3,742
Stock appreciation right expense 330 204 2,154 1,298 433
Residential lot and outparcel cost of sales 15,514 11,917 13,676 8,407 5,762
Interest expense 11,558 14,126 6,546 687 411
General, administrative, and other expenses 15,250 16,018 12,016 10,333 9,627
---------------------------------------------------------------------
Total expenses 75,527 71,682 49,227 29,922 23,313
(Benefit) provision for income taxes
from operations (148) (1,527) (1,703) 747 (166)
Gain on sale of investment properties,
net of applicable income tax provision 3,944 5,972 12,804 1,862 6,356
---------------------------------------------------------------------
Net income $ 45,299 $ 37,277 $ 41,016 $ 26,342 $ 26,895
=====================================================================
Basic net income per share $ 1.43 $ 1.27 $ 1.44 $ .94 $ .97
=====================================================================
Diluted net income per share $ 1.41 $ 1.26 $ 1.43 $ .94 $ .96
=====================================================================
Cash dividends declared per share $ 1.49 $ 1.29 $ 1.12 $ .99 $ .90
=====================================================================
Total assets $752,858 $617,739 $556,644 $418,006 $330,817
Notes payable 198,858 226,348 231,831 113,434 41,799
Stockholders' investment 379,865 370,674 299,184 277,678 272,898
Shares outstanding at year-end 31,887 31,472 28,920 28,223 27,864
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
- --------------------------------------------------------------------------------
To Cousins Properties Incorporated:
We have audited the accompanying consolidated balance sheets of Cousins
Properties Incorporated (a Georgia corporation) and consolidated entities as of
December 31, 1998 and 1997, and the related consolidated statements of income,
stockholders' investment and cash flows for each of the three years in the
period ended December 31, 1998. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits. We did not audit the
financial statements of CSC Associates, L.P. and Haywood Mall which statements
combined reflect assets of 23% and 38% of the joint ventures totals as of
December 31, 1998 and 1997 and revenues of 46%, 50% and 48% of the 1998, 1997
and 1996 joint ventures totals, respectively. Those statements were audited by
other auditors whose reports have been furnished to us and our opinion, insofar
as it relates to the amounts included for those entities as of December 31, 1998
and 1997 and for each of the three years in the period ended December 31, 1998,
is based solely on the reports of the other auditors.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits and the reports of other auditors provide a
reasonable basis for our opinion.
In our opinion, based on our audits and the reports of other auditors, the
financial statements referred to above present fairly, in all material respects,
the financial position of Cousins Properties Incorporated and consolidated
entities as of December 31, 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.
ARTHUR ANDERSEN LLP
Atlanta, Georgia
February 11, 1999
Cousins Properties Incorporated and Consolidated Entities
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Results of Operations For The Three Years Ended December 31, 1998
- --------------------------------------------------------------------------------
General. Historically, the Company's financial results have been
significantly affected by sale transactions and the fees generated by, and
start-up operations of, major real estate developments, which transactions and
developments do not necessarily recur. Accordingly, the Company's historical
financial statements may not be indicative of future operating results. The
notes referenced in the discussion below are the "Notes to Consolidated
Financial Statements" included in this annual report.
Rental Property Revenues and Operating Expenses. Rental property revenues
increased from $33,112,000 in 1996 to $62,252,000 and $67,726,000 in 1997 and
1998, respectively. Rental property revenues from the Company's office division
increased approximately $2,566,000 in 1998 due primarily to the acquisition of
one office building and the addition of two new office buildings which became
partially operational for financial reporting purposes during 1998. The June
1998 acquisition of Lakeshore Park Plaza increased rental property revenues
approximately $1,354,000. Two office buildings, 333 North Point Center East and
Grandview II, became partially operational for financial reporting purposes in
June 1998 and August 1998, respectively, which contributed $1,499,000 and
$499,000, respectively, to the increase. The increase from Grandview II would
have been higher by $296,000 but this property was contributed to CP Venture Two
LLC in November 1998, which revenue is recorded as Income from Unconsolidated
Joint Ventures from the date of contribution (see Note 5). Additionally, rental
property revenues decreased $935,000, $266,000 and $97,000 in 1998 from the
contribution of three other office properties, First Union Tower, 100 North
Point Center East and 200 North Point Center East, respectively, to CP Venture
Two LLC in November 1998, which revenue is also recorded as Income from
Unconsolidated Joint Ventures from the date of contribution (see Note 5). Rental
property revenues also increased by $242,000 due to increased occupancy during
the year at 101 Independence Center, which was 94% leased at December 31, 1997
and 98% leased at December 31, 1998.
Rental property revenues from the Company's retail division increased
approximately $801,000 in 1998. Two retail centers, Abbotts Bridge Station and
Laguna Niguel Promenade, which became partially operational for financial
reporting purposes in January 1998 and July 1998, respectively, increased rental
property revenues in 1998 approximately $1,462,000 and $788,000, respectively.
Rental property revenues increased approximately $362,000 from Presidential
MarketCenter in 1998 due to the second expansion of the center in April 1997.
The increase in rental property revenues from the retail division was
partially offset (a decrease of $990,000) by the contribution of four retail
properties to CP Venture Two LLC in November 1998, which revenue is recorded as
Income from Unconsolidated Joint Ventures from the date of contribution (see
Note 5). The increase in rental property revenues was also partially offset by
decreases in rental property revenues of approximately $644,000 and $449,000
from Rivermont Station and Lovejoy Station, respectively, both of which were
sold in July 1997.
Rental property revenues from the Company's medical office division
increased approximately $2,103,000 in 1998 due to the June 1998 acquisition of
Northside/Alpharetta I ($1,438,000) and to Presbyterian Medical Plaza at
University ($665,000), which became partially operational in August 1997. The
increase from Presbyterian Medical Plaza at University would have been higher by
$178,000 but the property was contributed to CP Venture Two LLC in November
1998, which revenue is recorded as Income from Unconsolidated Joint Ventures
from the date of contribution (see Note 5).
Rental property revenues from the Company's office division increased
approximately $19,354,000 in 1997 due primarily to the acquisition of two office
buildings in 1996 and the addition of two new office buildings which became
operational for financial reporting purposes during 1996. Rental property
revenues from 101 Independence Center and 615 Peachtree Street, two office
buildings which were acquired in December 1996 and August 1996, respectively,
contributed to the increase in 1997 by $10,844,000 and $1,578,000, respectively.
Two office buildings, 100 and 200 North Point Center East, which became
operational for financial reporting purposes in April 1996 and November 1996,
respectively, increased rental property revenues in 1997 approximately
$1,186,000 and $2,354,000, respectively.
The Wildwood Training Facility also favorably impacted the rental property
revenues recognized from the Company's office division by approximately
$3,319,000 in 1997. Effective January 1, 1997, the Wildwood Training Facility is
being accounted for as a property owned by the Company.
Rental property revenues from the Company's retail division increased
approximately $9,507,000 in 1997. The increase was due primarily to new retail
centers or expansions of existing retail centers which became operational for
financial reporting purposes during 1996 as follows (1997 increase): Colonial
Plaza MarketCenter in March 1996 ($3,041,000), Greenbrier MarketCenter in
October 1996 ($4,059,000), Los Altos MarketCenter in November 1996 ($2,746,000),
the first expansion of Presidential MarketCenter in June 1996 ($956,000), the
expansion of North Point MarketCenter in December 1996 ($524,000) and Mansell
Crossing Phase II in March 1996 ($619,000). (The Company does not own Mansell
Crossing Phase I.) Rivermont Station, which became operational for financial
reporting purposes in February 1997 but was subsequently sold on July 1, 1997,
increased rental property revenues approximately $644,000.
The tax-deferred exchange of Lawrenceville MarketCenter in November 1996
partially offset the foregoing increases in rental property revenues by
$3,027,000 in 1997. Also the sale of Lovejoy Station on July 1, 1997 negatively
impacted rental property revenues by approximately $297,000.
Presbyterian Medical Plaza at University contributed approximately $476,000
to the increase in rental property revenues in 1997. Rental property
operating expenses increased from $7,616,000 in 1996 to $15,371,000 and
$17,702,000 in 1997 and 1998,
respectively. The increase in 1998 was primarily related to the aforementioned
retail centers and office buildings becoming operational, as well as the
acquisitions of Lakeshore Park Plaza and Northside/Alpharetta I. The increase in
1998 was partially offset by the contribution of nine properties to CP Venture
Two LLC in November 1998, which rental property operating expenses from these
nine properties would be recognized by the Company through Income from
Unconsolidated Joint Ventures from the date of contribution (see Note 5).
The increase in rental property operating expenses in 1997 was primarily
due to the occupancy of the retail centers, the 100 and 200 North Point Center
East office buildings and Presbyterian Medical Plaza at University becoming
operational, as well as the acquisition of the 615 Peachtree Street and 101
Independence Center office buildings.
Development Income. Development income increased from $1,660,000 in 1996 to
$3,123,000 in 1997 and then decreased in 1998 to $3,007,000. Development income
recognized by the Company's retail division from third party retail developments
increased approximately $1,324,000 in 1997. Development income was also
favorably impacted in 1997 by $622,000 from the fee development of Total
Systems' corporate headquarters in Columbus, Georgia. Partially offsetting the
foregoing increases in development income in 1997 was a decrease in development
income received from the Dusseldorf project of approximately $542,000 (see Note
5).
Management Fees. Management fees increased from $2,801,000 in 1996 to
$3,448,000 and $3,761,000 in 1997 and 1998, respectively. Management fees
increased in both 1997 and 1998 due to lease-up of certain properties and
formation of certain ventures from which management fees are received (see Note
5). The increase in 1997 was also due to the acquisition of the management
contracts of The Lea Richmond Company in July 1996 (increase of approximately
$491,000).
Leasing and Other Fees. Leasing and other fees decreased from $1,558,000 in
1996 to $720,000 in 1997 and then increased to $2,810,000 in 1998. The increase
in 1998 is partially due to an increase of approximately $1,065,000 of leasing
fees related to Wildwood Office Park, primarily due to the lease-up of the 4200
Wildwood Parkway Building. Leasing fees from Cousins LORET increased $560,000 in
1998, primarily due to the lease-up of The Pinnacle, which was under development
and in the early stages of lease-up in 1998. Leasing fees from CSC Associates
increased approximately $367,000 primarily due to increased occupancy at
NationsBank Plaza.
The decrease in leasing and other fees in 1997 was due in part to a
decrease of approximately $843,000 from leasing fees related to Wildwood Office
Park, primarily related to fees received from the leasing of the 4100 and 4300
Wildwood Parkway Buildings. Leasing and other fees recognized by the Company's
retail division from third party developments also decreased approximately
$305,000 in 1997. The decrease in 1997 was partially offset by the recognition
of approximately $411,000 of leasing fees from Cousins LORET, which was a newly
formed venture in 1997 (see Note 5).
Residential Lot and Outparcel Sales and Cost of Sales. Residential lot and
outparcel sales decreased from $14,145,000 in 1996 to $12,847,000 in 1997 and
then increased to $16,732,000 in 1998. Residential lot sales increased in 1998
to $15,932,000 from $10,228,000 in 1997 due to an increase in the number of
residential lots sold to 344 lots in 1998 from 260 lots in 1997. The increase
was partially offset by a decrease in outparcel sales by CREC and one of its
subsidiaries to $800,000 in 1998 from $2,619,000 in 1997, resulting from the
sale of two outparcels in 1998 and five outparcels in 1997.
The decrease in residential lot and outparcel sales in 1997 is due
primarily to a decrease in outparcel sales by CREC and one of its subsidiaries
to $2,619,000 in 1997 from $3,951,000 in 1996 resulting from the sale of five
outparcels in 1997 and eight outparcels in 1996. The decrease was partially
offset by an increase in residential lot sales to $10,228,000 in 1997 from
$10,194,000 in 1996. The number of residential lots sold increased to 260 lots
in 1997 from 227 lots in 1996.
Residential lot and outparcel cost of sales decreased from $13,676,000 in
1996 to $11,917,000 in 1997 and then increased to $15,514,000 in 1998. The
decrease in 1997 and the increase in 1998 were due to the aforementioned
decreases and increases in the number of residential lot and outparcel sales.
The increase in 1998 was also due to a $500,000 writedown of one of the
residential developments due to a change in lot sales price assumptions.
Interest and Other Income. Interest and other income decreased from
$5,256,000 in 1996 to $3,609,000 in 1997 and increased to $4,275,000 in 1998.
The increase in 1998 is due to interest income of approximately $714,000
recognized from a note receivable from Cousins LORET. The Company lent funds
beginning in June 1998 to Cousins LORET at a slightly higher rate than its
borrowing costs, until December 1998 when Cousins LORET drew down funds from its
$70 million financing of The Pinnacle.
The decrease in interest and other income in 1997 was due primarily to the
reclassification of the Wildwood Training Facility Mortgage Note Receivable to
Operating Properties, which caused a decrease of approximately $1,591,000 in
interest income. Also contributing to the decrease in 1997 was a decrease of
approximately $351,000 in interest income recognized from temporary investments.
Partially offsetting the aforementioned decreases was an increase in interest
income of approximately $369,000 recognized from the Daniel Realty Company Note
Receivable (see Note 3).
Income From Unconsolidated Joint Ventures. (All amounts reflect the
Company's share of joint venture income.) Income from unconsolidated joint
ventures decreased from $17,204,000 in 1996 to $15,461,000 in 1997 and then
increased to $18,423,000 in 1998.
Income from CSC Associates, L.P. increased from $7,978,000 in 1996 to
$9,284,000 and $10,021,000 in 1997 and 1998, respectively. The increases in both
1997 and 1998 were due to the continued lease-up of NationsBank Plaza. The
increase in 1998 was also due to the increase in rental income from a tenant
whose increase in rental rate did not require straight-lining under Statement of
Financial Accounting Standards No. 13. Also favorably impacting 1997 results was
a decrease in depreciation and amortization in 1997 of approximately $217,000
due to certain deferred leasing and marketing costs and furniture and equipment
becoming fully amortized during 1997.
Income from Wildwood Associates decreased from $4,245,000 in 1996 to
$1,903,000 in 1997 and then increased to $1,968,000 in 1998. Income before
depreciation, amortization and interest expense from the 2300 and 2500 Windy
Ridge Parkway Buildings favorably impacted results in 1998 by $215,000 and
$184,000, respectively, due to increased average economic occupancy of both
properties in 1998.
Income before depreciation, amortization and interest expense from the 4200
Wildwood Parkway Building increased $581,000 due to the building becoming
partially operational in June 1998. Also favorably impacting 1998 results was
the October 1998 condemnation gain of $110,000 related to the proceeds received
due to certain of Wildwood Associates' land being condemned for the widening of
a road.
Results in 1998 were negatively impacted by an increase in interest expense
of approximately $1,121,000. The increase was primarily due to the June 1998
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. This financing increased interest expense approximately
$756,000 in 1998. Interest expense on the 4100 and 4300 Wildwood Parkway
Buildings increased approximately $230,000 as the financing of these buildings
was completed in March 1997. Interest capitalized decreased approximately
$258,000 due to interest no longer being capitalized to the 4200 Wildwood
Parkway Building effective October 1998.
Results in 1997 were negatively impacted by an increase in interest expense
of approximately $1,630,000. This increase was primarily due to the financing of
the 3200 Windy Hill Road Building which contributed approximately $2,773,000 to
the increase in interest expense in 1997. On December 16, 1996, Wildwood
Associates completed the financing of this building with a $70 million
non-recourse mortgage note payable at an 8.23% interest rate and a term of ten
years. Concurrent with the financing, Wildwood Associates paid down its line of
credit to $0 which partially offset the increase in interest expense by
approximately $846,000. Interest expense also increased due to the financing of
the 4100 and 4300 Wildwood Parkway Buildings which increased interest expense
$901,000. On March 20, 1997, Wildwood Associates completed the financing of
these two buildings with a $30 million non-recourse mortgage note payable at a
7.65% interest rate and a term of fifteen years.
Partially offsetting the increase in interest expense in 1997 was a
decrease of approximately $475,000 in interest expense related to the Summit
Green Building. Effective December 1, 1996, Wildwood Associates disposed of its
interest in this building in exchange for cancellation of the related mortgage
debt. In addition, an increase in interest capitalization also partially offset
the increase in interest expense by $473,000.
Income before depreciation, amortization and interest expense from the 4100
and 4300 Wildwood Parkway Buildings favorably impacted results in 1997 by
approximately $840,000. The 4100 and 4300 Wildwood Parkway Buildings became
partially operational for financial reporting purposes in March 1996. Lease-up
of the 2300 and 2500 Windy Ridge Parkway Buildings also increased income before
depreciation, amortization and interest expense by $152,000 and $319,000,
respectively. Income before depreciation, amortization and interest expense from
the 3200 Windy Hill Road Building decreased approximately $1,222,000 due
primarily to the effect of the straight-lining of rental revenues in accordance
with Statement of Financial Accounting Standards No. 13, which decreased rental
revenues by approximately $1,386,000. The disposition of the Summit Green
Building, as discussed above, decreased income before depreciation, amortization
and interest expense by approximately $896,000.
Income from Haywood Mall increased from $3,538,000 in 1996 to $3,648,000
and $4,614,000 in 1997 and 1998, respectively. The increases in both 1998 and
1997 were due to the lease-up of the expansion of Haywood Mall.
Income from Cousins LORET increased from $68,000 in 1997 to $672,000 in
1998. Cousins LORET was formed on July 31, 1997 between the Company and LORET
Holdings, L.L.L.P. (see Note 5). The increases in both 1998 and 1997 were due to
the Two Live Oak office building, which became partially operational in October
1997.
Income from CP Venture LLC and CP Venture Two LLC was $284,000 in 1998.
These two ventures were formed on November 12, 1998 between the Company and
Prudential (see Note 5). The Company contributed nine of its operating
properties to CP Venture Two LLC. From the date of formation of these two
ventures forward, the Company's share of income from these nine properties is
recorded as Income from Unconsolidated Joint Ventures.
Income from Temco Associates decreased from $700,000 in 1996 to $11,000 in
1997 and increased to $97,000 in 1998. During 1998, approximately 83 acres of
the option related to the fee simple interest was exercised and simultaneously
sold. CREC's share of the gain on these sales was approximately $96,000. During
1996, Temco Associates exercised portions of the option related to the fee
simple interest to purchase 375 acres of land which it simultaneously sold.
CREC's share of the gain on these sales was approximately $713,000. There was no
similar sale in 1997.
Income from Hickory Hollow Associates decreased from $11,000 in 1996 to a
loss of $8,000 in 1997 and then increased to income of $185,000 in 1998. The
increase in 1998 was due to an outparcel sale, from which CREC's share of the
gain was approximately $192,000. There were no outparcel sales in 1996 or 1997.
General and Administrative Expenses. General and administrative expenses
increased from $9,148,000 in 1996 to $12,717,000 and $13,087,000 in 1997 and
1998, respectively. General and administrative expenses of the Company increased
approximately $2,000,000 in 1998 due to the Company's expansion. The increase
was partially offset by an increase in costs capitalized to projects under
construction of approximately $1,700,000, as the number of projects under
construction increased in 1998.
The increase in 1997 was primarily related to the Company's expansion and
the acquisition of The Lea Richmond Company and The Richmond Development Company
in July 1996. The increase in 1997 was also due to approximately $397,000 of
additional expense being accrued in 1997 for higher than anticipated estimates
of runoff and other expenses associated with the termination of the Company's
partially self-insured medical plan in December 1996.
Depreciation and Amortization. Depreciation and amortization increased from
$7,219,000 in 1996 to $14,046,000 and $15,173,000 in 1997 and 1998,
respectively. The increase in 1998 was mainly due to the aforementioned retail
centers and office buildings becoming operational and the acquisition of
Lakeshore Park Plaza and Northside/Alpharetta I. The increase was partially
offset by decreases in depreciation and amortization due to the contribution of
nine properties in November 1998 to CP Venture Two LLC, an unconsolidated joint
venture (see Note 5).
The 1997 increase was due primarily to the aforementioned retail centers
becoming operational, the 100 and 200 North Point Center East office buildings
becoming operational and the acquisitions of the 101 Independence Center and 615
Peachtree Street office buildings. Additionally, both the reclassification of
the Wildwood Training Facility Mortgage Note Receivable to Operating Properties,
as well as Presbyterian Medical Plaza at University becoming partially
operational in August 1997, increased depreciation and amortization in 1997.
Stock Appreciation Right Expense. Stock appreciation right expense
decreased from $2,154,000 in 1996 to $204,000 in 1997 and increased to $330,000
in 1998. This non-cash item is primarily related to the number of stock
appreciation rights outstanding and the Company's stock price. A reduction in
the number of stock appreciation rights outstanding due to exercises which
occurred since the first quarter of 1996 contributed to the decrease in the
stock appreciation right expense in 1997. The Company's stock price was $32.25,
$29.3125 and $28.125 per share at December 31, 1998, 1997 and 1996,
respectively.
Interest Expense. Interest expense increased from $6,546,000 in 1996 to
$14,126,000 in 1997 and then decreased to $11,558,000 in 1998. Interest expense
before capitalization increased from $12,194,000 in 1996 to $17,293,000 and
$19,028,000 in 1997 and 1998, respectively, due to higher debt levels.
Specifically, the Company assumed the mortgage note payable of
Northside/Alpharetta I when it acquired the property in June 1998 and in October
1998, the Company completed the financing of Lakeshore Park Plaza (see Note 4).
The amount of interest capitalization (a reduction of interest expense), which
changes parallel to the amount of projects under development, decreased from
$5,648,000 in 1996 to $3,167,000 in 1997, which contributed to the increase in
interest expense in 1997. Interest capitalized in 1998 increased to $7,470,000
which more than offset the increase in interest expense and resulted in a net
decrease in interest expense in 1998.
Property Taxes on Undeveloped Land. Property taxes on undeveloped land
decreased from $1,301,000 in 1996 to $606,000 in 1997 and increased to $900,000
in 1998. The increase in 1998 and the decrease in 1997 were primarily due to
favorable settlements of property taxes in 1997 on the Company's land related to
1994, 1995 and 1996 tax years, which had been under appeal.
Other Expenses. Other expenses increased from $1,567,000 in 1996 to
$2,695,000 in 1997 and decreased to $1,263,000 in 1998. The increase in 1997 and
decrease in 1998 were due to an increase and decrease, respectively, in
predevelopment expense.
Benefit for Income Taxes From Operations. The benefit for income taxes from
operations decreased from a benefit of $1,703,000 in 1996 to a benefit of
$1,527,000 in 1997, which benefit further decreased to $148,000 in 1998. The
decrease in the benefit for income taxes from operations in 1998 was due to a
decrease of $3,148,000 in CREC and its subsidiaries' loss before income taxes
and gain on sale of investment properties, which decrease was due to the
aforementioned increase in leasing fees and residential lot sales and the
decrease in predevelopment expense.
The decrease in the benefit for income taxes from operations in 1997 was
due to a decrease of $463,000 in CREC and its subsidiaries' loss before income
taxes and gain on sale of investment properties, which decrease was due to the
aforementioned increase in development income recognized by CREC and its
subsidiaries. Partially offsetting the increase in development income was an
increase in predevelopment expenses and a decrease in intercompany development
and leasing fees recognized in 1997. Certain development and leasing fees
recorded on CREC and its subsidiaries' books are intercompany fee income which
is eliminated in consolidation, but the tax effect is not.
Gain on Sale of Investment Properties. Gain on sale of investment
properties, net of applicable income tax provision was $12,804,000, $5,972,000
and $3,944,000 in 1996, 1997 and 1998, respectively. The 1998 gain included the
March 1998 sale of 6 acres of North Point land ($.6 million), the April 1998
sale of 23 acres of North Point land ($1.0 million), the October 1998
condemnation of land at Wildwood Office Park ($1.5 million), the December 1998
sale of 4.9 acres of McMurray land ($.2 million) and the amortization of the net
deferred gain from the Prudential transaction ($.5 million) (see Note 5).
The 1997 gain included the January 1997 sale of 28 acres of North Point
land ($2.4 million), the July 1997 sale of Lovejoy Station and Rivermont Station
($3.0 million), and the December 1997 sale of 30 acres of land adjacent to
Lawrenceville MarketCenter (a retail center formerly owned by the Company) ($.6
million). Liquidity and Capital Resources:
Financial Condition. The Company's debt (including its pro rata share of
unconsolidated joint venture debt) was 29% of total market capitalization at
December 31, 1998. As discussed in Note 4, the Company amended and extended the
maturity date of its line of credit to June 29, 1999 and increased the amount
available to $150 million. Also as discussed in Note 4, the Company and certain
of its unconsolidated joint ventures completed three new financings in 1998: the
$44 million non-recourse financing of the 4200 Wildwood Parkway Building, the
$70 million non-recourse financing of The Pinnacle and the $10.9 million
non-recourse financing of Lakeshore Park Plaza. The Company also assumed a $10.6
million non-recourse mortgage note payable when it acquired Northside/Alpharetta
I in June 1998. As discussed in Note 5, the Company entered into a venture with
Prudential where the Company contributed nine properties and Prudential is
obligated to contribute $230.5 million of cash, of which it had contributed $105
million as of December 31, 1998. As a result of these transactions, the Company
had only $11.1 million drawn on its $150 million line of credit as of December
31, 1998.
The Company has development and acquisition projects in various planning
stages. The Company currently intends to finance these projects and projects
currently under construction discussed in Note 8, by using the aforementioned
$125.5 million of additional cash Prudential is obligated to contribute, its
existing lines of credit (increasing those lines of credit as required), and
long-term non-recourse financing on the Company's unleveraged projects and other
financings as market conditions warrant. In September 1996, the Company filed a
shelf registration statement with the Securities and Exchange Commission ("SEC")
for the offering from time to time of up to $200 million of common stock,
warrants to purchase common stock and debt securities, of which approximately
$132 million remains available at December 31, 1998.
The executive branch of the U.S. Government has proposed certain changes to
the Internal Revenue Code which in their current form may affect the ability of
taxable REIT subsidiaries to deduct interest paid to or guaranteed by the REIT.
Also, the proposed legislation would change the REIT 10% asset test. At this
time, it is uncertain whether the proposed legislation will be passed by
Congress, and if passed, what its final form and impact will be on the Company.
Cash Flows. Net cash provided by operating activities increased from $57.1
million in 1996 to $58.0 million and $89.5 million in 1997 and 1998,
respectively. The increases resulted primarily from an improvement in income
before gain on sale of investment properties of $3.1 million and $10.1 million
in 1997 and 1998, respectively. Additionally, depreciation and amortization
increased $6.8 million and $1.1 million in 1997 and 1998, respectively.
Residential lot and outparcel cost of sales, which contributed approximately
$3.4 million of the increase in 1998, partially offset the increase in 1997 by
decreasing approximately $1.7 million. Operating distributions from
unconsolidated joint ventures also favorably impacted 1997 and 1998 with
increases of $2.3 million and $1.9 million, respectively. Changes in other
operating assets and liabilities, which decreased net cash provided by operating
activities in 1997 by approximately $10.9 million, increased approximately $17.3
million in 1998, which increase contributed to the increase in net cash provided
by operating activities in 1998. Income from unconsolidated joint ventures
decreased $1.7 million which contributed to the increase in net cash provided by
operating activities in 1997. An increase in income from unconsolidated joint
ventures of approximately $3.0 million partially offset the increase in net cash
provided by operating activities in 1998.
Net cash used in investing activities decreased from $124.7 million in 1996
to $55.6 million in 1997 and then increased to $100.0 million in 1998. The
increase in property acquisition and development expenditures of $113.6 million
in 1998 is due to the Company having a higher level of projects under
construction in 1998. Investment in unconsolidated joint ventures increased by
$25.8 million due to the formation of several new ventures (see Note 5), which
contributed to the increase in cash used in investing activities. Net cash
provided by sales activities decreased $17.8 million in 1998. The 1997 net cash
provided by sales activities was due to the 1997 sales of Rivermont Station and
Lovejoy Station. There were no such significant sales in 1998. Partially
offsetting the 1998 increase in net cash used in investing activities was the
net cash received of $103 million in the formation of the venture with
Prudential (see Note 5). Additionally, non-operating distributions from
unconsolidated joint ventures increased $7.9 million in 1998, primarily due to
Wildwood Associates distributing $22.6 million to each partner from the proceeds
of its $44 million financing of the 4200 Wildwood Parkway Building (see Notes 4
and 5). In 1997, Wildwood Associates made non-operating distributions to the
partners from the proceeds of the 3200 Wildwood Plaza and the 4100 and 4300
Wildwood Parkway Buildings financings, which totaled $12.5 million. An increase
in the change in other assets of $2.6 million in 1998 also partially offset the
increase in the net cash used in investing activities.
The decrease in property acquisition and development expenditures of
approximately $81.5 million in 1997, as a result of the Company having a lower
level of projects under construction, was the primary component of the decrease
in net cash used in investing activities in 1997. Also contributing to the
decrease was a decrease in investment in notes receivable of approximately $21.5
million in 1997. The Company temporarily invested approximately $18 million of
proceeds from the $80 million CSC Associates, L.P. financing completed in 1996
in a note receivable due from Wildwood Associates. No similar investment
occurred in 1997. Non-operating distributions from unconsolidated joint ventures
increased $13.3 million due primarily to distributions from Wildwood Associates
of $10 million in January 1997 from the proceeds of the financing of the 3200
Wildwood Plaza Building completed in December 1996 and $2.5 million from the
proceeds of the financing of the 4100 and 4300 Wildwood Parkway Buildings in
March 1997. The Company also received $2.2 million of distributions from Norfolk
Hotel Associates (see Note 5). The decrease in collection of notes receivable of
approximately $24.2 million in 1997, also partially offset the above decreases
in net cash used in investing activities. Net cash provided by sales activities
decreased approximately $15.7 million which was due to a decrease in net
proceeds received from the sale of Rivermont Station and Lovejoy Station in 1997
as compared to the sale of Lawrenceville MarketCenter in 1996. Investment in
unconsolidated joint ventures increased approximately $8.6 million in 1997 which
offset the decrease in net cash used in investing activities. The Company
contributed approximately $8.5 million to Cousins LORET (see Note 5).
Net cash provided by financing activities decreased from $67.7 million in
1996 to $28.7 million in 1997 and then decreased further in 1998 to $20.9
million net cash used in financing activities. The decrease in net cash used in
financing activities was mainly due to common stock sold, net of expenses,
decreasing by $60.8 million in 1998. The Company sold 2,150,000 shares of stock
which raised net proceeds of approximately $64.1 million in 1997. Further
contributing to the decrease was $14.1 million less proceeds from other notes
payable due to the Company completing one financing for $10.9 million in 1998,
as compared to one financing for $25 million in 1997. Dividends paid increased
$9.5 million due to an increase in dividends paid per share from $1.29 in 1997
to $1.49 in 1998 and an increase in the number of shares outstanding. Partially
offsetting this increase was an increase in the net amount drawn on the
Company's line of credit of approximately $34.9 million.
The decrease in 1997 was primarily attributable to a decrease of $106.8
million in proceeds from other notes payable. During 1996, the Company completed
the $80 million CSC Associates, L.P. financing and the assumption of the 101
Independence Center mortgage note payable, which included additional cash
financing of $18.6 million, as compared to one financing in 1997 for
approximately $25 million of the 100 and 200 North Point Center East office
buildings. An increase in the total dividends paid per share from $1.12 in 1996
to $1.29 in 1997 and an increase in the number of shares outstanding also
contributed to the decrease in net cash provided by financing activities as
dividends paid increased $5.7 million in 1997. Partially offsetting the above
decreases was an increase in common stock sold of approximately $59.7 million
due to the aforementioned December 1997 sale of 2,150,000 shares of common stock
which raised net proceeds of approximately $64.1 million. The net repayment of
the line of credit decreased approximately $16.2 million which also increased
the cash flows provided by financing activities. Effects of Inflation
The Company attempts to minimize the effect of inflation on income from
operating properties by the use of rents tied to tenants' sales, periodic
fixed-rent increases and increases based on cost-of-living adjustments, and/or
pass-through of operating cost increases to tenants. Year 2000
The "Year 2000 issue" is the result of certain computer systems, software,
electronic equipment or embedded chips (collectively known as "computer
systems") being written using two digits rather than four to define the
applicable year. Therefore, certain computer systems may not distinguish between
a year that begins with a "20" rather than a "19." This could result in system
failures which could cause disruptions of operations. The Company has completed
its initial assessment of the impact of the Year 2000 issue on its business and
operations and has identified the areas which rely on computer systems and may
be potentially impacted, which mainly include the systems utilized in the
operations of its real estate properties and in the processing of its accounting
data.
The Company has substantially completed an inventory of the material
computer systems being utilized in its existing operating real estate properties
which may be adversely affected by the Year 2000 issue. Such systems include,
but are not limited to, building control systems, heating and air conditioning
controls, elevator controls, fire alarms and security devices. Certain of these
systems are being replaced, upgraded or modified as deemed necessary, the cost
of which is not expected to be material.
The Company is currently in the process of upgrading its accounting
software to a version that its software vendor has represented to be Year 2000
compliant, as they define it. The Company expects to have the installation of
the upgrade completed by the second quarter of 1999. The hardware and operating
system used to run the accounting software has been represented to be Year 2000
compliant. The Company has also assessed its non-financial computer systems, and
is replacing, upgrading or modifying such systems as needed. The cost of the
upgrades to the accounting software and non-financial computer systems is not
expected to be material.
The Company has significantly completed its survey of all material third
party vendors to determine their Year 2000 compliance status and has received
certificates, where possible, as to their compliancy. No estimates can be made
as to any potential adverse impact resulting from the failure of any third party
vendor or service provider to be Year 2000 compliant. To the extent the Year
2000 issue has a material adverse effect on the business operations or financial
condition of third parties with which the Company has material relationships,
such as vendors, suppliers, tenants and financial institutions, the Year 2000
issue could also have a material adverse effect on the Company's business,
results of operations and financial condition.
To date, the cost to analyze and prepare for the Year 2000 issue has not
been material. There can be no assurance that the Company will be able to
identify and correct all aspects of the effect of the Year 2000 issue on the
Company. However, the Company does not currently expect the Year 2000 issue will
have a material impact on the Company's business, operations or financial
condition.
The Company is currently developing contingency plans on a property by
property basis. This involves assessing critical tenants, systems and vendors.
Certain servicing arrangements have been contracted with particular vendors to
provide immediate response if the need arises and the Company is arranging for
specific employees to staff certain properties in case of need.
The preceding "Year 2000" discussion contains various forward-looking
statements, within the meaning of the federal securities laws, which represent
the Company's beliefs or expectations regarding future events. When used in this
discussion, the words "expects" and "anticipates" and similar expressions are
intended to identify forward-looking statements. Forward-looking statements
include, without limitation, the Company's expectations as to when it will
complete its Year 2000 evaluation, the estimated costs of achieving Year 2000
readiness and the Company's expectation that Year 2000 issues will not have a
material impact on the Company's business, operations or financial condition.
All forward-looking statements involve a number of risks and uncertainties that
could cause the actual results to differ materially from the projected results.
Factors that may cause these differences include, but are not limited to, the
availability of qualified personnel, technology resources, any actions of third
parties with respect to Year 2000 problems and other risks detailed from time to
time in the Company's filings with the Securities and Exchange Commission.
Quantitative and Qualitative Disclosure about Market Risk
The Company has one mortgage note payable which has a floating interest
rate. The Company mitigates this exposure through the use of an interest rate
swap which effectively fixes the interest rate on this debt. This mortgage note
payable is included in the fixed rate category for purposes of the following
table. The variable rate debt is from the Company's short-term line of credit,
which is drawn on as needed and renewed and/or amended on a yearly basis, and
from a variable rate municipal bond indenture. Since these rates are floating,
the Company is exposed to the impact of interest rate changes. None of the
Company's notes receivable have variable interest rates. The Company does not
enter into contracts for trading purposes and does not use leveraged
instruments. The following table summarizes the Company's market risk associated
with notes payable and notes receivable as of December 31, 1998. The information
presented below should be read in conjunction with Notes 3 and 4. The table
presents principal cash flows and related weighted average interest rates by
expected year of maturity. Variable rate represents the floating interest rate
calculated at December 31, 1998. For the interest rate swap, the table presents
the notional amount and related interest rate by year of maturity.
Expected Year of Maturity
--------------------------------------------------------------------------------
Fair
1999 2000 2001 2002 2003 Thereafter Total Value
--------------------------------------------------------------------------------
($ in thousands)
Notes Payable (including
share of unconsolidated
joint ventures):
Fixed Rate $12,480 $28,633 $17,153 $10,219 $10,587 $329,614 $408,686 $433,330
Average Interest Rate 6.84% 6.79% 7.66% 7.39% 7.39% 7.52% 7.44% --
Variable Rate $11,495 $ 175 $ -- $ -- $ -- $ -- $ 11,670 $ 11,670
Average Interest Rate 5.54% 5.04% -- -- -- -- 5.53% --
Interest Rate Swaps:
Notional Amount $ 2,225 $19,275 $ -- $ -- $ -- $ -- $ 21,500 $ 178
Average Interest Rate 6.53% 6.53% -- -- -- -- 6.53% --
Notes Receivable:
Fixed Rate $ 1,847 $ 1,478 $ 1,462 $ 1,172 $ 23,038 $ -- $ 28,997 $ 35,854
Average Interest Rate 8.72% 9.47% 9.44% 9.04% 10.00% -- 9.43% --
Cousins Properties Incorporated and Consolidated Entities
MARKET AND DIVIDEND INFORMATION
- ---------------------------------------------------------------------------------------------------------------
The high and low sales prices for the Company's common stock and cash
dividends declared per share were as follows:
1998 Quarters 1997 Quarters
------------------------------------------ ---------------------------------------
First Second Third Fourth First Second Third Fourth
-------- -------- -------- -------- -------- ------- ------- --------
High $30-7/8 $31-3/4 $32-3/16 $32-9/16 $28-1/4 $29-1/8 $30 $33-3/4
Low 28-3/16 28-11/16 26 24-5/16 24-5/16 24-1/4 26-3/8 27-1/4
Dividends Declared .36 .36 .36 .41 .31 .31 .31 .36
Payment Date 2/23/98 5/29/98 8/26/98 12/22/98 2/24/97 5/30/97 8/26/97 12/22/97
The Company's stock trades on the New York Stock Exchange (ticker
symbol CUZ). At December 31, 1998, there were 1,305 stockholders of record.
ABOUT YOUR DIVIDENDS
- --------------------------------------------------------------------------------
Timing of Dividends - Cousins normally pays regular dividends four times
each year in February, May, August and December. Differences Between Net
Income and Cash Dividends Declared - Cousins' current intention is to
distribute 100% of its taxable
income and thus incur no corporate income taxes. However, Consolidated Net
Income for financial reporting purposes and Cash Dividends Declared will
generally not be equal for the following reasons:
a. There will continue to be considerable differences between Consolidated
Net Income as reported to stockholders (which includes the income of a
consolidated non-REIT entity that pays corporate income taxes) and Cousins'
taxable income. The differences are enumerated in Note 7 of "Notes to
Consolidated Financial Statements."
b. For purposes of meeting REIT distribution requirements, dividends may be
applied to the calendar year before or after the one in which they are declared.
The differences between dividends declared in the current year and dividends
applied to meet current year REIT distribution requirements are enumerated in
Note 6 of "Notes to Consolidated Financial Statements."
Capital Gains Dividends - In some years, as it did in 1998, 1997 and 1996,
Cousins will have taxable capital gains, and Cousins currently intends to
distribute 100% of such gains to stockholders. The Form 1099-DIV sent by Cousins
to stockholders of record each January shows total dividends paid (including the
capital gains dividends) as well as that which should be reported as a capital
gain (see Note 6 of "Notes to Consolidated Financial Statements"). For
individuals, the capital gain portion of the dividends is subtracted from total
dividends on Schedule B of IRS Form 1040 and reported separately on Schedule D,
line 13, column (g) of IRS Form 1040 as a capital gain.
Tax Preference Items and "Differently Treated Items" - Internal Revenue
Code Section 59(d) requires that certain corporate tax preference items and
"differently treated items" be passed through to a REIT's stockholders and
treated as tax preference items and items of adjustment in determining the
stockholder's alternative minimum taxable income. The amount of this adjustment
is included in Note 6 of "Notes to Consolidated Financial Statements."
Tax preference items and adjustments are includable in a stockholder's
income only for purposes of computing the alternative minimum tax. These
adjustments will not affect a stockholder's tax filing unless that stockholder's
alternative minimum tax is higher than that stockholder's regular tax.
Stockholders should consult their tax advisors to determine if the adjustment
reported by Cousins affects their tax filing. Many stockholders will find that
the adjustment reported by Cousins will have no effect on their tax filing
unless they have other large sources of alternative minimum tax adjustments or
tax preference items.
Cousins Properties Incorporated and Consolidated Entities
- -----------------------------------------------------------------------------------------------------------
SELECTED QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
Selected quarterly information for the two years ended December 31, 1998 ($ in
thousands, except per share amounts):
Quarters
First Second Third Fourth
------- ------- ------- ------
1998:
Revenues $23,854 $24,214 $27,663 $22,580
Income from unconsolidated joint ventures 4,581 4,547 4,406 4,889
Gain on sale of investment properties, net of applicable income
tax provision 771 886 -- 2,287
Net income 11,294 11,777 10,737 11,491
Basic net income per share .36 .37 .34 .36
Diluted net income per share .35 .37 .33 .36
1997:
Revenues $20,291 $21,141 $22,233 $22,334
Income from unconsolidated joint ventures 3,582 3,467 3,737 4,675
Gain on sale of investment properties, net of applicable income
tax provision 2,396 -- 2,974 602
Net income 9,624 7,455 10,874 9,324
Basic net income per share .33 .26 .37 .31
Diluted net income per share .33 .25 .37 .31
INDEPENDENT PUBLIC ACCOUNTANTS
Arthur Andersen LLP
COUNSEL
King & Spalding
Troutman Sanders
TRANSFER AGENT AND REGISTRAR
First Union National Bank
Corporate Trust Client Services NC-1153
1525 West W. T. Harris Boulevard 3C3
Charlotte, North Carolina 28288-1153
Telephone Number: 1-800-829-8432
FAX Number: 1-704-590-7598
DIVIDEND REINVESTMENT PLAN
The Company offers its stockholders the opportunity to purchase additional
shares of common stock through the Dividend Reinvestment Plan with purchases at
95% of current market value. A copy of the Plan prospectus and an enrollment
card may also be obtained by calling or writing to the Company.
FORM 10-K AVAILABLE
The Company's annual report on Form 10-K and interim reports on Form 10-Q are
filed with the Securities and Exchange Commission. Copies are available without
exhibits free of charge to any person who is a record or beneficial owner of
common stock upon written request to the Company at 2500 Windy Ridge Parkway,
Suite 1600, Atlanta, Georgia 30339-5683.
INVESTOR RELATIONS CONTACT
George T. Olmstead, Director of Investment Services
Cousins Properties Incorporated and Consolidated Entities
DIRECTORS
T. G. Cousins
Chairman of the Board and
Chief Executive Officer
Richard W. Courts, II
Chairman
Atlantic Investment Company
Lillian C. Giornelli +
Chairman and Chief Executive Officer
The Cousins Foundation, Inc.
Terence C. Golden
President, Chief Executive Officer
and Director
Host Marriott Corporation
Boone A. Knox
Chairman
Regions Bank of Central Georgia
William Porter Payne
Vice Chairman and Director
Premiere Technologies, Inc.
Richard E. Salomon
President and Managing Director
Spears, Benzak, Salomon & Farrell, Inc.
D. W. Brooks
Director Emeritus
Henry C. Goodrich
Director Emeritus
CORPORATE*
T. G. Cousins
Chairman of the Board and
Chief Executive Officer
Daniel M. DuPree
President and Chief Operating
Officer
Kelly H. Barrett
Senior Vice President - Finance
George J. Berry
Senior Vice President
Tom G. Charlesworth
Senior Vice President,
General Counsel and Secretary
Lisa R. Simmons
Director of Corporate
Communications
OFFICE DIVISION*
Craig B. Jones
President
John L. Murphy
Senior Vice President
W. Henry Atkins
Senior Vice President - Charlotte
Jack A. LaHue
Senior Vice President - Asset
Management
C. David Atkins
Vice President - Charlotte
John S. Durham
Vice President - Leasing
Walter L. Fish
Vice President - Leasing
Dara J. Nicholson
Vice President - Office Property
Management
Ronald C. Sturgis
Vice President - Office Property
Management
MEDICAL OFFICE DIVISION***
(Cousins/Richmond)
Lea Richmond III
President
John S. McColl
Senior Vice President
David J. Rubenstein
Senior Vice President
Thomas H. Sawyer
Senior Vice President
S. Rox Green
Vice President - Asset Management
Michael J. Lant
Vice President - Development
RETAIL DIVISION**
(Cousins MarketCenters, Inc.)
Joel T. Murphy*
President
John D. Hopkins
Senior Vice President - Western Region
Craig N. Kaser
Senior Vice President - Leasing
Robert A. Manarino
Senior Vice President - Western Region
Robert S. Wordes
Senior Vice President
William I. Bassett
Vice President - Development
Michael I. Cohn
Vice President - Development
Keven D. Doherty
Vice President - Development
Western Region
Terry M. Hampel
Vice President - Asset
Management
Michael J. Quinley
Vice President - Development
DEVELOPMENT AND
CONSTRUCTION DIVISION**
W. James Overton*
Senior Vice President -
Development
James D. Dean
Vice President - Development
James F. George
Vice President - Development
John N. Goff
Vice President - Development
Lloyd P. Thompson, Jr.
Vice President - Development
William D. Varner
Vice President - Development
LAND DIVISION**
(Cousins Neighborhoods)
Bruce E. Smith
President
+ Nominee for election at the May 4, 1999 Annual Stockholders' Meeting.
* Officers of Cousins Properties Incorporated, as well as Cousins Real Estate
Corporation and/or Cousins MarketCenters, Inc.
** Officers of Cousins Real Estate Corporation and/or Cousins MarketCenters,
Inc.
*** Officers of Cousins Properties Incorporated