1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1993 Commission file number 2-20111
COUSINS PROPERTIES INCORPORATED
A GEORGIA CORPORATION
I.R.S. EMPLOYER IDENTIFICATION NO. 58-086952
2500 WINDY RIDGE PARKWAY
MARIETTA, GEORGIA 30067
TELEPHONE: 404-955-2200
Name of exchange on which registered: New York Stock Exchange
Securities registered pursuant Common Stock ($1 Par Value)
to Section 12(b) of the Act:
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months, and (2) has been subject to such
filing requirements for the past 90 days. Yes /X/ No / /
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. / /
As of March 15, 1994, 27,842,415 common shares were outstanding; and
the aggregate market value of the common shares of Cousins Properties
Incorporated held by nonaffiliates was $353,049,081.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the following documents have been incorporated by reference into
the designated Part of this Form 10-K:
Registrant's Proxy Statement Part III, Items 10, 11, 12 and 13
dated March 29, 1994
Registrant's Annual Report to Part II, Items 5, 6, 7 and 8
Stockholders for the year
ended December 31, 1993
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PART I
ITEM 1. BUSINESS
CORPORATE PROFILE
Cousins Properties Incorporated (the "Registrant" or "Cousins") is a
Georgia corporation, which since 1987 has elected to be taxed as a real estate
investment trust ("REIT"). Cousins Real Estate Corporation ("CREC"), a taxable
entity consolidated with the Registrant, owns, develops, leases, and manages a
portion of the Company's real estate portfolio. Cousins/New Market Development
Company, Inc. ("CNM") is a subsidiary of CREC which develops retail shopping
centers. The Registrant, together with CREC, CNM and CREC's other consolidated
entities, is hereafter referred to as the ("Company").
Cousins is an Atlanta-based, fully integrated equity real estate
investment trust. The Company has extensive experience in the real estate
industry, including the acquisition, financing, development, management and
leasing of properties. Cousins has been a public company since 1962, and its
common stock trades on the New York Stock Exchange. The Company owns a
portfolio of well located, high-quality retail and office developments and
holds several tracts of strategically located undeveloped land. The Company's
holdings are concentrated in the southeastern United States, primarily in the
Atlanta area. The strategies employed to achieve the Company's investment
goals include the acquisition of quality income producing properties at
attractive prices; the development of properties which are substantially
precommitted to quality tenants; maintaining high levels of occupancy within
owned properties and the selective sale of assets. The Company also seeks to
be opportunistic and take advantage of normal real estate business cycles.
BRIEF DESCRIPTION OF COMPANY INVESTMENTS
Presently, the Company owns, directly and indirectly, equity interests
of at least 50% in eight high-quality commercial office buildings, primarily in
the Atlanta, Georgia area, with aggregate rentable space of approximately 3.7
million square feet (4.2 million gross square feet). The Company also owns a
9.8% interest in and manages a 1.2 million square foot building in Atlanta,
Georgia. The Company believes that its portfolio of commercial office
buildings is currently the largest (measured by leasable area) in the
southeastern United States held by any publicly-traded REIT.
The weighted average leased percentage of the eight 50% or more owned
buildings was approximately 87% as of March 15, 1993. The leases at these
major office properties expire as follows:
Square Feet Square Feet Expiring
Expiring as % of Total Leased
----------- --------------------
1994 31,592 1%
1995 292,800 9% (a)
1996 125,102 4%
1997 91,457 3%
1998 280,262 9% (a)
1999 45,389 1%
2000 and thereafter 2,334,433 73%
--------- ----
3,201,035 100%
========= ====
(a) Includes 130,847 square feet and 63,688 square feet of leases which
expire in 1995 and 1998, respectively, only if significant
cancellation penalties are paid. Otherwise, the leases expire 5
years later than shown in the above table.
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All of the Company's major office tenant leases in these buildings
provide for pass through of operating expenses, and base rents which escalate
over time.
The Company also owns the land under and leasehold mortgage note on a
188,000 square foot office building used as a training facility which has a
book value of $18 million. The training facility, which was developed by
Cousins, is located in Wildwood Office Park, and is 100% leased to
International Business Machines Corporation ("IBM") through November 1998.
Under terms of this note and land lease, the Company is expected to receive
substantially all of the building's cash flows (see Note 3 of "Notes to
Consolidated Financial Statements").
On March 10, 1994, the Company purchased two mortgage notes for $28
million from the Resolution Trust Corporation which are secured by a 250,000
square foot office building in Washington, D.C. The terms of these two notes
have some of the characteristics of an equity investment, and should provide a
comparable return on investment (see Note 11 of "Notes to Consolidated
Financial Statements").
In the retail area, which is the primary focus of the Company's
current development activity, the Company's holdings include a 50% interest in
a regional mall (currently being expanded), a 100% interest in two retail power
centers, and an 82.3% interest in a third retail power center (two of which
power centers were under construction at December 31, 1993). All of the
Company's retail power centers are significantly preleased to anchor tenants
with lease terms of 15 years or more, pass through of operating expenses, and
base rents which escalates over time.
The Company's other real estate holdings include equity interests in
approximately 600 acres of strategically located land held for investment and
future development, and $40 million of mortgage notes receivable guaranteed by
the AT&T Master Pension Trust which mature on June 21, 1994. The $40 million
of mortgage notes were consideration received from the sale of several retail
mall properties in 1984.
The Company's joint venture partners include IBM and affiliates of The
Coca-Cola Company ("Coca-Cola"), NationsBank Corporation ("NationsBank"),
Corporate Property Investors, Odyssey Partners, L.P., Temple-Inland Inc., Dutch
Institutional Holding Company ("DIHC"), and American General Corporation
The success of the Company's operations is dependent upon such
unpredictable factors as the availability of satisfactory financing; general
and local economic conditions; the activity of others developing competitive
projects; and zoning, environmental impact, and other government regulations.
Refer to Item 2 hereof for a more detailed description of the
Company's real estate properties.
SIGNIFICANT CHANGES IN 1993
Significant changes in the Company's business and properties during
the year ended December 31, 1993 were as follows:
In October 1993, the Registrant issued 5,800,000 shares of common
stock through a public offering at a price of $17.25 per share. Concurrently
with the public offering, an additional 300,000 shares were purchased at the
public offering price by Thomas G. Cousins. The Company has used the proceeds
to reduce debt (including joint venture debt) and to develop income-producing
properties, and intends to acquire and develop additional income-producing
proper-
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ties as suitable opportunities arise.
CNM began construction of five new retail power centers totaling 1.3
million square feet during 1993, including three centers totaling 919,000
square feet for the Company's account. CNM generated leasing and development
fees of $2.2 million from projects owned by third parties.
The first new development undertaken by CNM for the Company was
Perimeter Expo. Perimeter Expo is a 295,000 square foot retail power center
(of which 178,000 square feet are owned by the Company), located adjacent to
Perimeter Mall in Atlanta, Georgia. Construction commenced in June 1993 with
the center opening in November 1993, and became operational for financial
reporting purposes on December 1, 1993.
Additionally, CNM commenced development of 2 other retail power
centers for the Company, North Point Market and Presidential Market, in
September and October 1993, respectively. North Point Market is adjacent to
North Point Mall and will have 314,000 square feet in Phase I. The center also
includes six outparcels that are being leased to freestanding users. Phase I
will open in the spring of 1994. Presidential Market is an approximately
310,000 square foot retail power center (of which approximately 194,000 square
feet are owned by the Company), located in northeast suburban Atlanta. This
center is scheduled to open in the fall of 1994.
EXECUTIVE OFFICES
The Registrant's executive offices are located at 2500 Windy Ridge
Parkway, Suite 1600, Marietta, Georgia 30067. At December 31, 1993, the
Company employed 108 people. On August 2, 1994, the mailing address will
change to 2500 Windy Ridge Parkway, Suite 1600, Atlanta, Georgia 30339.
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ITEM 2. PROPERTIES
TABLE OF MAJOR PROPERTIES
The following tables set forth certain information relating to office
and retail properties, stand alone retail lease sites, and land held for
investment and future development in which the Company has a 50% or greater
ownership interest. All information presented is as of December 31, 1993,
except percentage leased which is as of March 15, 1994. Dollars are stated in
thousands.
Year Rentable
Development Joint Venture Company's Square Feet Major Tenants (lease
Completed Partner or Ownership (or Acres Percentage expiration/options
Description or Acquired Partners Interest as Noted) Leased expiration)
- ----------- ----------- -------- --------- ----------- ---------- --------------------
OFFICE
- ------
Wildwood Office Park:
Suburban Atlanta, GA
2300 Windy
Ridge Parkway 1987 IBM 50% 634,000 95% IBM (2002/2012)
(1994)
Electrolux (2000/2005)
Computer Associates (1998)(9)
Chevron USA (1995/2001)
2500 Windy
Ridge Parkway 1985 IBM 50% 313,000 83% Coca-Cola Enterprises Inc.
(1998/2008)
IBM (1995/2005)
3200 Windy
Hill Road 1991 IBM 50% 681,000 93% IBM(2001/2011)
Equifax (4) (1998/2003) (9)
W.H. Smith Inc.
(2002/2007)
3301 Windy Ridge
Parkway 1984 N/A 100% 106,000 60% The Systems Works, Inc.
(2003/2008) (9)
NationsBank, Plaza
Atlanta, GA 1992 NationsBank(4) 50% 1,256,000 80% NationsBank(4)
(2012/2042)
Ernst & Young
(2007/2017)
Troutman Sanders
(2007/2017)
Hunton & Williams
(2004/2009)
1993
Adjusted
Cash
Adjusted Flows From
Cost Less Operating
Major Depreciation Activities
Tenants' and Before
Rentable Adjusted Amortization Debt Debt Debt Interest Debt
Description Sq. Feet Cost (1) (1) Service (2) Balance Rate (3) Maturity
- ----------- -------- -------- ------------ ----------- ------- ------------- --------
OFFICE
- ------
Wildwood Office Park:
Suburban Atlanta, GA
2300 Windy
Ridge Parkway 303,436 $ 76,085 $ 57,758 $ 9,771 $82,000 9.090% 8/10/99
11,608
62,576
62,445
59,912
2500 Windy
Ridge Parkway 139,944 $ 26,283 $ 18,812 $ 4,422(5) $31,502 9.125% 6/28/96
52,039
3200 Windy
Hill Road 445,755 $ 77,835 $ 69,740 $ 7,836 $ 9,700 Floating 9/01/94
68,642 Renewable
34,658
3301 Windy Ridge
Parkway 63,688 $ 10,282 $ 7,752 $ (352)(6) $ 0 N/A N/A
NationsBank, Plaza
Atlanta, GA 572,742 $212,992 $201,651 $ 15,695 $ 0(7) N/A N/A
188,175
156,020
43,523
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Year Rentable
Development Joint Venture Company's Square Feet Major Tenants (lease
Completed Partner or Ownership (or Acres Percentage expiration/options
Description or Acquired Partners Interest as Noted) Leased expiration)
- ----------- ----------- -------- --------- ----------- ---------- --------------------
OFFICE (CONTINUED)
- ------------------
First Union Tower
Greensboro, NC 1990 Weaver 85% 317,000 81% Smith Helms Mullis &
Downtown, L.P. Moore (2000/2015)
First Union Bank (4)
(2009/2019)
Halstead Industries
(2000/2005)
Ten Peachtree Place
Atlanta, GA 1991 Coca-Cola (4) 50% 259,000 100% Coca-Cola (2001/2006)
Summit Green (11)
Greensboro, NC 1986 IBM 50% 135,000 100% IBM (1996/2006)
Fitech Systems (1999/2004)
Massachusetts Mutual
Life Ins. Co. (1997/2002)
RETAIL POWER CENTERS AND MALLS
- ------------------------------
Haywood Mall
Greenville, SC (11) 1977 Corporate 50% 942,000 100% Sears (8)
Property of which overall J.C. Penney (8)
Investors (4) 270,000 is 98% Rich's (8)
owned by of Venture Belk (8)
joint venture owned
Perimeter Expo
Atlanta, GA 1993 N/A 100% 295,000 93% The Home Depot Expo (8)
of which overall Marshalls (2013/2028)
178,000 is 89% Best Buy (2013/2028)
owned by of Company Linens 'N Things (2013/2023)
the Company owned Office Max (2014/2034)
North Point Market-Phase I
Suburban
Atlanta, GA (13) Coca-Cola (4) 82.3% 314,000 88% Sportstown (2014/2024) (13)
(15) Media Play (2009/2024) (13)
Marshalls (2009/2024) (13)
Linens 'N Things
(2004/2024) (13)
United Artists (2014/2034) (13)
Circuit City (2014/2029) (13)
PETsMART (2009/2029) (13)
1993
Adjusted
Cash
Adjusted Flows From
Cost Less Operating
Major Depreciation Activities
Tenants' and Before
Rentable Adjusted Amortization Debt Debt Debt Interest Debt
Description Sq. Feet Cost (1) (1) Service (2) Balance Rate (3) Maturity
- ----------- -------- -------- ------------ ----------- ------- ------------- --------
OFFICE (CONTINUED)
- ------------------
First Union Tower
Greensboro, NC 70,360 $32,126 $26,510 $3,388 $ 3,500 Floating 12/31/96
62,622
60,253
Ten Peachtree Place
Atlanta, GA 259,000 $23,475 $22,151 $2,859 $22,342 8.000% (10) 11/30/01(10)
Summit Green (11)
Greensboro, NC 80,941 $10,644 $ 8,052 $1,762 $10,736 9.875% 4/01/98
22,688
11,476
RETAIL POWER CENTERS AND MALLS
- ------------------------------
Haywood Mall
Greenville, SC (11) N/A $25,483 $17,678 $6,537 $19,529 9.375% 11/01/00
Perimeter Expo
Atlanta, GA N/A $18,469 $18,439 $ 149(12) $ 0 N/A N/A
36,598
36,000
30,351
23,500
North Point Market-Phase I
Suburban
Atlanta, GA 50,275 $ 9,913 $ 9,913 (13) $ 0 N/A N/A
48,884
40,000
35,000
34,800
33,000
25,416
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Year Rentable
Development Joint Venture Company's Square Feet Major Tenants (lease
Completed Partner or Ownership (or Acres Percentage expiration/options
Description or Acquired Partners Interest as Noted) Leased expiration)
- ----------- ----------- -------- --------- ----------- ---------- --------------------
RETAIL POWER CENTERS AND MALLS (CONTINUED)
- ------------------------------------------
Presidential Market
Suburban
Atlanta, GA (13) N/A 100% 310,000 76% Target (8)
of which overall Publix Super
194,000 61% Market (2019/2044) (13)
is owned of Company T.J. Maxx (2004/2014) (13)
by the owned Marshalls (2009/2024) (13)
Company
(16)
STAND ALONE RETAIL SITES ADJACENT TO COMPANY'S OFFICE AND RETAIL PROJECTS
- -------------------------------------------------------------------------
Wildwood Office Park
Suburban
Atlanta, GA 1985-1993 IBM 50% 14 Acres 94% N/A
GA Highway 400 Property
Suburban
Atlanta, GA 1993 N/A 100% 32 Acres 34% N/A
1993
Adjusted
Cash
Adjusted Flows From
Cost Less Operating
Major Depreciation Activities
Tenants' and Before
Rentable Adjusted Amortization Debt Debt Debt Interest Debt
Description Sq. Feet Cost (1) (1) Service (2) Balance Rate (3) Maturity
- ----------- -------- -------- ------------ ----------- ------- ------------- --------
RETAIL POWER CENTERS AND MALLS (CONTINUED)
- ------------------------------------------
Presidential Market
Suburban
Atlanta, GA N/A $14,556 $14,556 (13) $0 N/A N/A
56,146
32,000
30,000
STAND ALONE RETAIL SITES ADJACENT TO COMPANY'S OFFICE AND RETAIL PROJECTS
- -------------------------------------------------------------------------
Wildwood Office Park
Suburban
Atlanta, GA N/A $ 7,364 $ 6,781 $544 (14) $0 N/A N/A
GA Highway 400 Property
Suburban
Atlanta, GA N/A $ 4,709 $ 4,708 $ 41 (17) $0 N/A N/A
(1) Cost as shown in the accompanying table includes deferred leasing and
financing costs and other related assets. For each of the following
projects: 2300 and 2500 Windy Ridge Parkway, 3200 Windy Hill Road,
Wildwood Stand Alone Retail Lease Sites and North Point Market, the
cost shown is what the cost would be if the venture's land cost were
adjusted downward to the Company's lower basis in the land it
contributed to the venture.
(2) Adjusted cash flows from operating activities represents cash flows
from operating activities excluding changes in other operating assets
and liabilities.
(3) Floating rates range between .75% and 1% over Federal Funds rate;
Federal Funds rate averaged 2.96% for the month of December 1993.
(4) Actual tenant or venture partner is affiliate of entity shown.
(5) Includes $322,000 of deferred rent from a tenant who had occupied 8%
of the building, but whose lease expired December 31, 1993. This
space is currently being marketed to prospective tenants.
(6) The System Works, Inc. lease began in January 1994 and is expected to
generate cash flows from operating activities of approximately
$400,000 on an annualized basis. The lease contains options to expand
to 100% of the building over the next several years. This building
was unoccupied during 1993.
(7) The joint venture's indebtedness was fully repaid with the proceeds of
the October 1993 common stock offering and with matching funds
contributed by the Company's venture partner.
(8) This anchor tenant owns its own space.
(9) Computer Associates, Equifax, and The Systems Works, Inc. have the
right to terminate their leases in 1995, 1995 and 1998, respectively,
upon payment of significant cancellation penalties.
(10) Maturity extendible to December 31, 2008. Rate becomes floating after
November 30, 2001.
(11) Summit Green and a portion of the Haywood Mall parking lot are subject
to long-term ground leases.
(12) Perimeter Expo became operational for financial reporting purposes on
December 1, 1993. Thus, cash flows from operating activities before
debt service reported for Perimeter Expo represent one month of
operations. Cash flows from operating activities before debt service
are expected to be approximately $2.8 million on an annualized basis
when the center becomes fully operational.
(13) Project was under construction as of December 31, 1993. Lease
expiration dates are based upon estimated commencement dates. Final
project size may vary from that shown based on how much of the
unleased space is actually constructed.
(14) Approximately 10 acres of these sites were generating cash flows from
operating activities at December 31, 1993, of which 4 acres became
operational in the second half of 1993. Three of the remaining four
acres are leased to a tenant whose rental commencement date begins no
later than June 1, 1994, at which time cash flows from operating
activities before debt service from the 13 leased acres will be
approximately $1.0 million on an annualized basis. The remaining acre
is currently being marketed to prospective tenants.
(15) North Point Market includes approximately 8 acres being developed as
stand alone retail sites which are being ground leased to tenants.
(16) Presidential Market excludes approximately 6 acres being developed as
stand alone retail sites held for sale or lease to tenants, which
costs are included in Land Held for Investment and Future Development.
(17) Rentals have commenced on only six acres of the GA Highway 400
Property, and those rentals commenced during the fourth quarter of
1993. To date leases have been signed for approximately 5 additional
acres, with the lease commencements for these 5 acres ranging from the
second to the third quarter of 1994. Leases on the 11 leased acres
will generate cash flows from operating activities before debt service
of over $550,000 per year. The remaining acres are currently being
marketed to prospective tenants.
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LAND HELD FOR INVESTMENT AND FUTURE DEVELOPMENT
Adjusted
Cost (2)
Less
Developable Company's Depreciation
Land Area Joint Venture Ownership and Debt
Description, Location and Zoned Use Year Acquired (Acres)(1) Partner Interest Amortization Balances
- ----------------------------------- ------------- ----------- ------------- --------- ------------ --------
Wildwood Office Park
Suburban Atlanta, Georgia
Office and Commercial 1971-1987 151 N/A 100% $ 7,005 $ 0
Office and Commercial 1971-1982 53 IBM 50% $15,951 $ 0
Georgia Highway 400 Land
(Georgia Highway 400 & Haynes Bridge Road) (3)
Suburban Atlanta, Georgia
Office and Commercial - East 1970-1985 78 N/A 100% $ 3,177 $ 0
Office and Commercial - West 1970-1985 230 N/A 100% $ 4,260 $ 0
North Point Market - Phase II 1970-1985 14 Coca-Cola(5) 2.3% $ 1,095 $ 0
Peachtree Road (7)
(1 mile north of Lenox Square Mall)
Atlanta, Georgia
Multi-family 1971 9 N/A 100% $ 1,669 $ 0
West Cobb County
Suburban Atlanta, Georgia
Retail, commercial and office 1981 38 N/A 100% $ 834 $ 0
Midtown Atlanta
Office and Commercial 1984 2 N/A 100% $ 2,966 $188(4)
Office and Commercial 1985-1989 11 Coca-Cola(5) 50% $ 2,981 $ 0
Temco Associates
(Paulding County) 1991 --(6) Temple-Inland 50% --(6) $ 0
Suburban Atlanta, Georgia Inc. (5)
Presidential Market
Outparcels
Suburban Atlanta, Georgia 1993 6 N/A 100% $ 2,139 $ 0
(1) Based upon management's estimates.
(2) For the portion of the Wildwood Office Park land and Midtown Atlanta
land owned by joint ventures, the cost shown is what the cost would be
if the venture's land cost were adjusted downward to the Company's
lower basis in the land it contributed to the venture. For the
50%-owned Wildwood Office Park land, the adjusted cost excludes
building predevelopment costs of $1,317,000.
(3) The Georgia Highway 400 property is located both east and west of
Georgia Highway 400. Currently, only the land which is located east
of Georgia Highway 400 is being developed. This land surrounds North
Point Mall, a 1.3 million square foot regional mall on a 100 acre site
which the Company sold in 1988 to a joint venture of Homart
Development Co. and JMB/Federated Realty Associates, Ltd.
(4) This note bears interest at 8.5% and amortizes in equal monthly
installments through October 1997. There is a 15% penalty for
prepayment of this loan.
(5) Joint venture partner is an affiliate of the entity shown.
(6) Temco Associates has an option through March 2006, with no carrying
costs, to acquire approximately 35,000 acres in Paulding County,
Georgia (northwest of Atlanta, Georgia), of which approximately 13,000
acres would be a fee simple interest and approximately 22,000 acres
would be a timber rights interest only. The option may be exercised
in whole or in part over the option period. Temco Associates has also
engaged in certain sales of land as to which it simultaneously
exercised its purchase option. During 1993, approximately 1,100 acres
of the option related to the fee simple interest was exercised and
simultaneously sold for gross profits of $305,000.
(7) The Company has entered into a contract for sale of the Peachtree Road
property for $4.8 million net proceeds to the Company. The buyer has
deposited a $700,000 non-refundable deposit under the contract, and is
scheduled to close the sale by the second quarter of 1994. If the
sale closes as contemplated, the Company will recognize a gain of $3.1
million on the transaction.
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MAJOR OFFICE AND RETAIL PROPERTIES
General. This section describes the major operating properties in
which the Company has an interest either directly or indirectly through joint
venture arrangements. A "negative investment" in a joint venture results from
distributions of capital to the Company, if any, exceeding the sum of (i) the
Company's contributions of capital and (ii) reported earnings (losses) of the
joint venture allocated to the Company. "Investment" in a joint venture means
the book value of the Company's investment in the joint venture.
Wildwood Office Park. Wildwood Office Park, a Class A commercial
development in suburban Atlanta, was master planned by I.M. Pei. Located in
Atlanta's northwest commercial district, just north of the Interstate
285/Interstate 75 intersection, the property features convenient access to all
of Atlanta's major office, commercial and residential districts. The Wildwood
complex overlooks the Chattahoochee River and borders 1,200 acres of national
forest, thus providing an urban office facility in a forest setting.
Developments in Wildwood Office Park include the 3200 Windy Hill Road Building
(681,000 rentable square feet), the 2300 Windy Ridge Parkway Building (634,000
rentable square feet) and the 2500 Windy Ridge Parkway Building (313,000
rentable square feet). At December 31, 1993, these three buildings were 93%,
95% and 83% leased, respectively. IBM has been a major tenant in these three
buildings, leasing approximately 813,000 square feet, or approximately 50% of
the rentable square feet. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations - Additional Prospective
Information." Wildwood Office Park also contains 13 acres leased to two banking
facilities and four restaurants (one of which is currently under construction);
an additional one acre retail site currently being marketed to prospective
users, and a child care facility.
The 3200 Windy Hill Road Building was financed primarily with equity,
and at December 31, 1993 had $9.7 million outstanding debt related to it. The
2300 Windy Ridge Parkway Building and the 2500 Windy Ridge Parkway Building
were financed primarily with debt and, at December 31, 1993, had $82 million
and $31.5 million of outstanding debt related to them, respectively.
The developments described above are located on land controlled by
Wildwood Associates, a joint venture between the Company and IBM formed in
1985. The Company and IBM each have a 50% interest in Wildwood Associates.
Wildwood Associates also controls approximately 53 acres in Wildwood Office
Park held for future development, which is composed of a 6 acre site with a
restaurant and approximately 58,000 square feet of office space which was
purchased in 1986 for future development, and 47 acres of other land to be
developed (see "Land Held for Investment - Wildwood Office Park").
At December 31, 1993, the Company's investment in Wildwood Associates
and a related partnership (see "Summit Green") was approximately $4,867,000,
which included the cost of the land the Company is committed to contribute to
Wildwood Associates. In addition, the Company has severally guaranteed
one-half of a $50,000,000 bank line of credit to Wildwood Associates related to
the 3200 Windy Hill Road Building, under which, as noted above, $9.7 million
was drawn at December 31, 1993.
Wildwood Office Park also contains the 3301 Windy Ridge Parkway
Building, a 106,000 rentable square foot office building located on
approximately 5 acres which is wholly owned by the Company. Commencing January
1994, a single tenant leased approximately 60% of this building. The lease has
options permitting the tenant to expand its occupancy to the remainder of the
building over the next several years. In addition, the 3100 Windy Hill Road
Building, a 188,000 rentable
8
10
square foot corporate training facility occupies a 13-acre parcel of land which
is wholly owned by the Company. The training facility improvements were sold
in 1983 to a limited partnership of private investors, at which time the
Company received a leasehold mortgage note. The training facility land was
simultaneously leased to the partnership for thirty years, along with certain
equipment for varying periods. The training facility was 100% leased by the
partnership to IBM through November 1993. In January 1993, the IBM lease was
extended through November 30, 1998. Concurrently with the IBM extension, the
mortgage note and related leases were also modified (see Note 3 of "Notes to
Consolidated Financial Statements").
NationsBank Plaza. NationsBank Plaza is a Class A, 55-story, 1.3
million rentable square foot office tower designed by Kevin Roche and is
located on approximately 3.7 acres of land between the midtown and downtown
districts of Atlanta, Georgia. The building, which was completed in 1992, was
approximately 80% leased at December 31, 1993. An affiliate of NationsBank,
the fourth largest bank in the United States, leases 46% of the rentable square
feet.
NationsBank Plaza was developed by CSC Associates, L.P. ("CSC"), a
joint venture formed by the Company and C&S Premises, Inc., an affiliate of
NationsBank. The Company and C&S Premises, Inc. each have a 50% interest in
CSC.
In October 1993, the partnership fully repaid all of its debt with
equity contributions of $86.7 million made by each partner. At December 31,
1993, the Company's investment in CSC was approximately $106,759,000. The
Company has guaranteed one-half of a $20,000,000 bank line of credit under
which there was no outstanding balance at December 31, 1993.
CSC's net income or loss and cash distributions are allocated to the
partners based on their percentage interests (50% each), subject to a
preference to Cousins. The Cousins preference is $2.5 million (giving Cousins
an additional $1.25 million over what it would otherwise receive), and accrues
to Cousins, with interest at 9% to the extent unpaid, over the period February
1, 1992 through January 31, 1995. Following repayment of the partnership's
debt in October 1993, Cousins began recognizing its accrued preference
currently in income, which resulted in Cousins recognizing $874,000 in income
over what it would have otherwise recognized in the year ended December 31,
1993. The partners have agreed that until cumulative retained earnings (before
considering distributions) exceed zero, which should occur in 1994,
distributions will be based on their percentage interests. Thereafter, Cousins
will be distributed its preference, to the extent earned, with amounts above
the preference amount distributed based on the partners' percentage interests.
First Union Tower. First Union Tower is a Class A office building
containing approximately 317,000 rentable square feet. The property is located
on approximately one acre of land in downtown Greensboro, North Carolina.
First Union Tower opened in the first quarter of 1990 and at December 31, 1993
was approximately 81% leased.
First Union Tower is owned by North Greene Associates Limited
Partnership ("North Greene Associates"), which was formed in 1987 as a joint
venture of the Company and Weaver Downtown Limited Partnership. The Company
has an 85% ownership interest in North Greene Associates, and accounts for it
as a consolidated entity. At December 31, 1993, the Company had a demand loan
outstanding to the partnership of $28,051,000. The Company's demand loan to
the partnership was used to pay down to $3,500,000 the outstanding balance of a
first mortgage bank line of credit on this property. The Company has
guaranteed 27.3% of the bank line of credit.
One Ninety One Peachtree Tower. One Ninety One Peachtree Tower is a
50-story, Class A office tower located in downtown Atlanta, Georgia that was
completed in December 1990. One
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Ninety One Peachtree Tower, which contains 1.2 million rentable square feet,
was designed by John Burgee Architects, with Phillip Johnson as design
consultant.
One Ninety One Peachtree Tower was developed on approximately 2 acres
of land, of which approximately 1.5 acres is owned and approximately one-half
acre under the parking facility is leased for a 99-year term expiring in 2088
with a 99-year renewal option. One Ninety One Peachtree Tower was approximately
90% leased at December 31, 1993.
C-H Associates, Ltd. ("C-H Associates"), a partnership formed in 1988
between CREC (49%), Hines Peachtree Associates Limited Partnership (49%) and
Peachtree Palace Hotel, Ltd. (2%), owns a 20% interest in the partnership that
owns One Ninety One Peachtree Tower. C-H Associates' 20% ownership of One
Ninety One Peachtree Tower results in an effective 9.8% ownership interest by
CREC in the One Ninety One Peachtree Tower project. The balance of the One
Ninety One Peachtree Tower project is owned by DIHC Peachtree Associates, an
affiliate of DIHC.
Through C-H Associates, CREC received 50% of the development fees from
the One Ninety One Peachtree Tower project. In addition, CREC owns a 50%
interest in two general partnerships which receive fees from leasing and
managing the One Ninety One Peachtree Tower project.
The One Ninety One Peachtree Tower project was funded substantially
by debtuntil March 1993, at which time DIHC Peachtree Associates contributed
equity in the amount of $145,000,000. Subsequent to the equity contribution,
C-H Associates is entitled to a priority distribution of $250,000 per year (of
which the Company is entitled to receive $112,500) for seven years beginning in
1993. The equity contributed by DIHC Peachtree Associates is entitled to a
preferred return at a rate increasing over the first 14 years from 5.5% to
11.5% (payable after the Company's priority return). Thereafter, the partners
will share in any distributions in accordance with their percentage interests.
At December 31, 1993, the Company had a negative investment of $90,000 in the
One Ninety One Peachtree Tower project.
Ten Peachtree Place. Ten Peachtree Place is a 20-story, 259,000
rentable square foot Class A office building located in midtown Atlanta,
Georgia. Completed in 1991, this structure was designed by Michael Graves and
is currently 100% leased to Coca-Cola. Approximately four acres of adjacent
land, currently used for surface parking, are available for future development.
Ten Peachtree Place is owned by Ten Peachtree Place Associates, a
general partnership between the Company (50%) and a wholly owned subsidiary of
Coca-Cola (50%).
Ten Peachtree Place Associates acquired the property in 1991 for a
nominal cash investment, subject to a ten-year purchase money note. This 8%
purchase money note had an outstanding balance of $22.3 million at December 31,
1993. If the purchase money note is paid in accordance with its terms, it will
amortize to approximately $15.3 million ($59 per rentable square foot) over the
ten-year term of the Coca-Cola lease, at which time Coca-Cola is entitled to
receive the preferred return described below and the property may be sold,
re-leased, or returned to the lender under the purchase money note for $1.00
without penalty or any further liability to the Company for the indebtedness.
At December 31, 1993, the Company had a negative investment in Ten Peachtree
Place Associates of $66,000.
The Company anticipates that Ten Peachtree Place Associates will
generate approximately $400,000 per year of cash flows from operating
activities net of note principal amortization during the ten-year lease. The
partnership agreement generally provides that each of the partners is entitled
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to receive 50% of cash flows from operating activities net of note principal
amortization (excluding any sale proceeds) for ten years, after which time the
Company is entitled to 15% of cash flows (including any sale proceeds) and its
partner is entitled to receive 85% of cash flows (including any sale proceeds),
until the two partners have received a combined distribution of $15.3 million,
after which time each partner is entitled to receive 50% of cash flows
(including any sale proceeds).
Summit Green. Summit Green, a 21-acre office park located in
Greensboro, North Carolina, is owned by Wildwood Associates (the partnership
with IBM) and a related partnership. The park contains a 135,000 rentable
square foot mid-rise office building which was 100% leased at March 15, 1994.
The Summit Green land is leased from an unrelated third party for a 99-year
term expiring in 2084. Space exists for two additional office buildings, but
the Company has no plans to commence additional development without prior
leasing commitments.
Haywood Mall. Haywood Mall, a 942,000 square foot enclosed regional
shopping center located 5 miles southeast of downtown Greenville, South
Carolina, was developed by the Company and opened in 1980. Haywood Mall
Associates, a joint venture formed in 1979 by the Company and Bellwether
Properties of South Carolina, L.P., an affiliate of Corporate Properties
Investors, owns approximately 270,000 rentable square feet of shop space in the
mall. The balance of the mall, approximately 672,000 square feet, is owned by
four major department stores (Sears, Roebuck & Co., J.C. Penney, Rich's and
Belk). The portion of Haywood Mall owned by Haywood Mall Associates was
developed on approximately 19 acres of land, of which approximately 16 acres is
owned and approximately 3 acres (of parking area) is leased under a ground
lease expiring in 2067. The portion of Haywood Mall owned by the joint venture
was approximately 98% leased to approximately 107 tenants as of December 31,
1993 and has been at least 90% leased since 1986.
The Company has a 50% interest in Haywood Mall Associates. The
Company originally had only a nominal cash investment, but funded an aggregate
of $2.8 million in 1988 through 1990 as its 50% share of capital improvements
made to the mall, including a new food court area. At December 31, 1993 the
Company's investment was $323,000.
Haywood Mall Associates has announced an expansion of the mall to be
completed by mid-1995. The expansion will include the addition of
approximately 70,000 square feet of new mall shops owned by the venture, a
Dillard's department store, and an expansion of the Belk-Simpson department
store. The venture intends to fund the expansion, as well as the prepayment of
an existing 9.37% first mortgage in May 1994, with equity contributions of
approximately $22 million from each venturer.
Perimeter Expo Associates, L.P. In June 1993, Perimeter Expo
Associates, L.P. (90% owned by Cousins and 10% owned by CNM) purchased the land
for and began construction of this retail power center adjacent to Perimeter
Mall in Atlanta, Georgia. Perimeter Expo features a new concept called The
Home Depot Expo, which was separately developed by The Home Depot as an upscale
interior design center. Perimeter Expo contains approximately 295,000 square
feet, of which approximately 178,000 square feet are owned by the Company and
the balance of the center, 117,000 square feet, owned by The Home Depot. The
center opened in November 1993 and became operational for financial reporting
purposes on December 1, 1993.
North Point Market Associates, L.P. In September 1993, the Georgia
Highway 400 land owned through Spring/Haynes Associates (see Note 5 of "Notes
to Consolidated Financial Statements") was distributed to its partners, with
each partner concurrently recontributing certain acres of the land to a new
venture, North Point Market Associates, L.P. (owned 82.3% by Cousins and
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17.7% by an affiliate of Coca-Cola). Additionally, Cousins contributed certain
acres of its wholly owned Georgia Highway 400 land to the new venture. The
venture is constructing North Point Market, a retail power center adjacent to
North Point Mall, which will have 314,000 square feet in Phase I. The center
also includes six outparcels that are being ground leased to freestanding
users. Phase I will open in the spring of 1994.
Presidential Market. In October 1993, construction commenced on
Presidential Market, an approximately 310,000 square foot retail power center,
located in northeast suburban Atlanta. The Company will own approximately
194,000 square feet of the center (depending upon how much of the unleased
space is actually constructed), with the remaining 116,000 square feet being
separately developed as a Target which is owned by Dayton Hudson Corporation.
The center is scheduled to open in the fall of 1994.
Georgia Highway 400 Stand Alone Retail Sites. In September 1993, the
Company transferred to Operating Properties the carrying value of 32 acres of
the land the Company owns at the intersection of Georgia Highway 400 and Haynes
Bridge Road in suburban Atlanta, Georgia surrounding North Point Mall. This
land is being ground leased in 1 to 2 acre sites to freestanding users. The
remaining 308 developable acres is discussed below in Land Held for Investment
and Future Development.
LAND HELD FOR INVESTMENT AND FUTURE DEVELOPMENT
The following describes significant land holdings owned directly by
the Company or indirectly through joint venture arrangements. The Company
intends to convert its land holdings to income-producing usage or to sell
portions of land holdings as opportunities present themselves over time.
Wildwood Office Park. Wildwood Office Park consists of approximately
289 acres of land in suburban Atlanta, Georgia which is zoned for office,
institutional, and commercial use. Approximately 104 acres in the park are
owned by, or committed to be contributed to, Wildwood Associates, including
approximately 53 acres of land held for future development. See "Major
Operating Properties - Wildwood Office Park." The Company owns 100% of the
balance of the developable land of which approximately 151 acres are available
for future development. Utilities are available at the site, and over 7
million additional gross square feet of office and commercial space are planned
for the park. The Company has no plans to commence additional office
development without prior leasing commitments.
Georgia Highway 400 Property. In addition to the stand alone retail
sites discussed above, the Company owns 100% of approximately 308 developable
acres and 82.3% of 14 developable acres at the intersection of Georgia Highway
400 and Haynes Bridge Road in suburban Atlanta, Georgia. The Company
previously sold 100 acres of its holdings in 1988 to a joint venture of Homart
Development Co. and JMB/Federated Realty Associates, Ltd. This joint venture
constructed North Point Mall, a 1.3 million square foot regional mall which
opened in October 1993. The Company believes the construction of North Point
Mall has significantly enhanced the value of its Georgia Highway 400 land.
Of the Company's land, approximately 92 acres of the land located on
the east side of Georgia Highway 400 are zoned for mixed-use development
including retail and office space. Approximately 230 acres of the land are
located on the west side of Georgia Highway 400 and are zoned for office,
institutional and light industrial use.
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Spring/Haynes Associates. This general partnership was formed in 1985
between the Company and a wholly owned subsidiary of Coca-Cola, each as 50%
general partners, to jointly own and develop real estate. The Company
contributed 40 acres of undeveloped land at Georgia Highway 400 and Haynes
Bridge Road in north central suburban Atlanta, Georgia. Coca-Cola contributed
11 acres of property in midtown Atlanta. In September 1993, the undeveloped
land at Georgia Highway 400 was distributed to the partners who concurrently
recontributed certain areas of the land into North Point Market Associates,
L.P., a consolidated partnership formed between the partners.
The Company's remaining investment in Spring/Haynes Associates is
$1,571,000 at December 31, 1993.
Hickory Hollow. Hickory Hollow Associates is a partnership formed in
1975 between the Company and American General Realty Investment Corporation, an
affiliate of American General Corporation (an insurance company). CREC has a
50% interest in Hickory Hollow Associates. Hickory Hollow Associates owns
approximately 19 acres of land held for sale near Hickory Hollow Mall, an
enclosed regional shopping center approximately 12 miles southeast of downtown
Nashville, Tennessee which was developed by the Company. The venture sold 2
acres of this land in 1993 for a gross profit of $375,000. The venture's
holdings originally included the shopping center and approximately 236 adjacent
acres, with all but the remaining acres sold in prior years. The Company's
investment in Hickory Hollow Associates at December 31, 1993 was $104,000.
Additional Land Holdings. The Company owns approximately 9 acres on
Peachtree Road in the Buckhead area of Atlanta, Georgia zoned for multifamily
use and approximately 2 acres on Peachtree Street in the Pershing Point area of
Atlanta, Georgia zoned for office and commercial use. In addition, the Company
owns approximately 38 acres in west Cobb County, Georgia which is zoned for
retail, commercial and office development uses.
The Company has entered into a contract for sale of the Peachtree Road
property for $4.8 million net proceeds to the Company. The buyer has deposited
a $700,000 non-refundable deposit under the contract, and is scheduled to close
the sale by the second quarter of 1994. If the sale closes as contemplated,
the Company will recognize a gain of $3.1 million on the transaction.
Temco Associates. Temco Associates was formed in March 1991 as a
partnership between CREC (50%) and a subsidiary of Temple-Inland Inc. (50%).
Temco Associates has an option through March 2006, with no carrying costs, to
acquire approximately 35,000 acres in Paulding County, Georgia (northwest of
Atlanta, Georgia), of which approximately 13,000 acres would be a fee simple
interest and approximately 22,000 acres would be a timber rights interest only.
The option may be exercised in whole or in part over the option period. The
Temco Associates property has the potential for future residential and
industrial development. Temco Associates has also engaged in certain sales of
land as to which it simultaneously exercised its purchase option. During 1993,
approximately 1,100 acres of the option related to the fee simple interest was
exercised and simultaneously sold for gross profits of $305,000.
OTHER REAL PROPERTY INVESTMENTS
Omni Norfolk Hotel. Norfolk Hotel Associates ("NHA") is a general
partnership formed in 1978 between the Company and an affiliate of Odyssey
Partners, L.P. (an investment partnership), each as 50% partners, which held a
mortgage note on and owned the land under the 442-room Omni International Hotel
in downtown Norfolk, Virginia. In January 1992, NHA terminated the land lease
and became the owner of the hotel and a long-term parking agreement with an
adjacent building owner. The partnership is currently receiving cash payments
of approximately $400,000 per
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year (subject to annual increases) under the parking agreement. In April 1993,
the partnership sold the hotel, but retained its interest in the parking
agreement. The Company's share of the gain on this transaction was
approximately $.5 million and is included in Income From Joint Ventures in the
Consolidated Statements of Income. The partnership received a mortgage note
for a portion of the sales proceeds.
At December 31, 1993, the Company had an investment of $830,000 in
NHA. The Company has also guaranteed a $4.85 million line of credit to NHA
under which $1,000 had been drawn at December 31, 1993, and its partner has
guaranteed an equal line of credit under which $4.625 million had been drawn at
December 31, 1993. Additionally, NHA has a $4.75 million line of credit,
payable upon demand to the Company under which $4.624 million had been drawn at
December 31, 1993. The line bears interest at the daily Federal funds rate
plus 75 basis points with payments of interest only until the maturity date of
November 1, 1994. This line of credit is being used by the Company for
temporary investment of excess cash. NHA used the cash to temporarily pay down
the bank line of credit which the Company guarantees.
Dusseldorf Joint Venture. In 1992, Cousins entered into a joint
venture agreement for the development of a 133,000 rentable square foot office
building in Dnsseldorf, Germany which is 34% preleased to IBM. Cousins'
venture partners are IBM and Multi Development Corporation International B.V.
("Multi"), a Dutch real estate development company. In December 1993, the
building was presold to an affiliate of Deutsche Bank. CREC and Multi will
jointly develop the building, with CREC receiving fees of approximately $1.3
million ratably over the development period of January 1994 through June 1995.
In addition, the Company will recognize 30% of the venture's profit or 50% of
the venture's loss. Due to the Company's continuing involvement in the project
(see Notes 4 and 5 of "Notes to Consolidated Financial Statements"), all fees
and profits are being deferred until the project's completion and leaseup.
Kennesaw Crossings. The Company owns Kennesaw Crossings, a shopping
center in suburban Atlanta, Georgia. Kennesaw Crossings is a 116,000 square
foot shopping center constructed in 1974 located on 14 acres of land leased
from an unrelated party through 2068. The Company's net carrying value in
Kennesaw Crossings as of December 31, 1993 was $1.3 million.
Air Rights and Other Property Near the CNN Center. The Company owns a
leasehold interest in the air rights over the approximately 365,000 square foot
CNN Center parking facility in Atlanta, Georgia, adjoining the world
headquarters of Turner Broadcasting System, Inc. and Cable News Network. The
air rights are developable for additional parking or office use. The Company's
net carrying value of this property is $0. The Company also owns 0.8 acres of
additional land proximate to the CNN Center which is currently being used for
surface parking and has a net carrying value of $398,000.
Residential Lots Under Development. In October 1993, CREC purchased
38 acres in northwest suburban Atlanta, Georgia which is being developed as
residential lots. In January 1994, an additional 81 acres in northeast
suburban Atlanta, Georgia was purchased for residential lot development.
ITEM 3. LEGAL PROCEEDINGS
No material legal proceedings are presently pending by or against the
Company.
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ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matter was submitted to a vote of security holders during the
fourth quarter of the Registrant's fiscal year ended December 31, 1993.
ITEM X. EXECUTIVE OFFICERS OF THE REGISTRANT
The Executive Officers of the Registrant as of the date hereof are as
follows:
Name Age Office Held
---- --- -----------
Thomas G. Cousins 62 Chairman of the Board of Directors, President, and Chief Executive Officer
Vipin L. Patel 51 Senior Executive Vice President
George J. Berry 56 Senior Vice President
Tom G. Charlesworth 44 Senior Vice President, Secretary, and General Counsel
Daniel M. DuPree 47 Senior Vice President and President of the Retail Division (Cousins/New Market Development
Company, Inc.)
John L. Murphy 48 Senior Vice President - Marketing
W. James Overton 47 Senior Vice President - Development
William C. Smith 48 Senior Vice President and President of the Office Division
Peter A. Tartikoff 52 Senior Vice President and Chief Financial Officer
Roy I. Wood, Jr. 72 Senior Vice President - Management
Relationships:
There are no family relationships among the Executive Officers or
Directors.
Term of Office:
The term of office for all officers expires at the annual directors'
meeting, but the Board has the power to remove any officer at any time.
Business Experience:
Mr. Cousins has been the Chief Executive Officer of the Company since
its inception.
Mr. Patel has been Senior Executive Vice President of the Company
since March 1991. He joined the Company in December 1982 and was Executive
Vice President from March 1983 through February 1991.
Mr. Berry has been Senior Vice President since joining the Company in
September 1990. Prior to that he was Commissioner of the State of Georgia's
Department of Industry, Trade and Tourism from 1983 to 1990.
Mr. Charlesworth joined the Company in October 1992 and became Senior
Vice President, Secretary, and General Counsel in November 1992. Prior to that
he worked for certain affiliates of Thomas G. Cousins as Chief Financial
Officer and Legal Counsel.
Mr. DuPree joined the Company in October 1992 and became Senior Vice
President in April 1993. Prior to that he was President of New Market
Companies, Inc. and affiliates since 1984.
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Mr. Murphy has been Senior Vice President since joining the Company in
December 1987.
Mr. Overton has been Senior Vice President since joining the Company
in September 1989. Prior to that he was employed by Hardin Construction Group,
Inc. from 1972 to 1989, where he served as President from 1985 to 1989.
Mr. Smith has been Senior Vice President since joining the Company in
September 1993. Prior to that he was employed as the Chief Operating Officer
and Senior Vice President of The John Akridge Company, an office development
company headquartered in Washington, D.C. since 1978.
Mr. Tartikoff has been Senior Vice President and Chief Financial
Officer of the Company since February 1986.
Mr. Wood has been a Senior Vice President of the Company since
September 1992 and a Senior Vice President of Cousins Real Estate Corporation
since January 1990. From January 1987 to November 1992, he was principally
employed as President of Cousins Management, Inc.
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PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED SECURITY HOLDER
MATTERS
The information concerning the market prices for the Registrant's
common stock and related stockholder matters appearing under the caption
"Market and Dividend Information" on page 38 of the Registrant's 1993 Annual
Report to Stockholders is incorporated herein by reference.
ITEM 6. SELECTED FINANCIAL DATA
The information appearing under the caption "Five Year Summary of
Selected Financial Data" on page 34 of the Registrant's 1993 Annual Report to
Stockholders is incorporated herein by reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Management's Discussion and Analysis of Financial Condition and
Results of Operations which appears on pages 35 through 37 of the Registrant's
1993 Annual Report to Stockholders is incorporated herein by reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The Consolidated Financial Statements and Notes to Consolidated
Financial Statements of the Registrant and Report of Independent Public
Accountants which appear on pages 19 through 34 of the Registrant's 1993 Annual
Report to Stockholders are incorporated herein by reference.
The information appearing under the caption "Selected Quarterly
Financial Information (Unaudited)" on page 33 of the Registrant's 1993 Annual
Report to Stockholders is incorporated herein by reference.
Other financial statements and financial statement schedules required
under Regulation S-X are filed pursuant to Item 14 of Part IV of this report.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not applicable.
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PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information concerning the Directors and Executive Officers of the
Registrant that is required by this Item 10, except that which is presented in
Item X in Part I above, is included under the captions "Directors and Executive
Officers of the Company" on pages 2 through 6 of the Proxy Statement dated
March 29, 1994 relating to the 1994 Annual Meeting of the Registrant's
Stockholders, and is incorporated herein by reference.
ITEM 11. EXECUTIVE COMPENSATION
The information appearing under the captions "Executive Compensation"
on pages 6 through 12 of the Proxy Statement dated March 29, 1994 relating to
the 1994 Annual Meeting of the Registrant's Stockholders is incorporated herein
by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information concerning security ownership of certain beneficial
owners and management required by this Item 12 is included under the captions
"Directors and Executive Officers of the Company" on pages 2 through 6 and
"Principal Stockholders" on pages 15 through 16 of the Proxy Statement dated
March 29, 1994 relating to the 1994 Annual Meeting of the Registrant's
Stockholders, and is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information concerning certain transactions required by this Item
13 is included under the caption "Certain Transactions" on pages 13 through 14
of the Proxy Statement dated March 29, 1994 relating to the 1994 Annual Meeting
of the Registrant's Stockholders, and is incorporated herein by reference.
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PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) 1. Financial Statements
A. The following Consolidated Financial Statements of the
Registrant, together with the applicable Report of
Independent Public Accountants, are contained on pages 19
through 34 of the Registrant's 1993 Annual Report to
Stockholders and are incorporated herein by reference:
Page Number
in Annual Report
----------------
Consolidated Balance Sheets - December 31, 1992
and 1993 19
Consolidated Statements of Income for the Years Ended
December 31, 1991, 1992 and 1993 20
Consolidated Statements of Stockholders' Investment for the
Years Ended December 31, 1991, 1992 and 1993 21
Consolidated Statements of Cash Flows for the Years Ended
December 31, 1991, 1992 and 1993 22
Notes to Consolidated Financial Statements 23
Report of Independent Public Accountants 34
B. The following Report of Independent Auditors is
incorporated as Exhibit 28 herein:
Report of Independent Auditors on
Haywood Mall Associates
C. The following Combined Financial Statements, together
with the applicable Report of Independent Public
Accountants, of Wildwood Associates and Green Valley
Associates II, joint ventures of the Registrant
meeting the criteria for significant subsidiaries
under the rules and regulations of the Securities and
Exchange Commission, are filed as a part of this
report.
Page Number
in Form 10-K
------------
Report of Independent Public Accountants F-1
Combined Balance Sheets - December 31, 1992 and 1993 F-2
Combined Statements of Income for the Years
Ended December 31, 1991, 1992 and 1993 F-3
Combined Statements of Partners' Capital for the Years
Ended December 31, 1991, 1992 and 1993 F-4
Combined Statements of Cash Flows for the Years Ended
December 31, 1991, 1992 and 1993 F-5
Notes to Combined Financial Statements F-6 through
F-11
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ITEM 14. CONTINUED
D. The following Financial Statements, together with the
applicable Report of Independent Auditors, of CSC
Associates, L.P., a joint venture of the Registrant
meeting the criteria for a significant subsidiary
under the rules and regulations of the Securities and
Exchange Commission, are filed as a part of this
report.
Page Number
in Form 10-K
------------
Report of Independent Auditors G-1
Balance Sheets - December 31, 1992 and 1993 G-2
Statements of Operations for the Years Ended
December 31, 1991, 1992 and 1993 G-3
Statements of Partners' Capital for the Years Ended
December 31, 1991, 1992 and 1993 G-4
Statements of Cash Flows for the Years Ended
December 31, 1991, 1992 and 1993 G-5
Notes to Financial Statements G-6 through
G-9
2. Financial Statement Schedules
The following financial statement schedules, together with the
applicable report of independent public accountants are filed
as a part of this report.
Page Number
in Form 10-K
------------
A. Cousins Properties Incorporated and Consolidated Entities:
Report of Independent Public Accountants on Schedules S-1
X - Supplementary Income Statement Information for
the Years Ended December 31, 1991,1992 and 1993 S-2
XI - Real Estate and Accumulated Depreciation -
December 31, 1993 S-3 through
S-5
XII - Mortgage Loans on Real Estate - December 31,
1993 S-6 and S-7
B. Wildwood Associates and Green Valley Associates II:
VIII -Valuation and Qualifying Accounts and Reserves for
the Years Ended December 31, 1991, 1992 and 1993 F-12
IX - Short-term Borrowings for the Years Ended
December 31, 1991, 1992 and 1993 F-13
X - Supplementary Income Statement Information for
the Years Ended December 31, 1991, 1992 and 1993 F-14
XI - Real Estate and Accumulated Depreciation -
December 31, 1993 F-15
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ITEM 14. CONTINUED
C. CSC Associates, L.P.
IX - Short-term Borrowings for the Years Ended
December 31, 1991, 1992 and 1993 G-10
X - Supplementary Income Statement Information for
the Year Ended December 31, 1993 G-11
XI - Real Estate and Accumulated Depreciation -
December 31, 1993 G-12
NOTE: Other schedules are omitted because of the absence of conditions under
which they are required or because the required information is given
in the financial statements or notes thereto.
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Item 14. Continued
3. Exhibits
3(a)(i) Articles of Incorporation of Registrant, as
restated as of April 29, 1993, filed as
Exhibit 4(a) to the Registrant's Form S-3
dated September 28, 1993, and incorporated
herein by reference.
3(b) By-laws of Registrant, as amended and
restated as of November 30, 1989, as further
amended by Stockholders on April 30, 1990,
and as further amended by the Stockholders on
April 29, 1993, filed as Exhibit 4(b) to the
Registrant's Form S-3 dated September 28,
1993, and incorporated herein by reference.
4(a) Dividend Reinvestment Plan as effective
January 27, 1993, filed in the Registrant's
Form S-3 dated March 31, 1993, and
incorporated herein by reference.
10(a)(i) Cousins Properties Incorporated 1989 Stock
Option Plan, filed as Exhibit A to the
Registrant's Proxy Statement dated March 31,
1989 relating to the 1989 Annual Meeting of
Registrant's Stockholders, and incorporated
herein by reference.
10(a)(ii) Cousins Real Estate Corporation Stock
Appreciation Right Plan, amended and restated
as of March 15, 1993, filed as Exhibit to the
Registrant's Form 10-K for the year ended
December 31, 1992, and incorporated herein by
reference.
10(a)(iii) Cousins Properties Incorporated Stock
Appreciation Right Plan, dated as of March
15, 1993, filed as Exhibit 10(a)(iii) to the
Registrant's Form 10-K for the year ended
December 31, 1992, and incorporated herein by
reference.
10(b)(i) Cousins Properties Incorporated Profit
Sharing Plan as effective as of January 1,
1991, filed as Exhibit 10(b)(i) to the
Registrant's Form 10-K for the year ended
December 31, 1991, and incorporated herein by
reference.
10(b)(ii) Amendment Number One to the Cousins
Properties Incorporated Profit Sharing Plan,
effective as of January 3, 1993, filed as
Exhibit 10(b)(ii) to the Registrant's Form
10-K for the year ended December 31, 1992,
and incorporated herein by reference.
10(b)(iii) Cousins Properties Incorporated
Profit-Sharing Trust Agreement as effective
as of January 1, 1991, filed as Exhibit
10(b)(ii) to the Registrant's Form 10-K for
the year ended December 31, 1991, and
incorporated herein by reference.
10(d) Land lease (Kennesaw) dated December 17,
1969, and an amendment thereto dated December
15, 1977, filed as Exhibit l0(d) to the
Registrant's Form 10-K for the year ended
December 31, 1980, and incorporated herein by
reference.
22
24
ITEM 14. CONTINUED
10(f) Cousins Properties Incorporated 1987
Restricted Stock Plan for Outside Directors,
filed as Exhibit A to the Registrant's Proxy
Statement dated March 27, 1987 relating to
the 1987 Annual Meeting of Registrant's
Stockholders, and incorporated herein by
reference.
11 Schedule showing computations of weighted
average number of shares of common stock
outstanding as used to compute primary and
fully diluted income per share for each of
the five years ended December 31, 1993.
13 Annual Report to Stockholders for the year
ended December 31, 1993.
22 Subsidiaries of the Registrant.
24(a) Consent of Independent Public Accountants
(Arthur Andersen & Co.).
24(b) Consent of Independent Auditors (Ernst &
Young).
28 Report of Independent Auditors on Haywood
Mall Associates.
(b) Reports on Form 8-K.
No reports on Form 8-K were filed during the fourth quarter of
the year ended December 31, 1993.
23
25
SIGNATURES
Pursuant to the requirements of Section 13 or 15 (d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
Cousins Properties Incorporated
(Registrant)
Dated: March 24, 1994
BY:
-------------------
Peter A. Tartikoff
Senior Vice
President - Finance
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the date indicated.
SIGNATURE CAPACITY DATE
- --------- -------- ----
PRINCIPAL EXECUTIVE OFFICER:
Chairman of the Board, March 24, 1994
President, and Chief
Executive Officer.
Director
- ------------------------------------
T. G. Cousins
PRINCIPAL FINANCIAL AND ACCOUNTING OFFICER:
Senior Vice President- March 24, 1994
Finance
- ------------------------------------
Peter A. Tartikoff
ADDITIONAL DIRECTORS:
Director March 24, 1994
- ------------------------------------
Boone A. Knox
Director March 24, 1994
- ------------------------------------
Henry C. Goodrich
Director March 24, 1994
- ------------------------------------
Richard W. Courts, II
24
26
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS ON SCHEDULES
To the Stockholders of Cousins Properties Incorporated:
We have audited in accordance with generally accepted auditing
standards, the financial statements included in the Cousins Properties
Incorporated annual report to stockholders incorporated by reference in this
Form 10-K, and have issued our report thereon dated March 10, 1994. Our audit
was made for the purpose of forming an opinion on those statements taken as a
whole. The schedules listed in Item 14, Part (a)2.A. are the responsibility of
the Company's management and are presented for purposes of complying with the
Securities and Exchange Commission's rules and are not part of the basic
financial statements. These schedules have been subjected to the auditing
procedures applied in the audit of the basic financial statements and, in our
opinion, fairly state in all material respects the financial data required to
be set forth therein in relation to the basic financial statements taken as a
whole.
ARTHUR ANDERSEN & CO.
Atlanta, Georgia
March 10, 1994
25
27
SCHEDULE X
COUSINS PROPERTIES INCORPORATED
SUPPLEMENTARY INCOME STATEMENT INFORMATION
FOR THE YEARS ENDED DECEMBER 31, 1991, 1992 AND 1993
($ in thousands)
Column A Column B
-------- --------
Charged to Costs and Expense
----------------------------
Item 1991 1992 1993
---- ---- ---- ----
Maintenance and repairs $ 555 $ 548 $ 547
===============================
Amortization of intangible assets and
other deferrals (1) $ 350 $ 561 $1,324
===============================
Taxes, other than payroll and income taxes $1,186 $1,146 $1,262
===============================
(1) Includes amortization of deferred leasing costs, marketing expenses,
financing costs, predevelopment rights, goodwill, and organization
expenses
26
28
SCHEDULE XI
(Page 1 of 3)
COUSINS PROPERTIES INCORPORATED AND CONSOLIDATED ENTITIES
REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 1993
($ in thousands)
Column A Column B Column C Column D Column E
-------- -------- -------- -------- --------
Costs Capitalized Gross Amount at Which
Initial Cost Subsequent Carried at
to Company to Acquisition December 31, 1993
------------------ ------------------ ------------------------------------
Carrying
Costs
Buildings Less Cost Land Buildings
and Improve- of Sales and Land and Total
Description Encumbrances Land Improvements ments and Other Improvements Improvements (a),(b)
- ----------- ------------ ---- ------------ ------- --------- ------------ ------------ --------
LAND HELD FOR INVESTMENT OR FUTURE DEVELOPMENT
- ----------------------------------------------
Wildwood - Cobb Co., GA $ -- $11,156 $ -- $ 4,737 $(8,888) $7,005 $ -- $7,005
North Fulton Property -
Fulton Co., GA -- 10,294 -- 12,457 (15,314)(c) 7,437 -- 7,437
Midtown - Atlanta, GA 188 2,949 -- 81 (64) 2,966 -- 2,966
Peachtree Road Land -
Atlanta, GA -- 2,500 -- 2 (833) 1,669 -- 1,669
McMurray - Cobb Co., GA. -- 1,015 -- 172 (353) 834 -- 834
North Point Market -
Phase II - Fulton Co., GA -- 1,646 -- 61 -- 1,707 -- 1,707
Presidential Market
Outparcels - Gwinnett
Co., GA -- 2,067 -- 69 3 2,139 -- 2,139
Miscellaneous Investments -
Atlanta, GA -- 120 -- -- -- 120 -- 120
-------------------------------------------------------------------------------------------
188 31,747 -- 17,579 (25,449) 23,877 -- 23,877
-------------------------------------------------------------------------------------------
OPERATING PROPERTIES
First Union Tower -
Greensboro, N.C. 3,500 1,394 -- 29,021 1,971 1,399 30,987 32,386
Wildwood - 3301 Windy
Ridge - Cobb Co., GA -- 20 -- 8,743 1,519 1,237 9,045 10,282
Kennesaw - Cobb Co., GA -- -- -- 2,337 -- -- 2,337 2,337
Perimeter Expo -
Fulton Co., GA -- 8,564 -- 9,834 71 8,564 9,905 18,469
GA Highway 400
Stand Alone Retail Sites -
Fulton Co., GA -- 4,709 -- -- -- 4,709 -- 4,709
Miscellaneous -- 398 145 67 (14) 398 198 596
-------------------------------------------------------------------------------------------
3,500 15,085 145 50,002 3,547 16,307 52,472 68,779
-------------------------------------------------------------------------------------------
Column F Column G Column H Column I
-------- -------- -------- --------
Life on
Which De-
preciation
Accumu- In 1993
lated Date of Income
Deprecia- Construc- Date Statement
Description tion (a) tion Acquired Is Computed
- ----------- --------- --------- ----------- -----------
LAND HELD FOR INVESTMENT OR FUTURE DEVELOPMENT
- ----------------------------------------------
Wildwood - Cobb Co., GA $ -- -- 1971-1982,1989 --
North Fulton Property -
Fulton Co., GA -- -- 1970-1985 --
Midtown - Atlanta, GA -- -- 1984 --
Peachtree Road Land -
Atlanta, GA -- -- 1971 --
McMurray - Cobb Co., GA. -- -- 1981 --
North Point Market -
Phase II - Fulton Co., GA -- -- 1970-1985 --
Presidential Market
Outparcels - Gwinnett
Co., GA -- -- 1993 --
Miscellaneous Investments -
Atlanta, GA -- -- 1972-1984 --
--
-------
OPERATING PROPERTIES
First Union Tower -
Greensboro, N.C. 5,661 1988-1990 1987 40 Years
Wildwood - 3301 Windy
Ridge - Cobb Co., GA 2,530 1984 1984 30 Years
Kennesaw - Cobb Co., GA 1,054 1974 1973 30 Years
Perimeter Expo -
Fulton Co., GA 30 1993 1993 30 Years
GA Highway 400
Stand Alone Retail Sites -
Fulton Co., GA -- -- 1970-1985 --
Miscellaneous 143 -- 1977-1984 Various
-------
9,418
-------
27
29
SCHEDULE XI
(Page 2 of 3)
COUSINS PROPERTIES INCORPORATED AND CONSOLIDATED ENTITIES
REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 1993
($ in thousands)
Column A Column B Column C Column D Column E
-------- -------- -------- -------- --------
Costs Capitalized Gross Amount at Which
Initial Cost Subsequent Carried at
to Company to Acquisition December 31, 1993
------------------- --------------------- ------------------------------------
Carrying
Costs
Buildings Less Cost Land Buildings
and Improve- of Sales and Land and Total
Description Encumbrances Land Improvements ments and Other Improvements Improvements (a),(b)
- ----------- ------------ ---- ------------ -------- --------- ------------ ------------ -------
PROJECTS UNDER CONSTRUCTION
North Point Market - Phase I -
Fulton Co., GA $ -- $ 7,932 $ -- $3,963 $ 69 $ 7,932 $4,032 $11,964
Presidential Market - Phase I -
Gwinnett Co., GA -- 1,786 -- 803 3 1,786 806 2,592
---------------------------------------------------------------------------------------------
-- 9,718 -- 4,766 72 9,718 4,838 14,556
---------------------------------------------------------------------------------------------
RESIDENTIAL LOTS UNDER DEVELOPMENT
Brown's Farm -
Cobb Co., GA -- 911 -- 128 1 1,040 -- 1,040
--------------------------------------------------------------------------------------------
$ 3,688 $57,461 $ 145 $72,475 $(21,829) $50,942 $57,310 $108,252
---------------------------------------------------------------------------------------------
Column F Column G Column H Column I
-------- -------- -------- --------
Life on
Which De-
preciation
Accumu- In 1993
lated Date of Income
Deprecia- Construc- Date Statement
Description tion (a) tion Acquired Is Computed
- ----------- --------- --------- -------- -----------
PROJECTS UNDER CONSTRUCTION
North Point Market - Phase I -
Fulton Co., GA $ -- 1993 1970-1985 --
Presidential Market - Phase I -
Gwinnett Co., GA -- 1993 1993 --
--
-----
RESIDENTIAL LOTS UNDER DEVELOPMENT
Brown's Farm -
Cobb Co., GA -- 1993 1993 --
$ 9,418
-------
28
30
SCHEDULE XI
(Page 3 of 3)
COUSINS PROPERTIES INCORPORATED AND CONSOLIDATED ENTITIES
REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 1993
($ in thousands)
NOTES:
(a) Reconciliations of total real estate carrying value and
accumulated depreciation for the three years ended December
31, 1993 are as follows:
Real Estate Accumulated Depreciation
-------------------------- --------------------------
1991 1992 1993 1991 1992 1993
---- ---- ---- ---- ---- ----
Balance at beginning of period $67,499 $69,338 $ 71,994 $3,849 $5,703 $7,448
Additions during the period:
Improvements and other
capitalized costs 1,839 6,231 37,851 -- -- --
Provision for depreciation -- -- -- 1,854 1,974 1,970
--------------------------- ---------------------------
1,839 6,231 37,851 1,854 1,974 1,970
--------------------------- ---------------------------
Deductions during the period
Cost of real estate sold -- (3,332) (1,593) -- -- --
Retirement of fully depreciated
assets and write-offs -- (243) -- -- (229) --
--------------------------- ---------------------------
-- (3,575) (1,593) -- (229) --
--------------------------- ---------------------------
Balance at close of period $69,338 $71,994 $108,252 $5,703 $7,448 $9,418
=========================== ===========================
(b) Initial cost was previously adjusted to reflect the following
write-downs to state the properties at the then realizable
value:
Property Location Amount
-------- -------- ------
Peachtree Road Land Atlanta, GA $1,176
Kennesaw Cobb Co., GA $1,430
(c) Other for the North Fulton Property includes $11,134 of
transfers to Projects Under Construction and another category
within Land Held for Investment and Future Development.
29
31
SCHEDULE XII
(Page 1 of 2)
COUSINS PROPERTIES INCORPORATED AND CONSOLIDATED ENTITIES
MORTGAGE LOANS ON REAL ESTATE
DECEMBER 31, 1993
($ in thousands)
Column A Column B Column C Column D Column E Column F
-------- -------- -------- --------- -------- --------
Face
Final Amount
Interest Maturity Prior of
Description Rate Date Periodic Payment Terms Liens Mortgages
- ----------- -------- -------- ---------------------- ----- ---------
Mortgage Notes:
- ---------------
Nashland Associates 9.10% 6/21/94 Interest Due Monthly; First Mortgage $19,323
(Hickory Hollow Mall) Principal Due in Full Loan
6/21/94
Nashland Associates 9.10% 6/21/94 Interest Due Monthly; First Mortgage 16,441
(Rivergate Mall) Principal Due in Full Loan
6/21/94
Nashland Associates 9.10% 6/21/94 Interest Due Monthly; First Mortgage 4,163
(Lion's Head Village) Principal Due in Full Loan
6/21/94
Wildwood-I, Ltd. - 7.729% through 11/30/13 $166,824 monthly through None 25,900
Mortgage On Training 11/30/98; 11/30/98; payments there-
Facility prime + 1.7% after shall equal all project
Cobb County, Georgia (capped at 10.55%) cash flow over $54,000
through 11/30/03; per year through 11/30/03,
prime + 1.7% with a minimum monthly
(capped at 12.7%) payment of $311,392
through 11/30/13 beginning 12/1/03
Residential Mortgages 8.25% Various Various None 80
to
8.75%
Column A Column G Column H
-------- -------- --------
Principal
Amount of
Carrying Loans Subject
Amount to Delinquent
of Mortgages Principal
Description (a) or Interest
- ----------- ------------ -------------
Mortgage Notes:
- ---------------
Nashland Associates $19,323 --
(Hickory Hollow Mall)
Nashland Associates 16,441 --
(Rivergate Mall)
Nashland Associates 4,163 --
(Lion's Head Village)
Wildwood-I, Ltd. - 18,208 --
Mortgage On Training
Facility
Cobb County, Georgia
Residential Mortgages 80 --
-------
$58,215
=======
30
32
SCHEDULE XII
(Page 2 of 2)
COUSINS PROPERTIES INCORPORATED AND CONSOLIDATED ENTITIES
MORTGAGE LOANS ON REAL ESTATE
DECEMBER 31, 1993
($ in thousands)
NOTE:
(a) Reconciliation of total carrying amounts of mortgage loans for
the three years ended December 31, 1993 are as follows:
1991 1992 1993
---- ---- ----
Balance at beginning of period $61,718 $61,542 $57,698
Additions during period:
Additions to existing mortgage -- -- 900
Deductions during period:
Collections of principal 176 224 383
Deferred income applied to principal
of Wildwood I, Ltd. Note -- 3,620 --
-----------------------------------------
Balance at close of period $61,542 $57,698 $58,215
=========================================
31
33
REPORT OF INDEPENDENT PUBLIC ACCOUNTANT
To the Partners of Wildwood Associates and Green Valley Associates II:
We have audited the accompanying combined balance sheets of WILDWOOD ASSOCIATES
(a Georgia general partnership) and GREEN VALLEY ASSOCIATES II (a North
Carolina general partnership) as of December 31, 1992 and 1993, and the related
combined statements of income, partners' capital and cash flows for each of the
three years in the period ended December 31, 1993. These financial statements
are the responsibility of the management of the partnerships. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Wildwood Associates and Green
Valley Associates II as of December 31, 1992 and 1993, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1993 in conformity with generally accepted accounting principles.
Our audit was made for the purpose of forming an opinion on the basic financial
statements taken as a whole. The schedules listed in Item 14 are presented for
purposes of complying with the Securities and Exchange Commission's rules and
are not part of the basic financial statements. These schedules have been
subjected to the auditing procedures applied in the audit of the basic
financial statements and, in our opinion, fairly state in all material respects
the financial data required to be set forth therein in relation to the basic
financial statements taken as a whole.
ARTHUR ANDERSEN & CO.
Atlanta, Georgia
March 10, 1994
32
34
WILDWOOD ASSOCIATES AND GREEN VALLEY ASSOCIATES II
COMBINED BALANCE SHEETS
DECEMBER 31, 1992 AND 1993
($ in thousands)
1992 1993
-------- --------
ASSETS
REAL ESTATE ASSETS:
Income producing properties, including land of $31,146
and $36,349 in 1992 and 1993, respectively (Notes 7 and 9) $206,337 $215,316
Accumulated depreciation and amortization (26,039) (32,932)
-------------------------
180,298 182,384
Land committed to be contributed (Notes 3 and 9) 21,366 20,440
Land and property predevelopment costs 18,769 13,958
-------------------------
Total real estate assets 220,433 216,782
-------------------------
CASH AND CASH EQUIVALENTS, at cost,
which approximates market 509 4
-------------------------
OTHER ASSETS:
Deferred expenses, net of accumulated amortization of
$3,464 and $4,706 in 1992 and 1993, respectively 5,862 5,617
Receivables (Note 6) 13,525 14,201
Allowance for possible losses (Note 1) (2,621) (2,619)
Furniture, fixtures and equipment, net of accumulated
depreciation of $776 and $1,000 in 1992 and 1993,
respectively 708 501
Other 51 48
-------------------------
17,525 17,748
-------------------------
$238,467 $234,534
=========================
LIABILITIES AND PARTNERS' CAPITAL
NOTES PAYABLE (Note 7) $133,251 $133,938
RETAINAGE, ACCOUNTS PAYABLE AND
ACCRUED LIABILITIES 6,098 5,156
-------------------------
Total liabilities 139,349 139,094
-------------------------
PARTNERS' CAPITAL (Notes 3 and 4):
International Business Machines Corporation 49,559 47,720
Cousins Properties Incorporated 49,559 47,720
-------------------------
Total partners' capital 99,118 95,440
-------------------------
$238,467 $234,534
=========================
The accompanying notes are an integral part of these combined balance sheets.
33
35
WILDWOOD ASSOCIATES AND GREEN VALLEY ASSOCIATES II
COMBINED STATEMENTS OF INCOME
FOR THE YEARS ENDED DECEMBER 31, 1991, 1992 AND 1993
($ in thousands)
1991 1992 1993
------- ------- -------
REVENUES:
Rental income, and recovery of expenses
charged directly to specific tenants (Note 6) $31,002 $34,181 $36,104
Interest 89 25 24
Other 70 75 96
-----------------------------------------
Total revenues 31,161 34,281 36,224
-----------------------------------------
OPERATING EXPENSES:
Real estate taxes 2,398 2,089 2,785
Maintenance and repairs 1,901 2,171 2,142
Management and personnel costs 1,506 1,665 1,805
Utilities 1,767 1,801 1,737
Expenses charged directly to specific tenants 1,076 1,350 852
Contract security 556 720 761
Grounds maintenance 529 672 632
Insurance 87 98 99
-----------------------------------------
Total operating expenses 9,820 10,566 10,813
-----------------------------------------
OTHER EXPENSES:
Interest expense (Note 7) 10,578 11,998 11,606
Depreciation and amortization 7,257 8,278 8,336
Predevelopment, marketing and other expenses 302 435 489
Ground lease expense (Note 8) 322 322 322
Real estate taxes on undeveloped land (Note 4) 208 194 190
General and administrative expenses 204 184 146
-----------------------------------------
Total other expenses 18,871 21,411 21,089
-----------------------------------------
Total expenses 28,691 31,977 31,902
-----------------------------------------
NET INCOME $ 2,470 $ 2,304 $ 4,322
=========================================
The accompanying notes are an integral part of these combined statements.
34
36
WILDWOOD ASSOCIATES AND GREEN VALLEY ASSOCIATES II
COMBINED STATEMENTS OF PARTNERS' CAPITAL
FOR THE YEARS ENDED DECEMBER 31, 1991, 1992 AND 1993
($ in thousands)
International
Business Cousins
Machines Properties
Corporation Incorporated Total
----------- ------------ -----
BALANCE, December 31, 1990 $47,172 $47,172 $94,344
Net income 1,235 1,235 2,470
--------------------------------------
BALANCE, December 31, 1991 48,407 48,407 96,814
Net income 1,152 1,152 2,304
--------------------------------------
BALANCE, December 31, 1992 49,559 49,559 99,118
Distributions (4,000) (4,000) (8,000)
Net income 2,161 2,161 4,322
--------------------------------------
BALANCE, December 31, 1993 $47,720 $47,720 $95,440
======================================
The accompanying notes are an integral part of these combined statements.
35
37
WILDWOOD ASSOCIATES AND GREEN VALLEY ASSOCIATES II
COMBINED STATEMENTS OF CASH FLOWS (Note 9)
FOR THE YEARS ENDED DECEMBER 31, 1991, 1992 AND 1993
($ in thousands)
1991 1992 1993
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 2,470 $ 2,304 $ 4,322
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 7,257 8,278 8,336
Rental revenue recognized on straight-line
basis in excess of rental revenue
specified in the lease agreements (2,527) (3,278) (570)
Change in tenant rental receivables (19) 101 (106)
Change in accounts payable and accrued
liabilities related to operations 1,462 156 24
-----------------------------------------------------------
Net cash provided by operating activities 8,643 7,561 12,006
-----------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Property acquisition and development expenditures (22,458) (2,389) (3,581)
Payment for deferred expenses; furniture, fixtures
and equipment; and other assets (1,522) (939) (1,617)
------------------------------------------------------------
Net cash used in investing activities (23,980) (3,328) (5,198)
------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of notes payable (356) (2,735) (413)
Proceeds from line of credit 10,949 4,350 11,500
Repayments under line of credit (1,350) (5,350) (10,400)
Partnership distributions -- -- (8,000)
-----------------------------------------------------------
Net cash provided by (used in) financing activities 9,243 (3,735) (7,313)
-----------------------------------------------------------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS (6,094) 498 (505)
CASH AND CASH EQUIVALENTS AT BEGINNING
OF YEAR 6,105 11 509
-----------------------------------------------------------
CASH AND CASH EQUIVALENTS AT END OF
YEAR $ 11 $ 509 $ 4
===========================================================
The accompanying notes are an integral part of these combined statements.
36
38
WILDWOOD ASSOCIATES AND GREEN VALLEY ASSOCIATES II
NOTES TO COMBINED FINANCIAL STATEMENTS
DECEMBER 31, 1991, 1992 AND 1993
1. SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION:
The Combined Financial Statements include the accounts of Wildwood
Associates ("WWA") and Green Valley Associates II ("GVA II"), both of which are
general partnerships. Cousins Properties Incorporated (together with its other
consolidated entities hereinafter referred to as "Cousins") and International
Business Machines Corporation ("IBM") each have a 50% general partnership
interest in both partnerships. The financial statements of the partnerships
have been combined because of the common ownership. The combined entities are
hereinafter referred to as the "Partnerships." All transactions between WWA
and GVA II have been eliminated in the Combined Financial Statements.
COST OF PROPERTY CONTRIBUTED BY COUSINS:
The cost of property contributed or committed to be contributed by
Cousins was recorded by WWA based upon the procedure described in Note 3. Such
cost was, in the opinion of the partners, at or below estimated fair market
value at the time of such contribution or commitment, but was in excess of
Cousins' historical cost basis.
COST CAPITALIZATION:
All costs related to planning, development and construction of
buildings, and expenses of buildings prior to the date they become operational
for financial statement purposes, are capitalized. Interest and real estate
taxes are also capitalized to property under development.
DEPRECIATION AND AMORTIZATION:
Buildings are depreciated over 25 to 40 years. Furniture, fixtures,
and equipment are depreciated over 5 years. Leasehold improvements and tenant
improvements are amortized over the life of the leases or useful life of the
assets, whichever is shorter. Deferred expenses - which include organizational
costs, certain marketing and leasing costs, and loan acquisition costs - are
amortized over the period of estimated benefit. The straight-line method is
used for all depreciation and amortization.
ALLOWANCE FOR POSSIBLE LOSSES:
The allowance for possible losses provides for potential writeoffs of
certain tenant related assets on WWA's books. The allowance reflects
management's evaluation of the credit exposure to WWA based on a specific
review of existing tenants and the impact of current economic conditions on
those tenants.
37
39
ALLOCATION OF OPERATING EXPENSES:
In accordance with certain lease agreements, certain management and
maintenance costs incurred by WWA are allocated to individual buildings or
tenants, including buildings not owned by WWA.
INCOME TAXES:
No provision has been made for federal or state income taxes because
each partner's proportionate share of income or loss from the Partnerships is
passed through to be included on each partner's separate tax return.
CASH AND CASH EQUIVALENTS:
Cash and Cash Equivalents includes all cash and highly liquid money
market instruments. Highly liquid money market instruments include securities
and repurchase agreements with original maturities of three months or less,
money market mutual funds, and securities on which the interest rate is
adjusted to market rate at least every three months.
RENTAL INCOME:
In accordance with Statement of Financial Accounting Standards No. 13
("SFAS No. 13"), income on leases which include scheduled increases in rental
rates over the lease term is recognized on a straight-line basis.
2. FORMATION AND PURPOSE OF THE PARTNERSHIPS
WWA and GVA II were formed under the terms of partnership agreements
effective May 30, 1985 and March 31, 1988, respectively. The purpose of the
Partnerships is, among other things, to develop and operate the Summit Green
project located in Greensboro, North Carolina, and selected property within
Wildwood Office Park ("Wildwood"), located in Cobb County, Georgia.
Summit Green is a project consisting of one office building and a
parts distribution center totaling approximately 144,000 gross square feet
("GSF") which was completed in 1986, and land for two additional office
buildings not yet constructed. The two additional buildings are planned to
total approximately 240,000 GSF. The 21 acres in the project are leased from a
third party by WWA (see Note 8). GVA II subleases the undeveloped portion of
this land from WWA.
Wildwood is an office park containing a total of approximately 289
acres, of which approximately 73 acres are owned by WWA, and an estimated 31
acres are committed to be contributed to WWA by Cousins (see Note 3). Cousins
owns the balance of the developable acreage in the park. At December 31, 1993,
WWA's income producing real estate assets in Wildwood consisted of: one office
building of 338,000 GSF which became operational January 1, 1986, one office
building of 684,000 GSF which became operational December 1, 1987 and one
office building of 757,000 GSF which became operational April 1, 1991
(including land under such buildings totaling approximately 35 acres); land
parcels totaling approximately 13 acres leased to two banking facilities and
four restaurants (one of which is currently under construction); a 2 acre site
on which a child care facility is constructed, and a 1 acre restaurant site.
In addition, WWA's assets include 53 acres of land held for future development,
which is composed of a 6 acre site with a restaurant and approximately 58,000
square feet of office space which was purchased in 1986 for future development
(classified with income producing properties in the ac-
38
40
companying financial statements), and 47 acres of other land to be developed
(including additional land committed to be contributed by Cousins) (see Note
3).
3. CONTRIBUTIONS TO THE PARTNERSHIPS
IBM and Cousins have each contributed or committed to contribute
$62,857,000 in cash or properties to the Partnerships. The value of property
contributed was agreed to by the partners at the time of formation of WWA.
The status of contributions at December 31, 1993, was as follows ($ in
thousands):
IBM COUSINS TOTAL
------- ------- --------
Cash contributed $46,590 $ 84 $ 46,674
Property contributed 16,267 42,817 59,084
Land committed to be contributed -- 19,956 19,956
------------------------------------------
Total $62,857 $62,857 $125,714
==========================================
WWA has elected not to take title to the remaining land committed to
be contributed by Cousins until such land is needed for development. However,
Cousins' capital account was previously credited with the amount originally
required to bring it equal to IBM's, and a like amount, plus preacquisition
costs paid by WWA, and condemnation proceeds net of condemnation restoration
costs, were set up as an asset entitled "Land Committed To Be Contributed."
This asset account subsequently has been reduced as land actually has been
contributed, or as land yet to be contributed became associated with a
particular building.
At December 31,1993, Cousins was committed to contribute land on which
an additional 1,473,691 GSF are developable, provided that regardless of
planned use or density, 38,333 GSF shall be the minimum GSF attributed to each
developable acre contributed. Cousins has also agreed to contribute
infrastructure land in Wildwood, as defined, at no cost to WWA, in order to
provide the necessary land for development of roads and utilities. The
ultimate acreage remaining to be contributed by Cousins will depend upon the
actual density achieved, but would be approximately 31 acres if the density
were similar to that achieved on land contributed to date.
4. OTHER PROVISIONS OF THE PARTNERSHIP AGREEMENTS
Net income or loss and net cash flow, as defined, shall be allocated
to the partners based on their percentage interests (50% each, subject to
adjustment as provided in the partnership agreements).
In the event of dissolution of the Partnerships, the assets will be
distributed as follows:
- First, to repay all debts to third parties, including any
secured loans with the partners.
- Second, to each partner until each capital account is reduced
to zero.
- The balance to each partner in accordance with its percentage
interest.
39
41
WWA pays all real estate taxes on property owned by Cousins which is
subject to future contribution. Such real estate taxes were $208,000,
$194,000, and $190,000, in 1991, 1992 and 1993, respectively, all of which were
expensed.
5. FEES TO RELATED PARTIES
The Partnerships engaged Cousins to develop and lease the
Partnerships' property, and Cousins Management, Inc. ("CMI"), to manage the
Partnerships' property. As of November 20, 1992, Cousins acquired the assets
of CMI and assumed its management functions. Fees to Cousins and CMI incurred
by the Partnerships during 1991, 1992 and 1993 were as follows ($ in
thousands):
1991 1992 1993
---- ---- ----
Development fees and tenant
construction fees $1,299 $ 63 $ 132
Management fees 725 787 902
Leasing and procurement fees 227 331 523
-----------------------
$2,251 $1,181 $1,557
=======================
6. RENTAL REVENUES
WWA leases property to the partners, as well as to unrelated third
parties. The leases with partners are at rates comparable to those quoted to
third parties. The leases typically contain escalation provisions and
provisions requiring tenants to pay a pro rata share of operating expenses.
The leases typically include renewal options and all are classified and
accounted for as operating leases.
At December 31, 1993, future minimum rentals to be received under
existing non-cancelable leases, including tenants' current pro rata share of
operating expenses are as follows ($ in thousands):
Leases
Leases With
With Third
Partners Parties Total
-------- ------- -----
1994 $ 23,333 $12,766 $ 36,099
1995 22,845 14,456 37,301
1996 19,051 10,431 29,482
1997 17,469 10,327 27,796
1998 18,379 8,823 27,202
Subsequent to 1998 55,956 26,537 82,493
-------------------------------------
$157,033 $83,340 $240,373
=====================================
40
42
In the years ended December 31, 1991, 1992 and 1993, income recognized
on a straightline basis exceeded income which would have accrued in accordance
with the lease terms by $2,527,000, $3,278,000, and $570,000, respectively. At
December 31, 1992 and 1993, receivables which related to the cumulative excess
of revenues recognized in accordance with SFAS No. 13 over revenues which
accrued in accordance with the actual lease agreements totaled $13,452,000 and
$14,022,000, respectively. Of the 1993 amount, 61% was related to leases with
IBM.
7. NOTES PAYABLE
At December 31, 1992 and 1993, notes payable consisted of the following
($ in thousands):
Due In
----------------------------------------------
Six
Year-End Years
Interest One Two Three Four Five or
Description Rate Balance Year Years Years Years Years Later
- ----------- ---- ------- ---- ----- ----- ----- ----- -----
2300 Windy Ridge
Parkway 9.090% $ 82,000 $ 178 $ 567 $ 621 $ 679 $ 744 $79,211
2500 Windy Ridge
Parkway 9.125% 31,502 362 397 30,743 -- -- --
Summit Green 9.875% 10,736 90 99 109 121 10,317 --
3200 Windy
Hill Road 3.710% 9,700 9,700 -- -- -- -- --
------------------------------------------------------------------
December
31, 1993 $133,938 $10,330 $1,063 $31,473 $ 800 $11,061 $79,211
==================================================================
December
31, 1992 $133,251 $ 9,013 $ 630 $ 1,063 $31,473 $ 800 $90,272
==================================================================
The 2300 Windy Ridge Parkway Building note is secured by the building
and two additional leased commercial properties in Wildwood, which properties
had a net carrying value of approximately $64,600,000 and $62,300,000 at
December 31, 1992 and 1993, respectively. The note is also secured by a bank
letter of credit under which $362,000 could be drawn by the lender at December
31, 1993. The note is payable interest only through August 10, 1994, after
which it amortizes in equal monthly installments of $665,108 based on a 30 year
amortization schedule, and matures August 10, 1999.
The 2500 Windy Ridge Parkway Building note is secured by the building,
which had a net carrying value of approximately $22,000,000 and $21,300,000 at
December 31, 1992 and 1993, respectively. The note amortizes in equal monthly
installments of $268,499 based on a 30 year amortization schedule, and matures
June 28, 1996.
The Summit Green Building note is secured by a leasehold mortgage on
the building, which had a net carrying value of approximately $8,300,000 and
$7,900,000 at December 31, 1992 and 1993, respectively. The note amortizes in
equal monthly installments of $95,517 based on a 30 year amortization schedule,
and matures April 1, 1998.
41
43
The note related to the 3200 Windy Hill Road building is an unsecured
line of credit under which up to $50,000,000 may be drawn. As amended and
restated as of August 1, 1990, the line of credit matures September 1, 1994,
but will automatically be renewed from year to year unless the lender provides
a notice of non-renewal at least three months in advance of the annual renewal
date. The line generally prohibits new borrowings other than those under the
line, or the pledging of any assets not pledged as of August 1, 1990. The line
bears a floating interest rate equal to the daily federal funds rate plus 3/4%,
and there are no fees or compensating balance arrangements required under the
line. Cousins and IBM have each severally guaranteed one-half of the line of
credit.
The Partnerships capitalize interest expense to property under
development as required by Statement of Financial Accounting Standards No. 34.
In the years ended December 31, 1991 and 1993, the Partnerships capitalized
interest totaling $1,443,000 and $108,000, respectively. No interest was
capitalized during the year ended December 31, 1992.
The estimated fair value of the Partnership's $133 million and $134
million of notes payable at December 31, 1992 and 1993, respectively, is $139
million and $144 million, respectively, calculated by discounting future cash
flows under the notes payable at estimated rates at which similar notes would
be made currently.
8. GROUND LEASE
All of the land in the Summit Green development is subject to a
non-subordinated ground lease expiring October 31, 2084. Lease payments
commenced December 1, 1986, and are payable in monthly installments at an
annual rate of approximately $322,000 per year for the first ten years. The
lease rate escalates at ten year intervals commencing December 1, 1996, based
on the cumulative increase in the Consumer Price Index ("Index") over the prior
ten year period (subject to a 5% annual cap on the increase in such Index in
any one year); or, at lessor's option, at the end of any ten year interval the
property shall be appraised, and the lessee shall elect to either purchase the
land for the appraised value, or pay annually during the succeeding ten year
period 10% of the appraised fair market value of the land.
9. COMBINED STATEMENTS OF CASH FLOWS-SUPPLEMENTAL
INFORMATION
Interest (net of amounts capitalized) was as follows ($ in thousands):
1991 1992 1993
---- ---- ----
Interest paid $ 10,201 $ 12,038 $ 11,608
Significant non-cash financing and investing activities included the
following:
In 1992, land parcels with an aggregate value of $4,583,000 were
transferred from Land Committed To Be Contributed to Land and Property
Predevelopment Costs.
In 1993, a land parcel with a value of $926,000 was transferred from
Land Committed To Be Contributed to Land and Property Predevelopment Costs. In
September 1993, restaurant site parcels under construction with an aggregate
value of $6,700,000 were transferred from Land and Property Predevelopment
Costs to Income Producing Properties. See Notes 2 and 3.
42
44
SCHEDULE VIII
WILDWOOD ASSOCIATES AND GREEN VALLEY ASSOCIATES II
VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
FOR THE YEARS ENDED DECEMBER 31, 1991, 1992 AND 1993
($ in thousands)
Column A Column B Column C Column D Column E Column F
-------- -------- -------- -------- -------- --------
Additions Additions
Balance at Charged to Charged to Balance at
Beginning Costs & Other End
Description (a) of Period Expenses Accounts (b) Deductions (c) of Period
--------------- --------- ---------- ------------ -------------- ----------
Allowance for Possible Losses:
Year Ended December 31, 1991 $3,000 $-- $25 $320 $2,705
Allowance for Possible Losses:
Year Ended December 31, 1992 $2,705 $-- $18 $102 $2,621
Allowance for Possible Losses:
Year Ended December 31, 1993 $2,621 $-- $-- $ 2 $2,619
NOTES: (a) The allowance for possible losses provides for potential
writeoffs of certain tenant related assets on Wildwood
Associates' books.
(b) Additions charged to other accounts are recoveries.
(c) Deductions are writeoffs of tenant improvements, deferred
lease costs, and receivables.
43
45
SCHEDULE IX
WILDWOOD ASSOCIATES AND GREEN VALLEY ASSOCIATES II
SHORT-TERM BORROWINGS
FOR THE YEARS ENDED DECEMBER 31, 1991, 1992 AND 1993
($ in thousands)
Column A Column B Column C Column D Column E Column F
-------- -------- -------- -------- -------- --------
Weighted Average Maximum Amount Average Amount Weighted Average
Category of Aggregate Balance at Interest Rate at Outstanding Outstanding Interest Rate
Short-Term Borrowings End of Year End of Year During Year During Year (a) During Year (b)
--------------------- ----------- ---------------- -------------- --------------- ---------------
YEAR ENDED DECEMBER 31, 1991:
Line of Credit from Bank $9,600 5.18% $10,000 $4,799 6.07%
YEAR ENDED DECEMBER 31, 1992:
Line of Credit from Bank $8,600 3.67% $ 9,650 $7,825 4.30%
YEAR ENDED DECEMBER 31, 1993:
Line of Credit from Bank $9,700 3.71% $10,000 $8,122 3.77%
NOTES: (a) The average borrowings were determined based on the daily
amounts outstanding.
(b) The weighted average interest rate during the year was
computed by dividing the actual applicable interest expense
for the year by the average borrowings outstanding.
44
46
SCHEDULE X
WILDWOOD ASSOCIATES AND GREEN VALLEY ASSOCIATES II
SUPPLEMENTARY INCOME STATEMENT INFORMATION
FOR THE YEARS ENDED DECEMBER 31, 1991, 1992 AND 1993
($ in thousands)
Column A Column B
-------- --------
Charged to Costs and Expenses
-----------------------------
Item 1991 1992 1993
---- ---- ---- ----
Maintenance and repairs $2,430 $2,843 $2,774
=======================
Amortization of intangible assets and
other deferrals (1) $ 997 $1,122 $1,239
=======================
Taxes, other than payroll and income taxes $2,606 $2,283 $2,975
=======================
(1) Includes amortization of deferred leasing costs, marketing expenses,
financing costs, and organization expenses.
45
47
SCHEDULE XI
WILDWOOD ASSOCIATES AND GREEN VALLEY ASSOCIATES II
REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 1993
($ in thousands)
Column A Column B Column C Column D
- -------- -------- -------- --------
Costs Capitalized
Initial Cost Subsequent
to Venture to Acquisition
----------------------- -------------------
Carrying
Costs
Buildings Less Cost
and Improve- of Sales
Description Encumbrances Land Improvements ments and Other
- ----------- ------------ ------ ------------ ----------- -----------
Wildwood Office Park -
Cobb Co., GA
2500 Windy Ridge $ 31,502 $ 4,414 $ 14,814 $ 8,776 $ 141
2300 Windy Ridge 82,000 8,927 -- 61,393 5,429
Parkside -- 4,274 2,553 109 (45
3200 Windy Hill 9,700 10,503 -- 65,661 5,470
Stand Alone Retail Sites -- 7,659 1,234 2,348 108
Land committed to
be contributed -- 20,059 -- -- 381
Other land and
property -- 11,430 -- 3,327 (69)
-----------------------------------------------------------
123,202 67,266 18,601 141,614 11,415
-----------------------------------------------------------
Summit Green, Greensboro, NC:
Summit Green Phase I 10,736 -- -- 10,058 259
Other property -- -- -- 501 --
-----------------------------------------------------------
10,736 -- -- 10,559 259
-----------------------------------------------------------
$133,938 $67,266 $18,601 $152,173 $11,674
===========================================================
Column E Column F Column G Column H Column I
-------- ------- -------- -------- --------
Gross Amount at Which
Carried at
December 31, 1993
------------------------------------------
Life
Which on
Depreciation
Accumu- In 1993
Land Buildings lated Date of Income
and Land and Total Deprecia- Construc- Date Statement
Description Improvements Improvements (a) tion (a) tion Acquired Is Computed
- ----------- ------------ ------------ ----- ---------- -------- -------- -----------
Wildwood Office Park -
Cobb Co., GA
2500 Windy Ridge $ 4,414 $ 23,731 $ 28,145 $ 6,863 1985 1985 40 Years
2300 Windy Ridge 8,927 66,822 75,749 14,813 1986 1986 40 Years
Parkside 4,230 2,661 6,891 853 1980 1986 25 Years
3200 Windy Hill 10,503 71,131 81,634 7,191 1989 1989 40 Years
Stand Alone Retail Sites 8,276 3,073 11,349 577 Various 1985-1992 Various
Land committed to
be contributed 20,440 -- 20,440 -- -- 1985-1986 --
Other land and
property 11,639 3,049 14,688 229 Various 1985-1986 Various
-------------------------------------------------
68,429 170,467 238,896 30,526
-------------------------------------------------
Summit Green, Greensboro, NC:
Summit Green Phase I -- 10,317 10,317 2,406 1986 1986 40 Years
Other property -- 501 501 -- 1986 1986 --
-------------------------------------------------
-- 10,818 10,818 2,406
-------------------------------------------------
$68,429 $181,285 $249,714 $32,932
=================================================
NOTE: (a) Reconciliations of total real estate carrying value and
accumulated depreciation for the three years ended December 31, 1993 are as
follows:
Real Estate Accumulated Depreciation
---------------------------------- --------------------------------------
1991 1992 1993 1991 1992 1993
-------- -------- -------- ------- ------- -------
Balance at beginning of period $231,710 $244,212 $246,472 $14,223 $20,510 $26,039
Additions during the period:
Improvements, and other
capitalized costs 12,502 3,747 3,242 -- -- --
Provisions for depreciation -- -- -- 6,287 6,956 6,893
Deductions during the period:
Retirement of fully depreciated
assets and writeoffs -- (1,487) -- -- (1,427) --
---------------------------------- --------------------------------------
Balance at close of period $244,212 $246,472 $249,714 $20,510 $26,039 $32,932
================================== ======================================
46
48
REPORT OF INDEPENDENT AUDITORS
TO THE PARTNERS OF
CSC ASSOCIATES, L.P. (A LIMITED PARTNERSHIP)
We have audited the accompanying balance sheets of CSC Associates, L.P. (the
Partnership) as of December 31, 1992 and 1993, and the related statements of
operations, partners' capital, and cash flows for each of the three years in
the period ended December 31, 1993. Our audits also included the financial
statement schedules of CSC Associates, L.P. listed in the Index at Item 14(a).
These financial statements and schedules are the responsibility of the
Partnership's management. Our responsibility is to express an opinion on these
financial statement and schedules based on our audits. We conducted our audits
in accordance with generally accepted auditing standards. Those standards
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We believe
that our audits provide a reasonable basis for opinion. In our opinion, the
financial statements referred to above present fairly, in all material
respects, the financial position of CSC Associates, L.P. at December 31, 1992
and 1993, and the results of its operations and its cash flows for each of the
three years in the period ended December 31, 1993, in conformity with generally
accepted accounting principles. Also, in our opinion, the related financial
statement schedules when considered in relation to the basic financial
statements taken as a whole, present fairly in all material respects the
information set forth therein.
Ernst & Young
Atlanta, Georgia
February 4, 1994
47
49
CSC ASSOCIATES, L.P.
BALANCE SHEETS
DECEMBER 31, 1992 AND 1993
($ in thousands)
ASSETS
1992 1993
---- ----
REAL ESTATE ASSETS:
Building and improvements, including land and
land improvements of $22,082 and $22,818 in
1992 and 1993, respectively $195,681 $200,781
Accumulated depreciation (3,463) (9,176)
------------------------
192,218 191,605
------------------------
CASH -- 965
------------------------
OTHER ASSETS:
Deferred expenses, net of accumulated amortization
of $1,124 and $1,663 in 1992 and 1993, respectively 9,808 8,612
Receivables (Note 3) 2,230 5,522
Furniture, fixtures and equipment, net of accumulated
depreciation of $190 and $502 in 1992 and 1993,
respectively 1,330 1,434
Other 27 37
------------------------
Total other assets 13,395 15,605
------------------------
$205,613 $208,175
========================
LIABILITIES AND PARTNERS' CAPITAL
NOTES PAYABLE (Note 4) $163,513 $ --
RETAINAGE, ACCOUNTS PAYABLE AND ACCRUED
LIABILITIES 6,500 2,322
------------------------
Total liabilities 170,013 2,322
------------------------
PARTNERS' CAPITAL (Note 1) 35,600 205,853
------------------------
$205,613 $208,175
========================
The accompanying notes are an integral part of these balance sheets.
48
50
CSC ASSOCIATES, L.P.
STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1991, 1992 AND 1993
($ in thousands)
1991 1992 1993
---- ---- ----
REVENUES:
Rental income and recovery of expenses
charged directly to specific tenants $ -- $19,831 $27,810
OPERATING EXPENSES:
Real estate taxes -- 1,468 3,673
Utilities -- 1,072 1,317
Management and personnel costs -- 1,013 1,311
Cleaning -- 763 1,042
Contract security -- 360 419
Repairs and maintenance -- 192 258
Elevator -- 11 193
Parking -- 144 186
Insurance -- 101 111
Grounds maintenance -- 41 90
----------------------------
Total operating expenses -- 5,165 8,600
----------------------------
OTHER EXPENSES:
Interest expense -- 12,318 12,317
Depreciation and amortization 40 4,448 7,182
Marketing and other expenses -- 315 174
General and administrative expenses -- 29 8
----------------------------
Total other expenses 40 17,110 19,681
----------------------------
Total expenses 40 22,275 28,281
----------------------------
CAPITALIZED OPERATIONS -- 1,392 --
----------------------------
LOSS BEFORE EXTRAORDINARY ITEM (40) (1,052) (471)
EXTRAORDINARY ITEM (Note 4) -- -- (723)
----------------------------
NET LOSS $ (40) $ (1,052) $ (1,194)
============================
The accompanying notes are an integral part of these statements.
49
51
CSC ASSOCIATES, L.P.
STATEMENTS OF PARTNERS' CAPITAL
FOR THE YEARS ENDED DECEMBER 31, 1991, 1992 AND 1993
($ in thousands)
BALANCE, December 31, 1990 $ 36,692
Net loss (40)
--------
BALANCE, December 31, 1991 36,652
Net loss (1,052)
--------
BALANCE, December 31, 1992 35,600
Capital contributions 173,347
Distributions (1,900)
Net loss (1,194)
--------
BALANCE, December 31, 1993 $205,853
========
The accompanying notes are an integral part of these statements.
50
52
CSC ASSOCIATES, L.P.
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1991, 1992 AND 1993
($ in thousands)
(Note 6)
1991 1992 1993
------ ------ ------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (40) $ (1,052) $ (1,194)
Extraordinary item (Note 4) -- -- 723
Adjustments to reconcile net loss to
net cash provided by operating activities:
Depreciation and amortization 40 4,448 7,182
Rental revenue recognized on straight-line
basis in excess of rental revenue
specified in the lease agreements -- (2,047) (3,333)
Change in other receivables and
other assets -- (210) 31
Change in accounts payable and
accrued liabilities related to operations -- 2,815 (1,016)
-------------------------------------
Net cash provided by operating activities -- 3,954 2,393
-------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to building and improvements (95,895) (52,169) (7,242)
Payments for deferred expenses and furniture,
fixtures and equipment (1,600) (7,325) (2,120)
-------------------------------------
Net cash used in investing activities (97,495) (59,494) (9,362)
-------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from construction loan 108,014 55,499 4,533
Repayment of construction loan -- -- (168,046)
Net change in borrowings under line of credit (10,482) -- --
Capital contributions -- -- 173,347
Partnership distributions -- -- (1,900)
-------------------------------------
Net cash provided by financing activities 97,532 55,499 7,934
-------------------------------------
NET INCREASE (DECREASE) IN CASH 37 (41) 965
CASH AT BEGINNING OF YEAR 4 41 --
-------------------------------------
CASH AT END OF YEAR $ 41 $ -- $ 965
=====================================
The accompanying notes are an integral part of these statements.
51
53
CSC ASSOCIATES, L.P.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31 1991, 1992 AND 1993
1. FORMATION OF THE PARTNERSHIP AND TERMS OF THE PARTNERSHIP AGREEMENT
CSC Associates, L.P. ("CSC," or the "Partnership") was formed under
the terms of a Partnership Agreement effective September 29, 1989. C&S
Premises, Inc. ("Premises"), a wholly owned subsidiary of C&S/Sovran
Corporation (the "Holding Corporation"), and Cousins Properties Incorporated
("CPI"), each own a 1% general partnership and a 49% limited partnership
interest in the Partnership. The Holding Corporation became a wholly owned
subsidiary of NationsBank Corporation on December 31, 1991. The Partnership
was formed for the purpose of developing and owning a 1.4 million gross square
foot office tower in downtown Atlanta, Georgia (the "Building"), which is the
Atlanta headquarters of NationsBank Corporation.
The Partnership Agreement and related documents (the "Agreements")
contain among other provisions, the following:
a. CPI is the Managing Partner.
b. CPI is obligated to contribute a total of $18.2 million cash
to the Partnership, all of which has been contributed. Premises is obligated
to contribute land parcels to the Partnership having an aggregate agreed upon
value of $18.2 million, all of which has been contributed, which property
value, in the opinion of the partners, is equal to the estimated fair market
value of the land at the time of formation of the Partnership. In October
1993, the partners each contributed an additional $86.7 million.
c. No interest is earned on partnership capital.
d. Net income or loss and cash distributions are allocated to the
partners based on their percentage interests (50% each), subject to a
preference to CPI. The CPI preference is $2.5 million, and accrues to CPI,
with interest at 9% to the extent unpaid, over the period February 1, 1992
through January 31, 1995. The partners have agreed that until cumulative
retained earnings (before considering distributions), exceed zero,
distributions will be based on their percentage interests. Thereafter, CPI
will be allocated its preference, to the extent earned, with amounts above the
preference amount allocated based on the partners' percentage interests.
2. SIGNIFICANT ACCOUNTING POLICIES
CAPITALIZATION POLICIES
All costs related to planning, development and construction of the
Building, and expenditures for the Building prior to the date it became
operational for financial statement purposes, have been capitalized. Interest
expense, amortization of financing costs, and real estate taxes were also
capitalized while the Building was under development.
52
54
The accompanying financial statements reflect revenues and expenses
subsequent to February 1, 1992, the date the first lease in the building
commenced. For financial reporting purposes, the Building was considered
operational on June 1, 1992. Capitalized operations in the accompanying
statement of operations represent revenues of $4,849,000 and expenses of
$6,241,000 which were capitalized for the period February 1, 1992 through May
31, 1992.
DEPRECIATION AND AMORTIZATION
Depreciation of the Building commenced the date the Building became
operational for financial statement purposes and the Building is being
depreciated over 40 years. Leasehold and tenant improvements are amortized
over the life of the leases or useful life of the assets, whichever is shorter.
Furniture, fixtures, and equipment are depreciated over 5 years. Deferred
expenses which include organizational costs, certain marketing and leasing
costs, and loan acquisition costs are amortized over the period of estimated
benefit. The straight line method is used for all depreciation and
amortization.
INCOME TAXES
No provision has been made for federal or state income taxes because
each partner's proportionate share of income or loss from the Partnership will
be passed through to be included on each partner's separate tax return.
RENTAL INCOME
In accordance with Statement of Financial Accounting Standards No. 13
("SFAS No. 13"), income on leases which include increases in rental rates over
the lease term is recognized on a straight-line basis.
PRESENTATION
Certain 1992 amounts have been reclassified to conform with the 1993
presentation.
3. LEASES
The Partnership has leased office space to the Holding Corporation, as
well as to unrelated third parties. The lease with the Holding Corporation is
at rates comparable to those quoted to third parties. The leases contain
escalation provisions and provisions requiring tenants to pay a pro rata share
of operating expenses. The leases typically include renewal options and all
are classified and accounted for as operating leases.
At December 31, 1993, future minimum rentals to be received under
existing non-cancelable leases, including tenants' current pro rata share of
operating expenses, are as follows ($ in thousands):
53
55
Lease Leases
With With
Holding Third
Corporation Parties Total
----------- ------- -----
1994 $ 14,145 $ 10,534 $ 24,679
1995 14,697 11,997 26,694
1996 15,091 12,331 27,422
1997 15,091 12,777 27,868
1998 15,091 13,022 28,113
Subsequent to 1998 202,476 110,899 313,375
----------------------------------
$276,591 $171,560 $448,151
==================================
In the years ended December 31, 1992 and 1993, income recognized on a
straight-line basis exceeded income which would have accrued in accordance with
the lease terms by $2,047,000 and $3,333,000, respectively. At December 31,
1992 and 1993, receivables which related to the cumulative excess of revenues
recognized in accordance with SFAS No. 13 over revenues which accrued in
accordance with the actual lease agreements totaled $2,047,000 and $5,380,000,
respectively. Of that amount, 28% was related to leases with the Holding
Corporation.
4. NOTES PAYABLE
At December 31, 1992, notes payable consisted solely of the amount
borrowed under a Construction Loan Agreement with six banks under which a
maximum of $210 million could have been drawn. On October 29, 1993, using
capital contributions made by each partner, the Partnership paid off this note
payable, which had an outstanding balance of $168 million. Approximately
$723,000 of deferred loan costs were written off due to the early
extinguishment of this note payable and is classified as an Extraordinary Item
in the accompanying Statements of Operations. The Construction Loan was
payable interest only monthly and had a floating interest rate equal to LIBOR
plus the Applicable Spread Rate. The Applicable Spread Rate was .85% through
May 29, 1992, and .70% through December 31, 1992. The Applicable Spread Rate
was reduced to .65% effective January 1, 1993 and .60% effective February 1,
1993 to maturity.
The Partnership entered into an interest rate swap agreement with an
affiliate of Premises which effectively fixed LIBOR at 8.45% through September
1993. The face amount of the swap increased over time in amounts corresponding
to the projected increases in the Construction Loan balance.
The Partnership has an unsecured $20 million line of credit provided
by an affiliate of Premises. Interest on the line is paid at a floating rate
(3.8% weighted average rate in December 1993), and interest only is payable
through July 31, 1994, at which time the entire outstanding balance is due.
There were no borrowings under the line at December 31, 1993.
For the years ended December 31, 1991 and 1992, the Partnership
capitalized interest expense totaling $5,749,000, and $4,591,000, respectively,
including $3,853,000 capitalized as part of capitalized operations in 1992.
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5. RELATED PARTIES
The Partnership has engaged an affiliate of CPI, Cousins Real Estate
Corporation ("CREC"), to develop and lease the Building and has engaged Cousins
Management, Inc. ("CMI") to manage the Building. In November 1992, CPI
purchased the assets of CMI and assumed all responsibilities under the
management agreement. During 1991, 1992 and 1993, fees to CREC, CMI, and CPI
incurred by the Partnership were as follows ($ in thousands):
1991 1992 1993
------ ------ ------
Development and tenant construction fees $2,252 $1,547 $ 58
Leasing and procurement fees -- 1,145 684
Management fees -- 444 610
-----------------------------
$2,252 $3,136 $1,352
=============================
6. STATEMENTS OF CASH FLOWS - SIGNIFICANT NON-CASH
TRANSACTIONS
In February 1992, the office building under construction with a book
value of $167,511,000 was transferred to Buildings and Improvements. In 1991
and 1993, there were no significant non-cash transactions. Interest paid net
of amounts capitalized was $8,007,000 and $13,387,000 in 1992 and 1993,
respectively.
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SCHEDULE IX
CSC ASSOCIATES, L.P.
SHORT-TERM BORROWINGS
FOR THE YEARS ENDED DECEMBER 31, 1991, 1992 AND 1993
($ in thousands)
Column A Column B Column C Column D Column E Column F
-------- -------- -------- -------- -------- --------
Weighted Average Maximum Amount Average Amount Weighted Average
Category of Aggregate Balance at Interest Rate at Outstanding Outstanding Interest Rate
Short-Term Borrowings End of Year End of Year During Year During Year (a) During Year (b)
--------------------- ----------- ---------------- -------------- --------------- ---------------
YEAR ENDED DECEMBER 31, 1991:
Line of Credit from Bank $-- 5.3% $18,764,384 $10,689,039 6.8%
YEAR ENDED DECEMBER 31, 1992:
Line of Credit from Bank $-- 3.8% $15,100,000 $ 3,969,904 4.7%
YEAR ENDED DECEMBER 31, 1993:
Line of Credit from Bank $-- 3.8% $ 5,840,000 $ 2,515,315 3.9%
NOTES: (a) The average borrowings were determined based on the daily
amounts outstanding.
(b) The weighted average interest rate during the year was
computed by dividing the actual applicable interest expense
for the year by the average borrowings outstanding.
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SCHEDULE X
CSC ASSOCIATES, L.P.
SUPPLEMENTARY INCOME STATEMENT INFORMATION
FOR THE YEARS ENDED DECEMBER 31, 1992 and 1993 (1)
($ in thousands)
Column A Column B
-------- --------
Charged to Costs and Expense
----------------------------
Item 1992 1993
---- ---- ----
Maintenance and repairs $ --(2) $ 451
======================
Amortization of intangible assets and
other deferrals (3) $706 $1,185
======================
Taxes, other than payroll and income taxes $727 $3,673
======================
(1) All expenses were capitalized into the Building prior to June 1, 1992,
the date it became operational for financial reporting purposes.
(2) This item was less than 1% of revenues in the year indicated.
(3) Includes amortization of deferred leasing costs, marketing expenses,
financing costs, and organization expenses.
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59
CSC ASSOCIATES, L.P.
REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 1993
($ in thousands)
Column A Column B Column C Column D Column E Column F
-------- -------- -------- -------- -------- --------
Costs Capitalized Gross Amount at Which
Initial Cost Subsequent Carried at
to Venture to Acquisition December 31, 1993
------------------ ------------------- ---------------------------------
Carrying
Costs Accumu-
Buildings Less Cost Land Buildings lated
and Improve- of Sales and Land and Total Deprecia-
Description Encumbrances Land Improvements ments and Other Improvements Improvements (a) tion (a)
- ----------- ------------ ---- ------------ -------- --------- ------------ ------------ ----- --------
NationsBank Plaza
Atlanta, Georgia $ -- $ 18,200 $ -- $172,132 $10,449 $18,777 $182,004 $200,781 $9,176
Column G Column H Column I
-------- -------- --------
Life on
Which De-
preciation
In 1993
Date of Income
Construc- Date Statement
Description tion Acquired Is Computed
- -------------------------- --------- -------- -----------
NationsBank Plaza
Atlanta, Georgia 1990-1992 1990 40
NOTE: (a) Reconciliations of total real estate carrying value and accumulated depreciation for the three years ended December 31,
1993 areas follows:
Real Estate Accumulated Depreciation
------------------------------------ -----------------------------
1991 1992 1993 1991 1992 1993
-------- --------- --------- ----- ------ -------
Balance at beginning of period $ 60,529 $ 164,997 $ 195,681 $ -- $ -- $ 3,463
Improvements and other capitalized costs 104,468 30,684 5,100 -- -- --
Provision for depreciation -- -- -- -- 3,463 5,713
Balance at close of period $164,997 $ 195,681 $ 200,781 $ -- $3,463 $ 9,176
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