1
COUSINS PROPERTIES INCORPORATED AND CONSOLIDATED ENTITIES
CONSOLIDATED BALANCE SHEETS
- -----------------------------------------------------------------------------------------
($ IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
DECEMBER 31,
------------------
1992 1993
-------- --------
ASSETS
- ------
PROPERTIES (Notes 4 and 8)
Operating properties, net of accumulated depreciation of
$7,448 in 1992 and $9,418 in 1993 $ 37,370 $ 59,361
Land held for investment or future development 27,176 23,877
Projects under construction -- 14,556
Residential lots under development -- 1,040
------------------
Total properties 64,546 98,834
CASH AND CASH EQUIVALENTS, at cost, which approximates market 31,033 31,684
INVESTMENT IN GOVERNMENT AGENCY
SECURITIES, at cost, which approximates market 1,854 1,269
NOTES AND OTHER RECEIVABLES (Note 3) 62,582 68,186
INVESTMENT IN JOINT VENTURES (Notes 4 and 5) 30,574 115,252
OTHER ASSETS 5,202 4,477
------------------
TOTAL ASSETS $195,791 $319,702
==================
LIABILITIES AND STOCKHOLDERS' INVESTMENT
- ----------------------------------------
NOTES PAYABLE (Note 4) $ 9,079 $ 35,151
ACCOUNTS PAYABLE AND ACCRUED LIABILITIES 6,929 9,925
MINORITY INTERESTS IN CONSOLIDATED ENTITIES (Note 8) 23 3,648
DEPOSITS AND DEFERRED INCOME (Note 8) 3,669 421
------------------
TOTAL LIABILITIES 19,700 49,145
------------------
COMMITMENTS AND CONTINGENT LIABILITIES (Note 4)
STOCKHOLDERS' INVESTMENT (Notes 2 and 6)
Common stock, $1 par value, authorized 50,000,000 shares;
issued 21,716,911 in 1992 and 27,830,631 in 1993 21,717 27,831
Additional paid-in capital 53,427 147,018
Cumulative undistributed net income 100,947 95,708
------------------
TOTAL STOCKHOLDERS' INVESTMENT 176,091 270,557
------------------
TOTAL LIABILITIES AND STOCKHOLDERS' INVESTMENT $195,791 $319,702
==================
The accompanying notes are an integral part of these consolidated balance
sheets.
19
2
COUSINS PROPERTIES INCORPORATED AND CONSOLIDATED ENTITIES
CONSOLIDATED STATEMENTS OF INCOME
- ------------------------------------------------------------------------------------------------------------
($ IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
YEARS ENDED DECEMBER 31,
-------------------------------------
1991 1992 1993
------- ------- --------
REVENUES:
Rental revenues (Note 10) $ 6,728 $ 6,933 $ 6,687
Development and construction fees 3,571 1,744 898
Management fees (Note 2) 203 498 1,999
Leasing and other fees 1,081 2,711 3,006
Interest and other 7,127 6,989 6,456
-------------------------------------
18,710 18,875 19,046
-------------------------------------
INCOME FROM JOINT VENTURES (Note 5) 2,434 2,573 5,516
-------------------------------------
COSTS AND EXPENSES:
Rental property operations 2,456 2,354 2,310
General and administrative expenses 4,519 4,585 7,336
Depreciation and amortization 2,236 2,345 3,164
Leasing and other commissions 243 404 193
Stock appreciation right expense (Note 6) 378 860 721
Interest expense (Note 4) 1,149 820 --
Other 811 651 1,595
-------------------------------------
11,792 12,019 15,319
-------------------------------------
INCOME FROM OPERATIONS BEFORE INCOME TAXES
AND GAIN ON SALE OF INVESTMENT PROPERTIES 9,352 9,429 9,243
PROVISION (BENEFIT) FOR INCOME TAXES FROM
OPERATIONS (Note 7) 244 360 (795)
-------------------------------------
INCOME BEFORE GAIN ON SALE OF INVESTMENT PROPERTIES 9,108 9,069 10,038
-------------------------------------
GAIN ON SALE OF INVESTMENT PROPERTIES, NET OF
APPLICABLE INCOME TAX PROVISION (Notes 7 and 8) -- 6,644 1,927
NET INCOME $ 9,108 $15,713 $ 11,965
=====================================
INCOME PER SHARE (Note 6)
From operations before gain on sale of investment properties $ .53 $ .50 $ .44
From gain on sale of investment properties, net of
applicable income tax provision -- .36 .09
=====================================
NET INCOME PER SHARE $ .53 $ .86 $ .53
=====================================
CASH DIVIDENDS DECLARED PER SHARE (Note 6) $ .60 $ .62 $ .73
=====================================
The accompanying notes are an integral part of these consolidated statements.
20
3
COUSINS PROPERTIES INCORPORATED AND CONSOLIDATED ENTITIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' INVESTMENT
- ------------------------------------------------------------------------------------------------------------------------
YEARS ENDED DECEMBER 31, 1991, 1992 AND 1993
($ IN THOUSANDS)
ADDITIONAL CUMULATIVE
COMMON PAID-IN UNDISTRIBUTED TREASURY
STOCK CAPITAL NET INCOME STOCK TOTAL
------- ---------- ------------- ---------- --------
BALANCE, December 31, 1990 $20,237 $ 7,399 $108,754 $ (21,045) $115,345
Net income, 1991 -- -- 9,108 -- 9,108
Treasury stock sold -- 22 -- 29 51
Dividends declared -- -- (10,404) -- (10,404)
---------------------------------------------------------------------------
BALANCE, December 31, 1991 20,237 7,421 107,458 (21,016) 114,100
---------------------------------------------------------------------------
Net income, 1992 -- -- 15,713 -- 15,713
Cancellation of treasury stock (2,896) (7,421) (10,699) 21,016 --
Common stock issued pursuant to:
4,375,000 share stock offering,
net of expenses 4,375 53,389 -- -- 57,764
Exercise of options 9 101 -- -- 110
Common stock acquired (8) (63) (29) -- (100)
Dividends declared -- -- (11,496) -- (11,496)
---------------------------------------------------------------------------
BALANCE, December 31, 1992 21,717 53,427 100,947 -- 176,091
---------------------------------------------------------------------------
Net income, 1993 -- -- 11,965 -- 11,965
Common stock issued pursuant to:
6,100,000 share stock offering,
net of expenses 6,100 93,401 -- -- 99,501
Exercise of options 14 190 -- -- 204
Dividends declared -- -- (17,204) -- (17,204)
---------------------------------------------------------------------------
BALANCE, December 31, 1993 $27,831 $147,018 $ 95,708 $ -- $270,557
===========================================================================
The accompanying notes are an integral part of these consolidated statements.
21
4
COUSINS PROPERTIES INCORPORATED AND CONSOLIDATED ENTITIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (Note 9)
- ---------------------------------------------------------------------------------------------------------
($ IN THOUSANDS)
YEARS ENDED DECEMBER 31,
-----------------------------------
1991 1992 1993
------- ------- ---------
CASH FLOWS FROM OPERATING ACTIVITIES:
Income from operations before gain on sale of investment properties $ 9,108 $ 9,060 $ 10,038
Adjustments to reconcile net income to net cash --
provided by operating activities:
Depreciation and amortization 2,236 2,345 3,164
Stock appreciation right expense 378 860 721
Cash charges to expense accrual for stock appreciation rights -- (123) (147)
Other non-cash charges -- -- 310
Rental revenue recognized on straight-line basis in excess
of rental revenue specified in lease agreements (950) (804) (391)
Deferred income received 697 284 297
Deferred income recognized -- (703) (252)
Income from joint ventures (2,434) (2,573) (5,516)
Distributions from joint ventures 1,829 2,370 7,507
Changes in other operating assets and liabilities:
Change in other receivables 127 (237) 440
Change in accounts payable and accrued liabilities 136 945 (1,068)
-----------------------------------
Net cash provided by operating activities 11,127 11,433 15,103
-----------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Gain on sale of investment properties, net of applicable
income tax provision -- 6,644 1,927
Adjustments to reconcile gain on sale of investment properties
to net cash provided by sales activities:
Cost of sales -- 3,483 1,444
Deposits and deferred income received 368 358 --
Deposits and deferred income recognized -- (9,118) (3,370)
Investment in joint ventures, including interest capitalized to
equity investments (2,085) (725) (87,180)
Non-property acquisitions, net of cash acquired (Note 9) -- (2,003) --
Property acquisition and development expenditures (1,389) (6,038) (31,358)
Principal payments received on government
agency securities 530 648 585
Investment in notes receivable -- -- (5,524)
Collection of notes receivable 182 294 386
Change in other assets, net 277 (95) (458)
-----------------------------------
Net cash used in investing activities: (2,117) (6,552) (123,548)
-----------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Common or treasury stock sold, net of expenses 29 57,788 99,564
Proceeds from other notes payable -- 8,616 22,306
Dividends paid (10,404) (11,496) (17,204)
Proceeds from line of credit 1,393 788 3,499
Investment in joint venture by minority interest -- -- 974
Repayment of other notes payable (46) (480) (43)
Repayment of line of credit (470) (34,525) --
Common stock acquired -- (100) --
-----------------------------------
Net cash (used in) provided by financing activities (9,498) 20,591 109,096
-----------------------------------
NET (DECREASE) INCREASE IN CASH AND
CASH EQUIVALENTS (488) 25,472 651
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 6,049 5,561 31,033
-----------------------------------
CASH AND CASH EQUIVALENTS AT END OF YEAR $ 5,561 $ 31,033 $ 31,684
===================================
The accompanying notes are an integral part of these consolidated statements.
22
5
COUSINS PROPERTIES INCORPORATED AND CONSOLIDATED ENTITIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
DECEMBER 31 1991, 1992 AND 1993
1. SIGNIFICANT ACCOUNTING POLICIES
CONSOLIDATION AND PRESENTATION:
The Consolidated Financial Statements include the accounts of Cousins
Properties Incorporated ("Cousins") and its majority owned partnerships, as
well as Cousins Real Estate Corporation ("CREC") and its subsidiaries. All of
the entities included in the Consolidated Financial Statements are hereinafter
referred to collectively as the "Company." The Company's investments in its
non-majority owned joint ventures are recorded using the equity method of
accounting. However, the recognition of losses is limited to the amount of
direct or implied financial support. Information regarding the non-majority
owned joint ventures is included in Note 5.
Certain 1991 and 1992 amounts have been reclassified to conform with the
1993 presentation.
INCOME TAXES:
Since 1987, Cousins has elected to be taxed as a real estate investment
trust ("REIT"). As a REIT, Cousins is not subject to corporate federal income
taxes to the extent that it distributes 100% of its taxable income (excluding
CREC's consolidated taxable income) to stockholders, which is Cousins' current
intention. The Company computes taxable income on a basis different from that
used for financial reporting purposes (see Note 7). CREC and its wholly owned
subsidiaries file a consolidated federal income tax return.
DEPRECIATION AND AMORTIZATION:
Buildings are depreciated over 30 to 40 years. Furniture, fixtures and
equipment are depreciated over 5 to 7 years. Leasehold improvements and tenant
improvements are amortized over the life of the applicable leases or the
estimated useful life of the assets, whichever is shorter. Deferred expenses
are amortized over the period of estimated benefit. The straight-line method is
used for all depreciation and amortization.
FEE INCOME CLASSIFICATION AND RECOGNITION:
Development, construction, management, and leasing fees received from
unconsolidated joint ventures are recognized as earned. A portion of these fees
may be capitalized by the joint ventures; however, the Company expenses
salaries and other direct costs related to this income. The Company classifies
its share of fee income earned by unconsolidated joint ventures as fee income
rather than joint venture income for those ventures where the related expense
is borne primarily by the Company rather than the venture.
Development, construction, and leasing fees received by CREC and its
subsidiaries from Cousins and Cousins' majority owned joint ventures are
eliminated in consolidation. Such fees totaled $34,000, $7,800, and $918,000,
in 1991, 1992 and 1993, respectively. Management fees received from
consolidated entities are shown as a reduction in rental property operating
expenses.
COST CAPITALIZATION AND CLASSIFICATION:
All costs related to planning, development and construction of properties
(including directly related general and administrative expenses) are
capitalized. Also capitalized are interest, real estate taxes, and operating
expenses of properties prior to the date they become operational for financial
reporting purposes. Interest is capitalized to investments accounted for by the
equity method when the investee has property under development with a carrying
value in excess of the investee's borrowings. Deferred leasing and other
capitalized costs associated with a particular property are classified with
Properties in the Consolidated Balance Sheets.
CASH AND CASH EQUIVALENTS:
Cash and cash equivalents includes cash and highly liquid money market
instruments. Highly liquid money market instruments include securities and
repurchase agreements with original maturities of three months or less, money
market mutual funds, and securities on which the interest or dividend rate is
adjusted to market rate at least every three months.
INTEREST RATE SWAP AGREEMENTS:
The interest differential to be paid or received by the Company is
recognized currently as an increase or reduction in interest expense during the
term of a swap agreement.
RENTAL REVENUES:
In accordance with Statement of Financial Accounting Standards No. 13,
income on leases which include scheduled increases in rental rates over the
lease term is recognized on a straight-line basis.
23
6
2. RELATIONSHIP WITH MANAGEMENT ENTITY AND DEVELOPMENT
AND LEASING ENTITY
DEVELOPMENT AND LEASING ACTIVITIES - CREC conducts development and
leasing activities for real estate projects. CREC also manages a joint
venture property in which it has an ownership interest. At December 31, 1991,
1992 and 1993 Cousins owned 100% of CREC's $5,025,000 par value 8% cumulative
preferred stock and 100% of CREC's nonvoting common stock, which common stock
is entitled to 95% of any dividends of CREC after preferred dividend
requirements. Thomas G. Cousins, Chairman of the Board of Cousins, owns 100%
of the voting common stock of CREC, which voting common stock is entitled to
95% of any dividends of CREC after preferred dividend requirements. CREC is
included in the Company's Consolidated Financial Statements, but is taxed
as a regular corporation. CREC has paid no common dividends to date, and
for financial reporting purposes, none of CREC's income is attributable to Mr.
Cousins' minority interest because the face amount of CREC's preferred stock
plus accumulated dividends thereon ($7,437,000 in aggregate) exceed CREC's
$3,022,000 of equity.
On October 30, 1992, a wholly owned subsidiary of CREC, Cousins/New
Market Development Company, Inc. ("CNM"), acquired certain assets related to
the real estate development business of New Market Companies, Inc. and
affiliates. New Market has been active in the business of leasing and
developing retail power centers and other retail properties.
PROPERTY MANAGEMENT ACTIVITIES - Through November 19, 1992, Cousins
Management, Inc. ("CMI") conducted property management activities for Cousins
and certain of its joint ventures. A charitable foundation was the owner of
100% of the nonvoting common stock of CMI, which stock was entitled to 99% of
any dividends. Vipin L. Patel, Senior Executive Vice President of Cousins,
was the owner of 100% of the voting common stock of CMI, which stock was
entitled to 1% of any dividends. CMI was an independent contractor and was
not included in the Company's Consolidated Financial Statements. CMI received
$950,000 and $1,338,000 of management fees from the Company and its joint
ventures in 1991 and 1992, respectively. All personnel and other costs
associated with generating these management fees were absorbed by CMI.
On November 20, 1992, after receiving a ruling from the Internal
Revenue Service that Cousins' performance of the management activities which
had been conducted by CMI would not affect the status, as qualifying REIT
income, of the rents received from real property owned by Cousins or its
joint ventures, Cousins acquired the assets of CMI and began directly
managing properties owned by Cousins and certain of its joint ventures.
3. NOTES AND OTHER RECEIVABLES
At December 31, 1992 and 1993, notes and other receivables include the
following ($ in thousands):
1992 1993
------- -------
Wildwood Training Facility Mortgage Note $17,613 $18,208
9.1% Mortgage Notes 39,927 39,927
Norfolk Hotel Associates Line of Credit -- 4,624
Miscellaneous Notes 161 80
Cumulative rental revenue recognized on a straight-
line basis in excess of revenue which accrued in
accordance with lease terms (see Note 1) 3,344 3,735
Other Receivables 1,537 1,612
--------------------------
Total Notes and Other Receivables $62,582 $68,186
==========================
WILDWOOD TRAINING FACILITY MORTGAGE NOTE - This note, which has a
face amount of $25.9 million and matures November 30, 2013, is
collateralized by a building located on land owned by the Company and
leased to a limited partnership through November 30, 2013, with no renewal
option. The limited partnership also leased certain equipment from the
Company. The building was 100% leased to International Business Machines
Corporation ("IBM") through November 30, 1993. In January 1993, the IBM
lease was extended through November 30, 1998. Concurrently with the IBM
lease extension, the mortgage note and leases were also modified, and the
Company agreed to fund an additional $900,000 under the modified note during
1993 for building improvements.
The IBM lease generated net cash flow of approximately $3.7 million
annually to the limited partnership through December 31, 1992, of which
approximately $3.6 million was paid to the Company as note and lease
payments. Effective January 1, 1993, the IBM lease generated net cash flow of
approximately $2.4 million annually to the limited partnership, of which
approximately $2.3 million was paid to the Company as note and lease
payments. Of these amounts, ground lease payments of $304,000 per year have
been treated as rental
24
7
income in the accompanying financial statements. The leased land is
carried at $0 in the accompanying financial statements.
For financial reporting purposes, the following accounting treatment was
applied. During the years ended on and before December 31, 1992, payments from
the limited partnership in excess of the ground lease payments were treated as
interest (at 12.7%), principal amortization and deferred income. Cumulative
deferred income of $3.6 million was applied against the note balance at
December 31, 1992. During the year ended December 31, 1993, the Company
recognized payments as principal amortization over the remaining ground lease
term and interest at 9.235% on the carrying value of the note.
IBM has an option to extend its Training Facility lease from December 1,
1998 through November 30, 2003 on terms that would generate net cash flow to
the limited partnership of approximately $3.1 million annually, of which
approximately $3.0 million would be paid to the Company as note and ground
lease payments.
9.1% MORTGAGE NOTES - These notes are collateralized by shopping center
properties and guaranteed by the AT&T Master Pension Trust. The notes are
payable interest only until maturity in June 1994.
During 1991, 1992 and 1993, CREC purchased $4.0 million, $8.1 million and
$21.7 million participations, respectively, in the 9.1% mortgage notes from
Cousins. These purchases resulted in Cousins' recognition of gains for tax
purposes of $3.9 million, $7.7 million, and $20.0 million, respectively,
including installment gains of $3.6 million, $7.2 million, and $19.5 million,
respectively, which had been deferred for tax purposes in 1984. Cousins will
recognize additional installment gains for tax purposes of approximately $5.0
million upon repayment of the 9.1% mortgage note in 1994.
NORFOLK HOTEL ASSOCIATES LINE OF CREDIT - This $4.75 million line of
credit, payable upon demand, is due from Norfolk Hotel Associates (see Note
5). 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 Cousins for temporary investment of
excess cash. Norfolk Hotel Associates used the cash from Cousins to
temporarily pay down a Cousins guaranteed bank line of credit.
FAIR VALUE - The estimated fair value of the Company's $57.7 million and
$62.8 million of notes receivable at December 31, 1992 and 1993, respectively,
is $60.1 million and $63.8 million, respectively, calculated by discounting
future cash flows from the notes receivable at the estimated rates at which
similar loans would be made currently.
4. NOTES PAYABLE, COMMITMENTS, AND CONTINGENT LIABILITIES
At December 31, 1992 and 1993, the composition and scheduled maturities of
notes payable were as follows ($ in thousands):
DUE IN
----------------------------------------------------
YEAR-END ONE TWO THREE FOUR FIVE SIX YEARS
INTEREST RATE BALANCE YEAR YEARS YEARS YEARS YEARS OR LATER
------------- ------- ------ ----- ----- ----- ----- ---------
CREC Notes 3.7% $30,907 $30,907 $-- $ -- $-- $-- $ --
First Union Tower Line of Credit 4.0% 3,500 -- -- 3,500 -- -- --
Unsecured Note 10.0% 306 33 34 35 35 36 133
Life Insurance Loans 5.0% 250 -- -- -- -- -- 250
Land Mortgage 8.5% 188 43 47 52 46 -- --
---------------------------------------------------------------
DECEMBER 31, 1993 $35,151 $30,983 $81 $3,587 $81 $36 $383
===============================================================
DECEMBER 31, 1992 $ 9,079 $ 8,657 $43 $ 47 $53 $46 $233
---------------------------------------------------------------
At December 31, 1992 and 1993, the carrying value of notes payable
approximates fair value. Interest expense as reported in the Consolidated
Statements of Income included herein is net of interest capitalized of
$1,542,000, $571,000, and $346,000 in 1991, 1992 and 1993, respectively.
The CREC Notes are payable by CREC and guaranteed by Cousins. The note
proceeds were used by CREC to purchase participating interests in certain of
Cousins' notes receivable (see Note 3). The notes bear interest tied to the
daily Federal funds rate and mature June 21, 1994. $16,924,000 of the CREC
notes are payable on demand.
The First Union Tower Line of Credit is secured by an office building
which had a net carrying value of $28,133,000 and $26,724,000 in 1992 and
1993, respectively. The line bears interest tied to the daily Federal funds
rate. Interest only was payable through August 1993; thereafter, minimum
monthly payments of $290,000 are payable until maturity on December 31, 1996,
with any amount in excess of interest applied to principal. At December 31,
1993, up to $34,449,000 may be borrowed under the line, which amount will be
reduced by any principal portion of the minimum monthly payments. Cousins has
guaranteed 27.3% of the principal outstanding under the line.
25
8
Certain property (carrying value of $1,000,000 and $991,000 in 1992 and
1993, respectively), and cash surrender value of life insurance ($302,000
and $311,000 in 1992 and 1993, respectively), are pledged as collateral on the
Land Mortgage and Life Insurance Loans, respectively.
In addition to the above indebtedness, at December 31, 1993, Cousins
had future lease commitments under a land lease aggregating $7.5 million
over its remaining term of 75 years. Current annual lease payments are
approximately $63,000.
Cousins has guaranteed the following obligations related to its
unconsolidated joint ventures (see Note 5):
a. Wildwood Associates - One half of a $50 million bank line of credit,
under which $9,700,000 was drawn at December 31, 1993. The line of credit
matures September 1, 1994, but is renewable on an annual basis at the lender's
discretion.
b. Norfolk Hotel Associates - $4,850,000 bank line of credit under which
$1,000 was drawn at December 31, 1993. The line of credit matures November 1,
1994, but may be called at an earlier date under certain circumstances.
c. CSC Associates, L.P. - One half of a $20 million bank line of credit
used for working capital under which there was no outstanding balance at
December 31, 1993.
d. Dusseldorf Joint Venture - A DEM 4,750,000 (approximately $2.8 million)
letter of credit guaranteeing certain obligations related to the Dusseldorf
project.
The Company has entered into construction and design contracts for
retail power centers and residential lot development of which approximately
$10.2 million remains committed at December 31, 1993.
5. INVESTMENT IN JOINT VENTURES
The following information summarizes financial data and principal
activities of non-majority owned joint ventures in which the Company had
ownership interests ($ in thousands):
COMPANY'S
TOTAL ASSETS TOTAL DEBT TOTAL EQUITY INVESTMENT
-------------------- --------------------- ------------------- -------------------
1992 1993 1992 1993 1992 1993 1992 1993
--------- --------- --------- --------- -------- --------- -------- ---------
SUMMARY OF FINANCIAL POSITION:
Wildwood Associates $ 238,467 $ 234,534 $ 133,251 $ 133,938 $ 99,118 $ 95,440 $ 6,706 $ 4,867
CSC Associates, L.P. 205,613 208,175 163,513 -- 35,600 205,853 20,835 106,759
Ten Peachtree Place Associates 23,020 22,320 22,951 22,342 (212) (201) (106) (66)
Haywood Mall Associates 21,408 21,074 19,790 19,529 738 647 369 323
Spring/Haynes Associates 30,412 16,333 -- -- 30,411 16,267 2,080 1,571
Norfolk Hotel Associates 12,598 11,051 11,104 9,250 214 1,659 107 830
Other 1,211 2,164 438 1,101 659 884 583 968
-------------------- --------------------- ------------------- -------------------
$ 532,729 $ 515,651 $ 351,047 $ 186,160 $166,528 $ 320,549 $ 30,574 $ 115,252
-------------------- --------------------- ------------------- -------------------
COMPANY'S SHARE
TOTAL REVENUES NET INCOME (LOSS) OF NET INCOME (LOSS)
---------------------------- --------------------------- --------------------------
1991 1992 1993 1991 1992 1993 1991 1992 1993
------- ------- ------- ------ ------- ------- ------ ------ ------
SUMMARY OF OPERATIONS:
Wildwood Associates $31,161 $34,281 $36,224 $2,470 $ 2,304 $ 4,322 $1,235 $1,152 $2,161
CSC Associates, L.P. -- 19,831 27,810 (40) (1,052) (1,194) (20) (526) 201
Ten Peachtree Place Associates 364 4,425 4,263 (42) 166 411 (12) 92 240
Haywood Mall Associates 8,759 9,538 9,979 2,960 3,525 4,014 1,480 1,763 2,007
Spring/Haynes Associates 51 32 57 (150) (162) (214) (75) (81) (107)
Norfolk Hotel Associates 2,075 10,698 12,680 -- 214 1,445 -- 107 723
Other 121 1,293 1,784 (213) 132 582 (174) 66 291
---------------------------- ---------------------------- --------------------------
$42,531 $80,098 $92,797 $4,985 $ 5,127 $ 9,366 $2,434 $2,573 $5,516
============================ ============================ ==========================
26
9
COMPANY'S SHARE OF
--------------------------------------------------------
CASH FLOWS FROM CASH FLOWS FROM
OPERATING ACTIVITIES OPERATING ACTIVITIES CASH DISTRIBUTIONS
---------------------------- --------------------------- ---------------------------
1991 1992 1993 1991 1992 1993 1991 1992 1993
------- ------- ------- ------ ------ -------- ------ ------- ---------
SUMMARY OF OPERATING CASH FLOWS:
Wildwood Associates $ 8,643 $ 7,561 $12,006 $4,321 $3,780 $ 6,003 $ -- $ -- $4,000
CSC Associates, L.P. -- 3,954 2,393 -- 1,977 2,070 -- -- 950
Ten Peachtree Place Associates 271 828 935 77 243 280 -- 385 200
Haywood Mall Associates 4,023 4,146 4,628 2,012 2,073 2,314 1,798 1,949 2,053
Spring/Haynes Associates (102) (101) (98) (51) (51) (49) -- -- --
Norfolk Hotel Associates 805 1,136 33 403 568 17 -- -- --
Other (142) 192 843 (70) 96 422 31 36 304
---------------------------- -------------------------- --------------------------
$13,498 $17,716 $20,740 $6,692 $8,686 $11,057 $1,829 $2,370 $7,507
============================ ========================== ==========================
WILDWOOD ASSOCIATES - Wildwood Associates was formed in 1985 between the
Company and IBM, each as 50% partners. The partnership owns three office
buildings totaling 1.6 million rentable square feet, other income producing
commercial properties, and additional developable land in Wildwood Office
Park ("Wildwood") in Atlanta, Georgia. Wildwood is an office park
containing a total of approximately 289 acres, of which approximately 73
acres are owned by Wildwood Associates and an estimated 31 acres are committed
to be contributed to Wildwood Associates by the Company; the Company owns the
balance of the developable acreage in the park.
Wildwood Associates and a related partnership (included in the amounts
for Wildwood Associates above) also own one office building at Summit Green,
an office project situated on 21 acres of leased land in Greensboro, North
Carolina. Two additional buildings are planned for the project.
Through December 31, 1993, IBM had contributed $46.6 million in cash
plus properties having an agreed value of $16.3 million for its one-half
interest in Wildwood Associates. The Company has contributed $84,000 in cash
plus properties having an agreed value of $42.8 million for its one-half
interest in the partnership, and is obligated to contribute the aforesaid
estimated 31 acres of additional land with an agreed value of $20.0 million.
The Company and IBM each lease office space from the partnership at rates
comparable to those charged to third parties.
The Company's investment as recorded in the Consolidated Balance Sheets
($4.9 million at December 31, 1993) is based upon the Company's historical
cost of the properties at the time they were contributed or committed to be
contributed to the partnership, whereas its investment as recorded on
Wildwood Associates' books ($47.7 million at December 31, 1993) is based upon
the agreed values at the time the partnership was formed.
CSC ASSOCIATES, L.P. ("CSC") - CSC was formed in 1989 between the
Company and a wholly owned subsidiary of NationsBank Corporation, each as 50%
partners. CSC owns the 1.3 million rentable square foot NationsBank Plaza
in Atlanta, Georgia. The building became operational for financial reporting
purposes in June 1992. In October 1993, the partnership fully repaid all of
its debt with equity contributions of $86.7 million made by each partner.
CSC's net income or loss and cash distributions are allocated to the
partners based on their percentage interests (50% each), subject to a
preference to Cousins. The Cousins preference is $2.5 million (giving
Cousins an additional $1.25 million over what it would otherwise receive),
and accrues to Cousins, with interest at 9% to the extent unpaid, over
the period February 1, 1992 through January 31, 1995. Following repayment
of the partnership's debt in October 1993, Cousins began recognizing its
accrued preference currently in income, which resulted in Cousins
recognizing $874,000 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.
TEN PEACHTREE PLACE ASSOCIATES ("TPPA") - TPPA is a general partnership
between the Company (50%) and a wholly owned subsidiary of The Coca-Cola
Company ("Coca-Cola") (50%). The venture owns Ten Peachtree Place, a
259,000 rentable square foot building located in midtown Atlanta, Georgia.
The building is 100% leased to Coca-Cola through November 30, 2001.
The TPPA partnership agreement generally provides that each of the
partners is entitled to receive 50% of cash flows from operating activities
net of note principal amortization through the term of the Coca-Cola lease,
after which the Company and its partner are entitled to receive 15% and 85%
of the cash flows (including any sales proceeds), respectively, until
the two partners have received a combined distribution of $15.3 million.
Thereafter, each partner is entitled to receive 50% of cash flows.
27
10
HAYWOOD MALL ASSOCIATES - Haywood Mall Associates is a joint venture
between the Company and an affiliate of Corporate Property Investors. The
venture owns 270,000 rentable square feet of Haywood Mall, a 942,000 rentable
square foot enclosed regional shopping center on 86 acres, 5 miles southeast of
downtown Greenville, South Carolina. The balance, 672,000 square feet, is owned
by four major department stores.
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 and a fifth major
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 partner.
SPRING/HAYNES ASSOCIATES - This general partnership was formed in 1985
between the Company and a wholly owned subsidiary of Coca-Cola, each as 50%
general partners, to jointly own and develop real estate. The Company
contributed 40 acres of undeveloped land at Georgia Highway 400 and Haynes
Bridge Road in north central suburban Atlanta, Georgia. Coca-Cola
contributed 11 acres of property in midtown Atlanta. In September 1993, the
undeveloped land at Georgia Highway 400 was distributed to the partners who
concurrently recontributed certain acres of the land into North Point Market
Associates, L.P., a consolidated partnership formed between the partners
(see Note 8). The Company's remaining investment in Spring/Haynes Associates
as recorded in the Consolidated Balance Sheets ($1.6 million at December 31,
1993) is based upon the Company's historical cost, whereas its investment as
recorded on the partnership's books ($8.1 million at December 31, 1993) is
based upon the agreed values of the properties at the time they were
contributed to the partnership.
NORFOLK HOTEL ASSOCIATES ("NHA") - NHA is a partnership between the
Company and an affiliate of Odyssey Partners, L.P., each as 50% partners,
which held a mortgage note on and owned the land under the Omni
International Hotel in Norfolk, Virginia. In January 1992, NHA terminated
the land lease and became the owner of the hotel and a long-term parking
agreement with an adjacent building owner. The partnership receives payments of
approximately $400,000 per year 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 accompanying Consolidated Statements of Income. The partnership received a
mortgage note for a portion of the sales proceeds.
OTHER - This category consists of several other joint ventures including:
COUSINS-HINES PARTNERSHIPS - Through the Cousins-Hines partnerships, CREC
effectively owns 9.8% of the One Ninety One Peachtree Tower in Atlanta,
Georgia. This 1.2 million rentable square foot structure, which opened in
December 1990, was developed in partnership with the Hines Interests Limited
Partnership and the Dutch Institutional Holding Company. Because CREC's
effective ownership of this building is less than 20%, the Company accounts
for its investment using the cost method of accounting, and therefore the
above tables do not include the Company's share of One Ninety One Peachtree
Tower.
TEMCO ASSOCIATES - Temco Associates was formed in 1991 as a partnership
between the Company (50%) and a subsidiary of Temple-Inland Inc. (50%). Temco
Associates has an option through March 2006, with no carrying costs, to
acquire approximately 35,000 acres in Paulding County, Georgia (northwest of
Atlanta, Georgia), of which approximately 13,000 acres would be a fee
simple interest and approximately 22,000 acres would be a timber rights
interest only. The option may be exercised in whole or in part over the
option period. 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.
DUSSELDORF JOINT VENTURE - In 1992, Cousins entered into a joint venture
agreement for the development of a 133,000 rentable square foot office
building in Dusseldorf, Germany which is 34% preleased to IBM. Cousins'
venture partners are IBM and Multi Development Corporation International
B.V. ("Multi"), a Dutch real estate development company. In December 1993,
the building was presold to an affiliate of Deutsche Bank. CREC and Multi
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 Note 4), all fees and profits will be deferred until the
project's completion and leaseup.
At December 31, 1993, total assets of joint ventures included in the
above tables include $462 million of real estate properties financed by $166
million of mortgage notes.
The Company received $4,405,000, $4,342,000 and $3,106,000 of
development, construction, leasing, and management fees from non-majority
owned joint ventures in 1991, 1992 and 1993, respectively.
28
11
6. STOCKHOLDERS' INVESTMENT, STOCK APPRECIATION RIGHT EXPENSE AND
PER SHARE DATA
COMMON STOCK ISSUANCE:
In October 1992 and October 1993, Cousins issued 3,975,000 and 5,800,000
shares of common stock, respectively, through public offerings at prices of
$14.00 and $17.25 per share, respectively. Concurrently with the public
offerings, an additional 400,000 and 300,000 shares, respectively, were
purchased at the public offering price by Thomas G. Cousins, Chairman of the
Board of Cousins. The Company has used the proceeds to reduce debt (including
joint venture debt) and develop income-producing properties, and intends to
acquire and develop additional income-producing properties as suitable
opportunities arise.
OPTIONS:
The Company has a stock option plan for key employees. At December 31,
1993, the Company had granted options to key employees to purchase 911,341
shares of the Company's common stock (including 282,341 shares under a
predecessor plan), and was authorized under the plan to grant an additional
368,000 stock options. The Company may incorporate a provision in each stock
option agreement to allow the option holder to surrender options and request a
cash payment for the difference between the fair market value of the shares at
the date of surrender and the option price. Separately from the stock option
plan, the Company has issued stock appreciation rights ("SARs") to certain
employees.
In order to compensate the holders of unexercised stock options for
decreases in the underlying value of shares subject to the options resulting
from certain capital gain distributions to stockholders, the Company has also
issued Deferred Payment Agreements to holders of unexercised stock options at
the time of such distributions. These Deferred Payment Agreements provide for a
fixed cash payment to stock option holders upon exercise of the options in an
amount approximately equal to the amount of the capital gain distribution that
would have been payable on the shares subject to the options if the options had
been exercised prior to the record date for the distributions. Holders of SARs
have been similarly compensated by a downward adjustment in the price of SARs
held by them.
Financial Accounting Standards Board pronouncements require that all stock
options which have a cash payment election option be accounted for as SARs.
Accordingly, included in the Consolidated Statements of Income under the
heading "stock appreciation right expense" are increases or reductions in
accrued compensation expense to reflect the issuance of new SARs or stock
options with cash payment provisions, vesting, changes in the market value of
the common stock from the dates of grant, expirations of non-vested options or
SARs of terminated employees, and issuance of Deferred Payment Agreements or
adjustment in SAR prices because of capital gain distributions. In the first
quarter of 1993, the cash payment provision associated with 374,341 stock
options was given up by certain of the option holders, thereby reducing stock
appreciation right expense for 1993 by approximately $502,000.
The following is a summary of stock option activity under the stock option
plan (amounts in thousands, except per share amounts):
Number of Total Option
Shares Price Option Price Per Share
------------ ------------ -------------------------------------
1992 1993 1992 1993 1992 1993
---- ---- ---- ---- ------------------ ----------------
Outstanding, beginning of year 553 658 $7,535 $ 9,221 $ 4.13 to $17.25 $ 4.82 to $17.25
Terminated (28) -- (414) -- $11.00 to $16.50 $ --
Exercised (27) (11) (220) (51) $ 4.13 to $12.125 $ 4.82
Granted 160 264 2,320 4,333 $14.50 $16.125 to $17.75
-------------------------------
Outstanding, end of year 658 911 $9,221 $13,503 $ 4.82 to $17.25 $ 4.82 to $17.75
===============================
Shares exercisable
at end of year 388 455
============
At December 31, 1992, the Company had 295,601 SARs outstanding (of which
113,631 were exercisable) at prices ranging from $1.60 per share to $14.50 per
share. At December 31, 1993, the Company had 382,605 SARs outstanding (of which
142,015 were exercisable) at prices ranging from $9.87 per share to $16.875 per
share.
At December 31, 1992 and 1993, the total amount accrued for stock options,
SARs, and Deferred Payment Agreements was $1,570,000 and $2,026,000,
respectively.
PER SHARE DATA:
Primary income per share is computed by dividing income by the weighted
average number of shares of common stock and dilutive common stock equivalents
outstanding during the years of 17,340,404, 18,249,306,
29
12
and 22,781,485 in 1991, 1992 and 1993, respectively. Fully diluted income per
share does not differ materially from primary income per share in 1991, 1992
and 1993.
OWNERSHIP LIMITATIONS:
In order to maintain Cousins' qualifications as a REIT, Cousins' Articles
of Incorporation include certain restrictions on the ownership of more than
3.9% of the Company's common stock.
DISTRIBUTION OF REIT TAXABLE INCOME:
The following is a reconciliation between dividends declared and dividends
applied in 1991 and 1992 and estimated to be applied in 1993 to meet REIT
distribution requirements ($ in thousands):
1991 1992 1993
------- ------- -------
Dividends declared $10,404 $11,496 $17,204
That portion of dividends declared in current year, and paid in current
year, which was applied to the prior year distribution requirements (975) (136) (665)
That portion of dividends declared in subsequent year, and paid in
subsequent year, which will apply to current year 136 665 --
----------------------------
Dividends applied to meet current year REIT distribution requirements $ 9,565 $12,025 $16,539
============================
In 1991 and 1992, dividends applied to meet REIT distribution requirements
were equal to Cousins' taxable income (see Note 7). In 1993, dividends applied
exceeded taxable income by $198,000 because of an operating loss which will be
carried forward to 1994. Since electing to qualify as a REIT in 1987, Cousins
has had no accumulated undistributed taxable income.
7. INCOME TAXES
In 1991, 1992 and 1993, because Cousins qualified as a REIT and
distributed all of its taxable income (see Note 6), it incurred no federal
income tax liability. The differences between taxable income as reported on
Cousins' tax return (actual 1991 and 1992 and estimated 1993) and Consolidated
Net Income as reported herein are as follows ($ in thousands):
1991 1992 1993
------- ------- -------
Consolidated net income $ 9,108 $15,713 $11,965
Consolidating adjustments 337 178 515
Less CREC net loss (income) (359) (366) 1,413
-------------------------
Cousins net income for financial reporting purposes 9,086 15,525 13,893
Adjustments arising from:
Sales of investment properties 3,595 1,085 17,563
Income from joint ventures (principally depreciation, revenue
recognition, and operational timing differences) (2,939) (4,829) (7,614)
Rental income recognition (941) (726) (403)
Wildwood Training Facility differences 742 765 (7,664)
Interest expense (447) (320) 251
Compensation expense under stock option and deferred compensation plans 299 397 146
Depreciation 232 37 54
Other (62) 91 115
-------------------------
Cousins taxable income $ 9,565 $12,025 $16,341
=========================
The consolidated provision (benefit) for income taxes is composed of the following ($ in thousands):
1991 1992 1993
------- ------- -------
CREC and its wholly owned subsidiaries:
Currently payable (refundable):
Federal $ (640) $ 542 $ (818)
State (78) (37) (154)
-------------------------
(718) 505 (972)
-------------------------
Adjustments arising from:
Income from joint ventures 1,020 (153) 565
Operating loss carryforward -- -- (170)
Stock appreciation right expense (29) (127) (166)
Other (29) -- (82)
-------------------------
962 (280) 147
-------------------------
CREC provision (benefit) for income taxes 244 225 (825)
Cousins provision for state income taxes -- 205 30
Less provision applicable to gain on sale of investment properties -- (70) --
-------------------------
Consolidated provision (benefit) applicable to income from operation $ 244 $ 360 $ (795)
=========================
30
13
The Cousins provision for state income taxes in 1992 included $185,000 for
settlement of prior years' income taxes.
The net income tax provision (benefit) differs from the amount computed by
applying the statutory federal income tax rate to CREC's income (loss) before
taxes as follows ($ in thousands):
1991 1992 1993
------------ -------------- ---------------
Amount Rate Amount Rate Amount Rate
------ ---- ------ ---- ------ -----
Federal income tax provision (benefit) at statutory rate $ 204 34% $ 201 34% $ (761) 34%
State income tax provision (benefit), net of
federal income tax effect 24 4 24 4 (90) 4
Other 16 3 -- -- 26 (1)
-----------------------------------------------
CREC provision (benefit) for income taxes 244 41% 225 38% (825) 37%
=== === ===
Cousins provision for income taxes -- 205 30
Less provision applicable to gain on sale of
investment properties -- (70) --
----- ----- ------
Consolidated provision (benefit) applicable to income
from operations $ 244 $ 360 $ (795)
===== ===== ======
At December 31, 1992 and 1993, the components of CREC's net deferred tax
liability are as follows ($ in thousands):
1992 1993
-------- --------
Deferred tax assets $ 257 $ 633
Deferred tax liabilities (1,562) (2,385)
-------- --------
Net deferred tax liability $ (1,305) $ (1,752)
======== ========
At December 31, 1992 and 1993, the tax effect of significant temporary
differences representing CREC'S deferred tax assets and liabilities are as
follows ($ in thousands):
1992 1993
-------- --------
Operating loss carryforward, expiring 2008 $ -- $ 170
Income from joint ventures (1,549) (2,245)
Stock appreciation right expense 153 319
Other 91 4
-------- --------
$ (1,305) $ (1,752)
======== ========
8. PROPERTY TRANSACTIONS
OPERATING PROPERTIES
PERIMETER EXPO - In June 1993, the Company purchased the land for and began
construction of Perimeter Expo, a retail power center adjacent to Perimeter
Mall in Atlanta, Georgia. Perimeter Expo features a new concept called The Home
Depot Expo, which was separately developed by The Home Depot as an upscale
interior design center. Perimeter Expo contains approximately 295,000 square
feet, of which approximately 178,000 square feet are owned by the Company. The
center opened in November 1993 and became operational for financial reporting
purposes on December 1, 1993. Perimeter Expo is included in Operating
Properties in the accompanying December 31, 1993 Consolidated Balance Sheet.
LAND HELD FOR INVESTMENT AND FUTURE DEVELOPMENT
GEORGIA HIGHWAY 400 LAND - On December 21, 1988, the Company sold 100
acres in north central suburban Atlanta, Georgia, for use as a regional
shopping center to be known as North Point Mall. The $12.5 million sales
proceeds were treated as a deposit liability in the Consolidated Financial
Statements until certain repurchase obligations expired. Profits on the sale of
$6.0 million and $1.9 million were then recognized in 1992 and 1993,
respectively, over the period that the Company completed certain infrastructure
obligations, based on percentage of completion accounting. For income tax
purposes, this transaction was treated as an installment sale, and gains of
approximately $2.6 million and $7.8 million were recognized in 1988 and 1989,
respectively.
During 1993, portions of the Georgia Highway 400 land were developed by
the Company for North Point Market and for ground leasing to freestanding users
(see below and Note 9).
PEACHTREE ROAD PROPERTY - The Company has entered into a contract for sale
of its 9 acre 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.
31
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PROJECTS UNDER CONSTRUCTION
NORTH POINT MARKET- In September 1993, the Georgia Highway 400 land owned
through Spring/Haynes Associates (see Note 5) was distributed to its partners,
with each partner concurrently recontributing certain acres of the land to a
new venture, North Point Market Associates, L.P. (owned 82.3% by Cousins and
17.7% by an affiliate of Coca-Cola, whose ownership is included in Minority
Interests in Consolidated Entities in the accompanying December 31, 1993
Consolidated Balance Sheet). 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 is
scheduled to open in the spring of 1994.
PRESIDENTIAL MARKET- In October 1993, the Company purchased the land for
and began construction of Presidential Market, a retail power center in
northeast suburban Atlanta, Georgia. Presidential Market will contain
approximately 310,000 square feet, of which approximately 194,000 will be owned
by the Company. The center is scheduled to open in the fall of 1994. The center
also includes six outparcels that will be sold or ground leased to freestanding
users, which costs are separately included in Land Held for Investment or
Future Development in the accompanying Consolidated Balance Sheets.
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.
9. CONSOLIDATED STATEMENTS OF CASH FLOWS - SUPPLEMENTAL INFORMATION
Interest (net of amounts capitalized (see Note 4)) and income taxes paid
(net of refunds) were as follows ($ in thousands):
1991 1992 1993
------ ---- ----
Interest paid $1,206 $957 $ --
Income taxes paid, net of $565 refunded in 1992 $ 179 $163 $ 68
Significant non-cash financing and investing activities included the
following:
a. In September 1993, the carrying value of the Company's land and
infrastructure costs for North Point Market (approximately $7,933,000) was
transferred from Land Held for Investment or Future Development to Projects
Under Construction (see Note 8). Included in the $7,933,000 of costs
transferred to Projects Under Construction was the Company's carrying value
(approximately $495,000) of a concurrent land distribution from Spring/Haynes
Associates. Also concurrently, an affiliate of Coca-Cola contributed the land
it previously held in Spring/Haynes Associates for a 17.7% minority interest in
the North Point Market project, which was recorded at a value of $2,658,000
(see Note 8).
b. In December 1993, the $4,709,000 carrying value of the 32 acres of the
Georgia Highway 400 land being ground leased to freestanding users was
transferred from Land Held For Investment or Future Development to Operating
Properties.
c. Effective June 30, 1992, the Company elected to cancel its outstanding
treasury stock. The carrying value of the 2,896,000 shares of treasury stock in
excess of $1 per share was charged to additional paid-in capital ($7,421,000)
and cumulative undistributed net income ($10,699,000). This transaction had no
effect on stockholders' investment.
d. In 1992, the Company purchased certain assets of New Market Companies,
Inc. and affiliates and CMI (see Note 2). The assets were acquired subject to
certain liabilities as follows ($ in thousands):
Assets acquired (including cash of $609) $3,508
Liabilities 896
------
Cash paid for assets $2,612
======
e. In December 1992, cumulative deferred income of $3.6 million was
applied against the Wildwood Training Facility Mortgage Note (see Note 3).
f. The Company canceled a life insurance policy in 1991 and offset
$482,000 of the life insurance's cash surrender value against a related loan.
32
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10. RENTAL REVENUES
The Company leases office space and retail space. The leases typically
contain escalation provisions and provisions requiring tenants to pay a pro
rata share of operating expenses. The leases typically include renewal options
and all are classified and accounted for as operating leases.
At December 31, 1993, future minimum rentals to be received under existing
non-cancelable leases, including tenants' current pro rata share of operating
expenses are as follows ($ in thousands):
Retail Office Total
-------- ------- --------
1994 $ 7,674 $ 6,099 $ 13,773
1995 7,788 6,268 14,056
1996 7,828 6,466 14,294
1997 7,969 5,977 13,946
1998 8,038 5,744 13,782
Subsequent to 1998 115,266 28,197 143,463
------------------------------------------
$154,563 $58,751 $213,314
==========================================
For the years ended December 31, 1991, 1992 and 1993, income recognized on
a straight-line basis for financial reporting purposes exceeded income which
accrued in accordance with the lease terms by $950,000, $804,000, and $391,000,
respectively (see Notes 1 and 3). Of the future minimum office rentals, 89% are
attributable to the three major tenants of the Company's First Union Tower
project in Greensboro, North Carolina.
11. SUBSEQUENT EVENT
On March 10, 1994, the Company purchased from the Resolution Trust
Corporation ("RTC") two notes aggregating $37 million at a total cost of
approximately $28 million. The two notes, which resulted from the RTC's
restructuring in December 1993 of a $53 million note, are secured by a first
deed of trust on an office building containing approximately 250,000 square
feet located at 650 Massachusetts Avenue, NW, in Washington, D.C. The notes
mature December 31, 2003, at which time their unamortized balance will be a
maximum of approximately $33 million. The notes require minimum monthly
payments totaling $2,818,000 annually, which through the year 2000, are
supported by a U.S. government agency lease.
SELECTED QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
- -----------------------------------------------------------------------------------------------------------------------
Selected quarterly information for the two years ended December 31, 1993
($ in thousands, except per share amounts):
Quarters
----------------------------------
First Second Third Fourth
----- ------ ----- ------
1992:
Revenues $5,280 $5,785 $3,622 $4,188
Income from joint ventures 519 931 768 355
Gain on sale of investment properties, net of applicable income tax provision -- 114 5,995 535
Net income 2,528 3,466 7,454 2,265
Net income per share .15 .20 .43 .11
1993:
REVENUES $4,374 $4,637 $4,986 $5,049
INCOME FROM JOINT VENTURES 441 1,145 494 3,436
GAIN ON SALE OF INVESTMENT PROPERTIES, NET OF APPLICABLE INCOME TAX PROVISION 230 496 1,201 --
NET INCOME 1,415 3,205 2,913 4,432
NET INCOME PER SHARE .07 .15 .13 .17
33
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COUSINS PROPERTIES INCORPORATED AND CONSOLIDATED ENTITIES
FIVE YEAR SUMMARY OF SELECTED FINANCIAL DATA
- --------------------------------------------------------------------------------------------------------------------------
($ IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
1989 1990 1991 1992 1993
-------- -------- -------- -------- --------
Rental revenues $ 4,388 $ 4,917 $ 6,728 $ 6,933 $ 6,687
Fees 2,891 5,512 4,855 4,953 5,903
Interest and other 9,844 7,794 7,127 6,989 6,456
----------------------------------------------------------------------
TOTAL REVENUES 17,123 18,223 18,710 18,875 19,046
----------------------------------------------------------------------
INCOME FROM JOINT VENTURES 712 880 2,434 2,573 5,516
----------------------------------------------------------------------
Rental property operations 1,151 1,890 2,456 2,354 2,310
Depreciation and amortization 960 1,911 2,236 2,345 3,164
Stock appreciation right expense (credit) 632 (1,272) 378 860 721
Interest expense 263 1,376 1,149 820 --
General, administrative, and other expenses 5,374 4,743 5,573 5,640 9,124
----------------------------------------------------------------------
TOTAL EXPENSES 8,380 8,648 11,792 12,019 15,319
----------------------------------------------------------------------
PROVISION (BENEFIT) FOR INCOME TAXES
FROM OPERATIONS 42 (2,347) 244 360 (795)
GAIN ON SALE OF INVESTMENT PROPERTIES,
NET OF APPLICABLE INCOME TAX PROVISION 5,752 5,006 -- 6,644 1,927
----------------------------------------------------------------------
NET INCOME $ 15,165 $ 17,808 $ 9,108 $ 15,713 $ 11,965
======================================================================
INCOME PER SHARE:
From operations before gain on
sale of investment properties $ .54 $ .74 $ .53 $ .50 $ .44
From gain on sale of investment properties,
net of applicable tax provision .33 .29 -- .36 .09
----------------------------------------------------------------------
Net income per share $ .87 $ 1.03 $ .53 $ .86 $ .53
======================================================================
CASH DIVIDENDS DECLARED PER SHARE $ .91 $ .60 $ .60 $ .62 $ .73
======================================================================
Total assets $157,191 $168,358 $169,406 $195,791 $319,702
Notes payable 25,667 34,285 34,680 9,079 35,151
Stockholders' investment 107,924 115,345 114,100 176,091 270,557
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
- --------------------------------------------------------------------------------
TO THE STOCKHOLDERS OF COUSINS PROPERTIES INCORPORATED:
We have audited the accompanying consolidated balance sheets of Cousins
Properties Incorporated (a Georgia corporation) and consolidated entities as of
December 31, 1992 and 1993, and the related consolidated statements of income,
stockholders' investment and cash flows for each of the three years in the
period ended December 31, 1993. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits. We did not audit the
financial statements of CSC Associates, L.P. and Haywood Mall Associates which
statements combined reflect assets of 43% and 44% of the joint ventures totals
as of December 31, 1992 and 1993 and revenues of 21%, 37% and 41% of the 1991,
1992 and 1993 joint ventures totals, respectively. Those statements were
audited by other auditors whose reports have been furnished to us and our
opinion, insofar as it relates to the amounts included for those entities as of
December 31, 1991, 1992 and 1993 and for the years then ended, is based solely
on the reports of the other auditors.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits and the reports of other
auditors provide a reasonable basis for our opinion.
In our opinion, based on our audits and the reports of other auditors, the
financial statements referred to above present fairly, in all material
respects, the financial position of Cousins Properties Incorporated and
consolidated entities as of December 31, 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.
ARTHUR ANDERSEN & CO.
Atlanta, Georgia
March 10,1994
34
17
COUSINS PROPERTIES INCORPORATED AND CONSOLIDATED ENTITIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
- -------------------------------------------------------------------------------
RESULTS OF OPERATIONS FOR THE THREE YEARS ENDED DECEMBER 31, 1993
GENERAL - Historically, the Company's financial results have been
significantly affected by sale transactions and the fees generated by, and
start-up losses of, major real estate developments, which transactions and
developments do not necessarily recur. Accordingly, the Company's historical
financial statements may not be indicative of future operating results. For
information as to certain factors which may affect future income and cash flow,
see "Additional Prospective Information."
RENTAL REVENUES - Rental revenues increased in 1992 over 1991, and then
decreased in 1993. Rental revenues were primarily affected by changes which
occurred in the 3301 Windy Ridge Parkway Building, a 107,000 square foot
Company wholly owned building in Wildwood Office Park, which had rental
revenues of $912,000 and $713,000 in 1991 and 1992, respectively, and $0 in
1993. This building was unoccupied for the first three months of 1991, after
which it was 80% leased to IBM from April 1991 through June 1992. Subsequently,
commencing January 1994 a single tenant leased approximately 60% of the
building for a term of ten years. The lease has options permitting the tenant
to expand its occupancy to the remainder of the building over the next several
years.
Rental revenues were favorably impacted over the three year period by
First Union Tower, which had rental revenues of $4,916,000, $5,302,000, and
$5,421,000 in 1991, 1992 and 1993, respectively.
DEVELOPMENT AND CONSTRUCTION FEES - Development and construction fee
income decreased in 1992 and 1993, primarily because the number of office
buildings under development decreased from two in 1991 to one in 1992 and none
in 1993. In addition, the level of office tenant construction activity
decreased over the three year period.
In the fourth quarter of 1992, the Company acquired the retail development
business of New Market Companies, Inc. ("NMC") and as a result of that
acquisition, recognized development fees from third parties of $129,000 and
$590,000 in 1992 and 1993, respectively, partially offsetting the decreases in
office related fees.
MANAGEMENT FEES - Management fees increased in 1992 and 1993. Management
fees in 1991 and 1992 were received by CREC for management of the One Ninety
One Peachtree Tower, which opened at the end of 1990. Beginning in November
1992, additional management fees were received from projects previously managed
by CMI, amounting to $194,000 and $1,673,000 in 1992 and 1993, respectively.
See Note 2 of Notes to Consolidated Financial Statements.
LEASING AND OTHER FEES AND LEASING AND OTHER COMMISSION EXPENSE - Leasing
and other fees increased in 1992 and 1993. In 1993, the increase was primarily
the result of acquiring the retail development business of NMC in October 1992,
which generated leasing and other fees from third parties of $49,000 and
$1,598,000 in 1992 and 1993, respectively; this increase was partially offset
by a decrease in office leasing fees from $2,663,000 to $1,408,000 because
there were no new office buildings generating major tenant leasing fees in
1993. The increase in office leasing fees in 1992 compared to 1991 was
primarily due to major tenant leasing fee income from NationsBank Plaza, which
opened in February 1992.
Changes in leasing commission expense were associated primarily with the
changes in leasing fee income recognized from One Ninety One Peachtree Tower.
INTEREST AND OTHER INCOME - Interest income decreased in 1992 and 1993.
Between 1991 and 1992, the decrease was primarily due to a decrease in rates
available on temporary investments. Between 1992 and 1993, the decrease was
primarily due to a $1,088,000 reduction in interest recognized on the Wildwood
Training Facility Mortgage Note (see Note 3 of Notes to Consolidated Financial
Statements). The decrease in 1993 was partially offset by a $403,000 increase
in temporary investment income due to higher average cash balances, and
$242,000 of other income from residential land sale proceeds.
INCOME FROM JOINT VENTURES - (All amounts reflect the Company's share of
joint venture income.) Income from joint ventures was approximately $3 million
higher in 1993 compared to 1992 and 1991. Income from Wildwood Associates
increased $1,009,000 from 1992 to 1993, primarily because of leaseup of the
3200 Windy Hill Road Building ($326,000), a deferred rent payment received on
the 2500 Windy Ridge Parkway Building ($161,000), and reduced interest expense
($195,000).
Income from CSC Associates, L.P. increased $727,000 from 1992 to 1993. The
Company's share of the 1993 results benefited by $874,000 in the fourth quarter
of 1993 due to recognition by the Company of a partnership income preference
which had accrued over the period January 1992 through December 1993, and was
recognized by the Company after the partnership's debt was repaid in October
1993 and net income became
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positive. In addition, interest expense was reduced by approximately $1.8
million in the fourth quarter of 1993 because of the partnership's debt
prepayment (see Note 5 of Notes to Consolidated Financial Statements).
Partially offsetting the improvement in 1993 was the benefit in 1992 of the
capitalization of $696,000 of startup losses, and the lack of approximately $.7
million of building depreciation until the building became operational in June
1992. Also mitigating the improvement in 1993 was the write-off of $361,000 of
unamortized loan closing costs upon prepayment of the partnership's debt in
October 1993.
Income from joint ventures was also favorably impacted in 1993 by a
$460,000 gain recognized upon the sale of the Omni International Hotel in April
1993 by Norfolk Hotel Associates, and an additional $156,000 in net income from
that venture primarily as a result of receiving income on the purchase money
mortgage note rather than income from hotel operations following the sale.
GENERAL AND ADMINISTRATIVE EXPENSES - General and administrative expenses
were $2.8 million higher in 1993 than they had been in each of the prior two
years. The 1993 increase was primarily due to the acquisition in the fourth
quarter of 1992 of CMI ($1,029,000 increase over 1992) and the retail
development business of NMC ($1,922,000 increase over 1992 net of costs
capitalized to projects under construction).
DEPRECIATION AND AMORTIZATION - Depreciation and amortization increased
$819,000 in 1993 over the 1992 level, which was approximately the same as the
1991 level. The increase was due primarily to an increase of $763,000 in the
amortization of intangible assets acquired from NMC. These intangible assets
are being written off as the related income is recognized.
STOCK APPRECIATION RIGHT EXPENSE - This non-cash item is primarily related
to the price per share of the Common Stock, which increased over the three year
period and was $11.875, $14.50 and $16.50 per share at December 31, 1991, 1992
and 1993, respectively. The cash payment provision associated with 374,341
stock options was given up by certain of the option holders in 1993, thereby
reducing stock appreciation right expense by approximately $502,000 (see Note 6
of Notes to Consolidated Financial Statements).
INTEREST EXPENSE - Interest expense decreased in 1992 and 1993, primarily
because the First Union Tower line of credit was paid down to $1,000 from
October 1992 through December 30, 1993 with the proceeds from a common stock
offering. This reduced interest expense on the line of credit from $2,585,000
in 1991 to $1,250,000 in 1992 and $1,000 in 1993. Partially offsetting these
decreases in interest expense was the amount of interest capitalized to
projects under development (a reduction of interest expense), which decreased
from $1,542,000 in 1991 to $571,000 in 1992 and $347,000 in 1993.
OTHER EXPENSES - Other expenses decreased in 1992 versus 1991, and then
increased in 1993. The decrease between 1992 and 1991 was due to a decrease in
predevelopment expenses from $253,000 to $120,000. In 1993, predevelopment
expenditures increased to $556,000. Other expenses also increased in 1993
because of a $309,000 reserve established for the present value of an
indemnification an insurance company in rehabilitation had made to the Company
in 1974, but defaulted on in the third quarter of 1993. This obligation is due
in monthly installments of principal and interest of $3,208 through December
2009. In addition, other expenses included the $150,000 cost of the $242,000
residential land sale included in other income.
PROVISION (BENEFIT) FOR INCOME TAXES FROM OPERATIONS - Income taxes
increased in 1992 as compared to 1991 primarily because the 1992 provision
included $185,000 in settlement of Cousins' prior years' income taxes (see Note
7 of Notes to Consolidated Financial Statements). Other than this provision,
the income tax provision (benefit) primarily reflected the income or loss of
CREC and its subsidiaries. In 1993, CREC and its subsidiaries had a net loss
(resulting in an income tax benefit) due to a reduction in CREC's fee income
and higher expenses resulting from the acquisition of the retail development
business of NMC.
GAIN ON SALE OF INVESTMENT PROPERTIES - The gain on sale of investment
properties in 1992 included $6.0 million of profits recognized on the North
Point Mall land sale (see Note 8 of Notes to Consolidated Financial Statements)
and $.5 million from the sale of a 27 acre parcel in West Cobb County, Georgia.
The gain on sale of investment properties in 1993 was entirely from profits
recognized on the North Point Mall sale. The Company recognized profits on the
North Point Mall sale based on percentage of completion accounting as certain
infrastructure work required by the sales contract was completed. All of the
remaining profit on the North Point Mall sale was recognized in 1993, when all
work required by the sales contract was substantially completed. The Company
recognized a total profit of approximately $7,944,000 on this sale in 1992 and
1993.
ADDITIONAL PROSPECTIVE INFORMATION
Following the Company's October 1993 stock offering, the Company and its
joint venture partner paid off the mortgage loan on NationsBank Plaza. Based on
current occupancy and lease terms, the Company expects its share of net income
from this project to increase from $201,000 in 1993 to approximately $6.5
million in 1994, and its share of cash flows from operating activities to
increase from $2.6 million to approximately $8.5 million. (These amounts
include Cousins' benefit from its partnership preference, including interest
thereon, of $874,000 and $475,000 in 1993 and 1994, respectively. Cousins'
benefit of its partnership preference will be $35,000 in
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January 1995, and zero thereafter; however, beginning in February 1995, the
Company's joint venture partner's annual rental rate will increase by an amount
equal to the preference rate.)
The Company opened its Perimeter Expo retail power center at the end of
1993. Two more retail power centers, North Point Market and Presidential
Market, are currently under construction and are scheduled to open in the
spring and fall of 1994, respectively. In addition, ground leases on a portion
of the Company's Georgia Highway 400 property began producing income in the
fourth quarter of 1993, and the amount of income will increase during 1994 as
additional leases commence.
The Company plans to increase its equity investment in its Haywood Mall
joint venture by approximately $22 million in order to fund its 50% share of
the costs of an expansion of Haywood Mall and prepay the venture's 9.37%
mortgage debt. This will result in the venture's producing increased cash flows
from operating activities beginning in mid-1994.
A single tenant has leased approximately 60% of the 3301 Windy Ridge
Parkway Building beginning in January 1994. This lease is expected to increase
the Company's cash flows from operating activities by approximately $700,000 on
an annualized basis over 1993 results. The lease has options permitting the
tenant to expand its occupancy to the remainder of the building over the next
several years.
The repayment of $39.9 million of mortgage notes receivable in June 1994
(see Note 3 of Notes to Consolidated Financial Statements) will cause a
reduction in interest income in 1994. However, this reduction will be offset by
the Company's purchase of a mortgage note from the RTC in March 1994 (see Note
11 of Notes to Consolidated Financial Statements).
The Company's Peachtree Road property is under contract for a sale
scheduled to close by the second quarter of 1994. If the sale closes as
anticipated, the Company will receive net cash of $4.8 million, and record a
gain on sale of investment property of approximately $3.1 million.
IBM currently leases over 1.1 million square feet in Wildwood Office Park
and Summit Green. While IBM has announced reductions in its work force,
effective January 1, 1993 it extended its lease of the Wildwood Training
Facility from November 1993 to November 1998. With the Training Facility lease
extension, IBM has a continuing leasing commitment for the following square
footage in Wildwood Office Park and Summit Green, in addition to its 50%
ownership interest in all of the leased properties except the Wildwood Training
Facility: 11,608 expiring in December 1994, 46,333 expiring in December 1995,
80,941 expiring in November 1996, 187,955 expiring in November 1998, 445,755
expiring in March 2001, and 303,436 expiring in December 2002. IBM has
currently made available to Wildwood Associates for re-leasing to new tenants
all of the space expiring in December 1995, approximately 56,000 square feet
expiring in November 1996, and all of the space expiring in December 2002. To
date, 78,170 square feet of this space has been leased to other tenants. In
addition to the above subleased space, an IBM lease on 139,944 square feet
previously expiring in December 1995 was replaced in 1993 by a Coca-Cola
Enterprises Inc. lease expiring in December 1998, and 22,688 square feet of
space previously expiring in November 1996 was replaced by leases to other
tenants. The IBM downsizing has provided Cousins with an opportunity to help
its partner, IBM, as well as provide the joint venture with a marketing
advantage by allowing cash flow to be maintained from existing leases, while
making space available to prospective tenants for extended leases on very
competitive lease terms.
LIQUIDITY AND CAPITAL RESOURCES
As a result of common stock offerings in 1992 and 1993, the Company's debt
(including its pro rata share of unconsolidated joint venture debt) was only
22% of total market capitalization at December 31, 1993, giving the Company
excellent financial flexibility.
The Company has acquisition and development projects in various planning
stages. The Company currently intends to finance these projects, and the
acquisitions, projects under construction and debt repayments discussed in
Notes 4, 5, 8, and 11 of Notes to Consolidated Financial Statements, by using
cash on hand, existing lines of credit, additional lines of credit as required,
and the scheduled repayment of approximately $40 million of notes receivable in
June 1994.
EFFECTS OF INFLATION
The Company attempts to minimize the effect of inflation on income from
operating properties by the use of rents tied to tenants' sales, periodic
fixed-rent increases and increases based on cost-of-living adjustments, and/or
pass-through of operating cost increases to tenants.
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COUSINS PROPERTIES INCORPORATED AND CONSOLIDATED ENTITIES
MARKET AND DIVIDEND INFORMATION
- ----------------------------------------------------------------------------------------------------------------------------
The high and low sales prices for the Company's common stock and cash dividends declared per share were as follows:
1992 QUARTERS 1993 QUARTERS
------------------------------------------ ----------------------------------------------
FIRST SECOND THIRD FOURTH FIRST SECOND THIRD FOURTH
-------- -------- -------- -------- -------- -------- -------- --------
High $ 12 1/2 $ 12 1/2 $ 13 7/8 $ 15 $ 18 $ 18 $ 18 1/4 $ 18 3/8
Low 11 1/2 11 1/4 11 1/2 13 5/8 14 1/4 14 7/8 15 3/8 15 1/2
Dividends Declared .15 .15 .15 .17 .17 .17 .17 .22
Payment Date 2/21/92 5/28/92 8/24/92 12/21/92 2/22/93 5/28/93 8/24/93 12/21/93
The Company's stock trades on the New York Stock Exchange (ticker symbol
CUZ). At December 31, 1993, there were 1,161 stockholders of record.
In 1992, the Company designated as capital gain dividends 40% of the
dividend paid May 28, 1992 and all of the dividends paid August 24, 1992 and
December 21, 1992. All other dividends paid in 1992 were taxable as ordinary
dividends. In 1993, the Company designated all dividends as capital gain
dividends. In addition, in 1992 and 1993 an amount calculated as 9.77% of
ordinary dividends and 5.26% of total dividends, respectively, was an
"adjustment attributed to depreciation of tangible property placed in service
after 1986" for alternative minimum tax purposes. This amount was passed
through to stockholders and must be used as an item of adjustment in
determining each stockholder's alternative minimum taxable income.
ABOUT YOUR DIVIDENDS
- -------------------------------------------------------------------------------
TIMING OF DIVIDENDS - Cousins normally pays regular dividends four times
each year in February, May, August and December. However, the timing of the
last dividend from year to year may cause stockholders to receive as few as
three and as many as five regular dividends in any year. Depending upon taxable
income (see below), special dividends may also be declared in some years, and
may be payable at the same time or separately from regular dividends.
DIFFERENCES BETWEEN NET INCOME AND CASH DIVIDENDS DECLARED - Cousins'
current intention is to distribute 100% of its taxable income and thus incur no
corporate income taxes. However, Consolidated Net Income for financial
reporting purposes and Cash Dividends Declared will generally not be equal for
the following reasons:
a. There will continue to be considerable differences between
Consolidated Net Income as reported to stockholders (which includes the income
of a consolidated non-REIT entity that pays corporate income taxes) and
Cousins' taxable income. The differences are enumerated in Note 7 of Notes to
Consolidated Financial Statements.
b. For purposes of meeting REIT distribution requirements, dividends may
be applied to the calendar year before or after the one in which they are
declared. The differences between dividends declared in the current year and
dividends applied to meet current year REIT distribution requirements are
enumerated in Note 6 of Notes to Consolidated Financial Statements.
CAPITAL GAINS DIVIDENDS - In some years, as it did in 1991, 1992 and 1993,
Cousins will have taxable capital gains, and Cousins currently intends to
distribute 100% of such gains to stockholders. The Form 1099-DIV sent by
Cousins to stockholders of record each January shows total dividends paid
(including the capital gains dividends) as well as that which should be
reported as a capital gain. For individuals, the capital gain portion of the
dividends is subtracted from total dividends on Schedule B of IRS Form 1040 and
reported separately as a capital gain in accordance with the Schedule B
instructions.
TAX PREFERENCE ITEMS AND "DIFFERENTLY TREATED ITEMS" - Internal Revenue
Code Section 59(d) requires that certain corporate tax preference items and
"differently treated items" be passed through to a REIT's stockholders and
treated as tax preference items and items of adjustment in determining the
stockholder's alternative minimum taxable income. The amount of this adjustment
is included under "Market and Dividend Information" in this report.
Tax preference items and adjustments are includable in a stockholder's
income only for purposes of computing the alternative minimum tax. These
adjustments will not affect a stockholder's tax filing unless that
stockholder's alternative minimum tax is higher than that stockholder's regular
tax. Stockholders should consult their tax advisors to determine if the
adjustment reported by Cousins affects their tax filing. Many stockholders will
find that the adjustment reported by Cousins will have no effect on their tax
filing unless they have other large sources of alternative minimum tax
adjustments or tax preference items.
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